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: January 31, 1998 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: 1-13113
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):
750 Lakeshore Parkway, Birmingham, Alabama 35211
Registrant's telephone number, including area code: (205) 940-4000
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. (X)
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 16, 1998 was approximately $3,204,000,000.
As of March 16, 1998, the number of shares of the Registrant's
Common Stock outstanding was 89,484,567.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Proffitt's, Inc. Annual Report to
Shareholders for the Fiscal Year Ended January 31, 1998 are
incorporated by reference into Part II.
(2) Portions of the Proffitt's, Inc. Proxy Statement dated April
30, 1998 for the Annual Shareholders' Meeting to be held on
June 10, 1998 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. 10
4 Submission of Matters to a Vote of
Security Holders. 11
Executive Officers of the Registrant. 11
Part II 5 Market for Registrant's Common Equity
and Related Stockholder Matters. 13
6 Selected Financial Data. 13
7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 13
7A Quantitative and Qualitative Disclosures
About Market Risk. 13
8 Financial Statements and Supplementary Data. 13
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 13
Part III 10 Directors and Executive Officers of the
Registrant. 14
11 Executive Compensation. 14
12 Security Ownership of Certain Beneficial
Owners and Management. 14
13 Certain Relationships and Related
Transactions. 14
Part IV 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 15
Signatures 17
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, decorative home furnishings, and
furniture in selected locations. The Company's stores are
principally anchor stores in leading regional or community malls.
Proffitt's also operates four free-standing furniture stores.
The Company currently operates a total of 237 stores (including
the four furniture stores) under the following nameplates:
Proffitt's (24 stores), McRae's (31 stores), Younkers (50
stores), Parisian (40 stores), Herberger's (37 stores), Carson
Pirie Scott (30 stores), Boston Store (12 stores), and Bergner's
(13 stores).
All of the Company's department stores, excluding the Parisian
stores, are considered traditional department stores, emphasizing
moderate to better prices. The Parisian stores are specialty
department stores and carry a more upscale and unique assortment
of merchandise than the traditional department stores, with
higher price points. Parisian stores do not carry home
furnishings.
Proffitt's has experienced significant growth since 1994,
primarily through a series of acquisitions. The Company's major
acquisitions are outlined below:
<TABLE>
<CAPTION>
Current
Number of Date Accounting
Name Headquarters Stores Locations Acquired Treatment
---------- -------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
McRae's Jackson, MS 31 Southeast March 31, 1994 Purchase
Younkers Des Moines, IA 50 Midwest February 3, 1996 Pooling
Parisian Birmingham, AL 40 Southeast/ October 11, 1996 Purchase
Midwest
Herberger's St. Cloud, MN 37 Midwest February 1, 1997 Pooling
Carson Pirie Scott, Milwaukee, WI 55 Midwest January 31, 1998 Pooling
Boston Store, and
Bergner's
</TABLE>
In addition to acquisitions, the Company historically has grown
through opening new stores. During 1997, the Company opened
three new McRae's units (Biloxi, Mississippi; Baton Rouge,
Louisiana; and Meridian, Mississippi) and four new Parisian units
(Macon, Georgia; Tupelo, Mississippi; metropolitan Atlanta,
Georgia; and Birmingham, Alabama). The Company opened one
Proffitt's store in March 1998 (Parkersburg, West Virginia) and
has plans to open one Younkers store in July 1998 (Coralville,
Iowa). Proffitt's also routinely expands and renovates stores.
In March 1998, the Company acquired Brody Brothers Dry Goods
Company, Inc. a department store chain with six units in North
Carolina. The Company will convert four of these stores to the
Proffitt's nameplate and close two of the smaller units in May
1998.
The Company also may close stores in the normal course of
business. In 1998, Proffitt's closed its Parisian clearance
center in Birmingham, Alabama. The Company also closed another
Parisian store in Birmingham and one McRae's store in Meridian,
Mississippi, both of which where replaced by new units previously
discussed.
The Company has announced its planned July 1998 closing of one
Parisian store in Cincinnati, Ohio and the scheduled October 1998
conversion of two McRae's stores located in Florence, Alabama and
Montgomery, Alabama into Parisian stores.
Merchandising, sales promotion, and certain store operating
support functions are conducted in multiple locations. The
Proffitt's Merchandising Group, headquartered in Birmingham, was
formed in 1996 to coordinate merchandise planning and execution
for the Company. Certain back office administrative support
functions for the Company, such as accounting, credit card
administration, store planning, and management information
systems, are centralized.
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 in the Company's stores include Liz Claiborne,
Jones New York, Calvin Klein, Polo/Ralph Lauren, Tommy Hilfiger,
Nautica, Estee Lauder, Clinique, Lancome, Nine West, Enzo, and
Waterford. Additional specialty brands carried at Parisian
stores include: Sigrid Olson, Robert Talbott, Barry Bricken, Ike
Behar, MAC, Bobbi Brown, Trish McEvoy, BCBG, Birkenstock, and
Brighton.
Proffitt's supplements its branded assortments with high-quality
private-label merchandise in selected areas. The Company has
traditionally utilized outside buying services, primarily
Frederick Atkins and Associated Merchandising Corporation, to
develop and source private label merchandise. The Company is
developing a private brand program in house, which will reduce
Proffitt's reliance on outside sources to develop these products.
Products are being developed in five key areas: women's better
career apparel, women's casual apparel, men's casual apparel,
children's apparel, and home. The new private brand program will
be introduced into the Company's stores beginning in the second
half of 1998. Management's goal is to increase private brand
sales from its current 7% of total sales to 12% over a two year
period. Management expects this program will enhance merchandise
margins and create differentiation from competitors through
unique, high quality product offerings at attractive 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.
In 1996, the Company formed the Proffitt's Merchandising Group
(the "PMG") headquartered in Birmingham, Alabama. The PMG
ensures coordination of merchandising planning and execution, as
well as visual, marketing, and advertising activities for the
Company, while supporting the Company's strategy of merchandising
with regional assortments.
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. The principal leased
department is fine jewelry. The Carson's, Bergner's, and Boston
Store stores also have a leased shoe business. The terms of the
lease agreements typically are between one and four 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 stores
until August 1996, when it was converted to an owned operation.
This conversion enhanced sales and gross margins for the Company.
The Company intends to convert the Carson's, Bergner's, and
Boston Store leased shoe operations to owned at the end of 1998.
Management expects that sales and margins will be improved as a
result of this conversion. The shoe departments at all of the
Company's other stores are owned.
For the year ended January 31, 1998, Proffitt's percentages of
net sales by major merchandise category were as follows:
Women's 31.3%
Men's 16.8
Home 12.8
Cosmetics 11.0
Children's 7.5
Accessories 6.5
Shoes 5.6
Lingerie 3.8
-----
Owned 95.3
Leased 4.7
-----
Total 100.0%
Pricing
Proffitt's primary merchandise focus is on moderate to better-priced
nationally branded merchandise. Management believes that
many customers respond to promotional events more favorably than
they do to "everyday low pricing." Accordingly, although the
Company continues to maintain a pricing structure that provides
value to its customers, 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 Company has seven distribution facilities serving its stores.
Refer to "Item 2. Properties" for a listing of these facilities.
The Company's distribution facilities are linked electronically
to the Company's merchandising staffs through a computerized
purchase order management system, facilitating rapid re-order and
replenishment of merchandise. Proffitt's utilizes UPC barcode
technology which is designed to move merchandise onto the selling
floor more quickly and cost-effectively by allowing vendors to
deliver floor-ready merchandise to the distribution facilities.
For example, high speed automated conveyor systems are capable of
scanning bar coded labels and diverting cartons to the proper
merchandise processing areas. Some types of merchandise are
being processed in the receiving area and immediately "cross
docked" to the shipping dock for delivery to the stores. Certain
processing areas are staffed with personnel equipped with hand-held radio
frequency terminals that can scan a vendor's bar code
and transmit the necessary information to a computer to check-in
merchandise. This technology, when fully utilized, will create a
nearly paperless environment for the distribution function.
Management Information Systems
Proffitt's believes that technological investments are necessary
to support its business strategy, and, as a result, the Company
has continually upgraded its information systems to improve
operations and support future growth.
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 card administration, 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. EDI allows the Company to speed
the flow of information and merchandise in order to capitalize on
emerging sales trends, maximize inventory turnover, and minimize
out-of-stock conditions. The Company's use of EDI technology
includes an advance shipping notice system ("ASN"). The ASN
system identifies discrepancies between merchandise that is ready
to be shipped from a vendor's warehouse and that which was
ordered from the vendor. This early identification provides the
Company with a window of time to resolve any discrepancies in
order to speed merchandise through the distribution facilities
and into its stores.
Proffitt's completed its assessment of the year 2000 effect on
the Company's systems and began the necessary systems
modifications during 1997. The Company expects to be year 2000
compliant by December 31, 1998.
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 regional in-house sales
promotion staffs in conjunction with outside advertising
agencies. Proffitt's utilizes data captured through the use of
proprietary credit cards to develop segmented advertising and
promotional events targeted at specific customers who have
established purchasing patterns for certain brands, departments,
and store locations. To promote its image as the fashion leader
in its markets, Proffitt's also sponsors fashion shows and in-store
special events highlighting the Company's key brands.
Proprietary Credit Cards
The Company issues proprietary credit cards for each of its store
nameplates. 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 created
various loyalty programs that reward customers for frequency and
volume of proprietary charge card usage. The Company's credit
card customers are offered private shopping nights, direct mail
catalogs, and advance notice of sale events.
A proprietary credit card was introduced at the Company's
Herberger's stores in May 1997. Prior to that time, Herberger's
customers were not offered a Herberger's proprietary card.
The Company has approximately 2.9 million credit accounts which
have been active within the prior six months. Approximately 45%
of the Company's 1997 sales were transacted on the Company's
proprietary credit cards (approximately 48% excluding the newly
issued Herberger's card).
All of the Company's proprietary credit cards are now issued
through the National Bank of the Great Lakes ("NBGL"), the credit
card bank acquired in conjunction with the acquisition of
Carson's. NBGL's credit card program is subject to government
regulations, including consumer protection laws, that impose
restrictions on the making and collection of consumer loans and
on other aspects of credit card operations. There can be no
assurance that the existing laws and regulations will not be
amended or that new laws or regulations will not be adopted, in a
manner that could adversely affect NBGL's credit card operations.
Trademarks
The Company owns several federally registered trademarks,
including, but not limited to, its various store names and its
private brands. Management believes its trademarks and trade
names are important; however, management believes that the loss
of any of its trademarks or trade names, other than the store
nameplates, would not have a material adverse effect on the
Company.
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
As of March 31, 1998, the Company employed approximately 38,000
associates, of which approximately 17,000 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 50 of the Company's
associates are covered by a collective bargaining agreement.
Proffitt's considers its relations with its employees to be good.
Item 2. Properties.
The Company owns and operates seven distribution facilities as
follows:
Stores Served Location of Facility Square Feet
------------- ------------------- ------------
Proffitt's Maryville, Tennessee 85,000
McRae's Jackson, Mississippi 164,000
Younkers Green Bay, Wisconsin 182,000
Younkers Ankeny, Iowa 102,000
Parisian Birmingham, Alabama 125,000
Herberger's St. Cloud, Minnesota 98,000
Carson Pirie Scott, Rockford, Illinois 585,000
Bergner's, and
Boston Store
The Company's principal administrative offices are as follows:
<TABLE>
Location of Square Owned/
Office Facility Feet Leased
------------------ ----------------- ------- -------
<S> <C> <C> <C>
Proffitt's stores support offices/certain Alcoa, Tennessee 44,000 Leased
corporate administrative offices
McRae's stores support offices/certain Jackson, Mississippi 272,000 Owned
corporate administrative offices
Younkers stores support offices/certain Des Moines, Iowa 127,000 Leased
corporate administrative offices
Parisian stores support offices/certain Birmingham, Alabama 125,000 Owned
corporate administrative offices
Herberger's stores support offices St. Cloud, Minnesota 58,000 Owned
Carson Pirie Scott, Bergner's, and Milwaukee, Wisconsin 156,000 Owned
Boston Store stores support offices/
certain corporate administrative offices
Carson Pirie Scott, Bergner's, and Elm Hurst, Illinois 41,500 Leased
Boston Store credit center
</TABLE>
The following table sets forth certain information about the
Company's stores as of March 31, 1998. The majority of the
Company's stores are leased. 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.
Generally, store leases have primary terms ranging from 20 to 30
years and include renewal options ranging from 5 to 15 years.
<TABLE>
<CAPTION>
Gross Gross Gross
Square Square Square
Number Feet Number Feet Number Feet States of
Store Name of Units (in mil.) of Units (in mil.) of Units (in mil.) Operation
- ------------ ------- -------- -------- --------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proffitt's 6 .7 18 1.5 24 2.2 GA, KY, NC, VA,
TN, WV
McRae's 14 1.8 17 1.5 31 3.3 AL, FL, LA, MS
Younkers - - 50 4.9 50 4.9 IL, IA, MI, MN,
NE, SD, WI
Parisian 7 .6 33 3.8 40 4.4 AL, FL, GA, IN,
MI, MS, OH, SC, TN
Herberger's 1 .1 36 2.2 37 2.3 CO, IL, IA, MN,
MT, NE, ND, SD,
WI, WY
Carson Pirie 6 .8 24 3.9 30 4.7 IL, IN, MN
Scott
Boston Store 8 1.7 4 .4 12 2.1 WI
Bergner's 1 .1 12 1.3 13 1.4 IL
Totals 43 5.8 194 19.5 237 25.3
</TABLE>
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.
In 1992, Carson Pirie Scott ("Carson's", which is now a part of
the Company) commenced an adversary proceeding in the Bankruptcy
Court against Bank One, Milwaukee, N.A. ("Bank One"). In the
adversary proceeding, the Company alleges, among other things,
that Bank One made an illegal setoff of $31.2 million from the
Company's Predecessor's account at Bank One in order to reimburse
itself for a $31.2 payment Bank One made to AMC under a letter of
credit Bank One issued to AMC. In July 1995, the Bankruptcy
Court granted Carson's motion for summary judgment in the amount
of $37.6 million, plus costs, against Bank One. The Bankruptcy
Count's ruling was appealed by Bank One, and the Company appealed
the Bankruptcy Court's denial of prejudgment interest. On April
9, 1998, the Court of Appeals affirmed the judgment except that
it remanded the case for the award of prejudgment interest in
favor of the Company. Bank One has asserted that the Company's
recovery is subject to a 33% reduction in accordance with the
distribution Bank One would receive as an unsecured creditor
under the Plan of Reorganization. While the Company believes
strongly in its causes of action, the ultimate outcome of this
proceeding still cannot be determined with certainly. In
accordance with generally accepted accounting principles, no gain
has been recognized in the Company's consolidated financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of the shareholders of Proffitt's, Inc. was
held on January 30, 1998. 49,831,929 shares, or 81.12%, of the
61,433,314 shares of Common Stock entitled to vote, were
represented in person or by proxy at the meeting. The matters
submitted to a vote of the shareholders and the vote on these
matters were as follows:
1. Approval of the Agreement and Plan of Merger ("Merger
Agreement"), dated as of October 29, 1997, among Proffitt's,
Inc.; LaSalle Merger Corporation, a wholly-owned subsidiary
of Proffitt's, Inc.; and Carson Pirie Scott & Co., pursuant
to which LaSalle Merger Corporation will merge with and into
Carson's, which will result in Carson's becoming a wholly-owned
subsidiary of Proffitt's, Inc.
For: 49,800,887 Against: 11,804 Abstain: 19,238
2. Approval of the issuance of shares of the Company's Common
Stock in connection with the Merger Agreement, including the
issuance of shares of Company Common Stock in the Merger and
upon the exercise of stock options of Carson's which
pursuant to the terms of the Merger Agreement, following the
Merger will constitute options to purchase shares of
Proffitt's Common Stock.
For: 49,222,523 Against: 577,597 Abstain: 31,809
3. Approval and adoption of an Amendment to the Company's
Amended and Restated Charter to increase the number of
shares of Company Common Stock authorized for issuance
thereunder by 200 million shares from 100 million shares to
300 million shares.
For: 48,468,880 Against: 1,408,234 Abstain: 67,569
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
- -------------- ------ -------------------------
R. Brad Martin 46 Chairman of the Board of
Directors and
Chief Executive Officer
James A. Coggin 55 President and Chief
Operating Officer
Robert M. Mosco 48 President and Chief
Executive Officer of
Proffitt's Merchandising Group
Douglas E. Coltharp 36 Executive Vice President
and Chief Financial Officer
Brian J. Martin 41 Executive Vice President
of Law and General Counsel
Donald E. Wright 40 Senior Vice President of
Finance and Acounting
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 Younkers. 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.
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 the post of
Senior Vice President of Corporate Finance.
Brian J. Martin was promoted to Executive Vice President of Law
and General Counsel in May 1997. He served as Senior Vice
President of Human Resources and Law and General Counsel from
August 1995 to May 1997 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.
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.
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 52 of the Proffitt's, Inc. Annual Report to
Shareholders for the Fiscal Year Ended January 31, 1998 (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 13
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 14 through 22 of the
Annual Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
None.
Item 8. Financial Statements and Supplementary Data.
The consolidated Financial Statements and the Report of
Independent Accountants appearing on pages 23 through 51 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 5 through 7 of the Proffitt's, Inc.
Proxy Statement dated April 30, 1998 (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 pages 16 and 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 7 and 8 through
10, 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" contained on pages 7 and 8 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
November 5, 1997 regarding the disclosure information
related to the merger with Carson Pirie Scott & Co.
Reports on Form 8-K were filed with the Commission on
November 17, 1997, December 16, 1997, and January 15, 1998
regarding the Company's accounts receivable master trust.
(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.
ITEM 14(a)(1) AND (2) AND (d)
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 23 through 51 of the
Proffitt's, Inc. Annual Report to Shareholders for the
Fiscal Year Ended January 31, 1998, are incorporated by
reference in Item 8:
* Consolidated Balance Sheets as of January 31, 1998 and
February 1, 1997
* Consolidated Statements of Income for Fiscal Years Ended
January 31, 1998, February 1, 1997, and February 3, 1996
* Consolidated Statements of Shareholders' Equity for Fiscal
Years Ended January 31, 1998, February 1, 1997, and February
3, 1996
* Consolidated Statements of Cash Flows for Fiscal Years Ended
January 31 1998, February 1, 1997, and February 3, 1996
* Notes to Consolidated Financial Statements
* Report of Independent Accountants
(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, 1998
/s/ Douglas E. Coltharp
---------------------------
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Pincipal Accounting Officer
/s/ Donald E. Wright
--------------------------
Donald E. Wright
Senior Vice President of
Financial and Accounting
Principal Accounting 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
Principal Executive Officer
/s/ Ronald de Waal
--------------------------
Ronald de Waal
Vice Chairman of the Board
/s/ James A. Coggin
-------------------------
James A. Coggin
President and Chief Operating Officer
/s/ Bernard E. Bernstein
-------------------------
Bernard E. Bernstein
Director
/s/ Stanton J. Bluestone
-------------------------
Stanton J. Bluestone
Director
/s/ John W. Burden, III
------------------------
John W. Burden, III
Director
/s/ Edmond D. Cicala
-------------------------
Edmond D. Cicala
Director
/s/ Gerard K. Donnelly
-------------------------
Gerard K. Donnelly
Director
/s/ Donald F. Dunn
-------------------------
Donald F. Dunn
Director
/s/ Julius W. Erving
--------------------------
Julius W. Erving
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/ C. Warren Neel
------------------------
C. Warren Neel
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
Report of Independent Accountants
Board of Directors and Shareholders
Proffitt's, Inc.
We have audited the accompanying consolidated balance sheets of
Proffitt's, Inc. and Subsidiaries as of January 31, 1998 and
February 1, 1997, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three
years in the period ended January 31, 1998. 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.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Proffitt's, Inc. and Subsidiaries as of
January 31, 1998 and February 1, 1997 and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended January 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 19, 1998, except for Note 12
as to which the date is March 26, 1998
Report of Independent Accountants
To the Directors and Stockholders
Proffitt's, Inc.
Birmingham, Alabama
Our report on the consolidated financial statements of
Proffitt's, Inc. and Subsidiaries has been incorporated by
reference in this Form 10-K from page 51 of the 1997 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 listed in the index on page 20 of
this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 19, 1998
<TABLE>
PROFFITT'S, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Balance Charged to Charged to Balance at
beginning cost and other end of
Description of period expenses accounts Deductions(a) period
----------------------- ---------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Year ended 1/31/98
Allowance for doubtful
accounts 19,512 29,190 0 (29,689) 19,013
Year ended 2/1/97
Allowance for doubtful
accounts 16,083 24,222 4,058 (b) (24,851) 19,512
Year ended 2/3/86
Allowance for doubtful
accounts 13,509 23,005 0 (20,431) 16,083
(a) Uncollectible accounts written off, net of recoveries.
(b) Balance in account of company (Parisian, Inc.) acquired at October 11, 1996.<PAGE>
</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 as of July 8, 1996,
among Proffitt's, Inc., Casablanca Merger Corp., and
Parisian, Inc. (incorporated by reference from the
Exhibits of the Form 8-K of Proffitt's, Inc. dated
July 18, 1996)
2.2 Agreement and Plan of Merger, dated November 8, 1996,
among Proffitt's, Inc., Prairie Merger Corporation and
G.R. Herberger's, Inc. (incorporated by reference from
the Exhibits to the Form 8-K of Proffitt's, Inc. dated
November 22, 1996)
2.3 Agreement and Plan of Merger, dated October 29, 1997,
among Proffitt's, Inc., LaSalle Merger Corporation and
Carson Pirie Scott & Co. (incorporated by reference
from the Exhibits to the Form S-4 Registration Statement No.
of Proffitt's, Inc. dated November 22, 1996)
3.1 Charter of the Company, as amended (incorporated by
reference from the Exhibits to the Form 8-K of
Proffitt's, Inc. dated February 11, 1998
3.2 Amended and Restated Bylaws of the Company
(incorporated by reference from the Exhibits to the
Form S-4 Registration Statement No. 333-41563 of
Proffitt's, Inc. dated December 5, 1997)
4.1 Form of Supplemental Indenture to the Indenture dated
July 15, 1993 between Parisian, Inc. and AmSouth Bank
of Alabama, as Trustee (incorporated by reference from
the Exhibits to the Form S-3 Registration Statement No.
333-09941 of Proffitt's, Inc. dated August 9, 1996)
4.2 Indenture, dated as of May 21, 1997, between
Proffitt's, Inc., the Subsidiary Guarantors named
therein and The First National Bank of Chicago
(incorporated by reference from the Exhibits to the
Form S-1 Registration Statement No. 333-29919 of
Proffitt's, Inc. dated July 8, 1997)
10.1 Registration Rights Agreement between Proffitt's, Inc.
and Parisian, Inc. dated July 8, 1996 (incorporated by
reference from the Exhibits to the Form S-4
Registration Statement No. 333-09043 of Proffitt's,
Inc. dated August 16, 1996)
10.2 Credit Agreement dated February 2, 1998, by and among
Proffitt's, Inc., as Borrower, the Lenders from time to
time party thereto and NationsBank, N.A., as Agent, and
Deutsche Bank AG, New York Branch and/or Cayman Islands
Branch, Morgan Guaranty Trust Company of New York and
Bank of America National Trust & Savings Association as
Co-Agents (incorporated by reference from the Exhibits
to the Form 8-K of Proffitt's, Inc. dated February 17,
1998)
10.3 LC Account Agreement dated February 2, 1998, by and
between Proffitt's, Inc. and NationsBank, N.A., as
Agent (incorporated by reference from the Exhibits to
the Form 8-K of Proffitt's, Inc. dated February 17,
1998)
10.4 Form of Rights Certificate and Rights Agreement between
Proffitt's, Inc. and Union Planters National Bank, as
rights agent, dated March 28, 1995 (incorporated by
reference from the Exhibits to the Form 8-K of
Proffitt's, Inc. dated April 3, 1995)
10.5 Amended Rights Agreement between Proffitt's, Inc. and
Union Planters Bank, N.A., dated March 25, 1998
(incorporated by reference from the Exhibits to the
Form 8-K of Proffitt's, Inc. dated March 25, 1998)
10.6 Pooling and Servicing Agreement among Younkers Credit
Corporation, Younkers, Inc., and Union Planters
National Bank, as rights agent, dated March 28, 1995
(incorporated by reference from the Exhibits to the
Form 10-Q of Younkers, Inc. for the quarter ended July
29, 1995)
10.7 Series 1995-1 Supplement to Pooling and Servicing
Agreement among Younkers Credit Corporation, Younkers,
Inc., and Chemical Bank, as Trustee, dated June 13,
1995 (incorporated by reference from the Exhibits to
the Form 10-Q of Younkers, Inc. for the quarter ended
July 29, 1995)
10.8 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 (incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal
year ended February 1, 1997)
10.9 Receivables Purchase Agreement between Younkers Credit
Corporation and Younkers, Inc. dated June 13, 1995
(incorporated by reference from the Exhibits to the
Form 10-Q of Younkers, Inc. for the quarter ended July
29, 1995)
10.10 *First Amendment to the Receivables Purchase Agreement
between Younkers Credit Corporation and Proffitt's,
Inc. (as successor-by-merger to Younkers, Inc.) dated
February 2, 1998
10.11 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 (incorporated by
reference from the Exhibits to the Form 10-Q of
Younkers, Inc. for the quarter ended July 29, 1995)
10.12 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 (incorporated by reference
from the Exhibits to the Form 10-Q of Younkers, Inc.
for the quarter ended July 29, 1995)
10.13 Master Pooling and Servicing Agreement dated as of
August 21, 1997, by and among Proffitt's Credit
Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National
Association, as Trustee, as amended by Amendment No. 1
to the Master Pooling and Servicing Agreement dated as
of February 2, 1998, by and among Proffitt's Credit
Corporation, as transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National
Association, as Trustee (incorporated by reference
from the Exhibits to the Form 8-K/A filed by the Proffitt's
Credit Card Master Trust and Proffitt's Credit
Corporation on September 23, 1997 and to the Form 8-K
filed by the Proffitt's Credit Card Master Trust on
February 18, 1998)
10.14 Receivables Purchase Agreement by and among National
Bank of the Great Lakes, as Seller, Proffitt's Credit
Corporation, as Purchaser, and Proffitt's, Inc., as
Servicer (incorporated by reference from the Exhibits
to the Form S-3 Registration Statement Nos. 333-48739
and 333-48739-01 filed by the Proffitt's Credit Card
Master Trust and Proffitt's Credit Corporation on March
26, 1998)
10.15 *Certificate Purchase Agreement dated as of August
21, 1997 by and among Proffitt's Credit Corporation, as
Transferor, Proffitt's, Inc., as Servicer, Enterprise
Funding Corporation, Receivables Funding Corporation,
NationsBank, N.A., as Agent, as a Senior Class Agent
and as a Bank Investor, and Bank of America National
Trust and Savings Association, as a Senior Class Agent
and as a Bank Investor
10.16 * First Amendment to Certificate Purchase Agreement
dated as of November 26, 1997 by and among Proffitt's
Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, Enterprise Funding Corporation, Receivables
Funding Corporation, NationsBank, N.A., as Agent, as a
Senior Class Agent and as a Bank Investor, and Bank of
America National Trust and Savings Association, as a
Senior Class Agent and as a Bank Investor
10.17 *Second Amendment to Certificate Purchase Agreement
dated as of February 2, 1998 by and among Proffitt's
Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, Enterprise Funding Corporation, Receivables
Funding Corporation, NationsBank, N.A., as Agent, as a
Senior Class Agent and as a Bank Investor, and Bank of
America National Trust and Savings Association, as a
Senior Class Agent and as a Bank Investor
MANAGEMENT CONTRACTS, COMPENSATORY PLANS, OR ARRANGEMENTS, ETC.
10.18 Proffitt's, Inc. 1987 Stock Option Plan, as amended
(incorporated by reference from the Exhibits to the
Form S-8 Registration Statement No. 33-46306 of
Proffitt's, Inc. dated March 10, 1992)
10.19 Proffitt's, Inc. Employee Stock Purchase Plan
(incorporated by reference from the Exhibits to the
Form S-8 Registration Statement No. 33-88390 of Proffitt's,
Inc. dated January 11, 1995)
10.20 Proffitt's, Inc. 1994 Long-Term Incentive Plan
(incorporated by reference from the Exhibits to the
Form S-8 Registration Statement No. 33-80602 of
Proffitt's, Inc. dated June 23, 1994)
10.21 Proffitt's, Inc. 1997 Stock-Based Incentive Plan
(incorporated by reference from the Exhibits to the
Form S-3 Registration Statement No. 333-32257
of Proffitt's, Inc. dated July 28, 1997)
10.22 Proffitt's, Inc. 401(k) Retirement Plan (incorporated
by reference from the Exhibits to the Form S-8
Registration Statement No. 333-25213 of Proffitt's,
Inc. dated April 15, 1997)
10.23 * Proffitt's, Inc. Supplemental Savings Plan
10.24 * First Amendment to Proffitt's, Inc. Supplemental
Savings Plan
10.25 * Second Amendment to Proffitt's, Inc. Supplemental
Savings Plan
10.26 G.R. Herberger's, Inc. 401(k) Employee Stock Purchase
Plan and Employee Stock Ownership Plan (incorporated by
reference from the Exhibits to the Form S-8
Registration Statement No. 333-27813 of Proffitt's,
Inc. dated May 27, 1997)
10.27 Third Amendment and Restatement of The Parisian, Inc.
Stock Option Plan for Officers (incorporated by
reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended February 1,
1997)
10.28 First Amendment and Restatement of The Parisian, Inc.
Management Incentive Plan (incorporated by reference
from the Exhibits to the Form 10-K of Proffitt's, Inc.
for the fiscal year ended February 1, 1997)
10.29 Younkers, Inc. Stock and Incentive Plan (incorporated
by reference from the Exhibits to the Form S-1
Registration Statement No. 33-45771 of Younkers, Inc.)
10.30 Younkers, Inc. Management Stock Option Plan
(incorporated by reference from the Exhibits to the
Form S-1 Registration Statement No. 33-45771 of Younkers,
Inc.)
10.31 Younkers, Inc. 1993 Long-Term Incentive Plan
(incorporated by reference from the Exhibits to the
Form S-8 Registration Statement No. 33-59224 of Younkers, Inc.)
10.32 Form of Younkers, Inc. Deferred Compensation Plan
(incorporated by reference from the Exhibits to the
Form 10-Q of Younkers, Inc. for the quarter ended May
1, 1993)
10.33 Carson Pirie Scott & Co. Supplemental Executive
Retirement Plan (incorporated by reference to Carson
Pirie Scott & Co. Common Shares Registration Statement
No. 33-67514)
10.34 Carson Pirie Scott & Co. Deferred Compensation Plan
(incorporated by reference from the Exhibits to the
Form 10-K of Carson Pirie Scott & Co. for the fiscal
year ended January 28, 1995)
10.35 Carson Pirie Scott & Co. 1993 Stock Incentive Plan as
Amended and Restated as of March 19, 1997 (incorporated
by reference from the Exhibits to the Form 10-K of
Carson Pirie Scott & Co. for the fiscal year ended
February 2, 1997)
10.36 Carson Pirie Scott & Co. 1996 Long-Term Incentive Plan
(incorporated by reference from the Exhibits to the
Form 10-K of Carson Pirie Scott & Co. for the fiscal
year ended February 2, 1997)
10.37 Carson Pirie Scott & Co. Savings Plan (incorporated by
reference from the Exhibits to the Form S-8 Carson
Pirie Scott & Co. Registration Statement No. 33-93012)
10.38 $500,000 Loan Agreement between Proffitt's, Inc. and R.
Brad Martin dated February 1, 1989 (incorporated by
reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended January 28,
1989)
10.39 Form of Deferred Compensation Agreement between
Younkers, Inc. and Robert M. Mosco, as amended
(incorporated by reference from the Exhibits to the
Form S-1 Registration Statement No. 33-45771 of Younkers, Inc.)
10.40 *Form of Fourth Amended and Restated Employment
Agreement by and between Proffitt's, Inc. and R. Brad
Martin dated February 2, 1998
10.41 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 (incorporated
by reference from the Exhibits to the Form 10-Q of
Proffitt's, Inc. for the quarter ended November 2,
1997)
10.42 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to R. Brad Martin dated January 31, 1998
10.43 *Form of Employment Agreement by and between
Proffitt's, Inc. and Robert M. Mosco dated February 2,
1998
10.44 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 (incorporated
by reference from the Exhibits to the Form 10-Q of
Proffitt's, Inc. for the quarter ended November 2,
1997)
10.45 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to Robert M. Mosco dated January 31, 1998
10.46 *Form of Employment Agreement by and between
Proffitt's, Inc. and James A. Coggin dated February 2,
1998
10.47 Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted
to James A. Coggin dated October 28, 1996 (incorporated
by reference from the Exhibits to the Form 10-Q of
Proffitt's, Inc. for the quarter ended November 2,
1997)
10.48 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to James A. Coggin dated January 31, 1998
10.49 *Form of Employment Agreement by and between
Proffitt's, Inc. and Douglas E. Coltharp dated February
2, 1998
10.50 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
(incorporated by reference from the Exhibits to the
Form 10-Q of Proffitt's, Inc. for the quarter ended
November 2, 1997)
10.51 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to Douglas E. Coltharp dated January 31, 1998
10.52 *Form of Employment Agreement by and between
Proffitt's, Inc. and Brian J. Martin dated February 2,
1998
10.53 Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted
to Brian J. Martin dated October 28, 1996 (incorporated
by reference from the Exhibits to the Form 10-Q of
Proffitt's, Inc. for the quarter ended November 2,
1997)
10.54 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to Brian J. Martin dated January 31, 1998
10.55 *Form of Employment Agreement by and between
Proffitt's, Inc. and Donald E. Wright dated February 2,
1998
10.56 * Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1997 Stock-Based Incentive Plan
granted to Donald E. Wright dated January 31, 1998
10.57 * Form of Employment Agreement by and between
Proffitt's, Inc. and Stanton J. Bluestone dated October
29, 1997
11.1 * Statement re: computation of earnings per share
13.1 * Annual Report to Shareholders for the fiscal year
ended January 31, 1998 (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
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT to the Receivables Purchase Agreement
(the "Receivables Purchase Agreement") dated as of February 2, 1998
by and between Younkers Credit Corporation, a Delaware corporation (the
"Buyer") and Proffitt's, Inc., a Tennessee corporation that is the
successor by merger to Younkers, Inc. (the "Company"). Capitalized
terms used but not defined herein have their respective defined
meanings as set forth in the Receivables Purchase Agreement.
WHEREAS, the Buyer and the Company entered into that certain
Receivables Purchase Agreement dated as of June 13, 1995 (the
"Receivables Purchase Agreement"), pursuant to which the Buyer
purchases, and the Company sells, certain Receivables arising from
time to time under certain of the Company's Accounts and Additional
Accounts;
WHEREAS, the Company desires to contribute and transfer such
Accounts and Additional Accounts that are the subject of the
Receivables Purchase Agreement to its wholly-owned subsidiary,
National Bank of the Great Lakes, a national banking association
located in Elmhurst, Illinois (the "Bank"); and
WHEREAS, the Company and the Buyer desire to amend the
Receivables Purchase Agreement to permit the transfer of such
Accounts and Additional Accounts to the Bank and to make the Bank
a Seller of Receivables to the Buyer under the Receivables Purchase
Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are acknowledged by each party,
the parties hereto, intending to be legally bound, agree as
follows:
Section 1. Amendment of Certain References. Upon and after the Effective
Time (as defined below) of this Amendment, all references to the
Company and the Seller in the Receivables Purchase Agreement shall
refer to and mean the Bank. All references in the Receivables
Purchase Agreement shall mean and include Accounts and Charge
Account Agreements between customers of Younkers' Department Stores
and the Bank from and after the Effective Time.
Section 1. Specific Amendments to the Receivables
Purchase Agreement.
(a) Definitions contained in Section 1.1 shall be amended as
follows:
"Account" shall be amended to add the following
sentence at the end of such definition: The term
"Account" shall also include all Accounts contributed to
the Bank pursuant to the Assumption Agreement and
hereafter originated or established by the Bank on behalf
of the customers of the Younkers Department Stores.
"Bank" shall mean National Bank of the Great Lakes,
and its successors and assigns.
"Company" shall mean Proffitt's, Inc. as successor
by merger to Younkers, Inc., and following the Effective
Time shall mean the Bank.
"Effective Time" shall mean the beginning of
business on February 2, 1998.
"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 (12) months (or such other period
mutually agreed upon by the Buyer and the Seller);
BDA = an allowance for bad debts (expressed as the
decimal equivalent of a percentage), based on,
among other relevant factors, historical rates for
the previous twelve (12) months (or such other
period mutually agreed upon by the Buyer and the
Seller);
SF = a Servicer fee equal to 2.00% (expressed as
the decimal equivalent of a percentage) per annum;
PCF = the Buyer's cost of funds, as calculated from
time to time, equal to the sum (expressed as the
decimal equivalent of a percentage) of (i) the
product of a fraction equal to the adjusted
investor amount of all classes of Certificates
issued by the Trust (other than those held by the
Buyer) divided by the Aggregate Principal
Receivables 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 Buyer's reasonably estimated marginal cost
of capital) multiplied by (y) a fraction equal to
the sum of the Transferor Amount plus the investor
amount of any class of Certificates held by the
Buyer divided by the Aggregate Principal
Receivables;
OE = the fraction (expressed as the decimal
equivalent of a percentage), the numerator of which
is the Buyer's annualized estimate of projected
operating expenses for the next twelve (12) months
and the denominator of which is the estimated
outstanding principal balance of Receivables
expected to be sold by the Seller to the Buyer in
the next twelve (12) months; and
RF = a contingency risk factor (expressed as the
decimal equivalent of a percentage) based on
industry and economic considerations, as determined
by the Buyer in its reasonable discretion and as
agreed upon between the Buyer and the Seller.
(b) The Receivables Purchase Agreement is hereby amended by
deleting Section 3.1 thereof in its entirety and substituting in
lieu thereof the following:
SECTION 3.1. Purchase Price.SECTION 3.1. Purchase Price
The Purchase Price for the Receivables and related property (including
Receivables and related property in Additional Accounts
and Deferred Receivables) 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 at any date as reflected
in the applicable Settlement Statement or any other
certificate delivered pursuant thereto or pursuant to
this Agreement as in effect prior to the date hereof and
(ii) the Purchase Rate on such date.
(c) Section 3.3 shall be amended and replaced in its entirety
by the following:
SECTION 3.3. Payment of Purchase Price.
(a) The Purchase Price for the Receivables sold upon and
after the Effective Time shall be paid by payment of cash in
immediately available funds. The Buyer may obtain the cash to pay
the Purchase Price from the sale of Eligible Receivables to the
Trust, and pursuant to advances pursuant to a Subordinated Note
(the "Subordinated Note") between Proffitt's, Inc. and the Buyer
(such advance and any advance thereunder as contemplated by Section
3.2(b), each an "Advance") and contributions to the capital of the
Buyer by Proffitt's.
(b) The Purchase Price for the Receivables sold by the Seller
on any date after the Effective Time (each, a "Purchase Date")
shall be paid in cash to the Seller from proceeds from (i) the sale
by the Buyer of the Receivables to the Trust or (ii) as the Buyer
may elect, in its sole discretion, from proceeds of an Advance
under the Subordinated Note or (iii) a capital contribution by
Proffitt's to the Buyer or (iv) any combination of the foregoing.
In the event the Buyer does not have sufficient cash to pay the
Purchase Price due on any Purchase Date, or Proffitt's determines,
in its sole discretion not to make a capital contribution to the
Buyer, Proffitt's, Inc., subject to the terms hereof, irrevocably
agrees to make an Advance on such Purchase Date in an original
principal amount equal to such cash insufficiency.
(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
Buyer 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 Buyer 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 actual number of days elapsed
based upon a year of 360 days.
(iii) Sole and Exclusive Remedy; Subordination. The
Subordinated Note shall be fully subordinated to any
rights of the Trustee, the Certificateholders and
their permitted assigns pursuant to the Pooling and
Servicing Agreement, all on the terms and conditions
set forth in the Subordinated Note, and shall not
evidence any rights in the Receivables.
(d) Section 4.1(a) is hereby amended by deleting existing
Section 4.1(a) in its entirety and substituting in lieu thereof the
following:
"(a) Organization, Good Standing and Qualification.
Such Seller is duly organized and validly existing
in good standing under the laws of the United
States or the jurisdiction of its organization, and
has full corporate power, authority and right to
own its properties and to conduct its business as
such properties are presently owned and such
business is presently conducted, and to execute,
deliver and perform its obligations under this
Agreement. Such Seller is duly qualified to do
business and is in good standing in each State
where the nature of its business requires it to be
so qualified."
(e) Section 4.2 is hereby amended by adding the
following to the end of such Section 4.2:
(g) 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.
(h) ERISA. The Seller and each of 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.
(i) Bulk Sales. No transaction contemplated by this
Agreement requires compliance with any bulk sales act or
similar law.
(j) No Insolvency. The Seller is not insolvent
immediately prior to any transfer of Receivables
hereunder, and will not be rendered insolvent immediately
following such transfer.
(k) Reasonably Equivalent Value. The Buyer has given
reasonably equivalent value to the Seller in
consideration for the transfer and sale to the Buyer of
the applicable Receivables and other property from such
Seller, and each such transfer shall not have been made
for or on account of an antecedent debt owed by such
Seller to the Buyer. The Seller acknowledges that it
will receive reasonably equivalent value in consideration
for the transfer to the Buyer of all Receivables and
other property now or hereafter to be transferred and
sold hereunder.
The Buyer and the Servicer may rely upon any of
these representations and warranties, and any of the
covenants and agreements of the Seller contained herein
in connection with any transactions pursuant to the
Pooling and Servicing Agreement.
(f) Subsection (d) of Section 5.1 is deleted and replaced in
its entirety the following:
"(d) Security Interests. Except for the conveyances
hereunder and under any Assumption Agreement delivered
pursuant to Section 2.3, (i) such Seller will not sell,
pledge, assign or transfer any Account or any Receivable to
any other Person (other than any other Seller), or grant,
create, incur, assume or suffer to exist any Lien on any
Account or any Receivable, whether now existing or hereafter
created, or any interest therein; (ii) such Seller shall
immediately notify Buyer and the Trustee of the existence of
any Lien on any Receivable; and (iii) such Seller shall defend
the right, title and interest of Buyer and its successors and
assigns in, to and under the Receivables, whether now existing
or hereafter created, against all claims of third parties
claiming through or under such Seller; provided, however, that
nothing in this Section 5.1(d) shall prevent or be deemed to
prohibit such Seller from suffering to exist upon any of the
Accounts or Receivables any Liens for state, municipal or
other local taxes if such taxes shall not at the time be due
and payable or if such Seller shall concurrently be contesting
the validity thereof in good faith by appropriate proceedings
and shall have set aside on its books adequate reserves with
respect thereto."
(g) The Receivables Purchase Agreement is hereby further
amended by deleting subsection (j) of Section 5.1 thereof in its
entirety and substituting in lieu thereof the following:
"(j) Conveyance of Accounts. Such Seller shall not
convey, assign, exchange or otherwise transfer the Accounts to
any Person (other than to any other Seller) prior to the
termination of this Agreement and the Servicing Agreement
except pursuant to an Assumption Agreement delivered pursuant
to Section 2.3."
(h) Section 5.1 is further amended by adding the following to
the end of such Section 5.1:
(n) 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 Buyer.
(h) Section 6.2 relating to "Optional Repurchases" of
Receivables is deleted in its entirety, all references in Section
6.3 to "Optional Repurchases" and to Section 6.2 are deleted,
Sections 6.3 and 6.4 are renumbered 6.2 and 6.3, respectively, and
Section 6.5 is deleted in its entirety.
(i) The address for notices to the Bank contained in Section
9.3 is hereby amended to read as follows:
140 Industrial Drive
Elmhurst, Illinois 60126
Attention: Richard Ehrle
Vice President
Section 1. Amendments to Schedules. Schedule 2 to the
Receivables Purchase Agreement is amended to read in its entirety
as attached hereto.
Section 2. Assumption Agreement. The Bank, in connection
with this Amendment, has executed and delivered an Assumption
Agreement that is supplemental to the Receivables Purchase
Agreement, whereby the Bank has agreed to perform every covenant
and obligation of the Seller under the Receivables Purchase
Agreement as hereby amended and shall obtain and have all rights of
Seller under such Receivables Purchase Agreement, as amended,
together with an Officer's Certificate and an Opinion of Counsel
which have been accepted by the Buyer in full satisfaction of the
requirements of Section 5.1(l) of the Receivables Purchase
Agreement.
Section 3. References to the Receivables Purchase Agreement.
Upon and after the Effective Time of this Amendment, each reference
to the Receivables Purchase Agreement in any agreement, document or
instrument shall be deemed to be a reference to the Receivables
Purchase Agreement, as amended by this First Amendment, and as the
same may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with Section 9.1 of the
Receivables Purchase Agreement.
Section 4. Benefits. This First Amendment shall be binding
upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns and shall benefit the
Trustee on behalf of all Certificateholders.
Section 5. Governing Law. This First Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
Section 6. Effect. This Amendment shall become effective as
of the beginning of business on February 2, 1998 (the "Effective
Time"). Except as expressly amended herein, the terms and
conditions of the Receivables Purchase Agreement shall remain in
full force and effect.
Section 7. Counterparts. This First Amendment may be
executed in any number of counterparts, each of which shall be
deemed to be an original, and all of which shall constitute one and
the same agreement and which shall be binding upon all parties,
their successors and assigns
ANNEX
Schedule 2 of the
Receivables Purchase Agreement
The above Schedule is amended to include the following
locations of the Bank's chief executive office and locations of
records:
Name of Entity
Place of Business
and Chief Executive Office
Additional
Locations of Records
National Bank of the Great Lakes
140 Industrial Drive
Elmhurst, Illinois 60126
140 Industrial Drive
Elmhurst, Illinois 60126
331 West Wisconsin Avenue
Milwaukee, Wisconsin 53203
Mailing Address:
140 Industrial Drive
Elmhurst, Illinois 60126
IN WITNESS WHEREOF, the parties have caused this First
Amendment to be executed under seal by their respective duly
authorized officers as of the date first written above.
THE COMPANY:
PROFFITT'S, INC., the successor by merger
to Younkers, Inc.
By: /s/ James S. Scully
Name: James S. Scully
Title: Vice President and Treasurer
THE BUYER:
YOUNKERS CREDIT CORPORATION
By: /s/ James S. Scully
Name: James S. Scully
Title: Vice President and Treasurer
Acknowledged as of the 31st day of January 1998 by the
undersigned duly authorized officer of the Trustee.
