<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 11, 1999
SAKS INCORPORATED
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Tennessee 1-13113 62-0331040
---------------- ------------ -------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
750 Lakeshore Parkway, Birmingham, Alabama 35211
--------------------------------------------------------------
(Addresses of Principal Executive Offices, including Zip Code)
(205) 940-4000
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
<PAGE>
Item 5. Other Events.
- ------ ------------
On February 11, 1999, Saks Incorporated offered for sale $200 million of
its 7-3/8% Notes due 2019 pursuant to a Prospectus dated February 5, 1999 and an
accompanying Prospectus Supplement dated February 11, 1999. A copy of the
Prospectus, together with the accompanying Prospectus Supplement, is filed as an
exhibit to this Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits.
- ------ -------------------------------------------------------------------
(c) Exhibits.
The following exhibits are filed herewith:
Exhibit No. Description
- ------------- ---------------------------------------------------------------
99.1 Prospectus dated February 5, 1999 and accompanying Prospectus
Supplement dated February 11, 1999, pursuant to which Saks
Incorporated offered for sale $200 million of its 7-3/8% Notes
due 2019.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAKS INCORPORATED
/s/ Charles J. Hansen
------------------------------
Charles J. Hansen
Senior Vice President and
Associate General Counsel
Date: February 12, 1999
-3-
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
- ------------- ---------------------------------------------------------------
99.1 Prospectus dated February 5, 1999 and accompanying Prospectus
Supplement dated February 11, 1999, pursuant to which Saks
Incorporated offered for sale $200 million of its 7-3/8% Notes
due 2019.
-4-
<PAGE>
EXHIBIT 99.1
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 5, 1999)
$200,000,000
SAKS INCORPORATED
7 3/8% Notes Due 2019
------------
The Terms --
. We will pay interest on the Notes twice a year on February 15 and August 15,
beginning on August 15, 1999.
. If we default, your right to payment under the Notes will be junior to our
secured debt, equal to our unsecured and unsubordinated debt, and senior to
our subordinated debt, in each case whether current or future debt.
. Most of our significant subsidiaries will guarantee the payment of interest
and principal under the Notes.
. We do not intend to list the Notes on any national securities exchange or on
Nasdaq.
. We have the right to redeem the Notes prior to their maturity at a redemption
price that is described more fully in this Prospectus.
------------
See "Risk Factors" beginning on page S-6 for several factors that you should
consider carefully before you invest in the Notes being offered by this
Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these Notes or determined that this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
------------
<TABLE>
<CAPTION>
Per Note Total
-------- ------------
<S> <C> <C>
Public Offering Price 99.587% $199,174,000
Underwriting Discount 0.875% $ 1,750,000
Proceeds to Saks (before expenses) 98.712% $197,424,000
</TABLE>
The underwriters expect to deliver the Notes to you on or about February 17,
1999.
------------
Salomon Smith Barney
Chase Securities Inc.
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
J.P. Morgan & Co.
NationsBanc Montgomery Securities LLC
February 11, 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is the Prospectus Supplement,
which describes the specific terms of the Notes we are offering. The second
part, the base Prospectus, gives more general information, some of which may
not apply to the Notes we are offering. Generally, when we refer only to the
"Prospectus," we are referring to both parts combined.
If the description of your Notes varies between the Prospectus Supplement and
the accompanying Prospectus, you should rely on the information in the
Prospectus Supplement.
You should rely only on the information contained in or incorporated by
reference in this Prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of the Notes in any state
where the offer is not permitted. You should not assume that the information
contained in or incorporated by reference in this Prospectus is accurate as of
any date later than February 11, 1999.
----------------
We include cross references in the Prospectus to captions in these materials
where you can find further related discussions. The following table of contents
tells you where to find these captions.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Saks Incorporated................................................... S-3
Risk Factors........................................................ S-6
Summary Financial and Operating Data................................ S-9
Use of Proceeds..................................................... S-12
Capitalization...................................................... S-13
Description of the Notes ........................................... S-14
Underwriting........................................................ S-26
Legal Matters....................................................... S-27
Experts............................................................. S-27
Prospectus
Important Information About This Prospectus......................... 2
How to Obtain Additional Information................................ 2
This Prospectus Incorporates Information by Reference to Other
Documents.......................................................... 3
This Prospectus Contains Forward-Looking Statements................. 3
Saks Incorporated................................................... 4
Use of Proceeds..................................................... 5
Consolidated Ratio of Earnings and Combined Fixed Charges and
Preferred Stock Dividends.......................................... 5
The Offered Securities.............................................. 6
Description of Debt Securities...................................... 9
Plan of Distribution................................................ 39
Legal Opinions...................................................... 40
Experts............................................................. 40
</TABLE>
S-2
<PAGE>
SAKS INCORPORATED
The following is a summary of our business. It does not contain all the
information that may be important to you. You should read the entire Prospectus
and the other information we refer to carefully before you decide to invest in
the Notes.
We are the fourth largest traditional department store company in the United
States and currently operate 352 specialty and full-line department stores in
38 states. Our stores operate under eleven store names:
<TABLE>
<CAPTION>
Name # of stores
- ---- -----------
<S> <C>
Saks Fifth Avenue................................................... 58
Younkers............................................................ 52
Parisian............................................................ 45
Off 5th............................................................. 42
Herberger's......................................................... 38
Carson Pirie Scott*................................................. 30
McRae's............................................................. 30
Proffitt's.......................................................... 30
Bergner's*.......................................................... 14
Boston Store*....................................................... 12
Bullock & Jones..................................................... 1
</TABLE>
- --------
* Unless we specifically mention otherwise, all references in this Prospectus
to "Carson Pirie Scott" will include all of the department stores and the
four furniture stores we operate under the names "Carson Pirie Scott,"
"Bergner's" and "Boston Store."
Our stores are typically leading department stores in their communities, and
most of the stores are located in premier locations in the areas they serve.
The stores offer a wide selection of products including fashion clothing,
clothing accessories, cosmetics and, with the exception of Saks Fifth Avenue,
decorative home furnishings.
Varied Store Formats Provide Access to Broader Customer Base
We believe that by positioning our stores in diverse geographic locations and
by using different store formats and tradenames, we are able to appeal to a
broader portion of our potential customer base. For example, the Younkers and
Proffitt's store formats generally appeal to middle- and upper-middle income
customers in smaller and mid-size trade areas, while the Parisian store format
appeals to upper-middle and upper-income customers in our larger metropolitan
trade areas. Complementing these formats are:
. The Saks Fifth Avenue format, which has a leadership position in the
luxury merchandise segment primarily through stores located in major
urban and suburban trade areas and certain resort locations;
. The Off 5th outlet format, which offers off-price merchandise to a more
moderate-income segment of the customer continuum; and
. The Folio catalog format, which offers merchandise to our customers
through direct mail.
In smaller communities, our stores cater to middle- and upper-income
customers with a selection of name-brand merchandise that is not otherwise
available in that trade area. In larger metropolitan areas, we try to maximize
our presence by operating several stores (sometimes with different formats) in
prime locations. In addition, we believe the Saks Fifth Avenue stores serve as
destination stores that draw customers from a wider geographic base.
Each of our stores carries name-brand merchandise selected to appeal to the
particular customer base of the store. For example, the Younkers, McRae's,
Herberger's, Carson Pirie Scott and Proffitt's store formats carry name brands
such as Estee Lauder, Ralph Lauren and Tommy Hilfiger. Our Parisian format also
carries these name brands, and complements them with name brands like Robert
Talbott, Tahari, Bobbi Brown and MAC. The Saks Fifth
S-3
<PAGE>
Avenue store format is focused on luxury and fashion merchandise and carries
designer brands like Oscar de la Renta, Gucci, Chanel and Armani.
Acquisition and Integration Strategy
In recent years, we have grown through the acquisition of strong, regional
department store businesses, such as Parisian, Herberger's and Carson Pirie
Scott. We complemented these department store company acquisitions with
selective real estate acquisitions and new store openings, all part of our goal
of achieving a leading position in each trade area in which we operate. Given
current trends toward limited new mall development, we believe the
attractiveness of our existing locations will provide us with a distinct
competitive advantage.
Through these acquisitions, we have developed, as one of our key strengths,
the ability to integrate and enhance the back office functions of the acquired
stores. Our integration philosophy includes:
. Retaining key store management;
. Maintaining store identity and store level sales personnel to assure that
the acquisition does not adversely affect customer service;
. Retaining previously developed regional expertise and knowledge of the
local customer base, which allows each store format to tailor a portion
of its merchandise selection to the local customer;
. Using a "best practices" process where each store's operating procedures
and policies are reviewed to see if there are practices which will
provide us with more efficient operations at our other stores;
. Coordinating merchandise planning and buying through our central
merchandising group to obtain the benefits of our vendor relationships;
and
. Centralizing support functions, such as credit card operations, logistics
and information systems, to reduce expenses and promote efficiency.
We successfully implemented this strategy in the acquisitions of McRae's,
Younkers, Parisian, Herberger's, and Carson Pirie Scott, each of which resulted
in enhanced efficiencies and improved earnings.
Strategic Acquisition and Integration of Saks Fifth Avenue.
In September 1998, we acquired Saks Fifth Avenue, which operates Saks Fifth
Avenue, Off 5th stores and one Bullock & Jones Store. We believe that our
purchase of Saks Fifth Avenue combines two of the most compelling growth
stories in the retail industry and provides us with the ability to serve a
broader customer base. The acquisition also provides us with:
. Opportunities to reduce operating costs through back office
consolidation;
. Access to the customers of Saks Fifth Avenue, an upper-income group that
is also a high-growth segment of the population;
. The Saks Fifth Avenue name, which is a premier name for luxury retailing
and which offers significant expansion opportunities;
. Fashion expertise that we can use in our other store formats;
. The Folio, a direct mail format; and
. Saks Fifth Avenue's developed expertise in customer service and customer
loyalty programs, which we can use in all of our
S-4
<PAGE>
stores to improve our profitability and the recurring revenue stream from
our customer base.
Overall, we believe our operating strength and support infrastructure allows
the Saks Fifth Avenue merchandise management team to focus on its strengths of
fashion direction, marketing and customer service. Due to the distinctiveness
of the merchandise that Saks Fifth Avenue stores offer, the buying organization
for the Saks Fifth Avenue stores has remained independent; however, several
aspects of merchandise planning and inventory management are being coordinated
centrally.
At the time of our acquisition of Saks Fifth Avenue, we changed our name from
"Proffitt's, Inc." to "Saks Incorporated."
Acquisition of 15 Stores from Dillard's.
During Fall 1998, we acquired 15 department stores and related inventory and
intangible assets from Dillard's for a purchase price of approximately $475
million. This acquisition expands our presence in several key trade areas, such
as Orlando, Florida and Nashville, Tennessee, and provides us entry into
several new trade areas, such as Duluth, Minnesota and Lafayette, Louisiana.
Capital Structure Strategy
We recently completed the following changes to our capital structure that are
designed to enhance our liquidity, strengthen our balance sheet and position us
for future growth:
. During November and December 1998, we issued and sold $500 million of 8
1/4% Notes due 2008, $350 million of 7 1/4% Notes due 2004, and
$250 million of 7 1/2% Notes due 2010. The net proceeds from these
offerings totaled approximately $1.08 billion.
. Since November 1998, we have repurchased approximately $273.8 million of
the 5 1/2% Convertible Subordinated Notes of Saks Holdings, Inc., our
wholly owned subsidiary.
. On February 10, 1999, we prepaid approximately $236 million of Saks
Holdings, Inc. real estate indebtedness secured by intercompany leases.
For a more complete discussion of our capitalization and the use of the
proceeds of this offering see "Use of Proceeds" and "Capitalization."
Management Ownership
Our senior management has a substantial investment in the company. As of
February 5, 1999, Brad Martin, the Chairman of our Board and our Chief
Executive Officer, beneficially owned approximately 1.5% of our common stock
and all of our directors and officers as a group beneficially owned
approximately 4.0% of our common stock.
Our principal executive offices are at 750 Lakeshore Parkway, Birmingham,
Alabama 35211. Our telephone number is (205) 940-4000.
S-5
<PAGE>
RISK FACTORS
Your investment in the Notes will involve some degree of risk. You should
carefully consider the following factors and the other information we have
included or referred to in this Prospectus before deciding to purchase any
Notes.
Competition in the Department Store Business
The department store business is highly competitive. Our stores compete with
national and regional department store chains as well as specialty retailers,
discount stores, general and mass merchandise stores, and mail-order
businesses. Some of the large department store chains and specialty retailers
are able to devote more financial resources than we can to marketing. In
addition, many of these competitors are able to use larger, more comprehensive
marketing campaigns because they operate only one or two store formats. At the
same time, some of the smaller retailers we compete with are able to use more
focused and targeted marketing and selling campaigns than we can because their
customer base is relatively narrow. To remain competitive, we must provide our
stores with marketing support that is comprehensive enough to compete with the
campaigns of our larger competitors but focused enough to reach the customer
base of each store format.
Our stores generally compete on the basis of price, quality, merchandise
selection, customer service and amenities, location and store design.
Merchandise selection and customer satisfaction are perhaps the most
challenging. Our financial success depends on the ability of our buyers and
designers to anticipate and respond quickly to changing merchandise trends and
customer preferences. For example, if we do not change our merchandise to match
prevailing consumer tastes, we may be left with merchandise that we cannot sell
at a profit.
Integrating Acquired Companies
As part of our business strategy, we have acquired several department store
businesses, including our recent acquisition of Saks Fifth Avenue. We regularly
evaluate future acquisition opportunities, including acquisitions of other
department store companies, groups of stores, such as the acquisition of the
stores from Dillard's, and individual stores. Our operations and earnings will
be affected by our ability to successfully integrate the operations of any
businesses and store locations acquired in the future. In addition, the success
of our acquisitions will depend on our ability to realize cost savings from the
combined operations. We have continued to integrate the operations of Parisian,
Herberger's and Carson Pirie Scott in 1997 and 1998 and have realized
significant cost savings from those acquisitions. We have begun to realize cost
savings from the Saks Fifth Avenue acquisition and the acquired Dillard's
stores. However, we cannot guarantee that we will be able to continue to be
successful in realizing cost savings from our earlier successes with our
acquisition of Saks Fifth Avenue or the acquisition of the stores from
Dillard's, or other stores or businesses that we may acquire in the future. See
"The Company--Acquisition and Integration Strategy" and "--Forward Looking
Statements."
Seasonal Fluctuations in Our Performance
Like others in the retail industry, we experience seasonal fluctuations in
sales and net income. We generally realize disproportionate amounts of sales
and net income in the months of October, November and December as consumer
spending increases for the holiday season.
S-6
<PAGE>
Potential "Year 2000 Problems"
We are taking what we believe are the appropriate steps to avoid the "Year
2000 Problem." The Year 2000 Problem could cause our information systems,
software products and other business systems, and those of our suppliers, to
fail in 1999 and 2000. These failures could cause numerous problems for us,
such as:
. Our inability to order merchandise.
. Our inability to receive and distribute merchandise to our stores.
. Our inability to pay for merchandise received, which could delay delivery
of on-order merchandise.
. Our inability to process our customers' purchases using credit cards
issued by our credit card bank.
. Our inability to process our customers' credit card payments to our
credit card bank.
. In the worst case, our total inability to sell merchandise and to process
our daily business for a long period of time, which could result in
default under our credit facilities and allow the lenders to demand that
we immediately repay them.
Each of these problems could materially and adversely affect our financial
condition and results of operations. However, we believe these scenarios are
unlikely based on the progress we have made to solve our Year 2000 Problem. In
fiscal 1997 and fiscal 1998, we incurred expenses of $6.6 million and $9
million, respectively, to assess the effect of the Year 2000 Problem on our
operations and to make planned systems modifications. We expect to incur
additional charges of approximately $3 million in fiscal 1999. We expect to
complete testing and be compliant by September 30, 1999.
Despite our efforts, there is always the possibility that we may not identify
and correct all Year 2000 Problems in our information systems and those of our
suppliers before they occur. Our efforts to identify and address these
problems, and the expenses or liabilities we may incur to fix them, could
materially and adversely affect our financial condition and results of
operations. Although we review the Year 2000 compliance efforts of our
suppliers and any businesses we acquire, we cannot be sure that their efforts
will be sufficient to avoid Year 2000 Problems.
Ranking of the Notes Among Our Other Debt
The Notes and the guarantees of the Notes by our subsidiaries will be senior
unsecured obligations. If we default, your right to payment under the Notes
will be:
. Subordinate to all of our secured debt;
. Equal to all of our unsecured and unsubordinated debt, including any
amounts we borrow under our credit facilities; and
. Senior to all of our subordinated debt.
Assuming that we sold the Notes and applied the proceeds on October 31, 1998
and made certain other adjustments as described under "Capitalization," our
outstanding short-term and long-term debt, combined with that of our
subsidiaries that are acting as guarantors of the Notes, would have been
approximately $2.0 billion. Of this amount:
. Approximately $177.5 million would have been secured debt that has
priority over the Notes.
. Approximately $1.6 billion outstanding under the credit facilities, the 8
1/4% notes, the 7 1/4% notes and the 7 1/2% notes would have been
unsecured and
S-7
<PAGE>
unsubordinated debt that ranks equally in right of payment with the Notes.
. Approximately $2.2 million of the Saks Holdings 5 1/2% notes would remain
outstanding and rank below the Notes in right of payment. See the
discussion above under "The Company--Capital Structure Strategy."
See "Use of Proceeds" and "Capitalization."
The holders of our secured debt will have a prior claim on our assets that
secure their debt. As a result, they will be paid before you receive any
amounts due under the terms of the Notes and the guarantees of the Notes, but
only to the extent of the value of the assets securing their debt. In addition,
if we or one of the guarantors are involved in any dissolution, liquidation or
reorganization, you may not be able to recover any interest or principal you
are due under the Notes.
If we or a guarantor become insolvent, the guarantee of the Notes could be
held by a court to be unenforceable. If the guarantees were held to be
unenforceable, you would have a claim against the equity of the guarantor but
would be paid only after all of the direct obligations of the guarantor had
been satisfied.
We will use a portion of our cash flow from operations to make payments
(primarily interest and principal) on our debt. This will reduce the funds
available for our operations and capital expenditures. Also, the overall amount
of debt we have outstanding and the restrictive covenants contained in the
terms of that debt may make us more vulnerable to economic downturns and
competitive pressures, and may hinder our ability to accomplish our strategic
objectives.
Absence of a Public Market for the Notes
The Notes are new securities and no market exists where you can resell them.
Although the Underwriters tell us they intend to buy and sell the Notes, or
"make a market" in the Notes, they are not required to do so. If the
Underwriters start market-making activities, they could stop these activities
at any time without notice. As a result, your ability to resell the Notes may
be limited. We do not intend to apply for listing of the Notes on any
securities exchange or for quotation through Nasdaq.
Forward-Looking Statements
This Prospectus Supplement and the accompanying Prospectus contain forward-
looking statements concerning our existing and contemplated operations,
economic performance and financial condition. These statements are based upon a
number of assumptions and estimates that are subject to uncertainties and
contingencies, many of which are beyond our control. See "This Prospectus
Contains Forward-Looking Statements" on page 3.
S-8
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(Dollars in Thousands)
The following table sets forth summary financial and operating data as of and
for the five fiscal years ended January 31, 1998 and summary unaudited
financial and operating data as of and for the nine months ended October 31,
1998 and November 1, 1997.
