<PAGE> 1
Commission File Number: 1-13113
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For Fiscal Year Ended: January 30, 1999 or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
_____________________ to ______________________
Commission File Number: 1-13113
Exact name of registrant as specified in its charter:
SAKS INCORPORATED (formerly Proffitt's, Inc.)
State of Incorporation: Tennessee
I.R.S. Employer Identification Number: 62-0331040
Address of principal executive offices (including zip code):
750 Lakeshore Parkway, Birmingham, Alabama 35211
Registrant's telephone number, including area code: (205) 940-4000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 and Preferred Stock Purchase Rights
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 15, 1999 was approximately $4,210,000,000.
As of March 15, 1999, the number of shares of the Registrant's Common Stock
outstanding was 144,431,755.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Saks Incorporated Annual Report to Shareholders for the
Fiscal Year Ended January 30, 1999 are incorporated by reference into
Part II.
(2) Portions of the Saks Incorporated Proxy Statement dated April 28, 1999
for the Annual Shareholders' Meeting to be held on June 16, 1999 are
incorporated by reference into Part III.
The Exhibit Index is on page of this document.
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TABLE OF CONTENTS
Item Page
Part I 1 Business. 3
2 Properties. 10
3 Legal Proceedings. 11
4 Submission of Matters to a Vote of Security Holders. 11
Executive Officers of the Registrant. 11
Part II 5 Market for Registrant's Common Equity and Related
Stockholder Matters. 14
6 Selected Financial Data. 14
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. 14
7A Quantitative and Qualitative Disclosures About
Market Risk. 14
8 Financial Statements and Supplementary Data. 14
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 14
Part III 10 Directors and Executive Officers of the Registrant. 15
11 Executive Compensation. 15
12 Security Ownership of Certain Beneficial Owners
and Management. 15
13 Certain Relationships and Related Transactions. 15
Part IV 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. 16
Signatures 18
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PART I
ITEM 1. BUSINESS
GENERAL
Founded in 1919, Saks Incorporated (formerly Proffitt's, Inc.; the "Company") is
a national retailer currently operating 352 stores throughout 38 states under
the following names: Saks Fifth Avenue (59 stores), Parisian (44 stores),
Proffitt's (31 stores), McRae's (29 stores), Younkers (52 stores), Herberger's
(38 stores), Carson Pirie Scott (30 stores), Bergner's (14 stores), Boston Store
(12 stores), Off 5th (42 stores), and Bullock & Jones (1 store). The Company's
stores are principally anchor department stores in leading regional or community
malls, and the stores typically offer a broad selection of fashion apparel,
shoes, accessories, jewelry, cosmetics, decorative home furnishings, and
furniture in selected locations. In addition, the Company operates a catalog
business under the Folio and Bullock & Jones names.
The Company has experienced significant growth since 1994, primarily through a
series of acquisitions. The Company's major acquisitions are outlined below:
<TABLE>
<CAPTION>
NUMBER OF
STORES ACCOUNTING
NAME HEADQUARTERS ACQUIRED LOCATIONS DATE ACQUIRED TREATMENT
---- ------------ -------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
MCRAE'S Jackson, MS 31 Southeast March 31, 1994 Purchase
YOUNKERS Des Moines, IA 50 Midwest February 3, 1996 Pooling
PARISIAN Birmingham, AL 40 Southeast/ October 11, 1996 Purchase
Midwest
HERBERGER'S St. Cloud, MN 37 Midwest February 1, 1997 Pooling
CARSON PIRIE SCOTT, Milwaukee, WI 55 Midwest January 31, 1998 Pooling
BOSTON STORE, AND
BERGNER'S
SAKS HOLDINGS New York, NY 95 National September 17, 1998 Pooling
(SAKS FIFTH AVENUE,
OFF 5TH, FOLIO, AND
BULLOCK & JONES)
</TABLE>
In March 1998, the Company acquired Brody Brothers Dry Goods Company, Inc., a
department store chain with six units in North Carolina. The Company converted
four of these stores to the Proffitt's nameplate and closed two of the smaller
units in May 1998.
In October and December 1998, the Company acquired 15 store locations, including
inventory and accounts receivable, from Dillard's, Inc. Immediately upon
acquiring the stores, they were converted into the Company's stores as follows:
Proffitt's (6 stores), Parisian (6 stores), McRae's (1 store), Younkers (1
store), and Herberger's (1 store).
In addition to acquisitions, the Company historically has grown through opening
new stores and by expanding and renovating selected stores. In addition to the
acquisition of the Brody's and Dillard's stores during 1998, the Company opened
11 new stores during the year. The Company has announced plans to open 13 new
stores in 1999.
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The Company also closes stores in the normal course of business. During 1998,
the Company closed 10 unproductive units. The Company has announced plans to
close three additional stores during 1999. On occasion, the Company may convert
certain stores under one nameplate into another nameplate to enhance
distribution and advertising economies. The Company converted two McRae's stores
into Parisian stores and one Herberger's store into a Bergner's store during
1998, converted one Parisian store into a Proffitt's store in early 1999, and
has plans to convert another McRae's store into a Parisian store in August 1999.
Merchandising, sales promotion, and certain store operating support functions
are conducted in multiple locations. Certain back office administrative support
functions for the Company, such as accounting, credit card administration, store
planning, and management information systems, are centralized or are in the
process of being centralized.
MERCHANDISING
The Company's merchandising strategy is to provide its customers a wide
assortment of quality fashion apparel, shoes, accessories, cosmetics, and
decorative home furnishings at appropriate prices. The Company's commitment to a
branded merchandising strategy, enhanced by its merchandise presentation and
high level of customer service, makes it a preferred distribution channel for
premier brand-name merchandise. Key brands featured in the Company's more
traditional department stores include Liz Claiborne, Jones New York, Calvin
Klein, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Estee Lauder, Clinique,
Lancome, Nine West, Enzo, Waterford, and Bali. In addition to the above brands,
Parisian stores carry certain brands typically carried only at specialty stores
which include: Sigrid Olson, Robert Talbott, Ike Behar, MAC, Bobbi Brown, Trish
McEvoy, BCBG, and Brighton. Saks Fifth Avenue has key relationships with the
leading fashion houses, including Giorgio Armani, Bill Blass, Chanel, Dolce and
Gabbana, Salvatore Ferragamo, Gucci, Donna Karan, Calvin Klein, Ralph Lauren,
Judith Leiber, Prada, Oscar de la Renta, Jil Sander, St. John, Yves St. Laurent,
J.P. Tod, Emanuel Ungaro, Ermenegildo Zegna, and Max Mara.
The Company supplements its branded assortments with high-quality private-label
merchandise in selected areas. Management's goal is to increase private brand
sales from approximately 8% of total sales in 1998 to approximately 10% of total
sales in 1999 and to approximately 12% of total sales in 2000. Management
expects the enhanced private brand program will improve merchandise margins and
create differentiation from competitors through unique, high quality product
offerings at attractive prices.
The Company has developed a knowledge of each of its markets and customer bases.
This market knowledge is gained through the Company's regional merchandising
structure in conjunction with store visits by senior management and
merchandising personnel and use of on-line merchandise information. The Company
strives to tailor each store's merchandise assortment to the unique
characteristics of its market.
Certain departments in the Company's stores are leased to independent companies
in order to provide high quality service and merchandise where specialization
and expertise are critical and
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economics do not justify the Company's direct participation in the business. The
leased departments vary by store to complement the Company's own merchandising
departments. The principal leased department is fine jewelry, except at Saks
Fifth Avenue where this is an owned business. The terms of the lease agreements
typically are between one and four years and require the lessee to pay for
fixtures and provide its own employees. Leased department sales are included in
the Company's total sales. Management regularly evaluates the performance of the
leased departments and requires compliance with established customer service
guidelines.
The shoe business was a leased operation at the Carson Pirie Scott, Bergner's,
and Boston Store stores until February 1999, when it was converted into an owned
operation. Management expects that sales and merchandise margins will be
improved as a result of this conversion. The shoe departments at all of the
Company's other stores are owned.
For the year ended January 30, 1999, the Company's percentages of net sales by
major merchandise category were as follows (excludes sales generated from Off
5th stores and the Folio and Bullock & Jones catalogs):
Women's 30.6%
Men's 16.4
Cosmetics 12.0
Women's Accessories 10.7
Home 8.7
Children's 7.8
Shoes 5.8
Intimate Apparel 3.4
-----
Total owned 95.4
Leased 4.6
-----
Total 100.0%
=====
PRICING
The Company's primary merchandise focus is on upper-moderate to better-priced
nationally branded merchandise in the more traditional department stores, a
greater assortment of better-priced nationally branded merchandise in the
Parisian stores, a greater assortment of luxury-priced and designer goods at
Saks Fifth Avenue, and value-priced merchandise in the Off 5th stores.
Management believes that many customers respond to promotional events more
favorably than they do to "everyday low pricing." Accordingly, although the
Company continues to maintain a pricing structure that provides value to its
customers, the Company runs various promotional events in its department stores
throughout the year.
Management recognizes that competitors in the traditional and specialty
department store arena sometimes price merchandise below the Company's prices.
In such situations, it is the Company's policy to match competitors' prices, if
the lower price is brought to the attention of a sales associate. Accordingly,
sales associates in these stores have the authority to reduce the
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price of any merchandise if the customer has seen the same item advertised or
sold at a lower price in the same market.
PURCHASING AND DISTRIBUTION
The Company purchases merchandise from many vendors. Management monitors
profitability and sales history with each supplier and believes it has
alternative sources available for each category of merchandise it purchases.
Management believes it has good relationships with its suppliers.
The Company has nine distribution facilities serving its stores. Refer to "Item
2. Properties" for a listing of these facilities.
The Company's distribution facilities are linked electronically to the Company's
merchandising staffs through a computerized purchase order management system,
facilitating rapid re-order and replenishment of merchandise. The Company
utilizes UPC barcode technology which is designed to move merchandise onto the
selling floor more quickly and cost-effectively by allowing vendors to deliver
floor-ready merchandise to the distribution facilities. For example, high speed
automated conveyor systems are capable of scanning bar coded labels and
diverting cartons to the proper merchandise processing areas. Some types of
merchandise are being processed in the receiving area and immediately "cross
docked" to the shipping dock for delivery to the stores. Certain processing
areas are staffed with personnel equipped with hand-held radio frequency
terminals that can scan a vendor's bar code and transmit the necessary
information to a computer to check-in merchandise. This technology, when fully
utilized, will create a nearly paperless environment for the distribution
function.
MANAGEMENT INFORMATION SYSTEMS
Company management believes that technological investments are necessary to
support its business strategy, and, as a result, the Company has continually
upgraded its information systems to improve operations and support future
growth.
The Company's information systems provide information necessary for management
operating decisions, cost reduction programs, and customer service enhancements.
Individual data processing systems include point-of-sale and sales reporting,
purchase order management, receiving, merchandise planning and control, payroll,
human resources, general ledger, credit card administration, and accounts
payable systems. Bar code ticketing is used, and scanning is utilized at all
point-of-sale terminals. Information is made available on-line to merchandising
staff and store management on a timely basis, thereby reducing the need for
paper reports.
The Company uses electronic data interchange technology ("EDI") with many of its
top vendors. EDI allows the Company to speed the flow of information and
merchandise in order to capitalize on emerging sales trends, maximize inventory
turnover, and minimize out-of-stock conditions. The Company's use of EDI
technology includes an advance shipping notice system ("ASN"). The ASN system
identifies discrepancies between merchandise that is ready to be shipped from a
vendor's warehouse and that which was ordered from the vendor. This early
identification
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provides the Company with a window of time to resolve any discrepancies in order
to speed merchandise through the distribution facilities and into its stores.
The Company has completed its assessment of the Year 2000 effect on the
Company's systems and began the necessary systems modifications during 1997. The
Company expects to complete compliance and testing of Year 2000 modifications by
September 1999. A complete discussion of the Company's Year 2000 compliance
efforts is contained on pages through of the Company's Annual Report to
Shareholders.
MARKETING
The Company's advertising and promotions are coordinated to reinforce its market
image position as a fashion leader selling quality merchandise at appropriate
prices. Advertising is balanced among fashion advertising, price promotions, and
special events.
The Company uses a multi-media approach, including newspaper, television, radio,
and direct mail. The Company's advertising and special events are produced by
regional in-house sales promotion staffs in conjunction with outside advertising
agencies. The Company utilizes data captured through the use of proprietary
credit cards to develop segmented advertising and promotional events targeted at
specific customers who have established purchasing patterns for certain brands,
departments, and store locations. To promote its image as the fashion leader in
its markets, the Company also sponsors fashion shows and in-store special events
highlighting the Company's key brands and key apparel designers.
PROPRIETARY CREDIT CARDS
The Company's credit card bank, National Bank of the Great Lakes (the "Bank"),
issues proprietary credit cards for each of the Company's department store
nameplates. Frequent use of these proprietary credit cards by customers is an
important element in the Company's marketing and growth strategies. The Company
believes that proprietary credit card holders shop more frequently with the
Company, purchase more merchandise, and are generally more loyal to the Company
than are customers who pay with cash or third-party credit cards. As previously
mentioned, the Company also makes frequent use of the names and addresses of its
proprietary credit card holders in direct marketing efforts.
The Company seeks to expand the number and use of its proprietary credit cards
by, among other things, providing incentives to sales associates to open
"instant credit" accounts, which can generally be opened within approximately
three minutes. Also, customers who open accounts are entitled to certain
discounts on initial and subsequent purchases. The Company has created various
loyalty programs that reward customers for frequency and volume of proprietary
charge card usage. The Company's proprietary credit card customers are offered
private shopping nights, direct mail catalogs, and advance notice of sale
events.
A proprietary credit card was introduced at the Company's Herberger's stores in
May 1997. Prior to that time, Herberger's customers were not offered a
Herberger's proprietary card.
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The Bank has approximately 3.9 million credit accounts which have been active
within the prior six months. Approximately 42% of the Company's 1998 sales were
transacted on these proprietary credit cards.
All of the Company's proprietary credit cards are issued through the Bank. The
Bank's credit card program is subject to government regulations, including
consumer protection laws, that impose restrictions on the making and collection
of consumer loans and on other aspects of credit card operations. There can be
no assurance that the existing laws and regulations will not be amended or that
new laws or regulations will not be adopted, in a manner that could adversely
affect the Bank's credit card operations.
TRADEMARKS AND SERVICE MARKS
The Company owns many federally registered trademarks and service marks,
including, but not limited to, "Saks Fifth Avenue," "SFA," "S5A," "The Fifth
Avenue Club," and "Off 5th," along with its various other store names and its
private brands. The Company has filed a federal trademark registration for the
name "Saks." Management believes its trademarks and service marks are important
and that the loss of certain of its trademarks or trade names, particularly the
store nameplates, could have a material adverse effect on the Company. Many of
the Company's trademarks and service marks are registered in the United States
Patent and Trademark Office. The term of these registrations is generally ten
years, and they are renewable for additional ten-year periods indefinitely, so
long as the marks are still in use at the time of renewal. Saks Incorporated is
not aware of any claims of infringement or other challenges to its right to
register or use its marks in the United States.
RELIANCE ON FIFTH AVENUE STORE
The Company's flagship Saks Fifth Avenue store on Fifth Avenue in New York City
accounted for approximately 7% of total Company net sales in 1998 and plays a
significant role in marketing the Saks Fifth Avenue name.
CUSTOMER SERVICE
The Company believes that personal customer attention builds loyalty and that
the Company's sales associates generally provide a level of customer service
superior to its competitors. The Company's strategy is to staff each store with
knowledgeable, friendly sales associates skilled in salesmanship and customer
service. Sales associates maintain customer records, send personalized thank-you
notes, and communicate personally with customers to advise them of new
merchandise offerings and special promotions. Superior customer service is
encouraged through the development and monitoring of sales/productivity goals
and through specific award and recognition programs.
SEASONALITY
The Company's business, like that of most retailers, is subject to seasonal
influences, with a significant portion of its net sales and net income realized
during the fourth quarter of each year,
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which includes the Christmas selling season. Generally, more than 30% of the
Company's sales and over 50% of its net income are generated during the fourth
quarter.
COMPETITION
The retail department store business is highly competitive. The Company's stores
compete with several national and regional department stores, specialty apparel
stores, designer boutiques, outlet stores, catalogs, and electronic commerce
retailers, some of which have greater financial and other resources than those
of the Company. Management believes that its knowledge of its markets and
customer base, combined with providing superior customer service and a broad
selection of quality fashion merchandise at appropriate prices in prime store
locations, provides a competitive advantage.
ASSOCIATES
As of March 15, 1999, the Company employed approximately 60,000 associates, of
which approximately 24,000 were employed on a part-time basis. The Company hires
additional temporary employees and increases the hours of part-time employees
during seasonal peak selling periods. Approximately 200 of the Company's
associates are covered by collective bargaining agreements. The Company
considers its relations with its employees to be good.
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ITEM 2. PROPERTIES.
The Company operates nine distribution facilities as follows:
<TABLE>
<CAPTION>
Stores Served Location of Facility Square Feet Owned/Leased
------------- -------------------- ----------- ------------
<S> <C> <C> <C>
Proffitt's Maryville, Tennessee 85,000 Owned
McRae's Jackson, Mississippi 164,000 Owned
Younkers Green Bay, Wisconsin 182,000 Owned
Younkers Ankeny, Iowa 102,000 Owned
Parisian Birmingham, Alabama 125,000 Owned
Herberger's St. Cloud, Minnesota 98,000 Owned
Carson Pirie Scott, Bergner's, Rockford, Illinois 585,000 Owned
and Boston Store
Saks Fifth Avenue and Off 5th Hickory Ridge, Maryland 514,000 Leased
Saks Fifth Avenue and Off 5th Ontario, California 120,000 Leased
</TABLE>
The Company's principal administrative offices are as follows:
<TABLE>
<CAPTION>
Office Location of Facility Square Feet Owned/Leased
------ -------------------- ----------- ------------
<S> <C> <C> <C>
Proffitt's stores support offices/certain Alcoa, Tennessee 44,000 Leased
corporate administrative offices
McRae's stores support offices/certain Jackson, Mississippi 272,000 Owned
corporate administrative offices
Younkers stores support offices/certain Des Moines, Iowa 127,000 Leased
corporate administrative offices
Parisian stores support offices/certain Birmingham, Alabama 125,000 Owned
corporate administrative offices
Herberger's stores support offices St. Cloud, Minnesota 58,000 Owned
Carson Pirie Scott, Bergner's, and Milwaukee, Wisconsin 156,000 Owned
Boston Store stores support offices/
certain corporate administrative offices
Carson Pirie Scott, Bergner's, and Elmhurst, Illinois 41,500 Leased
Boston Store credit center
Saks Fifth Avenue support offices/certain
corporate administrative offices New York, New York 298,000 Leased
Saks Fifth Avenue support offices/certain
corporate administrative offices Hickory Ridge, Maryland 70,000 Leased
</TABLE>
The following table sets forth certain information about the Company's stores as
of March 15, 1999. The majority of the Company's stores are leased. Store leases
generally require the Company to pay the greater of a fixed minimum rent or an
amount based on a percentage of sales. Generally, the Company is responsible
under its store leases for a portion of mall promotion and common area
maintenance expenses and for certain utility, property tax, and insurance
expenses. Typically, the Company contributes to common mall promotion,
maintenance, property tax, and insurance expenses at its owned locations.
Generally, store leases have primary terms ranging from 20 to 30 years and
include renewal options ranging from 5 to 15 years.
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<TABLE>
<CAPTION>
Owned Locations Leased Locations Total
--------------- ----------------- -----
Number Gross Square Number Gross Square Number Gross Square
Store Name of Units Feet (in mil.) of Units Feet (in mil.) of Units Feet (in mil.) States of Operation
- ----------- ---------- --------------- -------- --------------- -------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proffitt's 12 1.7 19 1.6 31 3.3 GA, KY, NC, SC,
TN, VA, WV
McRae's 11 1.6 18 1.8 29 3.4 AL, FL, LA, MS
Younkers 2 .2 50 4.9 52 5.1 IL, IA, MI, MN,
NE, SD, WI
Parisian 13 1.9 31 3.6 44 5.5 AL, FL, GA, IN,
LA, MI, MS, OH,
SC, TN
Herberger's 2 .3 36 2.2 38 2.5 CO, IA, MN, MT,
NE, ND, SD, WI,
WY
Carson Pirie 7 1.7 23 3.0 30 4.7 IL, IN, MN
Scott
Boston Store 8 1.7 4 .4 12 2.1 WI
Bergner's 1 .1 13 1.4 14 1.5 IL
Saks Fifth 30 3.7 29 2.1 59 5.8 AR, CA, CO, CT,
Avenue FL, GA, IL, LA,
MD, MA, MI, MN,
MO, NE, NJ, NY,
OH, OK, OR, PA,
SC, TX, VA
Off 5th 42 1.1 42 1.1 AR, CA, CO, CT,
FL, GA, HI, IL,
MA, MI, MN, NE,
NJ, NC, NY, OH,
PA, SC, TN, TX,
VA
Bullock & 1 .2 1 .2 CA
Jones ___ ___ ___ ___ ___ ___
Totals 86 12.9 266 22.3 352 35.2
=== ==== ==== ==== ==== ====
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in several legal proceedings arising from its normal
business activities and has accruals for losses where appropriate. Management
believes that none of these legal proceedings will have an ongoing material
adverse effect on the Company's consolidated financial position, results of
operations, or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT.
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The name, age, and position held with the Company for each of the executive
officers of the Company are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
R. Brad Martin 47 Chairman of the Board of Directors and
Chief Executive Officer
James A. Coggin 56 President and Chief Administrative Officer;
Director
Robert M. Mosco 50 President of Merchandising and Chief
Operating Officer; Director
Douglas E. Coltharp 37 Executive Vice President and Chief Financial
Officer
Brian J. Martin 42 Executive Vice President of Law and
General Counsel
Julia A. Bentley 40 Senior Vice President of Investor Relations
and Communications; Corporate
Secretary
Donald E. Wright 41 Senior Vice President of Finance and Chief
Accounting Officer
</TABLE>
R. Brad Martin has served as a Director since 1984 and became Chairman of the
Board in February 1987 and Chief Executive Officer in July 1989. Mr. Martin
previously served as President from July 1989 until March 1994 and from
September 1994 to March 1995.
James A. Coggin was named President and Chief Administrative Officer of Saks
Incorporated in November 1998. Mr. Coggin served as President and Chief
Operating Officer of the Company from March 1995 to November 1998 and served as
Executive Vice President and Chief Administrative Officer of the Company from
March 1994 to March 1995. From June 1978 to March 1994, Mr. Coggin served as
Executive Vice President and Chief Administrative Officer of McRae's, Inc. Mr.
Coggin joined McRae's, Inc. in 1971.
Robert M. Mosco was named President of Merchandising and Chief Operating Officer
of Saks Incorporated in November 1998. Mr. Mosco served as President and Chief
Executive Officer of Proffitt's Merchandising Group from October 1996 until
November 1998. Between February 1996 and October 1996, he served as President
and Chief Executive Officer of Younkers. Mr. Mosco served as President and Chief
Operating Officer of Younkers, Inc. between 1992 and
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January 1996. From 1989 to 1992, he held the position of Executive Vice
President of Merchandising and Marketing for Younkers, Inc. Mr. Mosco joined
Younkers, Inc. in 1987. Mr. Mosco began his retail career with Gimbel's and
later worked for Rich's.
Douglas E. Coltharp joined the Company in November 1996 as Executive Vice
President and Chief Financial Officer. Mr. Coltharp was with NationsBank (now
Bank of America) from 1987 to November 1996, where he held a variety of senior
positions including the post of Senior Vice President of Corporate Finance.
Brian J. Martin was promoted to Executive Vice President of Law and General
Counsel of the Company in May 1997. He served as Senior Vice President of Human
Resources and Law and General Counsel from August 1995 to May 1997 and served as
Senior Vice President and General Counsel of Proffitt's from March 1995 to
August 1995. He joined the Company in 1994 as Vice President and General
Counsel. From June 1990 to May 1994, Mr. Martin was affiliated with the
Indianapolis, Indiana law firm of Barnes and Thornburg. Mr. Martin served as
Assistant Solicitor General of the United States between January 1988 and June
1990.
Julia A. Bentley has served as Senior Vice President of Investor Relations and
Communications and Secretary of the Company since September 1997. Between March
1994 and September 1997, she held the post of Senior Vice President of Investor
Relations and Planning and Secretary. Ms. Bentley joined the Company in 1987 and
has held various financial positions, including Chief Financial Officer.
Prior to joining the Company, she was an audit manager with an international
accounting firm.
Donald E. Wright has served as Senior Vice President of Finance and Chief
Accounting Officer for the Company since April 1997. Mr. Wright is a Certified
Public Accountant and was a Partner with the international accounting firm of
Coopers & Lybrand (now PricewaterhouseCoopers LLP). He joined Coopers & Lybrand
in 1979.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption "Market Information," appearing on
page 58 of the Saks Incorporated Annual Report to Shareholders for the Fiscal
Year Ended January 30, 1999 (the "Annual Report"), is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Five-Year Financial Summary"
appearing on page 13 of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption "Management's Discussion and
Analysis" appearing on pages 14 through 22 of the Annual Report is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's exposure to market risk primarily arises from changes in interest
rates. Changes in interest rates may adversely affect the Company's financial
position, results of operations, and cash flows. The Company seeks to manage
exposure to adverse interest rate changes through its normal operating and
financing activities, and if appropriate, through the use of derivative
financial instruments. The Company does not enter into derivative financial
instruments for trading purposes. The Company is exposed to interest rate risk
primarily through its securitization, borrowing, and derivative financial
instrument activities, which are described in Notes 5, 8, 9, and 16 to the
Consolidated Financial Statements of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated Financial Statements and the Report of Independent Accountants
appearing on pages 23 through 57 of the Annual Report are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
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None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the caption "Election of Directors" contained on
pages 5 through 8 of the Saks Incorporated Proxy Statement dated April 28, 1999
(the "Proxy Statement"), with respect to Directors of the Company, is
incorporated herein by reference.