The Chase Manhattan Bank, successor by merger to Chemical Bank, as Trustee
under the Younkers Master Trust
By: /s/ Marcus Gustafson
Name: Marcus Gustafson
Title: Vice President
=====================================================
CERTIFICATE PURCHASE AGREEMENT
(Series 1997-1)
by and among
PROFFITT'S CREDIT CORPORATION,
PROFFITT'S, INC.,
ENTERPRISE FUNDING CORPORATION,
RECEIVABLES CAPITAL CORPORATION,
NATIONSBANK, N.A.,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Dated as of August 21, 1997
===========================================
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . 2
SECTION 1.2. Other Terms. . . . . . . . . . . . . . . . 13
SECTION 1.3. Computation of Time Periods . . . . . . . 13
ARTICLE II
PURCHASE OF SENIOR CERTIFICATES
SECTION 2.1. Purchase. . . . . . . . . . . . . . . . . 14
SECTION 2.2. Increase of Senior Class Investor Amount. . 14
SECTION 2.3. Fees . . . . . . . . . . . . . . . . . . . 17
SECTION 2.4. Sharing of Payments, Etc.. . . . . . . . . 17
SECTION 2.5. Right of Setoff. . . . . . . . . . . . . . 18
SECTION 2.6. Interest Rate; Eurodollar Rate Protection;
Illegality . . . . . . . . . . . . . . . . 18
SECTION 2.7. Notice of Reinvestment Termination Date . . 23
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.1. Representations and Warranties of the
Transferor . . . . . . . . . . . . . . . . . 24
SECTION 3.2. Representations and Warranties of the
Servicer. . . . . . . . . . . . . . . . . . 29
SECTION 3.3. Covenants of the Transferor . . . . . . . . 32
SECTION 3.4. Covenants of the Servicer . . . . . . . . . 43
SECTION 3.5. Tax Treatment. . . . . . . . . . . . . . . . 44
SECTION 3.6. Conditions Precedent . . . . . . . . . . . . 44
SECTION 3.7. Quarterly Certificate. . . . . . . . . . . . 47
SECTION 3.8. Periodic Notices and Reports . . . . . . . . 48
ARTICLE IV
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 4.1. Indemnities by the Transferor. . . . . . . . 49
SECTION 4.2. Indemnity for Taxes, Reserves and Expenses . 52
SECTION 4.3. Taxes. . . . . . . . . . . . . . . . . . . . 55
SECTION 4.4. Other Costs, Expenses and Related Matters. . 57
SECTION 4.5. Indemnification by Servicer . . . . . . . . 57
ARTICLE V
THE AGENT; BANK COMMITMENT; SENIOR CLASS AGENTS
SECTION 5.1. Authorization and Action of Agent. . . . . . 59
SECTION 5.2. Agent's Reliance, Etc. . . . . . . . . . . . 60
SECTION 5.3. Credit Decision. . . . . . . . . . . . . . . 61
SECTION 5.4. Indemnification of the Agent . . . . . . . . 62
SECTION 5.5. Successor Agent. . . . . . . . . . . . . . . 62
SECTION 5.6. Payments by the Agent. . . . . . . . . . . . 63
SECTION 5.7. Bank Commitment; Assignment to Bank Investors.64
SECTION 5.8. Authorization and Action of Senior Class Agent69
SECTION 5.9. Senior Class Agents' Reliance, Etc. . . . . . 71
SECTION 5.10. Credit Decision. . . . . . . . . . . . . . . 72
SECTION 5.11. Indemnification of the Senior Class Agent . . 72
SECTION 5.12. Successor Senior Class Agent . . . . . . . . .73
SECTION 5.13. Payments by the Senior Class Agents. . . . . .74
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Term of Agreement. . . . . . . . . . . . . . .75
SECTION 6.2. Waivers; Amendments. . . . . . . . . . . . . .75
SECTION 6.3. Notices, Etc.. . . . . . . . . . . . . . . . .76
SECTION 6.4. Governing Law; Submission to Jurisdiction;
Integration . . . . . . . . . . . . . . .76
SECTION 6.5. Severability . . . . . . . . . . . . . . . . .77
SECTION 6.6. Counterparts . . . . . . . . . . . . . . . . .77
SECTION 6.7. Successors and Assigns . . . . . . . . . . . .78
SECTION 6.8. Confidentiality. . . . . . . . . . . . . . . .78
SECTION 6.9. No Bankruptcy Petition Against the Senior
Class Conduits. . . . . . . . . . . . . .79
SECTION 6.10. No Recourse. . . . . . . . . . . . . . . . . .79
SECTION 6.11. Setoff . . . . . . . . . . . . . . . . . . . .80
SECTION 6.12. Further Assurances . . . . . . . . . . . . . .80
EXHIBITS
EXHIBIT A Form of Additional Investment Certificate
EXHIBIT B Form of Assignment and Assumption Agreement
EXHIBIT C Form of Secretary's Certificate
EXHIBIT D Form of Opinion
EXHIBIT E Form of Quarterly Certificate
EXHIBIT F Defined Terms in Financial Covenants
EXHIBIT G Proceedings
CERTIFICATE PURCHASE AGREEMENT (this "Agreement"), dated
as of August 21, 1997, by and among PROFFITT'S CREDIT
CORPORATION, a Nevada corporation (together with its suc-
cessors and permitted assigns, the "Transferor"),
PROFFITT'S, INC., a Tennessee corporation, as servicer
(in such capacity, the "Servicer"), ENTERPRISE FUNDING
CORPORATION, a Delaware corporation (together with its
successors and permitted assigns, "EFC"), RECEIVABLES
CAPITAL CORPORATION, a Delaware corporation (together
with its successors and permitted assigns, "RCC", and
collectively with EFC, the "Purchasers"), NATIONSBANK,
N.A., a national banking association ("NationsBank"), as
agent for the Senior Class Conduits and the Bank Inves-
tors (in such capacity, the "Agent"), as a Senior Class
Agent and individually as a Bank Investor, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a nation-
al banking association ("Bank of America"), as a Senior
Class Agent and individually as a Bank Investor.
W I T N E S S E T H:
WHEREAS, the Transferor may desire to convey, transfer
and assign, from time to time, to each of the Senior
Class Conduits, one or more certificates issued by the
Proffitt's Credit Card Master Trust pursuant to a master
pooling and servicing agreement (the "Master Pooling and
Servicing Agreement") dated as of August 21, 1997 among
the Transferor, the Servicer and Norwest Bank Minnesota,
National Association, a national banking association, as
trustee (the "Trustee") as supplemented by a Series 1997-1
Supplement dated as of the date hereof (the "Series
Supplement") among the Transferor, the Servicer and the
Trustee;
WHEREAS, the Senior Class Conduits may desire to, and the
Bank Investors, if requested, shall, accept such convey-
ance, transfer and assignment of such certificates on the
te rms and conditions set forth herein; and
WHEREAS, the Servicer has joined in this Agreement to
make certain representations, warranties, covenants and
agreements for the benefit of the Agent, the Senior Class
Agents, the Senior Class Conduits and the Bank Investors.
NOW THEREFORE, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1 Definitions. All capitalized terms used
herein shall have the meanings herein specified or as
specified in the Master Pooling and Servicing Agreement
or the Series Supplement, and shall include in the singu-
lar number the plural and in the plural number the singu-
lar:
"Act" shall mean the Securities Act of 1933, as amended.
"Additional Investor Amount" shall have the meaning set
forth in Section 2.2(a) hereof.
"Additional Investment Certificate" shall mean a
certificate of the Transferor substantially in the form
of Exhibit A hereto.
"Adjusted LIBOR Rate" means, with respect to any period
during which the return to any Bank Investor or a related
Program Support 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, if any, used for determin-
ing the maximum reserve requirement as specified in Regu-
lation 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 liabil-
ities (or, if more than one percentage shall be so appli-
cable, 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 deter-
mining the current annual assessment, if any, payable by
the Agent to the Federal Deposit Insurance Corporation in
respect of eurocurrency or eurodollar funding, lending or
liabilities.
"Affected Assets" shall mean, collectively, the Senior
Class Certificates and the Trust Property.
"Agent" shall mean NationsBank, in its capacity as agent
for the Senior Class Conduits and the Bank Investors, and
any successor agent appointed pursuant to Article V
hereof.
"Agreement" shall mean this Certificate Purchase Agree-
ment, as it may from time to time be amended, supplement-
ed or otherwise modified in accordance with the terms
hereof.
"Assignment" shall mean, with respect to each Senior
Class, an assignment pursuant to an Assignment and As-
sumption Agreement by which a Senior Class Conduit or a
Bank Investor may assign its interests in the Senior
Class Certificates, the Senior Class Certificate Princi-
pal Balance and the Trust Property pursuant to Section
5.7 hereof.
"Assignment Amount" shall mean, with respect to each Bank
Investor at any time, an amount equal to the lesser of
(a) such Bank Investor's Commitment and (b) the sum of
(i) the Bank Pro Rata Share for such Bank Investor of the
Senior Class Certificate Principal Balance for the relat-
ed Senior Class held by the related Senior Class Conduit
at such time and (ii) to the extent not paid by the
Transferor as provided in subsection 5.7(d) hereof, an
amount equal to all Carrying Costs to accrue with respect
to each Senior Class through the maturity of all out-
standing Related Commercial Paper.
"Assignment and Assumption Agreement" shall mean an
Assignment and Assumption Agreement substantially in the
form of Exhibit B hereto.
"Bank Base Rate" means, a rate per annum equal to the
greater of (i) the prime rate of interest announced
publicly by the Agent from time to time, changing when
and as said prime rate changes (such rate not necessarily
being the lowest or best rate charged by the Agent) 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 Agent from three Federal funds brokers of
recognized standing selected by it.
"Bank Investors" shall mean, (i) with respect to the
Senior Class of which EFC is a member, NationsBank and
its successors and assigns, (ii) with respect to the
Senior Class of which RCC is a member, Bank of America
and its successors and assigns, and (iii) with respect to
any other Senior Class, the financial institutions speci-
fied as such in any supplement hereto and their respec-
tive successors and permitted assigns.
"Bank of America" shall mean Bank of America National
Trust and Savings Association, a national banking
association, together with its successors and permitted
as signs.
"Bank Pro Rata Share" shall mean, for each Bank Investor,
the percentage equivalent of a fraction, the numerator of
which is the Commitment of such Bank Investor and the
denominator of which is the sum of the Commitments of all
Bank Investors in the Senior Class of which such Bank
Investor is a member.
"Benefit Plan" shall mean any employee benefit plan as
defined in Section 3(3) of ERISA which the Transferor or
any Eligible Originator maintains.
"Business Taxes" shall mean any Federal, state or local
income taxes or taxes measured by income, property taxes,
excise taxes, franchise taxes or other similar taxes.
"Capitalization" shall have the meaning set forth in
Exhibit F hereto.
"Collateral Agent" shall mean, (i) with respect to EFC,
any Person acting as collateral agent for certain secured
parties under the EFC commercial paper program and (ii)
with respect to any other Senior Class Conduit, the
collateral agent specified in any supplement hereto for
such Senior Class Conduit, if any.
"Commercial Paper" shall mean the promissory notes of a
Senior Class Conduit issued by such Senior Class Conduit
in the commercial paper market.
"Commitment" shall mean, for each Bank Investor, the
commitment of such Bank Investor to make acquisitions
from the Transferor or the related Senior Class Conduit
in accordance herewith in an amount not to exceed (i) for
NationsBank and Bank of America, the dollar amount set
forth opposite such Bank Investor's signature on the
signature pages hereto under the heading "Commitment",
minus the dollar amount of any Commitment or portion
thereof assigned pursuant an Assignment and Assumption
Agreement in accordance with Section 5.7 hereof prior to
the time of determination, 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) in the case of a Bank Investor for any other Senior
Class, the amount set forth in any supplement hereto for
the related Senior Class, minus the dollar amount of any
Commitment or portion thereof assigned pursuant an As-
signment and Assumption Agreement in accordance with Sec-
tion 5.7 hereof prior to the time of determination, 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, and (iii) in the case of any
permitted assignee of a Bank Investor pursuant to Section
5.7 hereof, the amount set forth in the Assignment and
Assumption Agreement pursuant to which such assignee ac-
quired its interest in the Senior Class Certificates, the
Senior Class Investor Amount and the Trust Property,
minus the dollar amount of any Commitment or portion
thereof assigned pursuant an Assignment and Assumption
Agreement in accordance with Section 5.7 hereof prior to
the time of determination, 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.
"Commitment Termination Date" shall mean August 20, 1998,
or such later date to which the Commitment Termination
Date may be extended by the Transferor, the Senior Class
Agents and the Bank Investors not later than 30 days
prior to the then current Commitment Termination Date.
"Consolidated EBITDA" shall have the meaning set forth in
Exhibit F hereto.
"Consolidated Fixed Charge Coverage Ratio" shall have the
meaning set forth in Exhibit F hereto.
"Consolidated Funded Senior Indebtedness" shall have the
meaning set forth in Exhibit F hereto.
"Consolidated Total Funded Indebtedness" shall have the
meaning set forth in Exhibit F hereto.
"Defined Benefit Plan" shall mean a "defined benefit
plan" as defined in Section 3(35) of ERISA which is or
was at any time during the current year or the immedi-
ately preceding five years contributed to by the Trans-
feror, any Eligible Originator or any ERISA Affiliate of
the Transferor or any Eligible Originator on behalf of
its employees.
"Early Collection Fee" means, for any funding period
(such funding period to be determined without regard to
the last sentence in Section 2.6(a) hereof) during which
the portion of the Senior Class Certificate Principal
Balance that was allocated to such funding period is
reduced for any reason whatsoever, the excess, if any, of
(i) the additional Carrying Costs 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.
"EFC" shall mean Enterprise Funding Corporation, a
Delaware corporation, together with its successors and
permitted assigns.
"Eligible Receivables" shall mean (solely for
the purposes of any Program Support Agreement), as of any
day, all Principal Receivables other than Ineligible
Receivables.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time,
and the regulations promulgated and the rulings issued
thereunder.
"ERISA Affiliate" shall mean, 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 Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorpo-
rated) under common control (within the meaning of Section
414(c) of the Internal Revenue Code) with such Person; or
(iii) for purposes of Code Section 412, a member of the
same affiliated service group (within the meaning of Sec-
tion 414(m) of the Internal Revenue Code) as such Person,
any corporation described in clause (i) above or any trade
or business described in clause (ii) above.
"Excluded Taxes" shall have the meaning set
forth in Section 4.3 hereof.
"Fee Letter" shall mean, collectively, the
letter agreement or agreements, dated the date hereof, (i)
among the Transferor and the Senior Class Conduits and (ii)
among the Transferor, the Agent and the Senior Class Agents
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.
"GAAP" shall mean generally accepted account-
ing principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Insti-
tute 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.
"Guaranty" shall mean, with respect to any
Person any agreement by which such Person assumes, guaran-
tees, 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, includ-
ing, 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.
"Indemnified Amounts" shall have the meaning
set forth in Section 4.1 hereof.
"Indemnified Parties" shall have the meaning
set forth in Section 4.1 hereof.
"Law" shall mean applicable 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
funding 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 funding period for a
term of one month or three months, as determined in accor-
dance with Section 2.6 hereof. If for any reason such rate
is not available, the term "LIBOR Rate" shall mean, for any
funding 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 approximately 11:00 a.m. (London
time) two London Business Days prior to the first day of
such funding period for a term of one month or three
months, as applicable; 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. If for any reason neither of such rates is avail-
able, the term "LIBOR Rate" shall mean, for any funding
period, the rate at which deposits in U.S. dollars are
offered to the Agent in the London interbank market at ap-
proximately 11:00 a.m. (London time) two London Business
Days prior to the first day of such funding period for a
term of one month or three months, as applicable.
"London Business Day" shall mean, with respect
to the determination of the LIBOR Rate, any Business Day
other than a Business Day on which banking institutions in
London, England trading in dollar deposits in the London
interbank market are authorized or obligated by law or
executive order to be closed.
"Majority Investors" shall mean at any time,
with respect to a Senior Class, Persons consisting of the
Bank Investors for such Senior Class and assignees thereof
which hold commitments in respect of the Senior Class
Facility Limit aggregating in excess of 51% of the applica-
ble Senior Class Facility Limit as of such date.
"Master Pooling and Servicing Agreement" shall
have the meaning specified in the recitals hereto.
"Material Adverse Effect" shall mean any event
or condition which would have a material adverse effect on
(i) the collectibility of the Receivables considered in the
aggregate, (ii) the condition (financial or otherwise),
businesses or the property of the Transferor or Proffitt's
and its subsidiaries taken as a whole, (iii) the ability of
the Transferor or any Eligible Originator to perform its
respective obligations under the Transaction Documents to
which it is a party and (iv) the interests of the Agent,
any Senior Class Agents, any Senior Class Conduit or any
Bank Investor under the Transaction Documents.
"McRae's" shall mean McRae's, Inc., a Missis-
sippi corporation.
"Merrill" shall mean Merrill Lynch Money Mar-
kets Inc., a Delaware corporation.
"Multiemployer Plan" shall mean 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, any Eligible Originator or any ERISA Affil-
iate of the Transferor or any Eligible Originator on behalf
of its employees.
"NationsBank" shall mean NationsBank, N.A., a
national banking association, together with its successors
and permitted assigns.
"Net Asset Test" shall mean, with respect to
any date of determination, in connection with an assignment
of the Senior Class Certificates held by a Senior Class
Conduit to the related Bank Investors, that the related
Subordinate Class Investor Amount as of the last day of the
prior Monthly Period is equal to or greater than zero.
"Net Investment" means (solely for the
purposes of this Agreement and any Program Support Agree-
ment), as of any date, the Senior Class Certificate
Principal Balance with respect to the Senior Class of which
EFC is a member.
"Official Body" shall mean 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" shall mean any Person other
than the Transferor that has entered into a receivables
purchase agreement, transfer and administration agreement
or other similar agreement with a Senior Class Conduit.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any other entity succeeding to the functions
currently performed by the Pension Benefit Guaranty
Corporation.
"Potential Pay Out Event" shall mean an event
which, but for the lapse of time or the giving of notice,
or both, would constitute a Pay Out Event.
"Program Support Agreement" shall mean an
agreement between a Senior Class Conduit and a Program
Support Provider evidencing the obligation of such Program
Support Provider to provide liquidity support, credit
enhancement or asset purchase facilities for or in respect
of any assets or liabilities of any Senior Class Conduit in
connection with the issuance by such Senior Class Conduit
of Commercial Paper.
"Program Support Provider" shall mean the
Person or Persons who will provide liquidity or program
support to a Senior Class Conduit in connection with the
issuance by such Senior Class Conduit of Commercial Paper.
"Purchasers" shall have the meaning specified
in the preamble to this Agreement.
"RCC" shall mean Receivables Capital Corpora-
tion, a Delaware corporation, together with its successors
and permitted assigns.
"Recipient" shall have the meaning set forth
in Section 2.4 hereof.
"Records" shall mean 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.
"Reinvestment Termination Date" shall mean the
Business Day on which the Agent or a Senior Class Agent
delivers to the Transferor (and, in the case of notice from
a Senior Class Agent, to the Agent) written notice that a
Senior Class Conduit has elected not to maintain its inter-
est in the related Senior Class Investor Amount; unless, on
such Business Day, the related Bank Investors accept an as-
signment of the Senior Class Certificate Principal Balance
with respect to the related Senior Class. Any such notice
shall be effective on the Business Day given if such notice
is given by 11:00 a.m. (New York time) on such Business Day
and shall be effective on the immediately succeeding
Business Day if such notice is given after 11:00 a.m. (New
York time) on such Business Day.
"Related Commercial Paper" shall mean (i) with
respect to EFC, Commercial Paper issued by EFC all or a
portion of the proceeds of which were used to finance the
acquisition of an interest in the Senior Class Certifi-
cates, (ii) with respect to RCC, Commercial Paper that is
allocated, in whole or in part, by RCC or its administrator
to fund or maintain the interest of RCC in the Senior Class
Certificates, and (iii) with respect to any other Senior
Class Conduit, the Commercial Paper specified as "Related
Commercial Paper" in any supplement hereto.
"Reportable Event" shall mean any of the
events set forth in Section 4043(b) of ERISA, other than
those events for which notice to the PBGC is waived under
applicable PBGC regulations.
"Section 4.2 Costs" shall have the meaning set
forth in Section 4.2 hereof.
"Senior Class" shall mean each group of Senior
Certificateholders consisting of a multi-seller commercial
paper conduit, the related Bank Investors and their
respective assigns and participants.
"Senior Class Agent" shall mean, (i) with
respect to the Senior Class of which EFC is a member,
NationsBank, (ii) with respect to the Senior Class of which
RCC is a member, Bank of America, and (iii) with respect to
any other Senior Class, the financial institution or other
Person identified in any supplement hereto for such Senior
Class.
"Senior Class Conduit" shall mean, with
respect to any Senior Class, the Certificateholder in such
Senior Class which is a multi-seller commercial paper con-
duit (and if more than one Certificateholder in such Senior
Class is a multi-seller commercial paper conduit, "Senior
Class Conduit" shall mean such Certificateholders collec-
tively).
"Senior Class Facility Limit" shall mean, (i)
with respect to the Senior Class of which EFC is a member,
$75,000,000, and (ii) with respect to the Senior Class of
which RCC is a member, $50,000,000, and (iii) with respect
to any other Class, the amount indicated in any supplement
hereto for such Senior Class; provided that in each case
such amount may not at any time exceed the aggregate
Commitments for the related Bank Investors.
"Series Supplement" shall have the meaning
specified in the recitals hereto.
"Subordinated Note" shall have the meaning
specified in the Receivables Purchase Agreements.
"Taxes" shall have the meaning set forth in
Section 4.3 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" shall mean the earliest of
(i) the Business Day designated by the Transferor to the
Agent and each Senior Class Agent as the termination date
at any time following 60 days' written notice to the Agent
and each Senior Class Agent, (ii) the date on which a Pay
Out Event is declared or automatically occurs pursuant to
the Master Pooling and Servicing Agreement or the Series
Supplement, (iii) the Stated Series Termination Date, (iv)
two Business Days prior to the Commitment Termination Date,
(v) the Reinvestment Termination Date and (vi) the date on
which a Program Support Agreement shall have terminated.
"Termination Event" shall, solely for the
purposes of this Agreement and any Program Support Agree-
ment, have the same meaning as "Pay Out Event" under the
Master Pooling and Servicing Agreement and the Series
Supplement.
"Transaction Costs" shall have the meaning set
forth in Section 4.4 hereof.
"Transaction Documents" shall mean, collec-
tively, this Agreement, each Receivables Purchase Agree-
ment, the Master Pooling and Servicing Agreement, the
Series Supplement, the Fee Letter, the Certificates and all
of the other instruments, documents and other agreements
executed and delivered by the Transferor or any Eligible
Originator in connection with any of the foregoing in
connection with Series 1997-1, in each case, as the same
may be amended, restated, supplemented or otherwise
modified from time to time.
"Transferor" shall mean Proffitt's Credit
Corporation, a Nevada corporation, together with its suc-
cessors and permitted assigns.
SECTION 2 Other Terms. All accounting terms
not specifically defined herein shall be construed in
accordance with GAAP. The symbol "$" shall mean the lawful
currency of the United States of America. 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 3 Computation of Time Periods.
Unless otherwise stated in this Agreement, in the compu-
tation 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". The
definitions of all terms defined herein shall include the
singular as well as the plural form of such terms and the
masculine of such terms as well as the feminine and neuter
genders of such terms.
ARTICLE II
PURCHASE OF SENIOR CERTIFICATES
SECTION 1 Purchase. Upon the terms and
subject to the conditions set forth herein, (x) the
Transferor may, at its option, convey, transfer and assign
to the Purchasers or the Bank Investors, as applicable, and
(y) the Purchasers may, at their respective option, or the
Bank Investors shall, if the related Purchaser determines
not to so accept and if so requested, accept such convey-
ance, transfer and assignment from the Transferor of, with-
out recourse except as provided herein and in the other
Transaction Documents, on the Closing Date, Senior Class
Certificates in the aggregate face amount of $125,000,000.
Such Senior Class Certificates shall accrue interest as de-
scribed in the Master Pooling and Servicing Agreement, as
supplemented by the Series Supplement, from and including
the Closing Date. Such Senior Class Certificates, if pur-
chased by (i) EFC or the related Bank Investors, shall be
delivered to and be registered in the name of "NationsBank,
N.A., as agent for the members of the Senior Class of which
Enterprise Funding Corporation and NationsBank, N.A. are
members" and shall be in the face amount of $75,000,000 and
(ii) RCC or the related Bank Investors, shall be delivered
to and be registered in the name of "Bank of America Na-
tional Trust and Savings Association, as agent for the mem-
bers of the Senior Class of which Receivables Capital
Corporation and Bank of America National Trust and Savings
Association are members" and shall be in the face amount of
$50,000,000.
SECTION 2 Increase of Senior Class Investor
Amount.
(a) Upon the terms and subject to the
conditions set forth herein and provided that neither the
Commitment Termination Date nor the Termination Date
(excluding, in the case of the Bank Investors, a "Termina-
tion Date" occurring as a result of clause (iv) or (v) of
the definition of "Termination Date") shall have occurred,
(x) the Transferor may, at its option, on any Distribution
Date during the Revolving Period, after delivery to the
Agent and each Senior Class Agent of an Additional Invest-
ment Certificate (to be received by the Agent and each
Senior Class Agent not later than 12 noon, New York City
time, on the second Business Day prior to the Distribution
Date on which the proposed increase in the Senior Class In-
vestor Amount is to occur), convey, transfer and assign to
the Senior Class Conduits or the Bank Investors, as
applicable, and (y) the Senior Class Conduits may, at their
respective option, or the Bank Investors shall, if the
related Senior Class Conduit has assigned its interest in
the Senior Class Certificate Principal Balance in whole to
the related Bank Investors and if so requested under
subsection 2.2(b), accept such conveyance, transfer and as-
signment from the Transferor of, without recourse except as
provided herein and in the other Transaction Documents, on
the following Distribution Date, an additional undivided
interest in the Trust in the amount specified in such
Additional Investment Certificate (each, an "Additional In-
vestor Amount"); provided that (i) such Additional Investor
Amount shall not cause the Senior Class Certificate Balance
for any Class plus the Interest Component of all Related
Commercial Paper issued by the related Senior Class Conduit
and then outstanding, if any, to exceed the Senior Class
Facility Limit for such Class, (ii) after giving effect to
such Additional Investor Amount, the Transferor Amount as
of the Determination Date immediately preceding such
Distribution Date and as reported in such Additional
Investment Certificate, shall not be less than the Minimum
Transferor Amount, (iii) after giving effect to such
Additional Investor Amount, the Subordinate Class Investor
Amount, as of the Business Day immediately preceding the
date of the Additional Investment Certificate and as
reported in such Additional Investment Certificate, shall
not be less than the Minimum Enhancement Amount, (iv) no
Potential Pay Out Event or Pay Out Event shall have oc-
curred and be continuing and (v) all of the representations
and warranties of the Transferor and the Servicer made
herein shall be true and correct as of such date (except to
the extent any such representation or warranty expressly
relates to an earlier date). The Senior Class Conduits or
the Bank Investors, as the case may be, shall acquire such
additional interest in consideration of the Senior Class
Conduits' or the Bank Investors', as the case may be, pay-
ment to the Transferor in immediately available funds of
the Additional Investor Amount for the related Senior
Class, and the Senior Class Investor Amount for each Senior
Class shall be increased to be equal to the Senior Class
Investor Amount immediately prior to such acquisition plus
the Additional Investor Amount for such Senior Class so ac-
quired. Each Additional Investor Amount shall be an amount
that results in the acquisition by each Senior Class of an
Additional Investor Amount of not less than $500,000 and
integral multiples of $100,000 in excess thereof. Each
acquisition of an Additional Investor Amount hereunder by
a Senior Class shall be made ratably in accordance with
their respective Senior Class Facility Limits. Each acqui-
sition of an Additional Investor Amount hereunder by the
Bank Investors of a Senior Class (in the aggregate) shall
be made ratably in accordance with the respective Commit-
ments of such Bank Investors.
(b) If a Senior Class Conduit elects not to
acquire any such Additional Investor Amount, the Transferor
(i) may withdraw its request that the Senior Class Conduits
acquire such Additional Investor Amount or (ii) may request
the related Bank Investors to accept an assignment of the
Additional Investor Amount for the related Senior Class
Conduit, in which case, if the Net Asset Test applicable to
the related Senior Class is met, the Senior Class Certifi-
cate Principal Balance for such Senior Class Conduit, prior
to such request to acquire such Additional Investor Amount,
shall be assigned to the related Bank Investors; provided,
however, that if the Net Asset Test applicable to the
related Senior Class is not met, such assignments shall not
be made and the Transferor shall be deemed to have with-
drawn its request that the Bank Investors acquire such
Additional Investor Amounts. The Transferor may not re-
quest and no Bank Investor shall acquire an Additional In-
vestor Amount on or after the occurrence and during the
continuation of a Potential Pay Out Event or a Pay Out
Event.
(c) In the event the Transferor requests
the Senior Class Conduits or any or all Bank Investors to
make any such acquisition of additional interests in the
Trust, the Transferor shall indemnify each Senior Class
Conduit and each such Bank Investor against any loss or ex-
pense incurred by any Senior Class Conduit or any such Bank
Investor, either directly or indirectly (including, in the
case of the Senior Class Conduits, through a Program
Support Agreement), as a result of any failure by the
Transferor to complete any such acquisition of an Addi-
tional Investor Amount (other than as a result of an
election by such Senior Class Conduit not to acquire such
Additional Investor Amount) including, without limitation,
any loss or reasonable out-of-pocket expenses incurred by
the Senior Class Conduits or any such Bank Investor, either
directly or indirectly (including, in the case of the
Senior Class Conduits, pursuant to a Program Support Agree-
ment), by reason of the liquidation or reemployment of
funds acquired by the Senior Class Conduits (or any Program
Support Provider) or any such Bank Investor (including,
without limitation, funds obtained by issuing commercial
paper or promissory notes or obtaining deposits as loans
from third parties) for the Senior Class Conduits to fund
such acquisition of an Additional Investor Amount.
(d) Each acquisition of an Additional
Investor Amount shall be subject to the further condition
precedent that, prior to the date of such acquisition, the
Transferor shall have delivered to the Agent and each
Senior Class Agent on the date that the Additional In-
vestment Certificate is delivered under subsection 2.2(a),
a certification in form and substance satisfactory to the
Agent and each Senior Class Agent, dated the date that such
certificate is delivered, that the conditions specified in
clauses (i), (ii), (iii), (iv), and (v) of subsection
2.2(a) have been satisfied (it being understood that such
certification may be included on the face of the Additional
Investment Certificate).
SECTION 3 Fees. The Transferor shall pay
such fees as are set forth in the Fee Letter at the times
and in the amounts set forth therein.
SECTION 4 Sharing of Payments, Etc. If any
Senior Class Conduit or any Bank Investor (for purposes of
this Section only, a "Recipient") shall obtain any payment
(whether voluntary, involuntary, through the exercise of
any right of setoff, or otherwise) on account of Senior
Class Certificates owned by it (other than pursuant to
Section 2.2(c) or Section 2.3 or Article IV hereof) in
excess of its ratable share of payments on account of
Senior Class Certificates obtained by the Senior Class
Conduits and/or the Bank Investors entitled thereto, such
Recipient shall forthwith purchase from the Senior Class
Conduits and/or the Bank Investors entitled to a share of
such amount participations in the Senior Class Certificates
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 ratable 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 5 Right of Setoff. Without in any
way limiting the provisions of Section 2.4, each of the
Senior Class Conduits and the Bank Investors is hereby
authorized (in addition to any other rights it may have) at
any time after the Termination Date or during the continu-
ance of a Potential Pay Out Event to setoff, 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 a Senior Class
Conduit or a Bank Investor to, or for the account of, the
Transferor against all amounts owing by the Transferor to
such Senior Class Conduit or Bank Investor under this
Agreement (even if contingent or unmatured), provided that
no Senior Class Conduit and no Bank Investor shall setoff
against any property of the Transferor which shall have
been pledged to the Trust or in which the Trust shall have
been granted an interest.
SECTION 6 Interest Rate; Eurodollar Rate Pro-
tection; Illegality.
(a) Prior to the Termination Date. At all
times hereafter, but prior to the Termination Date, and not
with respect to any portion of the Senior Class Certificate
Principal Balance held by any Bank Investor, the Transferor
may, subject to the applicable Senior Class Agent's
approval and the limitations described below, request that
the Senior Class Certificate Principal Balance held by a
Senior Class Conduit be allocated among one or more funding
periods, so that the aggregate amounts so allocated with
respect to such Senior Class Conduit at all times shall
equal the Senior Class Certificate Principal Balance held
by such Senior Class Conduit. The Transferor shall give
each Senior Class Agent irrevocable notice by telephone of
the new requested funding period(s) at least two (2) Busi-
ness Days prior to the expiration of any then existing
funding period for purposes of determining the LIBOR Rate
applicable to such funding period; provided, however, that
the applicable Senior Class Conduit or the related Senior
Class Agent 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) such Senior Class
Conduit or the related Senior Class Agent determines, in
its sole discretion, that the funding period requested by
the Transferor is unavailable or for any reason commer-
cially undesirable. Each Senior Class Conduit confirms
that it is its intention to fund all or substantially all
of the Senior Class Certificate Principal Balance held by
such Senior Class Conduit by issuing Related Commercial
Paper; provided that such Senior Class Conduit or the
related Senior Class Agent may determine, from time to
time, in its sole discretion, that funding such Senior
Class Certificate Principal Balance by means of Related
Commercial Paper is not possible or is not desirable for
any reason. In the case of any funding period outstanding
upon the Termination Date, such funding period shall end on
such date. In the case of the Senior Class of which EFC or
RCC is a member, if any Program Support Provider acquires
from EFC or RCC an interest in the Senior Class Certificate
Principal Balance held by EFC or RCC, then in the case of
EFC NationsBank and in the case of RCC Bank of America, on
behalf of such Program Support Provider, may exercise the
right of selection granted to EFC or RCC, as applicable, or
its related Senior Class Agent hereby then the initial
funding period applicable to any such interest shall be a
period of not greater than 14 days and shall accrue
Carrying Costs on the basis of the Bank Base Rate and
thereafter, provided that the Termination Date shall not
have occurred, Carrying Costs shall accrue on the basis of
either the Bank Base Rate or the Adjusted LIBOR Rate (with
a funding period of either one month or three months), as
determined by NationsBank or Bank of America, as applica-
ble.
Any portion of the Senior Class Certificate
Principal Balance transferred to the Bank Investors (or any
of them) pursuant to this Agreement prior to the Termina-
tion Date, shall initially bear interest at the Bank Base
Rate for a period of not greater than 14 days. Thereafter,
with respect to such portion of the Senior Class Certifi-
cate Principal Balance and with respect to any other por-
tion of the Senior Class Certificate Principal Balance held
by the Bank Investors (or any of them), provided that the
Termination Date shall not have occurred, the interest rate
applicable thereto shall be, at the Transferor's option,
either the Bank Base Rate or the Adjusted LIBOR Rate for
such period as may be specified by the Transferor. The
Transferor shall give the applicable Senior Class Agent
irrevocable notice by telephone of each requested funding
period (which funding period in the case of the Adjusted
LIBOR Rate shall be a period of either one or three months)
at least two (2) Business Days prior to the expiration of
any then existing funding period; provided, however, that
such Senior Class Agent may select, in its sole discretion,
the term of any such subsequent funding period and the rate
applicable thereto if (i) the Transferor fails to provide
such notice on a timely basis or (ii) such Senior Class
Agent determines, in its sole discretion, that the request-
ed funding period is unavailable or for any reason commer-
cially undesirable. Each Senior Class Agent confirms that
it is its intention to fund all or substantially all of the
Senior Class Certificate Principal Balance funded by the
related Bank Investors at the Adjusted LIBOR Rate; provided
that such Senior Class Agent may determine, from time to
time, in its sole discretion, that funding the related
Senior Class Certificate Principal Balance by such means is
not possible or is not desirable for any reason. 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.
(b) After the Termination Date. At all
times on and after the Termination Date, the Senior Class
Certificate Principal Balance (or applicable portion
thereof) shall bear interest at the Bank Base Rate plus
2.0%.
(c) Eurodollar Rate Protection. If a
Senior Class Agent is unable to obtain on a timely basis
the information necessary to determine the LIBOR Rate for
any proposed funding period, then
(i) the Senior Class Agent shall forthwith
notify the Bank Investors and the Transferor that the
Adjusted LIBOR Rate cannot be determined for such
funding period, and
(ii) while such circumstances exist, none
of the Senior Class Agents, the Bank Investors or the
Agent shall allocate the Senior Class Certificate
Principal Balance purchased during such period or
reallocate the Senior Class Certificate Principal Bal-
ance 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.
If, with respect to any outstanding funding
period which accrues Carrying Costs on the basis of the
Adjusted LIBOR Rate, the Senior Class Conduits or any of
the Bank Investors owning any interest in Senior Class
Certificates notifies the Senior Class Agent that it or any
Program Support Provider is unable to obtain matching
deposits in the London interbank market to fund its
purchase or maintenance of such interest in the Senior
Class Certificates or that the Adjusted LIBOR Rate applica-
ble to the Senior Class Certificate Principal Balance will
not adequately reflect the cost to the Person of funding or
maintaining its respective interest in the Senior Class
Certificates for such funding period then the Senior Class
Agent shall forthwith so notify the Transferor, whereupon
neither any Senior Class Conduit nor the Bank Investors, as
applicable, shall, while such circumstances exist, allocate
any Senior Class Certificate Principal Balance acquired
during such period or reallocate the Senior Class Certif-
icate Principal Balance 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.
(d) Illegality. Notwithstanding any other
provision of this Agreement, if a Senior Class Conduit or
any of the Bank Investors, as applicable, shall notify the
Senior Class Agent that such Person has determined (or has
been notified by any Program Support Provider) that the
introduction of or any change in or in the interpretation
of any law or regulation makes it unlawful (either for a
Senior Class Conduit, such Bank Investor, or such Program
Support Provider, as applicable), or any central bank or
other governmental authority asserts that it is unlawful,
for the Senior Class Conduit, such Bank Investor or such
Program Support Provider, as applicable, to fund the
purchases or maintenance of the Senior Class Certificate
Principal Balance at the Adjusted LIBOR Rate, then (x) as
of the effective date of such notice from such Person to
the Senior Class Agent, the obligation or ability of such
Senior Class Conduit or such Bank Investor, as applicable,
to fund its purchase or maintenance of the Senior Class
Certificate Principal Balance at the Adjusted LIBOR Rate
shall be suspended until such Person notifies the Senior
Class Agent that the circumstances causing such suspension
no longer exist and (y) such Senior Class Certificate Prin-
cipal Balance allocated to each funding period which ac-
crues 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
interest in the Senior Class Certificate Principal Balance
at the Adjusted LIBOR Rate until the last day of the appli-
cable funding period, be reallocated on the last day of
such funding period to another funding period in respect of
which the Senior Class Certificate Principal Balance
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 interest in the Senior Class Certificate Principal
Balance at the Adjusted LIBOR Rate until the end of the
applicable funding period, such Person's share of the
Senior Class Certificate Principal Balance allocated to
such funding period shall be deemed to accrue Carrying
Costs on the basis of the Bank Base Rate from the effective
date of such notice until the end of such funding period.
(e) Compensation. The Transferor shall
compensate each Senior Class Conduit and each Bank Inves-
tor, upon its written request (which request shall set
forth in reasonable detail the basis for requesting such
amounts), for all reasonable losses, out-of-pocket expenses
and liabilities (including, without limitation, any
interest paid by such Senior Class Conduit or Bank Investor
to lenders of funds borrowed by it to make or carry any
Senior Class Certificate Principal Balance and any loss
sustained by such Senior Class Conduit or Bank Investor in
connection with the re-employment of such funds), which
such Senior Class Conduit or Bank Investor actually sus-
tains if any payment in respect of any portion of the
Senior Class Certificate Principal Balance funded by such
Senior Class Investor or Bank Investor at a fixed rate
occurs on a date which is not a day agreed upon by the
Transferor and such Senior Class Conduit or Bank Investor.
SECTION 7 Notice of Reinvestment Termination
Date. A Senior Class Conduit that elects not to maintain
its interest in the related Senior Class Investor Amount
shall use commercially reasonable efforts to give the
related Senior Class Agent and the Agent two (2) Business
Days prior written notice of such election; provided that
prior notice shall not be required if such election is as
a result of such Senior Class Conduit's inability to issue
Commercial Paper in the commercial paper market; and
provided further that the Senior Class Conduit shall give
the related Senior Class Agent and the Agent notice
immediately after such election is made by such Senior
Class Conduit. The Agent shall use its reasonable efforts
to give the Transferor by facsimile immediate written
notice of such election.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 1 Representations and Warranties of
the Transferor. As of the date hereof, as of the Closing
Date and as of each day that an acquisition of an Addition-
al Investor Amount is made hereunder, the Transferor repre-
sents and warrants to the Agent, each Senior Class Agent,
each Senior Class Conduit and each Bank Investor, that all
representations and warranties described in this Section
3.1 are true and correct as of such day as though made on
and as of such day:
(a) Corporate Existence and Power. The
Transferor is a corporation duly organized and validly
existing in good standing under the laws of its jurisdic-
tion of incorporation, and has all corporate power, au-
thority and legal right and all material governmental
licenses, authorizations, consents and approvals required
to own its properties and conduct its business as such
properties are presently owned and such business is
presently conducted in each jurisdiction in which it
presently owns properties and presently conducts its
business, except where the absence of any such licenses,
authorizations, consents or approvals would not have a
Material Adverse Effect, and to execute, deliver and per-
form its obligations under this Agreement, the Master
Pooling and Servicing Agreement, the Series Supplement and
all other Transaction Documents to which the Transferor is
a party, and to execute and deliver to the Senior Class
Agents the Senior Class Certificates pursuant to the Series
Supplement.
(b) Due Qualification. The Transferor is
duly qualified to do business and is in good standing (or
is exempt from such requirement) in each jurisdiction in
which the nature of its business requires it to be so
qualified, and has obtained all necessary licenses and
approvals in each jurisdiction in which the failure to be
so qualified or to obtain such licenses and approvals would
have a Material Adverse Effect.
(c) Corporate and Governmental Autho-
rization; Contravention. The execution and delivery by the
Transferor of this Agreement, each Receivables Purchase
Agreement, the Master Pooling and Servicing Agreement, the
Series Supplement, the Fee Letter, the Certificates and the
other Transaction Documents to which the Transferor is a
party, the performance by the Transferor of the transac-
tions contemplated hereby and thereby and the fulfillment
by the Transferor of the terms hereof and thereof, are
within the Transferor's corporate powers, have been duly
authorized by all necessary corporate action, require no
action, approval or consent by or in respect of, or filing
with, any Official Body or official thereof that has not
been taken or obtained, and do not conflict with, violate
or result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time
or both) a default under, any Requirement of Law applicable
to the Transferor, or the Articles of Incorporation or
Bylaws of the Transferor or any agreement, judgment,
injunction, order, writ, decree or other instrument binding
upon the Transferor, or result in the creation or imposi-
tion of any Lien on the assets of the Transferor or any of
its Subsidiaries.
(d) Binding Effect. Each of this Agree-
ment, the Master Pooling and Servicing Agreement, the
Series Supplement, the Fee Letter, the Certificates and the
other Transaction Documents to which the Transferor is a
party constitutes the legal, valid and binding obligation
of the Transferor, enforceable against the Transferor in
accordance with its terms, subject to applicable bank-
ruptcy, insolvency, reorganization, conservatorship,
receivership, moratorium or other similar laws now or here-
after in effect affecting the rights of creditors generally
and to general equitable principles whether or not consid-
ered at law or in equity, and to limitations upon indemni-
fication and contribution contained in applicable securi-
ties laws and regulations.
(e) Accuracy of Information. All infor-
mation heretofore furnished by the Transferor to the Agent,
any Senior Class Agent, any Senior Class Conduit or any
Bank Investor for purposes of or in connection with this
Agreement, the Master Pooling and Servicing Agreement, the
Series Supplement or any transaction contemplated hereby or
thereby is, and all such information hereafter furnished by
the Transferor to any such party 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 its taxes, assessments and other govern-
mental charges.
(g) No Proceedings. Except as set forth in
Exhibit G hereto, there are no actions, suits, proceedings
or investigations pending or, to the best 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, regulatory body, admin-
istrative agency, arbitrator or other tribunal or govern-
mental instrumentality (i) asserting the invalidity of this
Agreement, the Master Pooling and Servicing Agreement, the
Series Supplement, the Certificates or the other Transac-
tion Documents, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Master Pooling and
Servicing Agreement, the Series Supplement, the Certifi-
cates or the other Transaction Documents, or (iii) seeking
any determination or ruling that, individually or in the
aggregate, would have a Material Adverse Effect.
(h) Use of Proceeds. The Transferor is not
engaged in the business of extending credit for the
purposes of purchasing or carrying margin stock, and no
proceeds of any acquisition of an interest in the Senior
Class Certificates, directly or indirectly, will be used
for a purpose that violates, or would be inconsistent with,
Regulations G, T, U and X promulgated by the Federal
reserve Board from time to time.
(i) Aggregate Principal Balance. On each
day, the product of (i) the aggregate Floating Allocation
Percentage with respect to Default Amounts for all Senior
Classes (as of the end of the most recent Monthly Period)
and (ii) the sum of the Excess Funding Amount and the
Aggregate Principal Receivables, shall at least equal the
sum of the Senior Class Certificate Principal Balances for
all Senior Classes.
(j) Transferor Amount; Subordinate Class
Investor Amount. After giving effect to the issuance of
the Senior Class Certificates on the Closing Date, (i) the
Transferor Amount is not less than the Minimum Transferor
Amount and (ii) the Subordinate Class Investor Amount is
not less than the Minimum Enhancement Amount.
(k) Credit Card Guidelines. Since January
9, 1997, other than as described in the Prospectus, dated
August 14, 1997, relating to the Trust's Series 1997-2
Certificates, there have been no material changes in the
Credit Card Guidelines other than as permitted under the
Master Pooling and Servicing Agreement. Since such date,
no material adverse change has occurred in the overall rate
of collection of the Receivables.
(l) No Pay Out Event. No event has oc-
curred and is continuing and no condition exists which
constitutes a Pay Out Event or a Potential Pay Out Event.
(m) Not an Investment Company. The Trans-
feror is not, and is not controlled by, an "investment
company" within the meaning of the 1940 Act, or is exempt
from all provisions of such Act.
(n) ERISA. No liability exists under Title
IV of ERISA or under Section 412 of the Internal Revenue
Code arising out of a Defined Benefit Plan or a
Multiemployer Plan of the Transferor or any ERISA Affili-
ate.
(o) Bulk Sales. No transaction contem-
plated by this Agreement, any Receivables Purchase Agree-
ment or the Master Pooling and Servicing Agreement requires
compliance with any bulk sales act or similar law.
(p) Transfers Under Receivables Purchase
Agreement. Each Receivable which has been transferred to
the Transferor by an Eligible Originator has been purchased
by the Transferor from such Eligible Originator pursuant
to, and in accordance with, the terms of a Receivables Pur-
chase Agreement.
(q) Reasonable Equivalent Value. The
Transferor has given reasonably equivalent value to each
Eligible Originator in consideration for the transfer to
the Transferor of the applicable Receivables and Collec-
tions and Related Security, if any, from such Eligible
Originator, and each such transfer shall not have been made
for or on account of an antecedent debt owed by such Eligi-
ble Originator to the Transferor. The Transferor has re-
ceived reasonably equivalent value in consideration for the
transfer to the Trust of the Receivables and Collections
and Related Security, if any, and will have received rea-
sonably equivalent value in consideration for the sale of
the Senior Certificates (and any sale of additional
interests in the Trust in connection with any Additional
Investor Amount) to the Senior Class Conduits and the Bank
Investors.
(r) Representations and Warranties. Each
representation and warranty of the Transferor set forth in
Article IV of each Receivables Purchase Agreement and in
Article II of the Master Pooling and Servicing Agreement is
true and correct in all material respects and the Trans-
feror hereby remakes all such representations and warran-
ties for the benefit of the Agent, each Senior Class Agent,
each Senior Class Conduit and each Bank Investor.
(s) Validity of Certificates. The Cer-
tificates will be issued pursuant to the terms of the
Master Pooling and Servicing Agreement and the Series
Supplement and, when executed and authenticated by the
Trustee in accordance with the Master Pooling and Servicing
Agreement and the Series Supplement and delivered pursuant
to this Agreement, will be validly issued and outstanding
and entitled to the benefits of the Master Pooling and
Servicing Agreement and the Series Supplement. The Certif-
icates will be in all material respects in the form con-
templated by the Master Pooling and Servicing Agreement and
the Series Supplement. At the time of transfer to the Pur-
chasers hereunder, the Transferor shall have good and
marketable title to the Certificates free and clear of any
Lien.
(t) No General Solicitation. None of the
Transferor or any of its affiliates (as defined in
Rule 501(b) under the Act) or any Person (other than the
Purchasers and their respective affiliates, as to whom the
Transferor makes no representation) acting on its behalf
has engaged, in connection with the offering of the Senior
Class Certificates, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under
the Act.
(u) No Registration under the Act; Trust
Indenture Act. It is not necessary in connection with the
offer, sale and delivery of the Certificates to the Pur-
chasers to register the Certificates under the Act. The
Master Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939.
The representations and warranties set forth
in this Section shall survive the sale of the Senior Class
Certificates to the Senior Class Conduits or the Bank
Investors and the acquisition by the Senior Class Conduits
or the Bank Investors of any additional interests in the
Trust in connection with any Additional Investor Amounts.
Upon discovery by the Transferor, the Agent, any Senior
Class Agent, any Senior Class Conduit or any Bank Investor
of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give
prompt written notice thereof to each other party, provided
that the failure by any such party to give any such notice
shall not impair any of such parties' rights hereunder.
SECTION 2 Representations and Warranties of
the Servicer. As of the date hereof, as of the Closing
Date and as of each day that an acquisition of an Addition-
al Investor Amount is made hereunder, the Servicer hereby
makes and shall be deemed to have made the following
representations and warranties:
(a) Organization and Good Standing. The
Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of
its incorporation and has all corporate power , authority
and legal right and all material governmental licenses,
authorizations, consents and approvals required to own its
properties and conduct its business as such properties are
presently owned and such business is presently conducted in
each jurisdiction in which it presently owns properties and
presently conducts its business, except where the absence
of any such licenses, authorizations, consents or approvals
would not have a Material Adverse Effect, and to execute,
deliver and perform its obligations under this Agreement,
the Master Pooling and Servicing Agreement and all other
Transaction Documents to which it is a party and to service
the Receivables as required under federal and state law.
(b) Due Qualification. The Servicer is
duly qualified to do business and is in good standing (or
is exempt from such requirements) in each jurisdiction in
which the nature of its business requires it to be so
qualified and has obtained all necessary licenses and
approvals in each jurisdiction in which the failure to be
so qualified or to obtain such licenses and approvals would
have a Material Adverse Effect or a material adverse effect
on the Servicer's ability to perform its obligation under
the Master Pooling and Servicing Agreement or to service
the Receivables as required under federal and state law.