<TABLE>
<CAPTION>
Nine Months Ended Fiscal Year Ended (a)
------------------------ ---------------------------------------------------------------
(Unaudited) (Unaudited)
October 31, November 1, January 31, February 1, February 3, January 28, January 29,
1998 1997 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $4,169,163 $3,907,510 $5,726,346 $4,926,862 $4,422,107 $4,085,595 $3,600,897
Cost of sales........... 2,750,189 2,540,006 3,731,293 3,208,989 2,900,026 2,665,525 2,357,829
Selling, general and
administrative
expenses............... 934,192 846,942 1,165,118 1,057,144 961,407 852,896 784,091
Depreciation and
amortization........... 111,434 99,695 136,119 123,533 121,171 115,543 142,650
Property and equipment
rentals................ 133,169 112,020 157,018 114,714 97,148 91,567 86,532
Taxes other than income
taxes.................. 108,487 100,185 134,121 117,355 110,137 108,677 98,811
Store pre-opening
costs.................. 6,128 12,804 17,018 11,645 2,178 1,798 295
Merger, restructuring
and integration costs
(b).................... 98,728 1,272 36,524 16,929 64,237 2,000 179,731
Year 2000 expense (c)... 5,078 4,705 6,590
Expenses related to
Younkers takeover...... 10,017
Long-lived assets
impairment or
disposition............ 18,951 191 (134) 1,406 (36,058)
ESOP expenses (d)....... 9,470 9,513 3,910 2,931 2,787 2,939
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income....... 2,807 180,220 333,166 271,237 188,913 244,802 (51,981)
Other income (expense):
Interest expense....... (76,425) (86,876) (113,685) (114,881) (141,725) (117,065) (99,205)
Reorganization
items (e)............. (219,857)
Other income (expense),
net................... (17,653) (318) 2,330 (11,780) 4,051 4,826 4,063
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes and
extraordinary items and
cumulative effect of
changes in accounting
methods................ (91,271) 93,026 221,811 144,576 51,239 132,563 (366,980)
NOL Recognition (g)..... (294,846)
Provision (benefit) for
income taxes........... (16,223) 32,956 100,420 50,998 48,914 58,112 34,432
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary items and
cumulative effect of
changes in accounting
methods................ (75,048) 60,070 416,237 93,578 2,325 74,451 (401,412)
Extraordinary loss on
debt, net of tax (f)... (21,890) (5,084) (11,323) (12,746) (8,051) (535) (28,728)
Extraordinary gain on
reorganization, net of
tax (e)................ 212,139
Cumulative effect of
changes in accounting
methods, net of
tax (k)................ (12,090)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ (96,938) $ 54,986 $ 404,914 $ 80,832 $ (5,726) $ 73,916 $ (230,091)
========== ========== ========== ========== ========== ========== ==========
Other Financial
Data: (j)
EBITDAR before unusual
items.................. $ 352,514 $ 407,255 $ 681,126 $ 519,949 $ 452,410 $ 461,525 $ 144,077
Rental expense.......... 133,169 112,020 157,018 114,714 97,148 91,567 86,532
---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA before unusual
items (m).............. 219,345 295,235 524,108 405,235 355,262 369,958 57,545
Unusual items (h)....... (122,757) (15,638) (52,493) (22,245) (41,127) (4,787) (182,670)
---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA after unusual
items.................. $ 96,588 $ 279,597 $ 471,615 $ 382,990 $ 314,135 $ 365,171 $ (125,125)
========== ========== ========== ========== ========== ========== ==========
Ratio of EBITDA to
interest
expense (i)(m)......... 4.3x 4.3x 4.6x 3.5x 2.5x 3.2x 0.6x
Ratio of total debt to
EBITDA (i)(m).......... 4.4 3.0 2.7 3.4 4.1 3.9 23.6
Ratio of Earnings to
Fixed Charges (l)...... 0.2 1.7 2.3 1.9 1.3 1.8 --
Consolidated Balance
Sheet Data:
Working capital......... $1,001,150 $1,108,217 $1,090,304 $ 951,752 $ 710,468 $ 777,444 $ 801,589
Total assets............ $5,043,418 $4,182,174 $4,270,253 $3,630,276 $2,899,565 $2,908,258 $2,593,779
Long-term debt, less
current portion........ $1,968,538 $1,457,131 $1,380,770 $1,365,242 $1,406,854 $1,413,416 $1,308,067
Shareholders' equity.... $1,882,638 $1,572,179 $1,944,529 $1,397,934 $ 691,059 $ 739,893 $ 658,101
Selected Store Data:
Stores open at end of
period................. 345 326 330 315 263 260 227
Capital expenditures.... $ 300,488 $ 249,707 $ 346,876 $ 247,814 $ 172,662 $ 163,748 $ 165,470
</TABLE>
(footnotes on following page)
S-9
<PAGE>
- --------
(a) Effective September 17, 1998, January 31, 1998, February 1, 1997, and
February 3, 1996, Saks Holdings, Inc. ("Saks Holdings") Carson Pirie Scott
& Co. ("CPS"), G.R. Herberger's, Inc. ("Herberger's") and Younkers, Inc.
("Younkers"), respectively, were acquired by Saks Incorporated (the
"Company"). Such acquisitions were accounted for under the pooling-of-
interests method of accounting. Accordingly, the Company's financial
statements were restated for all periods to include the results of
operations and financial position of Saks Holdings, CPS, Herberger's and
Younkers. The Company completed the purchase of 14 Dillard's stores on
October 2, 1998, which the Company accounted for under the purchase method
of accounting. As a consequence, the Company's financial statements include
the results of operations for these stores from the dates of purchase. The
Company completed the purchase of Parisian, Inc. ("Parisian") on October
11, 1996, which the Company accounted for under the purchase method of
accounting. As a consequence, the Company's financial statements include
Parisian's results of operations from October 11, 1996.
(b) In connection with the acquisitions of the Dillard's stores, Saks Holdings,
CPS, Parisian, Herberger's and Younkers, the Company incurred merger,
restructuring and integration costs, including (i) transaction costs, (ii)
costs associated with severance and related benefits and abandonment and
elimination of duplicate administrative office space, property, data
processing equipment and software, (iii) integration costs and (iv) other
costs.
(c) During fiscal 1997 the Company undertook the assessment of the effect of
the Year 2000 Problem on the Company and began the necessary systems
modifications resulting in expenses of $6.6 million. The Company's expenses
related to the Year 2000 Problem for the periods ended October 31, 1998 and
November 1, 1997 were $5.1 million and $4.7 million, respectively. See
"Risk Factors--Potential "Year 2000 Problems'."
(d) In December 1997, the Company terminated the Herberger's Employee Stock
Ownership Plan.
(e) CPS and its subsidiaries filed Chapter 11 bankruptcy petitions in fiscal
1991 and completed Chapter 11 reorganization in fiscal 1993. In connection
with the reorganization, CPS recognized a loss on reorganization of $219.9
million and an extraordinary gain on reorganization of $212.1 million net
of tax.
(f) During fiscal 1998 and as a result of the Saks Holdings acquisition, the
Company completed various balance sheet restructuring transactions that
resulted in debt extinguishment charges of $21.9 million. These
transactions included the restructuring of the Company's revolving credit
facilities, the repurchase of the Company's 8 1/8% Senior Notes and the
prepayment of certain real estate secured notes. During fiscal 1997, the
Company modified its capital structure, including retiring approximately
$114 million of 9 7/8% Parisian Senior Subordinated Notes due 2003,
prepaying approximately $15 million of 11% Junior Subordinated Notes,
prepaying certain mortgages 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
and premiums associated with the debt facilities, such as loan origination
costs, were written off resulting in a loss of $11.3 million net of income
taxes. In fiscal 1996, the Company recognized $12.7 million of
extraordinary charges associated with the prepayment of term borrowings
under the Saks Holdings credit facility, the repayment of outstanding
balances on the revolving credit portion of the Saks Holdings credit
facility and the prepayment of certain mortgages. In fiscal 1995, Younkers
canceled its $150 million revolving credit agreement and replaced its debt
financing of accounts receivable with sales of ownership interests in its
accounts receivable resulting in a write-off of $2.1 million net of income
taxes. In connection with the Saks Holdings real estate refinancing in
fiscal 1995, the Company incurred $6.0 million in charges. In fiscal 1993,
the Company incurred $28.7 million of charges associated with the early
extinguishment of debt.
(g) The Company recorded an income tax benefit of $294.8 million in the fourth
quarter of fiscal 1997, relating to the reduction in the Saks Holdings
valuation allowance associated with certain deferred tax assets.
(h) Unusual items for the nine months ended October 31, 1998 include merger,
restructuring and integration costs of $98.7 million, Year 2000 expense of
$5.1 million and losses from disposition of long-lived assets of $19.0
million. Unusual items for the nine months ended November 1, 1997 include
merger,
S-10
<PAGE>
restructuring and integration costs of $1.3 million, Year 2000 expense of
$4.7 million, losses from disposition of long-lived assets of $0.2 million,
and costs related the Herberger's employee stock ownership plan of $9.5
million. Unusual items for the 52 weeks ended January 31, 1998 include net
gains from disposition of long-lived assets of $0.1 million, merger,
restructuring and integration costs of $36.5 million, Year 2000 expense of
$6.6 million, and costs related to the termination of the Herberger's
employee stock ownership program of $9.5 million. Unusual items for the 52
weeks ended February 1, 1997 include net losses from disposition of long-
lived assets of $1.4 million, merger, restructuring and integration costs of
$16.9 million and costs related to the Herberger's employee stock ownership
plan of $3.9 million. Unusual items for the 53 weeks ended February 3, 1996
include expenses of $10.0 million related to CPS's attempted takeover of
Younkers in fiscal 1995, net gains from disposition of long-lived assets of
$36.1 million, merger, restructuring and integration costs of $64.2 million,
and costs related to the Herberger's employee stock ownership plan of $2.9
million. Unusual items for the 52 weeks ended January 28, 1995 include
merger restructuring and integration costs of $2.0 million and $2.8 million
of Herberger's employee stock ownership plan expenses. Unusual items for the
52 weeks ended January 29, 1994 include $179.7 million of impairment and
store closing costs at Saks Holdings and $2.9 million of Herberger's
employee stock ownership plan expenses.
(i) The ratio of EBITDA to interest expense and the ratio of total debt to
EBITDA for the periods ended October 31, 1998 and November 1, 1997 have
been calculated based on the twelve months ended October 31, 1998 and
November 1, 1997, respectively.
(j) EBITDA represents earnings before interest, taxes, depreciation,
amortization, unusual items, extraordinary items, and the cumulative effect
of changes in accounting methods. EBITDAR represents EBITDA plus rental
expense. While EBITDA and EBITDAR should not be construed as substitutes
for operating income or as better measures of liquidity than cash flows
from operating activities, which are determined in accordance with
generally accepted accounting principles, these measures are included
herein to provide additional information with respect to the ability of the
Company to meet future debt service, capital expenditure and working
capital requirements.
(k) Effective with fiscal 1993, the Company changed its method of accounting
for inventories, store pre-opening costs and pensions. The adjustments to
reflect these changes resulted in a net charge of $12.1 million. The most
significant component was a charge with respect to pensions of $14.0
million, net of tax.
(l) For the nine-month period ended October 31, 1998, the Company reported a
pre-tax loss before extraordinary items and changes in accounting methods
of $91,271 primarily due to merger, restructuring, and integration costs
related to the Saks Holding acquisition, lower gross margin performance,
and increased operating expenses. For the fiscal year ended January 29,
1994, the Company reported a pre-tax loss from continuing operations of
$366,980 due to Saks Holdings reporting a pre-tax loss of $231,283 as well
as CPS's emergence from Chapter 11 bankruptcy during fiscal 1993. Net loss
after extraordinary items and changes in accounting methods for fiscal 1993
was $230,091. The ratio of earnings to fixed charges calculation for the
fiscal year ended January 29, 1994, indicated a fixed charge coverage
deficiency of $368,547.
(m) In connection with the bankruptcy reorganization in fiscal 1993, CPS
recognized a reorganization charge of $219.9 million. When considering this
extraordinary item, pro forma EBITDA before unusual items would have been $
277.4 million, and the ratios of EBITDA to interest expense and total debt
to EBITDA would have been 2.8x and 4.9x, respectively.
S-11
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes are estimated to be
approximately $197.4 million. Saks Incorporated (the "Company") intends to use
all of the proceeds to repay outstanding amounts under the Company's unsecured
credit facilities (the "Credit Facilities").
The Company's Credit Facilities include: (a) a $750 million revolving credit
facility, with a maturity of 364 days (the "364 Day Facility"), unless renewed
with the consent of the lenders, or converted into a four-year term loan at
the option of the Company, and (b) a $750 million revolving credit facility,
with a maturity of five years, which includes subfacilities of $150 million
for standby letters of credit and $50 million for short-term borrowings (the
"Five Year Facility"). The Five Year Facility amends and restates the
Company's previous $600 million revolving credit facility and adds an
additional $150 million of new credit, while the 364 Day Facility represents
new credit. As of January 31, 1999, $608 million was outstanding under the
Credit Facilities carrying a weighted average interest rate as of that date of
approximately 5.8% per annum. The amounts outstanding under the Credit
Facilities were incurred for working capital purposes and other purposes
described under "Capitalization." The 364 Day Facility, if not extended, will
expire on September 15, 1999 and the Five Year Facility will expire on
September 17, 2003.
S-12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
October 31, 1998, (i) on an actual basis, (ii) on an as-adjusted basis giving
effect to the Company's repurchase of approximately $273.8 million of 5 1/2%
convertible subordinated notes due 2006 (the "5 1/2% Notes") of Saks Holdings,
Inc., a subsidiary of the Company ("Saks Holdings"), the prepayment of
approximately $236 million of Saks Holdings real estate indebtedness, the sale
of $500 million of 8 1/4% notes due 2008 (the "8 1/4% Notes") and the
application of the net proceeds therefrom, the sale of $350 million of 7 1/4%
notes due 2004 (the "7 1/4% Notes") and the application of the net proceeds
therefrom, and the sale of $250 million of 7 1/2% notes due 2010 (the "7 1/2
Notes") and the application of the net proceeds therefrom, and (iii) as
further adjusted to reflect the sale of the Notes offered by this Prospectus
(after deducting the estimated offering expenses) and the application of the
net proceeds therefrom as set forth under "Use of Proceeds." This table should
be read in conjunction with the consolidated financial statements of the
Company and the notes thereto and the summary financial statements and summary
unaudited financial statements and notes thereto, included or incorporated by
reference herein.
<TABLE>
<CAPTION>
October 31, 1998
-----------------------------
As Adjusted
As for this
Actual Adjusted Offering
-------- -------- -----------
(In Millions)
<S> <C> <C> <C>
Current maturities of long-term debt........ $ 12.6 $ 12.6 $ 12.6
======== ======== ========
Long-term debt:
Credit Facilities(a)...................... $1,291.8 $ 721.3 $ 523.9
Real estate and mortgage notes(b)......... 245.9 10.1 10.1
8 1/4% Notes.............................. 500.0 500.0
7 1/4% Notes.............................. 350.0 350.0
7 1/2% Notes.............................. 250.0 250.0
Securities offered hereby................. 200.0
Capital lease obligations................. 154.8 154.8 154.8
5 1/2% Notes(c)........................... 276.0 2.2 2.2
-------- -------- --------
Total long-term debt.................... $1,968.5 $1,988.4 $1,991.0
Shareholders' equity(b)(d).................. 1,882.6 1,872.6 1,872.6
-------- -------- --------
Total capitalization.................... $3,863.7 $3,873.6 $3,876.2
======== ======== ========
</TABLE>
- --------
(a) During November and December 1998, the Company repaid approximately $1.08
billion of amounts outstanding under the Credit Facilities using the net
proceeds from the sale of the 8 1/4% Notes, the 7 1/4% Notes, and the 7
1/2% Notes. Additionally, the Company borrowed under the Credit Facilities
to fund the prepayment of $236 million of real estate indebtedness of Saks
Holdings and the repurchase of approximately $273.8 million of the 5 1/2%
Notes.
(b) On February 10, 1999, the Company prepaid approximately $236 million of
Saks Holdings real estate indebtedness secured by intercompany leases,
resulting in a loss on extinguishment of $10 million.
(c) During the period from November 30, 1998 through February 5, 1999, the
Company repurchased approximately $273.8 million of the 5 1/2% Notes,
leaving approximately $2.2 million of the 5 1/2% Notes outstanding.
(d) The adjustments do not reflect anticipated net charges estimated not to
exceed approximately $50 million, after taxes, in the fourth quarter of
fiscal 1998 related to the continued integration of Saks Holdings and
other items.
S-13
<PAGE>
DESCRIPTION OF THE NOTES
General
The following description of the particular terms of the securities offered
by the Company pursuant to this Prospectus Supplement (the "Notes")
supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. Whenever a defined term is referred to and not herein defined, the
definition thereof is contained in the accompanying Prospectus dated February
5, 1999 to which this Prospectus Supplement relates or in the Indenture
referred to therein.
The Notes will be issued under an Indenture to be dated as of February 17,
1999 (the "Indenture") by and among the Company, the Guarantors and The First
National Bank of Chicago, as trustee (the "Trustee"). For purposes of this
section, references to the "Company" mean only Saks Incorporated and not any
of its subsidiaries. The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified by,
reference to the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture. Capitalized terms used but not defined in the following
summary are defined below under "--Certain Definitions."
The Notes will be general unsecured senior obligations of the Company
limited to $200,000,000 aggregate principal amount. The Notes will rank pari
passu in right of payment with all unsecured and unsubordinated indebtedness
of the Company and will be senior in right of payment to all subordinated
indebtedness of the Company. The Notes will be issued only in fully registered
form without coupons, in denominations of $1,000 and integral multiples
thereof. Initially, the Notes will be issued in the form of a Global Note to
the Depository Trust Company ("DTC"). See "--Book-Entry, Delivery and Form."
Principal of, premium, if any, and interest on the Notes are payable, and the
Notes are exchangeable and transferable, at the office or agency of the
Company in the City of New York maintained for such purposes (which initially
will be the corporate trust office of the Trustee); provided, however, that
payment of interest may be made at the option of the Company by check mailed
to the holders of record. No service charge will be made for any registration
of transfer, exchange or redemption of the Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith.
The Company will not be required to make any sinking fund payments with
respect to the Notes.
Maturity, Interest and Principal of the Notes
The Notes will mature on February 15, 2019. Interest on the Notes will
accrue at the rate of 7 3/8% per annum and will be payable semi-annually on
each February 15 and August 15, commencing on August 15, 1999, to the holders
of record at the close of business on February 1 and August 1, respectively,
immediately preceding such interest payment dates.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months.
Guarantees
All of the Company's Subsidiaries that are guarantors or obligors in respect
of the Credit Facilities on the Issue Date will, jointly and severally, fully
and unconditionally guarantee the Company's obligations under the Notes on an
equal and ratable basis subject to the limitation described in the next
paragraph. In addition, if any Subsidiary of the Company which is not already
a Guarantor becomes a guarantor or obligor in respect of the Credit
Facilities, the Company will cause such Subsidiary to enter into a
supplemental indenture to the Indenture pursuant to which such Subsidiary
shall agree to guarantee the Company's obligations under the Notes. If the
S-14
<PAGE>
Company defaults in payment of the principal of, premium, if any, or interest
on the Notes, the Guarantors, jointly and severally, will be unconditionally
obligated to duly and punctually pay the same.
The obligations of each Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections
from, or payments made by or on behalf of, any other Guarantor in respect of
the obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations
of such Guarantor under its Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under its Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the net
assets of each Guarantor determined in accordance with GAAP.
Notwithstanding the foregoing, but subject to the requirements described
below under "Merger and Consolidation," any Guarantee by a Guarantor shall be
automatically and unconditionally released and discharged (i) upon any sale,
exchange or transfer to any Person (other than an Affiliate of the Company) of
all of the Capital Stock of such Subsidiary, or all or substantially all of
the assets of such Subsidiary, pursuant to a transaction which is in
compliance with the Indenture or (ii) at the request of the Company, in the
event that the Lenders under the Credit Facilities unconditionally release
such Guarantor from its guarantee obligations under such facilities. The
release of the guarantees under the Credit Facilities is expected to occur if
the Company receives investment grade ratings from specified rating agencies.
Each Guarantee (including the payment of principal of, premium, if any, and
interest on the Notes) will rank pari passu in right of payment with all other
unsecured and unsubordinated indebtedness of such Guarantor and will rank
senior in right of payment to all subordinated indebtedness of such Guarantor.
Assuming that the Company sold the Notes and applied the proceeds on October
31, 1998 and made the other adjustments as described under "Capitalization,"
the Company and the Guarantors would have had approximately $2.0 billion of
indebtedness outstanding, of which approximately $177.5 million would have
been secured indebtedness, approximately $1.8 billion would have been
unsecured and unsubordinated indebtedness and approximately $2.2 million would
have been unsecured and subordinated indebtedness. See "Risk Factors--Ranking
of the Notes Among Our Other Debt" and "Capitalization."