The information required under this item with respect to the Company's Executive
Officers is incorporated by reference from Part I of this report under
"Executive Officers of the Registrant."
The information set forth under the caption "Section 16(a) of the Securities
Exchange Act of 1934" contained on page 19 of the Proxy Statement, with respect
to Director and Executive Officer compliance with Section 16(a), is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the captions "Directors' Fees" and "Executive
Compensation" contained on pages 8 and 9 through 11, respectively, of the Proxy
Statement with respect to executive compensation is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the caption "Outstanding Voting Securities"
contained on pages 3 through 4 of the Proxy Statement with respect to security
ownership of certain beneficial owners and management is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the captions "Further Information Concerning
Directors" contained on pages 8 and 9 of the Proxy Statement with respect to
certain relationships and related transactions is incorporated herein by
reference.
15
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1), (2), and (3) - The responses to these portions of Item 14 are
submitted as a separate section of this report.
(b) Reports on Form 8-K filed during the fourth quarter.
Reports on Form 8-K and Form 8-KA were filed with the
Commission on November 18, 1998 and November 23, 1998,
respectively, regarding the Company's operating results for
the third quarter ended October 31, 1998.
A Report on Form 8-K was filed with the Commission on
November 23, 1998 regarding the Company's pro forma
financial information.
Reports on Form 8-K were filed with the Commission on
November 16, 1998, December 15, 1998, and January 15, 1999
regarding the Company's accounts receivable master trust.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial statement schedules - The response to this
portion of Item 14 is submitted as a separate section of
this report.
16
<PAGE> 17
ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements
The following Consolidated Financial Statements and Report of
Independent Accountants of Saks Incorporated and Subsidiaries, included
on pages 23 through 57 of the Saks Incorporated Annual Report to
Shareholders for the Fiscal Year Ended January 30, 1999, are
incorporated by reference in Item 8:
- - Consolidated Balance Sheets as of January 30, 1999 and January 31, 1998
- - Consolidated Statements of Income for Fiscal Years Ended January 30,
1999, January 31, 1998, and February 1, 1997
- - Consolidated Statements of Shareholders' Equity for Fiscal Years Ended
January 30, 1999, January 31, 1998, and February 1, 1997
- - Consolidated Statements of Cash Flows for Fiscal Years Ended January
30, 1999, January 31 1998, and February 1, 1997
- - Notes to Consolidated Financial Statements
(2) Schedules to Financial Statements
The following Consolidated Financial Statement Schedule of Saks
Incorporated and Subsidiaries and the Related report of Independent
Accountants are included in item 14(d):
Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and
therefore have been omitted.
17
<PAGE> 18
SAKS INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
The following schedule has been restated to reflect the Company's acquisition of
Saks Holdings, Inc., which was accounted for as a pooling of interests.
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Year Expenses Accounts Deductions Year
----------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended February 1, 1997
Allowance for Doubtful Accounts $ 27,243 45,183 4,058 (a) (43,889) $ 32,595
Year Ended January 31, 1998
Allowance for Doubtful Accounts $ 32,595 12,682 (22,624) (b) (12,883) $ 9,770
Year Ended January 30, 1999
Allowance for Doubtful Accounts $ 9,770 (9,770) (c) $ -
</TABLE>
(a) Balance in account of company (Parisian, Inc.) acquired on October 11, 1996.
(b) Adjustment arising from the adoption of SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
in fiscal 1997.
(c) Adjustment related to the Carson's accounts receivable that were
subsequently sold into the Company's securitization program on February 2, 1998.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Saks Incorporated
Date: April 26, 1999
/s/ Douglas E. Coltharp
---------------------------
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer
/s/ Donald E. Wright
--------------------------
Donald E. Wright
Senior Vice President of
Finance and Accounting
Principal Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.
/s/ R. Brad Martin
-------------------------
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
Principal Executive Officer
/s/ Ronald de Waal
--------------------------
Ronald de Waal
Vice Chairman of the Board
/s/ James A. Coggin
-------------------------
James A. Coggin
President and Chief Administrative Officer
Director
/s/ Robert M. Mosco
-------------------------
Robert M. Mosco
President of Merchandising and Chief Operating Officer
Director
/s/ Bernard E. Bernstein
-------------------------
Bernard E. Bernstein
19
<PAGE> 20
Director
/s/ Stanton J. Bluestone
-------------------------
Stanton J. Bluestone
Director
/s/ John W. Burden, III
------------------------
John W. Burden, III
Director
-------------------------
Edmond D. Cicala
Director
/s/ Julius W. Erving
--------------------------
Julius W. Erving
Director
/s/ Michael S. Gross
-------------------------
Michael S. Gross
Director
/s/ Donald E. Hess
-------------------------
Donald E. Hess
Director
/s/ G. David Hurd
-------------------------
G. David Hurd
Director
------------------------
Phillip B. Miller
Director
/s/ C. Warren Neel
------------------------
C. Warren Neel
Director
/s/ Charles J. Philippin
------------------------
Charles J. Philippin
Director
------------------------
Stephen I. Sadove
Director
/s/ Marguerite W. Sallee
-------------------------
Marguerite W. Sallee
Director
/s/ Gerald Tsai, Jr.
-------------------------
Gerald Tsai, Jr.
Director
/s/ Julia A. Bentley
-------------------------
Julia A. Bentley
Senior Vice President
and Secretary
20
<PAGE> 21
FORM 10-K -- ITEM 14(a)(3) AND 14(c)
SAKS INCORPORATED AND SUBSIDIARIES (FORMERLY PROFFITT'S, INC.)
EXHIBITS
Exhibit
No. Description
2.1 Agreement and Plan of Merger, dated as of July 8, 1996, among
Proffitt's, Inc., Casablanca Merger Corp., and Parisian, Inc.
(incorporated by reference from the Exhibits of the Form 8-K of
Proffitt's, Inc. dated July 18, 1996)
2.2 Agreement and Plan of Merger, dated November 8, 1996, among Proffitt's,
Inc., Prairie Merger Corporation and G.R. Herberger's, Inc.
(incorporated by reference from the Exhibits to the Form 8-K of
Proffitt's, Inc. dated November 22, 1996)
2.3 Agreement and Plan of Merger, dated October 29, 1997, among Proffitt's,
Inc., LaSalle Merger Corporation and Carson Pirie Scott & Co.
(incorporated by reference from the Exhibits to the Form S-4
Registration Statement No. of Proffitt's, Inc. dated November 22, 1996)
2.4 Agreement and Plan of Merger, dated as of July 4, 1998, among
Proffitt's, Inc., Fifth Merger Corporation and Saks Holdings, Inc.
(incorporated by reference from the Exhibits of the Form 8-K of
Proffitt's, Inc. dated July 8, 1998)
3.1 Amended and Restated Charter of the Company, as amended (incorporated
by reference from the Exhibits to the Form 8-K of Proffitt's, Inc.
dated February 11, 1998)
3.2 * Amended and Restated Bylaws of the Company
4.1 Indenture, dated as of November 9, 1998, among the Company, the
Subsidiary Guarantors, and The First National Bank of Chicago, as
trustee ($500 million of 8-1/4% Notes due 2008)(incorporated by
reference from the Exhibits to the Form 8-K of Saks Incorporated dated
November 9, 1998)
4.2 Indenture, dated as of November 25, 1998, among the Company, the
Subsidiary Guarantors, and The First National Bank of Chicago, as
trustee ($350 million of 7-1/4% Notes due 2004) (incorporated by
reference from the Exhibits to the Form 8-K of Saks Incorporated dated
December 2, 1998)
4.3 Indenture, dated as of December 2, 1998, among the Company, the
Subsidiary Guarantors, and The First National Bank of Chicago, as
trustee ($250 million of
21
<PAGE> 22
7-1/2% Notes due 2010) (incorporated by reference from the Exhibits to
the Form 8-K of Saks Incorporated dated December 2, 1998)
4.4 Indenture, dated as of February 17, 1999, among the Company, the
Subsidiary Guarantors, and The First National Bank of Chicago, as
trustee ($200 million, 7-3/8% Notes, due 2019) (incorporated by
reference from the Exhibits to the Form 8-K of Saks Incorporated dated
February 18, 1999)
4.5 Supplemental Indenture dated as of September 17, 1998, between Saks
Holdings, Inc. and Bankers Trust Company, as trustee (incorporated by
reference from the Exhibits to the Form 8-K of Saks Incorporated dated
September 23, 1998)
4.6 Registration Rights Agreement between Proffitt's, Inc. and Parisian,
Inc. dated July 8, 1996 (incorporated by reference from the Exhibits to
the Form S-4 Registration Statement No. 333-09043 of Proffitt's, Inc.
dated August 16, 1996)
4.7 Registration Rights Agreement between Proffitt's, Inc. and certain
specified stockholders of Saks Holdings, Inc. dated July 4, 1998
(incorporated by reference from the Exhibits to the Form 8-K of
Proffitt's, Inc. dated July 8, 1998)
4.8 Stockholders' Agreement between Proffitt's, Inc. and certain specified
stockholders of Saks Holdings, Inc. dated July 4, 1998 (incorporated by
reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated
July 8, 1998)
4.9 Rights Agreement, dated as of March 28, 1995, by and between
Proffitt's, Inc. and Union Planters National Bank, as Rights Agent
(incorporated by reference from the Exhibits to the Form 8-K of
Proffitt's, Inc. dated April 3, 1995)
4.10 Amendment No. 1, dated as of March 25, 1998, to the Rights Agreement,
dated as of March 28, 1995, between the Registrant and Union Planters
Bank, N.A., as Rights Agent (incorporated by reference to the Exhibits
to the Form 8-K of Proffitt's, Inc. dated March 26, 1998).
10.1 Amended and Restated Credit Agreement (Five-Year Facility) dated as of
September 17, 1998, by and among Saks Incorporated, NationsBank, N.A.,
as administrative agent, Nationsbanc Montgomery Securities LLC, as loan
arranger, Morgan Guaranty Trust Company of New York and The Chase
Manhattan Bank, as co-syndication agents, Citibank, N.A. as
documentation agent, and certain lenders (incorporated by reference
from the Exhibits to the Form 8-K of Saks Incorporated dated September
23, 1998)
10.2 Credit Agreement (364 Day Facility) dated as of September 17, 1998, by
and among Saks Incorporated, NationsBank, N.A., as administrative
agent, Nationsbanc Montgomery Securities LLC, as loan arranger, Morgan
Guaranty
22
<PAGE> 23
Trust Company of New York and The Chase Manhattan Bank, as
co-syndication agents, Citibank, N.A. as documentation agent, and
certain lenders (incorporated by reference from the Exhibits to the
Form 8-K of Saks Incorporated dated September 23, 1998)
10.3 LC Account Agreement dated February 2, 1998, by and between Proffitt's,
Inc. and NationsBank, N.A., as Agent (incorporated by reference from
the Exhibits to the Form 8-K of Proffitt's, Inc. dated February 17,
1998)
10.4 Pooling and Servicing Agreement among Younkers Credit Corporation,
Younkers, Inc., and Union Planters National Bank, as rights agent,
dated March 28, 1995 (incorporated by reference from the Exhibits to
the Form 10-Q of Younkers, Inc. for the quarter ended July 29, 1995)
10.5 Series 1995-1 Supplement to Pooling and Servicing Agreement among
Younkers Credit Corporation, Younkers, Inc., and Chemical Bank, as
Trustee, dated June 13, 1995 (incorporated by reference from the
Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended July
29, 1995)
10.6 Amendment No. 2 to Pooling and Servicing Agreement among Younkers
Credit Corporation, Proffitt's, Inc. (successor-by-merger to Younkers,
Inc.), and The Chase Manhattan Bank (formerly known as Chase Bank), as
Trustee, dated February 1, 1997 (incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended
February 1, 1997)
10.7 * Amendment No. 3 to Pooling and Servicing Agreement among Younkers
Credit Corporation, Proffitt's, Inc. (successor-by-merger to Younkers,
Inc.), and The Chase Manhattan Bank (formerly known as Chase Bank), as
Trustee, dated May 6, 1998
10.8 Receivables Purchase Agreement between Younkers Credit Corporation and
Younkers, Inc. dated June 13, 1995 (incorporated by reference from the
Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended July
29, 1995)
10.9 First Amendment to the Receivables Purchase Agreement between Younkers
Credit Corporation and Proffitt's, Inc. (as successor-by-merger to
Younkers, Inc.) dated February 2, 1998 (incorporated by reference from
the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year
ended January 31, 1998)
10.10 Series 1995-2 Supplement to Pooling and Servicing Agreement dated as of
June 13, 1995 among Younkers Credit Corporation, Younkers, Inc., and
Chemical Bank, as Trustee, dated July 18, 1995 (incorporated by
reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the
quarter ended July 29, 1995)
23
<PAGE> 24
10.11 ISDA Master Agreement and Schedule thereto, each dated as of July 19,
1995, between Younkers, Inc. and NationsBank of Texas, N.A., with
Confirmation of Interest Rate Cap Transaction dated July 19, 1995, and
Assignment Agreement dated as of July 19, 1995 between Younkers Credit
Corporation, Younkers, Inc. and Chemical Bank, as Trustee (incorporated
by reference from the Exhibits to the Form 10-Q of Younkers, Inc. for
the quarter ended July 29, 1995)
10.12 Master Pooling and Servicing Agreement dated as of August 21, 1997, by
and among Proffitt's Credit Corporation, as Transferor, Proffitt's,
Inc., as Servicer, and Norwest Bank Minnesota, National Association, as
Trustee, as amended by Amendment No. 1 to the Master Pooling and
Servicing Agreement dated as of February 2, 1998, by and among
Proffitt's Credit Corporation, as transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference from the Exhibits to the Form 8-K/A filed by
the Proffitt's Credit Card Master Trust and Proffitt's Credit
Corporation on September 23, 1997 and to the Form 8-K filed by the
Proffitt's Credit Card Master Trust on February 18, 1998)
10.13 Receivables Purchase Agreement by and among National Bank of the Great
Lakes, as Seller, Proffitt's Credit Corporation, as Purchaser, and
Proffitt's, Inc., as Servicer (incorporated by reference from the
Exhibits to the Form S-3 Registration Statement Nos. 333-48739 and
333-48739-01 filed by the Proffitt's Credit Card Master Trust and
Proffitt's Credit Corporation on March 26, 1998)
10.14 Certificate Purchase Agreement dated as of August 21, 1997 by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, Enterprise Funding Corporation, Receivables Funding
Corporation, NationsBank, N.A., as Agent, as a Senior Class Agent and
as a Bank Investor, and Bank of America National Trust and Savings
Association, as a Senior Class Agent and as a Bank Investor
(incorporated by reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.15 First Amendment to Certificate Purchase Agreement dated as of November
26, 1997 by and among Proffitt's Credit Corporation, as Transferor,
Proffitt's, Inc., as Servicer, Enterprise Funding Corporation,
Receivables Funding Corporation, NationsBank, N.A., as Agent, as a
Senior Class Agent and as a Bank Investor, and Bank of America National
Trust and Savings Association, as a Senior Class Agent and as a Bank
Investor (incorporated by reference from the Exhibits to the Form 10-K
of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
24
<PAGE> 25
10.16 Second Amendment to Certificate Purchase Agreement dated as of February
2, 1998 by and among Proffitt's Credit Corporation, as Transferor,
Proffitt's, Inc., as Servicer, Enterprise Funding Corporation,
Receivables Funding Corporation, NationsBank, N.A., as Agent, as a
Senior Class Agent and as a Bank Investor, and Bank of America National
Trust and Savings Association, as a Senior Class Agent and as a Bank
Investor (incorporated by reference from the Exhibits to the Form 10-K
of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.17 Series 1997-2 Supplement dated as of August 21, 1997, by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference from the Exhibits to the form 8-K/A filed by
the Proffitt's Credit Card Master Trust and Proffitt's Credit
Corporation on September 23, 1997)
10.18 * Series 1998-1 Supplement dated as of May 6, 1998, by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
10.19 * Series 1998-2 Supplement dated as of May 21, 1998, by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
10.20 Amended and Restated Loan and Security Agreement dated as of May 12,
1998 between Fifth Avenue Capital Trust ("FACT") and certain direct and
indirect wholly-owned subsidiaries (incorporated by reference from the
Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year
ended January 31, 1998)
10.21 Trust and Servicing Agreement dated as of May 12, 1995 among FACT,
Bankers Trust Company, as servicer, and Marine Midland Bank, as trustee
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.22 Amended and Restated Trust Agreement, dated as of May 12, 1995, among
Saks & Company, HNY, Inc., and Wilmington Trust Company, as owner
trustee (incorporated by reference from the Exhibits to the Form 10-K
of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.23 Amended and Restated Pooling & Servicing Agreement, dated as of
December 16, 1991, among SFA Finance Company, Saks & Company, and
Bankers Trust Company, as trustee (the "1991 P&S") (incorporated by
reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for
the fiscal year ended January 31, 1998)
25
<PAGE> 26
10.24 First Amendment to the 1991 P&S, dated as of November 5, 1992
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.25 Second Amendment to the 1991 P&S, dated as of October 26, 1993
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.26 Second Amended and Restated Receivables Purchase Agreement dated as of
December 16, 1991, between Saks & Company and SFA Finance Company (the
"Receivables Purchase Agreement) (incorporated by reference from the
Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year
ended January 31, 1998)
10.27 First Amendment to the Receivables Purchase Agreement, dated as of
November 5, 1992 (incorporated by reference from the Exhibits to the
Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31,
1998)
10.28 Second Amendment to the Receivables Purchase Agreement, dated as of
October 26, 1993 (incorporated by reference from the Exhibits to the
Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31,
1998)
10.29 Series 1991-2 Supplement, dated as of December 16, 1991, among SFA
Finance Company, Saks & Company, MHTC, as administrative agent, and
Bankers Trust Company, as trustee (the "1991-2 Supplement")
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.30 First Amendment to the 1991-2 Supplement, dated as of July 22, 1992
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.31 Second Amendment to the 1991-2 Supplement, dated as of August 20, 1992
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.32 Third Amendment to the 1991-2 Supplement, dated as of November 5, 1992
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.33 Fourth Amendment to the 1991-2 Supplement, dated as of May 20, 1993
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
26
<PAGE> 27
10.34 Fifth Amendment to the 1991-2 Supplement, dated as of October 28, 1993
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.35 Sixth Amendment to the 1991-2 Supplement, dated as of September 30,
1994 (incorporated by reference from the Exhibits to the Form 10-K of
Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.36 Class C Supplement to Series 1991-2 Supplement, dated as of November 5,
1992, among SFA Finance Company, Saks & Company, and Bankers Trust
Company, as trustee (the "1991-2(C) Supplement") (incorporated by
reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for
the fiscal year ended January 31, 1998)
10.37 First Amendment to the 1991-2(C) Supplement, dated as of September 30,
1994 (incorporated by reference from the Exhibits to the Form 10-K of
Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.38 Class B Supplement to Series 1991-2 Supplement, dated as of September
30, 1994, among SFA Finance Company, Saks & Company, and Bankers Trust
Company, as trustee (incorporated by reference from the Exhibits to the
Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31,
1998)
10.39 Series 1995-1 Supplement, dated as of November 13, 1995, among SFA
Finance Company, Saks & Company, Swiss Bank Corporation, New York
Branch, as administrative agent, and Bankers Trust Company, as Trustee
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.40 Transition Supplement to the 1991 P&S, dated as of April 25, 1996,
among SFA Finance Company, Saks & Company, and Bankers Trust Company,
as trustee (incorporated by reference from the Exhibits to the Form
10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.41 Pooling and Servicing Agreement, dated as of April 25, 1996, among SFA
Finance Company, Saks & Company, and Bankers Trust Company, as trustee
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.42 Series 1996-1 Supplement to the 1996 P&S, dated as of April 25, 1996,
among SFA Finance Company, Saks & Company, and Bankers Trust Company,
as trustee (incorporated by reference from the Exhibits to the Form
10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
27
<PAGE> 28
10.43 Third Amended and Restated Receivables Purchase Agreement, dated as of
April 25, 1996, between Saks & Company and SFA Finance Company
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.44 Series 1996-2 Supplement to the 1996 P&S, dated as of April 25, 1996,
among SFA Finance Company, Saks & Company, and Bankers Trust Company,
as trustee (incorporated by reference from the Exhibits to the Form
10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.45 * Receivables Purchase Agreement, dated as of September 17, 1998, by
and among National Bank of the Great Lakes, as Seller, SFA Finance
Company, as Purchaser, and Saks & Company, as Servicer
10.46 * Amendment No. 1 dated as of September 17, 1998 to Pooling and
Servicing Agreement dated as of April 25, 1996, by and among SFA
Finance Company, as Transferor, Saks & Company, as Servicer, and
Bankers Trust Company, as Trustee
10.47 * Amendment No. 2 dated as of December 17, 1998 to Pooling and
Servicing Agreement dated as of April 25, 1996, by and among SFA
Finance Company, as Transferor, Saks & Company, as Servicer, and
Bankers Trust Company, as Trustee
10.48 * Amendment No. 1 dated as of December 17, 1998 to Series 1996-1
Supplement dated as of April 25, 1996, by and among SFA Finance
Company, as Transferor, Saks & Company, as Servicers, and Bankers Trust
Company, as Trustee
10.49 * Amendment No. 1 dated as of December 17, 1998 to Series 1996-2
Supplement dated as of April 25, 1996, by and among SFA Finance
Company, as Transferor, Saks & Company, as Servicers, and Bankers Trust
Company, as Trustee
10.50 * Amendment No. 1 dated as of December 17, 1998 to Series 1998-1
Supplement dated as of August 31, 1998, by and among SFA Finance
Company, as Transferor, Saks & Company, as Servicers, and Bankers Trust
Company, as Trustee
MANAGEMENT CONTRACTS, COMPENSATORY PLANS, OR ARRANGEMENTS, ETC.
10.51 Proffitt's, Inc. 1987 Stock Option Plan, as amended (incorporated by
reference from the Exhibits to the Form S-8 Registration Statement No.
33-46306 of Proffitt's, Inc. dated March 10, 1992)
10.52 * Saks Incorporated Amended and Restated Employee Stock Purchase Plan
28
<PAGE> 29
10.53 * Saks Incorporated Amended and Restated 1994 Long-Term Incentive Plan
10.54 * Saks Incorporated Amended and Restated 1997 Stock-Based Incentive Plan
10.55 * Saks Incorporated 401(k) Retirement Plan
10.56 * Trust Agreement for the Saks Incorporated 401(k) Retirement Plan
10.57 * Saks Incorporated Supplemental Savings Plan
10.58 * Trust Agreement for the Saks Incorporated Supplemental Savings Plan
10.59 First Amendment to Proffitt's, Inc. Supplemental Savings Plan
(incorporated by reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.60 Second Amendment to Proffitt's, Inc. Supplemental Savings Plan
(incorporated by reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.61 G.R. Herberger's, Inc. 401(k) Employee Stock Purchase Plan and Employee
Stock Ownership Plan (incorporated by reference from the Exhibits to
the Form S-8 Registration Statement No. 333-27813 of Proffitt's, Inc.
dated May 27, 1997)
10.62 Third Amendment and Restatement of The Parisian, Inc. Stock Option Plan
for Officers (incorporated by reference from the Exhibits to the Form
10-K of Proffitt's, Inc. for the fiscal year ended February 1, 1997)
10.63 First Amendment and Restatement of The Parisian, Inc. Management
Incentive Plan (incorporated by reference from the Exhibits to the Form
10-K of Proffitt's, Inc. for the fiscal year ended February 1, 1997)
10.64 Younkers, Inc. Stock and Incentive Plan (incorporated by reference from
the Exhibits to the Form S-1 Registration Statement No. 33-45771 of
Younkers, Inc.)
10.65 Younkers, Inc. Management Stock Option Plan (incorporated by reference
from the Exhibits to the Form S-1 Registration Statement No. 33-45771
of Younkers, Inc.)
10.66 Younkers, Inc. 1993 Long-Term Incentive Plan (incorporated by reference
from the Exhibits to the Form S-8 Registration Statement No. 33-59224
of Younkers, Inc.)
29
<PAGE> 30
10.67 Form of Younkers, Inc. Deferred Compensation Plan (incorporated by
reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the
quarter ended May 1, 1993)
10.68 Carson Pirie Scott & Co. Supplemental Executive Retirement Plan
(incorporated by reference to Carson Pirie Scott & Co. Common Shares
Registration Statement No. 33-67514)
10.69 Carson Pirie Scott & Co. Deferred Compensation Plan (incorporated by
reference from the Exhibits to the Form 10-K of Carson Pirie Scott &
Co. for the fiscal year ended January 28, 1995)
10.70 Carson Pirie Scott & Co. 1993 Stock Incentive Plan as Amended and
Restated as of March 19, 1997 (incorporated by reference from the
Exhibits to the Form 10-K of Carson Pirie Scott & Co. for the fiscal
year ended February 2, 1997)
10.71 Carson Pirie Scott & Co. 1996 Long-Term Incentive Plan (incorporated by
reference from the Exhibits to the Form 10-K of Carson Pirie Scott &
Co. for the fiscal year ended February 2, 1997)
10.72 Carson Pirie Scott & Co. Savings Plan (incorporated by reference from
the Exhibits to the Form S-8 Carson Pirie Scott & Co. Registration
Statement No. 33-93012)
10.73 Saks Fifth Avenue Retirement Savings Plan (incorporated by reference
from the Exhibits to the Form S-8 Saks Incorporated Registration
Statement No. 333-66759)
10.74 Saks Holdings, Inc. 1996 Management Stock Incentive Plan (incorporated
by reference from the Exhibits to the Form S-1 of Saks Holdings, Inc.
filed with the Commission on August 29, 1996)
10.75 Saks Fifth Avenue Supplemental Pension Plan, effective July 2, 1990
(incorporated by reference from the Exhibits to the Form 10-K of Saks
Holdings, Inc. for the fiscal year ended January 31, 1998)
10.76 Saks Holdings, Inc. Senior Management Stock Incentive Plan, dated as of
October 17, 1990 (incorporated by reference from the Exhibits to the
Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31,
1998)
10.77 Saks Holdings, Inc. 1996 Management Stock Incentive Plan, dated as of
February 1, 1996 (incorporated by reference from the Exhibits to the
Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31,
1998)
30
<PAGE> 31
10.78 Amendment to the Saks Holdings, Inc. 1996 Management Stock Incentive
Plan, dated as of February 1, 1996 (incorporated by reference from the
Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year
ended January 31, 1998)
10.79 $500,000 Loan Agreement between Proffitt's, Inc. and R. Brad Martin
dated February 1, 1989 (incorporated by reference from the Exhibits to
the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 28,
1989)
10.80 Form of Deferred Compensation Agreement between Younkers, Inc. and
Robert M. Mosco, as amended (incorporated by reference from the
Exhibits to the Form S-1 Registration Statement No. 33-45771 of
Younkers, Inc.)