(c) Corporate and Governmental Autho-
rization; Contravention. The execution and delivery and
performance by the Servicer of this Agreement and the other
Transaction Documents to which the Servicer is a party, the
performance by the Servicer of the transactions contemplat-
ed hereby and thereby and the fulfillment by the Servicer
of the terms hereof and thereof are within the Servicer's
corporate powers, have been duly authorized by all neces-
sary corporate action, require no action, consent or
approval by or in respect of, or filing with, any Official
Body or official thereof that has not been taken or
obtained, and do not conflict with, violate or result in
any breach of any of the terms and provisions of, or con-
stitute (with or without notice or lapse of time or both)
a default under, any Requirement of Law applicable to the
Servicer, or the Articles of Incorporation or Bylaws of the
Servicer or any agreement, judgment, injunction, order,
writ, decree or other instrument binding upon the Servicer
and will not result in the creation or imposition of any
Lien on assets of the Servicer or any of its Subsidiaries.
(d) Binding Effect. Each of this Agreement
and the other Transaction Documents to which the Servicer
is a party constitutes the legal, valid and binding obliga-
tion of the Servicer, enforceable against the Servicer in
accordance with its terms, subject to applicable bank-
ruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect affecting the en-
forcement of creditors' rights in general and to general
equitable principles, whether or not considered at law or
in equity, and to limitations upon indemnification and
contribution contained in applicable securities laws and
regulations.
(e) Accuracy of Information. All infor-
mation heretofore furnished by the Servicer to the Trans-
feror, the Agent, any Senior Class Agent, any Senior Class
Conduit or any Bank Investor for purposes of or in connec-
tion with this Agreement, the Master Pooling and Servicing
Agreement, the Series Supplement or any transaction contem-
plated hereby or thereby is, and all such information
hereafter furnished by the Servicer to any such party will
be, true and accurate in every material respect, on the
date such information is stated or certified.
(f) 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.
(g) No Proceedings. Except as set forth in
Exhibit G hereto, there are no proceedings or investiga-
tions pending or, to the best knowledge of the Servicer,
threatened against the Servicer or any Affiliate of the
Servicer before any court, regulatory body, administrative
agency or other tribunal or governmental instrumentality
(i) asserting the invalidity of this Agreement or the other
Transaction Documents, (ii) seeking to prevent the issuance
of the Certificates or the consummation of any of the
transactions contemplated by this Agreement and the other
Transaction Documents or (iii) seeking any determination or
ruling that, individually or in the aggregate, would have
a Material Adverse Effect.
(h) Credit Card Guidelines. Since January
9, 1997, other than as described in the Prospectus, dated
August 14, 1997, relating to the Trust's Series 1997-2
Certificates, there have been no material changes in the
Credit Card Guidelines other than as permitted hereunder
and under the Master Pooling and Servicing Agreement.
Since such date, no material adverse change has occurred in
the overall rate of collection of the Receivables.
(i) Collections and Servicing. Since
May 9, 1997, there has been no material adverse change in
the ability of the Servicer to service and collect the Re-
ceivables and no material adverse change has occurred in
the overall rate of collections of Receivables.
(j) Not an Investment Company. The
Servicer is not an "investment company" within the meaning
of the 1940 Act, or is exempt from all provisions of such
Act.
(k) ERISA. The Servicer is in compliance
in all material respects with ERISA.
The representations and warranties set forth
in this Section shall survive the sale of the Senior Class
Certificates to the Senior Class Conduits or the Bank
Investors and the acquisition by the Senior Class Conduits
or the Bank Investors of any additional interests in the
Trust in connection with any Additional Investor Amounts.
Upon discovery by the Servicer, the Transferor, the Agent,
any Senior Class Agent, any Senior Class Conduit or any
Bank Investor of a breach of any of the foregoing repre-
sentations and warranties, the party discovering such
breach shall give prompt written notice thereof to each
other party, provided that the failure by any such party to
give any such notice shall not impair any of such parties'
rights hereunder.
SECTION 3 Covenants of the Transferor. At
all times from the date hereof to the later to occur of (i)
the Termination Date or (ii) the date on which all amounts
due to the Senior Certificateholders under this Agreement
and the other Transaction Documents shall have been paid in
full, unless the Agent and each Senior Class Agent shall
otherwise consent in writing:
(a) Financial Reporting. The Transferor
will, and will cause each Eligible Originator and each of
such Eligible Originator's Subsidiaries to, maintain, for
itself and each of its respective Subsidiaries, a system of
accounting established and administered in accordance with
GAAP, and will furnish to the Agent and each Senior Class
Agent:
(i) Annual Reports. Within one
hundred (100) days after the close of the
Transferor's and Proffitt's fiscal years, (be-
ginning with the fiscal year ending in 1998) au-
dited financial statements, prepared in accor-
dance with GAAP on a consolidated basis for (x)
the Transferor and (y) for Proffitt's and its
Subsidiaries, 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 certified by Coopers & Lybrand,
L.L.P., or other 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 com-
pliance with the financial covenants set forth
in Section 3.4(j) hereof, or, if Proffitt's is
not in compliance with such covenants, stating
the nature and status thereof and (ii) a certif-
icate of the chief financial officer or chair-
man, president, treasurer or any executive or
senior vice president of the Transferor stating
that no Pay Out Event or Potential Pay Out Event
exists, or if any Pay Out Event or Potential Pay
Out Event exists, stating the nature and status
thereof and showing the computation of each of
the financial ratios and restrictions set forth
in Section 3.4(j) hereof.
(ii) Quarterly Reporting. With-
in fifty (50) 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, consolidated
unaudited balance sheets as at the close of each
such period and consolidated related statements
of operations 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 Section 3.4(j) hereof all certified
by its chief financial officer, chairman, presi-
dent, treasurer or any executive or senior vice
president.
(iii) Compliance Certificate.
Together with the financial statements required
hereunder, a compliance certificate signed by
the chief financial officer, chairman, presi-
dent, treasurer or any executive or senior vice
president of the Transferor or Proffitt's, as
applicable, stating that (x) the attached finan-
cial statements have been prepared in accordance
with GAAP and accurately reflect the financial
condition of the Transferor or Proffitt's as ap-
plicable (in the case of quarterly statements,
subject to normal adjustments) and (y) to the
best of such Person's knowledge, no Pay Out
Event or Potential Pay Out Event exists, or if
any Pay Out Event or Potential Pay Out Event
exists, stating the nature and status thereof
and showing the computation of, and showing
compliance with, each of the financial ratios
and restrictions set forth in Section 3.4(j)
hereof.
(iv) Shareholders Statements and
Reports. Promptly upon the furnishing thereof
generally to the shareholders of Proffitt's,
copies of all financial statements, reports and
proxy statements so furnished to the extent not
included in the filings provided pursuant to
paragraph (v) below.
(v) S.E.C. Filings. Promptly
upon (x) the filing thereof, copies of all annu-
al, quarterly, monthly or other regular reports
and reports on Form 8-K and (y) the effective-
ness thereof, copies of all registration state-
ments, in each case which Proffitt's or any sub-
sidiary files with the Securities and Exchange
Commission (excluding any filings on Form S-8).
(vi) Notice of Pay Out Events or
Potential Pay Out Events. As soon as possible
and in any event within two (2) days after the
occurrence of each Pay Out Event or each Poten-
tial Pay Out Event, a statement of the chief fi-
nancial officer or chief accounting officer of
the Transferor setting forth details of such Pay
Out Event or Potential Pay Out Event and the ac-
tion which the Transferor proposes to take with
respect thereto.
(vii) Change in Credit Card
Guidelines and Debt Ratings. Within thirty (30)
days after the date of any ,material change in
or amendment to the Credit Card Guidelines is
made, a copy of the Credit Card Guidelines then
in effect indicating such change or amendment.
Within fifteen (15) days after any change in
Proffitt's public or private debt ratings by any
rating agency that has been requested by
Proffitt's to provide any such rating, if any, a
written certification of Proffitt's public and
private debt ratings after giving effect to any
such change.
(viii) Credit Card Guidelines.
Within ten (10) Business Days of the request of
the Agent or any Senior Class Agent, a complete
copy of the Credit Card Guidelines then in ef-
fect.
(ix) ERISA. Promptly after the
filing or receiving thereof, copies of all
reports and notices with respect to any Report-
able Event which the Transferor, any Eligible
Originator or any ERISA Affiliate of the Trans-
feror or any Eligible Originator files under
ERISA with the Internal Revenue Service, the
PBGC or the U.S. Department of Labor or which
the Transferor, any Eligible Originator or any
ERISA Affiliates of the Transferor or any Eligi-
ble Originator receives from the Internal Reve-
nue Service, the PBGC or the U.S. Department of
Labor.
(x) Other Information. Such
other information (including non-financial in-
formation) as the Agent or any Senior Class
Agent may from time to time reasonably request
with respect to any Eligible Originator, the
Transferor or any Subsidiary of any of the
foregoing.
(b) Conduct of Business. The Transferor
will 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 jurisdic-
tion 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 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 Inspec-
tion of Records. The Transferor will, and will exercise
its rights under Section 5.1(c) of the Receivable Purchase
Agreement to obtain information from each Eligible Origina-
tor in order to, furnish to the Agent and each Senior Class
Agent from time to time such information with respect to
the Receivables as the Agent or such Senior Class Agent may
reasonably request, including, without limitation, listings
identifying the Obligor and the Outstanding Principal
Balance for each Receivable. The Transferor will permit,
and will exercise its rights under Section 5.1(c) of the
Receivable Purchase Agreement in order to permit, at any
time and from time to time during regular business hours
and upon reasonable prior notice, the Agent and each Senior
Class Agent, or their respective agents or representatives,
(i) to examine and make copies of and take abstracts from
all Records (at the expense of the Transferor) and (ii) to
visit the offices and properties of the Transferor or such
Eligible Originator, as applicable, for the purpose of
examining such Records, and to discuss matters relating to
Receivables or the Transferor's or such Eligible
Originator'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 Eligible
Originator, as applicable, having knowledge of such mat-
ters.
(e) Keeping of Records and Books of Ac-
count. The Transferor will, and will cause each Eligible
Originator 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 maintain, all documents, books, records and other
information reasonably necessary or customary for the
collection of all Receivables (including, without limita-
tion, records adequate to permit the daily identification
of each new Receivable and all Collections of and adjust-
ments to each existing Receivable). The Transferor will
give the Agent and each Senior Class Agent notice of any
material change in the administrative and operating proce-
dures of the Transferor or any Eligible Originator.
(f) Sale Treatment. The Transferor will
not (i) account for (including for accounting and tax
purposes), or otherwise treat, the transactions contem-
plated by the Receivables Purchase Agreement in any manner
other than as a sale of the Receivables by such Eligible
Originator to the Transferor, or (ii) account for (other
than for tax purposes) or otherwise treat the transactions
contemplated hereby in any manner other than as a sale of
an undivided percentage ownership interest in the Receiv-
ables by the Transferor to the Senior Class Conduits or the
Bank Investors, as applicable. In addition, the Transferor
shall, and shall cause each Eligible Originator to, dis-
close (in a footnote or otherwise) in all of its respective
financial statements (including any such financial state-
ments consolidated with any other Persons' financial state-
ments) the existence and nature of the transaction con-
templated by the Master Pooling and Servicing Agreement and
by each Receivables Purchase Agreement and the interest of
the Transferor (in the case of an Eligible Originator's
financial statements), the Senior Class Conduits and the
Bank Investors in the Affected Assets.
(g) Corporate Documents. The Transferor
shall not amend, alter, change or repeal any Articles of
its Articles of Incorporation without the prior written
consent of the Agent and each Senior Class Agent.
(h) No Sales, Liens, Etc. Except as
otherwise permitted by the Master Pooling and Servicing
Agreement, the Series Supplement, this Agreement or any
other Transaction Document, the Transferor will not sell,
assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Lien upon (or
the filing of any financing statement with respect to), any
of the Trust Property.
(i) No Extension or Amendment of Receiv-
ables; Discount Percentage. Except as otherwise permitted
by the Transaction Documents, the Transferor will not, and
will not change or waive Section 5.1(f) of any Receivable
Purchase Agreement to permit any Eligible Originator to,
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. The Transferor further cove-
nants 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 fi-
nance charges assessed on any Receivable or other fees on
any Account if, as a result of such reduction, the rea-
sonable expectation of the Portfolio Adjusted Yield as of
such date would be less than 1.00%.
(j) Changes to Account Agreements. The
Transferor shall not change the terms and provisions of the
Account Agreements or the Credit Card Guidelines in any re-
spect (including, without limitation, the calculation of
the amount, and the timing, of uncollectible Receivables)
except to the extent permitted by the Master Pooling and
Servicing Agreement.
(k) No Change in Business or Credit Card
Guidelines. The Transferor will not make any change in the
character of its business or in the Credit Card Guidelines,
which change would, in either case, impair the
collectibility of any substantial portion of the Receiv-
ables or otherwise result in a Material Adverse Effect.
(l) Amendment of Receivables Purchase
Agreement, Master Pooling and Servicing Agreement and
Series Supplement. The Transferor will not amend, waive,
modify or supplement any Receivables Purchase Agreement,
the Master Pooling and Servicing Agreement, the Series Sup-
plement or any other Transaction Document to which it is a
party without the prior written consent of the Agent and
each Senior Class Agent to the substance and form of any
such amendment, modification, waiver or supplement and, in
addition, will not permit any Eligible Originator to take
(or acquiesce in the taking of any such action) any action
(including any omission to act) under any Transaction Docu-
ment to which it is a party that would have a material
adverse effect on the Agent, any Senior Class Conduit or
any Bank Investor or which is inconsistent with the terms
of the Master Pooling and Servicing Agreement, the Series
Supplement or this Agreement.
(m) Other Debt. Except as permitted by
this Agreement or the Master Pooling and Servicing Agree-
ment, 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, under any Series Supplement, any
Enhancement or under a Receivables Purchase Agreement for
the purchase price of the Receivables under such Receiv-
ables Purchase Agreement, and (ii) other indebtedness
incurred in the ordinary course of its business, the amount
thereof which is past due not to exceed $9,750 at any time
outstanding.
(n) ERISA Matters. The Transferor will not
(i) 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 Defined
Benefit Plan other than a Multiemployer Plan that could
reasonably result in the PBGC or IRS filing a lien; (iii)
fail to make any payments to any Multiemployer Plan that
the Transferor, such Eligible Originator or any ERISA
Affiliate of the Transferor or such Eligible Originator is
required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto; (iv)
terminate any Defined Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any
Reportable Event which represents a material risk of a
liability to the Transferor, such Eligible Originator, or
any ERISA Affiliate of the Transferor or such Eligible
Originator under ERISA or the Code.
(o) Receivables Purchase Agreement. The
Transferor, in its capacity as purchaser of the Receivables
from the Eligible Originators pursuant to the related Re-
ceivables Purchase Agreement, will at all times enforce the
covenants and agreements of each Eligible Originator in
each Receivables Purchase Agreement. With respect to any
Receivable sold by an Eligible Originator to the Trans-
feror, the Transferor shall, and shall cause such Eligible
Originator 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, by increase in the amount of the Subordinated
Note, a contribution of capital or any combination thereof,
to such Eligible Originator in an aggregate amount equal to
the purchase price for such Receivable as required by the
terms of such Receivables Purchase Agreement.
(p) Master Pooling and Servicing Agreement.
The Transferor will comply with the covenants set forth in
Section 2.5 of the Master Pooling and Servicing Agreement.
(q) Notice of Breach; Liens. The Trans-
feror shall advise the Agent and each Senior Class Agent
promptly, in reasonable detail, (i) after becoming aware of
any Lien on any Receivable or other Trust Property other
than the conveyances under the Master Pooling and Servicing
Agreement or under a Receivables Purchase Agreements or
Liens permitted under Section 2.5(b) of the Master Pooling
and Servicing Agreement or under Section 5.2(a) of the
Receivable Purchase Agreement, (ii) of any breach by the
Transferor or the Servicer of any of their respective
representations, warranties and covenants contained herein
or in the Master Pooling and Servicing Agreement and (iii)
of the occurrence of any other event which would have a
material adverse effect on the Trustee's interest in the
Receivables or the collectibility thereof.
(r) Notice of Additions. On or before the
fifth Business Day prior to the Additional Account Closing
Date with respect to any Additional Accounts designated
pursuant to subsections 2.6(a) or (b) of the Master Pooling
and Servicing Agreement, the Transferor shall give the
Agent and each Senior Class Agent written notice that the
Receivables in such Additional Accounts will be included,
specifying the approximate aggregate amount of Receivables
in such Additional Accounts. The Transferor shall give the
Agent and each Senior Class Agent five (5) Business Days
prior written notice of (i) any designation of Accounts to
be included as Accounts pursuant to subsection 2.5(d) of
the Master Pooling and Servicing Agreement and (ii) any
discontinuance or suspension of any such designation. The
Transferor shall not include as Automatic Additional
Accounts any Accounts of a type not included as Accounts on
the Initial Closing Date or included on any Additional
Account Closing Date pursuant to which Additional Accounts
are designated pursuant to subsection 2.6(b) of the Master
Pooling and Servicing Agreement or consented to in writing
by the Agent and each Senior Class Agent.
(s) Protection of Interest in Trust
Property. The Transferor shall execute and file such con-
tinuation statements and any other documents reasonably re-
quested by the Trustee, the Agent, any Senior Class Agent,
any Senior Class Conduit or any Bank Investor or which may
be required by law to fully preserve and protect the inter-
est of the Trustee in and to the Receivables and the other
Trust Property.
(t) Transfer of Transferor Interest and
Subordinate Class Certificates. The Transferor shall not
assign, transfer or otherwise convey to any Person any
interest in the Transferor Interest or the Subordinate
Class Certificates held by it without (i) the prior written
consent of the Agent and each Senior Class Agent and (ii)
delivering to the Trustee prior thereto an Opinion of Coun-
sel to the effect that (x) the conveyed interest in the
Transferor's Interest or the Subordinate Class Certificates
will be treated as either debt or an interest in a part-
nership for federal income tax purposes and that the
conveyance of such interest will not cause the Trust to be
characterized for federal income tax purposes as an
association or a publicly traded partnership taxable as a
corporation or otherwise have any material adverse impact
on the federal or applicable state income taxation of any
outstanding Certificates or any Certificate Owner and (y)
such transfer will not cause a taxable event for federal
income tax purposes to any Investor Certificateholder.
(u) No Assignment. The Transferor shall
not assign any of its rights or delegate any of its duties
hereunder or under the Master Pooling and Servicing Agree-
ment or the Series Supplement or under any of the other
Transaction Documents to which it is a party without the
prior written consent of the Agent and each Senior Class
Agent.
(v) No Designation. The Transferor shall
not designate an Eligible Originator other than G.R.
Herberger's, Inc., McRae's, Inc., Parisian, Inc. or
Proffitt's, Inc., without the prior written consent of the
Agent and each Senior Class Agent.
(w) Consent of Agent and Senior Class
Agent. The Transferor shall obtain the written consent of
the Agent and each Senior Class Agent prior to taking any
action under the Master Pooling and Servicing Agreement
that would require (i) the satisfaction of the Rating
Agency Condition under the Master Pooling and Servicing
Agreement (whether or not any Series is then currently
rated by any rating agency) or (ii) the consent of the
Trustee.
(x) Notice of Delegation of Servicer's
Duties. The Transferor promptly shall notify the Agent and
each Senior Class Agent of any delegation by the Servicer
of any of the Servicer's duties under the Master Pooling
and Servicing Agreement or the Series Supplement, provided
that the designation of McRae's, Inc. or any other Affili-
ate of the Transferor as Subservicer shall be permitted
without notice.
(y) Notice of Resignation or Removal of the
Trustee. The Transferor promptly shall notify the Agent
and each Senior Class Agent of any resignation or removal
of the Trustee under the Master Pooling and Servicing
Agreement.
(z) Reduction of Investor Amounts. If, on
any day, (x) the Senior Class Certificate Principal Balance
for any Senior Class plus the Interest Component of all
Related Commercial Paper issued by the related Senior Class
Conduit and then outstanding, if any, exceeds the Senior
Class Facility Limit for such Class or (y) the product of
(i) the aggregate Floating Allocation Percentage with
respect to Default Amounts for all Senior Classes (as of
the end of the most recent Monthly Period) and (ii) the sum
of the Excess Funding Amount and the Aggregate Principal
Receivables, is less than the sum of the Senior Class Cer-
tificate Principal Balances for all Senior Classes, the
Transferor shall distribute on such day to such Senior
Class Conduit, in accordance with subsection 4.5(d) of the
Series Supplement an amount sufficient to (I) reduce the
sum of the Senior Class Investor Amount and the Interest
Component of all outstanding Related Commercial Paper for
such Senior Class to an amount which is less than the
Senior Class Facility Limit for such Senior Class or (II)
reduce the sum of the Senior Class Certificate Principal
Balances for all Senior Classes plus the Minimum Enhance-
ment Amount to an amount which is less than the Series
Allocation Percentage with respect to Principal Receivables
(as of the end of the most recent Monthly Period) of the
Aggregate Outstanding Principal Balance, as applicable.
SECTION 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 all amounts due
to the Senior Certificateholders under this Agreement and
the other Transaction Documents shall have been paid in
full, unless the Agent and each Senior Class Agent shall
otherwise consent in writing:
(a) Records. The Senior Class Certificate-
holders and their agents and representatives shall at all
times upon reasonable prior notice have full access during
normal business hours to all Records of the Servicer, and
the Agent, each Senior Class Agent and the Senior Class
Certificateholders and their agents and representatives may
examine the same, take extracts therefrom and make photo-
copies thereof, and the Servicer agrees to render to such
Persons, at the Servicer's cost and expense, such clerical
and other assistance as may be reasonably requested with
regard thereto.
(b) No Extension or Amendment of Receiv-
ables. Except as otherwise expressly permitted by the
Transaction Documents, 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 required by any Requirement of Law, it
shall not 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
Portfolio Adjusted Yield as of such date would be less than
1.00%.
(c) Conduct of Business. The Servicer
will, and will cause each of its Subsidiaries to which it
delegates any servicing functions under the Master Pooling
and Servicing Agreement to, carry on and conduct its
business 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 in its jurisdiction of incorporation and maintain
all requisite authority to conduct its business in each
jurisdiction in which its business is conducted. All
Eligible Originators shall at all times be direct or indi-
rect wholly-owned subsidiaries of Proffitt's.
(d) Financial Covenants. The Servicer
shall:
(i) not permit, at any time during any
four-quarter period, the ratio of Consoli-
dated Funded Senior Indebtedness to Con-
solidated EBITDA to be greater than 3.50 to
1.00;
(ii) not permit, at any time, the ratio of
Consolidated Total Funded Indebtedness to
Consolidated EBITDA to be equal to or
greater than 4.00 to 1.00; and
(ii) not permit, at any time during any
four-quarter period of the Servicer ending
during the periods set forth below, the
Consolidated Fixed Charge Coverage Ratio
for such four-quarter period to be equal to
or less than the ratios set forth opposite
the respective periods set forth below:
Period Ratio
Closing Date through
Fiscal Year End 1997 1.25 to 1.00
At all times thereafter 1.50 to 1.00
(e) No Assignment. The Servicer shall not
assign any of its rights or delegate any of its duties
hereunder or under the Master Pooling and Servicing
Agreement or the Series Supplement or under any of the
other Transaction Documents to which it is a party without
the prior written consent of the Agent and each Senior
Class Agent provided that any designation of McRae's or any
other Affiliate of the Transferor as Subservicer shall be
permitted without notice.
SECTION 5 Tax Treatment. The Transferor, the
Senior Class Conduits and the Bank Investors have entered
into this Agreement, and the Transferor has entered into
the Series Supplement, with the intention that the Senior
Class Certificates will qualify under applicable tax law as
indebtedness, and the Transferor and each Senior Class
Conduit and Bank Investor by its acceptance of the Senior
Class Certificates agree to and shall treat the Senior
Class Certificates for purposes of federal and state income
or franchise taxes and any other tax imposed on or measured
by income, as indebtedness unless otherwise required by the
Internal Revenue Service.
SECTION 6 Conditions Precedent to Initial
Transfer. On or prior to the Closing Date, the Transferor
and the Servicer shall deliver to the Agent (with suffi-
cient copies for each Senior Class Agent and their re-
spective counsel) the following documents, instruments and
fees, all of which shall be in a form and substance
acceptable to the Agent and each Senior Class Agent:
(a) A copy of the resolutions of the Board
of Directors (or Executive Committee) of each of the Trans-
feror and the Servicer, certified by its Secretary, approv-
ing the execution, delivery and performance by the Trans-
feror and the Servicer, respectively, of the Master Pooling
and Servicing Agreement, the Series Supplement, this Agree-
ment, the Certificates, the other Transaction Documents to
which the Transferor or the Servicer is a party.
(b) A copy of the resolutions of the Board
of Directors (or Executive Committee) of each Eligible
Originator, certified by its Secretary, approving the
execution, delivery and performance by such Eligible
Originator of the related Receivables Purchase Agreement
and the other Transaction Documents to which such Eligible
Originator is a party.
(c) The Articles of Incorporation of the
Transferor, the Servicer and each Eligible Originator,
certified by the Secretary of State or other similar
official of its jurisdiction of incorporation dated a
recent date and further certified by an officer of each
respective corporation.
(d) A Good Standing Certificate for the
Transferor, the Servicer and each Eligible Originator
issued by the Secretary of State or other similar official
of its jurisdiction of incorporation and certificates of
qualification 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 the Transaction Documents to
which such Person is a party, in each case dated a date
reasonably prior to the Closing Date.
(e) A certificate of an Executive Vice
President, Senior Vice President or Treasurer of the Trans-
feror, the Servicer and each Eligible Originator substan-
tially in the form of Exhibit C hereto.
(f) 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 prior to the Closing Date listing all
effective financing statements which name (x) the Transfer-
or or any Eligible Originator (under its present name and
any previous names) as debtor and which are filed with re-
spect to the Transferor or any Eligible Originator in the
jurisdictions in which the filings are made pursuant to
clauses (h) and (i) below, together with copies of such
financing statements (none of which shall cover any portion
of the Trust Property).
(g) Copies of proper financing statements
(Form UCC-3), if any, necessary to terminate all security
interests and other rights of any Person in the Receivables
and the other Trust Property previously granted by the
Transferor or any Eligible Originator.
(h) Copies of acknowledgment copies of
proper financing statements (Form UCC-1) naming each
Eligible Originator as the debtor or, alternatively, seller
of the Receivables and the other Trust Property, and the
Transferor as secured party or, alternatively, purchaser of
the Receivables and the other Trust Property and the
Trustee as assignee thereof or other similar instruments or
documents as may be necessary or in the opinion of the
Agent or any Senior Class Agent desirable under the UCC of
all appropriate jurisdictions or any comparable law to evi-
dence the perfection of the Transferor's interest in the
Receivables and the other Trust Property.
(i) Copies of acknowledgment copies of
proper financing statements (Form UCC-1) naming the
Transferor as the debtor or seller of the Receivables and
the other Trust Property and the Trustee as secured party
or purchaser of the Receivables and the other Trust Proper-
ty or other similar instruments or documents as may be
necessary or in the opinion of the Agent or any Senior
Class Agent desirable under the UCC of all appropriate
jurisdictions or any comparable law to evidence the
perfection of the Trustee's interest in the Receivables and
the other Trust Property.
(j) Favorable opinions of Alston & Bird
LLP, counsel to the Transferor, the Servicer and each
Eligible Originator (i) in substantially the form of Exhib-
it D hereto with respect to certain corporate and enforce-
ability matters and (ii) in form and substance satisfactory
to each Senior Class Agent and its counsel with respect to
certain bankruptcy and insolvency matters (i.e. "true sale"
and "nonconsolidation") and federal income tax matters.
(k) Favorable opinions of Butler Snow
O'Mara Stevens & Cannada, special Mississippi counsel to
the Servicer, in form and substance satisfactory to each
Senior Class Agent and its counsel with respect to certain
Mississippi Uniform Commercial Code matters.
(l) Favorable opinions of Schreck Morris,
special Nevada counsel to the Transferor, in form and sub-
stance satisfactory to each Senior Class Agent and its
counsel with respect to certain corporate and security
interest matters under Nevada law.
(m) Favorable opinions of counsel to the
Trustee, as to the due authorization, execution and
delivery by the Trustee of the Master Pooling and Servicing
Agreement, the Series Supplement and each other Transaction
Document executed by the Trustee.
(n) An executed copy of each Receivables
Purchase Agreement, the Master Pooling and Servicing
Agreement, the Series Supplement, this Agreement, the Fee
Letter, and executed or a certified copy of each of the
other Transaction Documents to be executed by the Trans-
feror, the Servicer or any Eligible Originator.
(o) The Class A-1 Variable Funding Certifi-
cates in the face amount of $75,000,000 and the Class A-2
Variable Funding Certificates in the face amount of
$50,000,000, and the Subordinate Class Certificates in the
face amount of $14,375,000, in each case duly executed by
the Transferor and duly authenticated by the Trustee and
issued, in the case of the Senior Class Certificates, to
the parties specified in Section 2.1 hereof and, in the
case of the Subordinate Class Certificates, to the Trans-
feror.
(p) Payment of (i) any fees to be paid on
or prior to the Closing Date pursuant to the Fee Letter and
(ii) all up-front fees to be paid to the Senior Class
Conduits.
(q) An instrument indicating the appoint-
ment by the Transferor and each Eligible Originator of CT
Corporation as agent for service of process in accordance
with Section 6.4(d) hereof.
(r) Such other documents, instruments, cer-
tificates and opinions as the Agent, any Senior Class Agent
or any Bank Investor shall reasonably request.
SECTION 7 Quarterly Certificate. The
Servicer shall deliver, or the Transferor shall cause the
Servicer (if Proffitt's Inc. is not the Servicer) to deliv-
er, to the Agent and each Senior Class Agent (i) within
forty-five (45) days after the end of each calendar quarter
of each calendar year, beginning with the calendar quarter
ending December 31, 1997, an officer's certificate substan-
tially in the form of Exhibit E hereto stating that (a) a
review of the activities of the Servicer during the
preceding calendar quarter (or such shorter period as may
have elapsed since the Closing Date), and of its perfor-
mance under this Agreement and the other Transaction
Documents to which it is a party was made under the super-
vision of the officer signing such certificate and (b) to
the best of such officer's knowledge, based on such review,
the Servicer has fully performed all of its obligations
under this Agreement, the Series 1997-1 Supplement, the
Master Pooling and Servicing Agreement and the other Trans-
action Documents to which it is a party throughout such
quarter (or such shorter period as may have elapsed since
the Closing Date), or, if there has occurred an event
which, with the giving of notice or passage of time or
both, would constitute a Pay Out Event or Servicer Default,
specifying each such event known to such officer and the
nature and status thereof and (ii) the Officer's Certifi-
cate required to be delivered to the Trustee pursuant to
Section 3.5 of the Master Pooling and Servicing Agreement
concurrently with the delivery of such Officer's Certifi-
cate to the Trustee.
SECTION 8 Periodic Notices and Reports.
(a) Notices, Certificates and Reports
Delivered to the Trustee and the Rating Agencies. In addi-
tion to those notices, certificates and reports required to
be delivered to the Agent or the Senior Class Agents pursu-
ant to Section 3.3 hereof, the Transferor shall furnish to
the Agent and each Senior Class Agent a copy of each no-
tice, certificate or report delivered to the Trustee or a
Rating Agency pursuant to the Master Pooling and Servicing
Agreement or the Series Supplement concurrently with the
delivery of any such notice, certificate or report to the
Trustee or a Rating Agency, as the case may be.
(b) Annual Opinion of Counsel. The
Transferor will deliver to the Agent and each Senior Class
Agent each Opinion of Counsel required to be delivered to
the Trustee pursuant to subsection 13.2(d)(ii) of the
Master Pooling and Servicing Agreement concurrently with
the delivery of such Opinion of Counsel to the Trustee.
ARTICLE IV
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 1 Indemnities by the Transferor.
Without limiting any other rights which the Agent, the
Senior Class Agents, the Senior Class Conduits or the Bank
Investors may have hereunder or under applicable law, the
Transferor hereby agrees to indemnify the Senior Class
Conduits, the Bank Investors, the Agent, the Senior Class
Agent, the Collateral Agents, each Program Support Provider
and any successors and permitted assigns and any of their
respective officers, directors and employees (collectively,
the "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, costs and expenses,
including, without limitation, reasonable attorneys' fees
(which such attorneys may be employees of a Program Support
Provider, the Agent, a Senior Class Agent or a Collateral
Agent, as applicable) and disbursements (all of the fore-
going being collectively referred to as "Indemnified
Amounts") awarded against or incurred by any Indemnified
Party in any action or proceeding between the Transferor or
the Servicer and any of the Indemnified Parties or between
any of the Indemnified Parties and any third party arising
out of or as a result of this Agreement, the other Transac-
tion Documents, the ownership or maintenance, either di-
rectly or indirectly, by the Agent, any Senior Class Agent,
any Senior Class Conduit or any Bank Investor of the Senior
Class Certificates or any of the other transactions contem-
plated hereby or thereby, excluding, however, (i) Indemni-
fied Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified
Party, (ii) recourse (except as otherwise specifically
provided in this Agreement) for amounts due under the
Receivables which are uncollectible and (iii) Indemnified
Amounts specifically excluded from coverage under Section
4.2. 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 war-
ranty made by the Transferor, any Eligible
Originator or the Servicer or any officer of the
Transferor, any Eligible Originator or the Ser-
vicer under or in connection with this Agree-
ment, any Receivables Purchase Agreement, any of
the other Transaction Documents or any other in-
formation or report delivered by the Transferor
or the Servicer pursuant hereto or thereto,
which shall have been false or incorrect in any
material respect when made or deemed made;
(ii) the failure by the Trans-
feror, any Eligible Originator 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 Trustee, on behalf of the
Trust, an undivided first priority, perfected
percentage ownership or security interest in the
Trust Property free and clear of any Lien (ex-
cept as expressly permitted by the Transaction
Documents);
(iv) the failure to file, or any
delay in filing, financing statements, continu-
ation statements, or other similar instruments
or documents under the UCC of any applicable
jurisdiction or other applicable laws with re-
spect to any of the Trust Property;
(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 re-
sulting from the sale of merchandise or services
related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vi) any failure of the Servicer
to perform its duties or obligations in accor-
dance with the provisions of the Master Pooling
and Servicing Agreement and the Series Supple-
ment; 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 owner-
ship interest in any Receivable other than an
Eligible Receivable as defined in the Master
Pooling and Servicing Agreement;
(ix) the failure by the Trans-
feror, any Eligible Originator or the Servicer
to comply with any term, provision or covenant
contained in this Agreement or any of the other
Transaction Documents to which it is a party or
to perform any of its respective duties under
the Accounts;
(x) the failure of any Eligible
Originator to pay when due any taxes, including
without limitation, sales, excise or personal
property taxes payable in connection with any of
the Receivables;
(xi) any repayment by any Indem-
nified Party of any amount previously distrib-
uted in reduction of the Senior Class Investor
Amount which such Indemnified Party believes in
good faith is required to be made;
(xii) the commingling by the
Transferor, any Eligible Originator or the Ser-
vicer of Collections of Receivables at any time
with other funds;
(xiii) any investigation, liti-
gation or proceeding related to this Agreement,
any of the other Transaction Documents, the use
of proceeds of the acquisition of interests in
the Senior Class Certificates by the Transferor,
the ownership of the Senior Class Certificates
or any Trust Property;
(xiv) 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 fail-
ure of the Transferor or any Eligible Originator
to qualify to do business or file any notice of
business activity report or any similar report;
(xv) any failure of the Trans-
feror to give reasonably equivalent value to an
Eligible Originator in consideration of the pur-
chase by the Transferor from such Eligible
Originator of any Receivable, 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 Bank-
ruptcy Code; or
(xvi) any action taken by the
Transferor, any Eligible Originator or the Ser-
vicer in the enforcement or collection of any
Receivable;
provided, however, that if the Senior Class Conduits enter
into agreements for the purchase of certificates represent-
ing interests in amounts due under receivables or of inter-
ests in receivables from one or more Other Transferors, the
Senior Class Conduits shall allocate such Indemnified
Amounts which are in connection with a Program Support
Agreement or the program support furnished by a Program Su-
pport Provider among the Transferor and each Other Trans-
feror; and provided, further, that if such Indemnified
Amounts are attributable to the Transferor or the Servicer
and not attributable to any Other Transferor, the Trans-
feror shall be solely liable for such Indemnified Amounts
or if such Indemnified Amounts are attributable to Other
Transferors and not attributable to the Transferor or the
Servicer, such Other Transferors shall be solely liable for
such Indemnified Amounts.
SECTION 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 guide-
line, whether or not having the force of law):
(i) shall subject any Indemni-
fied 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
Senior Class Certificates, the Receivables 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 Senior Class Certificates, the Receiva-
bles or payments of amounts due hereunder or its
obligation to advance funds hereunder, under a
Program Support Agreement or otherwise in re-
spect of this Agreement, the other Transaction
Documents, the ownership, maintenance or fi-
nancing of the Senior Class Certificates 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 jurisdiction in which such Indem-
nified Party's principal executive office is
located);
(ii) shall impose, modify or
deem applicable any reserve, special deposit or
similar requirement (including, without limita-
tion, any such requirement imposed by the Board
of Governors of the Federal Reserve System other
than any such requirement used in determining
the Adjusted LIBOR Rate) against assets of, de-
posits with or for the account of, or credit ex-
tended by, any Indemnified Party or shall impose
on any Indemnified Party or on the London inter-
bank market any other condition affecting this
Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the
Senior Class Certificates, the Receivables or
payments of amounts due hereunder or its obliga-
tion to advance funds hereunder, under a Program
Support Agreement or otherwise in respect of
this Agreement, the other Transaction Documents,
the ownership, maintenance or financing of the
Senior Class Certificates or the Receivables; or
(iii) imposes upon any Indemni-
fied Party any other expense (including, without
limitation, reasonable attorneys' fees and
expenses, and expenses of litigation or prepara-
tion therefor in contesting any of the fore-
going) with respect to this Agreement, the other
Transaction Documents, the ownership, mainte-
nance or financing of the Senior Class Certifi-
cates, the Receivables or payments of amounts
due hereunder or its obligation to advance funds
hereunder, under a Program Support Agreement or
otherwise in respect of this Agreement, the
other Transaction Documents, the ownership,
maintenance or financing of the Senior Class
Certificates or the Receivables,
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 Senior Class Certificates,
the Receivables, the obligations hereunder, the funding of
any purchases hereunder, a Program 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 adequacy) 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) Each Senior Class Agent will notify the
Agent and 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 Section. A notice by the
Agent or the applicable Indemnified Party claiming compen-
sation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In deter-
mining such amount, the Agent or any applicable Indemnified
Party may use any reasonable averaging and attributing
methods.
(d) Anything in this Section 4.2 to the
contrary notwithstanding, if a Senior Class Conduit enters
into agreements for the acquisition of certificates
representing interests in other receivables from one or
more Other Transferors, such Senior Class Conduit shall
allocate the liability for any amounts under this Section
which are in connection with a Program Support Agreement or
the program support provided by a Program Support Provider
("Section 4.2 Costs") to the Transferor and each Other
Transferor; provided, however, that if such Section 4.2
Costs are attributable to the Transferor, an Eligible
Originator or the Servicer and not attributable to any
Other Transferor, the Transferor shall be solely liable for
such Section 4.2 Costs or if such Section 4.2 Costs are at-
tributable to Other Transferors and not attributable to the
Transferor, an Eligible Originator or the Servicer, such
Other Transferors shall be solely liable for such Section
4.2 Costs.
SECTION 3 Taxes. All payments made hereunder
by the Transferor or the Servicer (each, a "payor") to any
Senior Class Conduit, 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, with-
holdings 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 imposed on net
income (or any interest or penalties with respect thereto)
and taxes imposed on or measured by the recipient's net
income required to be paid by any recipient in connection
herewith to any taxing authority ("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 shall promptly notify
the Transferor and the Servicer, and 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 docu-
mentary 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 4 Other Costs, Expenses and Related
Matters.
(a) The Transferor agrees, upon receipt of
a written invoice in reasonable detail, to pay or cause to
be paid, and to save the Senior Class Conduits, the Bank
Investors, the Senior Class Agents 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 Senior Class Conduits, the Bank Inves-
tors, the Agent and/or the Senior Class Agents) or intangi-
ble, documentary or recording taxes incurred by or on
behalf of any Senior Class Conduit, any Bank Investor, the
Agent and any Senior Class Agent (i) in connection with the
negotiation, execution, delivery and preparation of this
Agreement, the other Transaction Documents and any docu-
ments or instruments delivered pursuant hereto and thereto
and the transactions contemplated hereby or thereby, 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 any
Senior Class Conduit's, any Bank Investor's, the Agent's or
any Senior Class Agent's enforcement or preservation of
rights, 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 to each Senior
Class Agent, for the account of the related Senior Class
Conduit and Bank Investors, as applicable, on demand any
Early Collection Fee due on account of the receipt by a
Senior Class Conduit or Bank Investor of any amounts
applied in reduction of the Senior Class Investor Amount on
any day other than the last day of any applicable funding
period.
SECTION 5 Indemnification by Servicer. The
Servicer shall indemnify and hold harmless each Indemnified
Party from and against any loss, liability, expense, damage
or injury suffered or sustained by reason of willful
misfeasance, bad faith, or negligence in the performance of
the duties of the Servicer or by reason of reckless
disregard of obligations and duties of the Servicer
hereunder or under the Master Pooling and Servicing
Agreement or by reason of any acts, omissions or alleged
acts or omissions of the Servicer pursuant to this Agree-
ment or the Master Pooling and Servicing Agreement;
provided, however, that the Servicer shall not indemnify
any such Indemnified Party for any such loss, liability,
expense, damage or injury suffered or sustained by reason
of any action taken or omitted at the written request of
such Indemnified Party; and provided, further, that the
Servicer shall not indemnify any such Indemnified Party for
any such loss, liability, expense, damage or injury
incurred with respect to any action taken by such Indemni-
fied Party constituting fraud, gross negligence, breach of
fiduciary duty or willful misconduct, with respect to the
uncollectibility of the Receivables or with respect to any
federal, state or local income or franchise taxes (or any
interest or penalties with respect thereto) required to be
paid by any such Indemnified Party in connection herewith
to any taxing authority. The Servicer shall not be liable
for acts or omissions of any Successor Servicer. The
provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations
hereof.
ARTICLE V
THE AGENT; BANK COMMITMENT; SENIOR CLASS AGENTS
SECTION 1 Authorization and Action of Agent.
(a) Each Senior Class Conduit 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, each Senior Class Conduit
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 a Senior Class
Conduit or a Bank Investor may reasonably request in order
to perfect, protect or more fully evidence the interests
transferred or to be transferred from time to time by the
Transferor hereunder, or to enable any of them to exercise
or enforce any of their respective rights hereunder. The
Senior Class Agents jointly may direct the Agent to take
any such incidental action hereunder. With respect to
other actions which are incidental to the actions specif-
ically delegated to the Agent hereunder, the Agent shall
not be required to take any such incidental action hereun-
der, but shall be required to act or to refrain from acting
(and shall be fully protected in acting or refraining from
acting) upon the joint direction of the Senior Class
Agents; provided, however, that the Agent shall not be re-
quired to take any action hereunder if the taking of such
action, in the reasonable determination of the Agent, shall
be in violation of any applicable law, rule or regulation
or contrary to any provision of this Agreement or shall
expose the Agent to liability hereunder or otherwise. Upon
the occurrence and during the continuance of any Pay Out
Event or Potential Pay Out 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 Required Investor Certificatehold-
ers. The Agent shall not, without the prior written con-
sent of each Senior Class Agent and Bank Investor, agree to
(i) amend, modify or waive any provision of this Agreement
in any way which would (A) reduce or impair Collections or
the payment of fees payable hereunder to the Senior Class
Conduits or the Bank Investors or delay the scheduled dates
for payment of such amounts, (B) increase the Servicing Fee
Percentage, (C) modify any provisions of this Agreement,
the Master Pooling and Servicing Agreement or the Series
Supplement relating to the timing of payments required to
be made by the Transferor or the Servicer or the applica-
tion of the proceeds of such payments, (D) the appointment
of any Person (other than the Trustee) as successor
Servicer, (E) release any property from the lien provided
by this Agreement (other than as expressly contemplated
herein), or (F) modify Section 3.4(d) hereof or the defini-
tion of "Minimum Enhancement Amount" in the Series Supple-
ment or the definitions of "Defaulted Account" or "Eligible
Receivable" in the Master Pooling and Servicing Agreement.
The Agent shall not agree to any amendment of or waiver
under this Agreement which increases the dollar amount of
a Bank Investor's Commitment without the prior written
consent of such Bank Investor. In addition, the Agent
shall not agree to any amendment of or waiver under this
Agreement not specifically described in the two preceding
sentences without the consent of the Required Investor
Certificateholders. In the event the Agent requests a
Senior Class Agent's, a Senior Class Conduit's or a Bank
Investor's consent pursuant to the foregoing provisions and
the Agent does not receive a response (either positive or
negative) from such Senior Class Agent, Senior Class Con-
duit or Bank Investor within 10 Business Days of such
Person's receipt of such request, then such Senior Class
Agent, Senior Class Conduit or Bank Investor (and its
percentage interest hereunder, if applicable) shall be
disregarded in determining whether the Agent shall have
obtained sufficient consent hereunder.
(b) 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 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 the Servicer), 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, accountants or experts; (ii) makes no
warranty or representation to any Senior Class Conduit or
Bank Investor and shall not be responsible to any Senior
Class Conduit or Bank Investor for any statements, warran-
ties 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 Trans-
feror or the Servicer or to inspect the property (including
the books and records) of the Transferor or the Servicer;
(iv) shall not be responsible to any Senior Class Conduit
or any Bank Investor for the due execution, legality,
validity, enforceability, genuineness, 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 or facsimile)
believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 3 Credit Decision. Each Senior Class
Conduit and Bank Investor acknowledges that it has,
independently and without reliance upon the Agent, any of
the Agent's Affiliates, any other Bank Investor or any
other Senior Class Conduit 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 all or any
portion of the Senior Class Certificates. Each Senior
Class Conduit and 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
any other Senior Class Conduit 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 Agreement and the other Transaction
Documents to which it is a party.
SECTION 4 Indemnification of the Agent. Each
Bank Investor agrees to indemnify the Agent (to the extent
not reimbursed by the Transferor), ratably (and not
jointly) in accordance with their respective Commitments,
from and against any and all liabilities, obligations,
losses, damages, penalties, 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 its capacity as such) in any
way relating to or arising out of this Agreement and the
other Transaction Documents or any action taken or omitted
by the Agent hereunder or thereunder, provided that a Bank
Investor shall not be liable for any portion of such
liabilities, obligations, 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 (and not
jointly) in accordance with their respective Commitments,
promptly upon demand for any out-of-pocket expenses
(including counsel fees) incurred by the Agent (in its
capacity as such) in connection with the enforcement
(whether through negotiations, legal proceedings or other-
wise) of, or legal advice in respect of rights or respon-
sibilities under, this Agreement and the other Transaction
Documents, to the extent that such expenses are incurred in
the interests of or otherwise in respect of the Senior
Class Conduits or the Bank Investors hereunder and/or
thereunder and to the extent that the Agent is not reim-
bursed for such expenses by the Transferor.
SECTION 5 Successor Agent. The Agent may
resign at any time, effective upon the appointment and
acceptance of a successor Agent as provided below, by
giving written notice thereof to each Senior Class Agent,
each Senior Class Conduit, each Bank Investor, the Trans-
feror and the Servicer and may be removed at any time with
cause by holders of more than 50% of the aggregate Senior
Class Investor Amounts. Upon any such resignation or
removal, the Required Investor Certificateholders shall ap-
point a successor Agent. Each Senior Class Conduit and
each Bank Investor agrees that it shall not unreasonably
withhold or delay its approval of the appointment of a suc-
cessor 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 holders of more than 50% of the
aggregate Senior Class Investor Amounts removal of the
retiring Agent then the retiring Agent may, on behalf of
the Senior Class Conduits 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 V 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. The
successor agent shall promptly notify the Transferor and
the Servicer of its appointment hereunder.
SECTION 6 Payments by the Agent. Unless
specifically allocated to a Bank Investor or a Senior Class
Conduit pursuant to the terms of this Agreement, all
amounts received by the Agent, if any, on behalf of the
Senior Class Conduits or the Bank Investors shall be paid
by the Agent to the applicable Senior Class Agent (at the
account specified on the signature pages hereto or as may
be specified in writing to the Agent) in accordance with
their respective related pro rata interests in the Senior
Class Investor Amount 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 Senior Class
Conduits or Bank Investors on such Business Day, but, in
any event, shall pay such amounts to the Senior Class Con-
duits or Bank Investors in accordance with their respective
related pro rata interests in the Senior Class Investor
Amount not later than the following Business Day.
SECTION 7 Bank Commitment; Assignment to Bank
Investors.