Optional Redemption
The Notes will be redeemable, in whole or in part, at the option of the
Company, at any time or from time to time, upon not less than 30 and not more
than 60 days' notice mailed to each Beneficial Owner of the Notes as shown in
the security register for the Notes, on any date prior to their maturity date
at a price equal to the greater of (i) 100% of the principal amount thereof,
or (ii) the sum of the present values of the Remaining Scheduled Payments
thereon discounted to the date of redemption (the "Redemption Date") on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 35 basis points, plus accrued and unpaid interest on
the principal amount being redeemed to the Redemption Date (subject to the
right of persons in whose name the Notes are registered on the record date to
receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
S-15
<PAGE>
Certain Covenants of the Company
Restrictions on Liens
The Company will not, and will not permit any Subsidiary to issue, assume or
guarantee any Indebtedness secured by any Lien upon any Operating Property or
Operating Asset of the Company or any Subsidiary, whether such property or
assets are now owned or hereafter acquired, without in any such case
effectively providing that the Notes (together with, if the Company shall so
determine, any other Indebtedness ranking equally with the Notes) shall be
secured at least equally and ratably with such Indebtedness, except that the
foregoing restrictions shall not apply to:
(i) (A) a purchase money Lien on such property (including security for
inventory financing in the ordinary course of business and vendors' rights
under purchase contracts under an agreement whereby title is retained for
the purpose of securing the purchase price thereof) given simultaneously
with or within 180 days after the later of (1) the acquisition or
completion of construction or completion of substantial reconstruction,
renovation, remodeling, expansion or improvement (each a "substantial
improvement") of such property, or (2) the date such property was placed in
operation after the acquisition or completion of any such construction or
substantial improvement, or (B) the acquisition of property not theretofore
owned by the Company or such Subsidiary subject to an existing Lien
securing Indebtedness (whether or not assumed), including in each case
Indebtedness incurred for reimbursement of funds previously expended for
any construction or substantial improvement, provided, however, that in
each case (x) such Lien is limited to any or all of (i) such acquired or
constructed property or substantial improvement (including accretions
thereto), (ii) the real property on which any construction or substantial
improvement occurs, or (iii) with respect to distribution centers, any
equipment used directly in the operation of, or the business conducted on,
the real property on which any construction or substantial improvement
occurs, and (y) the total amount of the Indebtedness secured by such Lien,
together with all other Indebtedness to Persons other than the Company or a
Subsidiary secured by Liens on such property, shall not exceed the lesser
of (i) the total cost of such property, including any such construction or
substantial improvement, to the Company or a Subsidiary, and (ii) the fair
market value thereof immediately following the acquisition, construction or
substantial improvement thereof by the Company or a Subsidiary as
determined by the Company's Board of Directors or a member of the Company's
senior management in good faith;
(ii) a Lien on real property of the Company or a Subsidiary or, with
respect to distribution centers, on equipment used directly in the
operation of, or the business conducted on, such real property, which Lien
is the sole security for Indebtedness and (x) is incurred within three
years after the latest of (1) the date of issuance of the Notes under the
Indenture, (2) the acquisition of the real property or equipment or (3) the
completion of construction or substantial improvement on such real
property, (y) is incurred for the purpose of reimbursing the Company or
such Subsidiary, as the case may be, for the cost of acquisition and/or the
cost of improvement of such real property or equipment and (z) the amount
of which does not exceed the lesser of the aggregate cost of such real
property, improvements and equipment and the fair market value thereof, as
determined by the Company's Board of Directors or a member of the Company's
senior management in good faith;
(iii)(a) Liens on the Operating Property of the Company or any of its
Subsidiaries securing (1) nondelinquent performance of bids or contracts
(other than for borrowed money, obtaining of advances or credit or the
securing of debt), (2) contingent obligations on surety and appeal bonds
and (3) other nondelinquent obligations of a like nature, in each case,
incurred in the ordinary course of business, (b) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies as to deposit accounts or
other funds, provided that such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the
Federal Reserve Board and such deposit account is not intended by the
Company or any Subsidiary to provide collateral to the depository
S-16
<PAGE>
institution, (c) pledges or deposits under worker's compensation laws,
unemployment insurance laws or similar legislation, (d) statutory and tax
Liens for sums not yet due or delinquent or which are being contested or
appealed in good faith by appropriate proceedings and (e) Liens arising
solely by operation of law and in the ordinary course of business, such as
mechanics', materialmen's, warehousemen's and carriers' Liens and Liens of
landlords or of mortgages of landlords, on fixtures and Operating Assets
located on premises leased in the ordinary course of business;
(iv) Liens (1) existing on the date of the Indenture, or (2) on assets of
a Subsidiary existing on the date it became a Subsidiary;
(v) Liens in favor of the Company or a Subsidiary;
(vi) Liens securing only the Indebtedness issued under the Indenture; and
(vii) Liens to secure Indebtedness incurred to extend, renew, refinance
or replace Indebtedness secured by any Liens referred to in the foregoing
clauses (i) to (vi), provided, however, that the principal amount of the
extending, renewal, refinancing or replacement Indebtedness does not exceed
the principal amount of Indebtedness so extended, renewed, refinanced or
replaced, plus transaction costs and fees, and that any such Lien applies
only to any part or all of the same property or assets that were subject to
the prior permitted Lien (and, in the case of real property, improvements
thereon).
Restrictions on Sale and Leaseback Transactions
Without equally and ratably securing the Notes (together with, if the
Company shall so determine, any other Indebtedness ranking equally with the
Notes), the Company will not, nor will it permit any Subsidiary to, enter into
any arrangement with any Person providing for the leasing by the Company or
any Subsidiary of any Operating Property or Operating Asset that has been or
is to be sold or transferred by the Company or such Subsidiary to such Person
with the intention of taking back a lease of such property (a "Sale and
Leaseback Transaction") unless the terms of such sale or transfer have been
determined by the Company's Board of Directors, in the case of any sale or
transfer involving proceeds in excess of $25 million, to be fair and arms'
length and (i) within 365 days after the receipt of the proceeds of such sale
or transfer, the Company or any Subsidiary applies an amount equal to the
greater of the net proceeds of such sale or transfer or the fair value of such
Operating Property or Operating Asset at the time of such sale or transfer to
(A) the prepayment or retirement (other than any mandatory prepayment or
retirement) of Senior Funded Debt of the Company or a Subsidiary, or (B) to
the acquisition, construction, development or improvement of Operating Assets
or Operating Properties, or (ii) the Company or such Subsidiary would be
entitled, at the effective date of such sale or transfer, to incur
Indebtedness secured by a Lien on such Operating Property or Operating Assets,
in an amount at least equal to the Attributable Debt in respect thereof,
without equally and ratably securing the Notes pursuant to "Restrictions on
Liens" described above. The foregoing restriction will not apply to (w) any
Sale and Leaseback Transaction for a term of not more than three years
including renewals, (x) any Sale and Leaseback Transaction with respect to
Operating Property (and, with respect to distribution centers, equipment used
directly in the operation of, or the business conducted on, such Operating
Property) if a binding commitment with respect thereto is entered into within
three years after the later of (1) the date of issuance of the Notes under the
Indenture or (2) the date such Operating Property was acquired (as the term
"acquired" is used in the definition of Operating Property), (y) any Sale and
Leaseback Transaction with respect to Operating Assets if a binding commitment
with respect thereto is entered into within 180 days after the later of the
date such property was acquired and, if applicable, the date such property was
first placed in operation, or (z) any Sale and Leaseback Transaction between
the Company and a Subsidiary or between Subsidiaries provided that the lessor
shall be the Company or a Subsidiary.
Exempted Debts
Notwithstanding the restrictions contained in the Indenture on (i) Liens and
(ii) Sale and Leaseback Transactions, the Company or its Subsidiaries may, in
addition to amounts permitted under such restrictions, issue, assume or
guarantee Indebtedness secured by Liens, or enter into Sale and Leaseback
Transactions, provided, however, that, after giving effect thereto, the
aggregate outstanding amount of all such Indebtedness
S-17
<PAGE>
secured by Liens plus Attributable Debt resulting from such Sale and Leaseback
Transactions (collectively, the "Exempted Debt") does not exceed 15% of
Consolidated Net Tangible Assets at the time such Lien is granted or at the
time such Sale and Leaseback Transaction is entered into.
No Special Protection in the Event of a Highly Leveraged Transaction
The terms of the Notes will not afford the holders special protection in the
event of a highly leveraged transaction.
Merger and Consolidation
The Indenture provides that the Company may, without the consent of the
holders of the Notes, consolidate with or merge with or into any other
corporation, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, provided, however, that in any
such case (i) the successor corporation shall be the Company or a domestic
corporation and such corporation (if other than the Company) shall assume by
supplemental indenture the Company's obligations under the Indenture and the
Notes, (ii) immediately after such transaction, no Event of Default shall have
occurred and be continuing, and (iii) if, as a result of any such merger or
consolidation, or such conveyance, transfer or lease, an Operating Property or
an Operating Asset of the Company or a Subsidiary would become subject to a
Lien which would not be permitted under "Restrictions on Liens" or "Exempted
Debts" described above, the Notes would be secured equally and ratably with
(or prior to) all Indebtedness so secured. Upon compliance with these
provisions by a successor corporation, the Company (except in the case of a
lease) would be relieved of its obligations under the Indenture and the Notes.
Events of Default
The following will be Events of Default under the Indenture: (a) default in
payment of any interest on the Notes when due and payable, that continues for
30 days; (b) default in payment of all or any part of the principal of or
premium, if any, on the Notes at maturity; (c) default in the performance of
or breach of any other covenant or warranty of the Company in the Indenture
(other than a covenant or warranty a default in whose performance or whose
breach is elsewhere in the Indenture specifically dealt with), that continues
for 60 days after written notice as provided in the Indenture; (d)
acceleration of any Indebtedness, having an aggregate minimum principal amount
of $50 million, for money borrowed by the Company or a Subsidiary under the
terms of the instrument under which such Indebtedness is issued or secured, if
such acceleration is not discharged within 10 days after written notice as
provided in the Indenture; (e) any Guarantee ceases to be in full force and
effect or is declared null and void or any Guarantor denies that it has any
further liability under any Guarantee, or gives notice to such effect (other
than by reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the terms of the Indenture); (f) certain events
in bankruptcy, insolvency or reorganization; and (g) any other Event of
Default provided in the Indenture with respect to the Notes.
If an Event of Default (other than as specified in clause (f) with respect
to the Company), shall occur and be continuing, the Trustee, by notice to the
Company, or the holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice to the Trustee and the Company, may declare
the principal of, premium, if any, and accrued interest on all of the
outstanding Notes due and payable immediately, upon which declaration, all
such amounts payable will become and be immediately due and payable. If an
Event of Default specified in clause (f) above with respect to the Company
occurs and is continuing, then the principal of, premium, if any, and accrued
interest on all of the outstanding Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if (a) the
Company has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the
S-18
<PAGE>
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
the Notes, (iii) the principal of and premium, if any, on the Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest at the rate borne by
the Notes; and (b) all Events of Default, other than the non-payment of
principal of, premium, if any, and interest on the Notes that has become due
solely by such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may on behalf of the holders of all Notes waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on the Notes, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Note outstanding.
No holder of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 60 days after receipt of such
notice and the Trustee, within such 60-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five
business days of any event which is, or after notice or lapse of time or both
would become, an Event of Default.
Defeasance or Covenant Defeasance of Indentures
The Company may, at its option and at any time, terminate the obligations of
the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company and each Guarantor will
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, except for (i) the rights of holders of outstanding
Notes and Guarantees to receive payment in respect of the principal of,
premium, if any, and interest on the Notes when such payments are due, (ii)
the Company's obligations to issue temporary Notes, register the transfer or
exchange of the Notes, replace mutilated, destroyed, lost or stolen Notes and
maintain an office or agency for payments in respect of the Notes, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
any Guarantor with respect to certain covenants that are set forth in the
Indenture, some of which are described under "--Certain Covenants" above, and
any omission to comply with such obligations will not constitute a Default or
an Event of Default with respect to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes at maturity; (ii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (in the case of defeasance, such
S-19
<PAGE>
opinion must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable federal income tax laws); (iii) no Default
shall have occurred and be continuing on the date of such deposit or insofar
as clause (f) under the first paragraph under "--Events of Default" is
concerned, at any time during the period ending on the 91st day after the date
of deposit; (iv) such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of the
Company or any Guarantor; (v) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument to which the Company or any Guarantor is a
party or by which it is bound; (vi) the Company shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (vii) the Company shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes
not theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company or any Guarantor has paid all other sums payable under
the Indenture by the Company and the Guarantors; and (iii) the Company and
each of the Guarantors have delivered to the Trustee an officer's certificate
and an opinion of counsel each stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
Amendments and Waivers
From time to time, the Company and the Guarantors, when authorized by
resolutions of their boards of directors, and the Trustee may, without the
consent of the holders of the outstanding Notes, amend, waive or supplement
the Indenture or the Notes for certain specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act,
as amended, or making any change that does not materially adversely affect the
legal rights of any holder; provided, however, that the Company has delivered
to the Trustee an opinion of counsel stating that such change does not
materially adversely affect the legal rights of any holder. Other amendments
and modifications of the Indenture or the Notes may be made by the Company,
the Guarantors and the Trustee with the consent of the holders of not less
than a majority of the aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note, (i) reduce the principal of or
change the stated maturity of any Note, or alter the provisions with respect
to the redemption or repurchase of the Notes in any manner adverse to the
holders of the Notes; (ii) reduce the rate of or change the time for payment
of interest on the Notes; (iii) change the place or currency of payment of
principal of (or premium) or interest on the Notes; (iv) modify any provisions
of the Indenture relating to the waiver of past defaults, the right of the
holders of Notes to institute suit for the enforcement of any payment on or
with respect to the Notes or any Guarantee, or the modification and amendment
provisions of the Indenture and the Notes (other than to add sections of the
Indenture or the Notes which may not be amended,
S-20
<PAGE>
supplemented or waived without the consent of each holder therein affected);
(v) reduce the percentage of the principal amount of outstanding Notes
necessary for amendment to or waiver of compliance with any provision of the
Indenture or the Notes or for waiver of any Default; (vi) waive a default in
the payment of principal of, interest on, or redemption payment with respect
to, the Notes (except a rescission of acceleration of the Notes by the holders
thereof as provided in the Indenture and a waiver of the payment default that
resulted from such acceleration); (vii) modify the ranking or priority of the
Notes or the Guarantee in any manner adverse to the holders of the Notes; or
(viii) release any Guarantor from any of its obligations under its Guarantee
or the Indenture otherwise than in accordance with the Indenture.
The holders of a majority in aggregate principal amount of the Notes, on
behalf of all holders of the Notes, may waive compliance by the Company and
the Guarantors with certain restrictive provisions of the Indenture. Subject
to certain rights of the Trustee, as provided in the Indenture, the holders of
a majority in aggregate principal amount of the Notes, on behalf of all
holders of the Notes, may waive any past default under the Indenture
(including any such waiver obtained in connection with a tender offer or
exchange offer for the Notes), except a default in respect of a provision that
under the Indenture cannot be modified or amended without the consent of the
holder of each Note.
Governing Law
The Indenture and the Notes and the Guarantees are governed by the laws of
the State of New York, without regard to the principles of conflicts of law.
Certain Definitions
"Accounts Receivable Subsidiary" means Proffitt's Credit Corporation,
National Bank of the Great Lakes, SFA Finance Company, SFA Finance Company II
and any other present or future subsidiary (including any credit card bank) of
the Company that is, directly or indirectly, wholly owned by the Company
(except, in the case of SFA Finance Company and SFA Finance Company II, for
1,000 shares of Series A Preferred Stock of SFA Finance Company owned by
certain independent directors of SFA Finance Company and except in the case of
any credit card bank, for directors' qualifying shares) and organized for the
purpose of, and is only engaged in, (i) originating, purchasing, acquiring,
financing, servicing or collecting accounts receivable obligations of
customers of the Company or its subsidiaries, (ii) issuing or servicing credit
cards, engaging in other credit card operations or financing accounts
receivable obligations of customers of the Company and its subsidiaries,
(iii) the sale or financing of such accounts receivable and interests therein
and (iv) other activities incident thereto.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value (discounted at the imputed rate
of interest of such transaction determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). The term "net rental payments" under any lease for any
period shall mean the sum of the rental and other payments required to be paid
in such period by the lessee thereunder, not including any amounts required to
be paid by such lessee (whether or not designated as rental or additional
rental) on account of maintenance and repairs, insurance, taxes, assessment,
water rates or similar charges or any amounts required to be paid by such
lessee thereunder contingent upon the amount of sales, maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable
to the remaining term of the Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
S-21
<PAGE>
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such Redemption Date.
"Consolidated Net Tangible Assets" means the total amount of assets (less
depreciation and valuation reserves and other reserves and items deductible
from gross book value of specific asset accounts under GAAP) which under GAAP
are included on a balance sheet of the Company and its Subsidiaries after
deducting therefrom all goodwill, trade names, trademarks, patents, favorable
lease rights, unamortized debt discount and expense and other like intangibles
(other than leasehold costs and investments in so-called safe harbor leases),
which in each such case would be so included on such balance sheet, net of
accumulated amortization.
"Credit Facilities" means the Credit Facility amended and restated as of
September 17, 1998, and the Credit Facility dated as of September 17, 1998,
each by and among the Company, NationsBank, N.A., as Agent, and other
financial institutions, as in effect on the Issue Date, and as such agreement
may be amended, renewed, extended, substituted, refinanced, replaced,
supplemented or otherwise modified from time to time, and includes related
notes, guarantees and other agreements executed in connection therewith.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "--Events of Default"
above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Foreign Subsidiary" means a subsidiary of the Company not organized or
existing under the laws of the United States, any state thereof, the District
of Columbia or any territory thereof.
"Funded Debt" means Indebtedness which matures more than one year from the
date of the computation thereof, or which is extendable or renewable at the
sole option of the obligor so that it may become payable more than one year
from such date; provided, however, that Funded Debt shall not include (i)
obligations created pursuant to leases, or (ii) any Indebtedness for the
payment or redemption of which money in the necessary amount shall have been
deposited in trust either at or before the maturity date thereof.
"GAAP" means generally accepted accounting principles in effect in the
United States which are applicable as of the Issue Date and which are
consistently applied for all applicable periods.
"Guarantee" means the guarantee by each of the Guarantors of the Notes and
the Company's obligations under the Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation. A guarantee shall include, without limitation,
any agreement to maintain or
S-22
<PAGE>
preserve any other Person's financial condition or to cause any other Person
to achieve certain levels of operating results.
"Guarantor" means (i) each of the Company's Subsidiaries that are guarantors
or obligors in respect of the Credit Facilities on the Issue Date and (ii)
each other Subsidiary of the Company that is required to execute a
supplemental indenture and become a Guarantor subsequent to the Issue Date
pursuant to the Indenture.
"Indebtedness" of any Person means indebtedness for borrowed money and
indebtedness under purchase money Liens or conditional sales or similar title
retention agreements, in each case where such indebtedness has been created,
incurred, or assumed by such Person to the extent such indebtedness would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, guarantees by such Person of such indebtedness, and
indebtedness for borrowed money secured by any Lien, pledge or other lien or
encumbrance upon property owned by such Person, even though such Person has
not assumed or become liable for the payment of such indebtedness.
"Issue Date" means the original issue date of the Notes under the Indenture.
"Lien" means any security interest, pledge, lien or other encumbrance.
"Operating Assets" means all merchandise, inventories, furniture and
equipment (including all transportation and warehousing equipment, store racks
and showcases but excluding office equipment and data processing equipment)
owned by the Company or a Subsidiary.
"Operating Property" means all real property and improvements thereon owned
by the Company or a Subsidiary and constituting, without limitation, any
store, warehouse, service center or distribution center wherever located;
provided, however, that such term shall not include any store, warehouse,
service center or distribution center which the Company's Board of Directors
declares by resolution not to be of material importance to the business of the
Company and its Subsidiaries. Operating Property is treated as having been
"acquired" on the day the Operating Property is placed in operation by the
Company or a Subsidiary after the latest of (a) its acquisition from a third
party, including a Subsidiary, (b) completion of its original construction or
(c) completion of its substantial reconstruction, renovation, remodeling,
expansion or improvement (whether or not constituting an Operating Property
prior to such reconstruction, renovation, remodeling, expansion or
improvement).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc., Chase
Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and
NationsBanc Montgomery Securities LLC and their respective successors;
provided, however, that if any of the foregoing or their affiliates shall
cease to be a primary U.S. Government securities dealer in The City of New
York (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Notes, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related Redemption Date but for
such redemption; provided, however, that, if such Redemption Date is not
Interest Payment Date, the amount of the next succeeding scheduled interest
payment thereon will be reduced by the amount of interest accrued thereon to
such Redemption Date.
"Securities Act" mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the Commission thereunder.
S-23
<PAGE>
"Senior Funded Debt" means all Funded Debt of the Company or any Person
(except Funded Debt, the payment of which is subordinated to the payment of
the Notes).
"Subsidiary" means any corporation or other business entity of which at
least a majority of the outstanding stock or membership or other interest, as
the case may be, having voting power under ordinary circumstances to elect a
majority of the board of directors, managers or other governing body of said
corporation or business entity or otherwise direct the business and affairs of
such corporation or business entity is at the time owned or controlled by the
Company, or by the Company and one or more Subsidiaries, or by any one or more
Subsidiaries; provided, that, unless otherwise expressly stated, Subsidiary
shall not include any Accounts Receivable Subsidiary or any Foreign
Subsidiary.
"Treasury Rate" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury
Price for such Redemption Date.
Book-Entry, Delivery and Form
The Notes will be represented by one or more permanent Global Notes in
definitive, fully registered book-entry form (each, a "Global Note") which
will be registered in the name of Cede & Co., as nominee of DTC and deposited
on behalf of purchasers of the Notes represented thereby with a custodian for
DTC for credit to the respective accounts of the purchasers (or to such other
accounts as they may direct) at DTC.
The Global Notes
The Company expects that pursuant to procedures established by DTC (a) upon
deposit of each Global Note, DTC or its custodian will credit on its internal
system portions of the Global Note, which shall be comprised of the
corresponding respective amount of the Global Note to the respective accounts
of persons who have accounts with such depositary and (b) ownership of the
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC or its nominee with respect to
interests of persons who have accounts with DTC ("Participants") and the
records of Participants with respect to interests of persons other than
Participants. Such accounts initially will be designated by or on behalf of
the Underwriters and ownership of beneficial interests in the Global Notes
will be limited to Participants or persons who hold interests through
Participants. Purchasers may hold their interests in the Global Notes directly
through DTC if they are Participants in such system, or indirectly through
organizations which are Participants in such system.
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
the Global Notes for all purposes under the Indenture and under the Notes. No
beneficial owner of an interest in the Global Notes will be able to transfer
such interest except in accordance with the applicable procedures of DTC in
addition to those provided for under the Indenture.
Payments of the principal of, premium (if any) and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
under the Indenture will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the Global Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest on the Global Notes will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in the Global Notes
held through such Participants will be governed by standing instructions and
customary practice as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payment
will be the responsibility of such Participants.
S-24
<PAGE>
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Note in fully registered form ("Certificated
Notes") for any reason, including to sell Notes to Persons in states which
require physical delivery of such securities or to pledge such securities,
such holder must transfer its interest in the applicable Global Note in
accordance with the normal procedures of DTC and in accordance with the
procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more Participants to whose
account the DTC interests in the applicable Global Note are credited and only
in respect of the aggregate principal amount of as to which such Participant
or Participants has or have given such direction. However, if there is an
Event of Default under the Indenture, DTC will exchange the applicable Global
Note for Certificated Notes, which it will distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Certificated Notes
Interests in the Global Notes will be exchanged for Certificated Notes if
(i) DTC notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes, or DTC ceases to be a "Clearing Agency"
registered under the Exchange Act, and a successor depositary is not appointed
by the Company within 90 days, or (ii) an Event of Default has occurred and is
continuing with respect to the Notes. Upon the occurrence of any of the events
described in the preceding sentence, the Company will cause the appropriate
Certificated Notes to be delivered.