10.81 Form of Fourth Amended and Restated Employment Agreement by and between
Proffitt's, Inc. and R. Brad Martin dated February 2, 1998
(incorporated by reference from the Exhibits to the Form 10-K of
Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.82 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1994 Long-Term Incentive Plan granted to R. Brad Martin dated October
11, 1996 (incorporated by reference from the Exhibits to the Form 10-Q
of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.83 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to R. Brad Martin dated January
31, 1998 (incorporated by reference from the Exhibits to the Form 10-K
of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.84 Form of Employment Agreement by and between Proffitt's, Inc. and Robert
M. Mosco dated February 2, 1998 (incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended
January 31, 1998)
10.85 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1994 Long-Term Incentive Plan granted to Robert M. Mosco dated October
28, 1996 (incorporated by reference from the Exhibits to the Form 10-Q
of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.86 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to Robert M. Mosco dated
January 31, 1998 (incorporated by reference from the Exhibits to the
Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31,
1998)
31
<PAGE> 32
10.87 Form of Employment Agreement by and between Proffitt's, Inc. and James
A. Coggin dated February 2, 1998(incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended
January 31, 1998)
10.88 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1994 Long-Term Incentive Plan granted to James A. Coggin dated October
28, 1996 (incorporated by reference from the Exhibits to the Form 10-Q
of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.89 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to James A. Coggin dated
January 31, 1998 (incorporated by reference from the Exhibits to the
Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31,
1998)
10.90 Form of Employment Agreement by and between Proffitt's, Inc. and
Douglas E. Coltharp dated February 2, 1998 (incorporated by reference
from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal
year ended January 31, 1998)
10.91 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1994 Long-Term Incentive Plan granted to Douglas E. Coltharp dated
November 25, 1996 (incorporated by reference from the Exhibits to the
Form 10-Q of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.92 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to Douglas E. Coltharp dated
January 31, 1998 (incorporated by reference from the Exhibits to the
Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31,
1998)
10.93 Form of Employment Agreement by and between Proffitt's, Inc. and Brian
J. Martin dated February 2, 1998 (incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended
January 31, 1998)
10.94 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1994 Long-Term Incentive Plan granted to Brian J. Martin dated October
28, 1996 (incorporated by reference from the Exhibits to the Form 10-Q
of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.95 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to Brian J. Martin dated
January 31, 1998 (incorporated by reference from the Exhibits to the
Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31,
1998)
10.96 Form of Employment Agreement by and between Proffitt's, Inc. and Donald
E. Wright dated February 2, 1998 (incorporated by reference from the
Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended
January 31, 1998)
32
<PAGE> 33
10.97 Form of Restricted Stock Grant Agreement under the Proffitt's, Inc.
1997 Stock-Based Incentive Plan granted to Donald E. Wright dated
January 31, 1998 (incorporated by reference from the Exhibits to the
Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31,
1998)
10.98 Form of Employment Agreement by and between Proffitt's, Inc. and
Stanton J. Bluestone dated October 29, 1997 (incorporated by reference
from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal
year ended January 31, 1998)
10.99 Form of Employment Agreement by and between Saks Holdings, Inc.,
Proffitt's, Inc. and Philip B. Miller dated as of September 3, 1998
(incorporated by reference from the Exhibits to the Form 8-K of Saks
Incorporated dated September 23, 1998)
13.1 * Annual Report to Shareholders for the fiscal year ended January 30,
1999 (not to be deemed filed except for those portions thereof which
are incorporated herein by reference in this filing)
21.1 * Subsidiaries of the registrant
23.1 * Consents of Independent Accountants
27.1 * Financial Data Schedule
* Filed as a current year Exhibit.
33
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
SAKS INCORPORATED
(As amended effective April 7, 1999)
ARTICLE I
IDENTIFICATION; OFFICES AND REGISTERED AGENT
Section 1. Identification. The name of the Corporation is SAKS
Incorporated, a Tennessee corporation (the "Corporation").
Section 2. Principal Office. The principal office of this Corporation
is located at 750 Lakeshore Parkway, Birmingham, Alabama 35211, as provided in
the Charter. The Board of Directors may, by resolution, amend the Charter to
change the address of the principal office.
Section 3. Registered Agent. The Corporation has designated and shall
continue to have a registered agent in the State of Tennessee. If the registered
agent resigns or is for any reason unable to perform his duties, the Corporation
shall promptly designate another registered agent. The Corporation may, by
resolution of the Board of Directors, appoint such other agents for the service
of process in such other jurisdictions as the Board of Directors may determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Meetings. All meetings of the shareholders for the election
of directors shall be held in the City of Alcoa, State of Tennessee, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Tennessee as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of shareholders for any other purpose may be held at
such time and place, within or without the State of Tennessee, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof
Section 2. Annual Meetings. Annual meetings of the shareholders,
commencing with fiscal year 1988, shall be held on the 2nd Monday of June if
said date is not a legal holiday, and if a legal holiday, then on the next day
following which is not a legal holiday, or at such other date and time as shall
be designated from time to time by the Board of Directors, for the purpose of
electing directors of the Corporation and for the transacting of such other
business as may properly come before the meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than 10 days nor more than
60 days before the date of the meeting.
Section 3. Shareholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of the shareholders, a
<PAGE> 2
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for the purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held
(which place shall be specified in the notice of the meeting), or, if not so
specified at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
Section 4. Special Meetings. Special meetings of the shareholders may
be called by the Board of Directors or by the Chairman of the Board, or by the
President, and shall be called by the Chairman, the President, the Secretary, or
an assistant Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of the holders of record of at least
twenty-five percent (25%) of the outstanding shares of the Corporation entitled
to vote at the meeting. Each special meeting shall be held at such time as the
Board of Directors shall determine, or, in the absence of such determination by
the Board of Directors, at such time as the person or persons calling or
requesting the call of the meeting shall specify in the notice or in the written
request. Written notice of a special meeting stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called, shall
be given to each shareholder entitled to vote at such meeting not less than 10
days or more than 60 days before the date of the meeting. The business
transacted at any special meeting shall be limited to the purposes stated in the
notice.
Section 5. Waiver of Notice. The shareholders may waive the requirement
of written notice of annual and special meetings by written waiver duly executed
and filed with the minutes of the meeting.
Section 6. Quorum. The holders of record of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Charter. A quorum once present, is not broken by the
subsequent withdrawal of any shareholder. If, however, such quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented by
proxy, any business may be transacted which might have been transacted at the
meeting as originally notified. If the adjournment is for more than 30 days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the Charter a different vote is required, in which case such
express provision shall govern and control the decision of such question.
2
<PAGE> 3
Section 7. Meeting Chairman. The Chairman of the Board, or if absent or
unable to serve, the President, or if absent or unable to serve, the Treasurer
or Secretary, shall call meetings of the shareholders to order and act as
Chairman of such meetings. The shareholders may elect any one of their number to
act as Chairman of any meeting in the absence of the aforenamed individuals.
Section 8. Proxies. Every shareholder entitled to vote at a
shareholders' meeting may authorize another person or persons to act for him by
proxy. Each proxy must be in writing and signed by the shareholder or by his
attorney in fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Each proxy shall be
revocable at the pleasure of the shareholder executing it, unless it conforms to
the requirements of an irrevocable proxy, as provided by statute. All proxies
must be delivered to the Secretary of the Corporation prior to the opening of
the meeting, except for proxies granted after the meeting has opened, which
proxies shall be delivered to the Secretary as soon as practicable after
execution.
Section 9. Determination of Shareholder. In order to determine
shareholders entitled to notice of or to vote at any meeting of shareholders, or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the Stock Transfer Books
be closed for a stated period, but not to exceed 40 days. If the Stock Transfer
Books are closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least 10 days immediately preceding such meeting. In lieu of closing the Stock
Transfer Books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
less than 10 days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the Stock Transfer Books
are not closed and no record date is fixed for determination of shareholders
entitled to notice of or entitled to vote at a meeting of shareholders or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed, or the date on which the resolution of the Board
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders.
Section 10. Shareholder Action By Written Consent. Any action required
or permitted to be taken by the shareholders of the Corporation must be effected
at a duly called annual or special meeting of such holders and may not be
effected by any consent in writing by such holders.
ARTICLE III
NOTICE REQUIREMENTS AND CONDUCT OF SHAREHOLDERS MEETINGS
Section 1. Notice of Nominations. Nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors authorized to make such nominations or by any shareholder
entitled to vote in the election of directors generally. However, any such
shareholder nomination may be made only if written notice of such nomination has
been given, either by personal delivery or the United States mail, postage
prepaid, to the
3
<PAGE> 4
Secretary of the Corporation not later than (a) with respect to an election to
be held at an annual meeting of shareholders, one hundred twenty (120) days in
advance of the anniversary date of the proxy statement for the previous year's
annual meeting, and (b) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close of business on
the tenth day following the date on which notice of such meeting is first given
to shareholders. In the case of any nomination by the Board of Directors or a
committee appointed by the Board of Directors authorized to make such
nominations, compliance with the proxy rules of the Securities and Exchange
Commission shall constitute compliance with the notice provisions of the
preceding sentence.
In the case of any nomination by a shareholder, each such notice shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director, (i) the name, age, business address, and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies with
respect to nominees for election as directors, pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including without limitation
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected); and (b) as to the shareholder giving
the notice (i) the name and address, as they appear on the Corporation's books,
of such shareholder, and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder; and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The President,
Chief Executive Officer, or chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
Section 2. Notice of New Business. At an annual meeting of the
shareholders only such new business shall be conducted, and only such proposals
shall be acted upon, as have been properly brought before the meeting. To be
properly brought before the annual meeting, such new business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a shareholder. For a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the Corporation
and, if the Corporation is a reporting company under the Securities Exchange Act
of 1934 (the "Exchange Act"), the proposal and the shareholder must comply with
Rule 14a-8 under the Exchange Act. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation within the time limits specified by Rule 14a-8, if applicable.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposed to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual
4
<PAGE> 5
meeting, (b) the name and address, as they appear on the Corporation's books, of
the shareholder proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the shareholder, and (d) any
financial interest of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 2. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that new business or any
shareholder proposal was not properly brought before the meeting in accordance
with the provisions of this Section 2, and if he or she should so determine, he
or she shall so declare to the meeting and any such business or proposal not
properly brought before the meeting shall not be acted upon at the meeting.
Section 3. Conduct of Shareholders Meetings. The Board of Directors of
the Corporation shall be entitled to make such rules or regulations for the
conduct of meetings of shareholders as it shall deem necessary, appropriate or
convenient. Subject to such rules and regulations of the Board of Directors, if
any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to shareholders of record of the corporation and
their duly authorized and constituted proxies, and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting and matters which are to be voted on by ballot. Unless and to the
extent determined by the board of directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Number of Directors. The affairs of the Corporation shall be
managed by a Board of up to 18 directors.
Effective as of the annual meeting of shareholders in 1997, the Board
shall be divided into three classes, designated as Class I, Class II, and Class
III, as nearly equal in number as possible. The initial term of office of Class
I shall expire at the annual meeting of shareholders in 1998, that of Class II
shall expire at the annual meeting of shareholders in 1999, and that of Class
III shall expire at the annual meeting in 2000, and in all cases as to each
director until his or her successor shall be elected and shall qualify, or until
his or her earlier resignation, removal from office, death, or incapacity.
5
<PAGE> 6
Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified. Vacancies on
the Board for any reason, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled by a vote of the
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
If the number of directors is changed, the Board shall determine the
class or classes to which the increased or decreased number of directors shall
be apportioned; provided that the directors in each class shall be as nearly
equal in number as possible. No decrease in the number of directors shall have
the effect of shortening the term of any incumbent director.
Notwithstanding any other provisions of the Charter or these Bylaws
(and notwithstanding that a lesser percentage may be specified by law, the
Charter, or these Bylaws), the affirmative vote of the holders of 80% or more of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with this Article IV, Section 1 of these Bylaws.
Section 2. Removal of Directors. Any or all directors may be removed by
a vote of a majority of the shareholders entitled to vote, only for cause as
defined by the Tennessee Business Corporation Act.
Section 3. Filling of Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors,
for any reason, may be filled by a vote of the majority of the directors then in
office, although less than a quorum exists, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and qualified, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole board (as constituted immediately prior to any such
increase), the vacancy or newly created directorship may be filled by vote of
the shareholders at any meeting of the shareholders, notice of which shall have
referred to the proposed election. Any director elected by the shareholders to
fill any vacancy shall be elected to hold office until the next annual meeting
of shareholders and until their successors are duly elected and qualified,
unless sooner displaced.
Section 4. Annual Meeting. The annual meeting of the Board of Directors
shall be held immediately after and at the same place as the annual meeting of
the shareholders, provided a quorum be present and no notice of such meeting
shall be necessary. In the event such meeting of the Board of Directors is not
held at such time and place, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.
6
<PAGE> 7
Section 5. Notice of Meetings. The annual and all regular meetings of
the Board of Directors may be held without notice at such time and at such place
as shall from time to time be determined by the Board. Special meetings shall be
held upon written notice not less than one day before the meeting.
Section 6. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board or President, or if either is absent or
unable to do so, by any Vice President, or by any two directors.
Section 7. Quorum. At all meetings of the Board, a majority of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law, the Charter or by these Bylaws. If a quorum shall
not be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Dissent to Action. A director who is present at a meeting of
the Board, at which any action is taken, shall be presumed to have concurred in
the action, unless his dissent thereto shall be entered in the Minutes of the
meeting, or unless he shall submit his written dissent to the person acting as
the Secretary of the meeting before the adjournment thereof, or shall deliver or
send such dissent to the Secretary of the Corporation promptly after the
adjournment of the meeting. Such rights to dissent shall not apply to a director
who voted in favor of any such action. A director who is absent from a meeting
at which such action is taken shall be presumed to have concurred in the action
unless he shall deliver or send by registered or certified mail his dissent
thereto to the Secretary of the Corporation or shall cause such dissent to be
filed with the Minutes of the proceedings of the Board within 10 days after
learning of such action.
Section 9. Action without Meeting. Unless otherwise restricted by the
Charter or these Bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing setting forth the actions so taken, signed by all of
the persons entitled to vote thereon, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 10. Board Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, but no such committee shall have the power or authority in
reference to amending the Charter, adopting an agreement of merger or
7
<PAGE> 8
consolidation, recommending to the shareholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the shareholders a dissolution of the Corporation or a revocation of the
dissolution, or amending the Bylaws of the Corporation; and, unless the
resolution or the Charter expressly so provide, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
Section 11. Compensation of Directors. Unless otherwise restricted by
the Charter, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors and/or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 12. Indemnification. The Corporation shall indemnify, to the
full extent authorized or permitted by the Tennessee Business Corporation Act,
any person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was a director of the Corporation or serves or served as a director of any other
enterprise at the request of the Corporation.
Section 13. Mandatory Resignation. Directors who are also officers of
the Corporation shall submit a letter of resignation as such to the Board of
Directors upon any termination of employment as an officer of the Corporation,
and directors who are not officers of the Corporation shall likewise submit a
letter of resignation upon any change in that director's principal business or
other activity in which the director was engaged at the time of his or her
election.
ARTICLE V
OFFICERS
Section 1. Appointment. The Board of Directors at its first meeting
after each annual meeting of stockholders shall choose a Chairman of the Board,
a Chief Executive Officer, a President, an Executive Vice President, a Chief
Operating Officer, a Chief Financial Officer, a Treasurer, and a Secretary. The
Board of Directors may also choose additional vice presidents and one or more
assistant secretaries and assistant treasurers. Any two of the aforementioned
offices may be filled by the same person, except that no one person may be
Secretary and also President. No person shall purport to execute or attest any
document or instrument on behalf of the Corporation in more than one capacity.
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Section 2. Term. The officers of the Corporation shall hold office for
one year or until their successors are chosen and qualified subject, however, to
the removal of any officer pursuant to these Bylaws.
Section 3. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors.
Section 4. Removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
Section 5. Duties. All officers shall have such authority to perform
such duties in the management of the Corporation as are normally incident to
their offices and as the directors from time to time provide.
Section 6. The Chairman of the Board and Chief Executive Officer. The
Chairman of the Board and Chief Executive Officer of the Corporation shall
preside at all meetings of the shareholders and the Board of Directors, shall
have general and active management of the business of the Corporation, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
Section 7. Other Duties of the Chairman of the Board. He shall execute
bonds, mortgages and other contracts, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
Section 8. The President. The President shall perform such duties as
shall be prescribed to him from time to time by the Board of Directors.
Section 9. Duties of the President and the Vice President(s). In the
absence of the Chief Executive Officer or in the event of his inability or
refusal to act, the President shall perform the duties of the Chief Executive
Officer and, when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer. The Vice President(s) shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 10. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or the President, under whose supervision he shall be.
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Section 11. Assistant Secretary. The Assistant Secretary, or if there
be more than one, the assistant secretaries in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 12. The Chief Financial Officer and Treasurer. The Chief
Financial Officer and the Treasurer, in his capacity as such officers, shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors.
Section 13. Duties of the Chief Financial Officer and Treasurer. He
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as the
Treasurer and of the financial condition of the Corporation.
Section 14. Bond. If required by the Board of Directors, the Chief
Financial Officer and the Treasurer shall give the Corporation a bond (which
shall be renewed every six years) in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
Section 15. Assistant Treasurer(s). The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election) shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
Section 16. Indemnification. The Corporation shall indemnify, to the
full extent authorized or permitted by the Tennessee Business Corporation Act,
any person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was an officer of the Corporation or serves or served as a director or officer
of any other enterprise at the request of the Corporation.
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ARTICLE VI
CAPITAL STOCK
Section 1. Certificate. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the Chairman of the Board, the Chief Executive Officer or the President and
the Chief Operating Officer, a Vice President, the Treasurer (or an Assistant
Treasurer), or the Secretary (or an Assistant Secretary) of the Corporation,
certifying the number of shares owned by him in the Corporation.
Section 2. Facsimile Signatures. Where a certificate is countersigned
(1) by a transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case an officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issuance.
Section 3. Notice of Restrictions. Each certificate of stock which is
restricted or limited as to its transferability or voting rights, or which is
callable under the Charter, which is preferred or limited as to dividends or
rights upon voluntary or involuntary dissolution, shall have a notice of such
restriction, limitation or preference conspicuously stated on the face or back
of the certificate. Upon the removal of expiration of any such restriction or
limitation, the holder of such certificate shall be entitled to receive a new
certificate upon the surrender of the old restricted or limited certificates,
and the payment of the reasonable expenses of the Corporation incurred in
connection therewith.
Section 4. Reissuance of Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 5. Transfer of Shares. The Corporation shall register a
transfer of a stock certificate presented to it for transfer if:
(a) the certificate is endorsed by the appropriate person or persons;
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(b) the signature of the appropriate person or persons has been
guaranteed by a national banking association, a bank organized
and operating under the statutes of the State of Tennessee, or a
member of the National Association of Security Dealers, and
reasonable assurance is given that the endorsements are
effective, unless the Secretary of the Corporation waives such
requirements;
(c) there has been compliance with any applicable law relating to the
collection of taxes; and
(d) the transfer is in fact rightful or is to a bona fide purchaser.
Section 6. Endorsements. An endorsement of the stock certificate in
registered form is made when an appropriate person signs on it or on a separate
document an assignment or transfer of it, or a power to assign or transfer it,
or when the signature of this person is written without more upon the back of
the certificate. An endorsement may be in blank, which includes an endorsement
to bearer, or special, which specifies the person to whom the stock is to be
transferred, or who has the power to transfer it. The Corporation may elect to
require reasonable assurance beyond that specified in this Section.
Section 7. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Tennessee.
ARTICLE VII
DIVIDENDS, SURPLUS AND RESERVE
Section 1. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property or its own shares, except where the Corporation is insolvent, as
that term is defined in Section 48-1-102 (14), Tennessee Code Annotated, or when
the payment thereof would render the Corporation insolvent, or when the
declaration of payment thereof would be contrary to any restrictions contained
in the Charter, these Bylaws, or in any applicable valid contract. The
declaration and payment of any such dividend shall be in accordance with Section
48-1-511, Tennessee Code Annotated, as it may be amended from time to time.
Section 2. Capital Distributions. The Board of Directors may distribute
to the shareholders of the Corporation out of capital surplus, a portion of its
assets, in cash or property, subject to the following provisions:
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(a) no such distribution shall be made at a time when the Corporation
is insolvent or when such distribution would render the
Corporation insolvent;
(b) no such distribution shall be made unless such distribution is
authorized by the affirmative vote of the holders of the majority
of all of the outstanding shares of stock entitled to vote
thereon;
(c) no such distribution shall be made to the holders of any class of
shares unless all cumulative dividends accrued on all preferred
or special classes of shares entitled to preferential dividends
shall have been fully paid;
(d) no such distribution shall be made to the holders of any class of
shares which would reduce the remaining net assets of the
Corporation below the aggregate preferential amount payable in
the event of voluntary liquidation to the holders of shares
having preferential rights to the assets of the Corporation in
the event of liquidation; and
(e) each such distribution, when made, shall be identified as a
distribution from capital surplus and the amount per share shall
be disclosed to the shareholders receiving the same, concurrently
with the distribution thereof.
Section 3. Increases of Capital Surplus. The capital surplus of the
Corporation may be increased from time to time by resolution of the Board,
directing that all or part of the earned surplus of the Corporation be
transferred to capital surplus. The Board of Directors may, by resolution, apply
any part or all of the capital surplus of the Corporation to the reduction or
elimination of any deficit arising from losses however incurred; provided,
however, that the earned surplus has first been exhausted by charging such
losses to earned surplus and then only to the extent that such losses exceed the
earned surplus. Each such application of capital surplus shall, to the extent
thereof, effect a reduction of capital surplus.
Section 4. Seal. The Corporation shall have a corporate seal. The
presence or absence of a seal on any instrument shall not affect the character,
validity, or legal effect thereof in any respect. The affixing of a seal shall
not be necessary for the execution of any instrument or document by the
Corporation.
ARTICLE VIII
AMENDMENTS
Subject to the provisions of the Charter of the Corporation, these
Bylaws may be altered, amended, or repealed or new bylaws may be adopted by the
vote of a majority of all of the shareholders or by the majority vote of the
entire Board of Directors, when such power is conferred upon the Board of
Directors by the Charter, at any regular meeting of the shareholders or of the
Board of Directors or at any special meeting of the shareholders or of the Board
of Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 2. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 3. Savings Clause. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation may nevertheless indemnify each director or officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 4. Notices. Whenever, under the provisions of the statutes, the
Charter or these Bylaws, notice is required to be given to any director or
shareholder, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such director or shareholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to directors may
also be given by telegram or electronic facsimile, in which event it shall be
deemed to have been given when deposited with a telegraph or electronic
facsimile office for transmission.
Section 5. Indemnification. Notwithstanding anything in the Charter to
the contrary, the Corporation shall be permitted, but shall not be required, to
indemnify and hold harmless any employee or agent of the Corporation made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative.
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EXHIBIT 10.7
YOUNKERS CREDIT CORPORATION
SELLER
PROFFITT'S, INC.
(AS SUCCESSOR BY MERGER TO YOUNKERS, INC.)
SERVICER
AND
THE CHASE MANHATTAN BANK
(FORMERLY KNOWN AS CHEMICAL BANK)
TRUSTEE
------------------------------
AMENDMENT NO. 3
DATED AS OF MAY 6, 1998
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF JUNE 13, 1995
------------------------------
<PAGE> 2
THIS AMENDMENT NO. 3 ("Amendment") to the Pooling and Servicing
Agreement, dated as of June 13, 1995 (the "Pooling and Servicing Agreement"),
dated as of May 6, 1998, is by and among Younkers Credit Corporation, a Delaware
corporation, (the "Seller"), Proffitt's, Inc., a Tennessee corporation and
successor by merger to Younkers, Inc., (the "Servicer"), and The Chase Manhattan
Bank, formerly known as Chemical Bank, as trustee (the "Trustee"). Capitalized
terms used and not otherwise defined herein shall have the meanings ascribed to
them in the Pooling and Servicing Agreement.
W I T N E S S E T H
WHEREAS, the parties hereto are authorized by Section 13.1(b) of the
Pooling and Servicing Agreement to enter into this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, in the Pooling and Servicing Agreement and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE POOLING AND SERVICING AGREEMENT
1.1 Article II of the Pooling and Servicing Agreement is
hereby amended by adding the following Section 2.9:
"Section 2.9 Ownership of Certificates in the
Proffitt's Credit Card Master Trust. The Trustee, upon the request of the
Seller, may transfer and assign all Receivables and all other Trust Assets to
the Proffitt's Credit Card Master Trust (the "PCCMT") in exchange for
certificates representing beneficial ownership of undivided interests in the
PCCMT, pursuant to a series supplement to the PCCMT that allocates to holders of
the Series 1995-1 Class A Certificates and the Series 1995-1 Class B
Certificates, Principal Collections and Finance Charge Collections on
substantially identical terms to the Series 1995-1 Series Supplement to this
Agreement."