(a) Bank Commitment. At any time prior to
the Commitment Termination Date and prior to the Termina-
tion Date (excluding a "Termination Date" occurring as a
result of clause (iv) or (v) of the definition of "Termina-
tion Date"), in the event that any Senior Class Conduit
does not acquire an Additional Investor Amount as requested
under Section 2.2(a), then at any time, the Transferor
shall have the right to require such Senior Class Conduit
to assign its interests in the Senior Class Certificate
Principal Balance in whole to the related Bank Investors
pursuant to this Section 5.7. In addition, at any time
prior to the Commitment Termination Date (i) upon the
occurrence of a Pay Out Event, a Senior Class Agent may re-
quest that the related Senior Class Conduit assign its
interest in the Senior Class Certificate Principal Balance
in whole to the related Bank Investors pursuant to this
Section 5.7, and (ii) if a Senior Class Conduit gives
notice to the Transferor of a Reinvestment Termination Date
and requests that its interest in the Senior Class Certifi-
cate Principal Balance be assigned to the related Bank
Investors, such interest shall be assigned in whole to the
related Bank Investors pursuant to this Section 5.7, and,
in each case, the Transferor hereby agrees to pay the
amounts described in Section 5.7(d) below. Provided that
the Net Asset Test is satisfied with respect to the related
Senior Class, upon any such notice by a Senior Class Agent
or a Senior Class Conduit, the applicable Senior Class Con-
duit shall make such Assignment and the related Bank Inves-
tors shall accept such Assignment and shall assume all of
the applicable Senior Class Conduit's obligations hereun-
der. In connection with any Assignment from a Senior Class
Conduit to the related Bank Investors pursuant to this Sec-
tion, each Bank Investor shall, on the date of such As-
signment, pay to such Senior Class Conduit an amount equal
to its Assignment Amount. Consent of the Transferor shall
in no event be required in order for any Senior Class
Conduit to assign any interest in the Senior Class Certifi-
cate Principal Balance to the related Bank Investors. Upon
any Assignment by a Senior Class Conduit to the related
Bank Investors contemplated hereunder, such Senior Class
Conduit shall cease to acquire any Additional Investor
Amounts hereunder.
(b) Assignment. No Bank Investor may
assign all or a portion of its interests in the Senior
Class Certificates, the Senior Class Certificate Principal
Balance, the Trust Property or its rights and obligations
hereunder to any Person unless approved in writing by the
Agent, the related Senior Class Agent and the Transferor
(in each case such approval not to be unreasonably withheld
or delayed) and made in accordance with the Master Pooling
and Servicing Agreement and the Series Supplement. In the
case of an Assignment by a Senior Class Conduit to the
related 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 B hereto, duly executed, assigning to the
assignee a pro rata interest in the Senior Class Certifi-
cates, the Senior Class Certificate Principal Balance, the
Trust Property and the assignor's rights and obligations
hereunder and the assignor shall promptly execute and
deliver all instruments and documents required by the
Master Pooling and Servicing Agreement and the Series
Supplement and 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 Transac-
tion 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 acquire Additional Investor Amounts under Sec-
tion 2.2(a) hereof in accordance with the terms thereof,
notwithstanding that the Senior Class Conduits were not so
obligated and (y) not have the right (in the absence of a
Pay Out Event) to elect not to maintain the related Senior
Class Investor Amount, notwithstanding that the Senior
Class Conduits 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 reasonable out-of-pocket
costs and reasonable legal expenses of the Agent and the
initial Bank Investors hereto incurred in connection with
any Assignment hereunder shall be borne by the Transferor.
No Bank Investor shall assign any portion of its Commitment
hereunder without also simultaneously assigning an equal
portion of its interest in the applicable Program Support
Agreement.
(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 state-
ments, warranties or representations made in or in con-
nection with this Agreement, the other Transaction Docu-
ments or any other instrument or document furnished pursu-
ant hereto or thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement, the other Transaction Documents or any such
other instrument or document; (ii) the assignor makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of the Transferor
or the Servicer or the performance or observance by the
Transferor or the Servicer of any of their respective obli-
gations under this Agreement, the other Transaction Docu-
ments or any other instrument or document furnished pursu-
ant hereto; (iii) such assignee confirms that it has re-
ceived a copy of this Agreement, the Master Pooling and
Servicing Agreement, the Series Supplement 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, indepen-
dently 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 Docu-
ments and the Trust Property; (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 Transaction Documents are required to be per-
formed by it as the assignee of the assignor; and (vii)
such assignee agrees that it will not institute against any
Senior Class Conduit any proceeding of the type referred to
in Section 6.9 prior to the date which is one year and one
day after the payment in full of all Commercial Paper
issued by any Senior Class Conduit.
(d) Transferor's Obligation to Pay Certain
Amounts; Additional Assignment Amount. The Transferor
shall pay to the related Senior Class Agent, for the ac-
count of the related Senior Class Conduit, in connection
with any Assignment by a Senior Class Conduit to the
related Bank Investors pursuant to this Section 5.7, an
amount equal to all Carrying Costs to accrue through the
maturity of all outstanding Related Commercial Paper. To
the extent that such Carrying Costs relate to interest or
discount on Commercial Paper issued to fund the related
Senior Class Certificate Principal Balance, if the Trans-
feror fails to make payment of such amounts at or prior to
the time of Assignment by a Senior Class Conduit to the
related Bank Investors, such amount shall be paid by such
Bank Investors (in accordance with their respective Bank
Pro Rata Shares) to the Senior Class Conduit as additional
consideration for the interests assigned to the Bank Inves-
tors and the amount of the "Senior Class Certificate
Principal Balance" of the Senior Class Certificates held by
the Bank Investors and the "Senior Class Investor Amount"
of the related Senior Class shall be increased by an amount
equal to the additional amount so paid by the Bank Inves-
tors.
(e) Payments. After any Assignment by the
Senior Class Conduit to the related Bank Investors pursuant
to this Agreement, all payments to be made hereunder by the
Transferor or the Servicer to the related Senior Class
Agent for the benefit of the related Senior Class Conduit
shall be made to the related Senior Class Agent's account
as such account shall have been notified to the Transferor
and the Servicer for the benefit of the related Bank Inves-
tors. After any such Assignment, the related Bank Inves-
tors shall be obligated to pay to the related assigning
Senior Class Conduit an amount equal the aggregate amount
of Senior Class Investor Charge Offs allocated to such
Senior Class for all Distribution Dates prior to the date
of such Assignment, which were not reimbursed pursuant to
Section 4.4(a) of the Master Pooling and Servicing Agree-
ment, as supplemented by the Series Supplement, prior to
such date.
(f) Downgrade of Bank Investor. If at any
time prior to any Assignment by a Senior Class Conduit to
the related Bank Investors as contemplated pursuant to this
Section, 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 related Senior Class Agent,
shall, at its own expense, 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 or 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, respec-
tively (or such rating shall have been withdrawn by
Standard & Poor's or Moody's), such Bank Investor, upon re-
quest of the related Senior Class Agent, shall, within five
(5) Business Days of such request, at its own expense,
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 related Senior
Class Conduit or the Transferor shall have the right to re-
quire such Bank Investor to accept the Assignment of the
Bank Pro Rata Share for such Bank Investor of the related
Senior Class Investor Amount; such Assignment shall occur
in accordance with the applicable provisions of this Sec-
tion. Such Bank Investor shall be obligated to pay to the
related Senior Class Conduit, in connection with such
Assignment, in addition to the Bank Pro Rata Share of the
related Senior Class Investor Amount, an amount equal to
the interest component of the outstanding Commercial Paper
issued to fund the portion of the related Senior Class
Investor Amount being assigned to such Bank Investor, as
reasonably determined by the Agent. Notwithstanding any-
thing 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 related Senior Class
Facility Limit, solely as it relates to the acquisition of
any Additional Investor Amount by the related Senior Class
Conduit, shall be reduced by the amount of the 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 obliga-
tions and liabilities hereunder and under the other
Transaction Documents. The related Senior Class Agent
shall give the Agent and the Transferor prompt written
notice of any Assignment to a Bank Investor pursuant to
this Section 5.7.
SECTION 8 Authorization and Action of Senior
Class Agent.
(a) Each of the Senior Class Conduits and
related Bank Investors of each Class hereby appoints and
authorizes the Senior Class Agent with respect to such
Class to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated
to the Senior Class Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. In
furtherance, and without limiting the generality, of the
foregoing, each of the Senior Class Conduits and related
Bank Investors hereby appoint the related Senior Class
Agent as their agent to execute and deliver all further
instruments and documents, and take all further action that
the related Senior Class Agent may deem necessary or appro-
priate or that the related Senior Class Conduit or Bank
Investors may reasonably request in order to perfect,
protect or more fully evidence the interests transferred or
to be transferred from time to time by the Transferor
hereunder, or to enable any of them to exercise or enforce
any of their respective rights hereunder or under the
Senior Class Certificates, and such other instruments or
notices, as may be necessary or appropriate for the
purposes stated hereinabove. With respect to actions which
are incidental to the actions specifically delegated to the
Agent hereunder, the Majority Investors may direct the
related Senior Class Agent to direct the Agent to take any
such incidental action hereunder and the approval of the
Majority Investors is required to direct and/or approve the
related Senior Class Agent's decision to remove the Agent
pursuant to Section 5.5. The Majority Investors may direct
the related Senior Class Agent to direct the Agent not to
take or to cease taking any action which is incidental to
the actions specifically delegated to the Agent hereunder.
With respect to other actions which are incidental to the
actions specifically delegated to a Senior Class Agent
hereunder, a Senior Class Agent shall not be required to
take any such incidental action hereunder, but shall be re-
quired to act or to refrain from acting (and shall be fully
protected in acting or refraining from acting) upon the
direction of the related Majority Investors; provided,
however, that no Senior Class Agent shall be required to
take any action hereunder if the taking of such action, in
the reasonable determination of such Senior Class Agent,
shall be in violation of any applicable law, rule or
regulation or contrary to any provision of this Agreement
or shall expose such Senior Class Agent to liability here-
under or otherwise. Upon the occurrence and during the
continuance of any Pay Out Event or Potential Pay Out
Event, the Senior Class Agent shall take no action hereun-
der (other than ministerial actions or such actions as are
specifically provided for herein) without the prior consent
of each related Investor. Unless otherwise provided
herein, the Senior Class Agent shall not authorize the re-
lease by the Agent of any property conveyed to the Agent by
the Transferor hereunder without the prior consent of the
Majority Investors. The Senior Class Agent shall not,
without the prior written consent of each of the related
Senior Class Conduits (if any interest is held by a Senior
Class Conduit at such time) and Bank Investors, agree to
(i) amend, modify or waive any provision of this Agreement
in any way which would (A) reduce or impair Collections or
the payment of Carrying Costs or fees payable under the
related Fee Letter or delay the scheduled dates for payment
of such amounts, (B) increase the applicable Class Monthly
Servicing Fee, (C) modify any provisions of this Agreement
relating to the timing of payments required to be made by
the Transferor or the application of the proceeds of such
payments, or (D) the appointment of any Person (other than
the Agent) as Successor Servicer. In addition, each Senior
Class Agent agrees that it shall not agree to any amendment
of or waiver under this Agreement not specifically contem-
plated by the preceding sentence without the consent of the
related Majority Investors. In the event the Senior Class
Agent requests a Person's consent pursuant to the foregoing
provisions and the Senior Class Agent does not receive a
consent (either positive or negative) from such Person
within 10 Business Days of such Person's receipt of such
request, then such Person (and its percentage interest
hereunder) shall be disregarded in determining whether the
Senior Class Agent shall have obtained sufficient consent
hereunder.
(b) The Senior Class Agent shall exercise
such rights and powers vested in it by this Agreement, and
use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circum-
stances in the conduct of such person's own affairs.
SECTION 9 Senior Class Agents' Reliance, Etc.
Neither any Senior Class Agent nor any of their respective
directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them
as Senior Class Agent under or in connection with this
Agreement, except for its or their own gross negligence or
willful misconduct. Without limiting the foregoing, the
Senior Class Agent: (i) may consult with legal counsel
(including counsel for the Transferor), 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, accountants or experts; (ii) makes no warranty or
representation to any Senior Class Conduit or Bank Investor
and shall not be responsible to any Senior Class Conduit or
Bank Investor for any statements, warranties or representa-
tions 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 on the part of
the Transferor or to inspect the property (including the
books and records) of the Transferor; (iv) shall not be
responsible to any Investor for the due execution, legal-
ity, validity, enforceability, genuineness, sufficiency or
value of this Agreement, the Senior Class Certificates or
any other instrument or document furnished pursuant hereto;
and (v) shall incur no liability under or in respect of
this Agreement 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 Credit Decision. Each Senior
Class Conduit and Bank Investor acknowledges that it has,
independently and without reliance upon the Senior Class
Agent or any of the Senior Class Agent's Affiliates, and
based upon such documents and information as it has deemed
appropriate, made its own evaluation and decision to enter
into this Agreement and, if it so determines, to accept the
transfer of an interest in a Certificate hereunder. Each
Investor also acknowledges that it will, independently and
without reliance upon the Senior Class Agent or any of the
Senior Class Agent's Affiliates 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 Agreement.
SECTION 11 Indemnification of the Senior
Class Agent. Each Bank Investor agrees to indemnify the
related Senior Class Agent (to the extent not reimbursed by
the Transferor), ratably (and not jointly) according to
their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, ac-
tions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Senior Class Agent in
any way relating to or arising out of this Agreement or any
action taken or omitted by the Senior Class Agent under
this Agreement, provided that a Bank Investor shall not be
liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the related
Senior Class Agent's gross negligence or willful miscon-
duct. Without limitation of the foregoing, each Bank
Investor agrees to reimburse the related Senior Class
Agent, ratably (and not jointly) according to their
respective Commitments, promptly upon demand for any out-of-pocket
expenses (including counsel fees) incurred by
such Senior Class Agent in connection with the modifica-
tion, amendment or enforcement (whether through negoti-
ations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agree-
ment, to the extent that such expenses are incurred in the
interests of or otherwise in respect of the Series 1997-1
Certificates and to the extent that the Senior Class Agent
is not reimbursed for such expenses by the Transferor.
SECTION 12 Successor Senior Class Agent. A
Senior Class Agent may resign at any time by giving written
notice thereof to the Agent, each other Senior Class Agent,
each member of the Class, the Transferor and the Servicer
and may be removed at any time with cause by the related
Senior Class Conduit or Bank Investor. Upon any such
resignation or removal, the members of the related Class
acting jointly shall appoint a successor Senior Class
Agent. Each Senior Class Conduit and Bank Investor agrees
that it shall not unreasonably withhold or delay its
approval of the appointment of a successor Senior Class
Agent. If no such successor Senior Class Agent shall have
been so appointed, and shall have accepted such appoint-
ment, within 30 days after the retiring Senior Class
Agent's giving of notice of resignation or the removal of
the retiring Senior Class Agent, then the retiring Senior
Class Agent may, on behalf of the related Senior Class
Conduits and Bank Investors, appoint a successor Senior
Class 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
Senior Class Agent hereunder by a successor Senior Class
Agent, such successor Senior Class Agent shall thereupon
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Senior Class Agent,
and the retiring Senior Class Agent shall be discharged
from its duties and obligations under this Agreement.
After any retiring Senior Class Agent's resignation or
removal hereunder as Senior Class Agent, the provisions of
this Article V shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Senior
Class Agent under this Agreement. Each successor Senior
Class Agent shall promptly notify the Transferor and the
Servicer of its appointment hereunder.
SECTION 13 Payments by the Senior Class
Agents. Unless specifically allocated to a Senior Class
Conduit or a Bank Investor pursuant to the terms of this
Agreement, all amounts received by the Senior Class Agent
on behalf of the Senior Class Conduit or the Bank Investors
shall be paid by the Senior Class Agent to the Senior Class
Conduit or the Bank Investors, as applicable (at the ac-
counts specified to the Senior Class Agent) in accordance
with their respective related pro rata interests in the
Senior Class Investor Amount on the Business Day received
by the Senior Class Agent, unless such amounts are received
after 12:00 noon on such Business Day, in which case the
Senior Class Agent shall use its reasonable efforts to pay
such amounts on such Business Day, but, in any event, shall
pay such amounts in accordance with their respective
related pro rata interests in the Senior Class Investor
Amount not later than the following Business Day.
ARTICLE VI
MISCELLANEOUS
SECTION 1 Term of Agreement. This Agreement
shall terminate on the date following the Termination Date
upon which all amounts due to the Series 1997-1 Certifi-
cateholders under this Agreement and the other Transaction
Documents have been paid in full; provided, however, that
(i) the rights and remedies of the Agent, the Senior Class
Agents, the Senior Class Conduits and the Bank Investors
with respect to any representation and warranty made or
deemed to be made by the Transferor or the Servicer pursu-
ant to this Agreement, (ii) the indemnification and payment
provisions of Article IV, and (iii) the agreement set forth
in Section 6.9 hereof, shall be continuing and shall
survive any termination of this Agreement.
SECTION 2 Waivers; Amendments. No failure or
delay on the part of the Agent, any Senior Class Agent, any
Senior Class Conduit 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 nonexclusive of any rights
or remedies provided by law. Any provision of this Agree-
ment may be amended in a writing signed by the Transferor,
the Servicer, the Agent, each Senior Class Agent, each
Senior Class Conduit (prior to an assignment in whole by
such Senior Class Conduit of its interest in the related
Senior Class Certificate Principal Balance), and each Bank
Investor and any right or remedy herein provided to the
Agent, any Senior Class Agent, any Senior Class Conduit or
any Bank Investor may be waived in a writing signed by the
Agent and each Senior Class Agent; provided, however, that
(i) any supplement to this Agreement to add an additional
Senior Class Conduit as a party hereto must be signed only
by the Transferor, the Servicer, the Agent, each Senior
Class Agent, such additional Senior Class Conduit and the
Bank Investors related to such Senior Class Conduit, and
(ii) any amendment to the representations, warranties and
covenants of the Servicer in this Agreement in connection
with the appointment of a Successor Servicer shall not re-
quire the consent of the Transferor or the Servicer.
SECTION 3 Notices, Etc. Except where tele-
phonic instructions or notices are authorized herein to be
given, all notices, demands, instructions and other
communications required or permitted to be given to or made
upon any party hereto shall be in writing and shall be sent
by mail or facsimile transmission with a confirmation of
the receipt thereof and shall be deemed to be given for
purposes of this Agreement five (5) days after such mail
has been deposited or, where applicable, on the day that
the receipt of such facsimile transmission is confirmed in
accordance with the provisions of this Section 6.3. Unless
otherwise specified in a notice sent or delivered in accor-
dance with the foregoing provisions of this Section,
notices, demands, instructions and other communications in
writing shall be given to or made upon the respective
parties hereto at their respective addresses or facsimile
numbers indicated on the signature pages hereto, and, in
the case of telephonic instructions or notices, by calling
the telephone number or numbers indicated for such party on
the signature pages hereto or, in the case of a Bank
Investor which becomes a party hereto pursuant to an
Assignment and Assumption Agreement, on the signature page
to the Assignment and Assumption Agreement pursuant to
which it becomes a party hereto.
SECTION 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 AND THE SERVICER EACH HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DIS-
TRICT 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 and the Servicer each hereby irre-
vocably 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 shall affect the right of the
Senior Class Conduits to bring any action or proceeding
against the Transferor, the Servicer or their respective
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 OTHER-
WISE 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 integration 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 super-
seding all prior oral or written understandings.
(d) The Transferor and each Eligible
Originator 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 Dis-
trict of New York and of any New York State court sitting
in The City of New York by the Agent, any Senior Class
Agent, any Senior Class Conduit, any Bank Investor or any
assignee of any of them.
SECTION 5 Severability. 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 jurisdic-
tion shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 6 Counterparts. This Agreement may
be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.
SECTION 7 Successors and Assigns.
(a) This Agreement shall be binding on the
parties hereto and their respective successors and permit-
ted assigns; provided, however, that the Transferor may not
assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the Agent
and each Senior Class Agent.
(b) The Transferor hereby agrees and
consents to the assignment by each Senior Class Conduit
from time to time of all or any part of its rights under,
interest in and title to this Agreement and the Senior
Class Certificates to any Program Support Provider for such
Senior Class Conduit; provided, however, that any such as-
signment shall be made in accordance with the provisions of
the Master Pooling and Servicing Agreement and the Series
Supplement and any applicable provisions of this Agreement.
In addition, the Transferor hereby consents to and acknowl-
edges the assignment by (i) EFC of all of its rights under,
interest in and title to this Agreement and the Senior
Class Certificates to the Collateral Agent and (ii) each
other Senior Class Conduit of all of its rights under,
interest in and title to this Agreement and the Senior
Class Certificates to any Program Support Provider for such
Senior Class Conduit.
SECTION 8 Confidentiality.
(a) The Transferor, and the Servicer agree
to maintain the confidentiality of this Agreement, the
Senior Class Certificates, the Fee Letter, and all other
related documents and drafts thereof in communications with
third parties (other than its employees, accountants,
auditors, shareholders or counsel); provided, however, that
this Agreement may be disclosed to third parties to the
extent such disclosure is (i) required in order to comply
with any applicable law, order, regulation or ruling, or
(ii) required in response to any summons or subpoena or in
connection with any litigation; and provided, further,
however, that the Transferor and the Servicer shall have no
obligation of confidentiality in respect of any information
which may be generally available to the public or becomes
available to the public through no fault of theirs. Such
documents shall include, but not be limited to, research
studies, proprietary technology, trade secrets, know-how,
market studies and forecasts, competitive analyses, pricing
policies, the substance of agreements with customers and
others, marketing arrangements, customer lists and other
documents embodying such confidential information.
(b) The Agent, each Senior Class Agent,
each Senior Class Conduit and each Bank Investor agree to
maintain the confidentiality of any information obtained by
it in respect of the Receivables (including credit losses
and delinquency levels) and any other proprietary or confi-
dential information with respect to Obligors, the Accounts,
the Transferor or any Eligible Originator in communications
with third parties (other than its employees, accountants,
auditors, shareholders or counsel); provided, however, that
such information may be disclosed to third parties to the
extent such disclosure is (i) required in order to comply
with any applicable Law, or (ii) required in response to
any summons or subpoena or in connection with any litiga-
tion or (iii) to any Program Support Provider, Collateral
Agent or Bank Investor or any prospective Bank Investor or
Program Support Provider or to any rating agency providing
a rating for the Related Commercial Paper, provided that
the Agent, the applicable Senior Class Agent, the applica-
ble Senior Class Conduit and the applicable Bank Investor
inform such person that such information is sensitive,
proprietary and confidential information. Notwithstanding
the foregoing, (i) each Senior Class Conduit shall be
permitted to disclose Receivable performance information
and details concerning the structure of the facility
contemplated hereby and by the Series 1997-1 Supplement, in
summary form and in a manner not identifying the Trans-
feror, to prospective investors in Related Commercial
Paper, and (ii) the Agent, each Senior Class Agent and each
Senior Class Conduit shall have no obligation of confi-
dentiality in respect of any information which may be
generally available to the public or becomes available to
the public through no fault of theirs.
SECTION 9 No Bankruptcy Petition Against the
Senior Class Conduits. Each of the Transferor and the
Servicer 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 Senior Class Conduits, it will not institute
against, or join any other Person in instituting against
any Senior Class Conduit any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or
any state of the United States.
SECTION 10 No Recourse. (a) The obligations
of each Senior Class Conduit under this Agreement are
solely the corporate obligations of such Senior Class
Conduit. No recourse shall be had for the payment of any
amount owing against Merrill or against any stockholder,
employee, officer, director or incorporator of such Senior
Class Conduit. For purposes of this Section 6.10, the term
"Merrill" shall mean and include Merrill and all Affiliates
thereof and any employee, officer, director, incorporator,
shareholder or beneficial owner of any of them; provided
however, that EFC shall not be considered to be an affili-
ate of Merrill for purposes of this Section 6.10.
(b) The obligations of the Transferor arising
under this Agreement shall be payable solely from amounts
available therefore in accordance with the Series Supple-
ment and amounts otherwise released by the Trust to the
Transferor as holder of the Transferor Interest or any
other interest in the Trust.
SECTION 11 Setoff. The Transferor and the
Servicer hereby irrevocably and unconditionally waive all
right of setoff that it may have under contract (including
this Agreement), applicable law or otherwise with respect
to any funds or monies of the Senior Class Conduits at any
time held by or in the possession of the Transferor.
SECTION 12 Further Assurances.
(a) The Transferor and the Servicer each
agrees to do such further acts and things and to execute
and deliver to the Agent, each Senior Class Agent, each
Senior Class Conduit, each Bank Investor or each Collateral
Agent such additional assignments, agreements, powers and
instruments as are reasonably required by such party to
carry into effect the purposes of this Agreement or to
better assure and confirm unto such party its rights,
powers and remedies hereunder.
(b) The Agent, each Senior Class Agent and
each Senior Class Conduit each agrees to do such further
acts and things and to execute and deliver to the Transfer-
or such additional instruments as are reasonably required
by such party to carry into effect the purposes of this
Agreement or to better assure and confirm unto such party
its rights, powers and remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Certificate Purchase Agreement
as of the date first written above.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
Name:
Title:
Address for notices:
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
PROFFITT'S, INC.,
as Servicer
By:
Name:
Title:
Address for notices:
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
ENTERPRISE FUNDING CORPORATION,
as a Purchaser and a Senior Class
Conduit
By:
Name:
Title:
Address for notices:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center, South Tower
225 Liberty Street, 8th Floor
New York, New York 10080
Attention: Gerard Haugh
Telephone: (212) 449-1727
Telecopy: (212) 449-0599
(with a copy to the Agent)
RECEIVABLES CAPITAL CORPORATION,
as a Purchaser and a Senior Class
Conduit
By:
Name:
Title:
Address for notices:
Merrill Lynch Money Markets Inc.
World Financial Center, North Tower
250 Vesey Street - 11th Floor
New York, NY 10281-1311
Attention: George Roller
Telephone: (212) 449-2130
Telecopy: (212) 449-0599
(with a copy to the Agent)
Commitment:
$75,000,000<PAGE>
NATIONSBANK, N.A., as Agent,
as a Senior Class Agent and as a
Bank Investor
By:
Name:
Title:
Address for notices:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street, 10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath -
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Account for payments:
NationsBank, N.A.
ABA No.: 053000196
For Credit To: NationsBank, Charlotte
Account No.: 10822016511
Attention: Camille Zerbinos
Commitment:
$50,000,000<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Senior Class Agent
and as a Bank Investor
By:
Name:
Title:
Address for notices:
BancAmerica Securities
231 South LaSalle Street
Chicago, IL 60697
Attention: Asset Securitization Group
Telephone: (312) 828-6471
Telecopy: (312) 923-0273
(with a copy to the Agent)
Account for payments:
Attention: GPO Account Administrator
ABA No.: 071000039
For Credit To: Proffitt's Credit Card Master Trust
Account No.: 47-03421
EXHIBIT A
TO THE CERTIFICATE
PURCHASE AGREEMENT
FORM OF ADDITIONAL INVESTMENT CERTIFICATE
The undersigned [Name of Officer], [Title of Officer]
of Proffitt's Credit Corporation, a Nevada corporation (the
"Transferor"), and [Name of Officer] [Title of Officer] of
Proffitt's, Inc., a Tennessee Corporation, as Servicer (the
"Servicer") pursuant to Section 2.2 of the Certificate Purchase
Agreement dated August 21, 1997 (the "Agreement"), by and among the
Transferor, the Servicer, Enterprise Funding Corporation, a Dela-
ware corporation, Receivables Capital Corporation, a Delaware
corporation, NationsBank, N.A., a national banking association, as
agent for the Senior Class Conduits and the Bank Investors, as a
Senior Class Agent and individually as a Bank Investor and Bank of
America National Trust and Savings Association, a national banking
association, as a Senior Class Agent and individually as a Bank
Investor, hereby certify that:
(7) All of the representations and
warranties of the Transferor and the
Servicer in the Agreement are true and
correct as of the date hereof (except
to the extent that any such
representation and warranty expressly
relates to an earlier date).
(8) The Aggregate Outstanding Principal
Balance as of the end of the
immediately preceding Monthly Period$_____
(9) The Senior Class Investor Amount for
each Senior Class as of the date
hereof . . . . . . . . . . . . .$_____[A-1]
$_____[A-2]
(10) The Senior Class Certificate Principal
Balance for each Senior Class as of
the date hereof. . . . . . . . .$_____[A-1]
$_____[A-2]
(11) The Interest Component of Related
Commercial Paper issued by the related
Senior Class Conduit, if any, as of
the Business Day immediately preceding
the date hereof. . . . . . . . .$_____[A-1]
$_____[A-2]
(12) The Subordinate Class Investor Amount
as of the Business Day immediately
preceding the date hereof. . . . .$_____
(13) The total amount of the Additional
Investor Amount requested by the
Transferor and the share of such
Additional Investor Amount to be
acquired by each Senior Class.$_____[total]
$_____[A-1]
$_____[A-2]
(14) The Senior Class Certificate Principal
Balance for each Senior Class after
giving effect to the Additional In-
vestor Amount (line 4 plus line 7)$_____[A-1]
$_____[A-2]
(15) The estimated additional Interest
Component of the Related Commercial
Paper to be issued to fund the
Additional Investor Amount (Assuming:
Discount Rate: _____; Term: _____)$_____[A-1]
$_____[A-2]
(16) The Senior Class Certificate Principal
Balance after giving effect to the
Additional Investor Amount plus the
Interest Component of Related Commer-
cial Paper issued by the related Se-
nior Class Conduit, if any (line 5
plus line 8 plus line 9) . .$_____[A-1]
$_____[A-2]
(17) Are the amounts on line 10 less than
the related Senior Class Facility
Limit . . . . . . . . . . . . . [Yes]
(18) The Transferor Amount after giving ef-
fect to the Additional Investor
Amount, each as of the Determination
Date preceding the Distribution Date$_____
(19) The Transferor Amount is not less than
the Minimum Transferor Amount.[Yes]
(20) The Subordinate Class Investor Amount
(line (6)) is not less than the Mini-
mum Enhancement Amount . . . .[Yes]
(21) No Potential Pay Out Event or Pay Out
Event under the Agreement has occurred
and is continuing. . . . . . .[Yes]
Capitalized terms used and not otherwise de-
fined herein shall have the meaning assigned to such terms
in the Agreement.
IN WITNESS WHEREOF, I have duly executed and
delivered this Additional Investment Certificate on this
____ day of ______, 199_.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:_______________________
Name:
Title:
EXHIBIT B
TO THE CERTIFICATE
PURCHASE AGREEMENT
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Certificate Purchase
Agreement dated as of August 21, 1997, as it may be amended
or otherwise modified from time to time (as so amended or
modified, the "Agreement"), by and among Proffitt's Credit
Corporation, a Nevada corporation, as transferor,
Proffitt's, Inc., a Tennessee corporation, as servicer,
Enterprise Funding Corporation, a Delaware corporation,
Receivables Capital Corporation, a Delaware corporation,
Nationsbank, N.A., a national banking association, as agent
for the Senior Class Conduits and the Bank Investors, as a
Senior Class Agent and as a Senior Class Agent and individ-
ually as a Bank Investor, Bank of America National Trust
and Savings Association, a national banking association, as
a Senior Class Agent and individually as a Bank Investor,
hereby certify that:
[NAME OF ASSIGNOR], in its capacity as [a Senior
Class Conduit] [a Bank Investor] under the Agreement (the
"Assignor") and [NAME OF ASSIGNEE] (the "Assignee") agree
as follows:
1. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to all of the Assignor's
rights and obligations under the Agreement, such interest,
expressed as a percentage of all rights and obligations of
the members of the Senior Class of which the Assignor is a
member, being equal to the percentage equivalent of a frac-
tion the numerator of which is $[________] and the denomi-
nator of which is the Senior Class Facility Limit for such
Senior Class.
2. 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 statements, warranties
or representations made in or in connection with the Agree-
ment 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 Receivables, or any other instrument or document
furnished pursuant thereto; and (iii) makes no represen-
tation or warranty and assumes no responsibility with
respect to the financial condition of the Transferor or the
performance or observance by the Transferor of any of its
obligations under the Agreement or any instrument or
document furnished pursuant thereto.
3. The Assignee (i) confirms that it has
received a copy of the Agreement, the Pooling and Servicing
Agreement and the Series Supplement, together with copies
of the financial statements referred to in Section 3.3 of
the Agreement, to the extent delivered through the date of
this Assignment and Assumption Agreement, 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 Assumption Agreement 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 or any of its Affiliates,
any Senior Class Agent, the Assignor or any other Senior
Class Conduit or Bank 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 and the other Transaction
Documents; (iii) appoints and authorizes each of the Agent
and the Senior Class Agent for the Senior Class of which
the Assignor is a member to take such action as agent on
its behalf and to exercise such power under the Agreement
and the Transaction Documents and any other instrument or
document furnished pursuant thereto as are delegated to the
Agent and the Senior Class Agent, respectively, 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 Agreement
and the Receivables in accordance with Article V 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; (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; (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; and (viii) 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 indebtedness of the Senior Class Conduits,
it will not institute against, or join any other Person in
instituting against any Senior Class Conduit any
bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under
the laws of the United States or any state of the United
States.
4. The effective date for this Assignment
and Assumption Agreement shall be the later of (i) the date
on which the Agent receives this Assignment and Assumption
Agreement executed by the parties hereto, and receives the
consent of the Senior Class Agent, on behalf of the
Assignor, and (ii) the date of this Assignment and Assump-
tion Agreement (the "Effective Date"). Following the
execution of this Assignment and Assumption Agreement and
the consent of the Senior Class Agent, on behalf of the
Assignor, this Assignment and Assumption Agreement will be
delivered to the Agent for acceptance and, with respect to
the Assignment and Assumption Agreement, recording by the
Agent.
5. 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 and Assumption Agreement, have the rights and obli-
gations of a Bank Investor thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and
Assumption Agreement, relinquish its rights and be released
from its obligations under the Agreement.
6. 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 the related Senior
Class Certificates, Carrying Costs allocable to the related
Bank Investor 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.
7. This Assignment and Assumption Agree-
ment 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 and Assumption Agreement to be
executed by their respective officers thereunto duly
authorized as of the ___ day of _______, 199_.
[NAME OF ASSIGNOR]
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
Address for notices and Account for payments:
For Credit Matters: For Administrative Matters:
[NAME], [NAME],
[ADDRESS] [ADDRESS]
Attn: Attn:
Telephone: Telephone:
Telefax: Telefax:
Account for Payments:
[ACCOUNT NAME]
[ROUTING ADDRESS]
ABA Number:
Account Number:
Attn:
Accepted this ___ day
of _______, 199_
NATIONSBANK, N.A.,
as Agent
By: ________________________
Name:
Title:
Consented to this ___ day
of _________, 199_
[Senior Class Agent],
as Senior Class Agent
By: ________________________
Name:
Title:
EXHIBIT C
TO THE CERTIFICATE
PURCHASE AGREEMENT
FORM OF SECRETARY'S CERTIFICATE
I, _______________, the undersigned [Secre-
tary][Assistant Secretary] of [NAME OF COMPANY], a Delaware
corporation (the "Company"), DO HEREBY CERTIFY that:
1. Attached hereto as Annex A is a true and com-
plete 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 com-
plete 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 com-
plete copy of the resolutions duly adopted by the Board of
Directors of the Company on ________, 199_, approving 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 authorized
on the Company's behalf to execute the Certificate Purchase
Agreement and any other documents to be delivered by the
Company thereunder, 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 the
signatures below set opposite their names are their genuine
signatures:
Name Title Signature
______________ _______________ _______________
______________ _______________ _______________
______________ _______________ _______________
______________ _______________ _______________
5. The representations and warranties of the
Company contained in Section 3.1 of the Certificate
Purchase Agreement dated as of August 21, 1997 by and among
the Transferor, Proffitt's, Inc., as servicer, Enterprise
Funding Corporation, Receivables Capital Corporation,
Nationsbank, N.A., as agent for the Senior Class Conduits
and the Bank Investors, as a Senior Class Agent and
individually as a Bank Investor, Bank of America National
Trust and Savings Association, individually as a Bank
Investor, are true and correct as if made on the date here-
of.
WITNESS my hand as of this _____ day of August,
1997.
___________________________
[Name]
[Title]
I, the undersigned, [Title of Officer] of the
Transferor, do hereby certify that [Name of
Secretary/Assistant Secretary] is the duly elected and
qualified [Secretary][Assistant Secretary] of the Company
and the signature above is his/her genuine signature.
WITNESS my hand as of this _____ day of August,
1997.
___________________________
[Name]
[Title]
EXHIBIT D
TO THE CERTIFICATE
PURCHASE AGREEMENT
[Opinions to be Attached]
EXHIBIT E
TO THE CERTIFICATE
PURCHASE AGREEMENT
FORM OF QUARTERLY SERVICER'S CERTIFICATE
PROFFITT'S, INC.
The undersigned, a duly authorized representa-
tive of Proffitt's, Inc., as Servicer pursuant to the
Master Pooling and Servicing Agreement dated as of August
21, 1997 (the "Pooling and Servicing Agreement"), as sup-
plemented by a Series 1997-1 Supplement dated as of
August 21, 1997 (the "Series Supplement"), each among
Proffitt's Credit Corporation, as Transferor, Proffitt's,
Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee, does hereby certify that:
1. Capitalized terms used in this Officer's
Certificate have their respective meanings
set forth in the Pooling and Servicing
Agreement.
2. Proffitt's, Inc. is as of the date hereof
the Servicer under the Pooling and Servic-
ing Agreement.
3. The undersigned is duly authorized pursu-
ant to the Pooling and Servicing Agreement
to execute and deliver this Officer's
Certificate to NationsBank, N.A., as the
Agent, and to each Senior Class Agent
under the Certificate Purchase Agreement
referred to in the Series Supplement.
4. This certificate is delivered pursuant to
Section 3.7 of the Certificate Purchase
Agreement.
5. A review of the activities of the Servicer
during the calendar quarter ended ______
__, and of its performance under the
Certificate Purchase Agreement and the
other Transaction Documents was made under
my supervision.
6. To the best of my knowledge, based on such
review, the Servicer has fully performed
all its obligations under the Pooling and
Servicing Agreement, the Series Supple-
ment, the Certificate Purchase Agreement
and the other Transaction Documents
throughout such calendar quarter and no
event which, with the giving of notice or
passage of time or both, would constitute
a Pay Out Event or Servicer Default has
occurred or is continuing except as set
forth in paragraph 7 below.
7. The following is a description of each Pay
Out Event or Servicer Default known to me
to have been made during the calendar
quarter ended ______ __, ____ including
the (i) nature of each such Pay Out Event
or Servicer Default, (ii) the action taken
by the Servicer, if any, to remedy each
such Pay Out Event or Servicer Default and
(iii) the current status of each such Pay
Out Event or Servicer Default:
IN WITNESS WHEREOF, the undersigned, a duly
authorized officer of the Servicer, has duly executed
this Certificate this ___ day of __________, ____.
PROFFITT'S, INC.
By:
Name:
Title:
EXHIBIT F
TO THE CERTIFICATE
PURCHASE AGREEMENT
DEFINED TERMS UNDER THE FINANCIAL COVENANTS
All capitalized terms used herein which are not
defined herein shall have the meanings specified in the
Certificate Purchase Agreement dated as of August 21,
1997, as it may be amended or otherwise modified from
time to time (as so amended or modified, the
"Agreement"), by and among the Transferor, Proffitt's,
Inc., a Tennessee corporation, as servicer (in such
capacity, the "Servicer"), Enterprise Funding Corpora-
tion, a Delaware corporation, Receivables Capital
Corporation, a Delaware corporation, NationsBank, N.A., a
national banking association, as agent for the Senior
Class Conduits and the Bank Investors, as a Senior Class
Agent and individually as a Bank Investor and Bank of
America National Trust and Savings Association, a na-
tional banking association, as a Senior Class Agent and
individually as a Bank Investor, to which this Exhibit is
attached.
"Acquisition" shall mean, the acquisition of
(i) a controlling equity interest in another Person
(including the purchase of an option, warrant or convert-
ible or similar type security to acquire such a control-
ling 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 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
"Borrower" shall mean, for the purpose of these
financial covenant definitions, Proffitt s, Inc., having
a principal place of business in Jackson, Mississippi.
"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 succes-
sor 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.
"Common Stock" means the common stock, par
value $.10 per share, of the Servicer.
"Consistent Basis" in reference to the applica-
tion 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 Servicer, Proffitt's
and each Person referred to in Section 5.1(a) hereof.
"Consolidated EBITDA" means, with respect to
the 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) amortiza-
tion, plus (v) depreciation, all determined on a Consoli-
dated basis in accordance with GAAP applied on a Consis-
tent Basis; provided however, that extraordinary and
unusual charges incurred by Proffitt s directly as a
result of (i) the Acquisition by Proffitt s of Parisian,
Inc. effective October 11, 1996, the Acquisition by
Proffitt s of Younker s, Inc. effective February 3, 1996
and the Acquisition by Proffitt s of G.R. Herberger s,
Inc. effective February 1, 1997 and (ii) any Permitted
Acquisition after the Closing Date in an amount up to and
including 10% of the Cost of Acquisition for such Permit-
ted Acquisition shall be excluded from the computation of
Consolidated EBITDA; provided further, however, that
effective as of the effective date of any Acquisition for
each Four-Quarter Period then and thereafter occurring
until such Acquisition has been effective for a complete
Four-Quarter Period.
"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.
"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 arriv-
ing at Consolidated EBITDA, lease, rental and all other
payments made in respect of or in connection with operat-
ing leases, to (b) Consolidated Fixed Charges during such
Four-Quarter Period.
"Consolidated Fixed Charges" means, with re-
spect to Proffitt's and its Subsidiaries, for the periods
indicated, the sum of, without duplication, (i) Consoli-
dated 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 Con-
solidated Funded Total Indebtedness, plus (iv) all divi-
dends and other distributions (other than distributions
in the form of any stock (including without limitation
capital stock of 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 accordance with GAAP applied on a Consistent Basis;
provided further, however, that effective as of the
effective date of any Acquisition, such calculations
shall be computed giving pro forma effect to such Acqui-
sition for each Four-Quarter Period then and thereafter
occurring until such Acquisition has been effective for a
complete Four-Quarter Period.
"Consolidated Funded Senior Indebtedness"
means, at any time as of which the amount thereof is to
be determined, (i) all Consolidated Funded Total Indebt-
edness the outstanding, including without limitation any
Loans, minus (ii) the aggregate principal amount of all
Consolidated Subordinated Debt.
"Consolidated Funded Total Indebtedness" means,
at any time as of which the amount thereof is to be
determined, all Indebtedness for Money Borrowed of the
Borrower and its Subsidiaries (including, but not limited
to, all current maturities and borrowings under short
term loans) plus the face amount of all issued and out-
standing standby letters of credit and all obligations
(to the extent not duplicative) arising under such let-
ters 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 any 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 net income of Proffitt's and
its Subsidiaries as determined on a Consolidated basis in
accordance with GAAP applied on a Consistent Basis; but
excluding as income: (i) net gains on the sale, conver-
sion 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
Subsidiaries, and net gains on the collection of proceeds
of life insurance policies, which net gains in the aggre-
gate 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 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 Subor-
dinated Notes and (iv) all other Consolidated Funded
Total Indebtedness which is by its terms subordinate in
all respects to the Loans as required by, and in sub-
stance 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 (in-
cluding 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 con-
stituting 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 pri-
mary obligor;
(iii) to grant or convey any lien, security
interest, pledge charge or other en-
cumbrance on any property or assets
of such Person to secure payment of
such Indebtedness or other
obligation;
(iv) to lease property or to purchase securi-
ties or other property or services primar-
ily for the purpose of assuring the owner
or holder of such Indebtedness or obliga-
tion of the ability of the primary obligor
to make payment of such Indebtedness or
other obligation;
(v) otherwise to assure the owner of the In-
debtedness or such obligation of the pri-
mary 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 Inden-
ture").
"Cost of Acquisition" means, as at the date of
closing any Acquisition, the sum of the following: (i) the
value of the capital stock or warrants or options to acquire
capital stock of Proffitt s or any Subsidiary to be trans-
ferred in connection therewith, (ii) any cash or other proper-
ty (excluding property described in clause (i)) or the unpaid
principal amount of any debt instrument given as consideration
in such Acquisition, and (iii) any Indebtedness or liabilities
assumed by the Proffitt s or its Subsidiaries in connection
with such Acquisition. For purposes of determining the Cost
of Acquisition for any transaction, (A) the capital stock of
Proffitt s shall be valued (I) at its market value as reported
on the Nasdaq National Market System or any national securi-
ties exchange with respect to shares that are freely trade-
able, and (II) with respect to shares that are not freely
tradeable, as determined by the Board of Directors of
Proffitt s, (B) the capital stock of any Subsidiary shall be
valued as determined by the Board of Directors of such Subsid-
iary, and (C) with respect to any Acquisition accomplished
pursuant to the exercise of options or warrants or the conver-
sion of securities, the Cost of Acquisition shall include both
the cost of acquiring such option, warrant or convertible
security as well as the cost of exercise or conversion;
"Credit Facilities Agreement" shall mean that certain
Credit Facilities and Reimbursement Agreement, dated as of [
], 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 [ ]
"Four-Quarter Period" means a period of four full
consecutive quarterly periods, taken together as one account-
ing period, and in the event any such fiscal quarterly period
occurs prior to the effective date of any Acquisition, or is
the period in which such effective date occurs (each a "Pre-Acquisition
Period"), all financial statements, data, computa-
tions and determinations for such Four-Quarter Period shall be
made on a pro forma basis for each Pre-Acquisition Period
giving effect to such 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 lia-
bility 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 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 or as
described in clause (d) of the definition of "Contingent
Obligation"), reserves for deferred income taxes and investment
credits, other deferred credits and reserves, and deferred
compensation obligations.
"Indebtedness for Money Borrowed" means for any
Person all Indebtedness in respect of money borrowed, includ-
ing without limitation all Capital Leases and the deferred
purchase price of any property or asset, evidenced by a prom-
issory note, bond or similar written obligation for the pay-
ment of money (including, but not limited to, conditional
sales or similar title retention agreements);
"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 June
"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, statute 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 this Agreement, Proffitt s 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 ar-
rangement pursuant to which title to the property has been
retained by or vested in some other Person for security pur-
poses.
"Loan" or "Loans" means any of the Revolving Credit
Loans or Swing Line Loans.
"Rate Hedging Obligations" means any and all obliga-
tions of Proffitt s, whether absolute or contingent and howso-
ever 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, termi-
nations or assignments of any of the foregoing.
"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).
"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.
EXHIBIT G
TO THE CERTIFICATE
PURCHASE AGREEMENT
PROCEEDINGS
[To come from Proffitt's]
FIRST AMENDMENT (this "Amendment"), dated as of
November 26, 1997, to the CERTIFICATE PURCHASE AGREEMENT,
dated as of August 21, 1997 (the "Certificate Purchase
Agreement"), by and among Proffitt's Credit Corporation,
a Nevada corporation (together with its successors and
permitted assigns, the "Transferor"), Proffitt's, Inc., a
Tennessee corporation, as servicer (in such capacity, the
"Servicer"), Enterprise Funding Corporation, a Delaware
corporation (together with its successors and permitted
assigns, "EFC"), Receivables Capital Corporation, a Dela-
ware corporation (together with its successors and per-
mitted assigns, "RCC", and collectively with EFC, the
"Purchasers"), NationsBank, N.A., a national banking
association ("NationsBank"), as agent for the Senior
Class Conduits and the Bank Investors (in such capacity,
the "Agent"), as a Senior Class Agent and individually as
a Bank Investor, and Bank of America National Trust and
Savings Association, a national banking association
("Bank of America"), as a Senior Class Agent and individ-
ually as a Bank Investor.
WHEREAS, the Transferor, the Servicer, EFC,
RCC, NationsBank and Bank of America have heretofore exe-
cuted and delivered the Certificate Purchase Agreement;
WHEREAS, Section 6.2 of the Certificate Pur-
chase Agreement provides that the Transferor, the
Servicer, the Agent, each Senior Class Agent, each Senior
Class Conduit (prior to an assignment in whole by such
Senior Class Conduit of its interest in the related
Senior Class Certificate Principal Balance), and each
Bank Investor may amend the Certificate Purchase Agree-
ment; and
WHEREAS, all other conditions precedent to the
execution of this Amendment have been complied with;
NOW THEREFORE, the Transferor, the Servicer,
the Agent, each Senior Class Agent, each Senior Class
Conduit and each Bank Investor are executing and deliver-
ing this Amendment in order to amend the provisions of
the Certificate Purchase Agreement in the manner set
forth below.
Capitalized terms used herein as defined terms
but not defined herein shall have the meanings assigned
to them in the Certificate Purchase Agreement.
SECTION 1. Amendments.
(a) Section 1.1 of the Certificate Pur-
chase Agreement is hereby amended by deleting the refer-
ence to "$75,000,000" in clause (i) definition of Senior
Class Facility Limit and substituting therefor
"$100,000,000".