S-25
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") by and among the Company, Salomon Smith Barney
Inc., Chase Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities
Inc. and NationsBanc Montgomery Securities LLC (collectively, the
"Underwriters"), the Company has agreed to sell to each of the Underwriters,
and each of the Underwriters has severally agreed to purchase from the
Company, the aggregate principal amount of the Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
Principal Amount
Underwriter of Notes
----------- ----------------
<S> <C>
Salomon Smith Barney Inc. ..................................... $ 80,000,000
Chase Securities Inc........................................... 20,000,000
Goldman, Sachs & Co. .......................................... 20,000,000
Lehman Brothers Inc. .......................................... 20,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................. 20,000,000
J.P. Morgan Securities Inc. ................................... 20,000,000
NationsBanc Montgomery Securities LLC.......................... 20,000,000
------------
Total........................................................ $200,000,000
============
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the Notes
offered hereby if any Notes are purchased. In the event of default by any
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
The Company has been advised by the Underwriters that they propose initially
to offer the Notes to the public at the public offering prices set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
prices less a concession of not more than .50% of the principal amount of the
Notes. The Underwriters may allow and such dealers may reallow a concession of
not more than .25% of the principal amount of the Notes to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
There is currently no public market for the Notes. The Company has been
advised by the Underwriters that they intend to make a market in the Notes,
but that they are not obligated to do so and may discontinue making a market
at any time without notice. The Company currently has no intention to list the
Notes on any securities exchange, and there can be no assurance given as to
whether an active trading market for the Notes will develop or as to the
liquidity of any trading market for the Notes.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended, or contribute to payments which
the Underwriters may be required to make in respect thereof.
Certain of the Underwriters and their affiliates have from time to time
provided, and may in the future provide, investment banking and general
financing and banking services to the Company and its affiliates. NationsBank,
N.A., an affiliate of NationsBanc Montgomery Securities LLC, is the agent and
a lender under the Credit Facilities and affiliates of Chase Securities Inc.,
J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. are lenders under
the Credit Facilities, and in such capacities each will receive its
proportionate share of any amounts repaid under such Credit Facilities with
the proceeds of this offering. Under the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD"), special considerations
apply to a public offering of securities where more than 10% of the net
proceeds thereof will be paid to a participating underwriter or any of its
affiliates. Because more than 10% of the net proceeds of the offering of the
Notes may be paid to affiliates of certain Underwriters (see "Use of
Proceeds"), this offering is being conducted pursuant to the requirements of
Rule 2710(c)(8) of the Conduct Rules of the NASD.
S-26
<PAGE>
In connection with this offering and in compliance with applicable law, the
Underwriters may engage in transactions which stabilize or maintain the market
price of the Notes at levels above those which might otherwise prevail in the
open market. Specifically, the Underwriters may over-allot in connection with
this offering creating a short position in the Notes for their own accounts.
For the purposes of covering a syndicate short position or stabilizing the
price of the Notes, the Underwriters may place bids for the Notes or effect
purchases of the Notes in the open market. Finally, the Underwriters may
impose a penalty bid whereby selling concessions allowed to syndicate members
or other broker-dealers for distributing the Notes in this offering may be
reclaimed by the syndicate if the syndicate repurchases previously distributed
Notes in transactions to cover short positions, in stabilization transactions
or otherwise. These activities may stabilize, maintain or otherwise affect the
market price of the Notes, which may be higher than the price that might
otherwise prevail in the open market, and, if commenced, may be discontinued
at any time.
LEGAL MATTERS
The validity of the Notes and the Guarantees being offered hereby and
certain other legal matters in connection with this offering are being passed
upon for the Company by Charles J. Hansen, Esq., Senior Vice President and
Associate General Counsel of the Company. Certain legal matters related to the
Notes will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements included in the Company's Current
Report on Form 8-K (filed with the Securities and Exchange Commission on
November 23, 1998) as of January 31, 1998 and February 1, 1997 and for each of
the three years in the period ended January 31, 1998, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
S-27
<PAGE>
PROSPECTUS
$1,400,000,000
SAKS INCORPORATED
PROFFITT'S CAPITAL TRUST I
PROFFITT'S CAPITAL TRUST II
PROFFITT'S CAPITAL TRUST III
PROFFITT'S CAPITAL TRUST IV
PROFFITT'S CAPITAL TRUST V
We will offer and sell debt and equity securities from time to time in one
or more offerings. This prospectus provides you with a general description of
the securities we may offer.
Each time we sell securities we will provide a supplement to this prospectus
that contains specific information about the offering. The supplement may also
add, update or change information contained in this prospectus. You should
carefully read this prospectus and any supplement before you invest in any of
our securities.
Saks Incorporated
Saks may offer and sell the following securities:
.common stock .stock purchase contracts
.preferred stock .stock purchase units
.depositary shares .debt securities
.warrants .guarantees
Proffitt's Capital Trusts
The Trusts may offer and sell preferred securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful and complete. Any representation to the contrary is a
criminal offense.
This prospectus may not be used to sell securities unless accompanied by a
prospectus supplement.
The date of this prospectus is February 5, 1999.
<PAGE>
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement that Saks filed
with the United States Securities and Exchange Commission, or the "SEC." By
using a shelf registration statement, Saks may sell any combination of the
securities described in this prospectus from time to time and in one or more
offerings. Saks may use the shelf registration statement to sell up to $1.4
billion of securities. This prospectus only provides you with a general
description of the securities Saks may offer. Each time Saks sells securities,
Saks will provide a supplement to this prospectus that contains specific
information about the terms of the securities. The supplement may also add,
update or change information contained in this prospectus. Before purchasing
any securities, you should carefully read both this prospectus and any
supplement, together with the additional information described under the
heading "How to Obtain Additional Information."
The Proffitt's Capital Trusts were created to provide Saks with the ability
to issue certain types of preferred securities. This prospectus does not
contain separate financial statements for the Trusts. Saks does not believe
these financial statements would be useful to you because each Trust is an
affiliate of Saks, and Saks files consolidated financial information with the
SEC that includes the Trusts. The Trusts do not have any independent function
other than to issue securities and to purchase subordinated notes from Saks.
You should rely only on the information contained or incorporated by
reference in this prospectus and in any supplement. Saks has not authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it.
Saks will not make an offer to sell these securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover of
this prospectus only. Saks' business, financial condition, results of
operations and prospects may have changed since that date.
HOW TO OBTAIN ADDITIONAL INFORMATION
Saks files reports, proxy statements and other information with the SEC.
Saks' filings with the SEC are available on the Internet at the Commission's
web site at http://www.sec.gov. You may also read and copy any document that
Saks files with the SEC at the SEC's public reference rooms at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; Seven World Trade Center,
13th Floor, New York, New York 10048; and Citicorp Center, 5000 West Madison
Street, Suite 1400, Chicago, Illinois 60601. You can call the SEC at 1-800-
SEC-0330 for more information about the public reference rooms and their copy
charges. You may also inspect the reports and other information that Saks
files with the SEC at the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
Saks filed a registration statement on Form S-3 with the SEC that covers the
securities described in this prospectus. For further information on Saks, the
Trusts and the securities, you should refer to Saks' registration statement
and its exhibits. In this prospectus, Saks has summarized material provisions
of contracts and other documents. Since this prospectus may not contain all
the information that you may find important, you should review the full text
of these documents. Saks has included copies of these documents as exhibits to
its registration statement. The registration statement can be obtained from
the SEC, as described above, or from Saks at the address provided below.
2
<PAGE>
THIS PROSPECTUS INCORPORATES INFORMATION
BY REFERENCE TO OTHER DOCUMENTS
The SEC allows Saks to "incorporate by reference" the information that Saks
files with the SEC. This means that Saks can disclose important information to
you by referring you to information and documents that Saks has filed with the
SEC. Any information that Saks references in this manner is considered part of
this prospectus. Any information that Saks files with the SEC after the date
of this prospectus will automatically update and supersede the information
contained in this prospectus.
Saks, formerly Proffitt's, Inc., is incorporating by reference the following
documents which it has filed with the SEC:
. Saks' Annual Report to Shareholders filed on Form 10-K for the fiscal
year ended January 31, 1998;
. Saks' Quarterly Reports filed on Form 10-Q for the fiscal quarters ended
May 2, 1998, August 1, 1998 and October 31, 1998; and
. Saks' Current Reports filed on Form 8-K dated January 23, 1998, February
11, 1998, February 17, 1998, March 26, 1998, April 13, 1998, July 8,
1998, July 13, 1998 (as amended by the Form 8-K/As filed on July 14,
1998 and August 4, 1998), August 4, 1998, August 20, 1998, August 31,
1998, September 11, 1998, each of the two Form 8-K's dated September 23,
1998, each of the two Form 8-K's dated November 19, 1998 (one of which
was amended by the Form 8-K/A filed on November 23, 1998), November 23,
1998, November 24, 1998 and December 4, 1998.
Saks is also incorporating by reference all future filings that it makes
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended. You may request a free copy of any documents
referred to above, including exhibits, by contacting Charles J. Hansen, Esq.
at the following address: Saks Incorporated, 750 Lakeshore Parkway,
Birmingham, Alabama, 35211, or by telephone at (205) 940-4000 or facsimile at
(205) 940-4468.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks and
uncertainties. You can identify these forward-looking statements through our
use of words such as "may," "will," "intend," "project," "expect,"
"anticipate," "believe," "estimate," "continue," or other similar words. Saks'
actual results may differ significantly from the results Saks discusses in
forward-looking statements.
Factors that might cause such a difference include, but are not limited to:
general economic and business conditions, both nationally and in Saks' market
areas; Saks' merchandise mixes; Saks' site selection; traffic and demographic
patterns; general prospects for the retail industry; the level of consumer
spending for apparel and other consumer goods; levels of consumer debt and
bankruptcies; changes in interest rates; changes in buying, charging and
payment behavior among Saks' customers; the effects of weather conditions on
seasonal sales in Saks' market areas; competition among department and
specialty stores and other retailers, including luxury goods retailers,
general merchandise stores, mail order retailers and off-price and discount
stores; the competitive pricing environment within the department and
specialty store industries; the effectiveness of Saks' advertising, marketing
and promotional campaigns; the speed and effectiveness of identification and
implementation of Saks' best practices approach; Saks' ability to determine
and implement appropriate merchandising strategies, merchandise flow and
inventory turnover levels; Saks' realization of planned synergies and cost
savings in its operations and in recent and future acquisitions; Saks' ability
to integrate acquired businesses and stores; any adverse effects of the Year
2000 problem on Saks and its vendors; Saks' ability to contain costs; changes
in Saks' business strategy or development plans; Saks' ability to hire and
retain key personnel; and Saks' ability to obtain capital to fund its
expansion.
You should also consider any other factors contained in this prospectus or
in any accompanying supplement, including the information incorporated by
reference into this prospectus or into any accompanying supplement. You should
pay particular attention to those factors discussed in any supplement under
the heading "Risk Factors." You should not rely on the information contained
in any forward-looking statements, and you should not expect Saks to update
any forward-looking statements.
3
<PAGE>
SAKS INCORPORATED
Saks is a leading department store retailer that, as of the date of this
prospectus, operates over 350 department stores in 38 states. Saks is the
fourth largest traditional department store company in the United States.
Saks' stores operate under the following trade names: Saks Fifth Avenue,
Younkers, Off 5th, Parisian, Herberger's, Carson Pirie Scott, McRae's,
Proffitts, Bergner's, Boston Store and Bullock & Jones.
Saks' stores are typically leading branded traditional department stores in
their communities. Saks locates most of its stores in premier regional or
community malls in the trade areas that they serve. Saks' stores offer a wide
selection of fashion apparel, accessories, cosmetics and decorative home
furnishings, featuring assortments of premier brands, private brands and
specialty merchandise. Saks conducts its merchandising, sales promotion and
certain store operating support functions in multiple regional locations to
tailor regional assortments to its local customers. Saks coordinates
merchandising planning and execution among its stores and consolidates certain
administrative and support functions to realize scale economies, to promote a
competitive cost structure and to increase its profit margins. In addition to
its department stores, Saks also operates four furniture stores.
Saks was incorporated under the laws of the State of Tennessee in 1919.
Saks' principal executive offices are located at 750 Lakeshore Parkway,
Birmingham, Alabama 35211, and its telephone number is (205) 940-4000.
4
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in any supplement to this Prospectus (each, a
"Prospectus Supplement") for an offering of securities in respect of which
this Prospectus is being delivered (collectively, the "Offered Securities"),
the net proceeds received by Saks Incorporated (the "Company") from the sale
of the Offered Securities will be used for general corporate purposes, which
may include, without limitation, funding investments in, or extensions of
credit to, the Company's subsidiaries, repayment of maturing obligations,
redemption and repurchase of outstanding indebtedness or other securities,
financing possible future acquisitions, reduction of outstanding amounts under
the Company's credit facilities and other indebtedness, and for working
capital. Pending such use, the Company may temporarily invest the net
proceeds. The proceeds from the sale of securities by Proffitt's Capital Trust
I, Proffitt's Capital Trust II, Proffitt's Capital Trust III, Proffitt's
Capital Trust IV and Proffitt's Capital Trust V (each a "Proffitt's Trust"
and, collectively, the "Proffitt's Trusts") will be invested in unsecured
subordinated debt securities of the Company. Any proposal to use proceeds from
any offering of the Offered Securities in connection with an acquisition will
be disclosed in the Prospectus Supplement relating to such offering.
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to combined fixed charges and preferred stock
dividends is computed by dividing earnings by the sum of fixed charges and
preferred stock dividend requirements. For these purposes, earnings consist
primarily of income (loss) before income taxes adjusted for fixed charges.
Combined fixed charges and preferred stock dividends consist primarily of
interest (whether expensed or capitalized), the portion of rental expense
representative of the interest factor in these rentals and preferred stock
dividends.
The following sets forth the Company's consolidated ratio of earnings to
combined fixed charges and preferred dividends for the periods shown:
<TABLE>
<CAPTION>
For the 39 Weeks Ended, For the 52 Weeks Ended,
----------------------- -----------------------------------------------------------
October 31, November 1, January 31, February 1, February 3, January 28, January 29,
1998(1) 1997 1998 1997 1996 1995 1994(2)
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 0.2 1.7 2.3 1.9 1.3 1.8 --
=== === === === === === ===
</TABLE>
- --------
(1) For the 39 week period ended October 31, 1998, the Company reported a pre-
tax loss from continuing operations of $91.3 million, primarily due to
merger charges and balance sheet restructuring charges of approximately
$177.0 million incurred in the third quarter related to its acquisition of
Saks Holdings, Inc.
(2) For the fiscal year ended January 29, 1994, the Company reported a pre-tax
loss from continuing operations of $367.0 million, due to Saks Holdings
reporting a pre-tax loss of $231.3 million as well as Carson Pirie Scott &
Co.'s ("CPS") emergence from Chapter 11 bankruptcy during fiscal 1993. Net
loss after extraordinary items and changes in accounting methods for
fiscal 1993 was $230.1 million. The ratio of earnings to fixed charges
calculation for fiscal year ended January 29, 1994, indicated a fixed
charge coverage deficiency of $368.5 million.
5
<PAGE>
THE OFFERED SECURITIES
The Company may offer and sell from time to time the following securities:
(i) its unsecured senior debt securities ("Senior Debt Securities") and
unsecured subordinated debt securities ("Subordinated Debt Securities," and,
together with the Senior Debt Securities, the "Debt Securities"), consisting
of debentures, notes or other evidences of indebtedness, which may be
guaranteed on a senior or subordinated basis by one or more subsidiaries of
the Company; (ii) shares of its preferred stock, par value $1.00 per share
(the "Preferred Stock"); (iii) depositary shares representing entitlement to
all rights and preferences of a fraction of a share of Preferred Stock of a
specific series ("Depositary Shares"), (iv) shares of its common stock, par
value $.10 per share (the "Common Stock"); (v) warrants to purchase any of the
foregoing Senior Debt Securities, Subordinated Debt Securities, Preferred
Stock, Depositary Shares or Common Stock (the "Warrants"); (vi) stock purchase
contracts ("Stock Purchase Contracts") to purchase Common Stock; or (vii)
stock purchase units ("Stock Purchase Units"), each Stock Purchase Unit
representing ownership of a Stock Purchase Contract and one of the following,
which will secure the holder's obligation to purchase Common Stock under the
Stock Purchase Contract: (x) Senior Debt Securities or Subordinated Debt
Securities, (y) Preferred Securities (as defined below), or (z) debt
obligations of third parties, including U.S. government or government agency
securities. Such securities may be offered in one or more separate classes or
series, in amounts, at prices, and on terms to be determined by market
conditions at the time of sale and to be set forth in a Prospectus Supplement.
Such securities may be sold for U.S. dollars or foreign-denominated currency
or currency units, and amounts payable with respect to such securities may
likewise be payable in U.S. dollars or foreign-denominated currency or
currency units, in each case as the Company specifically designates.
The Proffitt's Trusts are separate statutory business trusts created under
the laws of the State of Delaware, each of which may offer and sell from time
to time preferred securities, which may be designated as preferred securities
or capital securities, representing undivided beneficial interests in the
assets of the applicable Proffitt's Trust ("Preferred Securities"). The
payment of periodic cash distributions ("Distributions") with respect to
Preferred Securities out of monies held by such Proffitt's Trust, and payments
on liquidation, redemption or otherwise with respect to Preferred Securities,
will be guaranteed by the Company to the extent described herein (each a
"Trust Guarantee" and, collectively, the "Trust Guarantees"). Each Trust
Guarantee (i) will rank junior and subordinate in right of payment to all
other indebtedness of the Company, except indebtedness of the Company that by
its terms is subordinate or pari passu to the Trust Guarantee, and (ii) will
rank pari passu with most senior preferred or preference stock of the Company.
Subordinated Debt Securities may be issued and sold from time to time by the
Company in one or more series to the Proffitt's Trusts or a Trustee of any of
the Proffitt's Trusts in connection with the investment of the proceeds from
the offering of Preferred Securities and Common Securities (as defined herein)
of the Proffitt's Trusts. Subordinated Debt Securities purchased by any of the
Proffitt's Trusts may be subsequently distributed pro rata to holders of
Preferred Securities and Common Securities in connection with the dissolution
of the applicable Proffitt's Trust upon the occurrence of certain events as
may be described in an accompanying Prospectus Supplement. See "Description of
Preferred Securities," "Description of Trust Guarantees--Status of the Trust
Guarantees."
Specific terms of the Offered Securities will be set forth in an
accompanying Prospectus Supplement or Supplements, together with the terms of
the offering of the Offered Securities. A Prospectus Supplement will set forth
with regard to the particular Offered Securities, certain terms thereof,
including, where applicable, (i) in the case of Debt Securities, the ranking
as Senior or Subordinated Debt Securities, the specific title or designation,
aggregate principal amount, denominations, maturity, interest rate, if any
(which may be fixed or variable), the time and method of calculating interest
payments, if any, the time of payment of interest, if any, any listing on a
securities exchange, any exchangeability, conversion, redemption, prepayment
or sinking fund provisions, the currency or currencies or currency unit or
units in which principal, premium, if any, or interest, if any, is payable,
initial public offering price and any other specific terms of the Debt
Securities; (ii) in the case of Preferred Stock, the specific title or
designation, number of shares, and the rights, preferences and privileges
thereof, any qualifications or restrictions thereon (including dividends,
liquidation value, voting rights, terms for the redemption, conversion or
exchange thereof and any other specific terms of the Preferred Stock), and
listing, if
6
<PAGE>
any, on a securities exchange; (iii) in the case of Depositary Shares, the
fractional share of the series of Preferred Stock representing such Depositary
Shares, and the other information provided with respect to Preferred Stock;
(iv) in the case of Common Stock, the initial offering price; (v) in the case
of Warrants, the specific designation, duration, offering price, exercise
price, detachability features, any listing of the Warrants or the underlying
securities on a securities exchange, as well as the terms on which and the
securities for which such Warrants may be exercised; (vi) in the case of Stock
Purchase Contracts, the designation and number of shares of Common Stock
issuable thereunder, the purchase price of the Common Stock, the date or dates
on which the Common Stock is required to be purchased by the holders of the
Stock Purchase Contracts, any periodic payments required to be made by the
Company to the holders of the Stock Purchase Contracts, or vice versa, and the
terms of the offering and sale thereof; (vii) in the case of Stock Purchase
Units, the specific terms of the Stock Purchase Contracts and any Debt
Securities or Preferred Securities or debt obligations of third parties
securing the holder's obligation to purchase the Common Stock under the Stock
Purchase Contracts, and the terms of the offering and sale thereof; and (viii)
in the case of Preferred Securities, the specific designation, number of
securities, liquidation amount per security, the purchase price, any listing
on a securities exchange, distribution rate (or method of calculation
thereof), dates on which distributions shall be payable and dates from which
distributions shall accrue, any voting rights, terms for any conversion or
exchange into other securities, any redemption, exchange or sinking fund
provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Preferred Securities and the terms upon which the
proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Subordinated Debt Securities of the Company.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
offering price to the public of the Offered Securities will be limited to
$1,400,000,000. Any Prospectus Supplement relating to any Offered Securities
will contain information concerning certain United States federal income tax
considerations, if applicable, to such Offered Securities.