1.2 The reporting obligations set out in Sections 3.4, 3.5 and
3.6 of the Pooling and Servicing Agreement shall be deleted and replaced in
their entirety by Sections 3.4, 3.5 and 3.6 (set out below) of the Master
Pooling and Servicing Agreement dated as of August 21, 1997 (the "PCCMT PSA") by
and among Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee. All
cross-references in the provisions of the PCCMT PSA hereby adopted shall be to
Sections, sub-sections or Exhibits of the PCCMT PSA.
"Section 3.4 Reports and Records for the Trustee
(a) Initial Report. On the Closing Date with
respect to each Series of the Investor Certificates,
the Servicer shall prepare and deliver, as provided
in Section 13.5, to the Trustee and the
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Rating Agencies, and the Persons, if any, specified
in any Supplement with respect to each class of
Investor Certificates of any then outstanding Series
which is not assigned a rating by any Rating Agency,
an Officer's Certificate substantially in the form of
Exhibit D setting forth the Aggregate Principal
Receivables, the Transferor Amount, the Discount
Option Receivables and the Transferor Interest
Percentage as of the end of the day two Business Days
preceding the Closing Date and the expected
Transferor Amount after giving effect to the issuance
of such Series.
(b) Daily Reports. For so long as deposits
of Collections are required to be made daily by the
Servicer pursuant to Section 4.1(f), on each Business
Day commencing on the Initial Closing Date, the
Servicer shall prepare, maintain at the office of the
Servicer and make available for inspection by the
Trustee, a record setting forth the aggregate amount
of Collections processed by the Servicer on the
second preceding Business Day. The Servicer shall
prepare such other reports on a daily (or less
frequent) basis as may be required by any Supplement.
(c) Monthly Servicer's Certificate. By 1:00
p.m., Minneapolis, Minnesota time on each
Determination Date, the Servicer shall deliver, as
provided in Section 13.5, to the Trustee, the Paying
Agent and the Rating Agencies, an Officer's
Certificate signed by a Servicing Officer
substantially in the form of Exhibit E (the "Monthly
Servicer's Certificate") (with the Monthly
Certificateholder's Statement required pursuant to
the applicable Supplement attached) setting forth the
following information (which, in the case of clauses
(iii), (iv) and (viii) below, will be stated on the
basis of an original principal amount of $1,000 per
Certificate): (i) the aggregate amount of Collections
processed for the immediately preceding Monthly
Period and the aggregate amount of Collections of
Finance Charge Receivables and the aggregate amount
of Collections of Principal Receivables processed
during such Monthly Period; (ii) the Investor
Percentage with respect to each Series of
Certificates with respect to Collections of Principal
Receivables, Finance Charge Receivables and Defaulted
Receivables processed during the immediately
preceding Monthly Period; (iii) for each Series and
for each class within any such Series, the amount of
such distribution allocable to principal, if
applicable; (iv) for each Series and for each class
within any such Series, the amount of such
distribution allocable to interest, if applicable;
(v) the aggregate outstanding balance of the Accounts
which were delinquent by 31 to 60 days, 61 to 90 days
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and 91 days or more as of the close of business on
the last day of the immediately preceding Monthly
Period immediately preceding such Distribution Date;
(vi) for each Series and for each class within any
such Series, the Investor Default Amount for the
immediately preceding Monthly Period; (vii) for each
Series and for each class within any such Series, the
amount of the Investor Charge Offs and the amount of
the reimbursements thereof for the next succeeding
Distribution Date; (viii) for each Series, the
Monthly Servicing Fee for the next succeeding
Distribution Date; (ix) for each Series, the existing
deficit controlled amortization amount or deficit
controlled accumulation amount, if applicable; (x)
the aggregate amount of Receivables in the Trust at
the close of business on the last day of the Monthly
Period immediately preceding such Distribution Date;
(xi) for each Series, the Investor Amount at the
close of business on the last day of the Monthly
Period immediately preceding such Distribution Date;
(xii) the available amount of Enhancement, if any,
for each Series; and (xiii) whether a Pay Out Event
with respect to any Series shall have occurred during
or with respect to the immediately preceding Monthly
Period. The Trustee shall make such statement
available to the Certificateholders, but shall be
under no duty to recalculate, verify or recompute the
information supplied to it under this Section 3.4.
Section 3.5 Annual Servicer's Certificate. The
Servicer will deliver, as provided in Section 13.5, to the
Trustee, the Rating Agencies and the Persons, if any,
specified in the Supplement with respect to each class of
Investor Certificates of any then outstanding Series which is
not assigned a rating by any Rating Agency, on or before June
30 of each calendar year, beginning with 1998, an Officer's
Certificate substantially in the form of Exhibit F (a) stating
that a review of the activities of the Servicer during the
preceding Fiscal Year (or, in the case of the first such
certificate, during the period from the Initial Closing Date
until February 3, 1998) and of its performance under this
Agreement was made under the supervision of the officer
signing such certificate and (b) stating that to the best of
such officer's Knowledge, based on such review, either there
has occurred no event which, with the giving of notice or
passage of time or both, would constitute a Servicer Default
and the Servicer has fully performed all its obligations under
this Agreement throughout such year, or, if there has occurred
such an event, specifying each such event known to such
officer and the nature and status thereof. A copy of such
Officer's Certificate may be obtained by any Investor
Certificateholder by a request in writing to the Trustee
directed to the Trustee's address specified in Section 13.5
hereof.
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Section 3.6 Annual Independent Public Accountants'
Servicing Report.
(a) On or before June 30 of each calendar
year, beginning with 1998, the Servicer shall cause a
firm of nationally recognized independent public
accountants (who may also render other services to
the Servicer or the Transferor) to furnish, as
specified in Section 13.5, a report prepared in
accordance with standards established by the American
Institute of Certified Public Accountants and,
accordingly, including such procedures or examination
as they considered necessary in the circumstances, to
the Trustee, the Rating Agencies and the Persons, if
any, specified in any Supplement with respect to each
class of Investor Certificates of any then
outstanding Series which is not assigned a rating by
any Rating Agency, and, as may be required by any
Series Supplement, any Enhancement Provider to the
effect that, such firm has applied certain procedures
to certain documents and records relating to the
servicing of the Accounts, compared the information
contained in the Servicer's certificates issued
during the period covered by the report with such
documents and records and that, based upon such
procedures or examination, no matters came to the
attention of such accountants that caused them to
believe that such servicing was not conducted in all
material respects, in conformity with Section 3.4(c),
except for such exceptions as such accountants
believe to be immaterial and such other exceptions as
shall be set forth in such report. Such procedures or
examination will include comparisons of the
mathematical calculations contained in the Monthly
Servicer's Certificates forwarded by the Servicer
pursuant to Section 3.4(c) during the period covered
by such report with the Servicer's computer reports
that were the source of such amounts, and such report
shall state that, on the basis of such comparison,
such accountants are of the opinion that such amounts
are consistent, except for such exceptions as they
believe to be immaterial and such other exceptions as
shall be set forth in such report. In the event such
firm requires the Trustee to agree to the procedures
performed by such firm, the Servicer shall direct the
Trustee in writing to so agree; it being understood
and agreed that the Trustee will deliver such letter
of agreement in conclusive reliance upon the
direction of the Servicer, and the Trustee makes no
independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the
sufficiency, validity or correctness of such
procedures. A copy of such report may be obtained by
any Investor Certificateholder or Certificate Owner
by a request in writing to (i) the Trustee directed
to the Trustee's address specified
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in Section 13.5 hereof or (ii) the Servicer at the
Servicer's address specified in such Section 13.5.
(b) On or before June 30 of each calendar
year, beginning with 1998, the Servicer shall cause a
firm of nationally recognized independent public
accountants (who may also render other services to
the Servicer or the Transferor) to furnish, as
specified in Section 13.5, a report to the Trustee,
the Rating Agencies and the Persons, if any,
specified in any Supplement with respect to each
class of Investor Certificates of any then
outstanding Series which is not assigned a rating by
any Rating Agency, and, as may be required by any
Series Supplement, any Enhancement Provider, to the
effect that in connection with their examination of
the Monthly Servicer's Certificates, nothing came to
their attention that caused them to believe that the
Servicer failed to comply with provisions of Sections
3.2, 3.4(c), 4.1 and 8.8 of this Agreement. In the
event such firm requires the Trustee to agree to the
procedures performed by such firm, the Servicer shall
direct the Trustee in writing to so agree; it being
understood and agreed that the Trustee will deliver
such letter of agreement in conclusive reliance upon
the direction of the Servicer, and the Trustee makes
no independent inquiry or investigation as to, and
shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such
procedures. A copy of such report may be obtained by
any Investor Certificateholder or Certificate Owner
by a request in writing to (i) the Trustee directed
to the Trustee's address specified in Section 13.5
hereof or (ii) the Servicer at the Servicer's address
specified in such Section 13.5."
1.3 Section 13.2(d)(ii) of the Pooling and Servicing Agreement
shall be deleted and replaced in its entirety by Section 13.2(d)(ii) of the
PCCMT PSA (set out below). All cross-references in the provisions of the PCCMT
PSA hereby adopted shall be to Sections, sub-sections or Exhibits of the PCCMT
PSA.
"(ii) on or before June 30 of each year,
beginning with June 30, 1998, an Opinion of Counsel,
dated as of a date within 90 days of such day,
substantially in the form of Exhibit H."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer represents and warrants that:
(a) Its execution, delivery and performance of this Amendment are
within its corporate powers, have been duly authorized by all necessary
corporate action and do not require any consent or approval which has not been
obtained.
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(b) This Amendment and the Pooling and Servicing Agreement as amended
hereby are legal, valid and binding obligations of it, enforceable in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
SECTION 3. CONDITIONS PRECEDENT
This Amendment shall become effective as of its date, provided that all
of the following conditions are met:
(a) This Amendment shall have been executed and delivered by the
parties hereto;
(b) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that (i) this Amendment will not materially and adversely
affect the interests of any Certificateholder, (ii) the Servicer provided at
least ten Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating Agency to the
effect that the rating of any Series rated by such Rating Agency will not be
reduced or withdrawn as a result of this Amendment, and (iii) all of the
conditions precedent to the effectiveness of this Amendment have been satisfied;
and
(c) The Seller and Servicer shall have provided Opinions of Counsel to
the Trustee to the effect that (i) this Amendment shall not cause the Trust to
be characterized for Federal income tax purposes as an association taxable as a
corporation, or otherwise have any material adverse impact on the Federal income
taxation of any outstanding Series of Investor Certificates or any Certificate
Owner, and (ii) this Amendment complies with all the requirements of the Pooling
and Servicing Agreement.
SECTION 4. MISCELLANEOUS
(a) Applicability of the Pooling and Servicing Agreement
In all respects not inconsistent with the terms and provisions of this
Amendment, the provisions of the Pooling and Servicing Agreement are hereby
ratified, approved and confirmed.
(b) Headings
The captions in this Amendment are for convenience of reference only
and shall not define or limit the provisions hereof.
- 7 -
<PAGE> 8
(c) Counterparts
This Amendment may be executed in counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute
but one and the same instrument.
(d) Governing Law
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
(e) The Trustee
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the sufficiency of this Amendment or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Seller
and the Servicer.
[Signatures on next page]
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
YOUNKERS CREDIT CORPORATION,
as Seller
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
PROFFITT'S, INC.,
as Servicer
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK,
as Trustee
By: _____________________________
Name:
Title:
- 9 -
<PAGE> 1
Exhibit 10.18
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
SERVICER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
------------------------------
SERIES 1998-1 SUPPLEMENT
DATED AS OF MAY 6, 1998
TO THE
MASTER POOLING AND SERVICING AGREEMENT
DATED AS OF AUGUST 21, 1997
------------------------------
$91,500,000
PROFFITT'S CREDIT CARD MASTER TRUST
SERIES 1998-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY STATEMENTS............................................................................... 2
Section A. Designation............................................................... 2
Section B. Definitions............................................................... 3
Section C. Minimum Transferor Interest Percentage.................................... 8
Section D. Optional Purchase; Reassignment and Transfer Terms........................ 8
Section E. Delivery and Payment for the Certificates................................. 8
Section F. Form of Delivery of the Series 1998-1 Certificates........................ 8
Section G. Servicing Compensation.................................................... 8
Section H. Article IV of the Agreement -- Rights of Series 1998-1
Certificateholders and Allocation and Application
of Collections............................................................ 9
Section 4.2 Collections and Allocations.............................. 9
Section 4.3 Determination of Monthly Interest........................ 9
Section 4.4 Determination of Monthly Principal; Certain
Allocations.............................................. 10
Section 4.6 Application of Class A Available Funds, Class B
Available Funds, Collateral Available Funds,
Class D Available Funds and Collections of
Principal Receivables.................................... 11
Section 4.7 Defaulted Amounts; Adjustment Amounts; Investor
Charge Offs; Reductions of Adjustment Amounts............ 12
Section I Article V of the Agreement................................................ 12
Section J Pay Out Events............................................................ 12
Section J. Pay Out Events............................................................ 12
Section K Construction.............................................................. 12
Section L. Ratification of Master Pooling and Servicing Agreement.................... 12
Section L1. FASIT Election............................................................ 12
Section M. Counterparts.............................................................. 13
Section N. Governing Law............................................................. 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section O. Subordination of Certain Termination Payments............................. 13
</TABLE>
<PAGE> 4
SERIES 1998-1 SUPPLEMENT
THIS SERIES 1998-1 SUPPLEMENT, dated as of May 6, 1998 (this
"Series Supplement"), is by and among PROFFITT'S CREDIT CORPORATION, a Nevada
corporation, as Transferor, PROFFITT'S, INC., a Tennessee corporation, as
Servicer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States (together
with its successors in trust thereunder the "Trustee"), as trustee under the
Master Pooling and Servicing Agreement, dated as of August 21, 1997 by and among
the Transferor, the Servicer and the Trustee (as amended or supplemented, the
"Agreement").
PRELIMINARY STATEMENTS
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into one
or more Supplements to the Agreement for the purpose of authorizing the issuance
by the Trust to the Transferor, for execution and redelivery to the Trustee for
authentication, one or more Series of Investor Certificates. The Transferor and
the Servicer each hereby enter into this Series Supplement with the Trustee as
required by Section 6.9(c) of the Agreement to provide for the issuance,
authentication and delivery of the Investor Certificates of Series 1998-1.
All Class A Certificates, Class B Certificates and Class C Certificates
to be issuable hereunder shall have terms substantially identical to the
respective terms of the corresponding classes of Investor Certificates of the
Younkers Master Trust, Series 1995-1 and shall be issued for, and in exchange
of, all Receivables and other Trust Assets of the Younkers Master Trust. The
Younkers Master Trust was established pursuant to a Pooling and Servicing
Agreement among Younkers Credit Corporation, Younkers, Inc. and Chemical Bank,
as trustee, dated as of June 13, 1995 (the "Younkers Agreement").
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof. The Series 1998-1 Certificates shall not be
subordinated to any other Series.
SECTION A. DESIGNATION. The Certificates issued hereunder shall be
designated generally as the "Series 1998-1 Certificates." The Series 1998-1
Certificates shall be one of the Series of Investor Certificates in Group One
and shall be a Principal Sharing Series. The Transferor and the Servicer each
hereby enter into this Series Supplement with the Trustee as required by Section
6.9(c) of the Agreement to provide for the issuance, authentication and delivery
of the Class A Asset Backed Certificates, Series 1998-1, the Class B Asset
Backed Certificates, Series 1998-1 and the Class C Asset Backed Certificates,
Series 1998-1. The first Distribution Date with respect to Series 1998-1 shall
be the June 1998 Distribution Date. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision
<PAGE> 5
contained in the Agreement, the terms and provisions of this Series
Supplement shall govern.
SECTION B. DEFINITIONS. All capitalized terms not otherwise defined
herein or in Exhibit A hereto are defined in the Agreement. All Article, Section
or subsection references herein shall mean Articles, Sections or subsections of
the Agreement, except as otherwise provided herein. Unless otherwise stated
herein, as the context otherwise requires or if such term is otherwise defined
in the Agreement, each capitalized term used or defined herein or in Exhibit A
hereto shall relate only to the Series 1998-1 Certificates and no other Series
of Certificates issued by the Trust. The following words and phrases shall have
the following meanings with respect to the Series 1998-1 Certificates and the
definitions of such terms are applicable to the singular as well as the plural
form of such terms and to the masculine as well as the feminine and neuter
genders of such terms:
"Accrual Period" shall mean the period from and including a
Distribution Date (or in the case of the initial Accrual Period, the Closing
Date) to but excluding the succeeding Distribution Date.
"Accumulation Period" shall have the meaning specified in
Exhibit A.
"Adjusted Investor Amount" shall mean, on any Determination
Date, the excess of the Investor Amount over the balance in the Principal
Account available for distribution on such Determination Date, excluding
investment income (net of investment expenses), if any, for the Monthly Period
that includes such Determination Date.
"Amortization Period" shall mean the Accumulation Period or
the Rapid Amortization Period.
"Available Funds" shall mean, with respect to any Monthly
Period, an amount equal to the applicable Investor Percentage of Collections of
Finance Charge Receivables.
"Available Principal Collections" shall mean, with respect to
any Distribution Date, an amount equal to (a) the applicable Investor Percentage
of Collections of Principal Receivables for the related Monthly Period, plus (b)
amounts designated as Collections of Principal Receivables pursuant to Section
4.6 of Exhibit A, minus (c) Reallocated Principal Collections applied pursuant
to Section 4.11 of Exhibit A for the related Monthly Period, plus (d) Shared
Principal Collections allocated to Series 1998-1 in accordance with the
allocations described in Section 4.4(c) of Exhibit A and applied in accordance
with Section 4.1(h) of the Agreement.
"Business Day" shall have the meaning provided in the
Agreement.
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<PAGE> 6
"Class A Certificate Rate" shall mean, with respect to the
Class A Certificates and each Interest Period, a per annum rate of 6.43%,
calculated based upon a year consisting of twelve 30 day months.
"Class A Certificate" shall mean the Certificate executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit D.
"Class A Certificateholder" shall mean the Younkers Master
Trust.
"Class A Expected Payment Date" shall mean the June 2000
Distribution Date.
"Class A Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $67,000,000.
"Class A Interest Shortfall" shall have the meaning specified
in Section 4.3(a) hereof.
"Class A Investor Amount" shall have the meaning assigned
thereto in Exhibit A.
"Class A Investor Charge-Off" shall have the meaning specified
in Section 4.5 of Exhibit A.
"Class A Investor Percentage" shall have the meaning specified
in Exhibit A.
"Class A Monthly Interest" shall have the meaning specified in
Section 4.3(a) hereof.
"Class A Monthly Principal" shall have the meaning specified
in Section 4.4(a) hereof.
"Class A Servicing Fee" shall have the meaning specified in
Section G hereof.
"Class B Additional Interest" shall have the meaning specified
in Section 4.3(b).
"Class B Certificate Rate" shall mean, with respect to the
Class B Certificates and each Interest Period, a per annum rate of 6.61%,
calculated based upon a year consisting of twelve 30 day months.
"Class B Certificate" shall mean the Certificate executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit E.
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<PAGE> 7
"Class B Certificateholder" shall mean the Younkers Master
Trust.
"Class B Expected Payment Date" shall mean the June 2000
Distribution Date.
"Class B Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $8,000,000.
"Class B Interest Shortfall" shall have the meaning specified
in Section 4.3(b).
"Class B Investor Amount" shall have the meaning assigned
thereto in Exhibit A.
"Class B Investor Charge-Off" shall have the meaning specified
in Section 4.5 of Exhibit A.
"Class B Investor Percentage" shall have the meaning assigned
thereto in Exhibit A hereto.
"Class B Monthly Interest" shall have the meaning specified in
Section 4.3(b) hereof.
"Class B Monthly Principal" shall have the meaning specified
in Section 4.4(b) hereof.
"Class B Principal Payment Commencement Date" shall have the
meaning assigned thereto in Exhibit A hereto.
"Class B Servicing Fee" shall have the meaning specified in
Section G hereof.
"Class B Reallocated Amounts" shall have the meaning specified
in Section 4.11 of Exhibit A.
"Class C Additional Interest" shall have the meaning specified
in Section 4.3(d) hereof.
"Class C Certificate Rate" shall mean, for any Interest Period
with respect to the Class C Certificates, the rate that may be designated from
time to time pursuant to Section 13 of Exhibit A.
"Class C Certificateholder" shall mean the Holder of any Class
C Certificate.
-6-
<PAGE> 8
"Class C Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit F hereto.
"Class C Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class C Certificates, which is $16,500,000.
"Class C Investor Amount" shall have the meaning assigned
thereto in Exhibit A.
"Class C Investor Charge-Off" shall have the meaning specified
in Section 4.5 of Exhibit A.
"Class C Investor Percentage" shall have the meaning assigned
thereto in Exhibit A.
"Class C Monthly Interest" shall have the meaning specified in
Section 4.3(c) hereof.
"Class C Monthly Principal" shall have the meaning specified
in Section 4.4(c) hereof.
"Class C Servicing Fee" shall have the meaning specified in
Section G hereof.
"Closing Date" shall mean, with respect to Series 1998-1, May
6, 1998.
"Controlled Deposit Amount" shall have the meaning specified
in Exhibit A.
"Cut-Off Date" shall mean May 1, 1998.
"Defaulted Receivables" shall mean for any Monthly Period, the
Principal Receivables in Accounts which became Defaulted Accounts during such
Monthly Period.
"Finance Charge Shortfall" shall mean the "Total Deficiency
Amount" (as defined in Exhibit A) prior to application of any amounts allocable
to Series 1998-1 in respect of Shared Finance Charge Collections (as defined in
Exhibit A) pursuant to Section 4.6 of such Exhibit A.
"Initial Investor Amount" shall mean the aggregate initial
principal amount of the Series 1998-1 Certificates, which is $91,500,000.
-7-
<PAGE> 9
"Investor Amount" shall mean, as of any date of determination,
an amount equal to the sum of the Class A Investor Amount, the Class B Investor
Amount and the Class C Investor Amount, in each case as of such date.
"Investor Default Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Default Amount for
the immediately preceding Monthly Period and (b) the applicable Investor
Percentage on the first day of such Monthly Period.
"Investor Monthly Servicing Fee" shall have the meaning
specified in Section G hereof.
"Investor Percentage" shall have the meaning assigned thereto
in Exhibit A.
"Minimum Transferor Interest Percentage" shall have the
meaning specified in Section C hereof.
"Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of the Class A Monthly Interest, the Class B Monthly
Interest and the Class C Monthly Interest for such Distribution Date.
"Principal Shortfall" shall mean the shortfall in Section
4.4(c)(ii) of Exhibit A.
"Rapid Amortization Period" shall have the meaning assigned
thereto in Exhibit A.
"Revolving Period" shall have the meaning assigned thereto in
Exhibit A.
"Series Adjustment Amount" shall mean, with respect to any
Distribution Date, the Shortfall Share (as defined in Section 4.5 of Exhibit A)
of the amount of any unpaid Deposit Obligation (as defined in Exhibit A) in
respect of the preceding Monthly Period. "Series 1995-1" shall have the meaning
assigned thereto in Exhibit A.
"Series 1998-1" shall mean the Series the terms of which are
specified in this Series Supplement.
"Series 1998-1 Certificate" shall mean a Class A Certificate,
a Class B Certificate, and/or a Class C Certificate.
"Series 1998-1 Certificateholder" shall mean the Younkers
Master Trust.
"Servicing Fee Percentage" shall mean 2.00% per annum.
-8-
<PAGE> 10
"Shared Excess Finance Charge Collections" shall have the
meaning assigned thereto in Exhibit A, except that such sharing shall occur
within and among those Series in Group One.
"Shared Principal Collections" shall have the meaning assigned
thereto in Exhibit A, except that such sharing shall occur within and among
those Series in Group One.
"Stated Series Termination Date" shall have the meaning
assigned thereto in "Scheduled Series 1995-1 Termination Date" defined in
Exhibit A.
"Transfer Date" shall have the meaning assigned thereto in
Exhibit A.
SECTION C. MINIMUM TRANSFEROR INTEREST PERCENTAGE. The Minimum
Transferor Interest Percentage applicable to the Series 1998-1 Certificates
shall be 0%.
SECTION D. OPTIONAL PURCHASE; REASSIGNMENT AND TRANSFER TERMS. All the
Series 1998-1 Certificates may be repurchased at the option and in the
discretion of the Transferor in accordance with, and subject to the repurchase
provisions of, the Younkers Master Trust and the Series 1995-1 Certificates
specified in Article III of Exhibit A, and subject further to the provisions of
Section 12.2 of the Agreement. Any such repurchase shall be simultaneous with
the repurchase of all outstanding Younkers Master Trust Series 1995-1
Certificates in accordance with their terms.
SECTION E. DELIVERY AND PAYMENT FOR THE CERTIFICATES. The Trustee shall
deliver the Series 1998-1 Certificates when authenticated in accordance with
Section 6.2 of the Agreement. For purposes of this Section E and such Section
6.2, the Certificates shall be authenticated and delivered for the benefit of
holders of Series 1995-1 Certificates by the Trustee upon the receipt from the
Younkers Master Trust of all Receivables and other Trust Assets held by the
Younkers Master Trust.
SECTION F. FORM OF DELIVERY OF THE SERIES 1998-1 CERTIFICATES. The
Class A Certificates, the Class B Certificates and the Class C Certificates
shall be delivered in fully registered form in the name of The Chase Manhattan
Bank, as trustee of the Younkers Master Trust for and on behalf of the holders
of the Younkers Master Trust, Series 1995-1 Investor Certificates of the
corresponding designations.