(b) Section 2.2(a) of the Certificate
Purchase Agreement is hereby amended to read in its
entirety as follows:
(a) Upon the terms and subject to
the conditions set forth herein and provided that
neither the Commitment Termination Date nor the
Termination Date (excluding, in the case of the Bank
Investors, a "Termination Date" occurring as a
result of clause (iv) or (v) of the definition of
"Termination Date") shall have occurred, (x) the
Transferor may, at its option, on any Business Day
during the Revolving Period, after delivery to the
Agent and each Senior Class Agent of an Additional
Investment Certificate (to be received by the Agent
and each Senior Class Agent not later than 1:00
P.M., New York City time, on the second Business Day
prior to the Business Day on which the proposed in-
crease in the Senior Class Investor Amount is to
occur), convey, transfer and assign to the Senior
Class Conduits or the Bank Investors, as applicable,
and (y) the Senior Class Conduits may, at their
respective option, or the Bank Investors shall, if
the related Senior Class Conduit has assigned its
interest in the Senior Class Certificate Principal
Balance in whole to the related Bank Investors and
if so requested under subsection 2.2(b), accept such
conveyance, transfer and assignment from the Trans-
feror of, without recourse except as provided herein
and in the other Transaction Documents, an addition-
al undivided interest in the Trust in the amount
specified in such Additional Investment Certificate
(each, an "Additional Investor Amount"); provided
that (i) such Additional Investor Amount shall not
cause the Senior Class Certificate Balance for any
Class plus the Interest Component of all Related
Commercial Paper issued by the related Senior Class
Conduit and then outstanding, if any, to exceed the
Senior Class Facility Limit for such Class, (ii)
after giving effect to such Additional Investor
Amount, the Transferor Amount as of the Business Day
immediately preceding the date of the Additional
Investment Certificate and as reported in such
Additional Investment Certificate, shall not be less
than the Minimum Transferor Amount, (iii) after
giving effect to such Additional Investor Amount,
the Subordinate Class Investor Amount, as of the
Business Day immediately preceding the date of the
Additional Investment Certificate and as reported in
such Additional Investment Certificate, shall not be
less than the Minimum Enhancement Amount, (iv) no
Potential Pay Out Event or Pay Out Event shall have
occurred and be continuing and (v) all of the repre-
sentations and warranties of the Transferor and the
Servicer made herein shall be true and correct as of
such date (except to the extent any such representa-
tion or warranty expressly relates to an earlier
date). The Senior Class Conduits or the Bank Inves-
tors, as the case may be, shall acquire such addi-
tional interest in consideration of the Senior Class
Conduits' or the Bank Investors', as the case may
be, payment to the Transferor in immediately avail-
able funds in an amount equal to the Additional In-
vestor Amount for the related Senior Class, and the
Senior Class Investor Amount for each Senior Class
shall be increased to be equal to the Senior Class
Investor Amount immediately prior to such acquisi-
tion plus the Additional Investor Amount for such
Senior Class so acquired. Each Additional Investor
Amount shall be an amount that results in the acqui-
sition by each Senior Class of an Additional Invest-
or Amount of not less than $500,000 and integral
multiples of $100,000 in excess thereof. Each
acquisition of an Additional Investor Amount hereun-
der by a Senior Class shall be made ratably in
accordance with the respective Senior Class Facility
Limits giving due regard to the respective Senior
Class Facility Limits; provided that if one or more
(but not all) Senior Class Facility Limits have been
reached, but availability exists under one or more
other Senior Class Facility Limits related to one or
more Senior Class, acquisitions of Additional In-
vestor Amounts hereunder by such Senior Class(es)
shall be made ratably among them in accordance with
their respective Senior Class Facility Limits. Each
acquisition of an Additional Investor Amount hereun-
der by the Bank Investors of a Senior Class (in the
aggregate) shall be made ratably in accordance with
the respective Commitments of such Bank Investors.
(c) The Commitment of NationsBank set
forth on the signature page to the Certificate Purchase
Agreement is amended to read "$100,000,000".
SECTION 2. Delivery of Certificate. In con-
nection with the increase of the Senior Class Facility
Limit for the Class of which EFC is a member, the Trans-
feror agrees to deliver a Senior Class Certificates in
the name of "NationsBank, N.A., as agent for the members
of the Senior Class of which Enterprise Funding Corpora-
tion and NationsBank, N.A. are members" in the face
amount of $100,000,000, duly executed by the Transferor
and duly authenticated by the Trustee against delivery to
the Trustee, for cancellation, of the existing Senior
Class Certificate(s) related to the Senior Class of which
EFC is a member.
SECTION 3. Ratification of Certificate Pur-
chase Agreement. As amended by this Amendment, the
Certificate Purchase Agreement is in all respects rati-
fied and confirmed, and the Certificate Purchase Agree-
ment, as so amended by this Amendment, shall be read,
taken and construed as one and the same instrument. This
Amendment has been executed and delivered solely for the
purpose of providing for the amendments set forth in
Section 1 hereof, and nothing herein expressed or implied
shall constitute: (i) an amendment, supplement or other
modification to any other term, provision or condition
contained in the Certificate Purchase Agreement; (ii) a
waiver of any right, remedy, power or privilege of the
Agent, any Senior Class Agent, any Senior Class Conduit
or any Bank Investor thereunder; or (iii) a waiver of the
performance, compliance or observance by the Transferor
or the Servicer of any of their respective covenants,
obligations or other agreements contained therein. By
executing this Amendment, each of the Transferor and the
Servicer hereby confirms in all respects each term,
condition, representation, warranty, covenant and agree-
ment set forth in the Certificate Purchase Agreement and
agrees that the same shall continue in full force and
effect.
SECTION 4. 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 the obligations, rights and remedies
of the parties hereunder shall be determined in accor-
dance with such laws.
SECTION 5. Severability. If any one or more
of the covenants, agreements, provisions or terms of this
Amendment shall for any reason whatsoever be held inval-
id, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Amendment and
shall in no way affect the validity or enforceability of
the other provisions of this Amendment.
SECTION 6. Counterparts. This Amendment may
be executed in any number of counterparts (and by differ-
ent parties on separate counterparts), each of which
shall be an original, but all of which together shall
constitute one and the same instrument.
SECTION 7. Headings. The headings herein are
for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision
hereof.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Amendment as of the date
first written above.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
Name:
Title:
PROFFITT'S, INC.,
as Servicer
By:
Name:
Title:
ENTERPRISE FUNDING CORPORATION,
as a Purchaser and a Senior
Class Conduit
By:
Name:
Title:
RECEIVABLES CAPITAL CORPORATION,
as a Purchaser and a Senior Class
Conduit
By:
Name:
Title:
NATIONSBANK, N.A., as Agent,
as a Senior Class Agent and
as a Bank Investor
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Senior Class Agent
and as a Bank Investor
By:
Name:
Title:
SECOND AMENDMENT (this "Amendment"), dated as
of February 2, 1998, to the CERTIFICATE PURCHASE AGREE-
MENT, dated as of August 21, 1997 (the "Certificate
Purchase Agreement"), by and among Proffitt's Credit
Corporation, a Nevada corporation (together with its suc-
cessors and permitted assigns, the "Transferor"),
Proffitt's, Inc., a Tennessee corporation, as servicer
(in such capacity, the "Servicer"), Enterprise Funding
Corporation, a Delaware corporation (together with its
successors and permitted assigns, "EFC"), Receivables
Capital Corporation, a Delaware corporation (together
with its successors and permitted assigns, "RCC", and
collectively with EFC, the "Purchasers"), NationsBank,
N.A., a national banking association ("NationsBank"), as
agent for the Senior Class Conduits and the Bank Inves-
tors (in such capacity, the "Agent"), as a Senior Class
Agent and individually as a Bank Investor, and Bank of
America National Trust and Savings Association, a nation-
al banking association ("Bank of America"), as a Senior
Class Agent and individually as a Bank Investor.
WHEREAS, the Transferor, the Servicer, EFC,
RCC, NationsBank and Bank of America have heretofore exe-
cuted and delivered the Certificate Purchase Agreement
and the First Amendment thereto, dated as of November 26,
1997;
WHEREAS, Section 6.2 of the Certificate Pur-
chase Agreement provides that the Transferor, the
Servicer, the Agent, each Senior Class Agent, each Senior
Class Conduit (prior to an assignment in whole by such
Senior Class Conduit of its interest in the related
Senior Class Certificate Principal Balance), and each
Bank Investor may amend the Certificate Purchase Agree-
ment; and
WHEREAS, all other conditions precedent to the
execution of this Amendment have been complied with;
NOW THEREFORE, the Transferor, the Servicer,
the Agent, each Senior Class Agent, each Senior Class
Conduit and each Bank Investor are executing and deliver-
ing this Amendment in order to amend the provisions of
the Certificate Purchase Agreement in the manner set
forth below.
Capitalized terms used herein as defined terms
but not defined herein shall have the meanings assigned
to them in the Certificate Purchase Agreement.
SECTION 1. Amendments.
(a) Section 1.1 of the Certificate Pur-
chase Agreement is hereby amended by deleting the defini-
tion of "Senior Class Facility Limit" and substituting
therefor the following:
"Senior Class Facility Limit" shall
mean, (i) with respect to the Senior Class of which
EFC is a member, $250,000,000, and (ii) with respect
to the Senior Class of which RCC is a member,
$150,000,000, and (iii) with respect to any other
Class, the amount indicated in any supplement hereto
for such Senior Class; provided that in each case
such amount may not at any time exceed the aggregate
Commitments for the related Bank Investors.
(b) The Commitment of NationsBank set
forth on the signature page to the Certificate Purchase
Agreement is amended to read "$250,000,000".
(c) The Commitment of Bank of America set
forth on the signature page to the Certificate Purchase
Agreement is amended to read "$150,000,000".
(d) Section 3.4(d) of the Certificate
Purchase Agreement is hereby deleted in its entirety and
substituted with the following:
"(d) Financial Covenants. The
Servicer shall:
(i) not permit, at any time, the
ratio of Consolidated Funded
Total Indebtedness to Consoli-
dated EBITDA for the four fiscal
quarter period most recently
ended to be equal to or greater
than 3.50 to 1.00; and
(ii) not permit, at any time
during any four-quarter period
of the Servicer, the Consolidat-
ed Fixed Charge Ratio for such
four-quarter period to be equal
to or less than 1.50 to 1.00."
(e) Exhibit F to the Certificate Purchase
Agreement is hereby deleted in its entirety and replaced
with Exhibit F attached hereto.
SECTION 2. Delivery of Certificate. In con-
nection with the increase of the Senior Class Facility
Limits, the Transferor agrees to deliver Senior Class
Certificates (a) in the name of "NationsBank, N.A., as
agent for the members of the Senior Class of which Enter-
prise Funding Corporation and NationsBank, N.A. are
members" in the face amount of $250,000,000, duly execut-
ed by the Transferor and duly authenticated by the Trust-
ee against delivery to the Trustee, for cancellation, of
the existing Senior Class Certificate(s) related to the
Senior Class of which EFC is a member and (b) in the name
of "Bank of America National Trust and Savings Associa-
tion, as agent for the members of the Senior Class of
which Receivables Capital Corporation and Bank of America
National Trust and Savings Association are members" in
the face amount of $150,000,000, duly executed by the
Transferor and duly authenticated by the Trustee against
delivery to the Trustee, for cancellation, of the exist-
ing Senior Class Certificate(s) related to the Senior
Class of which RCC is a member.
SECTION 3. Ratification of Certificate Pur-
chase Agreement. As amended by this Amendment, the
Certificate Purchase Agreement is in all respects rati-
fied and confirmed, and the Certificate Purchase Agree-
ment, as so amended by this Amendment, shall be read,
taken and construed as one and the same instrument. This
Amendment has been executed and delivered solely for the
purpose of providing for the amendments set forth in
Section 1 hereof, and except as expressly stated herein,
this Amendment shall not constitute: (i) an amendment,
supplement or other modification to any other term,
provision or condition contained in the Certificate
Purchase Agreement; (ii) a waiver of any right, remedy,
power or privilege of the Agent, any Senior Class Agent,
any Senior Class Conduit or any Bank Investor thereunder;
or (iii) a waiver of the performance, compliance or
observance by the Transferor or the Servicer of any of
their respective covenants, obligations or other agree-
ments contained therein. By executing this Amendment,
each of the Transferor and the Servicer hereby confirms
in all respects each term, condition, representation,
warranty, covenant and agreement set forth in the Certif-
icate Purchase Agreement and agrees that the same shall
continue in full force and effect.
SECTION 4. 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 the obligations, rights and remedies
of the parties hereunder shall be determined in accor-
dance with such laws.
SECTION 5. Severability. If any one or more
of the covenants, agreements, provisions or terms of this
Amendment shall for any reason whatsoever be held inval-
id, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Amendment and
shall in no way affect the validity or enforceability of
the other provisions of this Amendment.
SECTION 6. Counterparts. This Amendment may
be executed in any number of counterparts (and by differ-
ent parties on separate counterparts), each of which
shall be an original, but all of which together shall
constitute one and the same instrument.
SECTION 7. Headings. The headings herein are
for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision
hereof.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Amendment as of the date
first written above.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
Name:
Title:
PROFFITT'S, INC.,
as Servicer
By:
Name:
Title:
ENTERPRISE FUNDING CORPORATION,
as a Purchaser and a Senior
Class Conduit
By:
Name:
Title:
RECEIVABLES CAPITAL CORPORATION,
as a Purchaser and a Senior Class
Conduit
By:
Name:
Title:
NATIONSBANK, N.A., as Agent,
as a Senior Class Agent and
as a Bank Investor
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Senior Class Agent
and as a Bank Investor
By:
Name:
Title:
PROFFITT'S, INC.
SUPPLEMENTAL SAVINGS PLAN
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . .1-1
1.01 Establishment and Name of Plan1-1 .
1.02 Intent and Status of Plan . . . . . . . . . . . . . . . .1-1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .2-1
2.01 Basic Compensation. . . . . . . . . . . . . . . . . . . .2-1
2.02 Board . . . . . . . . . . . . . . . . . . . . . . . . . .2-1
2.03 Bonus Compensation. . . . . . . . . . . . . . . . . . . .2-1
2.04 Committee . . . . . . . . . . . . . . . . . . . . . . . .2-1
2.05 Code. . . . . . . . . . . . . . . . . . . . . . . . . . .2-1
2.06 Compensation. . . . . . . . . . . . . . . . . . . . . . .2-1
2.07 Compensation Deferral Agreement . . . . . . . . . . . . .2-1
2.08 Compensation Deferral Date. . . . . . . . . . . . . . . .2-1
2.09 Compensation Deferral Period. . . . . . . . . . . . . . .2-1
2.10 Corporation . . . . . . . . . . . . . . . . . . . . . . .2-1
2.11 Deferred Compensation Account . . . . . . . . . . . . . .2-1
2.12 Disability. . . . . . . . . . . . . . . . . . . . . . . .2-2
2.13 Distribution Date . . . . . . . . . . . . . . . . . . . .2-2
2.14 Effective Date. . . . . . . . . . . . . . . . . . . . . .2-2
2.15 Employee. . . . . . . . . . . . . . . . . . . . . . . . .2-2
2.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . .2-2
2.17 Participant . . . . . . . . . . . . . . . . . . . . . . .2-2
2.18 Participating Company . . . . . . . . . . . . . . . . . .2-2
2.19 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . .2-2
2.20 Plan Year . . . . . . . . . . . . . . . . . . . . . . . .2-2
2.21 Regular Participant . . . . . . . . . . . . . . . . . . .2-3
2.22 Retirement Account. . . . . . . . . . . . . . . . . . . .2-3
2.23 Retirement Rate . . . . . . . . . . . . . . . . . . . . .2-3
2.24 Select Group Participant. . . . . . . . . . . . . . . . .2-3
2.25 Termination Account . . . . . . . . . . . . . . . . . . .2-3
2.26 Termination Rate. . . . . . . . . . . . . . . . . . . . .2-3
2.27 Valuation Date. . . . . . . . . . . . . . . . . . . . . .2-3
ELIGIBILITY AND PARTICIPATION. . . . . . . . . . . . . . . . .3-1
3.01 Eligibility . . . . . . . . . . . . . . . . . . . . . . .3-1
3.02 Participation . . . . . . . . . . . . . . . . . . . . . .3-1
3.03 Termination of Participation for Purposes of Making
Deferrals. . . . . . . . . . . . . . . . . . . . . . . . 3-1
DEFERRED COMPENSATION ACCOUNTS . . . . . . . . . . . . . . . .4-1
4.01 Deferred Compensation Account . . . . . . . . . . . . . .4-1
4.02 Elective Deferral Amounts . . . . . . . . . . . . . . . .4-1
4.03 Interest Credited to Deferred Compensation Accounts . . .4-2
4.04 Vesting of Accounts . . . . . . . . . . . . . . . . . . .4-3
DISTRIBUTION OF DEFERRED COMPENSATION BENEFITS . . . . . . . .5-1
5.01 In General. . . . . . . . . . . . . . . . . . . . . . . .5-1
5.02 Time of Distribution. . . . . . . . . . . . . . . . . . .5-1
5.03 Hardship Distributions. . . . . . . . . . . . . . . . . .5-1
5.04 Amount and Method of Distribution of Benefits . . . . . .5-1
5.05 Committee Decision. . . . . . . . . . . . . . . . . . . .5-2
5.06 Payments After Participant's Death. . . . . . . . . . . .5-2
5.07 Designation of Beneficiaries. . . . . . . . . . . . . . .5-2
FINANCING AND UNFUNDED STATUS 6-1
6.01 Costs Borne by the Participating Companies. . . . . . . .6-1
6.02 Source of Benefit Payments and Medium of Financing the
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . .6-1
6.03 Unfunded Status . . . . . . . . . . . . . . . . . . . . .6-1
ADMINISTRATION 7-1
7.01 General Administration. . . . . . . . . . . . . . . . . .7-1
7.02 Committee Procedures. . . . . . . . . . . . . . . . . . .7-1
7.03 Facility of Payment . . . . . . . . . . . . . . . . . . .7-1
7.04 Indemnification of Committee Members. . . . . . . . . . .7-2
EMPLOYER PARTICIPATION 8-1
8.01 Adoption of Plan. . . . . . . . . . . . . . . . . . . . .8-1
8.02 Employer Accounting . . . . . . . . . . . . . . . . . . .8-1
8.03 Withdrawal from the Plan by Employer. . . . . . . . . . .8-1
AMENDMENT AND TERMINATION OF PLAN 9-1
9.01 Amendment and Termination . . . . . . . . . . . . . . . .9-1
GENERAL PROVISIONS 10-1
10.01 Limitation of Rights . . . . . . . . . . . . . . . . . 10-1
10.02 No Assignment or Alienation of Benefits. . . . . . . . 10-1
10.03 Successors . . . . . . . . . . . . . . . . . . . . . . 10-1
10.04 Governing Law. . . . . . . . . . . . . . . . . . . . . 10-2
ARTICLE 1
INTRODUCTION
1.01 Establishment and Name of Plan.
Proffitt's, Inc. hereby establishes, as of the Effective Date,
an unfunded, deferred compensation plan primarily for the
purpose of providing deferred compensation for a select group
of management or highly compensated employees of the
Participating Companies, entitled the "Proffitt's, Inc.
Supplemental Savings Plan."
1.02 Intent and Status of Plan.
The Plan is intended to be an unfunded plan maintained by the
Corporation with the Participating Companies primarily for the
purpose of providing deferred compensation for a select group
of management or highly compensated employees (and intended to
be within the exemptions therefore in, without limitation,
sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA
and section 2520.104-23 of the Labor Regulations). The Plan
is intended to be "unfunded" for purposes of both ERISA and
the Code. The Plan is not intended to be qualified as a
qualified plan under section 401(a) of the Code; rather, the
Plan is intended to be a "nonqualified" plan.
ARTICLE 2
DEFINITIONS
Each following word, term and phrase shall have the following
respective meanings whenever such word, term or phrase is
capitalized and used in any Article of this Plan unless the
context clearly indicates otherwise:
2.01 "Basic Compensation" means the portion of a Participant's
Compensation that is not Bonus Compensation.
2.02 "Board" means the Board of Directors of the Corporation.
2.03 "Bonus Compensation" means the portion of a Participant's
Compensation that is paid in the form of a bonus.
2.04 "Committee" means the Committee appointed by the Board to
administer the Plan pursuant to Article 8 hereof. If no such
Committee has been appointed, then the term Committee shall
mean the Corporation.
2.05 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.06 "Compensation" means the cash compensation which is earned and
otherwise payable in a given Compensation Deferral Period to
a Participant, including any amounts that would be payable as
cash compensation except for the Participant's election to
defer such amount under this plan or a plan under Code section
401(k) or Code section 125.
2.07 "Compensation Deferral Agreement" means the written agreement
to defer Compensation contemplated by Articles 3 and 4 hereof
executed by the Participant and the Participating Company.
2.08 "Compensation Deferral Date" means the Effective Date in the
initial plan year, and January 1 in each calendar year
thereafter.
2.09 "Compensation Deferral Period" means the period beginning on
the Effective Date and ending on December 31, 1997 (the
initial Plan Year), and the twelve (12) consecutive month
period beginning on each January 1 and ending on each
following December 31 thereafter (the calendar year).
2.10 "Corporation" means Proffitt's, Inc., a Tennessee corporation
and any business organization or corporation into which
Proffitt's, Inc. may be merged or consolidated or by which it
may be succeeded.
2.11 "Deferred Compensation Account" means the account established
by the Participating Companies pursuant to Article 4 of this
Plan for each Participant to which shall be credited (added)
the Participant's Elective Deferral Amounts; and from which
any distributions and any hardship withdrawal distributions
shall be subtracted; and to which shall be credited interest
at the Retirement Rate as described in Section 4.03 hereof.
All amounts which are credited to such Deferred Compensation
Account are credited solely for computation purposes and are
at all times general assets of the Participating Companies and
subject to the claims of the general creditors of the
Participating Companies.
2.12 Disability" means a physical or mental condition of a
Participant resulting in:
(a) evidence that the Participant is deemed by the Social
Security Administration to be eligible to receive a
Primary Social Security disability benefit, or
(b) evidence that the Participant is eligible for disability
benefits under the long-term disability plan sponsored by
a Participating Company, or
(c) evidence satisfactory to the Committee that the
Participant is totally and permanently disabled.
Whether or not a Participant meets any or all of the above
conditions will be determined solely and exclusively by the
Committee.
2.13 "Distribution Date" means either (a) the date that is as soon
as administratively possible after the date the Participant
terminates employment with the Participating Companies or (b)
the date that is as soon as administratively possible after
the end of the Plan Year in which the Participant terminates
employment, as elected by the Participant in his Compensation
Deferral Agreement.
2.14 "Effective Date" means April 1, 1997, the date the Plan is
established.
2.15 "Employee" means a person, other than an independent
contractor, who is receiving remuneration from the Employer
for services rendered to, or labor performed for, the Employer
(or who would be receiving such remuneration except for an
authorized leave of absence).
2.16 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
2.17 "Participant" means an eligible Employee participating in the
Plan pursuant to the provisions of Article 3 hereof.
2.18 "Participating Company" means the Corporation and any
subsidiary or affiliate of the Corporation which adopts the
Plan with the Corporation's consent as described in Section
8.01.
2.19 "Plan" means this Proffitt's, Inc. Supplemental Savings Plan
as established and set forth herein (together with any and all
supplements hereto), and as amended from time to time.
2.20 "Plan Year" means the period beginning on the Effective Date
and ending on December 31, 1997 (the initial Plan Year), and
the twelve (12) consecutive month period being on each January
1 and ending on each following December 31 thereafter (the
calendar year).
2.21 "Regular Participant" means a Participant who is not a Select
Group Participant.
2.22 "Retirement Account" means a Participant's Deferred
Compensation Account, and to which interest is credited at the
Retirement Rate.
2.23 "Retirement Rate" means the annual rate of interest that is
credited to the Retirement Account pursuant to Section 4.03
hereof. Until changed by the Committee, the Retirement Rate
shall be seven and one-half percent (7.5%) per annum. The
Committee may change the Retirement Rate at any time.
2.24 "Select Group Participant" means a Participant who is eligible
for special treatment and privileges under the Plan, as
described elsewhere in the Plan. At Plan inception, the
following Participants shall be Select Group Participants:
Brad Martin
James Coggin
Robert Mosco
Douglas Coltharp
Donald Wright
Frank Kulp
William Capiello
The Committee shall have the authority to name new Select
Group Participants and to redesignate Select Group
Participants as Regular Participants, at its discretion.
2.25 "Termination Account" means the portion of a Participant's
Deferred Compensation Account that would have resulted had the
Deferred Compensation Account always been credited with
interest at the Termination Rate rather than the Retirement
Rate.
2.26 "Termination Rate" means the annual rate of interest that is
credited to the Termination Account pursuant to Section 4.03
hereof. Until changed by the Committee, the Termination Rate
shall be five percent (5%) per annum. The Committee may
change the Termination Rate at any time.
2.27 "Valuation Date" means the last day of each calendar quarter,
or such other dates as the Committee, in its discretion, may
designate.
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility.
Eligibility to participate in the Plan shall be limited to
Employees of the Participating Companies who are in a select
group of management or highly compensated Employees and who
are designated, from time to time, by the Committee as
eligible to participate in the Plan. At Plan inception, the
Employees eligible to participant shall be those eligible
Employees as described above whose annual base rate of pay
from one or more Participating Companies is greater than
eighty thousand dollars ($80,000). The Committee shall have
the authority to, at any time and from time to time, change
the conditions for eligibility within the constraints imposed
by the first sentence of this Section 3.01.
3.02 Participation.
An Employee eligible to participate in the Plan as provided in
Section 3.01 hereof may elect to become a Participant in the
Plan by electing to defer Compensation with respect to any
Compensation Deferral Period under Article 4 hereof.
3.03 Termination of Participation for Purposes of Making Deferrals.
Participation in the Plan for purposes of being able to make
Elective Deferral Amounts pursuant to Section 4.02 hereof
under this Plan shall terminate when a Participant's
employment with the Participating Companies as an Employee
terminates or when such Participant is no longer designated by
the Committee as an Employee eligible to participate in the
Plan.
ARTICLE 4
DEFERRED COMPENSATION ACCOUNTS
4.01 Deferred Compensation Account.
On behalf of Participating Companies the Committee shall
establish and maintain for each Participant or former
Participant under the Plan a book reserve account (the
Deferred Compensation Account as defined in Section 2.11
hereof) for the purpose of determining deferred compensation
payable to the Participant. Such Deferred Compensation
Account shall be governed by the provisions of this Article 4.
4.02 Elective Deferral Amounts.
Elective deferral of Compensation by Participants under the
Plan is governed by the provisions of this Section. Amounts
deferred by a Participant pursuant to this Section shall
constitute "Elective Deferral Amounts" for purposes of this
Plan and shall be fully vested at all times.
(a) Compensation Elective Deferrals. The following
provisions apply to elective deferral of Compensation by
Participants under the Plan.
(i) Compensation Deferral Elections by Participants.
With respect to a Compensation Deferral Period, a
Participant may make an election prior to the
Compensation Deferral Date on which such
Compensation Deferral Period begins to defer a
specified percentage of the Basic Compensation and
a separate specified percentage of the Bonus
Compensation which would otherwise be payable by
the Participating Company to the Participant during
the Compensation Deferral Period beginning on such
Compensation Deferral Date. Any such election
shall be made on a Compensation Deferral Agreement
which is duly executed by the Participant and which
is delivered by such Participant to the Committee
before such Compensation Deferral Date and may not
be revoked, changed or modified for and during the
applicable Compensation Deferral Period and the
provisions of subsection 4.02(a)(iii) hereof shall
apply to any such election.
(ii) Compensation Deferral Elections by Certain New
Participants. In the case of an Employee who first
becomes eligible to participate in the Plan during
a Compensation Deferral Period, such an Employee
may make an election no later than thirty (30) days
following the date such Employee first becomes
eligible to participate in the Plan to defer a
specified percentage of the Basic Compensation and
a separate specified percentage of the Bonus
Compensation which would otherwise be earned by
such employee and be payable by the Participating
Employer after the later of (i) the date the
Employee first becomes eligible to participate in
the Plan or (ii) the date such Compensation
Deferral Agreement is received by the Committee and
during the remainder of the Compensation Deferral
Period. Any such election shall be made on a
Compensation Deferral Agreement which is duly
executed by the Employee and which is delivered by
such Employee to the Committee no later than thirty
(30) days following the date the Employee first
becomes eligible to participate in the Plan, and
may not be revoked, changed or modified for and
during the applicable Compensation Deferral Period,
and the provisions of subsection 4.02(a)(iii) shall
apply to any such election. If such Employee does
not make any such election, such Employee may make
an election under Section 4.02(a) with respect to
the next Compensation Deferral Period (or later
Compensation Deferral Periods) pursuant to the
applicable provisions.
(iii) Continuation and Irrevocability of Election.
Any election by a Participant pursuant to
subsection 4.02(a)(i) or 4.02(a)(ii) (and any
subsequent election) will continue (and may
not be modified, altered, or changed in any
way) until the earliest of (A) the
Compensation Deferral Period commencing after
the date the Participant delivers to the
Committee a written notice to suspend future
deferrals of Compensation under the Plan, (B)
the Compensation Deferral Period commencing
after the date on which the Participant
delivers a new Compensation Deferral Agreement
modifying his previous election to the
Committee, (C) the Participant is no longer
designated as eligible to participate in the
Plan, (D) the Participant terminates
employment with the Participating Companies,
or (E) the Plan is amended or terminated such
that the Plan no longer permits deferrals of
Compensation.
(iv) Limitations on Percentage Amounts. A Participant
may elect to make a deferral of up to twenty
percent (20%) of the Participant's annual Basic
Compensation and up to one hundred percent (100%)
of the Participant's Bonus Compensation otherwise
payable to him.
(v) Distribution Elections. At the time of a
Participant's initial deferral election, the
Participant must specify the date on which his
Deferred Compensation Account shall be paid or
commence (i.e. the Distribution Date). The
Distribution Date specified at the time of the
Participant's initial election is irrevocable and
shall apply to all amounts payable to the
Participant under the Plan.
(b) Withholding and Crediting of Elective Deferral Amounts.
The Participating Company shall withhold the specified
percentage amounts deferred by the Participant hereunder
from the Compensation which is otherwise payable to the
Participant. The Committee shall credit amounts equal to
such withheld amounts to the Participant's Deferred
Compensation Account.
4.03 Interest Credited to Deferred Compensation Accounts.
Interest shall be credited to the Deferred Compensation
Accounts of Participants as described in this Section 4.03.
(a) Retirement Account. As of each Valuation Date, each
Participant's Retirement Account will be credited with
interest at the rate for the period ending on the
Valuation Date which is equivalent to the annual
Retirement Rate.
(b) Termination Account. As of each Valuation Date, each
Participant's Termination Account will be credited with
interest at the rate for the period ending on the
Valuation Date which is equivalent to the annual
Termination Rate.
(c) Select Group. Notwithstanding the above, and until such
time as changed by the Committee, the Deferred
Compensation Accounts of Select Group Participants will
be credited with interest at rates which, on an
annualized basis, are one (1) percentage point higher
than the rates applicable to Regular Participants. The
Committee shall have the discretion of changing at any
time and from time to time the rates applicable to the
Accounts of Select Group Participants.
4.04 Vesting of Accounts.
Participants' Deferred Compensation Accounts will be vested as
described in this Section 4.04.
A Participant's Termination Account will always be fully
vested. The excess of a Participant's Retirement Account over
his Termination Account will become fully vested on the
earliest of the following dates:
(a) the date the Participant attains age sixty-two (62)
years, provided the Participant is actively employed by
a Participating Company on such date;
(b) the date of the Participant's death, provided the
Participant is actively employed by a Participating
Company on such date;
(c) the date of the Participant's Disability, provided the
Participant is actively employed by a Participating
Company on such date.
Notwithstanding the above, the Committee may, at its
discretion, designate a Participant as fully vested in his
entire Deferred Compensation Account for any reason it deems
appropriate.
The portion of a Participant's Deferred Compensation Account
which is not vested as described above will be forfeited as of
the date the Participant terminates employment.
ARTICLE 5
DISTRIBUTION OF DEFERRED COMPENSATION BENEFITS
5.01 In General.
The benefits to be paid as deferred compensation are governed
by the provisions of this Article 5. A Participant whose
employment with the Participating Companies terminates for any
reason shall be entitled to distribution of benefits pursuant
to this Article, subject to the provisions of Article 7.
5.02 Time of Distribution.
The Corporation on behalf of the Participating Company or
Companies shall distribute benefits on the Distribution Date
elected by the Participant with his initial Compensation
Deferral Agreement.
5.03 Hardship Distributions.
Notwithstanding the foregoing, the Committee may, in its sole
discretion, commence distribution of benefits from the vested
portion of a Participant's Deferred Compensation Account at
any date earlier than that provided in Section 5.02 based on
a determination of an unforeseeable financial emergency. A
Participant may withdraw in cash the vested portion of the
balance of his deferral account needed to satisfy the
unforeseeable financial emergency, to the extent that the
unforeseeable financial emergency may not be relieved:
(a) through reimbursement or compensation by insurance or
otherwise; or
(b) by liquidation of the Participant's assets, to the extent
the liquidation of such assets would not itself cause
severe financial hardship.
An "unforeseeable financial emergency" is a severe financial
hardship to the Participant resulting from:
(1) a sudden and unexpected illness or accident of the
Participant or of a dependent of the Participant;
(2) loss of the Participant's property due to casualty;
or
(3) such other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond
the control of the Participant as determined by the
Committee.
A withdrawal on account of an unforeseeable financial
emergency shall be paid as soon as possible following the date
on which the Committee approves the withdrawal.
5.04 Amount and Method of Distribution of Benefits.
A Participant whose employment with the Participating
Companies terminates shall be entitled to the vested balance
of his Deferred Compensation Account as of the Distribution
Date. Distribution of such deferred compensation benefits to
a former Participant under this Plan shall be made in a single
lump sum payment.
Notwithstanding the foregoing, any hardship distributions
which are made as provided in Section 5.03 above from a
Participant's Deferred Compensation Account shall be made in
such amounts and for such periods of time as may be considered
necessary by the Committee to meet the conditions of such
financial hardship; provided, however, that in no event will
amounts in excess of the remaining value of the Participant's
Deferred Compensation Account become payable to the
Participant.
5.05 Committee Decision.
Any decision to be made by the Committee under this Article 5
with respect to the distribution of benefits with respect to
a Participant or former Participant under this Plan shall be
made by the Committee, but such Participant shall exclude
himself therefrom for purposes of those decisions if such
Participant is a member of the Committee.
5.06 Payments After Participant's Death.
If the Participant dies before his benefit under the Plan has
been distributed to him, then the deferred compensation
benefits otherwise payable with respect to such Participant
under the Plan shall be paid in a lump sum to the beneficiary
or beneficiaries designated by the Participant.
5.07 Designation of Beneficiaries.
The Participant may designate in writing (on a form provided
by the Committee and delivered to the Committee before his
death) primary and contingent beneficiaries to receive any
deferred compensation benefit payments which may be payable
hereunder following the Participant's death and the
proportions in which such beneficiaries are to receive such
payments. The Participant may change such designation from
time to time and the last written designation delivered to the
Committee prior to the Participant's death will control. If
the Participant fails to specifically designate such a
beneficiary, or if no designated beneficiary survives the
Participant, or if all designated beneficiaries who survive
the Participant die before all payments are made, then the
remaining payments shall be made to the Participant's
surviving spouse if such spouse is then living; if such spouse
is not living, then to the executors or administrators of the
estate of the Participant. The Committee may determine the
identity of such persons and shall incur no responsibility by
reason of the payment of such interest in accordance with any
such determination made in good faith.
ARTICLE 6
FINANCING AND UNFUNDED STATUS
6.01 Costs Borne by the Participating Companies.
The costs of the Plan shall be borne by the Participating
Companies. Provided, however, that the Committee may elect to
charge some or all of the Plan's costs to the accounts of
Participants.
6.02 Source of Benefit Payments and Medium of Financing the Plan.
Benefits payable under the Plan to any Participant shall be
paid directly by the Participating Company which employs the
Participant. The Participating Company shall not be required
to fund or otherwise segregate assets to be used for payment
of benefits under the Plan. While the Participating Company
may, in the discretion of the Committee, make investments in
the funds designated by the Committee as investment funds in
amounts equal or unequal to Participants' Deferred
Compensation Accounts hereunder, the Participating Company
shall not be under any obligation to make such investments and
any such investment shall remain an asset of the Participating
Company subject to the claims of its general creditors.
Notwithstanding the foregoing, the Participating Company, in
the discretion of the Committee, may maintain one or more
grantor trusts ("trust") to hold assets to be used for payment
of benefits under the Plan. The assets of the trust with
respect to benefits payable to the employees of each
Participating Company shall remain the assets of such
Participating Company subject to the claims of its general
creditors. Any payments by a trust of benefits provided to a
Participant under the Plan shall be considered payment by the
Participating Company and shall discharge the Participating
Company of any further liability under the Plan for such
payments.
6.03 Unfunded Status.
This Plan is intended to be unfunded for purposes of both
ERISA and the Code.
ARTICLE 7
ADMINISTRATION
7.01 General Administration.
The Board shall appoint a Committee consisting of not less
than three (3) persons to administer the Plan. Any member of
the Committee may at any time be removed, with or without
cause, and his successor appointed by the Chief Executive
Officer of the Corporation, and any vacancy caused by death,
resignation or other reason shall be filled by the Chief
Executive Officer of the Corporation. The Committee shall be
the plan administrator of the Plan and in general shall be
responsible for the management and administration of the Plan.
The Committee shall have full power to administer the Plan in
all of its details (including establishing claims procedures
and other rules), subject to applicable requirements of law.
No member of the Committee who is an employee of the
Participating Companies shall receive compensation for his
services to the Plan. The Committee shall have such duties
and powers as may be necessary to discharge its duties under
this Plan.
The fiscal records of the Plan shall be maintained on the
basis of the Plan Year.
7.02 Committee Procedures.
The Committee may act at a meeting or in writing without a
meeting. The Committee may adopt such by-laws and regulations
as it deems desirable for the conduct of its affairs. All
decisions shall be made by majority vote. No member of the
Committee who is at any time a Participant in this Plan shall
vote in a decision of the Committee (whether in a meeting or
by written action) made specifically and uniquely with respect
to such member of the Committee or amount, payment, timing,
form or other aspect of the benefits of such Committee member
under this Plan.
7.03 Facility of Payment.
Whenever, in the Committee's opinion, a person entitled to
receive any payment of a benefit or installment thereof
hereunder is under a legal disability or is incapacitated in
any way so as to be unable to manage his financial affairs,
the Committee may direct payments to such person or to his
legal representative or to a relative or friend of such person
for his benefit, or the Committee may direct the payment for
the benefit of such person in such manner as the Committee
considers advisable. Any payment of a benefit or installment
thereof in accordance with the provisions of this Section
shall be a complete discharge to the Committee and the
Participating Companies of any liability for the making of
such payment under the provisions of the Plan.
7.04 Indemnification of Committee Members.
The Participating Companies shall indemnify and hold harmless
each member of the Committee against any and all liability,
claims, damages and expense (including all expenses reasonably
incurred in his defense in the event that the Participating
Companies fail to provide such defense upon his written
request) which the Committee member may incur while acting in
good faith in the administration of the Plan.
ARTICLE 8
EMPLOYER PARTICIPATION
8.01 Adoption of Plan.
Any subsidiary or affiliate of the Corporation may, with the
approval of the Corporation and under such terms and
conditions as the Committee may prescribe, adopt the Plan by
filing with the Corporation a resolution of its Board of
Directors to that effect. The Corporation may amend the Plan
as necessary or desirable to reflect the adoption of the Plan
by an employer, provided however, that an adopting employer
shall not have the authority to amend or terminate the Plan
under Article 9.
8.02 Employer Accounting.
If a trust is established pursuant to Section 6.02, the
Committee shall maintain a bookkeeping account in the name of
each Participating Company which, pursuant to rules
established by the Committee, will reflect:
(a) deposits made by that Participating Company to the trust;
(b) income, losses, and appreciation or depreciation in the
value of trust assets resulting from investment of the
trust to the extent such items are attributable to such
Participating Company's deposits;
(c) payments made from the trust to Participants employed or
formerly employed by that Participating Company (or to
their beneficiaries) in the form of benefits payable to
them under the plan, or to its creditors; and
(d) any other amounts charged to that Participating Company's
account, including its share of compensation and
expenses.
8.03 Withdrawal from the Plan by Employer.
Any such employer shall have the right, at any time, upon the
approval of and under such conditions as may be provided by
the Committee, to withdraw from the Plan by delivering to the
Committee written notice of its election so to withdraw. Upon
receipt of such notice by the Committee, the portion of the
deferral account of Participants and beneficiaries
attributable to amounts deferred while the Participants were
employees of such withdrawing employer, plus any net earnings,
gains and losses on such amounts, shall be distributed from
the trust at the direction of the Committee in cash at such
time or times as the Committee, in its sole discretion, may
deem to be in the best interest of such employees and their
beneficiaries. To the extent the amounts held in the trust
for the benefit of such Participants and beneficiaries are not
sufficient to satisfy the employer's obligation to such
Participants and their beneficiaries accrued on account of
their employment with the employer, the remaining amount
necessary to satisfy such obligation shall be an obligation of
the employer, and the Corporation and the other Participating
Companies shall have no further obligation to such
Participants and beneficiaries with respect to such amounts.
ARTICLE 9
AMENDMENT AND TERMINATION OF PLAN
9.01 Amendment and Termination.
The Board may amend or terminate the Plan (without the consent
of any Participant, former Participant or beneficiary) at any
time, provided that such amendment does not decrease or divest
any then Participant or former Participant of the amounts in
his Deferred Compensation Account as of the date of amendment.
ARTICLE 10
GENERAL PROVISIONS
10.01 Limitation of Rights.
Neither the establishment of this Plan nor any amendment
thereof, nor the payment of any benefits, will be construed as
giving to any Employee, Participant, beneficiary, or other
person any legal or equitable right against the Participating
Companies, except as provided herein. Neither the
establishment of this Plan nor any amendment thereof, nor the
payment of benefits, nor any action taken with respect to this
Plan shall confer upon any person the right to be continued in
the employment of the Participating Companies or Subsidiaries.
10.02 No Assignment or Alienation of Benefits.
The rights of a Participant, former Participant, beneficiary
or any other person to payment of benefits under this Plan
shall not be assigned, transferred, anticipated, conveyed,
pledged or encumbered except by will or the laws of descent or
distribution; nor shall any such right be in any manner
subject to levy, attachment, execution, garnishment or any
other seizure under legal, equitable or other process for
payment of any debts, judgments, alimony, or separate
maintenance, or reached or transferred by operation of law in
the event of bankruptcy, insolvency or otherwise. Provided,
however, that a Participant shall have the right to designate
in writing and in accordance with the provisions of Section
5.07 hereof primary and contingent beneficiaries to receive
benefit payments subsequent to the death of the Participant.
10.03 Successors.
The provisions of this Plan shall be binding upon and inure to
the benefit of the Corporation, its successors, and assigns,
and each Participant and his heirs, executors, administrators
and legal representatives. The term successors as used herein
shall include any corporate or other business entity which
shall, whether by merger, consolidation, purchase or
otherwise, acquire all or substantially all of the assets of
the Corporation, and successors of any such corporation or
other business entity.
10.04 Governing Law.
Except to the extent Federal law is controlling, the
provisions of this Plan shall be interpreted and construed
according to the laws of the State of Tennessee to the extent
not preempted by applicable law.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be
duly executed for and on behalf of the Corporation by its duly
authorized officers on this the _____ day of ______________, 1997.
PROFFITT'S, INC.
By:______________________________
Title:___________________________
ATTEST:
____________________________________
FIRST AMENDMENT
TO THE
PROFFITT'S, INC. SUPPLEMENTAL SAVINGS PLAN
The Proffitt's, Inc. Supplemental Savings Plan is hereby
amended effective December 1, 1997 as follows:
1. Article 6, Section 6.01 is hereby amended in its entirety
to read as follows:
6.01 Costs Borne by the Participating Companies.
The costs of the Plan shall be borne by the
Participating Companies or, at the election of the
Committee, by the trust if one is created pursuant
to section 6.02 hereof.
IN WITNESS WHEREOF, Proffitt's, Inc. has caused this First
Amendment to the Proffitt's, Inc. Supplemental Savings Plan to be
executed by its duly authorized officer on this _______ day of
____________________, 19_____.
PROFFITT'S, INC.
By:_______________________________
Title:____________________________
SECOND AMENDMENT
TO THE
PROFFITT'S, INC. SUPPLEMENTAL SAVINGS PLAN
The Proffitt's, Inc. Supplemental Savings Plan is hereby
amended effective January 1, 1998 as follows:
1. Article 4, Section 4.01(a)(iv) is hereby amended in its
entirety to read as follows:
(iv) Limitations on Percentage Amounts. Except as
hereinafter provided, a Participant may elect to
make a deferral of up to twenty percent (20%) of
the Participant's annual Basic Compensation and up
to one hundred percent (100%) of the Participant's
Bonus Compensation otherwise payable to him. The
Chief Executive Officer of the Corporation may
elect to make a deferral of up to one hundred
percent (100%) of both his annual Basic
Compensation and his Bonus Compensation otherwise
payable to him.
IN WITNESS WHEREOF, Proffitt's, Inc. has caused this Second
Amendment to the Proffitt's, Inc. Supplemental Savings Plan to be
executed by its duly authorized officer on this _______ day of
_________________, 19___.
PROFFITT'S, INC.
By: _______________________________
Title: ____________________________
Exhibit 10.40
FOURTH AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Fourth Amended and Restated Employment Agreement
("Agreement") is entered into as of the 2nd day of February 1998,
by and between Proffitt's, Inc. ("Company"), and R. Brad Martin
("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Chief
Executive Officer of Company or in such other capacity with
Company and its subsidiaries as Company's Board of
Directors shall designate. It is anticipated that Executive will
be elected Chairman of the Board.
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 $825,000 per
year. In addition, the Board of Directors of Company shall, in
good faith, consider granting increases in such Base Salary based
upon such factors as Executive's performance and the growth
and/or profitability of Company. 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 pursuant to the 1998 Senior Executive Bonus
Plan, as long as he holds the position stated in paragraph 1, for
a yearly cash bonus of up to 75% of Base Salary based upon his
performance in accordance with specific annual objectives, set in
advance, all as approved by the Board of Directors.
(c) End of Five-Years Service Stock Grants. In
accordance with Executive's prior employment agreements, Company
shall issue to Executive fifty thousand (50,000) shares of common
stock as soon as possible after July 1, 1998 provided Executive
has served the Company continuously for five years following July
1, 1993. Company shall also issue to Executive an additional
fifty thousand (50,000) shares of common stock to Executive as
soon as possible after October 11, 2001, provided Executive has
served the Company continuously for five years following October
11, 1996, the date of Executive's Second Amended and Restated
Employment Agreement. In the event of Executive's death prior to
July 1, 1998, or October 11, 2001, Executive's estate shall be
issued a pro rata potion of the shares, on the basis of 10,000
shares per year for each grant.
(d) Stock Grant. Pursuant to the 1998 Senior
Executive Bonus Plan, an amount up to twenty thousand (20,000)
shares of Company common stock may be issued to Executive as soon
as possible after the end of each fiscal year of Company, based
upon annual targeted growth in intrinsic value of the Company or
other factors, as determined by the Human Resources Committee of
the Board of Directors. The Human Resources
Committee, subject to approval from the Board of Directors, shall
have sole and exclusive discretion to grant or withhold any
portion of such yearly stock grant.
(e) Stock Bonus. Pursuant to the 1998 Senior
Executive Bonus Plan, Company shall award Executive a bonus of
20,000 shares of Company stock for each fiscal year in which
Company's earnings per share increase 20% or more over the prior
year's earnings. The Human Resources Committee of the Board of
Directors shall have sole and exclusive discretion to determine
whether that objective has been met, and the Committee may
consider matters such as non-recurring and extraordinary items.
(f) Incentive Compensation. Executive is hereby
granted a non-qualified option ("Option") to purchase one hundred
thousand (100,000) shares of Company common stock at an option
price equal to the closing price of the stock at the close of
business on February 2, 1998 (the "Grant Date"), as reported in
the Wall Street Journal. The Option is granted pursuant to the
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 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.
(g) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
LTIP), any Options granted to Executive prior to such Change of
Control shall immediately vest.
(h) Forgiveness of Loan. Company shall forgive the
$500,000 interest-free loan due January 31, 1999, in 1/5th
increments, at the end of each fiscal year; provided, however,
that Executive must continue to be employed by Company for any
portion of the loan to be forgiven, and provided further that
Executive must repay any outstanding balance if he terminates
employment.
(i) Company Aircraft. Company requires Executive to
use Company aircraft for personal use, whenever possible, up to
30 hours per year. Such use is important for the safety of
Executive and so that Executive may remain in communications with
other Company officials as necessary. Executive may use Company
aircraft for such uses -- up to 30 hours per year -- without
further reimbursement to Company.
4. Insurance and Benefits. Company shall allow Executive
to participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position. In addition, Company shall
pay the reasonable costs for Executive's tax and financial
planning, and shall continue to buy split-dollar life insurance
for Executive.