The Offered Securities may be offered directly by the Company, through
agents designated from time to time by the Company, or to or through
underwriters or dealers. If any agents or underwriters are involved in the
sale of any of the Offered Securities, their names, and any applicable
purchase price, fee, commission or discount arrangements between or among
them, will be set forth, or will be calculable from the information set forth,
in the applicable Prospectus Supplement. No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement or a term sheet
describing the method and terms of the offering of such series of Offered
Securities. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of the Offered
Securities unless accompanied by a Prospectus Supplement.
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus,
any accompanying Prospectus Supplement or the documents incorporated or deemed
incorporated herein in connection with the offering covered by this Prospectus
or any accompanying Prospectus Supplement. If given or made, such information
or representations must not be relied upon as having been authorized by the
Company, or any underwriter, dealer or agent. This Prospectus and any
accompanying Prospectus Supplement do not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the registered
securities to which it relates in any jurisdiction where, or to any person to
whom, it is unlawful to make such offer or solicitation. Neither the delivery
of this Prospectus or any accompanying Prospectus Supplement nor any sale made
hereunder shall, under any circumstances, create any implication that there
has not been any change in the facts set forth in this Prospectus or any
accompanying Prospectus Supplement or in the affairs of the Company since the
date hereof or thereof.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars" or
"U.S.$").
7
<PAGE>
THE PROFFITT'S TRUSTS
Each of the Proffitt's Trusts is a statutory business trust created under
Delaware law pursuant to (i) a declaration of trust (as amended and restated,
the "Declaration") executed by the Company as sponsor for such trust (the
"Sponsor"), and certain of the Proffitt's Trustees (as defined herein) of such
trust and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on June 1, 1998 with respect to Proffitt's
Capital Trust I and on August 19, 1998 with respect to each of Proffitt's
Capital Trusts II, III, IV and V. The Proffitt's Trusts exist for the
exclusive purposes of (i) issuing the Preferred Securities and common
securities representing undivided beneficial interests in the assets of the
Proffitt's Trusts (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities"), (ii) investing the gross proceeds from
the sale of the Trust Securities in Subordinated Debt Securities, and (iii)
engaging in only those other activities necessary or incidental thereto. All
of the Common Securities issued by the Proffitt's Trusts will be owned
directly or indirectly by the Company. Such Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that, if any event of default under the Declaration has
occurred and is continuing, the rights of the holders of the Common Securities
to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Company will directly or indirectly acquire
Common Securities in an aggregate liquidation amount equal to at least 3% of
the total capital of the Proffitt's Trusts.
Each of the Proffitt's Trusts has a term of approximately 45 years, but may
dissolve earlier, as provided in the applicable Declaration. The business and
affairs of each Proffitt's Trust will be conducted by the trustees (with
respect to each of the Proffitt's Trusts, the "Proffitt's Trustees") appointed
by the Company as the direct or indirect holder of all the Common Securities.
As the holder of the Common Securities, the Company will be entitled to
appoint, remove or replace any of, or increase or reduce the number of, the
Proffitt's Trustees. The duties and obligations of the Proffitt's Trustees are
governed by the applicable Declaration. A majority of the Proffitt's Trustees
of each Proffitt's Trust (the "Regular Trustees") are persons who are
employees or officers of or who are affiliated with the Company. In addition,
one Proffitt's Trustee is a financial institution that is unaffiliated with
the Company and has minimum capital and surplus of not less than $50,000,000.
That institution acts as property trustee and as indenture trustee for the
purpose of compliance with the provisions of the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act," or the "TIA"), pursuant to the terms
set forth in the applicable Prospectus Supplement (the "Property Trustee"). In
addition, unless the Property Trustee maintains a principal place of business
in the State of Delaware and otherwise meets the requirements of applicable
law, one Proffitt's Trustee will be an entity having a principal place of
business in the State of Delaware (the "Delaware Trustee"). The Company will
pay all fees and expenses related to the Proffitt's Trusts and the offering of
the Trust Securities.
The Property Trustee for each of the Proffitt's Trusts is The First National
Bank of Chicago, One First National Plaza, Mail Suite 0126, Chicago, Illinois
60670-0126; Attention: Corporate Trustee Administration. The Delaware Trustee
for each of the Proffitt's Trusts is First Chicago Delaware Inc. and its
address in the State of Delaware is 300 King Street, Wilmington, Delaware
19801, Attention: Mike Majchrzak. The principal place of business of each of
the Proffitt's Trusts is c/o Saks Incorporated, 750 Lakeshore Parkway,
Birmingham, Alabama, 35211, telephone number (205) 940-4000.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
General
The following description of the terms of the Senior Debt Securities and
Subordinated Debt Securities sets forth certain general terms and provisions
of the Debt Securities. Each Indenture (as defined below) gives the Company
broad authority to set the particular terms of each series of Debt Securities,
including the right to modify certain of the terms contained in the Indenture.
The particular terms of a series of Debt Securities and the extent, if any, to
which the particular terms of the issue modify the terms of the Indenture will
be described in the Prospectus Supplement relating to such Debt Securities.
The Senior Debt Securities are to be issued under an indenture (the "Senior
Indenture"), to be entered into between the Company and The First National
Bank of Chicago, as Trustee. The Subordinated Debt Securities are to be issued
under an indenture (the "Subordinated Indenture"), also to be entered into
between the Company and The First National Bank of Chicago, as Trustee. The
term "Trustee" as used herein shall refer to The First National Bank of
Chicago, or such other bank or trust company as the Trustee may appoint as
trustee pursuant to the terms of the applicable Indenture, in its capacity as
Trustee for the Senior Debt Securities or the Subordinated Debt Securities, as
appropriate. The Senior Indenture and/or the Subordinated Indenture, as
appropriate (being sometimes referred to herein collectively as the
"Indentures" and individually as an "Indenture"), will be filed with the
Commission upon the execution of a Prospectus Supplement relating to the
issuance of Debt Securities thereunder but will be substantially in the forms
filed as exhibits to the Registration Statement. The Indentures are subject to
and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and may be supplemented from time to time following
execution. The statements made under this heading relating to the Debt
Securities and the Indentures are summaries of the provisions thereof and do
not purport to be complete and are qualified in their entirety by reference to
the Indentures and such Debt Securities.
Capitalized terms used but not defined herein shall have the respective
meanings set forth in the Indentures. Wherever particular provisions or
defined terms of the Indentures are referred to, it is intended that such
provisions or defined terms shall be incorporated herein by reference.
Terms
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Debt Securities will rank equally
with all other unsecured and unsubordinated debt of the Company. The
indebtedness represented by the Subordinated Debt Securities will rank junior
and subordinate in right of payment to the prior payment in full of the senior
debt of the Company, to the extent and in the manner set forth in the
Prospectus Supplement for such Securities. See "--Subordination" below.
Each Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in, or pursuant to authority granted by, a
resolution of the Board of Directors of the Company and in one or more
indentures supplemental to such Indenture. Debt Securities may be issued with
terms different from those of any other Debt Securities previously issued by
the Company. All Debt Securities of one series need not be issued at the same
time and, unless otherwise provided, a series may be reopened, without the
consent of the Holders of outstanding Debt Securities of such series, for
issuances of additional Debt Securities of such series. The Debt Securities
may be denominated and payable in U.S. dollars or in foreign currencies or
units based on or related to foreign currencies, including European Currency
Units ("ECUs"). Special United States federal income tax considerations
applicable to any Debt Securities denominated other than in U.S. dollars will
be described in the relevant Prospectus Supplement.
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
an Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series. In
9
<PAGE>
the event that two or more persons are acting as Trustee with respect to
different series of Debt Securities, each such Trustee shall be a Trustee of a
trust under the applicable Indenture separate and apart from the trust
administered by any other Trustee, and, except as otherwise indicated herein,
any action described herein to be taken by each Trustee may be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee under the applicable Indenture.
Reference is made to the applicable Prospectus Supplement relating to a
particular series of Debt Securities being offered thereby for the specific
terms of the Debt Securities, including, but not limited to:
(1) the title of and ranking as Senior Debt Securities or Subordinated
Debt Securities;
(2) the aggregate principal amount;
(3) the issue price;
(4) the terms, if any, by which such Securities may be convertible into
or exchangeable for other securities or property of the Company;
(5) when, how much, at what place, under what conditions, and in what
currency, principal, premium, if any, and interest are payable, and
if any of the foregoing is not known at the time the Prospectus
Supplement is filed, the method of determining the same;
(6) any terms with respect to subordination;
(7) terms of any mandatory redemption, sinking fund, or similar
obligation;
(8) provisions, if any, affording holders of the Debt Securities
protection in the event of a highly leveraged or similar transaction
involving the Company;
(9) any terms with respect to the events of default;
(10) whether such Debt Securities will be issued in book-entry form;
(11) whether such Debt Securities will be in registered ("Registered Debt
Securities") or bearer ("Bearer Debt Securities") form;
(12) the applicability, if any, of the discharge, defeasance and covenant
defeasance provisions of the Indenture; and
(13) any other terms of such Debt Securities which are not inconsistent
with the Trust Indenture Act.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
as a result of the occurrence and continuation of an Event of Default
("Original Issue Discount Securities"). Any special U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal or interest
otherwise payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factors. Information as
to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity indices or other factors to
which the amount payable on such date is linked and certain additional tax
considerations will be set forth in the applicable Prospectus Supplement.
All Debt Securities of any one series shall be substantially identical,
except, in the case of Debt Securities issued in global form, as to
denomination and except as may otherwise be provided in or pursuant to
resolution of the Board of Directors of the Company or in any indenture
supplemental to the Indenture.
10
<PAGE>
Reference is made to the applicable Prospectus Supplement for information
with respect to any deletions from, modifications of or additions to the
Events of Default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk
or similar protection.
Guarantees
The Debt Securities may be guaranteed on a senior or unsubordinated basis by
subsidiaries of the Company, which would guarantee the due and punctual
payment of principal of, premium, if any, and interest on such Debt
Securities, and the due and punctual payment of any sinking fund payments
thereon, when and as the same shall become due and payable whether at a
maturity date, by declaration of acceleration, call for redemption or
otherwise. The applicability and terms of any such guarantee relating to a
series of Debt Securities will be set forth in the Prospectus Supplement
relating to such Debt Securities.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
described in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and
interest, if any, on any series of Debt Securities will be payable in the
currency designated in the Prospectus Supplement at the corporate trust office
of the Trustee, initially located at One First National Plaza, Mail Suite
0126, Chicago, Illinois 60670-0126; Attention: Corporate Trustee
Administration in the case of each of the Senior Debt Securities and the
Subordinated Debt Securities, provided that, at the option of the Company,
payment of interest may be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register for such series or by
wire transfer of funds to such Person at an account maintained within the
United States. The Company may at any time designate additional Paying Agents
or rescind the designation of any Paying Agents or approve a change in the
office through which any Paying Agent acts, except that the Company will be
required to maintain a Paying Agent in each Place of Payment for such series.
All monies paid by the Company to a Paying Agent for the payment of principal
of and premium, if any, and interest, if any, on any Debt Security which
remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company, and
the Holder of such Debt Security will thereafter look only to the Company for
payment thereof.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be mailed to each Holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described
in the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer or exchange at the
corporate trust office of the applicable Trustee referred to above. Every Debt
Security surrendered for conversion, registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer. No
service charge will be made for any registration of transfer or exchange of
any Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
If the applicable Prospectus Supplement refers to
11
<PAGE>
any transfer agent (in addition to the applicable Trustee) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities.
Neither the Company nor any Trustee shall be required to: (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing or publication of the relevant notice of
redemption; (ii) register the transfer of or exchange any Debt Security, or
portion thereof, called for redemption, except the unredeemed portion of any
Debt Security being redeemed in part; (iii) exchange any Bearer Debt Security
selected for redemption, except that such a Bearer Debt Security may be
exchanged for a Registered Debt Security of that series and like tenor,
provided that such Bearer Debt Security shall be simultaneously surrendered
for redemption or exchange; or (iv) issue, register the transfer of or
exchange any Debt Security that has been surrendered for repayment at the
option of the Holder, except the portion, if any, of such Debt Security not to
be so repaid.
Global Debt Securities
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security")
that will be deposited with a depositary (a "Depositary") or with a nominee
for a Depositary identified in the Prospectus Supplement relating to such
series and registered in the name of the Depositary or a nominee thereof. In
such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Securities. Unless and until
it is exchanged in whole for Debt Securities in definitive registered form, a
Registered Global Security may not be transferred except as a whole by the
Depositary for such Registered Debt Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of
such Depositary or by such Depositary or any such nominee to a successor of
such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to
all depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to Persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the
Depositary for such Registered Global Security will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depositary for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of The Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Except as set forth below, owners of
beneficial interests in a Registered Global Security
12
<PAGE>
will not be entitled to have the Debt Securities represented by such
Registered Global Security registered in their names, will not receive or be
entitled to receive physical delivery of such Debt Securities in definitive
form and will not be considered the owners or Holders thereof under the
applicable Indenture. Accordingly, each person owning a beneficial interest in
a Registered Global Security must rely on the procedures of the Depositary for
such Registered Global Security and, if such person is not a participant, on
the procedures of the participant or other intermediary through which such
person owns its interest, to exercise any rights of a Holder under the
applicable Indenture. The Company understands that, under existing industry
practices, if the Company requests any action of Holders, or if an owner of a
beneficial interest in a Registered Global Security desires to give or take
any action which a Holder is entitled to give or take under the applicable
Indenture, the Depositary for such Registered Global Security would authorize
the participants holding the relevant beneficial interests to give or take
such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners holding through them.
Payments of principal and premium or Make-Whole Amount, if any, and
interest, if any, or any Additional Amounts payable with respect to Debt
Securities represented by a Registered Global Security registered in the name
of a Depositary or its nominee will be made to such Depositary or its nominee,
as the case may be, as the registered owners of such Registered Global
Security. None of the Company, the Trustee or any other agent of the Company
or agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in such Registered Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered
Global Security as shown on the records of such Depositary. The Company also
expects that payments by participants to owners of beneficial interests in
such Registered Global Security held through such participants will be
governed by standing customer instructions and customary practices, as is now
the case with the securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or ineligible to continue as Depositary, and
a successor Depositary is not appointed by the Company within 90 days, the
Company will issue such Debt Securities in definitive form in exchange for
such Registered Global Security. In addition, the Company may at any time and
in its sole discretion determine not to have any of the Debt Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Debt Securities of such series in a definitive form in
exchange for all of the Registered Global Security or Securities representing
such Debt Securities. Any Debt Securities issued in definitive form in
exchange for a Registered Global Security will be registered in such name or
names as the Depositary shall instruct the Trustee. The Company expects that
such instructions will be based upon directions received by the Depositary
from participants with respect to ownership of beneficial interests in such
Registered Global Security.
Bearer Debt Securities of a series may also be issued in the form of one or
more global Securities (a "Bearer Global Security") that will be deposited
with a common depositary for Euroclear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series.
The specific terms and procedures, including the specific terms of the
depositary arrangement and any specific procedures for the issuance of Debt
Securities in definitive form in exchange for a Bearer Global Security, with
respect to any portion of a series of Debt Securities to be represented by a
Bearer Global Security, will be described in the Prospectus Supplement
relating to such series.
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other
corporation or trust or entity provided that: (i) either the Company shall be
the continuing
13
<PAGE>
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received
the transfer of such assets shall be an entity organized under the laws of the
United States or any state thereof and expressly assume by supplemental
indenture the due and punctual payment of the principal of (and premium or
Make-Whole Amount, if any) and interest (including any Additional Amounts), if
any, on all of the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in each Indenture;
(ii) immediately after giving effect to such transaction and treating any
indebtedness that becomes an obligation of the Company or any Subsidiary as a
result thereof as having been incurred by the Company or such Subsidiary at
the time of such transaction, no Event of Default under the Indenture, and no
event which, after notice or the lapse of time, or both, would become such an
Event of Default, shall have occurred and be continuing; and (iii) certain
other conditions are met.
This covenant would not apply to any recapitalization transaction, a change
of control of the Company or a highly leveraged transaction unless such
transactions or change of control were structured to include a merger or
consolidation or transfer or lease of the Company's assets substantially as an
entirety. Except as may be described in a Prospectus Supplement applicable to
a particular series of Debt Securities, there are no covenants or other
provisions in the Indentures providing for a put or increased interest or that
would otherwise afford holders of Debt Securities additional protection in the
event of a recapitalization transaction, a change of control of the Company or
a highly leveraged transaction.
Covenants
Any covenants with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
Events of Default, Notice and Waiver
Except as otherwise provided in a Prospectus Supplement with respect to a
particular series of Debt Securities, each Indenture may provide that the
following events are "Events of Default" with respect to any series of Debt
Securities issued thereunder: (i) default for 30 days in the payment of any
installment of interest or Additional Amounts, if any, payable on any Debt
Security of such series; (ii) default in the payment of the principal of (or
premium or Make-Whole Amount, if any, on) any Debt Security of such series
when due, either at maturity, redemption or otherwise; (iii) default in making
any sinking fund payment as required for any Debt Security of such series;
(iv) default in the performance or breach of any other covenant or agreement
of the Company contained in the Indenture continued for 60 days after written
notice as provided in the applicable Indenture; (v) default under a bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Company (or by any Subsidiary, the repayment of which the Company has
guaranteed or for which the Company is directly responsible or liable as
obligor or guarantor other than indebtedness which is non-recourse to the
Company or the Subsidiaries), having a principal amount in excess of a minimum
amount set forth in the applicable Prospectus Supplement, whether such
indebtedness now exists or shall hereafter be created, which default shall
have resulted in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
without such acceleration having been rescinded or annulled within 30 days
after written notice to the Company as provided in the Indenture; (vi) certain
events of bankruptcy, insolvency or reorganization; and (vii) any other Event
of Default provided with respect to a particular series of Debt Securities.
If an Event of Default under an Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Debt Securities (as defined in
the Indentures) of each such affected series (voting as a single class) may
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities (as defined in the Indentures) or Indexed
Securities (as defined in the Indentures), such portion of the principal
amount as may be specified in the terms thereof) of and premium or Make-Whole
Amount, if any, on all of the Debt Securities of that series to be due and
payable immediately by written notice thereof to the Company (and to the
applicable Trustee if given by the Holders). However, at
14
<PAGE>
any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under
the applicable Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (i) the
Company shall have deposited with the applicable Trustee all required payments
of the principal of (and premium or Make-Whole Amount, if any) and interest
(and Additional Amounts, if any) on the Debt Securities of such series (or of
all Debt Securities then Outstanding under the applicable Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (ii) all Events of Default, other than the nonpayment
of accelerated principal (or a specified portion thereof and the premium or
Make-Whole Amount, if any) or interest (and Additional Amounts, if any), with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) have been
cured or waived as provided in the Indenture. Each Indenture also provides
that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a
default (x) in the payment of principal of (or premium or Make-Whole Amount,
if any) or interest (or Additional Amounts, if any), on any Debt Security of
such series or (y) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the Holders of each Outstanding Debt Security affected thereby.
The Trustee may be required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal
of (or premium or Make-Whole Amount, if any) or interest (or Additional
Amounts, if any), on any Debt Security of such series or in the payment of any
sinking fund installment in respect of any Debt Security of such series) if
the Responsible Officers (as defined in the Indentures) of such Trustee
consider such withholding to be in the interest of such Holders. Each
Indenture may provide that no Holder of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision would not prevent, however, any Holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium or Make-Whole Amount, if any) and interest (or
Additional Amounts), if any, payable with respect to such Debt Securities at
the respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, the Trustee is not under an obligation to exercise any of its rights
or powers under such Indenture at the request or direction of any Holders of
any series of Debt Securities then Outstanding under such Indenture, unless
such Holders shall have offered to the Trustee thereunder reasonable security
or indemnity. Subject to such provisions for the indemnification of the
Trustee, the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under each Indenture, as the case may be) may have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the Holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by one of several specified
officers, stating such officer's knowledge of the Company's compliance with
all the conditions and covenants under the applicable Indenture and, in the
event of any noncompliance, specifying such noncompliance and the nature and
status thereof.
15
<PAGE>
Modification of the Indentures
Modifications and amendments of an Indenture applicable to any series may be
made only with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities issued under such
Indenture which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of
the Holder of each such Debt Security affected thereby, (i) change the Stated
Maturity (as defined in the Indentures) of the principal of (or premium or
Make-Whole Amount, if any), or any installment of principal of or interest (or
Additional Amounts, if any), payable on, any such Debt Security, (ii) reduce
the principal amount of, or the rate or amount of interest on, or any premium
or Make-Whole Amount, payable on redemption of or any Additional Amount, if
any, payable with respect to any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security or Make-Whole Amount, if any,
that would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
repayment of the Holder of any such Debt Security, (iii) change the Place of
Payment (as defined in the Indentures) where, or the currency or currencies,
currency units or composite currency or currencies in which payment of the
principal of (and Premium or Make-Whole Amount, if any), or interest (or
Additional Amounts, if any) payable with respect to, any such Debt Security,
is payable, (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security, (v) reduce the
percentage of the Holders of outstanding Debt Securities of any series
necessary to modify or amend the applicable Indenture, to waive compliance
with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
applicable Indenture, or (vi) modify any of the foregoing provisions or any of
the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the Holders of such Debt Security.
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive
compliance by the Company with certain covenants in such Indenture.