SECTION G. SERVICING COMPENSATION. The share of the Monthly Servicing
Fee allocable to the Series 1998-1 Certificateholders with respect to any
Distribution Date (the "Investor Monthly Servicing Fee") shall be equal to
one-twelfth (1/12th) of the product of (a) the Servicing Fee Percentage and (b)
each of the Class A Investor Amount, the Class B Investor Amount and the Class C
Investor Amount, respectively, as of the last day of the immediately preceding
Monthly Period. The share of the Investor Monthly Servicing Fee allocable to the
Class A Certificateholders with respect to any Distribution
-9-
<PAGE> 11
Date (the "Class A Servicing Fee") shall be equal to the product of (a)
one-twelfth (1/12th) of the Servicing Fee Percentage and (b) the Class A
Investor Amount. The share of the Investor Monthly Servicing Fee allocable to
the Class B Certificateholders with respect to any Distribution Date (the "Class
B Servicing Fee") shall be equal to the product of (a) one-twelfth (1/12th) of
the Servicing Fee Percentage and (b) the Class B Investor Amount. The share of
the Investor Monthly Servicing Fee allocable to the Class C Certificateholders
with respect to any Distribution Date (the "Class C Servicing Fee") shall be
equal to the product of (a) one-twelfth (1/12th) of the Servicing Fee Percentage
and (b) the Class C Investor Amount. The Class A Servicing Fee, the Class B
Servicing Fee and the Class C Servicing Fee shall be payable solely to the
extent amounts are available for distribution in respect thereof pursuant to
this Series Supplement. The remainder of the Monthly Servicing Fee shall be paid
from amounts allocable to other Series (as provided in the Agreement and the
Supplements relating to such other Series) or by the Transferor, and in no event
shall the Trust, the Trustee or the Series 1998-1 Certificateholders be liable
for the share of the Monthly Servicing Fee to be paid from amounts allocable to
any other Series or by the Transferor.
SECTION H. ARTICLE IV OF THE AGREEMENT. Any provisions of Article IV of
the Agreement which distribute Collections to the Transferor on the basis of the
Transferor Percentage shall continue to apply irrespective of the issuance of
the Series 1998-1 Certificates. Section 4.1 of the Agreement shall read in its
entirety as provided in the Agreement. Article IV of the Agreement (except for
Section 4.1) as it relates to Series 1998-1 shall read in its entirety as
follows:
ARTICLE IV
RIGHTS OF SERIES 1998-1 CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2. COLLECTIONS AND ALLOCATIONS. The Servicer shall apply, or
shall instruct the Trustee to apply, all Collections, and other funds held in
the Collection Account that are allocated to the Series 1998-1 Certificates as
described in Article IV to Exhibit A.
SECTION 4.3 DETERMINATION OF MONTHLY INTEREST.
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class A Certificate Rate for the related
Interest Period, and (ii) the Class A Investor Amount as of the preceding
Distribution Date (after giving effect to any reduction therein that occurs on
such preceding Distribution Date), plus an amount equal to the amount of any
unpaid Class A Interest Shortfall (as defined below).
-10-
<PAGE> 12
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class A Interest Shortfall"),
of (x) the Class A Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class A Monthly
Interest on such Distribution Date. If the Class A Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class A Additional Interest") equal to one-twelfth (1/12th) of the product of
(i) the Class A Certificate Rate for the related Interest Period, and (ii) such
Class A Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class A Certificateholders), shall be payable as provided herein
with respect to the Class A Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class A Interest Shortfall is paid to Class A Certificateholders.
Notwithstanding anything to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A Certificateholders only to the extent
permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class B Certificate Rate for the related
Interest Period, and (ii) the Class B Investor Amount as of the preceding
Distribution Date (after giving effect to any reduction therein that occurs on
such preceding Distribution Date), plus an amount equal to the amount of any
unpaid Class B Interest Shortfall (as defined below).
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class B Interest Shortfall"),
of (x) the Class B Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class B Monthly
Interest on such Distribution Date. If the Class B Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class B Additional Interest") equal to one-twelfth (1/12th) of the product of
(i) the Class B Certificate Rate for the related Interest Period, and (ii) such
Class B Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class B Certificateholders), shall be payable as provided herein
with respect to the Class B Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class B Interest Shortfall is paid to Class B Certificateholders.
Notwithstanding anything to the contrary herein, Class B Additional Interest
shall be payable or distributed to Class B Certificateholders only to the extent
permitted by applicable law.
(c) The amount of monthly interest ("Class C Monthly Interest")
distributable from the Collection Account with respect to the Class C
Certificates on any Distribution Date shall be an amount determined in
accordance with Sections 4.6(h) and Section 13 of Exhibit A.
SECTION 4.4 DETERMINATION OF MONTHLY PRINCIPAL; CERTAIN ALLOCATIONS.
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<PAGE> 13
(a) The amount of monthly principal ("Class A Monthly Principal")
distributable or available from the Collection Account with respect to the Class
A Certificates on each Distribution Date, beginning with the Distribution Date
in the month following the month in which an Amortization Period begins, shall
be equal to the least of (x) the Available Principal Collections held in the
Collection Account or the Principal Account as applicable, and available for
distribution with respect to such Distribution Date, (y) with respect to the
Accumulation Period prior to the Class A Expected Payment Date, the Controlled
Deposit Amount for such Distribution Date and (z) the Class A Investor Amount on
such Distribution Date.
(b) The amount of monthly principal ("Class B Monthly Principal")
distributable or available from the Collection Account (as defined in Exhibit A)
with respect to the Class B Certificates on each Distribution Date relating to
an Amortization Period, beginning with the Class B Principal Commencement Date,
shall be equal to the least of (x) the Available Principal Collections held in
the Collection Account or the Principal Account, as applicable, and available
for distribution with respect to such Distribution Date, minus the portion of
such amounts applied to Class A Monthly Principal on such Distribution Date, (y)
for each Distribution Date with respect to the Accumulation Period prior to the
Class B Expected Payment Date, the Controlled Deposit Amount for such
Distribution Date and (z) the Class B Investor Amount on such Distribution Date.
(c) The amount of monthly principal ("Class C Monthly Principal")
distributable with respect to the Class C Certificates on each Distribution
Date, beginning with the Distribution Date on which the Class B Investor Amount
has been paid in full, shall be equal to Available Principal Collections held in
the Collection Account with respect to such Distribution Date minus the portion
of such Available Principal Collections applied to any Class A Monthly Principal
or Class B Monthly Principal on such Distribution Date.
(d) Certain allocations of Collections shall be made in accordance with
Section 4.4 of Exhibit A.
SECTION 4.5 The provisions of Section 4.5 are contained in Exhibit A.
SECTION 4.6 APPLICATION OF AVAILABLE FUNDS AND COLLECTIONS OF PRINCIPAL
RECEIVABLES.
The Servicer shall apply or shall instruct the Trustee to apply, on
each Transfer Date, Available Funds allocable to Series 1998-1 held in the
Collection Account with respect to the Monthly Period immediately preceding such
Distribution Date to make the distributions specified in Section 4.6 of Exhibit
A.
The Servicer shall apply or shall instruct the Trustee to apply, on
each Transfer Date, Available Principal Collections allocable to Series 1998-1
held in the
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<PAGE> 14
Collection Account with respect to the Monthly Period immediately preceding such
Distribution Date to make the distributions specified in Section 4.8 of Exhibit
A.
SECTION 4.7 DEFAULTED AMOUNTS; ADJUSTMENT AMOUNTS; INVESTOR CHARGE
OFFS; REDUCTIONS OF ADJUSTMENT AMOUNTS.
(a) "Class A Investor Charge-Off", "Class B Investor Charge-Off" and
"Class C Investor Charge-Off" shall be calculated in accordance with Section 4.5
of Exhibit A.
(b) Any reduction of the Series Adjustment Amount for Series 1998-1 as
a result of the deposit of funds into the Excess Funding Account, the repurchase
or other repayment of Investor Certificates or the increase of Principal
Receivables in the Trust shall be allocated first to the Class A Certificates,
then to the Class B Certificates and finally to the Class C Certificates, in
each case to the extent of any unreimbursed reduction of the Investor Amount
thereof attributable to Series Adjustment Amounts. The Series Adjustment Amount
is equivalent to the "Shortfall Share" as defined in the Younkers Agreement.
SECTION I. ARTICLE V OF THE AGREEMENT. Article V of the Agreement as it
relates to Series 1998-1 shall read in its entirety as specified in Article V of
Exhibit A.
SECTION J. PAY OUT EVENTS. The Pay Out Events with respect to Series
1998-1 shall be the Series 1995-1 Pay Out Events specified in Exhibit B.
SECTION K. CONSTRUCTION. This Series Supplement is intended to and
shall be construed and administered by the Servicer and the Trustee so as to pay
to the Younkers Master Trust Collections of Principal Receivables and Finance
Charge Receivables, for pass through by the Younkers Master Trust to the holders
of the Series 1995-1 Investor Certificates in the same amounts and priorities as
currently provided in the Younkers Master Trust Series 1995-1 Supplement,
notwithstanding any ambiguity or conflict with or in any of the applicable
documents. The Series Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any
Certificateholder for purposes of correcting or supplementing any provisions
hereof in furtherance of the foregoing and to correct any ambiguity or conflict.
SECTION L. RATIFICATION OF MASTER POOLING AND SERVICING AGREEMENT. As
supplemented by this Series Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by this Series
Supplement shall be read, taken, and construed as one and the same instrument.
SECTION L1. FASIT ELECTION. Each Series 1998-1 Certificateholder, by
acquiring an interest in a Series 1998-1 Certificate, is deemed to consent to
any amendment to the Agreement or this Series Supplement necessary for the
Transferor to elect for the Trust or any portion thereof to be treated as a
FASIT within the meaning of
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<PAGE> 15
Section 860L of the Code (or any successor provision thereto), provided that,
such election may not be made unless the Transferor delivers to the Trustee (i)
an Opinion of Counsel to the effect that (x) the issuance of FASIT regular
interests will not adversely affect the tax characterization as debt of Investor
Certificates of any outstanding Series or Class with respect to which an Opinion
of Counsel was delivered at the time of their issuance that such Investor
Certificates would be characterized as debt, (y) following such issuance, the
Trust will not be classified, for federal income tax purposes, as an association
(or publicly traded partnership) taxable as a corporation, and (z) such issuance
will not cause or constitute an event in which gain or loss would be recognized
by any Investor Certificateholder, and (ii) an Officer's Certificate to the
effect that such issuance will not have a material adverse effect on Investor
Certificateholders of any outstanding Series or class (viewed as a Series or a
class, as applicable).
SECTION M. COUNTERPARTS. This Series Supplement may be executed in any
number of counterparts (and by different parties on separate counterparts), each
of which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
SECTION N. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION O. SUBORDINATION OF CERTAIN TERMINATION PAYMENTS.
Notwithstanding anything contained in Section 12.2(c) of the Agreement, upon the
sale of Receivables or interests therein as provided in Section 12.2(c) of the
Agreement, the proceeds of any such sale payable in respect of the Series 1998-1
Certificates shall be payable first to the Class A Certificates until paid in
full, then to the Class B Certificates until paid in full and then to the Class
C Certificates until paid in full.
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<PAGE> 16
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:_________________________________
Name: Douglas E. Coltharp
Title: President
PROFFITT'S, INC.,
as Servicer
By:_________________________________
Name: Douglas E. Coltharp
Title: Executive Vice President &
Chief Financial Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:_________________________________
Name: Marianna C. Stershic
Title: Assistant Vice-President
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<PAGE> 17
The Younkers Master Trust joins in this Agreement to confirm and
reflect its agreement to transfer and assign all Receivables and other Trust
Assets in the Younkers Master Trust in exchange for Series 1998-1 Investor
Certificates, as provided in this Series 1998-1 Supplement to the Master Pooling
and Servicing Agreement, by causing this Agreement to be executed by the
undersigned duly authorized officer of the Trustee of the Younkers Master Trust.
THE CHASE MANHATTAN BANK,
not individually, but solely as
Trustee of the Younkers Master Trust
By:_________________________________
Name:
Title:
-16-
<PAGE> 18
EXHIBIT A
TO THE
SERIES 1998-1 SUPPLEMENT
DEFINITIONS AND OTHER TERMS OF SERIES 1995-1
A-1
<PAGE> 19
EXHIBIT A
TO THE
SERIES 1998-1 SUPPLEMENT
DEFINITIONS AND OTHER TERMS OF SERIES 1995-1
The following terms shall have the meanings specified:
"Accumulation Period" shall mean, unless a Rapid Amortization Period
has occurred prior thereto, the period commencing on the first day of the
Monthly Period specified by the Seller pursuant to subsection 4.12 and ending on
the first to occur of (i) the commencement of the Rapid Amortization Period and
(ii) the Expected Final Payment Date.
"Base Rate" shall mean, with respect to any Monthly Period, (i) the sum
of (a) the amount of interest accrued or to accrue on the Class A Certificates,
the Class B Certificates and (at any time after the Class C Certificates have
been assigned an interest rate pursuant to Section 13(a) of this Series
Supplement) the Class C Certificates for the Accrual Period ending in the month
following the end of such Monthly Period and (b) the amount of the Investor
Monthly Servicing Fee allocable to the Series 1998-1 Certificates in respect of
such Monthly Period divided by (ii) the Average Investor Amount for the
preceding Monthly Period times (iii) 12.
"Class A Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Class A Initial Investor Amount, minus (b) the aggregate
amount of payments of certificate Principal paid to the Class A
Certificateholders pursuant to Section 4.8 prior to such date of determination,
minus (c) the excess, if any, of the aggregate amount of Class A Investor Charge
Offs over Class A Investor Charge Offs reimbursed pursuant to subsection 4.6(f)
prior to such date of determination.
"Class A Investor Percentage" shall mean, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the Class A Investor Amount determined as of the last day of the Monthly
Period immediately preceding such date of determination and the denominator of
which is the Investor Amount determined as of the end of such last day.
"Class A/B Percentage" means the percentage equivalent of a fraction
the numerator of which shall be the sum of the Class A Investor Amount and the
Class B Investor Amount and the denominator of which shall be the Investor
Amount, each as calculated as of the end of the day on the last day of the
Revolving Period.
"Class B Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Initial Class B Investor Amount, minus (b) the aggregate
amount of
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<PAGE> 20
payments of Certificate Principal paid to the Class B Certificateholders prior
to such date of determination, minus (c) the excess, if any, of the sum of the
aggregate amount of Class B Investor Charge Offs and Class B Reallocated Amounts
over Class B Investor Charge Offs and Class B Reallocated Amounts reimbursed
pursuant to subsection 4.6(f) or allocated to the Class C Investor Amount
pursuant to Section 4.11 prior to such date of determination.
"Class B Investor Percentage" shall mean, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the Class B Investor Amount determined as of the last day of the Monthly
Period immediately preceding such date of determination and the denominator of
which is the Investor Amount determined as of the end of such last day.
"Class B Principal Payment Commencement Date" shall mean the earlier of
(a) the first Distribution Date in an Amortization Period on which the Class A
Investor Amount equals or is reduced to zero or, if there are no Principal
Collections allocable to the Series 1998-1 Certificates remaining after payments
have been made to the Class A Certificates on such Distribution Date, the
Distribution Date following the Distribution Date on which the Class A Investor
Amount is paid in full and (b) the Distribution Date following a sale or
repurchase of the Receivables as set forth in the Agreement or Section D of this
series Supplement.
"Class C Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Class C Initial Investor Amount, minus (b) the aggregate
amount of payments of Certificate Principal paid to the Class C
Certificateholders prior to such date of determination, minus (c) the excess, if
any, of the sum of the aggregate amount of Class C Investor Charge Offs and
Class C Reallocated Amounts over Class C Investor Charge Offs and Class C
Reallocated Amounts reimbursed pursuant to subsection 4.6(f) of Exhibit A prior
to such Determination Date.
"Class C Investor Percentage" shall mean, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the Class C Investor Amount determined as of the last day of the Monthly
Period immediately preceding such date of determination and the denominator of
which is the Investor Amount determined as of the end of such last day.
"Controlled Deposit Amount" shall mean, for each Monthly Period which
commences during the Accumulation Period, $12,500,000 plus the Deficit
Controlled Deposit Amount for-the preceding monthly Period.
"Covered Amount" shall mean with respect to each Distribution Date
during the Accumulation Period and the first Distribution Date following the end
of the Accumulation Period the sum of:
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<PAGE> 21
(a) one-twelfth of the product of the Class A Certificate Rate and the
lesser of the Distribution Account Balance and the Class A Investor Amount, in
each case as of the preceding Distribution Date, and
(b) one-twelfth of the product of the Class B Certificate Rate and the
excess, if any, of the Distribution Account Balance over the Class A Investor
Amount, in each case as of the preceding Distribution Date.
"Deposit Obligation" shall mean the obligation of the Transferor to
make any deposit to the Excess Funding Account pursuant to Sections 2.4(e) or
4.3(g) of the Agreement.
"Distribution Account" shall have the meaning specified in Section
4.2A(b).
"Distribution Account Balance" shall mean, on any date of
determination, the amount of deposit in the Distribution Account on such date
(excluding investment income for the Monthly Period which includes such date of
determination).
"Investor Percentage", shall mean, on any date of determination:
(a) when used with respect to Principal Receivables during the
Revolving Period, the percentage equivalent of a fraction the numerator of which
shall be the Investor Amount on the preceding Business Day and the denominator
of which shall be the greater of (x) the Aggregate Principal Receivables at the
end of such day and (y) the sum of the numerators used to calculate the investor
percentages with respect to Principal Receivables on such day for all Series
outstanding;
(b) when used with respect to Principal Receivables during the
Amortization Period, the percentage equivalent of a fraction the numerator of
which shall be the Investor Amount as of the end of the day on the last day of
the Revolving Period and the denominator of which shall be the greater of (x)
the Aggregate Principal Receivables at the end of the Business Day preceding
such date of determination and (y) the sum of the numerators used to calculate
the Investor Percentages for allocations with respect to Principal Receivables
for all outstanding Series on such date of determination, provided, however,
that during the Accumulation Period, the Investor Percentage of Principal
Receivables may be reset by and at the option of the Servicer (and any such
reset Investor Percentage will apply in any Rapid Amortization Period following
the Accumulation Period) for each monthly Period to a fixed percentage
equivalent of a fraction which shall not be greater than the fraction described
above and shall not be less than the greater of (i) a fraction, the numerator of
which is the Adjusted Investor Amount determined as of the close of business on
the last day of the preceding Monthly Period, and the denominator of which is
the greater of (a) the Aggregate Principal Receivables, determined as of the end
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<PAGE> 22
of the last day of the preceding Monthly Period and (b) the sum of the
numerators used to calculate the Investor Percentages for such date of
determination with respect to Principal Receivables for all Series of
certificates outstanding and (ii) a fraction that when multiplied by the amount
of Collections allocable to Principal Receivables for the preceding Monthly
Period will equal 110% of the Controlled Deposit Amount for such preceding
Monthly Period; provided further, that if Series 1998-1 is paired with a Paired
Series and a Rapid Amortization Event commences for such Paired Series, the
Seller may by written notice to the Servicer and the Trustee, designate a
different numerator for such fraction; and
(c) when used with respect to Finance Charge Receivables during the
Revolving Period and the Accumulation Period and with respect to Receivables in
Defaulted Accounts at any time, the percentage equivalent of a fraction the
numerator of which shall be the Adjusted Investor Amount at the end of the last
day of the prior Monthly Period (or, in the case of the Monthly Period in which
the Closing Date occurs, on the Closing Date) and the denominator of which shall
be the greater of (x) the Aggregate Principal Receivables as of the end of such
day and (y) the sum of the numerators used to calculate the Investor Percentages
for such date of determination with respect to Finance Charge Receivables for
all Series of certificates outstanding; and
(d) when used with respect to Finance Charge Receivables during the
Rapid Amortization Period, the lesser of
(A) the percentage equivalent of a fraction the numerator of
which shall be the Investor Amount as of the end of the day on the last
day of the Revolving Period and the denominator of which shall be the
greater of (x) the Aggregate Principal Receivables at the end of the
Business Day preceding such date of determination and (y) the sum of
the numerators used to calculate the Investor Percentages for
allocations with respect to Finance Charge Receivables for all
outstanding Series on such date of determination, and
(B) the Investor Percentage then applicable to Principal
Receivables pursuant to this Series Supplement.
"Rapid Amortization Period" shall mean the period commencing on the
earlier of (a) the close of business on the day a Pay Out Event occurs or (b)
the Pay Out Commencement Date (as defined in the Younkers Master Trust Series
1995-1 Supplement, as amended (the "YMT Series 1995-1 Supplement").
"Reserve Account" shall have the meaning specified in subsection
4.9(a).
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<PAGE> 23
"Reserve Account Funding Date" shall mean the Distribution Date
following the Monthly Period which commences five months prior to the
commencement of the Accumulation Period.
"Reserve Account Surplus" shall have the meaning assigned in subsection
4.9(c).
"Reserve Draw Amount" shall have the meaning specified in subsection
4.9(b).
"Series 1995-1" shall mean the Series 1995-1 to the Younkers Master
Trust.
"Shared Finance Charge Collections" shall mean the amounts allocated to
the Investor Certificates (which are not retained by the Seller) of other Series
which the applicable Supplements for such Series specify are to be treated as
"Shared Finance Charge Collections" and which may be applied to cover the Total
Deficiency Amount with respect to the Series 1998-1 Certificates.
"Shortfall Share" shall have the meaning specified in Section 4.5.
"Total Deficiency Amount" shall have the meaning specified in Section
4.6. of Exhibit A.
All of the definitions and sections below that appear in the Younkers Agreement
are superseded and replaced by the following definitions and sections from the
Agreement, and shall have the meanings and effect as provided in the Agreement:
Account
Additional Accounts
Aggregate Principal Receivables
Business Day
Collections
Section 2.8 of the Younkers Agreement and related definitions are replaced
entirely by Section 2.8 of the Agreement and related definitions
Eligible Account
Eligible Originator
Eligible Receivable
Exchangeable Seller Certificate (replaced by "Exchangeable Transferor
Certificate" pursuant to the Agreement)
Finance Charge Collections is replaced by all references to Finance Charges,
Collections, and related sections in the Agreement
Finance Charge Receivables
Finance Charges
Ineligible Receivable
Insurance Proceeds
A-6
<PAGE> 24
Minimum Aggregate Principal Receivables
Minimum Seller Amount (replace with "Minimum Transferor Amount")
Minimum Seller Percentage (replace with "Minimum Transferor Interest
Percentage")
Permitted Investments
Principal Receivable
Principal Shortfalls
Receivable
Seller (replace with "Sellers")
Seller Amount (replace with "Transferor Amount")
Seller Percentage (replace with "Transferor Percentage")
Servicer
Shared Finance Charge Collections (replace with "Shared Excess Finance Charge
Collections")
Shared Principal Collections
ARTICLE III
REASSIGNMENT AND TRANSFER TERMS
The Series 1995-1 Certificates shall be subject to repurchase by Seller
at its option, in accordance with the terms specified in subsection 12.2(a), on
any Distribution Date on or after the Distribution Date on which the sum of the
Class A Investor Amount, the Class B Investor Amount and the amount of the Class
C Investor Amount held by Persons other than Younkers or any of its Affiliates
is reduced to an amount less than or equal to 5% of the sum of the Initial Class
A Investor Amount, the Initial Class B Investor Amount and the highest amount of
the Class C Investor Amount held by Persons other than Younkers or any of its
Affiliates since the Closing Date. The deposit required in connection with any
such repurchase shall be equal to (a) the Adjusted Investor Amount, plus (b)
accrued and unpaid interest on the Series 1998-1 Certificates through and
including the day preceding the day on which such repurchase occurs, less (c)
the amount on deposit in the Finance Charge Sub-subaccount which will be
transferred to the Distribution Account pursuant to subsections 4.6(a), (b),
(c), (d), (f) and (h) on the related Transfer Date, less (d) the amount on
deposit in the Principal Collections Sub-subaccount which will be transferred to
the Distribution Account pursuant to Subsection 4.8 on the related Transfer
Date.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.2A The Series 1995-1 Collection Account; Establishment
Account.
The Servicer shall apply, or shall instruct the Trustee to
apply, all Collections, and other funds held in the Collection
Account that are
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<PAGE> 25
allocated to the Series 1998-1 Certificates as described in
this Article IV. Provided that daily deposits of Collections
into the Collection Account are required pursuant to Section
4.1(f), the applicable Investor Percentage of Finance Charge
Collections shall be deposited into the Collection Account on
a daily basis. During the Revolving Period, Collections of
Principal Receivables allocable to Series 1998-1 with respect
to each Monthly Period need not be deposited into the
Collection Account on a daily basis during such Monthly
Period; provided, however, that in the event that the Minimum
Transferor Amount exceeds the Transferor Amount on any date,
such Collections of Principal Receivables shall be deposited
into the Excess Funding Account until the Transferor Amount
equals the Minimum Transferor Amount; and provided, further,
that on any date on which the sum of the Aggregate Principal
Receivables and the Excess Funding Amount is less than the
Aggregate Adjusted Investor Amount, such Collections of
Principal Receivables shall be deposited into the Collection
Account on a daily basis. During the Accumulation Period,
after an amount of Collections of Principal Receivables
allocable to Series 1998-1 equal to the Controlled Deposit
Amount with respect to each Monthly Period has been deposited
into the Collection Account, Collections of Principal
Receivables allocable to Series 1998-1 with respect to each
Monthly Period need not be deposited into the Collection
Account on a daily basis during such Monthly Period; provided,
however, that in the event that the Minimum Transferor Amount
exceeds the Transferor Amount on any date, such Collections of
Principal Receivables shall be deposited into the Excess
Funding Account until the Transferor Amount equals the Minimum
Transferor Amount; and, provided, further, that on any date on
which the sum of the Aggregate Principal Receivables and the
Excess Funding Amount is less than the Aggregate Investor
Amount, such Collections of Principal Receivables shall be
deposited into the Collection Account on a daily basis.
Notwithstanding the foregoing, the Servicer need not make
daily deposits of Collections into the Collection Account at
any time when the requirements of Section 4.1(f) of the
Agreement are satisfied. For purposes hereof, the Collection
Account shall be the Distribution Account, and wherever the
term "Distribution Account" is used, it shall mean the
Collection Account.
Section 4.4. Certain Allocations.
(a) Allocations During the Revolving Period. Collections pursuant to
Section 4.2A that are not required to be deposited in the Collection Account or
the Excess Funding Account shall be payable to the Holder of the Exchangeable
Transferor Certificate on a daily basis.