5. Term. The term of this Agreement shall be for five (5)
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 (at the rate in
effect at the time of termination) 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 shorter. In the event that Executive is
disabled for more than twelve consecutive months during the term
of this Agreement, Executive shall, at the expiration of the
initial twelve consecutive month period, be entitled to receive
under this Agreement 50% of his Base Salary plus the insurance
and benefits described in Section 4 of this Agreement for the
remaining term of this Agreement. 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 three years
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 solicit, in competition with
Company, any person who is a customer 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 three years 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;
(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: R. Brad Martin
5810 Shelby Oaks Drive
Memphis, TN 38134
If to Company: Proffitt's, Inc.
750 Lakeshore Parkway
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) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive
compensation evidenced by a written instrument -- some of which
are attached hereto as Exhibit A -- 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: _____________________
James A. Coggin
President
_____________________
Brian J. Martin
General Counsel
__________________
R. Brad Martin
Executive
Date of Grant: January 31, 1998
Grantee: Brian J. Martin
Number of shares: 20,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: __________________________
Its: President
_________________________________
Brian J. Martin
Grantee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 2nd day of February 1998, by and between Proffitt's, Inc. (the
"Company"), and Robert M. Mosco ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
and Chief Executive Officer of Proffitt's Merchandising Group 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 $700,000 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 60% of Base Salary
based upon his performance in accordance with specific annual
objectives, set in advance, all as approved by the Board of
Directors. Executive's bonus for fiscal year ending January 31,
1998, shall be calculated on the basis of his Base Salary in effect
during fiscal year 1997.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase one-hundred thousand
(100,000) shares of Company common stock at an option price equal
to the closing price of the stock on February 2, 1998, as reported
in the Wall Street Journal. This Option is granted pursuant to
Company's 1994 Long-Term Incentive Plan ("1994 Plan"), and shall be
subject to the terms and conditions thereof. The Option shall be
exercisable on or after February 2, 1998, (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 Plan) 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
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 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 employee benefit arrangement or
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 shorter. 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 his employment
relationship.
(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 his
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;
(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 in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Robert M. Mosco
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: Brian J. Martin
Executive Vice President of Law
750 Lakeshore Parkway
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) 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
Executive Vice President
___________________________
Robert M. Mosco
Executive
Date of Grant: January 31, 1998
Grantee: Robert Mosco
Number of shares: 75,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: ____________________________________
Its: Executive Vice President
____________________________________
Robert Mosco
Grantee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 2nd day of February 1998, by and between Proffitt's, Inc. (the
"Company"), and James A. Coggin ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
of Company 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 $700,000 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 60% of Base Salary
based upon his performance in accordance with specific annual
objectives, set in advance, all as approved by the Board of
Directors. Executive's bonus for fiscal year ending January 31,
1998, shall be calculated on the basis of his Base Salary in effect
during fiscal year 1997.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase one-hundred thousand
(100,000) shares of Company common stock at an option price equal
to the closing price of the stock on February 2, 1998, as reported
in the Wall Street Journal. This Option is granted pursuant to
Company's 1994 Long-Term Incentive Plan ("1994 Plan"), and shall be
subject to the terms and conditions thereof. The Option shall be
exercisable on or after February 2, 1998, (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 Plan) 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
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 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 employee benefit arrangement or
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 shorter. 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 his employment
relationship.
(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 his
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;
(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 in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: James A. Coggin
3455 Highway 80 West
Jackson, MS 39209
If to Company: Brian J. Martin
Executive Vice President of Law
750 Lakeshore Parkway
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) 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
Executive Vice President
____________________________________
James A. Coggin
Executive
Date of Grant: January 31, 1998
Grantee: James A. Coggin
Number of shares: 75,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: ____________________________________
Its: Executive Vice President
____________________________________
James A. Coggin
Grantee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 2nd day of February 1998, by and between Proffitt's, Inc. (the
"Company"), and Douglas E. Coltharp ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Executive
Vice President and Chief Financial Officer of Company 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 $350,000 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 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. Executive's bonus for fiscal year ending January 31,
1998, shall be calculated on the basis of his Base Salary in effect
during fiscal year 1997.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase forty thousand
(40,000) shares of Company common stock at an option price equal to
the closing price of the stock on February 2, 1998, as reported in
the Wall Street Journal. This Option is granted pursuant to
Company's 1994 Long-Term Incentive Plan ("1994 Plan"), and shall be
subject to the terms and conditions thereof. The Option shall be
exercisable on or after February 2, 1998, (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 Plan) 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
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
(e) Service Award. As compensation for his service,
Company shall issue 15,000 shares of Company stock to Executive as
soon as practicable after he completes three years of uninterrupted
service with Company. Executive shall be entitled to such 15,000
shares of Company stock prior to the completion of three years of
service in the event that his employment is terminated by Company,
and in that event, the award shall be made 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.
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 employee benefit arrangement or
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 three 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
(but not less than six months), whichever period is shorter. 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 their employment relationship.
(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
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;
(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 in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Douglas E. Coltharp
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: Brian J. Martin
750 Lakeshore Parkway
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) 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
Executive Vice President
_____________________
Douglas E. Coltharp
Executive
Date of Grant: January 31, 1998
Grantee: Douglas Coltharp
Number of shares: 20,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: ____________________________________
Its: Executive Vice President
____________________________________
Douglas Coltharp
Grantee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 2nd day of February 1998, by and between Proffitt's, Inc. (the
"Company"), and Brian J. Martin ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as
Executive Vice President and General Counsel of Company 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 $350,000 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 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. Executive's bonus for fiscal year ending January 31,
1998, shall be calculated on the basis of his Base Salary in effect
during fiscal year 1997.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase one-hundred thousand
(40,000) shares of Company common stock at an option price equal to
the closing price of the stock on February 2, 1998, as reported in
the Wall Street Journal. This Option is granted pursuant to
Company's 1994 Long-Term Incentive Plan ("1994 Plan"), and shall be
subject to the terms and conditions thereof. The Option shall be
exercisable on or after February 2, 1998, (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 Plan) 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
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 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 employee benefit
arrangement or 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 shorter. 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 his employment
relationship.
(b) nauthorized 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 his 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;
(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 in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Brian J. Martin
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: James A. Coggin
3455 Highway 80 West
Jackson, MS 39209
(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: _____________________
James A. Coggin
President
_____________________
Brian J. Martin
Executive
Date of Grant: January 31, 1998
Grantee: Brian J. Martin
Number of shares: 20,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: ____________________________________
Its: President
____________________________________
Brian J. Martin
Grantee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 2nd day of February 1998, by and between Proffitt's, Inc. (the
"Company"), and Donald E. Wright ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Senior
Vice President of Finance and Accounting of Company 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 $280,000 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 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. Executive's bonus for fiscal year ending January 31,
1998, shall be calculated on the basis of his Base Salary in effect
during fiscal year 1997.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase twenty-five thousand
(25,000) shares of Company common stock at an option price equal to
the closing price of the stock on February 2, 1998, as reported in
the Wall Street Journal. This Option is granted pursuant to
Company's 1994 Long-Term Incentive Plan ("1994 Plan"), and shall be
subject to the terms and conditions thereof. The Option shall be
exercisable on or after February 2, 1998, (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 Plan) 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
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
(e) Service Award. As compensation for his services,
Company shall issue 5,000 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 15,000 shares), provided that Executive remains employed by
Company on such dates. In the event that Executive's employment is
terminated by Company, 15,000 shares of stock, less any amounts
already awarded under this Section 3(e), 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.
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 employee benefit arrangement or
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 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) 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
(but not less than six months), whichever period is shorter. 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 his employment relationship.
(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 his
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;
(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 in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Donald E. Wright
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: Brian J. Martin
750 Lakeshore Parkway
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) 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
Executive Vice President
_____________________
Donald E. Wright
Executive
Date of Grant: January 31, 1998
Grantee: Donald Wright
Number of shares: 10,000
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE PROFFITT'S, INC.
1997 STOCK-BASED INCENTIVE PLAN
PROFFITT'S, INC., a Tennessee corporation (the "Company"),
hereby grants to the person named above (the "Grantee") a
conditional grant (the "Grant") of the number of shares of common
stock of the Company listed above (the "Shares"), subject in all
respects to the terms of this agreement (the "Agreement") and the
Company's 1997 STOCK-BASED INCENTIVE PLAN (the "Plan"), which is
incorporated herein.
1. Restrictions and Return Provisions. The Shares shall be
subject to the following restrictions:
(a) Except as permitted in paragraph 5 of this
Agreement, neither this Grant nor the Shares issued hereunder may
be sold, assigned, transferred, exchanged, pledged, hypothecated,
or otherwise encumbered prior to delivery of a certificate for
unrestricted Shares to the Grantee pursuant to paragraph 3 of this
Agreement.
(b) All rights of the Grantee to such restricted Shares
shall terminate without any payment by the Company to the Grantee,
if the Grantee voluntarily terminates employment with the Company,
or if the Company terminates the Grantee's employment for "cause,"
as defined in the Grantee's employment contract.
2. Lapsing of Restrictions. The Shares covered hereby shall
vest in the following ways:
(a) Restrictions shall lapse as a function of the
Company's achieving certain performance goals, as determined by the
Human Resources Committee of the Board of Directors (the
"Committee"). Shares shall be earned on the basis of achievement
of those goals for fiscal years 1998, 1999, and 2000. Those
performance goals, as currently formulated, are attached as an
addendum to this agreement. The Committee shall have the
unilateral authority to modify or change those goals and to
determine whether the goals have been achieved. In the exercise of
such discretion, the Committee may consider any matter relevant to
those performance goals, including but not limited to,
extraordinary gains or losses, mergers and acquisitions, changes in
accounting methods, and changes in company policies. Within 90
days after the end of each fiscal year, the Committee shall inform
the Grantee as to the number of Shares earned for that fiscal year.
The Committee's decision is conclusive and binding upon the
Grantee.
(b) With regard to Shares earned in accordance with
paragraph 2(a) ("Earned Shares"), 25% of such Earned Shares shall
immediately vest, and an additional 25% of such Earned Shares shall
vest at the end of each of the following three fiscal years.
(c) Upon a "Change in Control" as defined in the Plan,
all Shares shall immediately vest.
(d) Upon the Grantee's death or disability, all remaining
Earned Shares shall immediately vest.
(e) The Committee shall have the discretionary authority
to vest any and all Shares at any time.
(f) All Shares shall automatically vest ten (10) years
after the date of this Grant.
3. Certificates. The Grantee is entitled to a certificate
representing any Shares that become fully vested, and such a
certificate shall be issued at Grantee's request.
4. General Provisions.
(a) The Grantee acknowledges that the he or she shall
comply with this Agreement and applicable securities laws if he or
she decides to offer or dispose of any Shares. The Company may
require the Grantee to make any other representation and warranty
to the Company as may be appropriate or required by any law or
regulation.
(b) Nothing in this Agreement shall confer upon the
Grantee any right to continued employment with the Company. Any
such right must be found in a separate written employment contract.
5. Non-transferability of Grant. This Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent
and distribution.
6. Withholding.
(a) Prior to the delivery of certificates representing
unrestricted Shares under paragraph 3, the Grantee shall remit to
the Company an amount sufficient to satisfy any federal, state or
local tax-withholding requirements. The Grantee may satisfy the
withholding requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount required
to be withheld. The value of the Shares to be withheld shall be
the fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Such election must be made prior to the Tax Date
and must comply with all applicable securities laws and other legal
requirements, as interpreted by the Committee.
(b) The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of
any taxes in connection with any transaction contemplated by this
Agreement.
7. Adjustments in Shares. In the event of any change in the
outstanding common stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, stock split,
combination of shares, exchange of shares, or the like, the
Committee shall make equitable adjustments to the Shares.
8. Tax Elections. The Grantee may make an election in
accordance with Section 83(b) of the Internal Revenue Code to
include in the Grantee's gross income the value of the Shares in
the year of this agreement.
9. Merger and Amendment. This Agreement supersedes any
other agreement, written or oral, between the parties with respect
to the subject matter hereof. This Agreement may only be amended
with the consent of the Committee and a written instrument executed
by the Company and the Grantee.
10. Grantee Acknowledgment. Grantee acknowledges receipt of
a copy of the Plan, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Grant
subject to all the terms and provisions thereof. Grantee hereby
agrees to accept as binding the decisions and interpretations of
the Committee upon any question arising under this Agreement or the
Plan.
PROFFITT'S, INC.
By: ____________________________________
Its: Executive Vice President
____________________________________
Donald Wright
Grantee
AGREEMENT
THIS AGREEMENT is made and entered into as of this 29th day of
October, 1997 by and between Stanton J. Bluestone ("Bluestone"),
Carson Pirie Scott & Co., an Illinois corporation ("CPS"), and
Proffitt's, Inc. a Tennessee corporation (the "Company").
WITNESSETH:
WHEREAS, CPS and Bluestone are parties to that certain
Employment Agreement dated as of March 25, 1996, pursuant to which
Bluestone has agreed to perform certain duties for the benefit of
CPS; and
WHEREAS, CPS and the Company are contemplating a transaction
(the "Pr Transaction7) pursuant to which the Company would acquire
control of CPS; and
WHEREAS, in connection with the Proposed Transaction, it is
the desire of CPS and Bluestone that Bluestone continue as an
employee of CPS pursuant to the terms and conditions set forth in
the Employment Agreement attached hereto (the "Revised Employment
Agreement"); and
WHEREAS, in the event the Proposed Transaction is consummated
prior to April 15, 1998, CPS, the Company and Bluestone shall
execute and deliver the Revised Employment Agreement, and in the
event the Proposed Transaction is not consummated prior to such
date, this Agreement shall be null and void and of no effect,
except as otherwise provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties
hereto agree as follows:
1. Revised Employment Agreement. In the event the Proposed
Transaction is consummated on or before April 15, 1998, CPS, the
Company and Bluestone shall execute and deliver at the closing of
the Proposed Transaction (the "Closing") the Revised Employment
Agreement.
2. Effectiveness of Agreement. In the event the Closing
does not occur on or prior to April 15, 1998, this Agreement, and
the obligations and rights hereunder, shall be null and void and of
no effect, except as otherwise provided herein.
3. Expense Reimbursement. CPS shall promptly upon request of
Bluestone reimburse Bluestone for all reasonable expenses
(including reasonable accountants', attorneys' and advisors' fees)
incurred in connection with the preparation and negotiation of this
Agreement and the Revised Employment Agreement. Notwithstanding
the provisions of Section 2, above, this Section 3 shall survive
the termination hereof.
4. Miscellaneous.
a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of
Wisconsin.
b) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be
deemed on original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first written
above.
COMPANY:
PROFFITT'S, INC.
By:
___________________________________
(Title)
CPS:
CARSON PIRIE SCOTT & CO.
By:
___________________________________
(Title)
_________________________________
Stanton J. Bluestone
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this _____
day of ____________, 1998, by and between Carson Pirie Scott & Co.,
an Illinois corporation (the "Company"), Stanton J. Bluestone
("Executive") and Proffitt's, Inc., a Tennessee corporation
("Proffitt's).
WITNESSETH:
WHEREAS, Executive has been employed by the Company, pursuant
to that certain Employment Agreement dated as of March 25, 1996
between the Company and Executive (the "Previous Employment
Agreement"); and
WHEREAS, Proffitt's has acquired a controlling interest in the
Company and desires to continue to employ Executive, and Executive
desires to continue to be employed by the Company, in accordance
with the terms and provisions herein contained; and
WHEREAS, in connection with the transaction between the
Company and Proffitt's and in consideration for Executive agreeing
to remain as an employee of the Company, Proffitt's has agreed to
guaranty the obligations of the Company hereunder; and
WHEREAS, the parties hereto desire that this Agreement
supersede and replace the Previous Employment Agreement in its
entirety.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties
hereto hereby agree as follows:
1. Employment.
(a) The Company hereby employs Executive, and Executive
hereby accepts employment, on the terms and subject to the
conditions contained herein.
(b) Executive shall serve as the Chairman of the Company,
Special Consultant to the Chief Executive Officer of the Company
and as a Director of the Company and of Proffitt's, faithfully and
to the best of his ability, under the direction of the Company's
Board of Directors (the "Board of Directors") and, in such
capacities, shall perform such duties and exercise such power and
authority as may from time to time be delegated to him by the Board
of Directors consistent with his status. The Company shall be
operated as a subsidiary of Proffitt's. Executive shall perform his
duties from his current office location or from a location no more
than twenty-five (25) miles therefrom.
(c) Excluding periods of vacation and sick leave to which
Executive is entitled, Executive shall devote his full business
time and attention and his best efforts to the performance
of his duties hereunder; provided, that Executive may take
reasonable amounts of time to serve on corporate, civic or
charitable boards or committees or other similar activities.
2. Term.
The term of the employment of Executive under this Agreement
(the "Employment Term") shall commence as of the date hereof and
shall continue, unless sooner terminated under Section 11 hereof,
until January 29, 1999, unless extended by the written agreement of
the parties.
3. Salary.
(a) During the Employment Term and subject to Section 5
hereof, Executive shall be paid a salary at the rate equal to the
sum of Eight Hundred Thousand Dollars ($800,000) per annum plus the
greater of (i) Two Hundred Forty Thousand Dollars ($240,000) or
(ii) Executive's bonus paid to him for the fiscal year of the
Company ending January 31, 1998 (the "Annual Base Salary"), payable
in equal disbursements and in accordance with the Company's
customary payroll practices in effect from time to time.
Executive's Annual Base Salary shall not be reduced at any time
during the Employment Term.
4. Bonus.
(a) In addition to Annual Base Salary, Executive shall be
eligible to receive, subject to the provisions of Section 5 hereof,
for the period ending January 29, 1999, an annual bonus (the
"Annual Bonus") in an amount not to exceed sixty percent (60%) of
Executive's Annual Base Salary in any such fiscal year.
(b) A formula for determining Executive's Annual Bonus
for each fiscal year shall be agreed upon for each fiscal year by
Executive and the Company, and shall be based upon the results of
the Company for such fiscal year as compared with the projected
results therefor or such other criteria as may be agreed upon in
writing by Executive and the Company. Such formula shall be
substantially similar to the formula most recently used by the
Company to determine Executive's Annual Bonus.
(c) The Annual Bonus, if and to the extent earned in
accordance with the formula provided for in Section 4(b) hereof,
shall be paid to Executive within ninety (90) days after the end of
such fiscal year for which such Annual Bonus is awarded; provided,
however, that in the event the audited consolidated financial
statements of the Company have not been issued by the Company
within such ninety (90) day period, such Annual Bonus shall be paid
within ten (10) days after the issuance of such consolidated
financial statements.
5. Election to Defer.
At the request of Executive, the Company shall defer, for such
period of time as Executive may request at the time of such
deferral, the payment of all or any portion of any Annual Base
Salary and Annual Bonus not yet earned by Executive under this
Agreement; provided, however that in no event shall Executive defer
the commencement of such payments beyond April 30, 1999. Each such
deferred payment shall accrue simple interest (on the basis of
360-day year), from the date it would have been paid if no election
had been made until the date of actual payment, at the rate of
interest per annum reported in the Wall Street Journal, from time
to time as the "Prime Rate" or at such other rate as may be agreed
to by the Company and Executive (the "Interest Rate"). Any amount
deferred pursuant to this Section 5, and interest thereon, shall be
prepayable in whole or in part, without penalty, at any time at the
option of the Company. The rights of Executive to the payment of
the amounts pursuant to this Section 5 shall be no greater than the
rights of an unsecured general creditor of the Company and may not
be assigned, pledged or otherwise transferred by him during his
lifetime to any person, whether by operation of law or otherwise,
and shall not be subject to execution, attachment or similar
proceeding. By written notice delivered to the Company, Executive
may designate (or change a prior designation of) one or more
beneficiaries (or his estate) to receive payment hereunder in the
event of his death.
6. Employee Benefits and Options.
(a) Executive shall be entitled to participate, at the
highest participation level available to executives, including such
participation levels as may be determined by seniority, in any and
all life insurance, medical insurance and other employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which are made
available by the Company to executives of the Company from time to
time. The employee benefits provided to Executive hereunder shall
not be materially less than the benefits provided to him while
employed under the Previous Employment Agreement.
(b) In addition, subject to Executive's satisfactory
completion of any and all required physical examinations, during
the Employment Term the Company shall pay the premium for and
maintain in effect an unrated term life insurance policy on the
life of Executive in an amount equal to $1,000,000, reduced by the
amount of insurance coverage provided by the Company to Executive
under any other plan, policy or arrangement. At Executive's
option, Executive may elect to pay the excess of the cost of a
rated term life insurance policy over an unrated term life
insurance policy in order to obtain a rated term life insurance
policy equal to the sum of insurance provided above from time to
time. Executive shall be the owner of the life insurance policy
described in this Section 6(b) and shall have sole authority to
designate (or change a prior designation) one or more beneficiaries
(or his estate) under such policy.
(c) During the Employment Term, Executive shall be entitled
to participate in all incentive, savings and retirement plans,
practices, policies and programs of the Company. Notwithstanding
anything to the contrary contained in the Carson Pirie Scott & Co.
1993 Stock Incentive Plan (the "Equity Plan") or any document or
agreement in connection therewith, all stock options or other
securities granted to Executive under the Equity Plan prior to the
date hereof shall vest on the date hereof.
(d) As of the date of this Agreement ("Grant Date"),
Proffitt's grants to Executive an option to purchase 60,000 shares
of the common stock of Proffitt's (the "Option") under Proffitt's
1997 Stock-Based Incentive Plan. The exercise price of the Option
shall be equal to the closing price of the Company's stock on the
Grant Date or, if the Grant Date is not a business day, the price
at the end of the first business day following the Grant Date. The
Option shall be subject to all the terms and conditions of the 1997
Stock-Based Incentive Plan, except as otherwise provided herein.
The Option shall be exercisable on or after the Grant Date to the
extent of 20% of the shares covered thereby; exercisable to the
extent of an additional 20% of the shares covered thereby on and
after the first anniversary of the Grant Date; exercisable to the
extent of an additional 20% of the shares covered thereby on and
after the second anniversary of the Grant Date; exercisable to the
extent of an additional 20% of the shares covered thereby on and
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 the Option
shall be 100% exercisable in the event that Executive terminates
employment with Company.
(e) Notwithstanding anything to the contrary contained in the
Option or any options of Executive to acquire shares in the Company
converted into options of Proffitt's, all such options shall be
exercisable until one (1) year following the termination of
Executive's employment hereunder or until one (1) year after he
ceases to be a director of Proffitt's, whichever is later.
7. Transportation.
In recognition of the fact that Executive shall be required to
travel by automobile for the purpose of visiting the Company's
various stores, examining potential sites for new stores and
attending meetings and other activities in the performance of his
duties hereunder, the Company shall provide Executive with a
monthly allowance for a late model luxury class automobile,
consistent with the allowance provided by the Company under the
Previous Employment Agreement, which may be used at Executive's
discretion.
8. Expense Reimbursement.
The Company, upon the submission of proper written vouchers by
Executive, shall reimburse Executive promptly for all reasonable
and necessary expenses incurred by Executive incident to the
performance of his duties hereunder, in accordance with such
policies as may from time to time be established by the Board of
Directors.
9. Vacation.
During the Employment Term, Executive shall be entitled to
four (4) weeks of paid vacation in each fiscal year of the Company.
Executive may accumulate up to two (2) weeks of vacation in each
fiscal year to be used at Executive's discretion at any time and
from time to time during the Employment Term. Any vacation in
excess of two (2) weeks which is not used by Executive in a fiscal
year shall be forfeited. For purposes of determining Executive's
accrued vacation for the purpose of Section 12 hereof only,
Executive's vacation shall be deemed to accrue ratably on a monthly
basis on the first day of each month in the Company's fiscal year.
10. Total Disability of Executive.
For purposes of this Agreement, the term "Total Disability"
shall mean the inability of Executive to perform Executive's duties
with the Company on a full-time basis for one hundred eighty (180)
consecutive days or an aggregate of two hundred ten (210) days in
any consecutive twelve (12) month period, as a result of incapacity
due to mental or physical illness or injury which is determined to
be total and permanent by a physician selected by the Company or
its insurers and acceptable to Executive or Executive's legal
representative, provided if the parties are unable to agree on a
physician to make such determination, the parties shall request the
Dean of the Medical College of Wisconsin to choose such physician.
11. Termination.
(a) Notwithstanding anything to the contrary contained in
this Agreement, the Company, by written notice to Executive, shall
at all times have the right to terminate the employment of
Executive hereunder for "Cause." A termination for Cause is a
termination evidenced by a resolution adopted in good faith by a
majority of the Board of Directors that Executive (i) willfully
failed to substantially perform his duties under Section 1, above,
(other than a failure resulting from Executive's incapacity due to
physical or mental illness or injury), (ii) committed acts of
fraud, embezzlement, theft or dishonesty, as determined by a final
judgment or order of a court of competent jurisdiction, or (iii)
committed acts which constitute a felony or misdemeanor as
determined by a final judgment or order of a court of competent
jurisdiction and which, in the reasonable opinion of the Board of
Directors, involve moral turpitude and have caused material
embarrassment to the Company; provided, however, that no
termination of Executive's employment shall be for Cause as set
forth in (i), above, until (a) Executive shall have had at least
forty-five (45) days to cure any conduct or act alleged to provide
Cause for termination after a written notice of demand has been
delivered to Executive specifying in detail the manner in which
Executive's conduct violates this Agreement, and (b) Executive
shall have been provided an opportunity to be heard by the Board of
Directors (with the assistance of Executive's counsel if Executive
so desires). No act, or failure to act, on Executive's part, shall
be considered "willful" unless he has acted or failed to act
without reasonable belief that his action or failure to act was in
the best interest of the Company. Any termination of Executive's
employment by the Company other than pursuant to this Section 11(a)
or Sections 11(b) or 11(c), below, shall be deemed to have been
made "without Cause."
(b) Notwithstanding anything to the contrary contained in
this Agreement, the Company, by written notice to Executive, shall
have the right to terminate the employment of Executive under this
Agreement at any time in the event of Executive's Total Disability.
(c) Executive's employment under this Agreement shall
automatically terminate upon Executive's death.
(d) Executive may voluntarily terminate his employment
hereunder at any time for any reason.
(e) Notice of Termination. Any termination by the Company or
by Executive (other than by death of Executive) shall be
communicated by Notice of Termination to the other in accordance
with Section 22 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, and
(ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of Executive's employment under the provision so indicated. For
purposes of this Agreement, no purported termination of employment
shall be effective without such Notice of Termination.
12. Payments Upon Termination.
(a) If the employment of Executive hereunder shall be
terminated for any reason, the Company shall make the following
payments and take the following actions:
(i) pay Executive within fifteen (15) days after the
date of the termination of employment a lump sum in cash equal
to the sum of the following:
a) the product of Executive's Annual Base Salary
multiplied by 3.0;
b) the sum of the following (1) the product of
thirty percent (30%) of the Annual Base Salary (the
"Midpoint Bonus") multiplied by a fraction the numerator
of which is the number of days Executive was employed by
the Company during the fiscal year in which Executive's
employment with the Company is terminated and the
denominator of which is 365, except that the amount set
forth in this subsection (1) shall not be paid if
Executive is employed hereunder through January 29, 1999
and is paid a bonus pursuant to Section 4, above,
provided however, that nothing contained herein shall
affect Executive's right to receive the product of the
Midpoint Bonus multiplied by 3.0 plus (2) the product of
the Midpoint Bonus multiplied by 3.0;
(ii) pay Executive within fifteen (15) days after the
date of termination of employment a lump sum in cash equal to
the sum of (A) any unvested amount in Executive's Post- 1990
Matched Contribution Account under the Carson Pirie Scott &
Co. Savings Plan; and (B) the actuarial equivalent, determined
as of the date of termination of employment, of any unvested
accrued benefit under the Carson Pirie Scott & Co. Pension
Plan (using actuarial assumptions no less favorable to
Executive than the actuarial assumptions used for the
determination of benefits in effect under such plan
immediately prior to the date hereof,
(iii) for 36 months after the date of termination of
employment or such longer term as may be provided by the
appropriate plan (the "Extended Benefits Period"), program,
practice, or policy, continue benefits to Executive, and if
applicable, to Executive's family, at the Company's expense,
at least equal to those benefits which would have been
provided to them in accordance with the Company's health and
welfare plans, including, without limitation, accruals under
the SERP, medical, dental, life insurance, long-term
disability plans and automobile reimbursement plan pursuant to
Section 7, above, as if Executive's employment had not been
terminated;
(iv) credit Executive with additional hours of benefit
service under the Carson Pirie Scott & Co. Pension Plan equal
to the least of (A) the greater of (1) 501 hours or (2) the
maximum number of hours of benefit service attributable to
severance pay as such Plan in effect on the date of
termination of employment, (B) the maximum number of hours
permitted by law, or (C) 3,000 hours;
(v) notwithstanding any provision to the contrary in the
SERP, the Equity Plan or any other benefit plan in which
Executive participates, Executive's benefits under the SERP
and any stock options or other securities or awards under the
Equity Plan shall be and become fully vested as of the date of
such termination;
(vi) notwithstanding the provisions of the SERP, upon
Executive's termination of employment hereunder, Executive
shall have the option in his sole discretion to have the
amounts due to him under the SERP paid out in a lump sum
distribution or in accordance with the terms of the SERP. In
addition, in the event Executive's employment hereunder is
terminated as a result of his death, Executive's designated
beneficiary shall receive the benefits under the SERP as if
Executive had terminated his employment immediately prior to
his death and had selected the payment option under the SERP
most beneficial to his beneficiary; and
(vii) the Company shall pay to Executive, within
fifteen (15) days of his termination of employment, any
compensation previously deferred by Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid.
If the payments provided for in this Section 12(a) are made
promptly when due and without dispute by the Company (other than as
a result of a good faith dispute by the Company), such payments
shall be the sole and exclusive remedy available to Executive for
the termination of his employment.
(b) The payments set forth in Section 12(a), above, due upon
Executive's termination of employment, shall be in consideration of
two components: (i) Executive's foregoing his right to terminate
his employment immediately after the effective time of the merger
of Proffitt's and the Company, and (ii) Executive's entering into
the non-competitive provisions in Section 14, below The payments
shall also represent Executive's severance pay. Proffitt's
Accounting Firm (as hereinafter defined) shall determine the
valuation of each of these two components.
(c) Except as otherwise provided herein, nothing in this
Agreement shall affect the rights and obligations of Executive
under any of the Company's employee benefit plans in effect from
time to time, including but not limited to the SERP, and such
rights and obligations shall be determined solely by reference to
such employee benefit plan documents.
(d) Following the expiration of the Extended Benefits Period
(i) Executive and his spouse may elect to continue for the life of
Executive and his spouse their coverage under the Company's health
insurance plan in effect from time to time at their sole expense,
(ii) Executive shall have the right to purchase the car (if any)
provided to him by the Company or its affiliated companies
immediately preceding the termination of the Extended Benefits
Period, at the book value thereof as of such date exercisable
within thirty (30) days after the termination, and if such car is
not purchased, Executive shall return the car to the Company, and
(iii) Executive may elect to continue the life insurance policy
purchased pursuant to Section 6(b), above, and any disability
policies purchased on behalf of Executive, at Executive's expense.
(e) Notwithstanding anything else contained in this Section
12, the Company may defer payment of any amounts payable pursuant
to this Section 12 until the day fifty (50) days after the first
day of the first fiscal year that begins after the termination of
Executive's employment hereunder, if and to the extent that the
Company determines, based on a written opinion of its tax counsel,
that such deferral will prevent such amounts from being
nondeductible by the Company for federal income tax purposes. Any
such deferred payment shall be paid with simple interest at the
Interest Rate from the date it would otherwise have been payable
pursuant to this Section 12 until the date it is actually paid.
13. Fringe Benefits.
During the Employment Term, Executive shall be entitled to
reimbursement of up to Fifteen Thousand Dollars ($15,000.00) per
fiscal year, payable promptly by the Company upon submission of
proper evidence of payment by Executive to cover expenses for such
things as country club dues and assessments, social club dues,
travel expenses incurred by Executive's spouse while accompanying
Executive on Company business, where appropriate, and such other
similar expenses as may from time to time be incurred by Executive.
14. Restrictive Covenants and Confidentiality.
(a) As a condition to the performance by the Company of its
obligations hereunder, Executive shall not, without the prior
written approval of the Board of Directors, until the first
anniversary of the termination of his employment hereunder directly
or indirectly through any other person, firm, corporation, or other
entity solicit, raid, entice or induce any person who on the date
of termination of employment of Executive is, or within the last
six (6) months of Executive's employment by the Company was, an
employee of the Company or any of its subsidiaries, to become
employed by any person, firm, corporation, or other entity other
than the Company or any of its subsidiaries, and Executive shall
not approach any such employee for such purpose or authorize or
knowingly approve the taking of such actions by any other person.
(b) Recognizing that the knowledge, information and
relationship with customers, suppliers and agents, and the
knowledge of the Company's, Proffitts and their respective
subsidiaries' business methods, systems, plans and policies which
Executive shall hereafter establish, receive or obtain as an
employee of the Company, Proffitt's or any such subsidiary, are
valuable and unique assets of the businesses of the Company,
Proffitt's and their respective subsidiaries, Executive agrees
that, during and after the term of his employment hereunder, he
shall not (otherwise than pursuant to his duties hereunder)
disclose, without the prior written approval of the Board of
Directors of the Company, any such knowledge or information
pertaining to the Company, Proffitt's or any of their respective
subsidiaries, their business, personnel or policies, to any person,
firm, corporation or other entity, for any reason or purpose
whatsoever. The provisions of this Section 14(b) shall not apply to
information which is or shall become generally known to the public
or the trade (except by reason of Executive's breach of his
obligations hereunder), information which is or shall become
available in trade or other publications, information known to
Executive prior to entering the employ of the Company, and
information which Executive is required to disclose by law or an
order of a court of competent jurisdiction. If Executive is
required by law or a court order to disclose such information, he
shall notify the Company of such requirement and provide the
Company an opportunity (if the Company so elects) to contest such
law or court order.
(c) As a condition to the performance by the Company of its
obligations hereunder, Executive shall not, without the prior
written approval of the Board of Directors, which approval shall
not be unreasonably withheld, in light of all competitive factors,
until the fifth (5th) anniversary of the termination of this
employment hereunder directly or indirectly through any other
person, firm, corporation, or other entity, become employed by or
render advisory or other services to or for any person, firm,
corporation, or other entity, or in connection with any business
enterprise, that is, directly or indirectly, engaged in the
operation of retail department stores within a seventy-five (75)
mile radius of any retail department store operated by the Company,
CPS or any of their respective subsidiaries.
15. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach or violation by Executive of any of the covenants or
agreements contained in Section 14 of this Agreement may cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. Therefore,
Executive recognizes and hereby agrees that the Company shall be
entitled to an injunction from any court of competent jurisdiction,
upon proper showing by the Company that such grounds for injunctive
relief exists, enjoining and restraining any breach or violation of
any or all of the covenants and agreements contained in Section 14
of this Agreement by Executive and/or his employees, associates,
partners or agents, or entities controlled by one or more of them,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other rights or
remedies the Company may possess. Nothing contained in this Section
15 shall be construed to prevent the Company from seeking and
recovering from Executive damages sustained by it as a result of
any breach or violation by Executive of any of the covenants or
agreements contained in this Agreement
16. Director.
As of the date of this Agreement, Proffitt's shall cause
Executive to be elected to Proffitt's Board of Directors for the
class of 1998, and to serve until the next regularly scheduled
annual meeting of Proffitt's or until his successor has been duly
elected or appointed and qualified or until his earlier death.
Proffitt's shall also cause its Board to renominate Executive for
the class of 2001 and shall endorse Executive for election. In the
event that executive terminates his employment prior to January 29,
1999, he shall also submit his resignation from Proffitt's Board of
Directors. Proffitt's shall at all times while Executive is
employed hereunder or during the period Executive serves on the
Proffitt's Board of Directors, take all such steps as may be
necessary to permit Executive to serve on the Company's Board of
Directors.
17. Attorney's Fees.
If any cause of action is brought before any court to enforce
any provision of this Agreement, the Company shall reimburse
Executive for reasonable costs incurred (including reasonable
attorney's fees) by Executive.
18. Deductions and Withholding.
Executive acknowledges and agrees that the Company shall be
entitled to withhold from his compensation hereunder, including
Annual Base Salary, Annual Bonus and payments pursuant to any
retirement plans, and any additional compensation payable
hereunder, all federal, state, local or other taxes which the
Company determines are required to be withheld on amounts payable
to Executive pursuant to this Agreement or otherwise. Executive
further agrees to indemnify the Company and hold it harmless from
and against any and all taxes and interest with respect thereto
arising out of or based upon the Company's failure to so deduct and
withhold pursuant to any present or future law, regulation or
ordinance of the United States of America or any state, city or
municipality therein.
19. No Delegation.
Executive shall not delegate his employment obligations under
this agreement to any other person.
20. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of Wisconsin.
21. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements,
both oral and written, between the parties hereto with respect to
such subject matter, including, without limitation, the Previous
Employment Agreement. This Agreement may not be modified in any
manner, except by a written instrument signed by both the Company
and Executive.
22. Notices.
Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly
given when delivered by hand or facsimile transmission or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, as follows:
If to the Company: ________________________________
________________________________
________________________________
If to Proffitt's: Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, AL 35211
Attn: General Counsel
If to Executive: Stanton J. Bluestone
4724 North Wilshire
Whitefish Bay, WI 53211
with a copy to: Stephen L. Chernof
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
or to such other addresses as either party hereto may from time to
time specify to the other.
23. Benefit; Binding Effect.
This Agreement shall be for the benefit of and binding upon
the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where
applicable, assigns.
24. Severability.
The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this
Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted.
25. No Mitigation.
Following the termination of Executive's employment hereunder,
Executive shall not be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to
Executive under Section 12.
26. Excise Tax Payments.
(a) Notwithstanding anything contained in this Agreement to
the contrary, in the event that any payment or distribution to or
for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, his
employment with the Company (a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any interest and penalties, are
collectively referred to as the "Excise Tax"), then Executive shall
be entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) A determination shall be made as to whether and when a
Gross-Up Payment is required pursuant to this Section 26 and the
amount of such Gross-Up Payment, such determination to be made
within fifteen (15) business days of the date of Executive's
termination of employment, or such other time as requested by the
Company or by Executive. Such determination shall be made by
Proffitt's national independent accounting firm (the "Accounting
Finn"). All fees, costs and expenses (including, but not limited
to, the cost of retaining experts) of the Accounting Firm shall be
borne by the Company and the Company shall pay such fees, costs and
expenses as they become due. The Accounting Firm shall provide
detailed supporting calculations, acceptable to Executive, both to
the Company and Executive. The Gross-Up Payment, if any, as
determined pursuant to this Section 26(b) shall be paid by the
Company to Executive within five (5) business days of the receipt
of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive with respect
to a Payment or Payments, it shall furnish Executive with an
unqualified opinion that no Excise Tax will be imposed with respect
to any such Payment or Payments. Any such initial determination by
the Accounting Firm of the Gross-Up Payment shall be binding upon
the Company and Executive subject to the application of Section
26(c).
(c) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up
Payment (or a portion thereof) will be paid which should not have
been paid (an "Overpayment") or a Gross-Up Payment (or a portion
thereof) which should have been paid will not have been paid (an
"Underpayment"). An Underpayment shall be deemed to have occurred
upon notice (formal or informal) to Executive from any governmental
taxing authority that the tax liability of Executive (whether in
respect of the then current taxable year of Executive or in respect
of any prior taxable year of Executive) may be increased by reason
of the imposition of the Excise Tax on a payment or Payments with
respect to which the Company has failed to make a sufficient
Gross-Up Payment. An Overpayment shall be deemed to have occurred
upon a "Final Determination" (as hereinafter defined) that the
Excise Tax shall not be imposed upon a Payment or Payments with
respect to which Executive had previously received a Gross-Up
Payment. A Final Determination shall be deemed to have occurred
when Executive has received from the applicable governmental taxing
authority a refund of taxes or other reduction, in his tax
liability by reason of the Overpayment and upon either (i) the date
a determination is made by, or an agreement is entered into with,
the applicable governmental taxing authority which finally and
conclusively binds Executive and such taxing authority, or in the
event that a claim is brought before a court of competent
jurisdiction, the date upon which a final determination has been
made by such court and either all appeals have been taken and
finally resolved or the time for all appeals has expired or (ii)
the expiration of the statute of limitations with respect to
Executive's applicable tax return. If an Underpayment occurs,
Executive shall promptly notify the Company and the Company shall
pay to Executive at least five (5) business days prior to the date
on which the applicable governmental taxing authority has requested
payment, an additional Gross-Up Payment equal to the amount of the
Underpayment plus any interest and penalties imposed on the
Underpayment. If an Overpayment occurs, the amount of the
Overpayment shall be treated as a loan by the Company to Executive
and Executive shall, within ten (10) business days of the
occurrence of such Overpayment, pay to the Company the amount of
the Overpayment plus interest at the Interest Rate from the date
the Gross-Up Payment (to which the Overpayment relates) was paid to
Executive.
27. Waivers.
The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
28. Section Headings.
The section headings contained in this Agreement are for
reference purpose only and shall not affect in any way the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this agreement as of the day and year first above
written.
CARSON PIRIE SCOTT & CO.
By:
______________________________
(Title)
_________________________________
Stanton J. Bluestone
Proffitt's executes this Agreement for the purpose of (i)
agreeing to be bound by and perform its obligations under this
Agreement, and (ii) unconditionally guarantying to Executive, the
full and prompt payment and performance of each and every
obligation of the Company contained in this Employment Agreement in
accordance with the terms hereof. The obligations of Proffitt's as
guarantor hereunder shall be absolute and unconditional and shall
remain in full force and effect until all payments and obligations
owed to Executive are paid and satisfied in full.
PROFFITT'S, INC.
By:
_______________________________
(Title)
Exhibit 11.1
Statement Re: Computation of Historical
Earnings Per Common Share
Proffitt's, Inc. and Subsidiaries
(in thousands, except per share data)
Fiscal Year Ended
------------------------------
1/31/98 2/1/97 2/3/96
-------- --------- ---------
BASIC:
Weighted average common
shares outstanding 85,532 77,724 75,111
Income before extra-
ordinary loss $72,082 $67,080 $64,942
Less preferred dividends - (796) (1,950)
Less payment for early
conversion of preferred
stock - (3,032)
-------- -------- --------
Income available to common
shareholders before extra-
ordinary loss 72,082 63,252 62,992
Extraordinary (loss) (9,345) (2,060)
-------- -------- --------
Net income available to
common shareholders $62,737 $63,252 $60,932
========= ======== ========
Earnings per common share
before extraordinary loss $0.84 $0.81 $0.84
Extraordinary (loss) ($0.11) ($0.03)
--------- -------- --------
BASIC EARNINGS PER COMMON
SHARE $0.73 $0.81 $0.81
========= ======== ========
Exhibit 11.1
Statement Re: Computation of Historical
Earnings Per Common Share
Proffitt's, Inc. and Subsidiaries
(in thousands, except per share data)
Fiscal Year Ended
------------------------------
1/31/98 2/1/97 2/3/96
-------- --------- ---------
DILUTED:
Weighted average common
shares outstanding 85,532 77,724 75,111
Net effect of dilutive stock
options based on the treasury
stock method using the aver-
age price 2,941 2,570 1,335
Assumed conversion of 4.75%
subordinated debentures 2,613 4,040 4,040
Assumed conversion of pre-
ferred stock 2,844
-------- -------- ---------
Diluted weighted average common
shares outstanding 91,086 84,334 83,330
======== ======== ========
Income available to common
shareholders before extra-
ordinary loss $72,082 $63,252 $62,992
Add preferred dividends 1,950
Add 4.75% convertible sub-
ordinated debenture interest,
net of federal income tax
effect 1,708 2,500 2,500
-------- -------- ---------
Income available to common
shareholders before extra-
ordinary loss 73,790 65,752 67,442
Extraordinary (loss) (9,345) (2,060)
-------- -------- ---------
Net income available to common
shareholders $64,445 $65,752 $65,382
======== ======== ========
Diluted earnings per common
share before extraordinary
loss $0.81 $0.78 $0.81
Extraordinary (loss) (0.10) (0.02)
-------- -------- --------
DILUTED EARNINGS PER COMMON
SHARE $0.71 $0.78 $0.78
======== ======== ========
Proffitt's, Inc.
This is Living 1997 Annual Report
Contents
Report to Shareholders 1
Financial Highlights 3
Five-Year Financial Summary 13
Management's Discussion and Analysis 14
Consolidated Financial Statements 23
Notes to Consolidated Financial Statements 27
Report of Independent Accountants 51
Report of Management 51
Market Information 52
Directors and Certain Officers 53
Store Locations 54
Shareholder Information 56
Corporate Information 57
To Our Partners
1997 was a great year for Proffitt's, Inc. We again posted record
operating results, while continuing the integration process of our
recent acquisitions. On January 31, 1998, our fiscal year end, we
completed our merger with Carson Pirie Scott & Co. This transaction
significantly extends our midwestern franchise, particularly in
greater Chicago, Milwaukee, and central Illinois. Today, Proffitt's
operates 237 stores in 24 states with over 40,000 dedicated
associates on our team.
For 1997, we achieved our record operating results through solid
comparable store sales growth, enhanced merchandising margins, and
continued leverage on expenses. During the last five years,
operating earnings per share have grown at a compound rate of over
20%.
During the year, we executed a comprehensive capital structure
strategy that diversified our funding sources, lengthened the
duration of our debt capital, and enhanced the overall liquidity,
terms of availability, and pricing of our financing arrangements.
This balance sheet restructuring, along with the completion of the
Carson's transaction and our strong cash flow, significantly
lowered the financial leverage of our Company. As a result, Moody's
upgraded our corporate debt rating to investment grade level, and
Standard & Poors issued an upgrade as well.
Fiscal Year Ended
1/31/98 2/1/97 2/3/96
(in thousands, except per
share amounts)
Net sales $3,544,656 $2,992,606 $2,744,868
Net income before non-
routine charges* $ 119,386 $ 81,770 $ 66,819
Diluted earnings per
common share before
non-routine charges* $ 1.33 $ 0.95 $ 0.83
Net income* $ 72,082 $ 67,080 $ 64,942
Diluted earnings per
common share* $ 0.81 $ 0.78 $ 0.81
Diluted weighted average
common shares 91,086 84,334 83,330
Total assets $2,224,879 $2,085,719 $1,551,291
Shareholders' equity $1,094,565 $ 897,570 $ 625,797
*Prior to extraordinary items.
In July 1997, Proffitt's, Inc. became listed on the New York Stock
Exchange, and in October, we completed our first 2-for-1 stock
split. Both of these actions demonstrated our confidence in the
continued growth and bright future of our Company and increased our
visibility in the financial and investment community. The stock
split has enhanced the liquidity of and provided wider distribution
for our shares.
The Proffitt's Merchandising Group is successfully leading the
merchandising synergy process and facilitating the execution of our
strategy to offer regional merchandise assortments to our
customers, while enjoying "chain store" vendor relationships and
economics.
We believe substantial opportunities remain to improve the
Company's merchandising operations through enhancing relationships
and partnerships with core vendors, benchmarking our operations and
further developing focus businesses, expanding key brands, and
expanding specialty brand assortments at Parisian.
While we will continue to emphasize premier national brands in our
stores, we are excited about our new private brand program which
will be introduced in the second half of 1998. Our goal remains to
increase private brand penetration from our current 7% of total
sales to approximately 12% of sales over the next two years. We
expect this program to enhance merchandise margins; to create
further differentiation from our competitors through unique, high
quality product offerings; and to allow the Company to lower
operating costs by bringing product development in house.
Expense leverage in 1997 resulted from the realization of targeted
cost reductions and synergies related to our business combinations.
We will continue to focus on other opportunities to improve
productivity throughout the Company.
We remain on schedule in the synergies process with our Younkers,
Parisian, and Herberger's transactions. During 1997, we achieved
our targeted $20 million of cost savings related to these previous
mergers and expect to achieve an incremental $9 million of savings
in 1998. These cost reductions have traditionally come in several
forms, such as through the elimination of duplicate corporate
expenses, the realization of best practices, and the purchasing
power of our increased scale.
We have identified and expect to realize additional synergies
of $10 million in 1998, $20 million in 1999, and $40 million in
2000 related to the Carson's transaction. These synergies are
expected to come in the form of lower operating expenses as well as
through increased revenues and enhanced merchandise margins.
In May 1997, we introduced our proprietary credit card at
Herberger's. Customer reception has been outstanding. All of the
Company's proprietary credit cards are now issued by the National
Bank of the Great Lakes, the credit card bank acquired in
conjunction with the Carson's merger, which permits the Company to
assess uniform finance charges and late fees in all states as well
as eliminate certain duplicative costs of multi-state operations.
We view our proprietary card program as an important marketing
tool, and our focus remains to increase the penetration of
proprietary charge sales while maintaining the quality of our
credit portfolio.