Modifications and amendments of an Indenture may be made by the Company and
the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession
of another Person to the Company as obligor under such Indenture; (ii) to add
to the covenants of the Company for the benefit of the Holders of all or any
series of Debt Securities or to surrender any right or power conferred upon
the Company in such Indenture; (iii) to add Events of Default for the benefit
of the Holders of all or any series of Debt Securities; (iv) to add or change
any provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate
the issuance of Debt Securities in uncertificated form, provided that such
action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect; (v) to add, change or
eliminate any provisions of an Indenture, provided that any such addition,
change or elimination shall become effective only when there are no
Outstanding Debt Securities of any series created prior thereto which are
entitled to the benefit of such provision; (vi) to secure the Debt Securities;
(vii) to establish the form or terms of additional Debt Securities of any
series, including the provisions and procedures, if applicable, for the
conversion of such Debt Securities into Common Stock of the Company or other
securities or property of the Company; (viii) to provide for the acceptance or
appointment of a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (ix) to cure any
ambiguity, defect or inconsistency in an Indenture, provided that such action
shall not adversely affect the interests of Holders of Debt Securities of any
series issued under such Indenture in any material respect; (x) to close an
Indenture with respect to the authentication and delivery of additional series
of Debt Securities or to qualify, or maintain qualification of, an Indenture
under the Trust Indenture Act; or (xi) to supplement any of the provisions of
an Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action
shall not adversely affect the interests of the Holders of the Debt Securities
of any series in any material respect.
16
<PAGE>
Subordination
The Subordinated Indenture contains only minimal provisions relating to the
subordination of the Subordinated Debt Securities. Those provisions are
summarized below. The extent to which a particular series of Subordinated Debt
Securities is subordinated to other indebtedness of the Company will be set
forth in the Prospectus Supplement for that series. The particular terms of
subordination of an issue of Subordinated Debt Securities may supersede the
general provisions of the Subordinated Indenture summarized below.
Upon any distribution to creditors of the Company in a liquidation,
dissolution, bankruptcy, insolvency or reorganization, the payment of the
principal of and interest on the Subordinated Debt Securities will be
subordinated to the extent provided in the Subordinated Indenture in right of
payment to the prior payment in full of all Senior Debt, but the obligation of
the Company to make payment of the principal of and interest on the
Subordinated Securities will not otherwise be affected. No payment of
principal or interest may be made on the Subordinated Securities at any time
in the event there shall have occurred and be continuing a default in any
payment with respect to Senior Debt, or an event of default with respect to
any Senior Debt resulting in the acceleration of the maturity thereof, or if
any judicial proceeding shall be pending with respect to any such default and
the Company receives notice of the default. The Company may resume payments on
the Subordinated Securities when the default is cured or waived if the
subordination provisions of the Subordinated Indenture otherwise permit
payment at that time. After all Senior Debt is paid in full and until the
Subordinated Debt Securities are paid in full, Holders will be subrogated to
the rights of holders of Senior Debt to the extent that distributions
otherwise payable to Holders have been applied to the payment of Senior Debt.
By reason of such subordination, in the event of a distribution of assets upon
insolvency, certain general creditors of the Company may recover more,
ratably, than Holders of the Subordinated Securities.
There is no limit on the amount of senior debt that the Company may incur.
In addition, there are no restrictions in the Subordinated Indenture upon the
creation of additional senior debt or other indebtedness.
Discharge, Defeasance and Covenant Defeasance
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder if the relevant
defeasance provisions were made applicable to the series at the time it was
issued. There are two types of defeasance, one which discharges the Company
from virtually all obligations with respect to the series of Debt Securities
(called "defeasance") and the other which discharges the Company only from
certain covenant obligations (called "covenant defeasance"). The Prospectus
Supplement for a series may make either or both types of defeasance applicable
to a series. Under defeasance, the Company will be discharged from any and all
obligations with respect to the series of Debt Securities except (i) for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
the series and (ii) for certain ministerial obligations like the obligation to
register the exchange or transfer of the Debt Securities and to maintain an
office or registry for the Debt Securities. Under covenant defeasance, by
contrast, the Company will be discharged only from certain covenant
obligations such as those described under "Certain Covenants" with the result
that any failure of the Company to comply with the defeased covenants will not
result in a Default or Event of Default.
The discharge is effected by irrevocably depositing with the Trustee in
trust an amount, either in cash or in Government Obligations (as defined
below) or in a combination of the two, which will provide money in an amount
sufficient to pay the principal of (and premium or Make-Whole Amount, if any)
and interest on the Debt Securities, and any mandatory sinking fund or
analogous payments on the Debt Securities, on the scheduled dates of payment.
The cash and Governmental Obligations deposited with the Trustee must be
denominated in the currency, currencies, currency units or composite
currencies in which the series is payable.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency (as defined in the Indentures) in which the Debt Securities of a
particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United
17
<PAGE>
States of America or the government which issued the Foreign Currency in which
the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian
with respect to any such Government Obligation or a specific payment of
interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt.
As a condition to either type of defeasance, the Company must deliver to the
applicable Trustee an Opinion of Counsel (as specified in each Indenture) to
the effect that the Holders of the Debt Securities will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to United States federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax laws occurring after the date of
such Indenture.
If, after either type of defeasance has been effected with respect to an
issue of Debt Securities, the currency in which such issue is to be paid
changes either as a result of an election which a Holder of a security of that
series is entitled to make or as a result of a "Conversion Event" (as defined
below), then the indebtedness represented by the Securities will be fully
discharged and satisfied through the payment of the principal of (and premium
or Make-Whole Amount, if any) and interest on the Securities as they become
due by converting the amounts provided by the trust into the new currency or
currency unit at the exchange rate current at that time.
Unless otherwise provided in a Prospectus Supplement, "Conversion Event"
means the cessation of use of (i) a currency, currency unit or composite
currency issued by the government of one or more countries other than the
United States both by the government of the country that issued such currency
and for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, or (ii) the
ECU, both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community, or
(iii) any currency unit or composite currency for the purposes for which it
was established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium or Make-Whole Amount, if
any) and interest (and Additional Amounts, if any) on any Debt Security that
is payable in a Foreign Currency that ceases to be used by its government of
issuance shall be made in United States dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than with respect to a
covenant as to which there has been covenant defeasance, the amount on deposit
with the Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their Stated Maturity but may not be sufficient to
pay amounts due on such Debt Securities at the time of the acceleration
resulting from such Event of Default. However, the Company would remain liable
to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting defeasance or covenant defeasance, including any modifications
to the provisions described above.
Conversion and Exchange Rights
The terms on which Debt Securities of any series are convertible into or
exchangeable for Common Stock or other securities or property of the Company
will be set forth in the Prospectus Supplement relating thereto.
18
<PAGE>
Such terms shall include the conversion or exchange price (or manner of
calculation thereof), the exchange or conversion period, provisions as to
whether conversion or exchange is mandatory, at the option of the Holder or at
the option of the Company, and may include provisions pursuant to which the
number of shares, other securities or property of the Company to be received
by the Holders of Debt Securities would be calculated. The conversion or
exchange price of any Debt Securities of any series that is convertible into
Common Stock, Preferred Stock, Depositary Shares of the Company may be
adjusted for any stock dividends, stock splits, reclassification, combinations
or similar transactions, as set forth in the applicable Prospectus Supplement.
Governing Law
The Indentures are governed by and shall be construed in accordance with the
laws of the State of New York.
Redemption of Debt Securities
The Prospectus Supplement for a series of Debt Securities will describe the
terms pursuant to which the Securities of that series may be redeemed: whether
mandatory or at the option of the Company, whether in whole or in part and at
what price or Make-Whole Amount. The Indentures specify the procedures for
effecting a redemption.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have
been made available on such redemption date, such Debt Securities will cease
to bear interest on the date fixed for such redemption specified in such
notice, and the only right of the Holders of the Debt Securities will be to
receive payment of the Redemption Price (as defined in the Indentures).
The Trustee
The First National Bank of Chicago is one of a number of banks with which
the Company and its subsidiaries maintain banking relationships in the
ordinary course of business. The Company's banking relationship with The First
National Bank of Chicago includes existing trustee relations, general lending
activities, and general banking services. Upon the occurrence of an Event of
Default or an event which, after notice or lapse of time or both, would become
an Event of Default under a series of Debt Securities, or upon the occurrence
of a default under such other indenture, the Trustee may be deemed to have a
conflicting interest with respect to the Debt Securities for purposes of the
Trust Indenture Act and, accordingly, may be required to resign as Trustee
under one or both of the Indentures. In that event, the Company would be
required to appoint a successor Trustee.
19
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The following describes generally the terms of the Preferred Stock. The
particular terms of the Preferred Stock offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the
Preferred Stock so offered will be described in the Prospectus Supplement
relating to such Preferred Stock.
General
Under the Company's Amended and Restated Charter (the "Charter") and Amended
and Restated Bylaws (the "Bylaws"), which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, the Board of
Directors of the Company is authorized without further shareholder action to
adopt resolutions providing for the issuance of up to 10,000,000 shares of
Preferred Stock, in one or more series, with such voting powers, full or
limited, and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as may be determined by the Board of Directors. As of the date
of this Prospectus, the Company had no shares of Preferred Stock outstanding.
The Company has established a series of Preferred Stock, par value $1.00 per
share, designated as the Series C Junior Preferred Stock ("Series C Junior
Preferred Stock") consisting of 1,500,000 shares to be issued under certain
circumstances involving a potential change in control of the Company. The
terms of the Series C Junior Preferred Stock are described below under "Series
C Junior Preferred Stock."
The Prospectus Supplement relating to the particular series of Preferred
Stock offered will describe the specific terms, including, where applicable:
(i) the title, designation, number of shares and stated value of such
Preferred Stock; (ii) the price at which such Preferred Stock will be issued;
(iii) the dividend rates (or method of calculation) and dates on which
dividends shall be payable, whether such dividends will be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall
commence to cumulate; (iv) the dates on which the Preferred Stock will be
subject to redemption and the redemption price; (v) any redemption or sinking
fund provisions; (vi) whether the Preferred Stock is convertible or
exchangeable and, if so, the securities or rights into which such Preferred
Stock is convertible or exchangeable (which may include other Preferred Stock,
Senior Debt Securities, Subordinated Debt Securities, Common Stock or other
securities or rights of the Company (including rights to receive payment in
cash or securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or securities of other issuers or a
combination of the foregoing), and the terms and conditions upon which such
conversions or exchanges will be effected including the initial conversion or
exchange prices or rates, the conversion or exchange period and any other
related provisions; (vii) if other than the currency of the United States of
America, the currency or currencies including composite currencies in which
such Preferred Stock is denominated and/or in which payments will or may be
payable; (viii) the method by which amounts in respect of such Preferred Stock
may be calculated and any commodities, currencies or indices, or value, rate
or price, relevant to such calculation; (ix) the place or places where
dividends and other payments on the Preferred Stock are payable and the
identity of the transfer agent, registrar and dividend disbursement agent for
the Preferred Stock; (x) any additional dividend, liquidation, redemption,
sinking fund, voting and other rights, preferences, privileges, limitations
and restrictions.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Preferred Stock, each series of Preferred Stock will rank
on a parity in all respects with each other series of Preferred Stock. See
"Series C Junior Preferred Stock," below.
Dividends
Holders of Preferred Stock will be entitled to receive cash dividends, when
and as declared by the Board of Directors of the Company out of assets of the
Company legally available for payment, at such rates and on such dates as will
be set forth in the applicable Prospectus Supplement. Each dividend will be
payable to holders of record as they appear on the stock books of the Company
on the record dates fixed by the Board of Directors of the Company. Different
series of the Preferred Stock may be entitled to dividends at different rates
or based upon different methods of determination. Such rate may be fixed or
variable or both. Dividends on any series of
20
<PAGE>
the Preferred Stock may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating thereto. Except as provided in the related
Prospectus Supplement no series of Preferred Stock will be entitled to
participate in the Company's earnings or assets.
Liquidation Rights
Unless otherwise stated in the applicable Prospectus Supplement, in the
event of any voluntary or involuntary liquidation, dissolution or winding up
of the Company, the holders of each series of Preferred Stock will be entitled
to receive out of assets of the Company available for distribution to
shareholders, before any distribution of assets is made to holders of Common
Stock or any other class of stock ranking junior to such series of Preferred
Stock, liquidating distributions in the amount of the stated value per share
(as set forth in the applicable Prospectus Supplement) plus all accrued and
unpaid dividends up to the date fixed for distribution for the current
dividend period and, if such series of the Preferred Stock is cumulative, for
all dividend periods prior thereto, all as set forth in the Prospectus
Supplement with respect to such shares. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable
with respect to a series of Preferred Stock and any other shares of stock of
the Company ranking as to any distribution on a parity with such series of
Preferred Stock are not paid in full, the holders of such series of Preferred
Stock and of such other shares will share ratably in any such distribution of
assets of the Company in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company.
Neither the sale, conveyance, exchange or transfer of all or substantially
all the property and assets of the Company, the consolidation or merger of the
Company with or into any other corporation, nor the merger or consolidation of
any other corporation into or with the Company shall be deemed to be a
liquidation, dissolution or winding up of the Company.
Redemption and Sinking Fund
The terms, if any, on which shares of a series of Preferred Stock may be
subject to optional or mandatory redemption, in whole or in part, or have the
benefit of a sinking fund, will be set forth in the Prospectus Supplement
relating to such series.
Voting Rights
Except as indicated below or in the applicable Prospectus Supplement, or
except as expressly required by applicable law, the holders of the Preferred
Stock issued pursuant to this Prospectus and any Prospectus Supplement will
not be entitled to vote.
Conversion and Exchange Rights
The terms, if any, on which shares of any series of Preferred Stock are
convertible or exchangeable will be set forth in the Prospectus Supplement
relating thereto. The Prospectus Supplement will describe the securities or
rights into which such shares of Preferred Stock are convertible or
exchangeable (which may include other Preferred Stock, Debt Securities,
Depositary Shares, Common Stock or other securities or rights of the Company
(including rights to receive payment in cash or securities based on the value,
rate or price of one or more specified commodities, currencies or indices) or
securities of other issuers or a combination of the foregoing). Such terms may
include provisions for conversion, either mandatory, at the option of the
holder, or at the option of the Company, in which case the consideration to be
received by the holders of Preferred Stock would be calculated as of a time
and in the manner stated in the Prospectus Supplement.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for the
Preferred Stock will be designated in the applicable Prospectus Supplement.
21
<PAGE>
Series C Junior Preferred Stock
Pursuant to the Company's Charter, the Series C Junior Preferred Stock
consists of 1,500,000 shares of authorized Preferred Stock. No shares of
Series C Junior Preferred Stock have been issued, and unless indicated
otherwise in a Prospectus Supplement, the Company is aware of no facts
suggesting that issuance of such shares may be imminent. Any increase in the
number of authorized shares of Series C Junior Preferred Stock does not
require approval of the Company's shareholders under the Tennessee Business
Corporation Act (the "TBCA"). The ability of the Board of Directors of the
Company to issue Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company.
The following summary of the Series C Junior Preferred Stock is qualified in
its entirety by reference to the Charter, the Bylaws, and the applicable
provisions of the TBCA. Capitalized terms used but not defined herein shall
have the meanings set forth in the Charter, the Bylaws and the TBCA.
Rights Agreement. On March 28, 1995, the Board of Directors of the Company
declared a dividend distribution of one right (a "Right") for each share of
Common Stock pursuant to a Rights Agreement (the "Rights Agreement") dated as
of March 28, 1995 between the Company and Union Planters Bank, N.A., as Rights
Agent. Each Right entitles the holder to purchase from the Company one one-
hundredth (1/100) of a share of Series C Preferred Stock at a price of $85
per one one-hundredth (1/100) of a share. The Rights Agreement was amended on
March 25, 1998 by Amendment No. 1 to the Rights Agreement to increase the
exercise price of the Rights to $278 per one one-hundredth (1/100) of a share
of Series C Junior Preferred Stock, subject to adjustment. Initially, the
Rights are not exercisable. However, they will become exercisable if, without
the prior approval of the Board of Directors of the Company, any person either
acquires 20% or more of the shares of Common Stock then outstanding or
commences a tender or exchange offer which, if successfully consummated, would
result in such person's acquisition of 20% or more of the shares of Common
Stock then outstanding. The Rights are generally designed to deter coercive
takeover tactics and to encourage all persons interested in potentially
acquiring control of the Company to treat each shareholder on a fair and equal
basis.
Dividends and Distributions. Subject to any shares of a series of Preferred
Stock (or any similar stock) ranking senior to the Series C Junior Preferred
Stock with respect to dividends, each share of Series C Junior Preferred
Stock, if issued, would be entitled to receive quarterly dividends on the
first day of March, June, September and December in each year (each, a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the issuance of such share of Series C Junior Preferred
Stock in an amount per share (rounded to the nearest cent) equal to the
greater of: (a) $1.00, or (b) 100 times the aggregate per share amount of all
cash and non-cash dividends or distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series C Junior Preferred Stock.
In the event the Company declares a dividend on the Common Stock that is
payable in shares of Common Stock, or effects a subdivision, combination or
consolidation of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, the amount to which holders of shares
of Series C Junior Preferred Stock will be entitled under clause (b) of the
preceding paragraph shall be adjusted by multiplying such amount by a fraction
(the "Adjustment Multiplier"), the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Dividend payments on shares of Series C Junior Preferred Stock are in
preference to the holders of Common Stock and of any other junior stock. In
addition, such dividends will accrue and be cumulative on outstanding shares
of Series C Junior Preferred Stock. However, any accrued but unpaid dividends
shall not bear interest.
22
<PAGE>
Dividends paid on the shares of Series C Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable
on such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding.
In the event that dividends or other distributions payable on the Series C
Junior Preferred Stock are in arrears, thereafter and until all accrued and
unpaid dividends have been paid in full, the Company is prohibited from:
(i) declaring dividends or making any distributions on any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Junior Preferred Stock;
(ii) declaring dividends or making any distributions on any shares of
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Junior
Preferred Stock, except dividends paid ratably on the Series C
Junior Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeeming or otherwise acquiring for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Junior Preferred Stock,
provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (as to dividends
and upon dissolution, liquidation and winding up) to the Series C
Junior Preferred Stock; or
(iv) redeeming or otherwise acquiring for consideration any shares of
Series C Junior Preferred Stock, or any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series C Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
to all holders of such shares upon such terms as the Board, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
Liquidation Preference. Upon any liquidation, dissolution or winding up of
the Company, the Company is prohibited from making a distribution (1) to the
holders of shares of stock ranking junior to the Series C Junior Preferred
Stock unless, prior thereto, the holders of shares of Series C Junior
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon; provided that the
holders of shares of Series C Junior Preferred Stock are entitled to receive
an aggregate amount per share equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity with the Series C Junior
Preferred Stock except distributions made ratably on the Series C Junior
Preferred Stock and all such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
In the event the Company declares or pays a dividend on the Common Stock
payable in shares of Common Stock, or effects a subdivision, combination or
consolidation of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, the aggregate amount to which holders
of shares of Series C Junior Preferred Stock would otherwise be entitled
pursuant to clause (1) above will be adjusted by multiplying such amount by
the Adjustment Multiplier.
Voting Rights. Each share of Series C Junior Preferred Stock is entitled to
100 votes on all matters submitted to a vote of the Company's shareholders;
provided, however, that, in the event the Company at any time declares a
dividend on the Common Stock payable in shares of Common Stock, or effects a
subdivision, combination or consolidation of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, the number of
votes per share of Series C Junior Preferred Stock will be adjusted by
multiplying such number by the Adjustment Multiplier.
23
<PAGE>
Mergers, Consolidations and Certain Other Transactions. In the case of a
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, each share of Series C Junior Preferred Stock is
entitled to be similarly exchanged or changed into an amount per share equal
to 100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
Redemption. The shares of Series C Junior Preferred Stock are not
redeemable.
Rank. The Series C Junior Preferred Stock rank, with respect to the payment
of dividends and the distribution of assets, junior to all series of any other
class of the Company's Preferred Stock.
Amendment. The Charter of the Company may not be amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series C Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least a majority of the outstanding
shares of Series C Junior Preferred Stock, voting together as a single class.
DESCRIPTION OF DEPOSITARY SHARES
The Company may, at its option, elect to offer fractional interests in
shares of a series of Preferred Stock as Depositary Shares, rather than full
shares of Preferred Stock. In such event, receipts ("Depositary Receipts") for
such Depositary Shares will be issued, each of which will represent a fraction
of a share of a particular series of Preferred Stock, as described in the
related Prospectus Supplement.
Shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and the depositary (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Depositary with respect to such Depositary Shares.
Subject to the terms of the Deposit Agreement, each holder of a Depositary
Share will be entitled, in proportion to the applicable fraction of a share of
Preferred Stock represented by such Depositary Share, to all the rights and
preferences of the Preferred Stock represented thereby (including dividend,
voting, conversion or exchange, redemption, and liquidation rights, if any).