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<PAGE> 26
(b) Allocations During the Accumulation Period. During the Accumulation
Period, the Servicer shall, prior to the close of business on each day any
Collections are deposited in the Collection Account, direct the Trustee to
allocate to the Certificateholders or the Holder of the Exchangeable Seller
Certificate and pay or deposit from of the Collection Account the following
amounts as set forth below:
(i) Allocate from Collections of Finance Charge Receivables
for payment in accordance herewith, an amount equal to the product of
(A) the Investor Percentage on the date of processing of such
Collections and (B) the aggregate amount of Finance Charge Collections
for such date.
(ii) Allocate to the Principal Account (A) during the period
that the sum of the Class A Investor Amount and the Class B Investor
Amount exceeds the balance in the Principal Account, an amount equal to
the product of (1) the Investor Percentage on such date, (2) the Class
A/B Percentage and (3) the aggregate amount of such Collections
processed in respect of Principal Receivables on such date and (B) at
all times thereafter, an amount equal to the product of (1) the
Investor Percentage on such date of such Collections and (2) the
aggregate amount of such Collections processed in respect of Principal
Receivables on such date (for any such date, a "Principal Allocation");
provided, however, that if the sum of such Principal Allocation and all
preceding Principal Allocations with respect to the same Monthly Period
(the "Monthly Total Principal Allocation") exceeds the Controlled
Deposit Amount, then such excess shall not be treated as a Principal
Allocation and shall be paid as provided in subsection 4.4(b)(iii).
(iii) Pay to the Holder of the Exchangeable Seller Certificate
an amount equal to the product of (A) the Investor Percentage on such
date and (B) the aggregate amount of such Collections processed in
respect of Principal Receivables on such Date of Processing minus the
amount allocated to the Principal Account pursuant to subsection
4.4(b)(ii); provided, however, that in the event that the amount to be
paid to the Holder of the Exchangeable Seller Certificate pursuant to
this subsection 4.4(b)(iii) with respect to any date would result in a
Shortfall Amount, the Shortfall Amount shall be deposited into the
Excess Funding Account.
(c) Allocations During the Rapid Amortization Period. During the Rapid
Amortization Period, the Servicer shall, direct the Trustee to allocate to the
Certificateholders or the Holder of the Exchangeable Seller Certificate and pay
from the Collection Account or the Principal Account, as applicable, the
following amounts as set forth below:
(i) An amount from the Collection Account equal to the product
of (A) the Investor Percentage on the Date of Processing of such
Collections and (B)
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<PAGE> 27
the aggregate amount of Collections of Finance Charge Receivables for
such Date of Processing for payment as provided herein.
(ii) Deposit in the Principal Account an amount equal to the
product of (A) the Investor Percentage on the Date of Processing of
such Collections and (B) the aggregate amount of such Collections
processed in respect of Principal Receivables on such date; provided,
however, that after the date on which the Adjusted Investor Amount
minus the amount on deposit in the Principal Account has been reduced
to zero, the amount determined in accordance with this subparagraph
(ii) shall be paid as provided in subsection 4.4(b)(iii); provided,
further, that if on any date of processing after giving effect to the
allocation set forth in this subsection 4.4(c)(ii) for such Date of
Processing in such Monthly Period the amount credited to the Principal
Account is less than the Adjusted Investor Amount, then Shared
Principal Collections from other Series, if any, allocable to the
Series 1998-1 Certificates will be deposited in the Principal
Collections Account to the extent of such shortfall.
Section 4.5 Defaulted Accounts. On each Determination Date, the
Servicer shall calculate the Investor Default Amount for the preceding Monthly
Period and the Total Deficiency Amount for the related Distribution Date. If on
such date the Total Deficiency Amount exceeds zero (such deficiency, the
"Shortfall"), the Class C Investor Amount will be reduced on such date by the
lesser of (i) the sum of (x) the Investor Default Amount and (y) the applicable
Shortfall Share of the amount of any unpaid Deposit Obligation in respect of the
preceding Monthly Period and (ii) such Shortfall (together with any amount
allocated to the Class C Investor Amount in accordance with the last sentence of
Section 4.11, a "Class C Investor Charge-Off"). In the event that such reduction
would cause the Class C Investor Amount to be a negative number, the Class C
Investor Amount shall be zero, and the Class B Investor Amount will be reduced
on such date by an amount equal to the excess of such reduction over the Class C
Investor Amount prior to the reduction (a "Class B Investor Charge-Off"). In the
event that such reduction would cause the Class B Investor Amount to be a
negative number, the Class B Investor Amount shall be zero and the Class A
Investor Amount will be reduced by an amount equal to the excess of such
reduction over the sum of the Class B Investor Amount and the Class C Investor
Amount prior to such reduction (a "Class A Investor Charge-Off").
Section 4.6 Monthly Payments. On each Determination Date, the Servicer,
shall instruct the Trustee to withdraw, and on the succeeding Transfer Date, the
Trustee acting in accordance with such instructions shall withdraw, the amounts
required to be withdrawn from Collections of Finance Charge Receivables held in
the Collection Account pursuant to this Section 4.6 and the amounts required to
be withdrawn from the Principal Account pursuant to Section 4.11. On each
Determination Date, the Servicer shall also determine the amount (the "Total
Deficiency Amount"), if any, by which the
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<PAGE> 28
sum of (a) Class A Certificate Interest and Class B Certificate Interest,
calculated as set forth below, for the following Transfer Date, plus (b) the
Investor Monthly Servicing Fee accrued in respect of the preceding Monthly
Period plus (c) the Investor Default Amount, if any, for the preceding Monthly
Period, plus (d) the applicable Series Share of any unpaid Deposit Obligation
(that remains unpaid) for the preceding Monthly Period exceeds the aggregate of
(i) the product of Finance Charge Collections and the Investor Percentage in
respect of the preceding Monthly Period, (ii) any amounts allocable to the
Series 1995 in respect of Shared Finance Charge Collections in preceding Monthly
Period and (iii) any other amounts required to satisfy the requirements for
deposit into the Finance Charge Sub-account (as defined and provided in the
Series 1995-1 Supplement, Section 4.6 (such sum, the "Monthly Finance Charge
Allocation").
(a) Class A Certificate Interest. On each Transfer Date, the Servicer
or the Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from Collections of Finance Charge Receivables in the Collection
Account and pay, to the extent of funds available therefor interest on the Class
A Certificates in the amount of the Class A Monthly Interest:
(b) Class B Certificate Interest. On each Transfer Date, the Servicer
or the Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from Collections of Finance Charge Receivables the Collection Account,
and pay, to the extent of funds available therefore, interest on the Class B
Certificates in the amount of the Class B Monthly Interest.
(c) Servicing Fee. On each Transfer Date, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from Collections
of Finance Charge Receivables Collection Account, to the extent available, an
amount equal to the lesser of (i) the Monthly Finance Charge Allocation less any
amounts withdrawn from the Collection Account pursuant to subsections 4.6(a) and
(b), and (ii) the Investor Monthly Servicing Fee accrued in respect of the
preceding Monthly Period plus all accrued and unpaid Investor Monthly Servicing
Fees in respect of previous Monthly Periods, and the Trustee shall pay such
amount to the Servicer.
(d) Defaults. On each Transfer Date, the Trustee, acting in accordance
with instructions from the Servicer, shall withdraw from Collections of Finance
Charges in the Collection Account, to the extent available, an amount equal to
the Monthly Period Finance Charge Allocation less any amounts withdrawn from the
Collection Account pursuant to subsections 4.6(a), (b) and (c) up to the
Investor Default Amount, if any, for the preceding Monthly Period, and the
Trustee, upon direction of the Servicer shall (A) during the Revolving Period,
apply such amount in accordance with subsection 4.4(a)(ii), (B) during the
Accumulation Period, deposit such amount in accordance with subsection
4.4(b)(ii) or (iii) and (C) during the Rapid Amortization Period, deposit such
amount in
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<PAGE> 29
accordance with subsection 4.4(c)(ii), respectively, in each case as if such
amounts were Collections of Principal Receivables.
(e) Deposit Obligation. On each Transfer Date, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from Collections
of Finance Charge Receivables held in the Collection Account, to the extent
available, an amount equal to the Monthly Finance Charge Allocation less any
amounts withdrawn from the Collection Account allocation pursuant to subsections
4.6(a), (b), (c) and (d) up to the applicable Shortfall Share of the unpaid
Deposit Obligation for the preceding Monthly Period, and the Trustee shall
deposit such amount in the Excess Funding Account. Amounts deposited in the
Excess Funding Account pursuant to this subsection (e) shall be applied first to
reimburse the Class A Certificates for Class A Investor Charge-Offs, second to
the extent amounts are available following the reimbursement of the Class A
Certificates, to reimburse the Class B Certificates for Class B Investor
Charge-Offs and third to the extent amounts are available following the
reimbursement of the Class A Investor Charge-Offs and the Class B Investor
Charge-Offs, to reimburse the Class C Certificates for Class C Investor
Charge-Offs; provided that the aggregate of the foregoing reimbursements shall
not exceed the lesser of (i) the Shortfall and (ii) the applicable Shortfall
Share of the unpaid Deposit Obligation for the preceding Monthly Period.
(f) Reimbursement of Investor Charge Offs, Class B Reallocated Amounts,
and Class C Reallocated Amounts. On each Transfer Date, the Trustee, acting in
accordance with instructions of the Servicer, shall withdraw from Collections of
Finance Charge Receivables in the Collection Account, to the extent available,
an amount equal to the lesser of (i) the Monthly Period Finance Charge
Allocation less any amounts withdrawn from the Collections of Finance Charges in
the Collection Account pursuant to subsections 4.6(a), (b), (c), (d) and (e),
and (ii) an amount equal to the aggregate amount of Investor Charge Offs, if
any, Class B Reallocated Amounts, if any, and Class C Reallocated Amounts, if
any, which have not theretofore been reimbursed pursuant to this subsection
4.6(f), and shall (A) during the Accumulation Period, deposit such amounts in
accordance with subsection 4.4(b)(ii) or (iii) and (B) during the Rapid
Amortization Period, deposit such amounts in accordance with subsection
4.4(c)(ii), respectively as if such amounts were Collections of Principal
Receivables. On the date of any such reimbursement, the Investor Amount shall be
increased by the amount of such reimbursement of Investor Charge Offs, Class B
Reallocated Amounts and Class C Reallocated Amounts.
Reimbursements under this subsection 4.6(f) shall be applied first to
reimburse the Class A Certificates for Class A Investor charge-Offs, second, to
the extent amounts are available following the reimbursement of the Class A
Certificates, to reimburse the Class B Certificates for Class B Reallocated
Amounts, third, to the extent amounts are available following the reimbursement
of the Class B Certificates for Class B Reallocated
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Amounts, to reimburse the Class B Certificates for Class B Investor Charge Offs,
fourth, to the extent amounts are available following the reimbursement of the
Class B Certificates for Class B Investor Charge Offs, to reimburse the Class C
Certificates for Class C Reallocated Amounts and fifth, to the extent amounts
are available following the reimbursement of the Class C Certificates for Class
C Reallocated Amounts, to reimburse the Class C Certificates for Class C
Investor Charge Offs (excluding amounts reimbursed pursuant to subsection
4.6(e)).
(g) Reserve Account. On each Transfer Date in respect of each
Distribution Date occurring from and after the Reserve Account Funding Date but
prior to the date the Reserve Account terminates pursuant to subsection 4.9(d),
the Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from Collections of Finance Charge Receivables held in the Collection
Account and deposit to the Reserve Account an amount up to the lesser of (A) the
Monthly Period Finance Charge Allocation less any amounts withdrawn from the
Collection of Finance Charge Receivables held in the Collection Account pursuant
to subsections 4.6(a), (b), (c), (d), (e) and (f), and (B) the amount, if any,
by which the Required Reserve Account Amount exceeds the amount on deposit in
the Reserve Account (before giving effect to such deposit and after giving
effect to any Reserve Account Draw on such date).
(h) Class C Certificate Interest. On each Transfer Date, the Trustee,
acting in accordance with instructions from the Servicer, shall withdraw from
Collections of Finance Charge Receivables held in the Collection Account, an
amount up to the lesser of (A) the Monthly Period Finance Charge Allocation less
any amounts withdrawn from the Collections of Finance Charge Receivables held in
the Collection Account, pursuant to subsections 4.'6(a), (b), (c), (d), (e), (f)
and (g), and (B) the amount, if any, equal to interest accrued and unpaid in
respect of the portion of the Class C Investor Amount held by Persons other than
the Servicer or its Affiliates.
(i) Excess Spread. On each Transfer Date, the Trustee, acting
in accordance with instructions from the Servicer, shall withdraw from
Collections of Finance Charge Receivables held in the Collection
Account, an amount up to the Monthly Period Finance Charge Allocation
less any amounts withdrawn from the Collections of Finance Charge
Receivables held in the Collection Account, pursuant to subsections
4.6(a), (b), (c), (d), (e), (f), (g) and (h) (such remaining funds, the
"Excess Spread").
Section 4.7 Payment of Certificate Interest. On each Distribution Date,
the Paying Agent shall pay in accordance with Section 5.1: (i) to the Class A
Certificateholders from the Collection Account the amount determined pursuant to
Section 4.6(a) on the related Transfer Date; (ii) to the Class B
Certificateholders from the Collection Account the amount determined pursuant to
Section 4.6(b) on the related Transfer Date; (iii) to the Class C
Certificateholders (other than the Servicer and its
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Affiliates) from the Collection Account, the amount determined pursuant to
Section 4.6(h) on the related Transfer Date; and (iv) to the Class C
Certificateholders (if such Certificateholders are the Servicer or its
Affiliates) from the Collection Account the amount determined pursuant to
Section 4.6(i) on the related Transfer Date.
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Section 4.8 Payment of Certificate Principal.
(a) on the Determination Date in the calendar month following the
Monthly Period in which the Accumulation Period commences, and on each
Determination Date thereafter until the commencement of the Rapid Amortization
Period, the Servicer shall instruct the Trustee to withdraw, and on the next
succeeding Transfer Date the Trustee shall withdraw, from the Principal Account
(1) the amount deposited in the Principal Account pursuant to subsection
4.4(b)(ii) during the preceding monthly Period, (2) any Shared Principal
Collections allocated to the Series and (3) the amount to be deposited in the
Principal Account on such Transfer Date pursuant to subsection 4.6 (d), (f) or
4.3(j).
(b) on the Determination Date in the calendar month following the
Monthly Period in which the Rapid Amortization Period commences, and on each
Determination Date thereafter, the Servicer shall instruct the Trustee to
withdraw, and on the next succeeding Transfer Date the Trustee shall, subject to
the following paragraph, withdraw, from the Principal Account for distribution
and deposit in the Distribution Account (1) the amount deposited in the
Principal Account pursuant to subsections 4.4(b)(ii) and 4.4(c)(ii) (and not
reallocated pursuant to Section 4.11) during the preceding Monthly Period, (2)
any Shared Principal Collections allocated to the Series and (3) the amount to
be deposited in the Principal Account on such Transfer Date pursuant to
subsections 4.6(d), 4.6(f) or 4.3(j) in each case after giving effect to any
reallocation of such collections pursuant to Section 4.11.
(c) On each Transfer Date after the end of the Revolving Period, the
Servicer shall withdraw, or instruct the Trustee to withdraw, and on such
Transfer Date the Trustee shall withdraw, from the Excess Funding Account and
deposit to the Distribution Account, an amount equal to the lowest of (x) the
amount on deposit therein (exclusive of investment earnings net of investment
expenses), (y) during the Accumulation Period, the amount by which the
applicable Controlled Deposit Amount exceeds the Monthly Total Principal
Allocation for the preceding Monthly Period, and during the Rapid Amortization
Period, the Investor Amount (after giving effect to the application of the
amounts already allocated to the Distribution Account on such date) and (z) the
amount of Shared Principal Collections available to be withdrawn from the Excess
Funding Account pursuant to Section 4.3(g).
On the Determination Date preceding the final Transfer Date, the
Servicer shall determine the amounts to be deposited pursuant to this sentence
and on the final Transfer Date: (x) the Servicer shall, or shall instruct the
Trustee to, and the Trustee shall, withdraw from the Principal Account and
deposit into the Distribution Account, an amount which is no greater than the
Investor Amount as of the end of the day on the preceding Record Date; and (y)
the Servicer shall, or shall instruct the Trustee to, and the Trustee shall,
withdraw from the Principal Account and deposit into the Collection Account, for
allocation as Principal Receivables pursuant to Article IV, the amount, if
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any, remaining in the Principal Account after giving effect to the withdrawals
made pursuant to clause (x).
(d) Unless the Rapid Amortization Period has commenced, on the Class A
Expected Payment Date, the Paying Agent shall pay in accordance with Section
5.1, to the Class A Certificateholders from the Distribution Account the lesser
of (a) the amount on deposit in the Distribution Account on the related Transfer
Date and (b) the Class A Investor Amount on such date. Unless the Rapid
Amortization Period has commenced, on the Class B Expected Payment Date, the
Paying Agent shall pay in accordance with Section 5.1, to the Class B
Certificateholders from the Distribution Account the lesser of (a) the amount on
deposit in the Distribution Account on the related Transfer Date and (b) the
Class B Investor Amount on such date.
(e) In accordance with the subordination of the Class B Certificates to
the Class A Certificates and the subordination of the Class C Certificates to
the Class A and B Certificates, on each Distribution Date occurring after the
commencement of the Rapid Amortization Period, the Paying Agent shall pay in
accordance with Section 5.1, (i) to the Class A Certificateholders from the
Distribution Account the lesser of (a) the amount on deposit in the Distribution
Account on the related Transfer Date and (b) the Class A Investor Amount on such
date, (ii) to the Class B Certificateholders from the Distribution Account the
lesser of (r) the amount on deposit in the Distribution Account on the related
Transfer Date less any amounts withdrawn from the Distribution Account pursuant
to clause (i) of this subsection 4.8(e) and (s) the Class B Investor Amount on
such date and (iii) to the Class C Certificateholders from the Distribution
Account the lesser of (y) the amount on deposit in the Distribution Account on
the related Transfer Date less any amounts withdrawn from the Distribution
Account pursuant to clauses (i) and (ii) of this subsection 4.8(e) and (z) the
Class C Investor Amount on such date.
(f) On the first Distribution Date in an Amortization Period on which
the Class A Investor Amount and the Class B Investor Amount equals or is reduced
to zero or, if there are no Principal Collections allocable to the Series 1998-1
Certificates remaining after payments have been made to the Class A Certificates
and Class B Certificates on such Distribution Date, then on the Distribution
Date following the Distribution Date on which the Class A Investor Amount and
the Class B Investor Amount is paid in full, the Paying Agent shall pay in
accordance with Section 5.1, to the Class C Certificateholders from the
Distribution Account the amount on deposit in the Distribution Account on the
related Transfer Date.
Section 4.9 Reserve Account.
(a) The Servicer, for the benefit of the Series 1998-1 Investor
Certificateholders, shall establish and maintain or cause to be established and
maintained in the name of the Trustee, on behalf of the Trust, with a Qualified
Institution designated
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by the Servicer, a segregated trust account within the corporate trust
department of such Qualified Institution (the "Reserve Account"), bearing a
designation clearly indicating that the funds held therein are held in trust for
the benefit of the Series 1998-1 Investor Certificateholders. The Trustee shall
possess all right, title and interest in all amounts held from time to time in
the Reserve Account and in all proceeds thereof. Pursuant to the authority
granted to it pursuant to subsection 3.1(b), the Servicer shall have the power,
revocable by the Trustee, to withdraw funds and to instruct the Trustee to
withdraw funds from the Reserve Account for the purposes of carrying out its
duties hereunder. Funds on deposit in the Reserve Account shall at all times be
invested by the Trustee, at the written direction (or telephonic direction,
promptly confirmed in writing) of the Servicer, in Permitted Investments. Any
such investment shall mature and such funds shall be available for withdrawal on
the Transfer Date following the Monthly Period in which such funds were
processed for collection. Subject to the restrictions set forth above, the
Servicer, or a Person designated in writing by the Servicer, shall instruct the
applicable Qualified Institution in writing with respect to the investment of
funds allocated to the Reserve Account. For purposes of determining the
availability of funds or the balances in the Reserve Account for any reason
under this Agreement, all investment earnings on such funds (net of losses and
expenses) shall be deemed not to be available or on deposit until actually
credited to the Reserve Account. Permitted Investments shall not be disposed of
prior to their maturity. The foregoing notwithstanding, all amounts held in the
Reserve Account may be transferred to, and held as part of, the "Reserve
Account" established pursuant to the Younkers Agreement and Series 1995-1. In no
event shall the funds held in the Reserve Account for Series 1998-1 and in the
Reserve Account established pursuant to the Younkers Agreement and Series 1995-1
exceed the total amount required under the Younkers Agreement and Series 1995-1.
(b) On each Distribution Date all investment earnings credited to the
Reserve Account since the preceding Distribution Date shall be deposited in the
Finance Charge Sub-subaccount. On each Transfer Date in respect of each
Determination Date in respect of each Monthly Period during the Accumulation
Period, the Servicer shall withdraw, or instruct the Trustee to withdraw, and on
such Transfer Date the Trustee shall withdraw, from the Reserve Account an
amount (the "Reserve Draw Amount") equal to the lesser of the Distribution
investment Shortfall and the amount on deposit in the Reserve Account. The
Reserve Draw Amount shall be deposited in the Collection Account and deemed to
be a Collection of Finance Charge Receivables.
(c) If on any Transfer Date, after giving effect to all deposits to and
withdrawals from the Reserve Account, the amount on deposit in the Reserve
Account would exceed the Required Reserve Account Amount (the "Reserve Account
Surplus"), the Servicer shall withdraw, or instruct the Trustee to withdraw, and
on such Transfer Date the Trustee shall withdraw, from the Reserve Account, the
Reserve Account Surplus and distribute such amount as part of Excess Spread.
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<PAGE> 35
(d) Upon the earliest to occur of the Expected Payment Date or a Pay
Out Event, the Servicer shall withdraw, or instruct the Trustee to withdraw, and
on such Distribution Date the Trustee shall withdraw, after the prior payment of
all amounts payable from the Reserve Account as provided in this subsection 4.9,
all amounts then on deposit in the Reserve Account and distribute the same as
Excess Spread and the Reserve Account shall terminate.
Section 4.10 [Reserved].
Section 4.11 Reallocated Principal Collections. The Servicer shall
apply or shall cause the Trustee to apply on each Distribution Date a portion of
the Collections in respect of the preceding Monthly Period allocated pursuant to
subsection 4.4(c)(ii) equal to the lesser of (i) the Class C Investor Percentage
thereof and (ii) the excess, if any of the Total Deficiency Amount over the
Investor Default Amount for such Monthly Period (such amounts, the "Class C
Reallocated Amounts") to pay the amounts specified in Sections 4.6(a), (b), (c)
and (e) in the order of priority specified in subsection 4.6. If such Class C
Reallocated Amounts are insufficient to pay the amounts required pursuant to
subsections 4.6(a), (b), (c) and (e), the Servicer shall apply or shall cause
the Trustee to apply on such Distribution Date a portion of the Collections in
respect of the preceding Monthly Period allocated pursuant to subsection
4.4(c)(ii) equal to the lowest of (i) the Class B Investor Percentage thereof,
(ii) the difference between the Total Deficiency Amount and the Investor Default
Amount and (iii) the amount of such insufficiency (such amounts, the "Class B
Reallocated Amounts"; collectively with the Class C Reallocated Amounts,
"Reallocated Principal Collections") shall be reallocated by the servicer to pay
the amounts specified in subsections 4.6(a), (b), (c) and (e) in the order of
priority specified in Section 4.6. If there are Class B Reallocated Amounts and,
after giving effect to such Reallocated Principal Collections, the Class C
Investor Amount exceeds zero, the Class C Investor Amount shall be reduced by
the lesser of the Class B Reallocated Amounts and such remaining Class C
Investor Amount.
Section 4.12 Accumulation Period Length. On or prior to the
Distribution Date commencing 12 months prior to the Class A Expected Payment
Date, the Seller shall designate the number of Monthly Periods in the
Accumulation Period (the "Accumulation Period Length") and, correspondingly the
first day of the Monthly Period on which the Accumulation Period will commence.
The Seller shall notify the Rating Agencies of such designation. Such
designation will be effective when (i) the Rating Agency Condition has been
satisfied with respect thereto and (ii) the Seller has delivered to the Trustee
an Officer's Certificate to the effect that, based upon the facts known to such
officer at such time, such designation will not cause a Rapid Amortization
Event. In the absence of an effective designation the Accumulation Period will
commence on December 1, 1999.
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<PAGE> 36
Section 4.13 Principal Account.
(a) The Servicer shall establish and maintain, in the name of the Trustee,
for the benefit of the Series 1998-1 Certificateholders, with a Qualified
Institution a segregated trust account (the "Principal Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Series 1998-1 Certificateholders. The Principal Account shall
initially be established with the Trustee. The Trustee shall possess all right,
title and interest in all funds held from time to time in the Principal Account
and in all proceeds thereof. The Principal Account shall be under the sole
dominion and control of the Trustee for the benefit of the Series 1998-1
Certificateholders. If, at any time, the institution holding the Principal
Account ceases to be a Qualified Institution, the Trustee (or the Servicer on
its behalf) shall within five (5) Business Days establish a new Principal
Account meeting the conditions specified above with a Qualified Institution and
shall transfer any cash and/or any investments to such new Principal Account.
Pursuant to the authority granted to the Servicer in Section 3.1(b) of the
Agreement, the Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments or to instruct the Trustee to make withdrawals and
payments from the Principal Account for the purposes of carrying out the
Servicer's or the Trustee's duties hereunder.
(b) Funds held in the Principal Account shall be invested at the direction
of the Servicer by the Trustee in Permitted Investments. All such Permitted
Investments shall be held by the Trustee for the benefit of the Series 1998-1
Certificateholders; provided, however, that on each Distribution Date all
interest and other investment income (net of losses and investment expenses)
("Principal Investment Proceeds") on funds held therein shall be applied as set
forth in Section 4.13(c) below. Funds held in the Principal Account shall be
invested in Permitted Investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. No
Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1998-1 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
(c) On each Distribution Date with respect to the Accumulation Period, the
Servicer shall direct the Trustee to withdraw from the Principal Account and
deposit into the Collection Account all Principal Investment Proceeds then held
in the Principal Account and such Principal Investment Proceeds shall be treated
as a portion of (x) prior to the payment in full of the Class A Investor Amount,
Class A Available Funds and (y) thereafter, Class B Available Funds, in each
case for such Distribution Date.