In addition to growth through acquisition, the Company opened seven
new units in 1997 and completed a number of renovation and
expansion projects. Future internal growth plans call for an
average of eight to ten new units annually. We opened a new
Proffitt's store in Parkersburg, West Virginia in March 1998 and
have plans to open a newly constructed Younkers store in
Coralville, Iowa in July of this year. In March 1998, we also
completed the acquisition of Brody's, a family-owned department
store chain with six units in several attractive North Carolina
markets. Four of these stores will be converted into Proffitt's
stores in mid-1998, and the two smallest units will be closed. For
1998, we have additional renovations and expansions planned and are
also exploring other new unit opportunities.
We have consistently demonstrated that Proffitt's is a
preferred partner for regional chains seeking affiliation, as these
companies are attracted to our strong operating performance and our
corporate culture. Each of the companies we have chosen as partners
has a strong franchise identity and customer loyalty, healthy
market share in markets contiguous or complementary to our own, and
quality real estate. We remain positioned to take advantage of
future growth opportunities.
Proffitt's
24 department stores in 6 southeastern states
2.2 million gross square feet
Founded in 1919
McRae's
31 department stores in 4 southeastern states
3.3 million gross square feet
Founded in 1902
Acquired March 31, 1994
Younkers
50 department stores in 7 midwestern states
4.9 million gross square feet
Founded in 1856
Acquired February 3, 1996
Parisian
40 specialty stores in 9 southeastern and midwestern states
4.4 million gross square feet
Founded in 1887
Acquired October 11, 1996
Herberger's
37 department stores in 10 midwestern states
2.3 million gross square feet
Founded in 1927
Acquired February 1, 1997
Carson Pirie Scott, Boston Store, and Bergner's
51 department stores and 4 free-standing furniture stores in 4
midwestern states
8.1 million gross square feet
Founded in 1889
Acquired January 31, 1998
Over the next five years, we believe Proffitt's can sustain its
historical operating earnings per share growth rate. We can achieve
this goal by successfully executing our strategy, which includes
increasing sales and merchandise margins, further leveraging
operating expenses, enhancing credit card operations, achieving our
new unit goals, and prudently managing the balance sheet.
We remain focused on meeting and exceeding the expectations of
our customers, our shareholders, and our associates.
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 22 of this Annual Report.
What makes Proffitt's, Inc. one of the fastest growing fashion
apparel and furnishings retailers in the country? Proffitt's
People. Our sales and support associates in over 200 stores. Our
corporate and distribution associations. Our vendors. And our
customers. People make the difference at Proffitt's. We all share
the same standards. We're committed to style, quality, service,
and integrity. Living and working for values like these can lead
only to success. It's no wonder we do so well and love doing it.
<TABLE>
52 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended Ended
1/31/98 2/1/97 2/3/96 1/28/95 1/29/94
---------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Consolidated Income
Statement Data
Net sales 3,544,656 2,992,606 2,744,868 2,675,065 2,211,927
Costs and expenses
Cost of sales 2,296,262 1,952,896 1,811,622 1,755,361 1,446,967
Selling, general and
administrative expenses 832,738 717,593 664,784 641,202 540,395
Other operating expenses 258,893 207,942 191,380 183,518 177,701
Expenses related to
attempted Younkers take-
over 10,017
Settlement of reorganiz-
ation payables (680) (1,280) (725) (18,300)
(Gains) losses from long-
lived assets (134) 1,406 (36,058)
Merger, restructuring and
integration costs 43,524 15,929 20,822
Year 2000 expenses 6,590
ESOP expenses 9,513 3,910 2,931 2,787 2,939
--------- -------- --------- --------- ---------
Operating Income 97,950 94,210 80,095 110,488 43,925
Other income (expense)
Finance charge income, net 92,677 78,039 77,073 71,708 61,555
Interest expense (55,077) (42,666) (47,363) (40,910) (25,383)
Reorganization items (219,857)
Other income (expense), net 2,330 (11,780) 4,051 4,826 4,063
--------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes and
extraordinary items and
cumulative effect of changes
in accounting methods 137,880 117,803 113,856 146,112 (135,697)
Provision for income taxes 64,798 50,723 48,914 58,112 34,432
--------- --------- --------- ---------- ---------
Income (loss) before extra-
ordinary items and
cumulative effect of
changes in accounting
methods 72,082 67,080 64,942 88,000 (170,129)
Extraordinary loss on debt,
net of tax (9,345) (2,060) (1,088)
Extroardinary gain on
reorganization, net of tax 212,139
Cumulative effect of
changes in accounting
methods, net of tax (12,090)
-------- --------- --------- --------- ----------
Net income 62,737 67,080 62,882 88,000 28,832
======== ======== ======== ======== =========
Basic earnings (loss) per
common share before
extraordinary items
and cumulative effect .84 .81 .84 1.07 (2.14)
Basic earnings per common .73 .81 .81 1.07 .36
share
Diluted earnings (loss) per
common share before
extraordinary items
and cumulative effect .81 .78 .81 1.03 (2.14)
Diluted earnings per common
share .71 .78 .78 1.03 .36
Weighted average common shares
Basic 85,532 77,724 75,111 80,309 79,665
Diluted 91,086 84,334 83,330 88,106 79,665
Consolidated Balance Sheet Data
Working Capital 697,891 684,647 574,469 665,772 704,553
Total assets 2,224,879 2,085,719 1,551,291 1,632,461 1,300,800
Senior long-term debt,
less current portion 541,661 436,445 361,642 462,637 368,613
Subordinated debt 10,964 225,767 100,505 100,269 86,250
Shareholders' equity 1,094,565 897,570 625,797 606,099 508,023
</TABLE>
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. The Company's stores are
principally anchor stores in leading regional or community malls.
Proffitt's has experienced significant growth since 1994, primarily
through a series of acquisitions.
The Company currently operates a total of 237 stores under the
following nameplates: Proffitt's (24 stores), McRae's (31 stores),
Younkers (50 stores), Parisian (40 stores), Herberger's (37
stores), Carson Pirie Scott (30 stores), Boston Store (12 stores),
and Bergner's (13 stores).
<TABLE>
The Company's major acquisitions are outlined below:
Current Number Date Accounting
Name Headquarters of Stores Locations Acquired Treatment
- ------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
McRae's Jackson, MS 31 Southeast 3/31/94 Purchase
Younkers Des Moines, IA 50 Midwest 2/3/96 Pooling
Parisian Birmingham, AL 40 Southeast/Midwest 10/11/96 Purchase
Herberger's St. Cloud, MN 37 Midwest 2/1/97 Pooling
Carson Pirie Scott, Milwaukee, WI 55 Midwest 1/31/98 Pooling
Boston Store,
and Bergner's
</TABLE>
Merchandising, sales promotion, and certain store operating
support functions are conducted in multiple locations. The
Proffitt's Merchandising Group, headquartered in Birmingham, was
formed in 1996 to ensure coordination of merchandise planning and
execution for the Company while supporting the Company's strategy
of merchandising with regional assortments. Certain back office
administrative support functions for the Company, such as
accounting, credit, store planning, and management information
systems, are centralized.
Income statement information for each year presented has been
restated to reflect the Younkers, Herberger's, and Carson Pirie
Scott ("Carson's") mergers, which were accounted for as poolings of
interests. The operations of Parisian have been included in the
income statement subsequent to the October 11, 1996 purchase date.
The following table sets forth, for the periods indicated, certain
items from the Company's Consolidated Statements of Income,
expressed as percentages of net sales.
<TABLE>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
1/31/98 2/1/97 2/3/96
("1997") ("1996") ("1995")
--------- --------- ---------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Costs and expenses
Cost of sales 64.8 65.3 66.0
Selling, general, and administrative expenses 23.5 24.0 24.2
Other operating expenses 7.2 6.9 6.9
Expenses related to attempted Younkers takeover 0.4
(Gains) losses from long-lived assets 0.1 (1.3)
Merger, restructuring, and integration costs 1.2 0.5 0.8
Year 2000 expenses 0.2
ESOP expenses 0.3 0.1 0.1
--------- --------- ---------
Operating income 2.8 3.1 2.9
Other income (expense)
Finance charge income, net 2.6 2.6 2.8
Interest expense (1.6) (1.4) (1.7)
Other income (expense), net 0.1 (0.4) 0.1
--------- --------- ---------
Income before provision for income taxes
and extraordinary loss 3.9 3.9 4.1
Provision for income taxes 1.9 1.7 1.8
--------- --------- ---------
Income before extraordinary loss 2.0 2.2 2.3
Extraordinary loss (net of tax) (0.3) (0.1)
--------- --------- ---------
Net income 1.7% 2.2% 2.2%
========= ========= =========
</TABLE>
Net Sales
Total Company net sales increased by 18%, 9%, and 3% in 1997, 1996,
and 1995, respectively. The 1997 increase primarily was due to a
comparable store sales increase of 4% and incremental revenues
generated from the full year inclusion of Parisian which was
acquired in October 1996. The 1996 increase primarily was due to a
comparable store sales increase of 3% and a partial year of
revenues generated from Parisian. In 1995, comparable store sales
increased 3%.
Gross Margins
Gross margins were 35.2%, 34.7%, and 34.0% in 1997, 1996, and 1995,
respectively. The Company uses a full-cost method to account for
inventories and cost of sales, which includes certain purchasing
and distribution costs.
The improvement in gross margin percent from 1995 to 1997 was
a result of enhanced buying power with core vendors due to the
Company's increased scale, benchmarking the Company's operations
and further developing focus businesses, expanding key brands, and
continued appropriate inventory management.
Management believes the merchandising operations of the
business can be further enhanced through continuation of the above
actions as well as through the introduction of a new private brand
program in its stores in fall 1998. While Proffitt's continues to
emphasize premier national brands in its stores, management's goal
is to drive private brand business from approximately 7% of total
sales to approximately 12% of total sales by 2000.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses ("SG&A") were 23.5%
of net sales in 1997, 24.0% of net sales in 1996, and 24.2% of net
sales in 1995. The reduction of the SG&A percentage from 1995 to
1997 was due to increased economies of scale and the implementation
of the synergies and cost savings programs associated with the
Company's recent acquisitions.
Management identified synergies and developed cost savings
programs in conjunction with the Younkers, Parisian, Herberger's,
and Carson's business combinations. The implementation of these
synergies and programs reduced operating expenses by a total of $6
million in 1996 and $20 million in 1997. Incremental savings of
approximately $15 million are planned in 1998. 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 7.2% of net sales in 1997, compared
to 6.9% in both 1996 and 1995. The percent increase in 1997 over
1996 and 1995 levels primarily resulted from the addition of
Parisian, which has historically had a higher operating expense
structure.
Expenses Related to Attempted Takeover of Younkers
During 1995, the Company incurred expenses of approximately $10.0
million, or 0.4% of net sales, related to the attempted hostile
takeover of Younkers by Carson's and Younkers' defense of such
attempt.
(Gains) Losses from Long-Lived Assets
In March 1995, the Company sold eight Carson's stores (principally
buildings and real estate) located in Minnesota ("Minnesota
Stores") for net proceeds of $70.8 million. The assets sold had a
carrying value of $9.5 million. In addition, the Company liquidated
all inventory, fixtures, and accounts receivable related to the
Minnesota Stores for net proceeds of approximately $30.0 million.
After closing costs, a gain totaling $55.2 million was recorded in
1995.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 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
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 $19.1 million in 1995. Of the $19.1 million total, $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.
After recognition of the $55.2 million gain recorded from the
Minnesota Stores, or 2.0% of net sales, and the impairment
write-down of $19.1 million, or 0.7% of net sales, the Company
realized a net gain on long-lived assets of $36.1 million, or 1.3%
of net sales, in 1995.
Merger, Restructuring, and Integration Costs
In connection with the Company's mergers with Carson's,
Herberger's, and Younkers and the acquisition of Parisian, the
Company incurred certain costs to effect the transactions and other
costs to restructure, integrate, and combine the operations of the
companies.
For 1997, these costs totaled $43.5 million, or 1.2% of net
sales. The 1997 charges were comprised of: i) $13.8 million of
Carson's merger transaction costs (principally investment banking,
legal, and accounting fees and other direct merger costs); ii)
$17.3 million of restructuring and integration charges associated
with the Carson's merger related principally to such items as
severance, the consolidation of administrative operations, and the
write-off of duplicate assets; and iii) $12.4 million of continuing
integration costs related to mergers and acquisitions over the
prior two years.
For 1996, these charges totaled $15.9 million, or 0.5% of net
sales. The 1996 charges were comprised of: (i) $2.6 million of
Herberger's merger transaction costs (principally investment
banking, legal, and accounting fees and other direct merger costs);
(ii) $7.4 million of restructuring and integration charges
associated with the Herberger's merger related principally to such
items as severance, the consolidation of administrative operations,
and the write-off of duplicate assets; and (iii) $5.9 million
related to the continuing integration of the Younkers transaction.
For 1995, these charges totaled $20.8 million, or 0.8% of net
sales. The 1995 charges were comprised of: (i) $8.8 million of
Younkers' merger transaction costs (principally investment banking,
legal, and accounting fees and other direct merger costs) and (ii)
$12.0 million of restructuring and integration charges associated
with the Younkers merger related principally to such items as
severance, the consolidation of administrative operations, and the
write-off of duplicate assets.
Management also expects to incur certain additional
integration costs in 1998, primarily related to the integration of
redundant and duplicative systems and assets accumulated through
the series of acquisitions over the prior two years. These expenses
are expected to total approximately $21 million to $27 million in
1998.
Year 2000 Expenses
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have
date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.
Based on a recent assessment, the Company determined that it
will be required to modify or replace significant portions of its
software so that its computer systems will properly utilize dates
beyond December 31, 1999. The Company presently believes that with
modifications to existing software and conversions to new software,
the Year 2000 Issue can be mitigated.
The Company has initiated formal communications with all of
its significant suppliers to determine the extent to which the
Company is vulnerable to failure of those third parties to
remediate their own Year 2000 Issue. The Company's total Year 2000
project cost and estimates to complete include the estimated costs
and time associated with the effect of a third party's Year 2000
Issue, and are based on presently available information.
The Company is utilizing both internal and external resources
to reprogram, or replace, and test the software for Year 2000
modifications. Proffitt's completed its assessment of the Year 2000
Issue and began systems modifications during 1997, resulting in
charges of $6.6 million, or 0.2% of net sales, in 1997. The Company
expects to incur additional Year 2000 charges in 1998 estimated at
$5 million. The Company plans to complete the Year 2000 project by
December 31, 1998.
The costs of the project and the date on which the Company
plans to complete the modifications are based on management's best
estimates, which were derived utilizing assumptions of future
events including the continued availability of certain resources,
third party modification plans, and other factors. However, there
can be no guarantee that these estimates will be achieved, and
actual results could differ materially from those plans. Specific
factors that might cause such differences include, but are not
limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer
codes, and similar uncertainties.
ESOP Expenses
Herberger's had an Employee Stock Ownership Plan ("ESOP"), which
was terminated on December 31, 1997. Charges related to the ESOP
totaled $9.5 million, or 0.3% of net sales, in 1997. Of this total,
$7.9 million related to the termination of the plan. ESOP charges
totaled $3.9 million, or 0.1% of net sales, and $2.9 million, or
0.1% of net sales, in 1996 and 1995, respectively.
Finance Charge Income, Net
Net finance charge income was 2.6% of net sales in both 1997 and
1996 and 2.8% of net sales in 1995.
For 1997, gross finance charge income (before allocation of
finance charges to the third party purchasers of accounts
receivable (see "Liquidity")) increased to 3.2% of net sales from
3.1% in 1996 and 1995. This increase was primarily due to the
successful May 1997 introduction of a proprietary charge card at
Herberger's, as well as certain credit card term changes enacted in
the fall of 1997.
Effective February 1998, all of the Company's proprietary
credit cards are issued by the National Bank of the Great Lakes
(the "Bank"), the credit card bank acquired in conjunction with the
Carson's merger (see "Liquidity"). The Bank is able to assess
uniform finance charges (including late fees) in all twenty-four
states of operation. This has positive implications for future
finance charge income.
The allocation of finance charges to the third party
purchasers of accounts receivable totaled approximately $20.8
million, or 0.6% of net sales, in 1997; $16.0 million, or 0.5% of
net sales, in 1996; and $8.8 million, or 0.3% of net sales, in
1995. 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.
Interest Expense
Total interest expense was $55.1 million, $42.7 million, and $47.4
million in 1997, 1996, and 1995, respectively. Interest expense as
a percentage of net sales was 1.6% for 1997, 1.4% for 1996, and
1.7% for 1995. The increase in interest expense in 1997 over 1996
primarily was attributable to the full year effect of higher
borrowings associated with the purchase of Parisian acquired in
October 1996. 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.
Other Income, Net
In 1996, the Company posted a loss of $10.5 million, or 0.4% of net
sales, related to the write-down of County Seat Debentures (the
"Debentures"). Carson's received the Debentures in 1993 when County
Seat Holdings, Inc. exercised its option to exchange the Debentures
for other securities that had been issued to Carson's as part of
the sale price for Carson's 1989 divestiture of County Seat Stores,
Inc., to a management-led buyout group.
Income Taxes
The effective tax rates differ from the normalized tax rates
principally due to non-deductible goodwill, ESOP charges, and
merger related costs.
Net Income
Net income before extraordinary loss on extinguishment of debt was
$72.1 million in 1997, or 2.0% of net sales, $67.1 million in 1996,
or 2.2% of net sales, and $64.9 million in 1995, or 2.4% of net
sales. Prior to non-routine expenses related to hostile takeover
defense; (gains) losses from long-lived assets; merger,
restructuring, and integration costs; year 2000 expenses; and ESOP
expenses, net income before extraordinary loss on extinguishment of
debt totaled $119.4 million in 1997, or 3.4% of net sales, $81.8
million in 1996, or 2.7% of net sales, and $66.8 million in 1995,
or 2.4% of net sales.
Extraordinary Item
During 1997, the Company restructured its balance sheet, including
retiring approximately $113 million of 9-7/8% Parisian Senior
Subordinated Notes due 2003, prepaying approximately $15 million of
11% of Junior Subordinated Notes, and replacing the Company's
existing revolving credit and working capital facilities with a new
revolving credit facility. As a result of this early extinguishment
of debt, certain deferred costs associated with the debt
facilities, such as loan origination costs, were written off. The
aggregate loss of $15.5 million ($9.3 million net of income taxes)
was recorded as an extraordinary item in 1997.
In 1995, 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 this 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 SG&A 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 a significant portion of net sales and
net income realized during the fourth quarter of each year, which
includes the Christmas selling season. In light of these patterns,
SG&A 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
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
Cash Flow
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 $185.9 million
in 1997 and $136.2 million in 1996, principally representing net
income before depreciation and amortization charges and changes in
working capital needs.
Net cash used in investing activities was $144.6 million in
1997, which related to capital expenditures of $167.8 million
primarily for new store construction, store renovations, and
systems enhancements, netted against the proceeds from the sale of
assets of $23.2 million. Net cash used in investing activities was
$227.0 million in 1996, of which $119.1 million was for the
acquisition of Parisian and $113.9 million was related to new store
construction, store renovations, systems enhancements, and other
capital expenditures.
Net cash used in financing activities for 1997 totaled $25.9
million, which was primarily due to payments of $224.1 million on
long-term debt netted against proceeds from such debt of $175.5
million and proceeds from the issuance of stock and the sale of
treasury stock of $15.8 million. Net cash provided by financing
activities for 1996 totaled $41.2 million, which was primarily due
to proceeds of $35.4 million from the issuance of stock and the
sale of treasury stock and of $113.0 million from borrowings on
long-term debt netted against payments on such debt of $52.4
million and repayments under the Company's receivable facilities of
$35.6 million.
The availability of net operating loss carry forwards and
other tax benefits generated in prior years by Carson's will enable
the Company to reduce its cash requirements for income tax payments
in the next several years from that which would otherwise be
payable.
Accounts Receivable Securitization: Younkers Master Trust Facility
In June 1995, the Younkers Master Trust ("YMT") was established by
Younkers Credit Corporation ("YCC"), a wholly-owned, special
purpose subsidiary of the Company. YMT issued to third parties a
total of $75 million of asset backed securities in two separate
classes: (i) $67 million in principal amount of 6.43% Series 1995-1
Class A Certificates and (ii) $8 million in principal amount of
6.61% Series 1995-1 Class B Certificates. In July 1995, a second
series of YMT was established ("Series 1995-2"). This Series 1995-2
Variable Funding Certificate was issued to an asset backed
commercial paper based conduit in the aggregate principal amount of
$50 million. The Series 1995-2 Variable Funding Certificate was
issued to provide YMT with borrowing capacity based on commercial
paper rates for seasonal and expansion-related growth in the
underlying accounts receivable portfolio.
Accounts Receivable Securitization: Proffitt's Credit Card Master
Trust Facility
In April 1994, the Company (excluding Younkers) began selling an
undivided interest in its accounts receivable. In January 1997, the
Company, through its wholly-owned special purpose subsidiary,
Proffitt's Credit Corporation ("PCC"), entered into an agreement to
sell an undivided interest in the accounts receivable of the
Proffitt's, McRae's, and Parisian stores. This agreement provided
for the sales of receivables up to $300 million and contained
certain covenants requiring the maintenance of various financial
ratios. In May 1997, this agreement was modified to include the
accounts receivable of Herberger's.
In August 1997, the Company completed a restructuring of its
credit card receivables (excluding Younkers). Proffitt's Credit
Card Master Trust ("PCCMT") was formed by PCC and issued a total of
$200 million in five-year term asset back securities in two
separate classes (collectively, "Series 1997-2"): (i) $180 million
in aggregate principal amount in AAA/Aaa rated Class A Certificates
priced at 99.587% with a coupon of 6.50% and (ii) $20 million in
aggregate principal amount in A/A1 rated Class B Certificates
priced at 99.642% with a coupon of 6.69%. The proceeds of the
Series 1997-2 Certificates were used to repay outstanding
borrowings and to terminate the Company's previous securitization
arrangement discussed above.
Concurrent with the issuance of the Series 1997-2
Certificates, PCCMT issued to two co-purchasers, both of which are
asset backed commercial paper based conduits, $125 million in
aggregate principal amount in Series 1997-1 Variable Funding
Certificate. In November 1997, the aggregate principal amount of
the 1997-1 Variable Funding Certificate was increased to $150
million. The Series 1997-1 Variable Funding Certificate was issued
to provide PCCMT with borrowing capacity based on commercial paper
rates for seasonal and expansion-related growth in the underlying
accounts receivable portfolio.
National Bank of the Great Lakes
On January 31, 1998, in connection with the Company's acquisition
of Carson's, the Company acquired the Bank. Following that
acquisition, on February 2, 1998, all of the Company's proprietary
credit card agreements with customers, and the accounts related
thereto, were contributed to the Bank pursuant to the terms of the
Contribution Agreement, dated as of January 31, 1998, by and
between the Company and the Bank. The accounts receivable generated
by the Bank's credit card accounts maintained for customers of the
Company's Younkers stores remain subject to the terms of the YMT,
while the accounts receivable generated by the Bank's credit card
accounts maintained for customers of the Company's Proffitt's,
McRae's, Parisian, and Herberger's stores remain subject to the
terms of PCCMT.
Upon the acquisition of the Bank, the accounts receivable
generated by the Bank's credit card accounts maintained for
customers of the Company's Carson's, Boston Store, and Bergner's
stores were sold to PCC and then transferred to PCCMT. To
accommodate the increase in accounts receivable attributable to the
addition of these accounts, the principal amount of the 1997-1
Variable Funding Certificate was increased to $400 million.
As a result of the transactions discussed above, as of
February 2, 1998, the Bank became the sole originator of the
Company's proprietary credit card accounts maintained for customers
of the Company and has sold 100% of the accounts receivable
generated by these accounts to the Company's special purpose
entities, PCC and YCC. PCC and YCC, in turn, will continue to sell
these accounts receivable to PCCMT and YMT.
Capital Structure
During 1997, the Company implemented a comprehensive capital
structure strategy designed to reduce the Company's level of
secured indebtedness, to create a more appropriate fixed to
floating interest rate balance, and to lengthen the duration of
debt capital. The Company also enhanced the overall liquidity,
terms of availability, and pricing of financing arrangements. In
May 1997, Proffitt's issued $125 million of 8.125% Senior Unsecured
Notes due 2004 ("Senior Notes"), which were primarily used to repay
$64 million of mortgage debt and reduce borrowings under the
Company's revolving credit facility. Also in May, Proffitt's
repurchased $28.4 million of 9-7/8% Parisian Senior Subordinated
Notes due 2003 ("Parisian Notes") and in January 1998, the Company
retired approximately $85 million of the $97 million of remaining
Parisian Notes through a cash tender offer. In October 1997, the
Company called its $86.3 million 4-3/4% Convertible Subordinated
Debentures, which were converted into 4.0 million shares of Company
Common Stock. In January 1998, Proffitt's prepaid approximately $15
million of 11% of its Junior Subordinated Notes, which were
originally issued in conjunction with the 1994 McRae's acquisition.
In June 1997, the Company amended its unsecured revolving
credit facility, raising the capacity to $400 million from $275
million, extending the maturity from three years to five, and
obtaining more favorable pricing. The maximum amount outstanding
under the Company's revolving credit facility during 1997 was
$210.0 million. At that time, Proffitt's had unused availability on
its facility of $92.8 million.
In conjunction with the Carson's transaction, Proffitt's
replaced its $400 million unsecured revolving credit facility and
Carson's $125 million unsecured working capital facility with a
$600 million unsecured revolving credit facility ("New Revolver"),
again obtaining more favorable pricing and providing the Company
with more flexibility under operating covenants. The New Revolver
is with several banks and expires in 2003. The pricing on the New
Revolver is a LIBOR- based rate. As of March 19, 1998, the
LIBOR-based interest rate on the New Revolver was approximately
6.1%. As of March 19, 1998, the Company had borrowings totaling
$100.2 million outstanding under the New Revolver and unused
availability of $484.3 million.
As of January 31, 1998, long-term debt consisted of $210
million outstanding on the Company's $400 million revolving credit
facility, $125 million outstanding on Carson's $200 million
receivables facility, $40 million of mortgage debt, $125 million of
Senior Notes, $11 million of Parisian Notes, and $50 million of
capital lease obligations. At January 31, 1998, total debt was 34%
of total book capitalization, down from 43% at February 1, 1997. On
February 2, 1998, Carson's, Boston Store, and Bergner's proprietary
credit card receivables of approximately $270 million were sold to
PCC (refer to previous discussion). PCC, in turn, transferred these
receivables to PCCMT and received proceeds of $235 million which
were used to repay $125 million outstanding under the Carson's
receivables facility (which was then terminated), with the balance
applied to the New Revolver balance. After giving effect to these
transactions, total debt declined to 23% of capitalization at that
date.
Effective with the closing of the Carson's transaction, and
based upon the Company's 1997 balance sheet restructuring and
strong cash flow, both Moody's and Standard & Poors upgraded
Proffitt's corporate debt ratings to Baa3 (investment grade) and
BB+, respectively.
Capital Needs
Proffitt's estimates capital expenditures for 1998 will approximate
$185 million, primarily for the construction of two new stores
opening in 1998, initial construction related to eight to ten
stores expected to open in 1999, 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, which would
not preclude an increase from current levels, while providing
Proffitt's flexibility to capitalize on attractive opportunities
for growth that enhances shareholder value.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share" The new standard changed the
presentation and method in which earnings per share are computed
and was effective for the Company's year ended January 31, 1998.
The Company has restated all per share amounts consistent with SFAS
No. 128.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components in
a full set of general-purpose financial statements. Also in June
1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires
public business enterprises to report selected information about
operating segments as well as establishes standards for related
disclosures about products and services, geographic areas, and
major customers. In February 1998, the FASB issued SFAS No. 132
"Employers' Disclosures About Pensions And Other Postretirement
Benefits." SFAS No. 132 standardizes the disclosure requirements
for pensions and other postretirement benefits, eliminates certain
disclosures, and requires additional information on changes in the
benefit obligations and fair values of plan assets. These standards
are effective for the Company's year ending January 30, 1999, and
the Company is currently in the process of ascertaining the impact
these new standards will have on its financial statements for 1998
and prior periods.
Forward-Looking Information
This report contains "forward-looking" statements within the
meaning of the federal securities laws. The forward-looking
information presented in the letter to shareholders entitled "To
Our Partners" contained on pages 1 through 11 of the Annual Report
as well as the forward-looking statements contained throughout
Management's Discussion and Analysis on pages 14 through 22 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, effective cost containment, and
solution of year 2000 systems issues by the Company and its
suppliers.
When used in this report, words such as "believes,"
"estimates," "plans," "expects," "should," "may," "anticipates,"
and similar expressions as they relate to the Company or its
management are intended to identify forward-looking statements.
<TABLE>
Consolidated Statements of Income
(in thousands, except per share amounts)
PROFFITT'S, INC. & Subsidiaries
Year Ended
-------------------------------
January 31, February 1, February 3,
1998 1997 1996
--------- ---------- ----------
<S> <C> <C> <C>
Net Sales $ 3,544,656 $ 2,992,606 $ 2,744,868
Costs and Expenses
Cost of sales 2,296,262 1,952,896 1,811,622
Selling, general and administrative expenses 832,058 716,313 664,059
Other operating expenses
Property and equipment rentals 109,868 81,709 71,232
Depreciation and amortization 65,301 56,558 54,405
Taxes other than income taxes 79,602 68,354 65,259
Store pre-opening costs 4,122 1,321 484
Year 2000 expenses 6,590
ESOP expenses 9,513 3,910 2,931
(Gains) losses from long-lived assets (134) 1,406 (36,058)
Merger, restructuring and integration costs 43,524 15,929 20,822
Expenses related to attempted takeover of Younkers 10,017
--------- --------- ----------
Operating Income 97,950 94,210 80,095
Other Income (Expense)
Finance charge income, net 92,677 78,039 77,073
Interest expense (55,077) (42,666) (47,363)
Other income (expense), net 2,330 (11,780) 4,051
--------- --------- ----------
Income before provision for income taxes and
extraordinary loss 137,880 117,803 113,856
Provision for income taxes 65,798) 50,723) 48,914)
--------- --------- ----------
Income before extraordinary loss 72,082) 67,080) 64,942)
Extraordinary loss on early extinguishment of
debt, net of tax (9,345) (2,060)
--------- --------- ----------
Net income 62,737 67,080 62,882
Preferred stock dividends 796 1,950
Payment for early conversion of preferred stock 3,032
--------- --------- ----------
Net income available to common shareholders $62,737 $63,252 $60,932
========= ========= =========
Earnings per Common Share:
Basic earnings per common share before
extraordinary loss $ .84 $ .81 $ .84
Extraordinary loss (.11) (.03)
--------- --------- ----------
Basic earnings per common share after
extraordinary loss .73 .81 .81
========= ========= =========
Diluted earnings per common share before
extraordinary loss .81 .78 .81
Extraordinary loss (.10) (.03)
========= ========= =========
Diluted earnings per common share after
extraordinary loss $ .71 $ .78 $ .78
========= ========= =========
Weighted average common shares
Basic 85,532 77,724 75,111
Diluted 91,086 84,334 83,330
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Balance Sheets (in thousands)
PROFFITT'S, INC. & Subsidiaries
January 31, February 1,
1998 1997
----------- -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 39,396 $ 24,000
Trade accounts receivable 342,513 352,833
Merchandise inventories 715,147 643,410
Other current assets 30,835 57,662
Deferred income taxes 23,970 16,305
--------- ---------
Total Current Assets 1,151,861 1,094,210
Property and Equipment, net of depreciation 765,881 682,262
Goodwill and Tradenames, net of amortization 273,857 277,472
Other Assets 33,280 31,775
--------- ---------
Total Assets $ 2,224,879 $ 2,085,719
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $ 150,154 $ 174,612
Accrued expenses 210,921 158,551
Accrued compensation and related items 50,190 31,211
Sales taxes payable 34,105 29,820
Current portion of long-term debt 8,600 15,369
--------- ---------
Total Current Liabilities 453,970 409,563
Senior Debt 541,661 436,445
Deferred Income Taxes 18,002 21,021
Other Long-Term Liabilities 105,717 95,353
Subordinated Debt 10,964 225,767
Commitments and Contingencies
Shareholders' Equity
Common stock 8,925 5,585
Additional paid-in capital 682,224 561,251
Retained earnings 403,416 340,679
Deferred ESOP compensation (9,778)
Unamortized stock compensation (167)
--------- ---------
Total Shareholders' Equity 1,094,565 897,570
--------- ---------
Total Liabilities and Shareholders' Equity $ 2,224,879 $ 2,085,719
========= =========
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. & Subsidiaries
Unamort-
Add- Deferred ized Total
tional ESOP Stock Share-
Preferred Common Paid-In Retained Treasury Compen- Compen- holders'
Stock Stock Capital Earnings Stock sation sation Equity
-------- -------- --------- -------- -------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 1/28/95 $28,850 $6,085 $441,971 $163,580 $(33,639) $(748) $606,099
Net income 62,882 62,882
Issuance of
common stock 36 6,241 6,277
Income tax benefits
related to
exercised stock
options 731 731
Purchases and
retirements of
stock (525) (58,306) (4,044) (62,875)
Increase in stock
held in ESOP (15) (7,857) (7,872)
Preferred stock
dividends (1,950) (1,950)
Decrease in tax
valuation allowance 21,000 21,000
Benefit claims
settlement 2,000 2,000
Unrealized gain on
ESOP shares 45 45
Unrealized gain on
investments 211 211
Stock compensation 295 295
Common stock dividends
$.28 per Herberger's share (1,046) (1,046)
--------- -------- -------- -------- --------- -------- -------- --------
Balance at 2/3/96 28,850 5,581 413,893 215,609 (37,683) (453) 625,797)
Net income 67,080 67,080
Issuance of common stock 348 117,437 117,785
Income tax benefits
related to exercised
stock options 4,633 4,633
Purchases and retire-
ments of stock (776) (28,029) (7,059) 21,481) (14,383)
Sale of treasury stock 8,809 16,202 25,011
Reclassification
of ESOP stock 290 (57) 69,907 $(9,778) 60,362
Preferred stock dividends (796) (796)
Decrease in tax
valuation allowance 16,000 16,000
Unrealized gain
on investment (498) (498)
Stock compensation 278 286 564
Unrealized gain on
ESOP shares 122 122
Conversion of
preferred stock (28,850) 142 28,663 (3,032) (3,077)
Common stock dividends,
$.28 per Herberger's
share (1,030) (1,030)
-------- -------- -------- ------- -------- -------- -------- --------
Balance at 2/1/97 5,585 561,251 340,679 (9,778) (167) 897,570
Net income 62,737 62,737
Issuance of
common stock 112 17,438 17,550
Income tax ben-
efits related to
exercised stock
options 7,319 7,319
2-for-1 stock split 3,070 (3,070)
Purchases and retire-
ments of stock (53) (13,043) (13,096)
Decrease in tax
valuation allowance 16,000 16,000
Unrealized gain
on investments 10 10
Stock compensation 9 1,451 167 1,627
Conversion of 4.75%
subordinated
debentures 202 86,082 86,284
Termination of ESOP 8,786 9,778 18,564
------- ------- -------- -------- -------- -------- -------- --------
Balance at 1/31/98 $ - $8,925 $682,224 $403,416 $ - $ - $ - $1,094,565
======== ======= ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows (in thousands)
PROFFITT'S, INC. & Subsidiaries
Year Ended
-------------------------------------
January 31, February 1, February 3,
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Operating Activities
Net income $ 62,737 $ 67,080 $ 62,882
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss on extinguishment of debt 6,378 3,433
Depreciation and amortization 65,301 56,558 54,405
Deferred income taxes 5,412 31,628 17,960
(Gains) losses from long-lived assets (134) 1,406 (36,058)
ESOP expenses 8,786 1,481 1,363
Loss on County Seat Debentures 10,525
Settlement of reorganization payables (680) (1,280) (725)
Changes in operating assets and liabilities:
Trade accounts receivable 10,320 (32,014) 48,932
Merchandise inventories (71,737) 5,626 (678)
Other current assets 27,704 (13,533) (741)
Accounts payable, accrued expenses and
sales taxes payable 63,326 (126) 4,552
Other 8,451 8,860 (8,649)
-------- -------- ---------
Net Cash Provided By Operating Activities 185,864 136,211 146,676
-------- -------- ---------
Investing Activities
Purchases of property and equipment, net (167,813) (113,918) (90,083)
Proceeds from sale of assets 23,221 6,013 70,801
Proceeds from sale of marketable securities 5,653
Acquisition of Parisian (1996)/Parks-Belk (1995) (119,070) (10,483)
-------- -------- ---------
Net Cash Used In Investing Activities (144,592) (226,975) (24,112)
-------- -------- ---------
Financing Activities
Proceeds from long-term borrowings 175,546 113,037 32,273
Payments on long-term debt and capital lease
obligations (224,134) (52,395) (23,357)
Net borrowings (repayments) under receivables
facility 11,392 (35,637) (42,321)
Proceeds from issuance of stock and sale of
treasury stock 15,762 35,438 2,602
Redemption of subordinated notes (57,000)
Purchase of treasury stock (13,096) (14,383) (5,874)
ESOP loan repayment 9,778
Payments to preferred and common shareholders (1,124) (4,858) (3,139)
-------- -------- ---------
Net Cash Provided By (Used In) Financing
Activities (25,876) 41,202 (96,816)
-------- -------- ---------
Increase (Decrease) In Cash and Cash Equivalents 15,396 (49,562) 25,748
Cash and cash equivalents at beginning of year 24,000 73,562 47,814
-------- -------- ---------
Cash and cash equivalents at end of year $ 39,396 $ 24,000 $ 73,562
========= ========= ==========
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. & Subsidiaries
Note 1 - Organization and Summary of Significant Accounting
Policies
Organization
Proffitt's, Inc. ("the Company") is a retail organization operating
department stores under the store names of Proffitt's, McRae's,
Younkers, Parisian, Herberger's, Carson Pirie Scott ("CPS"),
Bergner's and Boston Store. The Company's fiscal year ends on the
Saturday nearest January 31. Years 1997 and 1996 consisted of 52
weeks ended on January 31, 1998 and February 1, 1997, respectively.
Year 1995 consisted of 53 weeks and ended on February 3, 1996. The
financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents. Cash of
approximately $13,012 and $10,805 has been restricted by the
accounts receivable securitization agreements facility at January
31, 1998 and February 1, 1997, respectively.
Trade Accounts Receivable
Trade accounts receivable represents an owned residual interest in
two special purpose subsidiaries that own Proffitt's proprietary
revolving charge accounts and a direct ownership of CPS's 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 5). The allowance for doubtful
accounts at January 31, 1998 and February 1, 1997 was $19,013 and
$19,512, respectively.
Inventories
Inventories are stated at the lower of cost or market as determined
by the retail inventory method using last-in, first-out (LIFO)
costs for substantially all of the Company's inventory at January
31, 1998 and February 1, 1997. At January 31, 1998, 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 of
inventory approximated the first-in, first-out (FIFO) method 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. For financial reporting purposes, depreciation is
computed principally using the straight-line method over the
estimated useful lives of the assets. 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 $7,622, $3,369 and $1,523 for 1997, 1996
and 1995, respectively. As of January 31, 1998, the accumulated
amortization of intangible assets was $13,833. 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 January
31, 1998.
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." See Note 13 for discussion of the
Herberger's Employee Stock Ownership Plan ("ESOP") termination
during 1997.
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 $163,654, $153,124 and $163,304 for
1997, 1996 and 1995, respectively.
Store Pre-Opening Costs
Store pre-opening costs are expenses when incurred.
Advertising Costs
Advertising and sales promotion costs are expenses as incurred.
Advertising and sales promotion costs were $140,757, $114,027 and
$105,919 for 1997, 1996 and 1995, 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
Basic earnings per common share (EPS) have been computed based on
the weighted average number of common shares outstanding, after
recognition of preferred stock dividends of $796 and $1,950 for
1996 and 1995, respectively, and a payment of $3,032 for early
conversion of the preferred stock in 1996.
During 1997, the Company converted $86,250 of convertible
subordinated debentures into 4,040 (split adjusted - see Note 12)
shares of common stock. Prior to conversion, the Company's
convertible subordinated debentures were considered in diluted
earnings per share when dilutive.
Common stock issued upon the conversion of the preferred stock
in 1996 and the convertible subordinated debentures in 1997 have
been included in the weighted average number of shares outstanding
subsequent to the date of conversion for computing basic earnings
per share.
<TABLE>
Computation Of Per Share Earnings
For the For the For the
Year Ended Year Ended Year Ended
1/31/98 2/1/97 2/3/96
----------------------- ---------------------- ------------------
Per Per Per
Share Share Share
Income Shares Amount Income Shares Amount Income Shares Amount
-------- ------- -------- --------------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income before
extraordinary loss $72,082 85,532 $.84 $63,252 77,724 $ .81 $62,992 75,111 $.84
Effect of Dilutive
Securities
Stock Options 2,941 2,570 1,335
Convertible
subordinated
debentures 1,708 2,613 2,500 4,040 2,500 4,040
Convertible
preferred stock 1,950 2,844
------- ------- ------- ------- ------- ------- ------- ------- -------
Diluted EPS
Income before
extraordinary
loss available
to common
shareholders plus
assumed conver-
sions $73,790 91,086 $.81 $65,752 84,334 $.78 $67,442 83,330 $.81
======= ====== ====== ======= ======= ====== ======= ====== ======
</TABLE>
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." The new standard changed the presentation
and method in which earnings per share are computed. The Company restated all
per share amounts consistent with the new accounting pronouncement.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. SFAS No. 131 requires public business
enterprises to report selected information about operating segments as well
as establishes standards for related disclosures about products and services,
geographic areas, and major customers. In February 1998, the FASB issued SFAS
No. 132, "Employers' Disclosures About Pensions and Other Postretirements
Benefits". SFAS No. 132 standardizes the disclosure requirements for pensions
and other postretirement benefits, eliminates certain disclosures, and
requires additional information on changes in the benefit obligations and
fair values of plan assets. These standards are effective for the Company's
year ending January 30, 1999 and the Company is currently in the process of
ascertaining the impact the new standards will have on its financial
statements for 1998 and prior periods.
Note 2 - Mergers with Carson Pirie Scott, Herberger's and Younkers
On January 31, 1998, Proffitt's, Inc. (Proffitt's) issued 27,565 shares of
its common stock for all of the outstanding common stock of Carson Pirie
Scott and Co. The merger has been accounted for as a pooling of interests
and, accordingly, these consolidated financial statements have been restated
for all periods to include the results of operations and financial position
of CPS.
Separate results of the combined entities were as follows:
Year Ended
-----------------------------------------
1/31/98 2/1/97 2/3/96
--------- --------- ----------
Revenue:
Proffitt's $ 2,374,654 $ 1,889,779 $ 1,661,056
Carson Pirie Scott 1,170,002 1,102,827 1,083,812
---------- --------- ----------
$ 3,544,656 $ 2,992,606 $ 2,744,868
========== ========== ==========
Extraordinary item:
Proffitt's $ (8,254) 0 $ (2,060)
Carson Pirie Scott (1,091)
---------- ---------- -----------
$ (9,345) 0 $ (2,060)
========== ========== ===========
Net income (loss):
Proffitt's $ 49,025 $ 37,399 $ (1,419)
Carson Pirie Scott 13,712 29,681 64,301
---------- ---------- ----------
$ 62,737 $ 67,080 $ 62,882
========== ========= ==========
CPS's financial statements have been restated to conform to Proffitt's
accounting methods and to reflect certain reclassifications and eliminations
changing previously reported income and shareholders' equity. Prior to the
mergers of Proffitt's with Younkers, Inc. ("Younkers") and Proffitt's with
CPS, CPS owned shares of Younkers common stock. CPS recorded an unrealized
gain of $6,940 before income taxes of $2,776 at February 3, 1996. During
1996, CPS sold the shares for $31,094 and realized a gain of $14,892. The
unrealized gain, the realized gain and the related income tax effect, which
had been reflected in previous CPS financial statements, have been eliminated
in the preparation of these financial statements.
On February 1, 1997, Proffitt's issued 8,000 (split adjusted, see Note
12) shares of its common stock for all the outstanding common stock of G.R.
Herberger's, Inc. ("Herberger's"). On February 3, 1996, Proffitt's issued
17,632 (split adjusted, see Note 12) shares of its common stock for all the
outstanding common stock of Younkers. Both mergers were accounted for as
poolings of interests, and accordingly, the consolidated financial statements
were restated for all periods to include the results of operations and
financial position of Herberger's and Younkers.
Note 3 - Acquisitions of Parisian, Parks-Belk and Brody Brothers
Parisian
On October 11, 1996, Proffitt's acquired Parisian, Inc. (:"Parisian"). The
total purchase price of the Parisian transaction was approximately $224,000
(cash payments and transaction costs of $119,000, issuance of 5,894 shares of
common stock valued at $101,000 and issuance of 812 replacement stock options
valued at $4,000) plus the assumption of Parisian liabilities aggregating
$293,000.
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 $229,000 allocated to its tradename and goodwill.
Parks-Belk
In April 1995, Proffitt's acquired the Parks-Belk Company. Consideration of
less than $20,000 was paid in Proffitt's, Inc. common stock and cash. Three
of the Parks-Belk locations were converted into Proffitt's stores, and one
was permanently closed.
Brody Brothers
On March 6, 1998, subsequent to the Company's 1997 year-end, the Company
acquired Brody Brothers Dry Goods Company, Inc. ("Brody's"), a department
store company with six locations in North Carolina. The Brody's stores are
expected to be converted into Proffitt's stores by mid 1998 and will be
included in the Company's financial statements subsequent to the date of
acquisition. Consideration of less than $20,000 was paid in cash.
Note 4 - Marketable Securities
Investments in marketable securities are carried as available-for-sale
securities at fair value. Unrealized holding gains and losses, net of the
related tax effect, are excluded from income and are reported as a component
of shareholders' equity until realized.
CPS held $23,353 par value of 9% Junior Subordinated Exchange Debentures
Due 2004 of County Seat Holdings, Inc. In 1996, CPS wrote down its entire
interest in the County Seat Debentures and reflected such in other income
(expense). In 1997, CPS sold its County Seat Debentures for an insignificant
amount.
Note 5 - Accounts Receivable Securitization
The Company (exclusive of CPS prior to February 2, 1998 - see Note 8) sells
an undivided interest in its accounts receivable through its subsidiaries,
Proffitt's Credit Corporation ("PCC") and Younkers Credit Corporation ("YCC")
(qualifying special purpose entities). The Company has the ability to sell
securities in fixed or variable denominations with fixed or variable implicit
discount rates. At January 31, 1998, the Company had available the following
funding sources:
Average
Amount Implicit
Outstanding Discount Expiration
Entity Funding Capacity 1/31/98 Rate Date
- ----------------------------------------------------------------------------
YCC Fixed at $75,000 $ 75,000 6.45% June 2000
YCC Variable up to $50,000 6,000 Variable July 2000
PCC Fixed at $200,000 200,000 6.50% August 2002
PCC Variable up to $150,000 114,113 Variable August 2002
- ----------------------------------------------------------------------------
$ 395,113
=============================================================================
The variable arrangements are discounted based on commercial paper rates. At
January 31, 1998, the weighted average variable rate was 6.1%. The various
agreements contain covenants requiring the maintenance of certain financial
ratios and receivables portfolio performance measures. The Company is
obligated to repurchase receivables related to customer credits such as
merchandise returns.
Effective for 1998, the National Bank of the Great Lakes ("NBGL"), a
wholly-owned national credit card bank subsidiary, will issue all credit
cards and sell all accounts receivable generated by the credit cards to PCC
and YCC. To accommodate the increase in accounts receivable attributable to
the CPS stores, the PCC variable funding facility was increased to $400,000.
The ownership interest transferred by PCC and YCC to the purchasers was
$395,113 and $324,000 at January 31, 1998 and February 1, 1997, respectively.
Finance charges earned by the purchasers were $20,825, $16,013 and $8,809 for
1997, 1996 and 1995, respectively.
Note 6 - Property and Equipment
A summary of property and equipment is as follows:
January 31, February 1,
1998 1997
---------- -----------
Land and land improvements $ 74,585 $ 70,051
Buildings 300,073 242,391
Leasehold improvements 101,482 131,255
Fixtures and equipment 549,957 402,176
Construction in progress 13,094 8,242
1,039,191 854,115
Accumulated depreciation (273,310) (193,200)
---------- -----------
765,881 660,915
Stores held for sale, net of
accumulated depreciation 21,347
---------- -----------
$ 765,881 $ 682,262
========== ===========
The Company realized gains of $134 and losses of $1,406 from asset sales,
store sales or closings and impairment charges in 1997 and 1996,
respectively.
In March 1995, the Company sold eight CPS stores located in Minnesota
(the "Minnesota Closed Stores") for net proceeds of $70,801. The assets sold
had a carrying cost of $9,521. The Company separately liquidated all
inventory, fixtures and accounts receivable related to the Minnesota Closed
Stores. The Company recorded a gain on the sale of its Minnesota Closed
Stores of $55,179, after closing costs, for the year ended February 3, 1996,
which is included in (gains) losses from long-lived assets in the
consolidated statements of income.