Depositary Shares will be evidenced by Depositary Receipts issued pursuant
to the applicable Deposit Agreement. Immediately following the issuance and
delivery of the Preferred Stock by the Company to a Depositary, the Company
will cause such Depositary to issue, on behalf of the Company, the Depositary
Receipts. Copies of the applicable form of Deposit Agreement and Depositary
Receipt may be obtained from the Company upon request, and the statements made
hereunder relating to the Deposit Agreement and the Depositary Receipt to be
issued thereunder are summaries of certain anticipated provisions thereof and
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, all of the provisions of the applicable Deposit
Agreement and related Depositary Receipts.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of a series of Preferred Stock to the
record holders of Depositary Receipts relating to such Preferred Stock in
proportion to the number of such Depositary Receipts owned by such holders on
the relevant Record Date, subject to certain obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to such Preferred Stock Depositary. The Preferred Stock Depositary
shall distribute only such amount, however, as can be distributed without
attributing to any holder of Depositary Shares a fraction of one cent, and the
balance not so distributed shall be added to and treated as part of the next
sum received by the Preferred Stock Depositary for distribution to record
holders of Depositary Shares.
24
<PAGE>
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares in an equitable manner, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary, with the Company's approval, may
sell such property and distribute the net proceeds from such sale to such
holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to the holders of Depositary
Shares.
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption, or converted or exchanged), the holders
thereof will be entitled to delivery at such office, to or upon each such
holder's order, of the number of whole or fractional shares of the class or
series of Preferred Stock and any money or other property represented by the
Depositary Shares evidenced by such Depositary Receipts. Holders of Depositary
Receipts will be entitled to receive whole or fractional shares of the related
class or series of Preferred Stock on the basis of the proportion of Preferred
Stock represented by each Depositary Share as specified in the applicable
Prospectus Supplement, but holders of such shares of Preferred Stock will not
thereafter be entitled to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of Preferred Stock to be withdrawn, the Preferred Stock Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing
such excess number of Depositary Shares.
Redemption of Depositary Shares
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Preferred Stock Depositary resulting from the redemption, in
whole or in part, of such class or series of Preferred Stock held by the
Preferred Stock Depositary. The Preferred Stock Depositary shall mail notice
of redemption not less than 30 and not more than 60 days prior to the date
fixed for redemption to the record holders of the Depositary Shares to be so
redeemed at their respective addresses appearing in the Preferred Stock
Depositary's books. The redemption price per Depositary Share will be equal to
the applicable fraction of the redemption price and other amounts, if any per
share payable with respect to such class or series of Preferred Stock.
Whenever the Company redeems Preferred Stock held by the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same
redemption date the number of Depositary Shares representing Preferred Stock
so redeemed. If fewer than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined to be equitable by the Preferred Stock Depositary.
From and after the date fixed for redemption, the Depositary Shares so
called for redemption will no longer be outstanding, and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
money, securities, or other property payable upon such redemption and any
money, securities, or other property to which the holders of such Depositary
Shares were entitled upon such redemption upon surrender to the Preferred
Stock Depositary of the Depositary Receipts evidencing such Depositary Shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting at which the holders of a class or
series of Preferred Stock are entitled to vote, the Preferred Stock Depositary
will mail the information contained in such notice of meeting to the record
holders of the Depositary Receipts evidencing the Depositary Shares of such
class or series of Preferred Stock. Each record holder of such Depositary
Receipts on the record date (which will be the same date as the record date
for the related class or series of Preferred Stock) will be entitled to
instruct the Preferred Stock Depositary as to the exercise of the voting
rights pertaining to the amount of Preferred Stock represented by such
holder's Depositary Shares. The Preferred Stock Depositary will endeavor,
insofar as practicable, to vote
25
<PAGE>
the number of shares of Preferred Stock represented by such Depositary Shares
in accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the Preferred Stock to the
extent it does not receive specific instructions from the holder of Depositary
Shares representing such shares of Preferred Stock. The Preferred Stock
Depositary will not be responsible for any failure to carry out any
instruction to vote, or for the manner or effect of any such vote made, as
long as any such action or non-action is in good faith and does not result
from the negligence or willful misconduct of the Stock Depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will
be entitled to the fraction of the liquidation preference accorded each share
of related Preferred Stock as set forth in the applicable Prospectus
Supplement.
Conversion of Preferred Stock
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of the Company. Nevertheless, if so specified
in a Prospectus Supplement relating to an offering of Depositary Shares, the
Depositary Receipts may be surrendered by the holders thereof to the Preferred
Stock Depositary with written instructions directing the Company to cause
conversion of a class or a series of Preferred Stock represented by the
related Depositary Shares into whole shares of Common Stock, other shares of a
class or series of Preferred Stock of the Company or other shares of stock.
Upon receipt of such instructions and any amounts payable in respect thereof,
the Company will cause such conversion utilizing the same procedures as those
provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in
part only, a Depositary Receipt or Receipts will be issued for any Depositary
Shares not converted. No fractional shares of Common Stock will be issued upon
conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of
the fractional interest based upon the closing price of the Common Stock on
the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may be amended at any time by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
which materially and adversely alters the rights of the holders of Depositary
Receipts or that would be materially and adversely inconsistent with the
rights of holders of the underlying Preferred Stock will be ineffective,
unless such amendment has been approved by the holders of at least a majority
of the Depositary Shares then outstanding. No amendment shall impair the
right, subject to certain anticipated exceptions in the Deposit Agreement, of
any holder of Depositary Receipts to surrender any Depositary Receipt with
instructions to deliver to the holder the related class or series of Preferred
Stock and all money and other property, if any, represented thereby, except in
order to comply with law. Every holder of any outstanding Depositary Receipt
at the time any such amendment becomes effective shall be deemed, by
continuing to hold such Depositary Receipt, to consent and agree to such
amendment and to be bound by the applicable Deposit Agreement as amended
thereby.
The Deposit Agreement may be terminated by the Company upon not less than 30
days prior written notice to the Preferred Stock Depositary if a majority of
each class or series of Preferred Stock subject to such Deposit Agreement
consents to such termination, whereupon the Preferred Stock Depositary will
deliver or make available to each holder of Depositary Receipts, upon
surrender of the Depositary Receipts held by such holder, such number of whole
or fractional shares of Preferred Stock as are represented by the Depositary
Shares evidenced by such Depositary Receipts, together with any other property
held by the Preferred Stock Depositary with respect to such Depositary
Receipts. The Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares related thereto have been redeemed, (ii) there
has been a final distribution in
26
<PAGE>
respect of the Preferred Stock in connection with any liquidation, dissolution
or winding up of the Company and such distribution has been distributed to the
holders of the related Depositary Receipts, or (iii) each share of the related
Preferred Stock has been converted into Company stock not so represented by
Depositary Shares.
Charges of Depositary
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Depositary Agreement. The Company
will pay the Preferred Stock Depositary's fees and charges in connection with
the initial deposit of the Preferred Stock and issuance of Depositary
Receipts, all withdrawals of Preferred Stock by owners of Depositary Shares
and any redemption of the Preferred Stock. Holders of Depositary Receipts will
pay all other transfer and other taxes, governmental charges, and fees and
charges of the Preferred Stock Depositary that are not expressly provided for
in the Deposit Agreement.
Resignation and Removal of Depositary
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depositary, any such resignation or removal to take
effect upon the appointment of a successor Depositary and such successor
Depositary's acceptance of the appointment. Such successor Depositary must be
appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least
$50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward all reports and communications
from the Company which are delivered to the Preferred Stock Depositary and
which the Company is required or otherwise determines to furnish to the
holders of the Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing in good faith their duties thereunder (in the case of
any action or inaction in the voting of a class or series of Preferred Stock
represented by the Depositary Shares), gross negligence or willful misconduct.
The Company and the Preferred Stock Depositary will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares,
Depositary Receipts or shares of any Preferred Stock represented thereby,
unless satisfactory indemnity is furnished. The Company and the Preferred
Stock Depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting shares of Preferred Stock for
deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine.
DESCRIPTION OF COMMON STOCK
The following description of the terms of the Common Stock sets forth
certain general rules and provisions of the Common Stock as contained in the
Charter and Bylaws and is qualified in its entirety by reference to the
Charter and Bylaws.
The Company is authorized to issue an aggregate of 500,000,000 shares of
Common Stock. As of February 5, 1999, there were 144,778,145 shares of Common
Stock outstanding held by approximately 2,527 shareholders of record. All
outstanding shares of Common Stock are fully paid and nonassessable. The
Common Stock is listed on the NYSE under the symbol "SKS."
27
<PAGE>
General
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of any series of Preferred Stock, whether currently outstanding or
designated and issued in the future. See "Description of Preferred Stock."
Dividends
Subject to the preferences of holders of Preferred Stock, including the
Series C Junior Preferred Stock, holders of Common Stock are entitled to
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor.
Voting Rights
Except as otherwise provided by law or by the designation of the
preferences, limitations and relative rights of any series of Preferred Stock,
the voting power of the Company is held by the holders of Common Stock. Each
holder of Common Stock is entitled to one vote for each share held. Holders of
Common Stock are not entitled to cumulative voting rights and, therefore,
holders of a plurality of shares voting in the election of directors may elect
the entire class of the Board of Directors standing for election at a
shareholders' meeting at which a quorum is present. In that event, holders of
the remaining shares of Common Stock would not be able to elect any director
to the Board of Directors. The Company's Charter requires that its Board of
Directors be staggered, consisting of three classes of directors which are as
nearly equal in number as possible. See "Anti-Takeover Provisions in the
Company's Charter and Bylaws--Staggered Board of Directors."
Liquidation and Dissolution
Except as otherwise provided by the designation of the preferences,
limitations and relative rights of any series of Preferred Stock, including
the Series C Junior Preferred Stock, in the event of any liquidation,
dissolution, or winding up of the Company, whether voluntary or involuntary,
after payment has been made to the holders of each series of Preferred Stock
of the full amount to which they are entitled, the holders of shares of Common
Stock will be entitled to share, ratably according to the number of shares of
Common Stock held by them, in all remaining assets if available for
distribution to holders of the Common Stock. Shares of the Series C Junior
Preferred Stock have a liquidation preference as described under "Description
of Preferred Stock--Series C Junior Preferred Stock--Liquidation Preference."
Indemnification
Article XII of the Charter and Article IV of the Bylaws provide that a
director or officer of the Company may be indemnified to the maximum extent
now or hereafter permitted by the TBCA. The Commission has taken the position
that similar provisions added to other corporations' articles of incorporation
would not protect those corporations' directors from liability for violations
of the federal securities laws. The Company has included this provision in its
Charter to provide its directors with the maximum indemnification made
available by the TBCA. It is believed that this provision will help the
Company to attract and retain as directors the persons most qualified for
those positions.
Transfer Agent
The transfer agent and registrar for the Common Stock is Union Planters
Bank, N.A.
Certain Provisions of Tennessee Law Regarding Takeovers
As a Tennessee corporation, the Company is subject to certain provisions of
Tennessee law which may discourage or render more difficult an unsolicited
takeover of the Company. These provisions include Tennessee's Business
Combination Act, Control Share Acquisition Act, Investor Protection Act and
Greenmail Act.
28
<PAGE>
Business Combination Act. Tennessee's Business Combination Act (the
"Business Combination Act") provides that a party owning 10% or more of stock
in a "resident domestic corporation" (such party is called an "interested
shareholder") cannot engage in a business combination with the resident
domestic corporation unless the combination (i) takes place at least five
years after the interested shareholder first acquired 10% or more of the
resident domestic corporation, and (ii) either (A) is approved by at least 2/3
of the noninterested voting shares of the resident domestic corporation or (B)
satisfies certain fairness conditions specified in the Business Combination
Act.
These provisions apply unless one of two events occurs. A business
combination with an entity can proceed without delay when approved by the
target corporation's board of directors before that entity becomes an
interested shareholder, or the resident corporation may enact a charter
amendment or bylaw to remove itself entirely from the Business Combination
Act. This charter amendment or by-law must be approved by a majority of the
shareholders who have held shares for more than one year prior to the vote. It
may not take effect for at least two years after the vote. The Company has not
adopted a provision in its Charter or Bylaws removing the Company from
coverage under the Business Combination Act.
The Business Combination Act further provides an exemption from liability
for officers and directors of resident domestic corporations who do not
approve proposed business combinations or charter amendments and by-laws
removing their corporations from the Business Combination Act's coverage as
long as the officers and directors act in "good faith belief" that the
proposed business combination would adversely affect their corporation's
employees, customers, suppliers, or the communities in which their corporation
operates and such factors are permitted to be considered by the board of
directors under the charter. The Company's Charter presently contains no
provisions relating to the Board's consideration of such factors.
Control Share Acquisition Act. The Tennessee Control Share Acquisition Act
("TCSAA") strips a purchaser's shares of voting rights any time an acquisition
of shares in a covered Tennessee corporation brings the purchaser's voting
power to one-fifth, one-third or a majority of all voting power. The
purchaser's voting rights can be reestablished only by a majority vote of the
other shareholders. The purchaser may demand a special meeting of shareholders
to conduct such a vote. The purchaser can demand such a meeting before
acquiring a control share only if it holds at least 10% of outstanding shares
and announces a good faith intention to make the control share acquisition. A
target corporation may or may not redeem the purchaser's shares if the shares
are not granted voting rights. The TCSAA applies only to a corporation that
has adopted a provision in its charter or by-laws expressly declaring that the
TCSAA will apply. The Company has not adopted any provision in its Charter or
Bylaws electing protection under the TCSAA.
Investor Protection Act. Tennessee's Investor Protection Act ("TIPA")
applies to tender offers directed at corporations (called "offeree companies")
that have "substantial assets" in Tennessee and that are either incorporated
in or have a principal office in Tennessee. By virtue of its incorporation
under the laws of the State of Tennessee, the Company is subject to the
provisions of the TIPA.
The TIPA requires an offeror making a tender offer for an offeree company to
file with the Commissioner of Commerce and Insurance (the "Commissioner") a
registration statement. When the offeror intends to gain control of the
offeree company, the registration statement must indicate any plans the
offeror has for the offeree. The Commissioner may require additional
information material to the takeover offer and may call for hearings. The TIPA
does not apply to an offer that the offeree company's board of directors
recommends to shareholders.
In addition to requiring the offeror to file a registration statement with
the Commissioner, the TIPA requires the offeror and the offeree company to
deliver to the Commissioner all solicitation materials used in connection with
the tender offer. The TIPA prohibits "fraudulent, deceptive, or manipulative
acts or practices" by either side, and gives the Commissioner standing to
apply for equitable relief to the Chancery Court of Davidson County,
Tennessee, or to any other chancery court having jurisdiction whenever it
appears to the Commissioner that the offeror, the offeree company, or any of
its respective affiliates has engaged in or is about to engage in a violation
of the TIPA. Upon proper showing, the Chancery Court may grant injunctive
relief. The TIPA further provides civil and criminal penalties for violations.
29
<PAGE>
Greenmail Act. The Tennessee Greenmail Act ("TGA") applies to any
corporation (including the Company) chartered under the laws of Tennessee
which has a class of voting stock registered or traded on a national
securities exchange or registered with the Commission pursuant to Section
12(g) of the Exchange Act. The TGA provides that it is unlawful for any
corporation or subsidiary to purchase, either directly or indirectly, any of
its shares at a price above the market value, as defined in the TGA, from any
person who holds more than 3% of the class of the securities purchased if such
person has held such shares for less than two years, unless either the
purchase is first approved by the affirmative vote of a majority of the
outstanding shares of each class of voting stock issued or the corporation
makes an offer of at least equal value per share to all holders of shares of
such class.
Anti-Takeover Provisions in the Company's Charter and Bylaws
Removal of Directors. The Company's Charter and Bylaws provide that any or
all directors may be removed only for cause (as defined in the TBCA) by a vote
of a majority of the shareholders entitled to vote thereon.
Staggered Board of Directors. The Company's Charter requires that its Board
of Directors be staggered, consisting of three classes of directors which are
as nearly equal in number as possible. The initial terms of the Class I, Class
II and Class III directors expire at the Company's annual meeting of
shareholders in the years 1998, 1999 and 2000, respectively. Thereafter,
directors of each class are elected for terms of three years. The Company's
Charter also provides that the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding capital stock, voting together as
a single class, is required to amend or repeal, or adopt any provision
inconsistent with, the provision of the Company's Charter requiring a
staggered Board of Directors.
Required Shareholder Vote for Authorization of Certain Actions. The TBCA
provides that the approval of the Company's Board of Directors and of a
majority of the outstanding shares of the Company's Common Stock entitled to
vote thereon would generally be required to approve a merger or to sell,
lease, exchange or otherwise dispose of substantially all of the Company's
assets. However, the Company's Charter provides that, except under specified
circumstances, the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding shares of capital stock entitled to vote
in the election of directors, voting together as a single class, is required
for the approval of (i) certain mergers or consolidations, (ii) certain sales,
leases, exchanges, mortgages, pledges or other dispositions of the assets of
the Company, (iii) the adoption of a plan for the liquidation of the Company,
(iv) certain reclassifications of the Company's securities and certain
recapitalizations and (v) any agreement providing for the foregoing.
No Shareholder Action by Written Consent. The Company's Charter and Bylaws
require that any shareholder action must be effected at a duly called annual
or special meeting and may not be effected by written consent.
Authorized Capital Stock. The Company's Charter authorizes the issuance of
up to 500,000,000 shares of Common Stock and up to 10,000,000 shares of
Preferred Stock. Such shares may be issued by the Company's Board of Directors
without further action or authorization by the Company's shareholders, unless
such action is required in a particular case by applicable laws or regulations
or by any stock exchange upon which the Company's capital stock may be listed
and the directors may fix the voting rights, conversion rights, and other
terms thereof without shareholder approval. Preferred Stock will be issuable
in one or more classes or series, with each class or series having such rights
and preferences as the Company's Board of Directors may fix and determine by
resolution.
This authority of the Board of Directors to issue additional shares of
Common Stock and Preferred Stock will provide the Company with the flexibility
necessary to meet its future needs without the time delay resulting from
seeking shareholder approval unless otherwise required. The unissued shares of
Common Stock and Preferred Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefit and compensation plans, acquisitions, and public
or private sales for
30
<PAGE>
stock ownership of persons seeking to obtain control of the Company. In
addition, the sale of a substantial number of shares of Common Stock to
persons who have an understanding with the Company concerning the voting of
such shares, or the discriminatory distribution or dividend of shares of
Common Stock (or the right to receive Common Stock) to the shareholders of the
Company, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of the Company. The issuance of
Preferred Stock may also, under certain circumstances, have an anti-takeover
effect, particularly if such stock has broad class voting rights or a
substantial number of votes per share.
The actual effect of any issuance of Preferred Stock upon the rights of
holders of Common Stock cannot be specified because the Company's Board of
Directors has not determined the issuance prices or terms or the rights of the
holders of any Preferred Stock, other than the Series C Junior Preferred
Stock. Such effects might include:
(i) restrictions on Common Stock dividends if Preferred Stock dividends
have not been paid;
(ii) dilution of the voting power and equity interest of current holders
of Common Stock to the extent that any Preferred Stock has voting
rights or is convertible into Common Stock; and
(iii) current holders of all the shares of Common Stock not being
entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preferences granted to holders of
Preferred Stock.
Rights Agreement. The Company has adopted and implemented a Rights Agreement
that is generally designed to deter coercive takeover tactics and to encourage
all persons interested in potentially acquiring control of the Company to
treat each shareholder on a fair and equal basis. See "Description of
Preferred Stock--Series C Junior Preferred Stock--Rights Agreement."
Effect Of Anti-Takeover Provisions. Certain provisions of the Company's
Charter, Bylaws and Rights Agreement may tend to discourage certain kinds of
unsolicited takeover bids for the Company, including some tender offers which
shareholders may feel would be in their best interests, and may tend to
perpetuate present management. Certain provisions of the TBCA may be deemed to
have an "anti-takeover" effect as well. These provisions affect shareholder
rights and should be given careful attention. They may have the effect of
delaying a tender offer or takeover attempt that a shareholder might consider
in his or her best interest, including those attempts that might result in a
premium over the current market price for the shares held by shareholders. See
"Description of Preferred Stock" and "Description of Common Stock" generally.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general rules and provisions of the Warrants to which any Prospectus
Supplement may relate. Particular terms of the Warrants offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Warrants so offered will be described in the Prospectus
Supplement relating to such Warrants.
General
The Company may issue Warrants to purchase Senior Debt Securities,
Subordinated Debt Securities, Preferred Stock, Depositary Shares, Common Stock
or any combination thereof (collectively, the "Underlying Warrant
Securities"), and such Warrants may be issued independently or together with
any such Underlying Warrant Securities and may be attached or separate from
such Underlying Warrant Securities. Each series of Warrants will be issued
under a separate warrant agreement (each a "Warrant Agreement") to be entered
into between the Company and a warrant agent ("Warrant Agent"). The Warrant
Agent will act solely as an agent of the Company in connection with the
Warrants of such series and will not assume any obligation or relationship of
agency for or with holders or beneficial owners of Warrants.
The applicable Prospectus Supplement will describe the terms of any Warrants
in respect of which this Prospectus is being delivered, including the
following: (i) the title of such Warrants; (ii) the aggregate number of
31
<PAGE>
such Warrants; (iii) the price or prices at which such Warrants will be
issued; (iv) the currency or currencies, including composite currencies, in
which the price of such Warrants may be payable; (v) the designation and terms
of the Underlying Warrant Securities purchasable upon exercise of such
Warrants and the number of such Underlying Warrant Securities issuable upon
exercise of such Warrants; (vi) the price at which and the currency or
currencies, including composite currencies, in which the Underlying Warrant
Securities purchasable upon exercise of such Warrants may be purchased; (vii)
the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (viii) whether such Warrants will be
issued in registered form or bearer form; (ix) if applicable, the minimum or
maximum amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Underlying Warrant Securities
with which such Warrants are issued and the number of such Warrants issued
with each such Underlying Warrant Security; (xi) if applicable, the date on
and after which such Warrants and the related Underlying Warrant Securities
will be separately transferable; (xii) information with respect to book-entry
procedures, if any; (xiii) if applicable, a discussion of certain United
States federal income tax considerations; (xiv) the procedures and conditions
relating to the exercise of such Warrants; and (xv) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants.