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<PAGE> 37
(d) Reinvested interest and other investment income on funds deposited in
the Principal Account shall not be considered to be principal amounts held
therein for purposes of this Agreement.
ARTICLE V
DISTRIBUTIONS AND REPORTS
TO INVESTOR CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS.
(a) On each Payment Date, the Paying Agent shall distribute (in accordance
with instructions delivered by the Servicer to the Trustee) to each Class A
Certificateholder of record on the immediately preceding Record Date (other than
as provided in subsection 2.4(e) or Section 12.3 respecting a final
distribution) such Class A Certificateholder's pro rata share (based on the
aggregate Undivided Interests represented by the Class A Certificates held by
such Class A Certificateholder) of amounts on deposit in the Distribution
Account as are payable with respect to the Class A Certificates pursuant to
Sections 4.7 and 4.8 on such Distribution Date by check mailed to each Class A
Certificateholder except that, with respect to Class A Certificates registered
in the name of the nominee of a Clearing Agency, such distribution shall be made
in immediately available funds.
(b) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the certificate delivered by the Servicer to the Trustee
pursuant to subsection 3.4(b)) to each Class B Certificateholder of record on
the immediately preceding Record Date (other than as provided in subsection
2.4(e) or Section 12.3 respecting a final distribution) such Class B
Certificateholder's pro rata share (based on the aggregate Undivided Interests
represented by the Class B Certificates held by such Class B Certificateholder)
of amounts on deposit in the Distribution Account as are payable with respect to
the Class B Certificates pursuant to Sections 4.7 and 4.8 in immediately
available funds.
(c) on each Distribution Date, the Paying Agent shall distribute (in
accordance with instructions delivered by the Servicer to the Trustee) to each
Class C Certificateholder of record on the immediately preceding Record Date
(other than as provided in subsection 2.4(e) or Section 12.3 respecting a final
distribution) such Class C Certificateholder's pro rata share (based on the
aggregate Undivided Interests represented by the Class C Certificates held by
such Class C Certificateholder) of amounts on deposit in the Distribution
Account as are payable to the Class C Certificates pursuant to Sections 4.7 and
4.8 by wire transfer to each Class C Certificateholder.
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<PAGE> 38
SECTION 5.2 STATEMENTS TO SERIES 1998-1 CERTIFICATEHOLDERS. On each
Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to
each Series 1998-1 Certificateholder, including, for the avoidance of doubt, the
Collateral Indebtedness Holder, a statement substantially in the form of Exhibit
C prepared by the Servicer setting forth certain information relating to the
Trust and the Series 1998-1 Certificates.
On or before January 31 of each calendar year, beginning with 1999, the
Paying Agent, on behalf of the Trustee, shall furnish or cause to be furnished
to each Person who at any time during the preceding calendar year was a Series
1998-1 Certificateholder a statement prepared by the Servicer containing the
information which is required to be contained in Exhibit C, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Certificateholder of such Series, together with other information as is required
to be provided by an issuer of indebtedness under the Code and such other
customary information as is necessary to enable the Certificateholders of such
Series to prepare their tax returns. Such obligation of the Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall have been provided by the Paying Agent pursuant to any
requirements of the Code as from time to time in effect.
SECTION 13. CONSTITUENT CLASS C CERTIFICATES.
(a) Subject to the satisfaction of the conditions set forth in subsection
13(c), the Class C Certificateholders may at any time and from time to time (i)
subdivide the Class C Certificates into two or more subsidiary certificates, or
(ii) reallocate all or any portion of the amounts distributable to the Class C
Certificateholders pursuant to Article IV and Section 5.1 to any other
Certificateholder. In connection with such subdivision, the Seller may assign an
interest rate to the Class C Certificates or a portion thereof. Upon
presentation to the Trustee and the Paying Agent of documentation satisfactory
to the Trustee (to which-the Trustee may be a party, if requested by the Seller)
reallocating payments with respect to the Class C Certificates, the Trustee
shall pay amounts due hereunder to the Class C Certificateholders to the holders
of such constituent certificates or such other Certificateholder, as the case
may be, pursuant to the terms of such documentation.
(b) The documentation referred to in subsection (a) of this Section 13
shall set forth the rights of the holders of the certificates or other interests
issued thereby with respect to the approval of amendments and waivers pursuant
to Section 13.1 of the Agreement.
(c) As a condition precedent to the subdivision of any Class C
Certificates pursuant to this Section 13, (A) the Trustee and the Seller shall
have received an opinion of outside tax counsel to the effect that (i) the
certificates issued and sold to third parties
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<PAGE> 39
will be characterized as indebtedness or an interest in a partnership (not
taxable as a corporation) for federal income tax purposes, (ii) the subdivision
will not cause outstanding Class A Certificates and Class B Certificates to be
characterized as other than indebtedness for federal income tax purposes and
(iii) the subdivision will not be treated as a taxable sale, exchange or other
disposition for federal income tax purposes, (B) in the reasonable belief of the
Seller, as evidenced by an Officer's Certificate, such subdivision would not
cause a Pay Out Event to occur, or an event which, with notice or lapse of time
or both, would constitute a Pay Out Event, and (C) the Rating Agency Condition
shall have been satisfied.
A-22
<PAGE> 40
EXHIBIT B
TO THE
SERIES 1998-1 SUPPLEMENT
SERIES 1998-1 PAY OUT EVENTS
B-1
<PAGE> 41
EXHIBIT B
TO THE
SERIES 1998-1 SUPPLEMENT
SERIES 1998-1 PAY OUT EVENTS
I. Series 1998-1 Pay Out Events.
If any one of the events specified in Section 9.1 of the Agreement or any
of the following events shall occur with respect to the Series 1998-1
Certificates:
(a) failure on the part of Transferor or the Servicer (i) to make
any payment or deposit required by the terms of (A) the Agreement, or (B)
this Series Supplement, on or before the date occurring five Business Days
after the date such payment or deposit is required to be made or (ii) duly
to observe or perform in any material respect any covenants or agreements
applicable to it set forth in the Agreement or this Series Supplement,
which failure has a material adverse effect on the Series 1998-1
Certificateholders and which continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Transferor by the Trustee, or
to the Transferor and the Trustee by the Holders of Series 1995-1
Certificates evidencing Undivided Interests aggregating not less than 50%
of the Investor Amount of this Series 1998-1, and continues to affect
materially and adversely the interests of the Series 1998-1
Certificateholders for such period; or
(b) any representation or warranty made by the Transferor in the
Agreement or this Series Supplement, or any information contained in a
computer file or microfiche list required to be delivered by the
Transferor pursuant to the Agreement, shall prove to have been incorrect
in any material respect when made or when delivered, which continues to be
incorrect in any material respect for a period of 60 days after the date
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor by the Trustee, or to
the Transferor and the Trustee by the Holders of the Series 1998-1
Certificates evidencing Undivided Interests aggregating not less than 50%
of the Investor Amount of this Series 1998-1, and as a result of which the
interests of the Series 1998-1 Certificateholders are materially and
adversely affected and continue to be materially and adversely affected
for such period; provided, however, that a Series 1998-1 Pay Out Event
shall not be deemed to have occurred hereunder if the Seller has accepted
reassignment of the related Receivable, or all of such Receivables, if
applicable, during such period in accordance with the provisions hereof;
or
(c) the average of the Portfolio Yields for any three consecutive
Monthly Periods is a rate which is less than the Base Rate; or
B-2
<PAGE> 42
(d) the Class A Investor Amount shall be greater than zero on the
Class A Expected Payment Date after giving effect to the distribution to
be made on such date; or
(e) the Seller shall fail to designate, or be unable to designate,
Additional Accounts the Receivables of which will be Eligible Receivables,
as required by the Agreement, and such failure shall continue for a period
of 5 Business Days; or
(f) any Servicer Default shall occur which would have a material
adverse effect on the Holders of the Series 1998-1 Certificates;
then, (i) in any such event described in subparagraph (a), (b) or (f), after the
applicable grace period, if any, set forth in such subparagraphs, either the
Trustee or the Holders of Series 1998-1 Certificates evidencing Undivided
Interests aggregating more than 50% of the Investor Amount by notice then given
in writing to the Seller and the Servicer (and to the Trustee if given by the
Certificateholders) may declare that a pay out event (a "Series 1998-1 Pay Out
Event") has occurred as of the date of such notice and (ii) in the case of any
event described in subparagraph (c), (d) or (e), a series 1998-1 Pay Out Event
shall occur without any notice or other action on the part of the Trustee or the
Certificateholders immediately upon the occurrence of such event.
Notwithstanding the foregoing, any failure of performance under subsection
(a)(i) for a period of up to 60 calendar days with respect to an event described
in clause (i) below or up to 15 calendar days with respect to an event described
in clause (ii) below (in addition to the five Business Days provided above)
shall not constitute a Pay Out Event for purposes of this sentence until the
expiration of such period, if such failure could not be prevented by the
exercise of reasonable diligence by the Seller and the Servicer and such failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages, bank closings, or similar causes or (ii)
computer malfunction, communication malfunction or other electronic system
malfunction or similar causes. The preceding proviso shall not relieve the
Seller or the Servicer from using all reasonable efforts to perform its
respective obligations in a timely manner in accordance with the terms of the
Agreement and this Supplement and the Seller shall provide the Trustee and each
Rating Agency with an Officer's Certificate giving prompt notice of such
failure, together with a description of its efforts to so perform its
obligations. Notice of any such Pay Out Event shall be given by the Servicer to
the Rating Agencies.
B-3
<PAGE> 43
EXHIBIT C
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF MONTHLY CERTIFICATEHOLDER'S STATEMENT
C-1
<PAGE> 44
EXHIBIT D
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
D-1
<PAGE> 45
EXHIBIT D
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
No. A-1 $__________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. SUCH SECURITIES
SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED
OR DISPOSED OF ABSENT SUCH REGISTRATION, UNLESS, IN THE OPINION OF THE
CORPORATION'S COUNSEL, SUCH REGISTRATION IS NOT REQUIRED.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1998-1
Class A Expected Payment Date
June 2000 Distribution Date
Each $1,000 minimum denomination represents a
fractional undivided interest in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit Corporation or any
Affiliate thereof)
This certifies that Younkers Master Trust (the "Class A
Certificateholder") is the registered owner of a fractional undivided interest
in certain assets of a trust (the "Trust") created pursuant to the Master
Pooling and Servicing Agreement dated as of August 21, 1997 (as amended and
supplemented, the "Agreement"), as supplemented by the Series 1998-1 Supplement
dated as of May 6, 1998 (as amended and supplemented, the "Series Supplement"),
among Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, a national banking
D-2
<PAGE> 46
association, as Trustee (the "Trustee"). The corpus of the Trust consists of (i)
receivables (the "Receivables") generated from time to time in a portfolio of
consumer revolving credit card accounts identified under the Agreement (the
"Accounts"), (ii) all monies due or to become due in payment of the Receivables,
(iii) all proceeds of the Receivables and proceeds of Insurance Policies
relating to the Receivables, (iv) all monies held in certain accounts of the
Trust (excluding investment earnings, unless otherwise specified in the
Agreement or any Supplement), (v) all Recoveries and Collections of the
Receivables, (vi) any Enhancement with respect to any Series (or class thereof)
and (vii) all other assets and interests constituting the Trust Property.
Although a summary of certain provisions of the Agreement and the Series
Supplement is set forth below and on the Summary of Terms and Conditions
attached hereto and made a part hereof, this Class A Certificate does not
purport to summarize the Agreement and the Series Supplement and reference is
made to the Agreement and the Series Supplement for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and obligations of the Trustee. A copy of the
Agreement and the Series Supplement (without schedules) may be requested from
the Trustee by writing to the Trustee at Norwest Bank Minnesota, N.A., Norwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0070, Attention: Asset
Backed Securities Corporate Trust Department. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to them in the
Agreement or the Series Supplement, as applicable.
This Class A Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class A Certificateholder by virtue of the acceptance hereof assents
and is bound.
THIS CLASS A CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN PROFFITT'S CREDIT CORPORATION OR ANY AFFILIATE THEREOF, AND NONE OF
THIS CERTIFICATE, THE RECEIVABLES OR THE ACCOUNTS IS INSURED OR GUARANTEED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. THIS CLASS A CERTIFICATE IS LIMITED
IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS RESPECTING THE RECEIVABLES, ALL AS
MORE SPECIFICALLY SET FORTH IN THE AGREEMENT.
It is the intent of the Transferor and the Investor Certificateholders
(and Certificate Owners) that, for Federal, state and local income and franchise
tax purposes only, the Investor Certificates will qualify as indebtedness of the
Transferor secured by the Receivables (unless otherwise specified in the related
Supplement). The Class A Certificateholder (and each Certificate Owner of a
Class A Certificate), by the acceptance of this Class A Certificate (or its
interest therein), is deemed to agree to treat this Class A
D-3
<PAGE> 47
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class A Certificate shall not
be entitled to any benefit under the Agreement or the Series Supplement or be
valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class A Certificate to
be duly executed by its undersigned officer thereunto duly authorized.
PROFFITT'S CREDIT CORPORATION
By:
-------------------------------
Name: Douglas E. Coltharp
Title: President
Dated: May 6, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-mentioned
Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------
Authorized Officer
Dated: May 6, 1998
D-4
<PAGE> 48
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1998-1
SUMMARY OF TERMS AND CONDITIONS
This Class A Certificate is one of a series of Certificates entitled
"Proffitt's Credit Card Master Trust Series 1998-1 Certificates" (the "Series
1998-1 Certificates"), and one of a class thereof entitled "Class A Asset Backed
Certificates, Series 1998-1" (the "Class A Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust,
including the right to receive the Collections and other amounts at the times
and in the amounts specified in the Agreement to be deposited in the Series
Accounts maintained for the benefit of such Investor Certificates or paid to the
Series 1998-1 Certificateholders. This Certificate is one of the Class A
Certificates. The Class B Certificates and Class C Certificates are subordinated
in right of payment to the Class A Certificates. The Exchangeable Transferor
Certificate represents the interest in the remaining undivided interest in the
Trust not represented by all Series of Investor Certificates issued by the
Trust. The Exchangeable Transferor Certificate may be exchanged by Proffitt's
Credit Corporation pursuant to the Agreement for a newly issued Series of
Investor Certificates and a reissued Exchangeable Transferor Certificate upon
the conditions set forth in the Agreement.
Certificate Interest will be distributed monthly on the fifteenth Business
Day of each calendar month, or if such fifteenth day is not a Business Day, the
next succeeding Business Day (a "Distribution Date"). In the case of the first
interest payment, interest will accrue from the date of issuance and in the case
of subsequent interest payments, interest will accrue from the preceding
Distribution Date in each case to but excluding the date of payment thereof (an
"Accrual Period").
On each Distribution Date, the Paying Agent shall distribute to each Class
A Certificateholder of record at the close of business on the last Business Day
of the immediately preceding calendar month (each a "Record Date") such Class A
Certificateholder's pro rata share of such amounts (including amounts held in
the Principal Account) as are payable to the Class A Certificateholders pursuant
to the Agreement and the Series 1998-1 Supplement. Distributions with respect to
this Class A Certificate will be made in the form of immediately available funds
to the address of the Class A Certificateholder of record appearing in the
Certificate Register without the presentation or surrender of this Class A
Certificate or the making of any notation thereon (except for the final
distribution in respect of this Class A Certificate). Final payment of this
Class A Certificate will be made only upon presentation and surrender of this
Class A Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee in accordance with the Agreement and the
Series 1998-1 Supplement.
D-5
<PAGE> 49
On each Distribution Date occurring after the commencement of the Rapid
Amortization Period, the Paying Agent shall pay to the Class A Certificateholder
its pro rata share of the lesser of (a) the amount on deposit in the
Distribution Account on the related Transfer Date and (b) the Class A Investor
Amount on such date. Unless the Rapid Amortization Period has commenced, on the
Distribution Date that occurs in June, 2000, the Paying Agent shall pay to the
Class A Certificateholder its pro rata share of the lesser of (a) the amount on
deposit in the Distribution Account on the related Transfer Date and (b) the
Class A Investor Amount. As soon as possible-thereafter, the Depositary will
allocate and pay such funds to the Persons to whom such amounts shall be payable
in accordance with its operating procedures.
Subject to the limitations set forth herein, the transfer of this Class A
Certificate shall be registered in the Certificate Register upon surrender of
this Class A Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer in a form satisfactory to the Trustee and the Transfer
Agent and Registrar duly executed by the Class A Certificateholder or such Class
A Certificateholder's attorney duly authorized in writing, and thereupon one or
more new Class A Certificates of authorized denominations and for the same
aggregate Undivided Interests will be issued to the designated transferee or
transferees.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any
of them shall be affected by notice to the contrary except in certain
circumstances described in the Agreement.
The rights evidenced by this Class A Certificate created by the Agreement
and the Trust shall terminate on the earlier of (i) the day, if any, designated
by Proffitt's Credit Corporation after the Distribution Date following the date
on which funds shall have been deposited in the Distribution Account sufficient
to pay the Class A Investor Amount plus Certificate Interest accrued through the
date of distribution thereof and (ii) the day on which final payment is made on
the Class A Certificates, but in no event later than December 31, 2015.
Upon the termination of the Trust pursuant to Section 12.1 of the
Agreement and the surrender of the Exchangeable Transferor Certificate, the
Trustee shall return to the holder of the Exchangeable Transferor Certificate,
without recourse, all right, title and interest of the Trust in, to and under
the Receivables then existing and thereafter created and arising in connection
with the Accounts, all monies due or to become due with respect thereto
(including all Finance Charge Receivables), all Recoveries, Collections and
other proceeds thereof and Insurance Proceeds relating thereto, except for
amounts held by the Trustee pursuant to subsection 12.3(b). The Trustee shall
execute and deliver
D-6
<PAGE> 50
such instruments of transfer, in each case without recourse, as shall be
reasonably requested by the holder of the Exchangeable Transferor Certificate to
vest in it all right, title and interest which the Trust had in the Receivables.
Subject to Section 13.1(c) of the Agreement, each Certificateholder by its
acceptance of this Certificate or any interest in this Certificate, consents to
any amendment to the Agreement or any Supplement necessary for the Transferor to
elect FASIT status for the Trust or any portion thereof under the Code.
As provided in the Agreement and the Series 1998-1 Supplement and subject
to certain limitations therein set forth, Class A Certificates are exchangeable
for new Class A Certificates in authorized denominations of like aggregate
undivided interests in the Trust as requested by the Class A Certificateholder
surrendering such Class A Certificates. No service charge may be imposed for any
transfer or exchange but the Transfer Agent and Registrar and the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
THE AGREEMENT AND THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
D-7
<PAGE> 51
EXHIBIT E
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
E-1
<PAGE> 52
EXHIBIT E
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
No. B-1 $__________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. SUCH SECURITIES
SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED
OR DISPOSED OF ABSENT SUCH REGISTRATION, UNLESS, IN THE OPINION OF THE
CORPORATION'S COUNSEL, SUCH REGISTRATION IS NOT REQUIRED.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1998-1
Class B Expected Payment Date
June 2000 Distribution Date
Each $1,000 minimum denomination represents a
fractional undivided interest in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing a subordinated undivided interest in a trust the corpus of which
consists primarily of receivables generated from time to time in a portfolio of
consumer revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit Corporation or any
Affiliate thereof)
This certifies that Younkers Master Trust (the "Class B
Certificateholder") is the registered owner of a fractional undivided interest
in a trust (the "Trust"), created by the Master Pooling and Servicing Agreement
dated as of August 21, 1997 (as amended and supplemented, the "Agreement"), as
supplemented by the Series 1998-1 Supplement dated as of May 6, 1998 (as amended
and supplemented, the "Series Supplement"), among Proffitt's Credit Corporation,
as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota,
National Association, a national banking association, as Trustee (the
"Trustee"). The corpus of the Trust consists of (i) receivables (the
E-2
<PAGE> 53
"Receivables") generated from time to time in a portfolio of consumer revolving
credit card accounts identified under the Agreement (the "Accounts"), (ii) all
monies due or to become due in payment of the Receivables, (iii) all proceeds of
the Receivables and proceeds of Insurance Policies relating to the Receivables,
(iv) all monies held in certain accounts of the Trust (excluding investment
earnings, unless otherwise specified in the Agreement or any Supplement), (v)
all Recoveries and Collections of the Receivables, (vi) any Enhancement with
respect to any Series (or class thereof) and (vii) all other assets and
interests constituting the Trust Property. Although a summary of certain
provisions of the Agreement and the Series Supplement is set forth below and on
the Summary of Terms and Conditions attached hereto and made a part hereof, this
Class B Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at
Norwest Bank Minnesota, N.A., Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479-0070, Attention: Asset Backed Securities Corporate Trust
Department. To the extent not defined herein, the capitalized terms used herein
have the meanings ascribed to them in the Agreement or the Series Supplement, as
applicable.
This Class B Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class B Certificateholder by virtue of the acceptance hereof assents
and is bound.
THIS CLASS B CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, PROFFITT'S CREDIT CORPORATION OR ANY AFFILIATE THEREOF, AND NONE OF
THIS CERTIFICATE, THE RECEIVABLES OR THE ACCOUNTS IS INSURED OR GUARANTEED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. THIS CLASS B CERTIFICATE IS LIMITED
IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS RESPECTING THE RECEIVABLES AND IS
EXPRESSLY SUBORDINATED TO THE CLASS A CERTIFICATES, ALL AS MORE SPECIFICALLY SET
FORTH IN THE POOLING AND SERVICING AGREEMENT.
It is the intent of the Transferor and the Investor Certificateholders
(and Certificate Owners) that, for Federal, state and local income and franchise
tax purposes only, the Investor Certificates will qualify as indebtedness of the
Transferor secured by the Receivables (unless otherwise specified in the related
Supplement). The Class B Certificateholder (and each Certificate Owner of a
Class B Certificate), by the acceptance of this Class B Certificate (or its
interest therein), is deemed to agree to treat this Class B Certificate for
Federal, state and local income and franchise tax purposes and any other tax
imposed on or measured by income as indebtedness of the Transferor.
E-3
<PAGE> 54
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class B Certificate shall not
be entitled to any benefit under the Agreement or the Series Supplement or be
valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class B Certificate to
be duly executed by its undersigned officer thereunto duly authorized.
PROFFITT'S CREDIT CORPORATION
By:
-------------------------------
Name: Douglas E. Coltharp
Title: President
Dated: May 6, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the within-mentioned
Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------
Authorized Officer
Dated: May 6, 1998
E-4
<PAGE> 55
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1998-1
SUMMARY OF TERMS AND CONDITIONS
This Class B Certificate is one of a series of Certificates entitled
"Proffitt's Credit Card Master Trust Series 1998-1 Certificates" (the "Series
1998-1 Certificates"), and one of a class thereof entitled "Class B
Certificates, Series 1998-1" (the "Class B Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust,
including the right to receive the Collections and other amounts at the times
and in the amounts specified in the Agreement to be deposited in the Series
Accounts maintained for the benefit of such Investor Certificates or paid to the
Series 1998-1 Certificateholders. This Certificate is one of the Class B
Certificates. The Class B Certificates are subordinate in right of payment to
the Class A Certificates. The Exchangeable Transferor Certificate represents the
interest in the remaining undivided interest in the Trust not represented by all
Series of Investor Certificates issued by the Trust. The Exchangeable Transferor
Certificate may be exchanged by Proffitt's Credit Corporation pursuant to the
Agreement for a newly issued Series of Investor Certificates and a reissued
Exchangeable Transferor Certificate upon the conditions set forth in the
Agreement.
Certificate Interest will be distributed monthly on the fifteenth Business
Day of each calendar month, or if such fifteenth day is not a Business Day, the
next succeeding Business Day (a "Distribution Date"). In the case of the first
interest payment, interest will accrue from the date of issuance and in the case
of subsequent interest payments, interest will accrue from the preceding
Distribution Date in each case to but excluding the date of payment thereof (an
"Accrual Period").
On each Distribution Date, the Paying Agent shall distribute to each Class
B Certificateholder of record at the close of business on the last Business Day
of the immediately preceding calendar month (each a "Record Date") such Class B
Certificateholder's pro rata share of such amounts (including amounts held in
the Principal Account) as are payable to the Class B Certificateholders pursuant
to the Agreement and the Series 1998-1 Supplement. Distributions with respect to
this Class B Certificate will be made in the form of immediately available funds
to the address of the Class B Certificateholder of record appearing in the
Certificate Register without the presentation or surrender of this Class B
Certificate or the making of any notation thereon (except for the final
distribution in respect of this Class B Certificate). Final payment of this
Class B Certificate will be made only upon presentation and surrender of this
Class B Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee in accordance with the Agreement and the
Series 1998-1 Supplement.
E-5
<PAGE> 56
On each Distribution Date occurring after the commencement of the Rapid
Amortization Period, the Paying Agent shall pay to the holder of this Class B
Certificate its pro rata share of the lesser of its pro rata share of (a) the
amount on deposit in the Distribution Account on the related Transfer Date less
any amounts withdrawn from the Distribution Account applied to the payment of
interest on the Class A Certificates and (b) the Class B Investor Amount on such
date. Unless the Rapid Amortization Period has commenced, on the Distribution
Date that occurs in June, 2000, the Paying Agent shall pay to the holder of the
Class B Certificate its pro rata share of the lesser of (a) the amount on
deposit in the Distribution Account on the related Transfer Date and (b) the
Class B Investor Amount. As soon as possible thereafter, the Depositary will
allocate and pay such funds to the Persons to whom such amounts shall be payable
in accordance with its operating procedures.