Note 7 - Income Taxes
The components of income tax expense are as follows:
Year Ended
January 31, February 1, February 3,
1998 1997 1996
---------- ---------- ----------
Current:
Federal $ 50,312 $ 14,247 $ 23,898
State 4,286 4,848 5,683
--------- --------- ---------
54,598 19,095 29,581
Deferred:
Federal 4,583 27,572 15,046
State 829 4,056 2,914
--------- --------- ---------
5,412 31,628 17,960
--------- --------- ---------
$ 60,010 $ 50,723 $ 47,541
========= ========= =========
The tax effect for extraordinary losses on early extinguishment of debt
was $5,788 and $1,373 for years 1997 and 1995, respectively.
Components of the net deferred tax asset or liability recognized in the
consolidated balance sheets are as follows:
January 31, February 1,
1998 1997
----------- -----------
Current:
Deferred tax assets:
Trade accounts receivable $ 7,486 $ 7,275
Accrued expenses 32,765 25,731
NOL carryforwards 4,212 4,255
Valuation allowance (6,155) (8,086)
--------- ----------
38,308 29,175
Deferred tax liabilities:
Inventory (13,126) (11,365)
Other (1,212) (1,505)
--------- ----------
(14,338) (12,870)
--------- ----------
Net current deferred tax asset $ 23,970 $ 16,305
========= ==========
Noncurrent:
Deferred tax assets
Capital leases $ 16,651 $ 16,635
Other long-term liabilities 32,492 36,405
Deferred compensation 1,908 2,195
NOL carryforwards 41,340 46,020
Valuation allowance (41,251) (56,481)
--------- ---------
51,140 44,774
Deferred tax liabilities:
Property and equipment (49,857) (45,040)
Deferred gain (6,491) (6,620)
Other assets (12,794) (12,930)
Junior subordinated debentures (1,205)
--------- ----------
(69,142) (65,795)
--------- ----------
Net non-current deferred tax liability $(18,002) $ (21,021)
========= ==========
At January 31, 1998, the Company has $116,800 in federal and state tax net
operating loss carryforwards related to CPS's pre-bankruptcy losses that will
expire between 2003 and 2008. The future utilization of these carryforwards
is restricted under federal income tax change-in-ownership rules and CPS's
ability to generate sufficient taxable income.
The valuation allowance attributable to CPS losses and tax basis
differences was reduced by $16,000 for each of the years ended January 31,
1998 and February 1, 1997, based on management's reassessment of the
realizability of the related deferred tax asset in future years. The tax
benefit resulting from the reduction in the valuation allowance is credited
directly to shareholders' equity.
The Company believes it is more likely than not that the benefit of the
net deferred tax assets will be realized.
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 are as follows:
1997 1996 1995
--------- -------- --------
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit 2.4 4.0 4.2
Nondeductible merger related costs 5.7 1.6 2.7
Amortization of goodwill 2.1 1.1 .5
Non-deductible ESOP expenses 3.6
Other items, net .1 1.4 .7
Effective tax rate 48.9% 43.1% 43.1%
The Company made income tax payments, net of refunds received, of $9,894,
$34,111 and $14,232 during 1997, 1996 and 1995, respectively.
Note 8 - Senior Debt
A summary of senior debt is as follows:
January 31, February 1,
1998 1997
----------- ------------
Revolving credit agreements $ 210,000 $ 154,437
CPS receivables facility, weighted average
interest rate of 5.58% and 5.47%,
respectively 125,000 113,511
Senior unsecured notes, 8.125%, maturing 2004 125,000
Real estate notes, mortgage notes and
industrial revenue bonds 39,865 133,324
Capital lease obligations 50,396 50,542
--------- ---------
550,261 451,814
Current portion (8,600) (15,369)
--------- ---------
$ 541,661 $ 436,445
========= =========
In conjunction with the acquisition of CPS, Proffitt's replaced its revolving
credit agreement and CPS's revolver with a new $600,000 revolving credit
facility (the "Credit Facility"). The Credit Facility is scheduled to expire
in February 2003. Advances under the Credit Facility bear interest at
variable rates and are unsecured. At January 31, 1998, the interest rate was
6.5%. The Credit Facility requires the Company to meet specific covenants
related to net worth, leverage, fixed charges, and indebtedness. Previously
unamortized debt issuance costs associated with the replaced revolver were
written off and reflected in the extraordinary loss on early extinguishment
of debt in 1997.
Prior to the merger with Proffitt's, CPS financed its trade accounts
receivable with a $200,000 facility ("Receivables Facility"). In connection
with the merger, the Receivables Facility was terminated and the $125,000
outstanding balance under the Receivables Facility was repaid on February 2,
1998, with proceeds from the sale of receivables under the Company's
receivables securitization agreements (see Note 5).
Proceeds from the 1997 sale of 8.125% senior unsecured notes were used
primarily to reduce subordinated debt, real estate notes and mortgage notes.
The notes contain several covenants including limitations on indebtedness,
transactions with affiliates, and disposition of assets.
Effective with the February 3, 1996 Younkers merger, the Company
replaced Younkers' debt collateralized by its trade accounts receivable with
the sale of an 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 1995.
At January 31, 1998, maturities of senior debt for the next five years
and thereafter, giving consideration to lenders' call privileges, are as
follows:
Year Maturities
-------- ----------
1998 $8,600
1999 7,307
2000 129,085
2001 1,824
2002 230,509
Thereafter 172,936
------------ -----------
$ 550,261
============= ===========
The Company made interest payments net of capitalized interest of $54,838,
$43,088 and $48,529 during 1997, 1996 and 1995, respectively.
Note 9 - Subordinated Debt
Subordinated debt represents uncollateralized obligations subordinated in
right of payment to all senior debt and is composed of the following:
January 31, February 1,
1998 1997
----------- -----------
Convertible debentures, interest
at 4.75%, maturing
November 2003, converted into 4,040
shares of Proffitt's common stock
in October 1997 $ 86,250
Notes, interest at 9.875%, maturing
July 2003 $ 10,964 125,000
Junior debentures, interest at 7.5%,
maturing
March 2004, prepaid in January 1998 14,517
--------- ---------
$ 10,964 $ 225,767
========= =========
In October 1997, the convertible debentures were converted into 4,040 (split
adjusted, see Note 12) shares of Proffitt's common stock. As a result of this
conversion, certain deferred debt issue costs aggregating $600 ($400 net of
tax) were written off as an extraordinary item.
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. In
May and June 1997, the Company purchased approximately $28,400 of these notes
which resulted in an extraordinary loss from the extinguishment of debt of
approximately $1,100, net of tax. In January 1998, the Company made a cash
tender offer at approximately 106% of face value for the remaining $96,600 in
outstanding notes. This tender offer was accepted by 89% of the note holders,
which left approximately $11,000 outstanding as of January 31, 1998. The
January tender resulted in an extraordinary loss from the early
extinguishment of debt of approximately $6,600, net of tax.
The 7.5% junior subordinated debentures were discounted at the date of
issue to reflect their fair value and were being accredit to a face value of
$17,500 with an effective interest rate of 11%. In January 1998, the Company
completed the prepayment of the junior subordinated debentures for the face
value, which resulted in a net of tax charge of $1,600.
Note 10 - Leases
The Company is committed under long-term leases primarily for the rentals of
retail stores and other properties. 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 January 31, 1998, future minimum rental commitments are as follows:
Operating Leases Capital Leases
----------------- ----------------
1998 $ 77,424 $ 10,621
1999 78,225 11,378
2000 73,678 10,885
2001 61,689 9,414
2002 58,867 9,137
Thereafter 466,679 101,906
--------- ----------
$ 816,562 $ 153,341
========= ==========
Amount representing interest (102,945)
---------- -----------
Capital lease obligations $ 50,396
========= ===========
Total rental expense for operating leases was $109,868, $81,709 and $71,232
during 1997, 1996 and 1995, respectively, including contingent rents of
approximately $11,233, $10,182 and $8,488, respectively.
Note 11 - Employee Benefit Plans
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, for 1997, 1996 and
1995 were $4,047, $2,806 and $3,092, respectively.
Defined Benefit Plan
CPS sponsors a noncontributory defined benefit plan with the costs of such
plan determined by an independent actuary. CPS's funding policy is to
contribute annually to the plan an amount, which does not exceed the maximum
amount that can be deducted for federal income tax purposes. The plan covers
substantially all employees who have attained a minimum age and number of
hours of employment.
Net pension costs were:
Fiscal Year Ended
1/31/98 2/1/97 2/3/96
-------- --------- ---------
Service cost $ 4,805 $ 5,326 $ 4,535
Interest cost 9,445 9,012 8,651
Return on assets (24,211) (17,144) (26,029)
Net amortization and deferral 12,338 5,867 14,886
------- ------- --------
Net pension cost $ 2,377 $ 3,061 $ 2,043
======= ======= =======
The following table sets forth the funded status of the defined benefit
pension plan:
January 31, February 1,
1998 1997
---------- ----------
Actuarial present value of benefit obligation:
Vested benefit obligation $ 128,755 $ 117,689
Nonvested benefit obligation 3,173 2,437
-------- ---------
Accumulated benefit obligation 131,928 120,126
Excess of projected benefit obligation
over accumulated benefit obligation 6,292 5,489
-------- ---------
Projected benefit obligation 138,220 125,615
Plan assets at fair value 146,345 131,076
-------- ---------
Funded status 8,125 5,461
Unrecognized net gain (11,990) (6,912)
Prior service cost not yet recognized in
net periodic pension cost (196) (233)
-------- ---------
Accrued pension cost classified in other
liabilities $ (4,061) $ (1,684)
======== ========
Discount rate 7.50% 7.75%
Expected long-term rate of return on assets 9.50% 9.25%
Average assumed rate of compensation increase 4.50% 4.75%
======== ========
Approximately 64% of the plan assets are invested in marketable equity
securities, with the remainder invested in bonds.
The plan assets at January 31, 1998 and February 1, 1997 were based on
a respective November 1 measurement date.
As a part of a prior 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.
Retiree Health Care Plans
CPS provides health care benefits for certain groups of CPS employees who
retired before 1997. The plans were contributory with CPS providing a frozen
annual credit of varying amounts per year of service. A $2.9 million
curtailment gain was recognized for the year ended February 3, 1996. The
annual expense is comprised principally of interest cost and is less than
$1,000 annually.
The liabilities for the unfunded plans reflected in the Company's
consolidated balance sheets are as follows:
January 31, February 1,
1998 1997
---------- ----------
Accumulated postretirement benefit obligation
Retirees $ 10,530 $ 9,619
Fully eligible active plan participants 1,031
--------- ---------
10,530 10,650
Unrecognized gain 3,504 3,416
--------- ---------
Accrued postretirement benefit cost
classified in other liabilities $ 14,034 $ 14,066
========= =========
Note 12 - 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 $28,900
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 2,844 (split adjusted, see below) shares of Proffitt's common stock. The
Company paid $3,032 to the holder of the preferred stock to induce early
conversion.
Common Stock
The Company has 300,000 shares of $.10 par value common shares authorized of
which 89,256 and 55,860 shares were issued and outstanding at January 31,
1998 and February 1, 1997, respectively.
In August 1997, the Company's Board of Directors approved a 2-for-1
stock split of the outstanding shares of the Company's common stock. The
split was effected in the form of a stock dividend; each shareholder received
one additional share for each outstanding share of common stock held of
record as of the close of business on October 15, 1997. The per share amounts
presented in the Company's consolidated financial statements are reflective
of the 2-for-1 stock split.
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. Subsequent to year-end, the
Company's Board of Directors approved an increase in the exercise price to
$278 and an extension of the term of the rights to March 25, 2008. 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 acquired)
to purchase common stock of the acquiring company or, in certain
circumstances, common stock having a market value of twice the exercise price
of the right.
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
1997, 1996 and 1995 were 3, 170 and 358 (split adjusted), respectively. In
connection with the rescission of the put option on the ESOP shares (see Note
13) the Company retired all 13,794 shares of the Company's common stock held
in treasury.
Prior to the merger with Proffitt's, CPS purchased and retired 700 and
905 common shares for $13,096 and $12,327 during the years ended January 31,
1998 and February 1, 1997.
Note 13 - Employee Stock Plans
ESOP
Herberger's sponsored an employee stock ownership plan for the benefit of its
employees. Contributions to the ESOP were made at the discretion of the Board
of Directors and were $0, $3,670 and $3,418 in 1997, 1996 and 1995,
respectively. At various times, the ESOP purchased shares of the Company's
common stock using the proceeds of ESOP loans. These shares were initially
held in a suspense account by the Plan Trustee. As contributions were made
and dividends were paid and the ESOP debt was repaid, shares were released
from suspense and allocated to the accounts of participants and the Company
recognized compensation expense. For shares acquired after January 30, 1994,
ESOP expense was recorded equal to the estimated fair value of shares
allocated and those shares became outstanding for earnings per share
computations. For all other shares, ESOP expense was recorded equal to the
cost of the shares released. All shares acquired prior to January 30, 1994
were considered outstanding for earnings per share calculations.
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.
During 1997, the ESOP was terminated. As a result, the Company received
approximately $10,000 in cash representing payment of a $9,000 note
receivable from the ESOP. All previously unallocated common shares of the
Company held by the ESOP were allocated to the ESOP participants, resulting
in a charge of $7,900 (primarily non-cash).
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 Company's stock-based compensation plans
been determined under the fair value method, using the Black-Scholes
option-pricing model, the Company's net income and earnings per share would
have been reduced (increased) to the pro forma amounts indicated below.
<TABLE>
January 31, 1998 February 1, 1997 February 3, 1996
------------------- ------------------- --------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 62,737 $ 56,911 $ 67,080 $ 64,890 $ 62,882 $ 61,515
Basic earnings per
common share .73 .67 .81 .79 .81 .79
Diluted earnings per
common share .71 .64 .78 .75 .78 .77
</TABLE>
The assumptions for determining compensation costs under the fair value
method include i) a risk-free interest rate based on zero-coupon government
issues on each grant date with the maturity equal to the expected term of the
option (6.01%, 6.84% and 5.74% for 1997, 1996 and 1995, respectively), ii) an
expected term of five years, iii) an expected volatility of 39.1%, 37.1% and
39.9% for 1997, 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 January 31, 1998 the Company has available for grant 2,832
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 at the discretion of the Company's Board of Directors if
the Company meets certain performance objectives.
A summary of the stock option plans for 1997, 1996 and 1995 is presented
below:
<TABLE>
1997 1996 1995
--------------------- --------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Range of Exercise Prices Shares Price Shares Price Shares Price
- ------------------------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 6,395 $ 10.31 5,666 $ 8.69 5,188 $ 8.06
Granted 2,628 23.52 1,278 16.31 1,154 11.17
Converted in acquisition 812 11.25
Exercised (1,687) 9.41 (1,104) 9.45 (418) 7.64
Forfeited (298) 20.41 (257) 11.22 (258) 8.62
------- -------- -------- -------- -------- -------
Outstanding at end of year 7,038 $ 15.03 6,395 $ 10.31 5,666 $ 8.69
======= ======== ======== ======== ======== =======
Options exercisable at year end 4,792 $ 11.46 4,324) $ 9.35 4,275 $ 7.77
======= ======== ======== ======== ======== =======
Weighted average fair value of
options granted during
the year $ 11.07 $ 7.55 $ 6.37
======== ======== ======== ======== ======== ========
</TABLE>
Contemporaneous with the Parisian acquisition, outstanding Parisian stock
options were converted into Proffitt's options.
The following table summarizes information about stock options
outstanding at January 31, 1998:
<TABLE>
Options Outstanding Options Exercisable
------------------------------------- ---------------------------
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
at Remaining Average at Average
Rage of Jan. 31, Contractual Exercise Jan. 31, Exercise
Exercise of Prices 1998 (Years) Price 1998 Price
- ------------------ -------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
$3.75 to $5.63 219 3 $ 4.68 219 $ 4.68
$5.64 to $8.45 1,005 6 5.90 1,005 5.90
$8.46 to $12.69 2,673 6 11.47 2,437 11.37
$12.70 to $19.06 1,915 8 17.68 1,010 16.89
$19.07 to $28.60 44 9 20.39 22 20.84
$28.61 to $30.29 1,182 10 28.66 99 27.70
------- ------- ------- ------- --------
7,038 $ 15.03 4,792 $ 11.46
======= ======== ======= ======= ========
</TABLE>
The Company also granted restricted stock awards of 176, 258 and 40 shares to
certain employees in 1997, 1996 and 1995, respectively. The fair value of
these awards on the dates of grants was $4,600, $3,763 and $499 for 1997,
1996 and 1995, respectively. During 1997, 1996 and 1995, compensation cost of
$5,700, $2,239 and $449, respectively, has been recognized in connection with
these awards.
Stock Purchase Plan
The stock purchase plan (the "Plan") provides that an aggregate of 700 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, 62 and 28 shares of the Company's
common stock were purchased by employees in 1997 and 1996 respectively. At
January 31, 1998, the Plan has available for future offerings 583 shares.
Note 14 - Commitments and Contingencies
In 1992, CPS commenced an adversary proceeding in the Bankruptcy Court
against Bank One, Milwaukee, N.A. ("Bank One"). In the adversary proceeding,
the Company alleges, among other things, that Bank One made an illegal setoff
of $31,207 from the Company's Predecessor's account at Bank One in order to
reimburse itself for a $31,207 payment Bank One made to Associated
Merchandising Corporation ("AMC") under a letter of credit Bank One issued to
AMC. In July 1995, the Bankruptcy Court granted the CPS motion for summary
judgment in the amount of $37,565, plus costs, against Bank One. The
Bankruptcy Court's ruling is currently being appealed by Bank One and the
Company is appealing the Bankruptcy Court's denial of prejudgment interest.
Bank One has asserted that the Company's recovery is subject to a 33%
reduction in accordance with the distribution Bank One would receive as an
unsecured creditor under the Plan of Reorganization. While the Company
believes strongly in its causes of action, the ultimate outcome of this
proceeding cannot be determined with certainty. In accordance with generally
accepted accounting principles, no gain has been recognized in the
accompanying consolidated financial statements.
CPS and its subsidiaries emerged from Chapter 11 bankruptcy in 1993. The
Company recognized $680, $1,280 and $725 in 1997, 1996 and 1995,
respectively, to reflect the favorable resolution of claims. Management
believes CPS has adequately provided for the resolution of all bankruptcy
claims and other matters related to the Plan of Reorganization remaining at
January 31, 1998.
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 Company's consolidated financial
condition, results of operations or liquidity.
Note 15 - Related Party Transactions
In 1989, an unsecured $500 interest-free loan, due January 31, 1999, was made
as a supplement to the Chairman of the Board and Chief Executive Officer's
("CEO") base compensation. During 1997, the Company agreed to forgive the
loan in one-fifth increments over five years, providing that the CEO remains
employed by the Company.
During 1996 and 1995, the Company paid $796 and $1,950 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 16 - 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
approximate cost due to the immediate or short-term maturity of these
instruments.
For variable rate notes that reprice frequently, fair value approximates
carrying value. The fair value of fixed rate notes are estimated using
discounted cash flow analyses with interest rates currently offered for loans
with similar terms and credit risk. As of January 31, 1998 and February 1,
1997, the fair value of fixed rate notes approximated the carrying value.
The fair values of the 8.125% and 9.875% notes and the 4.75% convertible
debentures are based on quoted market prices. For the junior debentures, the
fair value is estimated using discounted cash flow analyses with interest
rates offered for financial instruments with similar terms and credit risk.
The fair values of the Company's aforementioned financial instruments at
January 31, 1998 and February 1, 1997 were as follows:
Carrying Amount Estimated Fair Value
---------------- -------------------
January 31, 1998
8.125% senior notes $ 125,000 $ 132,700
9.875% notes $ 10,964 $ 11,731
February 1, 1997
4.75% convertible debentures $ 86,250 $ 84,525
9.875% notes $ 125,000 $ 127,500
7.5% junior debentures $ 14,517 $ 14,517
Note 17 - Merger, Restructuring and Integration Costs
Merger, restructuring and integration costs incurred in 1997, 1996 and 1995
(before income taxes) were as follows:
1997 1996 1995
-------- --------- ----------
Related to current year's merger:
Merger transaction costs, principally
investment banking, legal and other
direct merger costs $13,800 $ 2,649 $ 8,778
Severance and related benefits 11,100 3,129 3,235
Conversion and consolidation of systems
and administrative operations 3,355
Abandonment of duplicate data processing
equipment and software and other assets 6,200 885 7,422
Other 1,387
Related to all mergers and acquisitions:
Termination of Younkers benefit plan 1,362
Conversion and consolidation of systems 2,600 4,549
Termination of merchandise purchasing
agreements 3,900
Severance, relocation and other
integration costs associated with
all mergers and acquisitions 5,924
------- ------- --------
$ 43,524 $ 15,929 $ 20,822
======= ======= =======
A reconciliation of the above charges to the amounts remaining unpaid at
January 31, 1998 was as follows:
1997 1996 1995
-------- --------- ----------
Merger, restructuring and integration
charges $ 43,524 $15,929 $ 20,822
Amounts representing non-cash charges (14,500) (2,445) (4,086)
Amounts paid in 1995 (1,636)
Amounts paid in 1996 (7,308) (11,913)
Amounts paid in 1997 (7,111) (5,434) (776)
-------- -------- ---------
Amounts unpaid at January 31, 1998 $ 21,913 $ 770 $ 2,411
Note 18 - Hostile Takeover Attempt
In 1995, prior to the Proffitt's and Younkers merger, Younkers was subjected
to a hostile takeover attempt by CPS. In defending itself against this
takeover attempt, Younkers incurred legal fees and investment banker advisory
fees aggregating $3,182, while CPS's charges related to this takeover attempt
totaled $6,835.
Note 19 - Year 2000
The Company has completed its assessment of the year 2000 effect on the
Company's systems and began the necessary systems modifications during 1997,
resulting in expense of approximately $6,600.
Note 20 - Quarterly Financial Information
In the following summary of quarterly financial information, all adjustments
necessary for a fair presentation of each period were included.
<TABLE>
Year Ended
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Fiscal year ended January 31, 1998
Net sales $784,504 $736,052 $873,974 $1,150,126
Gross margin $275,078 $263,608 $313,236 $396,472
Income before extraordinary loss $13,213 $8,065 $15,968 $34,836
Net income $13,213 $6,945 $15,356 $27,223
Basic earnings per common share:
Before extraordinary items $ .16 $ .09 $ .19 $ .39
Extraordinary item $(.01) $(.01) $(.09)
Earnings per common share $ .16 $ .08 $ .18 $ .31
Diluted earnings per common share:
Before extraordinary items $ .15 $ .09 $ .18 $ .38
Extraordinary item $(.01) $(.01) $(.08)
Earnings per common share $ .15 $ .08 $ .17 $ .29
Fiscal year ended February 1, 1997
Net sales $601,948 $568,345 $719,494 $1,102,819
Gross margin $205,444 $200,764 $254,259 $379,243
Net income $5,730 $6,358 $ 10,997 $43,995
Basic earnings per common share $ .07 $ .04 $ .14 $ .53
Diluted earnings per common share $.07 $ .04 $ .14 $ .50
</TABLE>
Note 21 - Condensed Consolidating Financial Information
The following tables present condensed consolidating financial information
for 1997 and 1996 for: i) Proffitt's, Inc.; ii) on a combined basis, the
guarantors of Proffitt's, Inc.'s Senior Notes (which are all of the
wholly-owned subsidiaries of Proffitt's, Inc., except for PCC, YCC and NBGL;
and iii) on a combined basis, PCC, YCC and NBGL, the only non-guarantor
subsidiaries of the Senior Notes. The operations of the non-guarantor
subsidiaries were not significant for 1995. Separate financial statements of
the guarantor subsidiaries are not presented because the guarantors are
jointly, severally, and unconditionally liable under the guarantees, and the
Company believes the condensed consolidating financial statements are more
meaningful in understanding the financial position of the guarantor
subsidiaries.
Proffitt's, Inc. is comprised of substantially all of the Proffitt's and
Younkers stores and certain corporate management and financing functions.
Borrowings and the related interest expense under Proffitt's, Inc. revolving
credit facility are allocated to Proffitt's, Inc. and the guaranty
subsidiaries under an informal lending arrangement. There are also management
and royalty fee arrangements among Proffitt's, Inc. and the subsidiaries.
<TABLE>
Condensed Consolidating Statements of Income (in thousands)
For the Year Ended January 31, 1998
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $ 746,896 $ 2,797,760 $ 3,544,656
Costs and Expenses
Cost of sales 480,435 1,815,827 2,296,262
Selling, general and
administrative expenses 156,787 645,637 $ 29,634 832,058
Other operating expenses 56,343 198,428 254,771
Store pre-opening costs 412 3,710 4,122
Merger, restructuring and
integration costs 11,500 32,024 43,524
(Gains) losses from long-lived
assets (8) (126) (134)
Year 2000 expenses 357 6,233 6,590
ESOP expenses 9,513 9,513
--------- --------- --------- -------- --------
Operating income (loss) 41,070 86,514 (29,634) 97,950
Other Income (Expense)
Finance charge income, net 92,677 92,677
Gain (loss) on sale of receivables (4,627) (13,881) 18,508
Servicer fees 13,372 (13,372)
Equity in earnings of subsidiaries 55,180 20,064 $ (75,244)
Interest expense, net (10,612) (29,529) (14,936) (55,077)
Other income (expense), net (178) 2,279) 229 2,330
--------- --------- -------- --------- ---------
Income before provision for
income taxes and extraordinary
loss 80,833 78,819 53,472 (75,244) 137,880
Provision for income taxes 14,753 31,023 20,022 65,798
--------- --------- -------- --------- ---------
Net income before extraordinary
loss 66,080 47,796 33,450 (75,244) 72,082
Extraordinary loss on early exting-
uishment of debt, net of tax 3,343 6,002 9,345
--------- --------- -------- --------- ---------
Net income $ 62,737 $41,794 $33,450 $(75,244) $62,737
========= ======== ======== ======== ========
</TABLE>
<TABLE>
Condensed Consolidating Balance Sheets (in thousands)
For the Year Ended January 31, 1998
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $15,405 $(6,255) $30,246 $39,396
Trade accounts receivable 113 273 342,127 342,513
Merchandise inventories 171,212 543,935 715,147
Deferred income taxes 6,797 12,871 4,302 23,970
Notes receivable from sale of
receivables and intercompany
borrowings 30,715 90,293 $(121,008)
Other current assets 6,777 24,051 7 30,835
---------- ---------- --------- ---------- ----------
Total Current Assets 231,019 665,168 376,682 (121,008) 1,151,861
Property and Equipment, net 186,266 579,615 765,881
Goodwill And Tradenames, net 7,340 266,517 273,857
Other Assets 2,297 24,312 6,671 33,280
Investment in and advances to
subsidiaries 1,109,362 18,346 (1,127,708)
---------- ---------- --------- ---------- ----------
Total Assets $ 1,536,284 $ 1,553,958 $ 383,353 $(1,248,716) $ 2,224,879
========== ========== ========= =========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $39,713 $110,441 $150,154
Accrued expenses and other
current liabilities 45,563 234,582 $15,071 295,216
Notes payable from purchase of
receivables 121,008 $(121,008)
Current portion of long-term debt 452 8,148 8,600
----------- ------------ ----------- ------------ ------------
Total Current Liabilities 85,728 353,171 136,079 (121,008) 453,970
Senior Debt 336,545 80,116 125,000 541,661
Deferred Income Taxes 8,683 9,319 18,002
Other Long-Term Liabilities 10,763 94,954 105,717
Subordinated Debt 10,964 10,964
Investment by, and Advances from Parent 1,005,434 122,274 (1,127,708)
Shareholders' Equity 1,094,565 1,094,565
----------- ------------ ----------- ------------ ------------
Total Liabilities and
Shareholders' Equity $ 1,536,284 $ 1,553,958 $ 383,353 $ (1,248,716) $ 2,224,879
=========== ============ =========== ============ ============
</TABLE>
<TABLE>
Condensed Consolidating Statements of Cash Flows (in thousands)
For the Year Ended January 31, 1998
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 62,737 $ 41,794 $ 33,450 $(75,244) $62,737
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in earnings of subsid-
iaries (55,180) (20,064) 75,244
Depreciation and amortization 12,874 52,427 65,301
Deferred income taxes 222 4,614 576 5,412
Extraordinary loss on exting-
uishment of debt 1,425 4,953 6,378
(Gains) losses from long-lived
assets (8) (126) (134)
Settlement of reorganization
payables (680) (680)
ESOP expense 8,786 8,786
Changes in operating assets and
liabilities, net 52,575 (9,806) (4,705) 38,064
--------- --------- --------- --------- ----------
Net cash provided by operating
activities 74,645 81,898 29,321 185,864
Investing Activities
Purchases of property and
equipment, net (13,349) (154,464) (167,813)
Proceeds from sale of assets 23,221 23,221
--------- --------- --------- --------- ----------
Net cash provided by (used in)
investing activities 9,872 (154,464) (144,592)
Financing Activities
Inter-company borrowings (226,093) 250,113 (24,020)
Proceeds from long-term
borrowings 175,546 175,546
Payments on long-term debt (32,720) (191,414) (224,134)
Net borrowings under receivables
facility 11,392 11,392
Proceeds from issuance of stock 15,762 15,762
Purchase of treasury stock (13,096) (13,096)
ESOP loan repayment 9,778 9,778
Payments to preferred and common
shareholders (1,124) (1,124)
--------- --------- --------- --------- ----------
Net cash provided by (used in)
financing activities (80,601) 67,353 (12,628) (25,876)
Increase (decrease) in cash and
cash equivalents 3,916 (5,213) 16,693 15,396
Cash and cash equivalents at
beginning of period 11,489 (1,042) 13,553 24,000
--------- --------- --------- --------- ----------
Cash and cash equivalents at
end of period $ 15,405 $ (6,255) $ 30,246 $ - $ 39,396
========= ========= ========== ========= ==========
</TABLE>
<TABLE>
Condensed Consolidating Statements of Income (in thousands)
For the Year Ended February 1, 1997
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $737,902 $2,254,704 $ 2,992,606
Costs and Expenses
Cost of sales 461,117 1,491,779 1,952,896
Selling, general and administr-
ative expenses 172,219 529,003 $ 15,091 716,313
Other operating expenses 57,026 149,595 206,621
Store pre-opening costs 1,321 1,321
Merger, restructuring and integr-
ation costs 8,729 7,200 15,929
(Gains) losses from long-lived
assets 1,406 1,406
ESOP expenses 3,910 3,910
--------- ---------- --------- ---------- ----------
Operating income (loss) 38,811 70,490 (15,091) 94,210
Other Income (Expense)
Finance charge income, net 8,500 12,691 56,848 78,039
Gain (loss) on sale of receivables (2,475) 2,475
Servicer fees 6,749 (6,749)
Equity in earnings of subsidiaries 41,432 11,431 $(52,863)
Interest expense, net (6,404) (23,819) (12,443) (42,666)
Other income (expense), net 7,319 (19,186) 87 (11,780)
--------- ---------- --------- ---------- ----------
Income before provision for income
taxes 87,183 58,356 25,127 (52,863) 117,803
Provision for income taxes 20,103 20,693 9,927 50,723
--------- ---------- --------- ---------- ----------
Net income $67,080 $37,663 $15,200 $(52,863) $67,080
========== ========== ========= ========== ==========
</TABLE>
<TABLE>
Condensed Consolidating Balance Sheets (in thousands)
For the Year Ended February 1, 1997
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $11,489 $(1,042) $13,553 $24,000
Trade accounts receivable 167 31 352,635 352,833
Merchandise inventories 183,285 460,125 643,410
Deferred income taxes 7,814 4,492 3,999 16,305
Notes receivable from sale of
receivables and intercompany
borrowings 15,518 99,516 $(115,034)
Other current assets 18,925 37,147 1,590 57,662
-------- --------- -------- ---------- ----------
Total Current Assets 237,198 600,269 371,777 (115,034) 1,094,210
Property and Equipment, net 183,477 498,284 501 682,262
Goodwill And Tradenames, net 8,131 269,341 277,472
Other Assets 3,092 24,774 3,909 31,775
Investment in and advances to
subsidiaries 728,152 (728,152)
--------- --------- --------- ---------- ----------
Total Assets $1,160,050 $1,392,668 $376,187 $(843,186) $2,085,719
========= ========= ========= ========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $34,418 $140,194 $174,612
Accrued expenses and other current
liabilities 22,915 178,200 $ 18,467 219,582
Notes payable from purchase of
receivables 115,034 $ (115,034)
Current portion of long-term debt 4,686 10,683 15,369
--------- --------- --------- ---------- ---------
Total Current Liabilities 62,019 329,077 133,501 (115,034) 409,563
Senior Debt 157,077 165,857 113,511 436,445
Deferred Income Taxes 10,090 10,931 21,021
Other Long-Term Liabilities 18,777 76,576 95,353
Subordinated Debt 14,517 211,250 225,767
Investment by, and Advances from Parent 598,977 129,175 (728,152)
Shareholders' Equity 897,570 897,570
----------- ---------- --------- ---------- -----------
Total Liabilities and
Shareholders' Equity $ 1,160,050 $ 1,392,668 $ 376,187 $ (843,186) $ 2,085,719
========== ========== ========= ========== ===========
</TABLE>
<TABLE>
Condensed Consolidating Statements of Cash Flows (in thousands)
For the Year Ended February 1, 1997
PROFFITT'S, INC. & Subsidiaries
Non-
Guarantor Guarantor
Proffitt's, Subsid- Subsid- Elimin- Consol-
Inc. iaries iaries ations idated
--------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 67,080 $ 37,663 $ 15,200 $(52,863) $67,080
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in earnings of subsidiaries (41,432) (11,431) 52,863
Depreciation and amortization 14,123) 42,380 55 56,558
Deferred income taxes 8,901 22,679 48 31,628
Loss on County Seat Debentures 10,525 10,525
(Gains) losses from long-lived assets 1,406 1,406
Settlement of reorganization payables (1,280) (1,280)
ESOP expense 1,481 1,481
Changes in operating assets and liabil-
ities, net (34,394) 14,491 (11,284 (31,187)
--------- --------- --------- ---------- ----------
Net cash provided by operating
activities 14,278 117,914 4,019 136,211
Investing Activities
Purchases of property and equip-
ment, net (8,544) (105,374) (113,918)
Proceeds from sale of assets 5,410 603 6,013
Acquisition of Parisian (119,070) (119,070)
--------- --------- --------- ---------- ----------
Net cash used in investing
activities (3,134) (223,841) (226,975)
Financing Activities
Inter-company borrowings (121,314) 77,143 44,171
Proceeds from long-term borrowings 113,037 113,037
Payments on long-term debt (19,727) (32,668) (52,395)
Net borrowings under receivables
facility (35,637) (35,637)
Proceeds from issuance of stock 35,438 35,438
Purchase of treasury stock (14,383) (14,383)
Payments to preferred and common
shareholders (4,858) (4,858)
--------- --------- --------- ---------- ----------
Net cash provided by (used in)
financing activities (6,949) 39,617 8,534 41,202
Increase (decrease) in cash and
cash equivalents 4,195 (66,310) 12,553 (49, 562)
Cash and cash equivalents at begin-
ning of period 7,294 65,268 1,000 73,562
--------- --------- --------- ---------- ----------
Cash and cash equivalents at end
of period $ 11,489 $(1,042) $ 13,553 $ - $ 24,000
========= ========= ========= ========= ===========
</TABLE>
Reports
Report of Independent Accountants
Board of Directors and Shareholders
Poffitt's, Inc.
We have audited the accompanying consolidated balance sheets of
Proffitt's, Inc. and Subsidiaries of January 31, 1998 and February
1, 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in
the period ended January 31, 1998. 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.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. we believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Proffitt's, Inc. and
Subsidiaries as of January 31, 1998 and February 1, 1997 and the
consolidated results of their operations and their cash flows for
each of the three years ended January 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Birmingham, Alabama
March 19, 1998, except for Note 12,
as to which the date is March 26, 1998
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 the transactions are executed in
accordance with management 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, vary, 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
report provides an independent opinion upon the fairness of the
financial statements.
The Audit Committee of the Board of Directors is composed of
three 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.
/s/ R. Brad Martin /s/ Douglas E. Coltharp
R. Brad Martin Douglas E. Coltharp
Chairman of the Board and Executive Vice President
Chief Executive Officer and Chief Financial Officer
Market Information
Effective July 7, 1997, the Company's common stock began trading on
the New York Stock Exchange under the symbol PFT. Until that time,
the Company's stock was traded on the NSADAQ National Market tier
of The NASDAQ Stock Market under the symbol PRFT. As of March 13,
1998, there were approximately 2,200 shareholders of record. The
prices in the table below represent the high and low sales prices
for the stock as reported by the New York Stock Exchange (beginning
on July 7, 1997). The prices have been adjusted to reflect a 2-for-1
stock split effected in the form of a stock dividend in
October 1997.
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 the
circumstances then existing, including the earnings of the Company,
its financial requirements, and general business condition. The
Company declared no dividends to common shareholders in either 1997
or 1996.
Fiscal Year Ended
--------------------------------
January 31, 1998 February 1, 1997
Price Range Price Range
---------------- -----------------
Quarter High Low High Low
----- ----- ----- -----
First $ 20.69 $ 15.63 $ 16.88 $ 11.75
Second $ 26.67 $ 18.88 $ 20.00 $ 15.75
Third $ 30.63 $ 24.88 $ 21.00 $ 17.75
Fourth $ 32.44 $ 25.00 $ 21.38 $ 16.31
Directors and Certain Officers
Proffitt's, Inc. Directors
R. Brad Martin
Chairman of the Board of
Directors and Chief Executive
Officer of Proffitt's, Inc.
Ronald de Waal
Vice Chairman of the Board of Directors
Chairman of We International, B.V.
Bernard E. Bernstein
Partner in the law firm of
Bernstein, Stair & McAdams
Stanton J. Bluestone
Chairman of
Carson Pirie Scott
John W. Burden, III
Retail Consultant
Retired Chairman and Chief Executive
Officer of Federated Department Stores, Inc.
and Allied Stores Corporation
Edmond D. Cicala
President of Edmond Enterprises, Inc.
Retired Chairman and Chief Executive Officer
of the Goldsmith's Division of
Federated Department Stores
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
Julius W. Erving
President of The Erving Group, Inc.
and Executive Vice President of
the Orlando Magic
Michael S. Gross
Vice President of Apollo Capital
Management, L.P.
Donald E. Hess
Chairman of Parisian
G. David Hurd
Emeritus Chairman and retired
Chief Executive Officer of
The Principal Financial Group
C. Warren Neel
Dean of the College of Business Administration
at the University of Tennessee, Knoxville
Marguerite W. Sallee
President and Chief Executive Officer
of CorporateFamily Solutions
Gerald Tsai, Jr.
Private Investor
Former Chairman, President,
and Chief Executive Officer of
Delta Life Corporation
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
and Logistics
Julia A. Bentley
Senior Vice President of Investor Relations
and Communications and Secretary
R. Thomas Coan
Senior Vice President of
Human Resources
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Peggy Eskenasi
Senior Vice President of
Private Label and Brand Development
Mark A. Goldstein
Senior Vice President and
Chief Information Officer
Fran U. Jose
Senior Vice President of Marketing
Brian J. Martin
Executive Vice President of
Law and General Counsel
Jack C. Miller
Senior Vice President of Store
Planning, Construction, Maintenance, and Energy
Michael R. Molitor
Senior Vice President of
Merchandise Planning and Analysis
John T. Parros
Executive Vice President of Merchandising
Michael Rodgers
Senior Vice President of Credit
Daniel M. Sorvig
Senior Vice President
of Visual Merchandising
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 Officers
Toni E. Browning
President and Chief Executive Officer
A. Coleman Piper
Executive Vice President of Stores
and Visual Merchandising
Don M. Alexander
Senior Vice President of Sales
Promotion and Marketing
Mark F. Fedyk
Senior Vice President and
General Merchandise Manager
McRae's Officers
Dawn H. Robertson
President and Chief Executive Officer
George Myers
Senior Vice President of Stores
and Visual Merchandising
Thomas M. Ford
Senior Vice President of Sales
Promotion and Marketing
H.R. Harvey
Senior Vice President and
General Merchandise Manager
Joseph A. Sherman
Senior Vice President and
General Merchandise Manager
Michael D. Sholtis
Senior Vice President and
General Merchandise Manager
Younkers Officers
Frank E. Kulp, III
President and Chief Executive Officer
Robert M. Daughton
Senior Vice President of Stores
and Visual Merchandising
Robert H. Ferguson
Senior Vice President of Sales
Promotion and Marketing
Ric L. Anderson
Senior Vice President and
General Merchandise Manager
Alan E. Miller
Senior Vice President and
General Merchandise Manager
Thomas E. Pavsek
Senior Vice President and
General Merchandise Manager
Ann L. Strug
Senior Vice President and
General Merchandise Manager
Parisian Officers
W. Travis Saucer
Executive Vice President of Merchandising
Jim W. Adams
Executive Vice President of Stores
and Visual Merchandising
Ernest E. Brown
Senior Vice President and
General Merchandise Manager
Carol L. Winter
Senior Vice President and
General Merchandise Manager
Herberger's Officers
Max W. Jones
President and Chief Executive Officer
John B. Brownson
Executive Vice President
and Chief Operating Officer
Gary L. Pralle
Senior Vice President of Stores
and Visual Merchandising
Laurence P. Stuart
Senior Vice President of Sales
Promotion and Marketing
J.T. Fanning
Senior Vice President and
General Merchandise Manager
Kenneth W. Shuler
Senior Vice President and
General Merchandise Manager
Joseph W. Thebert
Senior Vice President and
General Merchandise Manager
Carson Pirie Scott Officers
Stanton J. Bluestone
Chairman
Michael R. MacDonald
President and Chief Executive Officer
Anthony J. Buccina
Executive Vice President of Merchandising
Catherine A. Shaw
Executive Vice President of Stores
and Visual Merchandising
Edward P. Carroll, Jr.
Executive Vice President of Sales
Promotion and Marketing
Joyce M. Armeli
Senior Vice President and
General Merchandise Manager
Stuart M. Goldblatt
Senior Vice President and
General Merchandise Manager
David C. Harris
Senior Vice President and
General Merchandise Manager
Michael N. Nemoir
Senior Vice President and
General Merchandise Manager
Proffitt's Stores
GEORGIA
Dalton
Rome
KENTUCKY
Ashland
Elizabethtown
NORTH CAROLINA
Asheville
Goldsboro
Greenville
Kinston
Rocky Mount
TENNESSEE
Athens
Chattanooga (2)
Cleveland
Greeneville
Johnson City
Kingsport
Knoxville (2)
Maryville
Morristown
Oak Ridge
VIRGINIA
Bristol
WEST VIRGINIA
Morgantown
Parkersburg
McRae's Stores
ALABAMA
Birmingham (5)
Dothan
Florence
Gadsden
Huntsville (2)
Mobile
Montgomery
Selma
Tuscaloosa
FLORIDA
Mary Esther
Pensacola
LOUISIANA
Baton Rouge
Monroe
MISSISSIPPI
Biloxi
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
lowa City
Marshalltown
Mason City
Sioux City (2)
Waterloo
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 (2)
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 (5)
Decatur
Dothan
Florence
Huntsville (2)
Mobile
Montgomery (2)
Tuscaloosa
FLORIDA
Jacksonville
Orlando
Pensacola
Tallahassee
GEORGIA
Atlanta (5)
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
ILLINOlS
Urbana
IOWA
Ottumwa
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
Beaver Dam
LaCrosse
Rice Lake
WYOMING
Rock Springs
Carson Pirie Scott Stores
ILLINOIS
Bourbonnais
Chicago (26)*
INDIANA
Michigan City
Merrillville
MINNESOTA
Rochester
Boston Stores
WISCONSIN
Brookfield*
Green Bay
Janesville
Madison (2)
Milwaukee (6)
Racine
Bergner's Stores
ILLINOIS
Bloomington
Champaign
Forsyth
Galesburg
Machesney
Pekin
Peoria
Peru
Quincy
Rockford (2)
Springfield
Sterling
This is Living . . .
and growing stronger all the time
The regions of the United States in which we operate have
outstanding growth potential.
Shareholder Information
Sales Release Dates for 1998
Sales Period Release Date
February 1998 3/5/98
March 1998 4/9/98
April 1998 5/7/98
May 1998 6/4/98
June 1998 7/9/98
July 1998 8/6/98
August 1998 9/3/98
September 1998 10/8/98
October 1998 11/5/98
November 1998 12/3/98
December 1998 1/7/99
January 1999 2/4/99
Earnings Release Dates for 1998
Quarter Release Date
First 5/19/98
Second 8/18/98
Third 11/17/98
Fourth To be announced
Annual Meeting
The Annual Meeting of Shareholders of Proffitt's, Inc. will be held
at 8:30 a.m., June 10, 1998, 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) 981-6325 (facsimile)
[email protected] (e-mail)
Financial results, corporate news,
and other Company information are available on Proffitt's web site:
http://www.proffitts.com
Corporate Information
Corporate Headquarters
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
Proffitt's Home Office
115 North Calderwood
Alcoa, Tennessee 37701
(423) 983-7000
McRae's Home Office
3455 Highway 80 West
Jackson, Mississippi 39209
(601) 968-4400
Younkers Home Office
701 Walnut Street
Des Moines, Iowa 50397
(515) 244-1112
Parisian Home Office
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
Herberger's Home Office
600 Mall Germain
St. Cloud, Minnesota 56301
(320) 251-5351
Carson Pirie Scott, Boston Store,
and Bergner's Home Office
331 West Wisconsin Avenue
Milwaukee, Wisconsin 53203
(414) 347-4141
Independent Accountants
Coopers & Lybrand L.L.P.
Birmingham, Alabama
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.598\EX-13-1.ASC
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
PROFFITT'S, INC. AND SUBSIDIARIES
Name of Subsidiary State of Incorporation
Bergner Credit Corporation Delaware
Bergner Finance Corporation Delaware
Brody Brothers Dry Goods Company North Carolina
Carson Pirie Scott & Co. Illinois
CPS Department Stores, Inc. Delaware
CPS Holding Co. Delaware
G.R. Herberger's, Inc. Delaware
Great Lakes Credit Corporation Delaware
McRae's, Inc. Mississippi
McRae's of Alabama, Inc. Alabama
McRae's Stores Partnership, G.P. Mississippi
National Bank of the Great Lakes United States
P.A. Bergner & Co. Illinois
Parisian, Inc. Alabama
Proffitt's Credit Corporation Nevada
Younkers Credit Corporation Delaware
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the incorporation by reference in the registration
statements of Proffitt's, Inc. listed below of our report dated
March 19, 1998, except for Note 12 as to which the date is March
26, 1998, on our audits of the consolidated financial statements of
Proffitt's, Inc. and Subsidiaries as of January 31, 1998 and
February 1, 1997 and for each of the three years in the period
ended January 31, 1998, which report is incorporated by reference
in this Annual Report on Form 10-K for the year ended January 31,
1998.
Registration Statements on Form S-3
Registration Numbers:
333-32257
Registration Statements on Form S-4
Registration Numbers:
333-09043
333-41563
Registration Statements on Form S-8
Registration Numbers:
33-46306
33-80602
33-88390
333-25213
333-47535
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheets as of January 31, 1998 and February 1,
1997 and the Condensed Consolidated Statements of Income for the years ended
January 31, 1998, February 1, 1997, and February 3, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-31-1998 FEB-01-1997 FEB-03-1996
<PERIOD-END> JAN-31-1998 FEB-01-1997 FEB-03-1996
<CASH> 39,396,000 24,000,000 0
<SECURITIES> 0 0 0
<RECEIVABLES> 342,513,000 352,833,000 0
<ALLOWANCES> 0 0 0
<INVENTORY> 715,147,000 643,410,000 0
<CURRENT-ASSETS> 1,151,861,000 1,094,210,000 0
<PP&E> 765,881,000 682,262,000 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 2,224,879,000 2,085,719,000 0
<CURRENT-LIABILITIES> 453,970,000 409,563,000 0
<BONDS> 552,625,000 662,212,000 0
0 0 0
0 0 0
<COMMON> 8,925,000 5,585,000 0
<OTHER-SE> 1,085,640,000 891,985,000 0
<TOTAL-LIABILITY-AND-EQUITY> 2,224,879,000 2,085,719,000 0
<SALES> 3,544,656,000 2,992,606,000 2,744,868,000
<TOTAL-REVENUES> 3,544,656,000 2,992,606,000 2,744,868,000
<CGS> 2,296,262,000 1,952,896,000 1,811,622,000
<TOTAL-COSTS> 2,296,262,000 1,952,896,000 1,811,622,000
<OTHER-EXPENSES> 318,386,000 229,187,000 189,092,000
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 55,077,000 42,666,000 47,363,000
<INCOME-PRETAX> 137,880,000 117,803,000 113,856,000
<INCOME-TAX> 65,798,000 50,723,000 49,914,000
<INCOME-CONTINUING> 72,082,000 67,080,000 64,942,000
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> (9,345,000) 0 (2,060,000)
<CHANGES> 0 0 0
<NET-INCOME> 62,737,000 67,080,000 62,882,000
<EPS-PRIMARY> .73 .81 .81
<EPS-DILUTED> .71 .78 .78
</TABLE>