Warrant certificates may be exchanged for new warrant certificates of
different denominations, and Warrants may be exercised at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement. Prior to the exercise of their Warrants, holders of Warrants
exercisable for Debt Securities will not have any of the rights of holders of
the Debt Securities purchasable upon such exercise and will not be entitled to
payments of principal (or premium, if any) or interest, if any, on the Debt
Securities purchasable upon such exercise. Prior to the exercise of their
Warrants for shares of Preferred Stock or Common Stock, holders of such
Warrants will not have any rights of holders of the Preferred Stock or Common
Stock purchasable upon such exercise and will not be entitled to dividend
payments, if any, or voting rights of the Preferred Stock or Common Stock
purchasable upon such exercise.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
The following description of the terms of the Stock Purchase Contracts and
Stock Purchase Units (as defined below) sets forth certain general rules and
provisions of the Stock Purchase Contracts and/or Stock Purchase Units to
which any Prospectus Supplement may relate. Particular terms of the Stock
Purchase Contracts and/or Stock Purchase Units offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to the Stock Purchase Contracts and/or Stock Purchase Units so offered will be
described in the Prospectus Supplement relating to such Stock Purchase
Contracts and/or Stock Purchase Units.
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to
the holders, a specified number of shares of Common Stock at a future date or
dates. The price per share of Common Stock may be fixed at the time the Stock
Purchase Contracts are issued or may be determined by reference to a specific
formula set forth in the Stock Purchase Contracts. The Stock Purchase
Contracts may be issued separately or as a part of units ("Stock Purchase
Units") consisting of a Stock Purchase Contract and (x) Senior Debt Securities
or Subordinated Debt Securities (y) Preferred Securities, or (z) debt
obligations of third parties, including U.S. government or agency securities,
each securing the holders' obligations to purchase the Common Stock under the
Stock Purchase Contracts. The Stock Purchase Contracts may require the Company
to make periodic payments to the holders of the Stock Purchase Units or vice
versa, and such payments may be unsecured or prefunded on some basis. The
Stock Purchase Contracts may require holders to secure their obligations
thereunder in a specified manner.
32
<PAGE>
DESCRIPTION OF PREFERRED SECURITIES
The following description of the terms of the Preferred Securities sets
forth certain general rules and provisions of the Preferred Securities to
which any Prospectus Supplement may relate. Particular terms of the Preferred
Securities offered by any Prospectus Supplement and the extent, if any, to
which such general provisions may apply to the Preferred Securities so offered
will be described in the Prospectus Supplement relating to such Preferred
Securities.
Each of the Proffitt's Trusts may issue, from time to time, only one series
of Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Proffitt's Trust authorizes the
Regular Trustees of each Proffitt's Trust to issue on behalf of the Proffitt's
Trust one series of Preferred Securities. Each Declaration will be qualified
as an indenture under the Trust Indenture Act. The Property Trustee, The First
National Bank of Chicago, an independent trustee, will act as indenture
trustee for the Preferred Securities, to be issued by the Proffitt's Trusts,
for the purposes of compliance with the provisions of the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act, and
which will mirror the terms of the Subordinated Debt Securities held by the
applicable Proffitt's Trust and as described in the Prospectus Supplement
related thereto. Reference is made to the Prospectus Supplement relating to
the Preferred Securities of the applicable Proffitt's Trust for specific
terms, including (i) the distinctive designation of such Preferred Securities;
(ii) the number of Preferred Securities issued; (iii) the annual distribution
rate (or method of determining such rate) for Preferred Securities issued by
the Proffitt's Trust and the date or dates upon which such distributions shall
be payable; provided, however, that distributions on such Preferred Securities
shall be payable on a periodic basis to holders of such Preferred Securities
as of a record date in each period during which such Preferred Securities are
outstanding; (iv) whether distributions on Preferred Securities shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities shall be cumulative;
(v) the amount or amounts which shall be paid out of the assets to the holders
of Preferred Securities upon voluntary or involuntary dissolution, winding-up
or termination of the Proffitt's Trust; (vi) the obligation, if any, of the
Proffitt's Trust to purchase or redeem Preferred Securities and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which, Preferred Securities shall be purchased or redeemed, in
whole or in part, pursuant to such obligation (with such redemption price to
be determined through negotiations among the Company and the Underwriters
based on, among other factors, redemption prices of securities similar to the
Preferred Securities and market conditions generally); (vii) the voting
rights, if any, of Preferred Securities in addition to those required by law,
including the number of votes per Preferred Security and any requirement for
the approval by the holders of Preferred Securities as a condition to
specified action or amendments to the Declaration of the Proffitt's Trust;
(viii) the terms and conditions, if any, upon which the Subordinated Debt
Securities may be distributed to holders of Preferred Securities; (ix) if
applicable, any securities exchange upon which the Preferred Securities shall
be listed; (x) whether Preferred Securities are convertible or exchangeable,
and if so, the securities or rights unto which Preferred Securities are
convertible or exchangeable, and the terms and conditions upon which such
conversions or exchanges will be effected; (xi) the amount by which amounts in
respect of Preferred Securities may be calculated and any commodities,
currencies, currency units or composite currencies, or indices, or value, rate
or price, relevant to such calculation; and (xii) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities
not inconsistent with the Declaration of the Proffitt's Trust or with
applicable law. All Preferred Securities offered will be guaranteed by the
Company to the extent set forth below under "Description of Trust Guarantees."
Each Trust Guarantee of the Company, when taken together with the Company's
obligations under the Subordinated Debt Securities and the relevant
Supplemental Indenture, and its obligations under the applicable Declaration,
including obligations to pay costs, expenses, debts and liabilities of the
related Proffitt's Trust (other than with respect to the Trust Securities),
would provide a full and unconditional guarantee, on a subordinated basis, of
amounts due on Preferred Securities issued by such Proffitt's Trust. Certain
United States federal income tax considerations applicable to any offering of
Preferred Securities will be described in the Prospectus Supplement relating
thereto.
33
<PAGE>
In connection with the issuance of Preferred Securities, the applicable
Proffitt's Trust will issue one series of Common Securities. Each Declaration
authorizes the Regular Trustees to issue on behalf of each of the Proffitt's
Trusts one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities issued by the
Proffitt's Trusts will be substantially identical to the terms of the
Preferred Securities issued by the Proffitt's Trusts and the Common Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities except that, upon an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. Except in certain limited circumstances, the Common Securities
will also carry the right to vote to appoint, remove or replace any of the
Proffitt's Trustees. All of the Common Securities of the Proffitt's Trusts
will be directly or indirectly owned by the Company.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If an Event of Default under a Declaration occurs and is continuing, then
the holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as a holder of the applicable series of
Subordinated Debt Securities against the Company. In addition, the holders of
a majority in liquidation amount of the Preferred Securities will have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Property Trustee or to direct the exercise of any
trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Subordinated Debt Securities. If the
Property Trustee fails to enforce its rights under the applicable series of
Subordinated Debt Securities, a holder of Preferred Securities may, to the
fullest extent permitted by law, institute a legal proceeding directly against
the Company to enforce the Property Trustee's rights under the applicable
series of Subordinated Debt Securities without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default under the applicable
Declaration has occurred and is continuing and such event is attributable to
the failure of the Company to pay interest or principal on the applicable
series of Subordinated Debt Securities on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
applicable series of Subordinated Debt Securities having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder (a "Direct Action") on or after the respective due date specified in
the applicable series of Subordinated Debt Securities. In connection with such
Direct Action, the Company will be subrogated to the right of such holder of
Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action.
DESCRIPTION OF TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust Guarantees
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Preferred Securities. Each Trust Guarantee will
be qualified as an indenture under the Trust Indenture Act. The First National
Bank of Chicago, an independent trustee, will act as indenture trustee under
each of the Trust Guarantees (the "Preferred Guarantee Trustee") for the
purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Trust Guarantees will be those set forth in the Trust Guarantee
and those made part of the Trust Guarantee by the Trust Indenture Act. The
following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the form of Trust Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Each Trust Guarantee will be held by the Preferred Guarantee
Trustee for the benefit of the holders of the Preferred Securities of the
applicable Proffitt's Trust.
34
<PAGE>
General
Pursuant to each Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay to the holders of the Preferred Securities, the
Guarantee Payments (as defined herein) (to the extent not paid by the
Proffitt's Trust), as and when due, regardless of any defense, right of set-
off or counterclaim which the applicable Proffitt's Trust may have or assert.
The following payments or distributions with respect to Preferred Securities
issued by a Proffitt's Trust to the extent not paid by such Proffitt's Trust
(the "Guarantee Payments"), will be subject to the Trust Guarantee (without
duplication): (i) any accrued and unpaid distributions which are required to
be paid on such Preferred Securities, to the extent such Proffitt's Trust
shall have funds available therefore; (ii) the redemption price (the
"Redemption Price") and all accrued and unpaid distributions to the date of
redemption to the extent such Proffitt's Trust has funds available therefore
with respect to any Preferred Securities called for redemption by such
Proffitt's Trust; and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of such Proffitt's Trust (other than in connection
with the distribution of Subordinated Debt Securities to the holders of
Preferred Securities or the redemption of all of the Preferred Securities),
the lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment, to
the extent such Proffitt's Trust has funds available therefore and (b) the
amount of assets of such Proffitt's Trust remaining available for distribution
to holders of such Preferred Securities in liquidation of such Proffitt's
Trust. The Company's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Company to the holders of
Preferred Securities or by causing the applicable Proffitt's Trust to pay such
amounts to such holders.
Each Trust Guarantee will be a full and unconditional guarantee, on a
subordinated basis, with respect to the Preferred Securities issued by the
applicable Proffitt's Trust, but will not apply to any payment of
distributions except to the extent such Proffitt's Trust shall have funds
available therefor. If the Company does not make interest payments on the
Subordinated Debt Securities purchased by the applicable Proffitt's Trust,
such Proffitt's Trust will not pay distributions on the Preferred Securities
issued by it and will not have funds available therefor. See "Description of
the Proffitt's Debt Securities--Particular Terms of the Subordinated Debt
Securities." Each Trust Guarantee, when taken together with the Company's
obligations under the Subordinated Debt Securities, the Subordinated
Indenture, and the Declaration will provide a full guarantee on a subordinated
basis by the Company of payments due on the applicable Preferred Securities.
The Company has also agreed separately to guarantee the obligations of each
of the Proffitt's Trusts with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Trust Guarantee, except that
upon an event of default under the applicable Subordinated Indenture, holders
of Preferred Securities shall have priority over holders of Common Securities
with respect to distributions and payments on liquidation, redemption or
otherwise.
Certain Covenants of the Company
Pursuant to each Trust Guarantee, the Company will covenant that, so long as
any Preferred Securities remain outstanding, if there shall have occurred any
event that would constitute an event of default under such Trust Guarantee or
the applicable Declaration, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security outstanding on the date of such event
requiring the Company to purchase shares of the Company Common Stock, (ii) as
a result of a reclassification of Proffitt's capital stock or the exchange or
conversion of one class or series of Proffitt's capital stock for another
class or series of Proffitt's capital stock or, (iii) the purchase of
fractional interests in shares of Proffitt's capital stock pursuant to the
conversion or exchange provisions of such Proffitt's capital stock or the
security being converted or exchanged), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company which
rank pari passu with or junior to such Subordinated Debt Securities and (c)
the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to such Trust Guarantee).
35
<PAGE>
Modification of the Trust Guarantees; Assignment
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities in any material respect (in which case no
vote will be required), each Trust Guarantee may be amended only with the
prior approval of the holders of not less than a majority in liquidation
amount of the outstanding Preferred Securities related thereto. The manner of
obtaining any such approval of holders of such Preferred Securities will be as
set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in each Trust Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall
inure to the benefit of the holders of the related Preferred Securities then
outstanding.
Termination
Each Trust Guarantee will terminate as to the Preferred Securities issued by
the applicable Proffitt's Trust (a) upon full payment of the Redemption Price
of all Preferred Securities of such Proffitt's Trust, (b) upon distribution of
the Subordinated Debt Securities held by such Proffitt's Trust to the holders
of the Preferred Securities or (c) upon full payment of the amounts payable in
accordance with the Declaration upon liquidation of such Proffitt's Trust.
Each Trust Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Preferred Securities must
restore payment of any sums paid under such Preferred Securities or such Trust
Guarantee.
Events Of Default
An event of default under each of the Trust Guarantees will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
to which each Trust Guarantee relates have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee in respect of the Trust Guarantee or to direct the
exercise of any trust or power conferred upon the Preferred Guarantee Trustee
under such Trust Guarantee. If the Preferred Guarantee Trustee fails to
enforce the applicable Trust Guarantee, any holder of Preferred Securities to
which such Trust Guarantee relates may institute a legal proceeding directly
against the Company to enforce such holder's rights under such Trust
Guarantee, without first instituting a legal proceeding against the applicable
Proffitt's Trust, such Preferred Guarantee Trustee or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
Guarantee Payment, a holder of Preferred Securities may directly institute a
proceeding against the Company for enforcement of the applicable Trust
Guarantee for such payment. The Company waives any right or remedy to require
that any action be brought first against the applicable Proffitt's Trust or
another person or entity before proceeding directly against the Company.
Status of the Trust Guarantees
Each Trust Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, except those made subordinate or pari passu by
their terms; (ii) pari passu with the most senior preferred or preference
stock now or hereafter issued by the Company and with any guarantee now or
hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company; and (iii) senior to the
Company's Common Stock. The terms of the Preferred Securities provide that
each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Trust Guarantee relating
thereto.
Each Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the guarantee without
instituting a legal proceeding against any other person or entity).
36
<PAGE>
Information Concerning the Preferred Guarantee Trustee
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the applicable Trust Guarantee, undertakes to perform only such
duties as are specifically set forth in such Trust Guarantee and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provisions,
the Preferred Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the applicable Trust Guarantee at the request of any
holder of Preferred Securities, unless offered reasonable indemnity against
the costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the Preferred Guarantee Trustee, upon the
occurrence of an event of default under such Trust Guarantee, from exercising
the rights and powers vested in it by such Trust Guarantee.
Governing Law
Each Trust Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT
SECURITIES AND THE TRUST GUARANTEE
As set forth in the Declaration, the sole purpose of each of the Proffitt's
Trusts is to issue the Trust Securities evidencing undivided beneficial
interests in the assets of such Proffitt's Trust, and to invest the proceeds
from such issuance and sale in the Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Subordinated Debt Securities will match the distribution
rate and other payment dates for the Preferred Securities; (iii) the Company
shall pay all, and none of the Proffitt's Trusts shall be obligated to pay,
directly or indirectly, costs, expenses, debt, and obligations of the
Proffitt's Trusts (other than with respect to the Trust Securities); and (iv)
each of the Declarations further provides that the applicable Proffitt's
Trustees shall not take or cause or permit the Proffitt's Trusts to, among
other things, engage in any activity that is not consistent with the purposes
of the Proffitt's Trusts.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed on a subordinated basis by the Company as and to
the extent set forth under "Description of Trust Guarantees." If the Company
does not make interest payments on the Subordinated Debt Securities purchased
by a Proffitt's Trust, it is expected that such Proffitt's Trust will not have
sufficient funds to pay distributions on the Preferred Securities. None of the
Trust Guarantee apply to any payment of distributions unless and until the
applicable Proffitt's Trust has sufficient funds for the payment of such
distributions. Each Trust Guarantee covers the payment of distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment of interest or principal on the Subordinated Debt
Securities held by the applicable Proffitt's Trust as its sole asset. Each
Trust Guarantee, when taken together with the Company's obligations under the
Subordinated Debt Securities and the Subordinated Indenture and its
obligations under the applicable Declaration, including its obligations to pay
costs, expenses, debts and liabilities of the related Proffitt's Trust (other
than with respect to the Trust Securities), provide a full guarantee of
payments due on the Preferred Securities.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (taking account of any Extension Period as defined in
the Declarations), each Declaration provides a mechanism whereby the holders
of the Preferred Securities, using the procedures described in "Description of
Preferred Securities" and in any accompanying Prospectus Supplement, may
direct the related Property Trustee to enforce
37
<PAGE>
its rights under the Subordinated Debt Securities. If the Property Trustee
fails to enforce its rights under the Subordinated Debt Securities, a holder
of Preferred Securities may, to the fullest extent permitted by law, institute
a legal proceeding against the Company to enforce the Property Trustee's
rights under the Subordinated Debt Securities without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Subordinated Debt Securities on the date
such interest or principal is otherwise payable (or in the case of redemption
on the redemption date), then a holder of Preferred Securities may institute a
Direct Action for payment on or after the respective due date specified in the
Subordinated Debt Securities. In connection with such Direct Action, the
Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under each Trust Guarantee, acknowledges that the related Preferred
Guarantee Trustee shall enforce such Trust Guarantee on behalf of the holders
of the Preferred Securities. If the Company fails to make payments under any
Trust Guarantee, the Trust Guarantee provides a mechanism whereby the holders
of the Preferred Securities may direct the Preferred Guarantee Trustee to
enforce its rights thereunder. Any holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under the applicable Trust Guarantee
without first instituting a legal proceeding against the applicable Proffitt's
Trust, the Preferred Guarantee Trustee, or any other person or entity.
The Company and each of the Proffitt's Trusts believe that the above
mechanisms and obligations, taken together, provide a full and unconditional
guarantee, on a subordinated basis, by the Company of payments due on the
Preferred Securities. See "Description of Trust Guarantees--General."
38
<PAGE>
PLAN OF DISTRIBUTION
The Company and/or the Proffitt's Trusts may offer and sell the Offered
Securities to or through underwriters or dealers, and also may offer and sell
the Offered Securities directly to other purchasers or through designated
agents. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company and/or the
Proffitt's Trusts also may, from time to time, authorize underwriters acting
as the Company's agents to offer and sell the Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Stock
Purchase Contracts providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Stock Purchase Contract will be for
an amount not less than, and the principal amount of Offered Securities sold
pursuant to Stock Purchase Contracts shall not be less nor more than, the
respective amounts stated in such Prospectus Supplement. Institutions with
which Stock Purchase Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutions, but
will in all cases be subject to the approval of the Company. Stock Purchase
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Offered Securities covered by its Stock Purchase Contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and
(ii) the Company shall have sold to such underwriters the total principal
amount of the Offered Securities less the principal amount thereof covered by
Stock Purchase Contracts. A commission indicated in the Prospectus Supplement
will be paid to agents and underwriters soliciting purchases of Offered
Securities pursuant to Stock Purchase Contracts accepted by the Company.
Agents and underwriters shall have no responsibility in respect of the
delivery or performance of Stock Purchase Contracts.
In connection with the sale of Offered Securities, underwriters may receive
compensation from the Company and/or the Proffitt's Trusts or from purchasers
of the Offered Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell the Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents. Underwriters,
dealers and agents that participate in the distribution of the Offered
Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company and/or the Proffitt's Trusts, and any profit on
the resale of the Offered Securities they realize may be deemed to be
underwriting discounts and commissions under the Securities Act. Any such
underwriter or agent will be identified, and any such compensation received
from the Company and/or the Proffitt's Trusts will be described, in the
applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of the Offered Securities will be a new issue with no established trading
market, other than the Common Stock and any series of Preferred Stock which
are listed on the NYSE. Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on the NYSE, subject to official notice of issuance.
The Company may elect to list any of the other Offered Securities on an
exchange, but is not obligated to do so. It is possible that one or more
underwriters may make a market in a series of the Offered Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of
the trading market for the Offered Securities.
If dealers are utilized in the sale of the Offered Securities, the Company
and/or the Proffitt's Trusts will sell such Offered Securities to the dealers
as principals. The dealers may then resell such Offered Securities to the
39
<PAGE>
public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of the Offered Securities may be
entitled to indemnification by the Company and/or the Proffitt's Trusts
against certain liabilities, including liabilities under the Securities Act,
or to contribution with respect to payments which such agents, dealers or
underwriters may be required to make in respect thereof.
Underwriters, dealers and agents may engage in transactions with, or perform
services for the Company and/or the Proffitt's Trusts in the ordinary course
of business.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legality and validity of the Offered Securities will be passed upon for the
Company by Charles J. Hansen, Senior Vice President and Associate General
Counsel of the Company, Birmingham, Alabama. Certain United States federal
income taxation matters will be passed upon for the Company and the Proffitt's
Trusts by Alston & Bird LLP, Atlanta, Georgia. Certain matters of Delaware law
relating to the validity of the Preferred Securities will be passed upon for
the Proffitt's Trusts and the Company by special Delaware counsel designated
in the related Prospectus Supplement.
EXPERTS
The consolidated financial statements included in the Company's Current
Report on Form 8-K (filed with the Securities and Exchange Commission on
November 23, 1998) as of January 31, 1998 and February 1, 1997 and for each of
the three years in the period ended January 31, 1998, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
SAKS INCORPORATED
7 3/8% Notes Due 2019
--------
PROSPECTUS SUPPLEMENT
February 11, 1999
--------
Salomon Smith Barney
Chase Securities Inc.
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
J.P. Morgan & Co.
NationsBanc Montgomery Securities LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