Subject to the limitations set forth herein, the transfer of this Class B
Certificate shall be registered in the Certificate Register upon surrender of
this Class B Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer in a form satisfactory to the Trustee and the Transfer
Agent and Registrar duly executed by the Class B Certificateholder or such Class
B Certificateholder's attorney duly authorized in writing, and thereupon one or
more new Class B Certificates of authorized denominations and for the same
aggregate Undivided Interests will be issued to the designated transferee or
transferees.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any
of them shall be affected by notice to the contrary except in certain
circumstances described in the Agreement.
The rights evidenced by this Class B Certificate created by the Agreement
and the Trust shall terminate on the earlier of (i) the day, if any, designated
by Proffitt's Credit Corporation after the Distribution Date following the date
on which funds shall have been deposited in the Distribution Account sufficient
to pay the Class B Investor Amount plus Certificate Interest accrued through the
date of distribution thereof and (ii) the day on which final payment is made on
the Series 1998-1 Certificates, but in no event later than December 31, 2015.
Upon the termination of the Trust pursuant to Section 12.1 of the Pooling
and Servicing Agreement and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall return to the holder of the Exchangeable
Transferor Certificate, without recourse, all right, title and interest of the
Trust in, to and under the Receivables then existing and thereafter created and
arising in connection with the Accounts, all monies due or to become due with
respect thereto (including all Finance Charge Receivables), all Recoveries,
Collections and other proceeds thereof and Insurance Proceeds relating
E-6
<PAGE> 57
thereto, except for amounts held by the Trustee pursuant to subsection 12.3(b).
The Trustee shall execute and deliver such instruments of transfer and
assignment, in each case without recourse, as shall be reasonably requested by
the holder of the Exchangeable Transferor Certificate to vest in it all right,
title and interest which the Trust had in the Receivables.
Subject to Section 13.1(c) of the Agreement, each Certificateholder by its
acceptance of this Certificate or any interest in this Certificate, consents to
any amendment to the Agreement or any Supplement necessary for the Transferor to
elect FASIT status for the Trust or any portion thereof under the Code.
As provided in the Agreement and the Series 1998-1 Supplement and subject
to certain limitations therein set forth, Class B Certificates are exchangeable
for new Class B Certificates in authorized denominations of like aggregate
undivided interests in the Trust as requested by the Class B Certificateholder
surrendering such Class B Certificates. No service charge may be imposed for any
transfer or exchange but the Transfer Agent and Registrar and the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
THE AGREEMENT AND THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
E-7
<PAGE> 58
EXHIBIT F
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS C CERTIFICATE
F-1
<PAGE> 59
EXHIBIT F
TO THE
SERIES 1998-1 SUPPLEMENT
FORM OF CLASS C CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND FROM APPLICABLE
STATE SECURITIES LAWS, AND IS NOT TRANSFERABLE WITHOUT COMPLIANCE WITH THE
REGISTRATION REQUIREMENTS OF ALL APPLICABLE SECURITIES LAWS OR THE AVAILABILITY
OF EXEMPTIONS THEREFROM.
No. C-1 $__________
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS C ASSET BACKED CERTIFICATE, SERIES 1998-1
Each $1,000 minimum denomination represents a
fractional undivided interest in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing a subordinated undivided interest in a trust the corpus of which
consists primarily of receivables generated from time to time in a portfolio of
consumer revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit Corporation or any
Affiliate thereof)
This certifies that Younkers Master Trust (the "Class C
Certificateholder") is the registered owner of a fractional undivided interest
in a trust (the "Trust"), created by the Master Pooling and Servicing Agreement
dated as of August 21, 1997 (as amended and supplemented, the "Agreement"), as
supplemented by the Series 1998-1 Supplement dated as of May 6, 1998 (as amended
and supplemented, the "Series Supplement"), among Proffitt's Credit Corporation,
as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota,
National Association, a national banking association, as Trustee (the
"Trustee"). The corpus of the Trust consists of (i) receivables (the
"Receivables") generated from time to time in a portfolio of consumer revolving
credit card accounts identified under the Agreement (the "Accounts"), (ii) all
monies due or to become due in payment of the Receivables, (iii) all proceeds of
the Receivables and
F-2
<PAGE> 60
proceeds of Insurance Policies relating to the Receivables, (iv) all monies held
in certain accounts of the Trust (excluding investment earnings, unless
otherwise specified in the Agreement or any Supplement), (v) all Recoveries and
Collections of the Receivables, (vi) any Enhancement with respect to any Series
(or class thereof) and (vii) all other assets and interests constituting the
Trust Property. Although a summary of certain provisions of the Agreement and
the Series Supplement is set forth below and on the Summary of Terms and
Conditions attached hereto and made a part hereof, this Class C Certificate does
not purport to summarize the Agreement and the Series Supplement and reference
is made to the Agreement and the Series Supplement for information with respect
to the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and obligations of the Trustee. A copy of the
Agreement and the Series Supplement (without schedules) may be requested from
the Trustee by writing to the Trustee at Norwest Bank Minnesota, N.A., Norwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0070, Attention: Asset
Backed Securities Corporate Trust Department. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to them in the
Agreement or the Series Supplement, as applicable.
This Class C Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class C Certificateholder by virtue of the acceptance hereof assents
and is bound.
THIS CLASS C CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, PROFFITT'S CREDIT CORPORATION OR ANY AFFILIATE THEREOF, AND NONE OF
THIS CERTIFICATE, THE RECEIVABLES OR THE ACCOUNTS IS INSURED OR GUARANTEED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. THIS CLASS C CERTIFICATE IS LIMITED
IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS RESPECTING THE RECEIVABLES AM IS
EXPRESSLY SUBORDINATED TO THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES,
ALL AS MORE SPECIFICALLY SET FORTH IN THE AGREEMENT.
It is the intent of the Transferor and the Investor Certificateholders
(and Certificate Owners) that, for Federal, state and local income and franchise
tax purposes only, the Investor Certificates will qualify as indebtedness of the
Transferor secured by the Receivables (unless otherwise specified in the related
Supplement). The Class C Certificateholder (and each Certificate Owner of a
Class C Certificate), by the acceptance of this Class C Certificate (or its
interest therein), is deemed to agree to treat this Class C Certificate for
Federal, state and local income and franchise tax purposes and any other tax
imposed on or measured by income as indebtedness of the Transferor.
F-3
<PAGE> 61
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class C Certificate shall not
be entitled to any benefit under the Agreement or the Series Supplement or be
valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class C Certificate to
be duly executed by its undersigned officer thereunto duly authorized.
PROFFITT'S CREDIT CORPORATION
By:
-------------------------------
Name: Douglas E. Coltharp
Title: President
Dated: May 6, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates described in the within-mentioned
Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------
Authorized Officer
Dated: May 6, 1998
F-4
<PAGE> 62
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS C ASSET BACKED CERTIFICATE, SERIES 1998-1
SUMMARY OF TERMS AND CONDITIONS
This Class C Certificate is one of a series of Certificates entitled
"Proffitt's Credit Card Master Trust Series 1998-1 Certificates" (the "Series
1998-1 Certificates"), and one of a class thereof entitled "Class C
Certificates, Series 1998-1" (the "Class C Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust,
including the right to receive the Collections and other amounts at the times
and in the amounts specified in the Agreement to be deposited in the Series
Accounts maintained for the benefit of such Investor Certificates or paid to the
Series 1998-1 Certificateholders. This Certificate is one of the Class C
Certificates. The Class C Certificate is subordinated in right of payment to the
Class A Certificates and the Class B Certificates. The Exchangeable Transferor
Certificate represents the interest in the remaining undivided interest in the
Trust not represented by all Series of Investor Certificates issued by the
Trust. The Exchangeable Transferor Certificate may be exchanged by Proffitt's
Credit Corporation pursuant to the Agreement for a newly issued Series of
Investor Certificates and a reissued Exchangeable Transferor Certificate upon
the conditions set forth in the Agreement.
On each Distribution Date occurring after the commencement of the Rapid
Amortization Period, the Paying Agent shall pay to the Class C Certificateholder
its pro rata share of (a) the amount on deposit in the Distribution Account on
the related Transfer Date less any amounts withdrawn from the Distribution
Account to pay the Class A Certificateholders and the Class B Certificateholders
and (b) the Class C Investor Amount.
Proffitt's Credit Corporation from time to time may subdivide the Class C
Certificates or reallocate all or any portion or the amounts distributable to
the Class C Certificateholder to any other Certificateholder.
The transfer of this Class C Certificate shall be registered in the
Certificate Register upon surrender of this Class C Certificate for registration
of transfer at any office or agency maintained by the Transfer Agent and
Registrar accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the Class C
Certificateholder or such Class C Certificateholder's attorney duly authorized
in writing, and thereupon one or more new Class C Certificates of authorized
denominations and for the same aggregate Undivided Interests will be issued to
the designated transferee or transferees.
F-5
<PAGE> 63
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Class C
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any
of them shall be affected by notice to the contrary except in certain
circumstances described in the Agreement.
The obligations in favor of this Class C Certificate created by the
Agreement and the Trust shall terminate on the day on which final payment is
made on the Series 1998-1 Certificates, but in no event later than December 31,
2015.
Upon the termination of the Trust pursuant to Section 12.1 of the Pooling
and Servicing Agreement and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall return to the holder of the Exchangeable
Transferor Certificate, without recourse, all right, title and interest of the
Trust in, to and under the Receivables then existing and thereafter created and
arising in connection with the Accounts, all monies due or to become due with
respect thereto (including all Finance Charge Receivables), all Recoveries,
Collections and other proceeds thereof and Insurance Proceeds relating thereto,
except for amounts held by the Trustee pursuant to subsection 12.3(b). The
Trustee shall execute and deliver such instruments of transfer and assignment,
in each case without recourse, as shall be reasonably requested by the holder of
the Exchangeable Transferor Certificate to vest in it all right, title and
interest which the Trust had in the Receivables.
Subject to Section 13.1(c) of the Agreement, each Certificateholder by its
acceptance of this Certificate or any interest in this Certificate, consents to
any amendment to the Agreement or any Supplement necessary for the Transferor to
elect FASIT status for the Trust or any portion thereof under the Code.
As provided in the Agreement and the Series 1998-1 Supplement and subject
to certain limitations therein set forth, Class C Certificates are exchangeable
for new Class C Certificates in authorized denominations of like aggregate
undivided interests in the Trust as requested by the Class C Certificateholder
surrendering such Class C Certificates. No service charge may be imposed for any
transfer or exchange but the Transfer Agent and Registrar and the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
THE AGREEMENT AND THIS CLASS D CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
F-6
<PAGE> 1
EXHIBIT 10.19
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
SERVICER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
------------------------------
SERIES 1998-2 SUPPLEMENT
DATED AS OF MAY 21, 1998
TO THE
MASTER POOLING AND SERVICING AGREEMENT
DATED AS OF AUGUST 21, 1997
------------------------------
$261,500,000
PROFFITT'S CREDIT CARD MASTER TRUST
SERIES 1998-2
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY STATEMENTS........................................................................... 1
Section A. Designation............................................................. 1
Section B. Definitions............................................................. 2
Section C. Minimum Transferor Interest Percentage.................................. 19
Section D. Optional Purchase; Reassignment and Transfer Terms...................... 20
Section E. Delivery and Payment for the Certificates............................... 20
Section F. Form of Delivery of the Series 1998-2 Certificates...................... 20
Section G. Servicing Compensation.................................................. 20
Section H. Article IV of the Agreement............................................. 21
ARTICLE IV Rights of Series 1998-2 Certificateholders and Allocation and
Application of Collections.............................................................. 21
Section 4.2 Collections and Allocations............................................. 21
Section 4.3 Determination of Monthly Interest....................................... 22
Section 4.4 Determination of Monthly Principal...................................... 24
Section 4.5 Required Amounts........................................................ 26
Section 4.6 Application of Class A Available Funds, Class B Available Funds,
Collateral Available Funds, Class D Available Funds and Collections of
Principal Receivables.......................................................... 28
Section 4.7 Defaulted Amounts; Adjustment Amounts; Investor Charge Offs; Reductions
of Adjustment Amounts.......................................................... 31
Section 4.8 Excess Spread; Shared Excess Finance Charge Collections................. 34
Section 4.9 Reallocated Principal Collections....................................... 36
Section 4.10 Principal Shortfall..................................................... 37
Section 4.11 Finance Charge Shortfall................................................ 38
Section 4.12 Cash Collateral Account................................................. 38
Section 4.13 Principal Account....................................................... 39
Section 4.14 Reserve Account......................................................... 40
Section 4.15 Postponement of Accumulation Period..................................... 42
Section 4.16 Additional Issuances of Class D Certificates............................ 42
Section I Article V of the Agreement.............................................. 43
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS.................................. 43
Section 5.1 Distributions........................................................... 43
Section 5.2 Statements to Series 1998-2 Certificateholders.......................... 45
Section 5.3 Distributions to Collateral Indebtedness Holder......................... 45
Section J. Pay Out Events.......................................................... 45
Section K. Restrictions on Transfer................................................ 47
Section K1. Tax Characterization of the Class D Certificates and the Collateral
Indebtedness Interest.......................................................... 48
Section L. Ratification of Master Pooling and Servicing Agreement.................. 48
Section L1. FASIT Election.......................................................... 48
Section L2. Paired Series........................................................... 49
Section M. Counterparts............................................................ 49
Section N. Governing Law........................................................... 49
Section O. Subordination of Certain Termination Payments........................... 49
</TABLE>
EXHIBITS
Exhibit A-1: Form of Class A Certificate
Exhibit A-2: Form of Class B Certificate
Exhibit A-3: Form of Class D Certificate
Exhibit B : Form of Monthly Payment Instructions and Notification to Trustee
[RESERVED]
Exhibit C : Form of Monthly Certificateholder's Statement
- 2 -
<PAGE> 4
SERIES 1998-2 SUPPLEMENT
THIS SERIES 1998-2 SUPPLEMENT, dated as of May 21, 1998 (this "Series
Supplement"), is by and among PROFFITT'S CREDIT CORPORATION, a Nevada
corporation, as Transferor, PROFFITT'S, INC., a Tennessee corporation, as
Servicer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States (together
with its successors in trust thereunder the "Trustee"), as trustee under the
Master Pooling and Servicing Agreement, dated as of August 21, 1997 (as amended
and supplemented, the "Agreement"), by and among the Transferor, the Servicer
and the Trustee.
PRELIMINARY STATEMENTS
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into one
or more Supplements to the Agreement for the purpose of authorizing the issuance
by the Trust to the Transferor, for execution and redelivery to the Trustee for
authentication, one or more Series of Investor Certificates. The Transferor and
the Servicer each hereby enter into this Series Supplement with the Trustee as
required by Section 6.9(c) of the Master Pooling and Servicing Agreement to
provide for the issuance, authentication and delivery of the Investor
Certificates of Series 1998-2.
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof. The Series 1998-2 Certificates shall not be
subordinated to any other Series.
SECTION A. DESIGNATION. The Certificates issued hereunder shall be
designated generally as the "Series 1998-2 Certificates." The Series 1998-2
Certificates shall be one of the Series of Investor Certificates in Group One
and shall be a Principal Sharing Series. The Transferor and the Servicer each
hereby enter into this Series Supplement with the Trustee as required by Section
6.9(c) of the Agreement to provide for the issuance, authentication and delivery
of the Class A Asset Backed Certificates, Series 1998-2, the Class B Asset
Backed Certificates, Series 1998-2 and the Class D Asset Backed Certificates,
Series 1998-2. In addition, this Supplement further creates a fourth Class of
uncertificated interests in the Trust which, except as expressly provided for
herein, shall be deemed to be "Investor Certificates" for all purposes under the
Agreement and this Series Supplement and which shall be known as "Collateral
Indebtedness Interest, Series 1998-2". The first Distribution Date with respect
to Series 1998-2 shall be the June 1998 Distribution Date. In the event that any
term or provision contained herein shall conflict with or be inconsistent with
any term or provision contained in the Agreement, the terms and provisions of
this Series Supplement shall govern.
- 1 -
<PAGE> 5
SECTION B. DEFINITIONS. All capitalized terms not otherwise defined
herein are defined in the Agreement. All Article, Section or subsection
references herein shall mean Articles, Sections or subsections of the Agreement,
except as otherwise provided herein. Unless otherwise stated herein, as the
context otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1998-2 Certificates and no other Series of Certificates issued by the
Trust. The following words and phrases shall have the following meanings with
respect to the Series 1998-2 Certificates and the definitions of such terms are
applicable to the singular as well as the plural form of such terms and to the
masculine as well as the feminine and neuter genders of such terms:
"Accumulation Commencement Monthly Period" shall mean the
Monthly Period in which the Accumulation Period commences.
"Accumulation Period" shall mean the Class A Accumulation
Period and the Class B Accumulation Period.
"Accumulation Period Factor" shall mean, for each Monthly
Period, a fraction, the numerator of which is equal to the sum of the initial
investor amounts of all outstanding Series, and the denominator of which is
equal to the sum, without duplication, of (a) the Initial Investor Amount (plus
the aggregate initial principal amount of any Additional Class D Certificates),
(b) the initial investor amounts (or other applicable amounts) of all
outstanding Series (other than Series 1998-2) which are not expected to be in
their revolving periods during such Monthly Period and (c) the initial investor
amounts (or other applicable amounts) of all other outstanding Series which are
not allocating Shared Principal Collections to other Series and are expected to
be in their revolving periods during such Monthly Period.
"Accumulation Period Length" shall have the meaning specified
in Section 4.15.
"Additional Class D Certificates" shall have the meaning
specified in Section 4.16.
"Adjusted Investor Amount" shall mean, as of any date of
determination, an amount equal to the sum of the Class A Adjusted Investor
Amount, the Class B Adjusted Investor Amount, the Collateral Indebtedness Amount
and the Class D Investor Amount, in each case as of such date.
"Allocable Amounts" shall mean with respect to any
Distribution Date, the sum of the Class A Allocable Amount, the Class B
Allocable Amount, the Collateral Allocable Amount and the Class D Allocable
Amount.
"Amortization Period" shall mean the Accumulation Period or
the Rapid Amortization Period.
- 2 -
<PAGE> 6
"Available Cash Collateral Amount" shall mean, with respect to
any Distribution Date, the amount held in and available to be withdrawn from the
Cash Collateral Account on such date.
"Available Enhancement Amount" shall mean an amount equal to
the sum of the Available Cash Collateral Amount, the Collateral Indebtedness
Amount and the Class D Investor Amount.
"Available Principal Collections" shall mean, with respect to
any Distribution Date, an amount equal to (a) the applicable Investor Percentage
of Collections of Principal Receivables for the related Monthly Period, plus (b)
amounts designated as Available Principal Collections pursuant to Section 4.8,
minus (c) Reallocated Principal Collections applied pursuant to Section 4.9 for
the related Monthly Period, plus (d) Shared Principal Collections allocated to
Series 1998-2.
"Available Reserve Account Amount" shall mean, with respect to
any Distribution Date, the lesser of (a) the amount held in and available to be
withdrawn from the Reserve Account on such date (before giving effect to any
deposit or withdrawal to be made to or from the Reserve Account on such date)
and (b) the Required Reserve Account Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Monthly Period,
the sum of (a) the annualized percentage equivalent of a fraction, the numerator
of which is equal to the Monthly Interest payable on the Series 1998-2
Certificates on the Distribution Date immediately following the last day of such
Monthly Period and the denominator of which is the Investor Amount as of the
last day of the preceding Monthly Period and (b) the product of (i) 2.00% per
annum and (ii) a fraction the numerator of which is an amount equal to the
Adjusted Investor Amount and the denominator of which is the Investor Amount, in
each case determined as of the last day of such preceding Monthly Period.
"Business Day" shall have the meaning provided in the
Agreement.
"Cash Collateral Account" shall have the meaning specified in
Section 4.12(a).
"Cash Enhancement Surplus" shall mean, as of any date of
determination, the lesser of (a) the Enhancement Surplus and (b) the excess of
the amount held in and available to be withdrawn from the Cash Collateral
Account over the Required Cash Collateral Amount.
"Class A Accumulation Period" shall mean, unless a Pay Out
Event with respect to Series 1998-2 shall have occurred prior thereto, the
period commencing at the close of business on the last day of the April 2000
Monthly Period, or such later date as shall be determined in accordance with
Section 4.15, and ending on the first to occur of
- 3 -
<PAGE> 7
(a) the commencement of the Rapid Amortization Period, (b) the payment in full
to Class A Certificateholders of the Class A Investor Amount or (c) the Stated
Series Termination Date.
"Class A Additional Interest" shall have the meaning specified
in Section 4.3(a).
"Class A Adjusted Investor Amount" shall mean, on any date of
determination while the Class A Certificates are outstanding, an amount equal to
the Class A Investor Amount minus the Principal Account Balance, but in no event
shall the Class A Adjusted Investor Amount be less than zero.
"Class A Adjustment Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class A
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Class A Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class A Investor Default Amount and the Class
A Adjustment Amount.
"Class A Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the sum of (a) the applicable Class A
Investor Percentage of Collections of Finance Charge Receivables and any other
amounts that are to be treated as Collections of Finance Charge Receivables in
accordance with the Agreement, (b) if such Monthly Period immediately precedes a
Distribution Date that occurs prior to the Class B Principal Commencement Date,
the amount of the Principal Investment Proceeds if any, with respect to such
Monthly Period, (c) the amount, if any, to be withdrawn from the Reserve Account
on the Distribution Date immediately following the last day of such Monthly
Period and included in Class A Available Funds pursuant to Section 4.14(d), and
(d) amounts required to be included in Class A Available Funds pursuant to
Section 4.14(b).
"Class A Certificate Rate" shall mean, with respect to the
Class A Certificates and each Interest Period, a per annum rate of 6.00%.
"Class A Certificateholder" shall mean any Person in whose
name a Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1.
- 4 -
<PAGE> 8
"Class A Expected Payment Date" shall mean the May 2001
Distribution Date.
"Class A Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $200,000,000.
"Class A Interest Shortfall" shall have the meaning specified
in Section 4.3(a).
"Class A Investor Amount" shall mean, on any date of
determination, an amount equal to (a) the Class A Initial Investor Amount, minus
(b) the aggregate amount of principal payments made to the Class A
Certificateholders prior to such date, minus (c) the excess, if any, of the
aggregate amount of Class A Investor Charge Offs for all prior Distribution
Dates over the sum of the aggregate amount of Class A Investor Charge Offs
reimbursed pursuant to Section 4.8(b) and, without duplication, the aggregate
amount of the reductions of the Series Adjustment Amounts allocable to the Class
A Certificates pursuant to Section 4.7(f) prior to such date; provided, however,
that the Class A Investor Amount may not be reduced below zero.
"Class A Investor Charge Offs" shall have the meaning
specified in Section 4.7(a).
"Class A Investor Default Amount" shall mean, with respect to
each Distribution Date, an amount equal to the product of (i) the Default Amount
for the related Monthly Period and (ii) the applicable Class A Investor
Percentage for such Monthly Period.
"Class A Investor Percentage" shall be calculated by
substituting the Class A Adjusted Investor Amount and the Class A Initial
Investor Amount in all references to the Adjusted Investor Amount and the
Initial Investor Amount, respectively, in the definition of Investor Percentage.
"Class A Monthly Interest" shall have the meaning specified in
Section 4.3(a).
"Class A Monthly Principal" shall have the meaning specified
in Section 4.4(a).
"Class A Penalty Rate" shall mean the sum of the Class A
Certificate Rate and 2.00% per annum.
"Class A Required Amount" shall have the meaning specified in
Section 4.5(a).
- 5 -
<PAGE> 9
"Class A Servicing Fee" shall have the meaning specified in
Section G hereof.
"Class B Accumulation Amount" means for any Distribution Date
with respect to the Class B Accumulation Period, an amount equal to the Class B
Investor Amount as of the beginning of the Accumulation Period.
"Class B Accumulation Period" shall mean, unless a Pay Out
Event with respect to Series 1998-2 shall have occurred prior thereto, the
period commencing on the Distribution Date on which the Class A Investor Amount
is paid in full or if the Class A Investor Amount is paid in full on the Class A
Expected Payment Date, at the close of business on the Class A Expected Payment
Date, and ending on the first to occur of (a) the commencement of the Rapid
Amortization Period, (b) the payment in full to Class B Certificateholders of
the Class B Investor Amount or (c) the Stated Series Termination Date.
"Class B Additional Interest" shall have the meaning specified
in Section 4.3(b).
"Class B Adjusted Investor Amount" shall mean, on any date of
determination, an amount equal to the Class B Investor Amount minus, prior to
the payment in full of the Class A Investor Amount, the excess of the Principal
Account Balance over the Class A Investor Amount, and after the payment in full
of the Class A Investor Amount, the Principal Account Balance, if any, but in no
event shall the Class B Adjusted Investor Amount be less than zero.
"Class B Adjustment Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class B
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Class B Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class B Investor Default Amount and the Class
B Adjustment Amount.
"Class B Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the sum of (i) the applicable Class B
Investor Percentage of Collections of Finance Charge Receivables and any other
amounts that are to be treated as Collections of Finance Charge Receivables in
accordance with the Agreement, (b) if such Monthly Period immediately precedes a
Distribution Date that occurs on or after the Class B Principal Commencement
Date, the amount of Principal Investment Proceeds, if any, with respect to such
Monthly Period, (c) the amount, if any, to be withdrawn from the Reserve Account
on the Distribution Date immediately following the last day of such
- 6 -
<PAGE> 10
Monthly Period and included in Class B Available Funds pursuant to Section
4.14(d), and (d) the amount, if any, required to be included in Class B
Available Funds pursuant to Section 4.14(b).
"Class B Certificate Rate" shall mean, with respect to the
Class B Certificates and each Interest Period, a per annum rate of 6.15%.
"Class B Certificateholder" shall mean any Person in whose
name a Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2.
"Class B Expected Payment Date" shall mean the June 2001
Distribution Date.
"Class B Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $21,500,000.
"Class B Interest Shortfall" shall have the meaning specified
in Section 4.3(b).
"Class B Investor Amount" shall mean, on any date of
determination, an amount equal to (a) the Class B Initial Investor Amount, minus
(b) the aggregate amount of principal payments made to the Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Investor Charge Offs for all prior Distribution Dates, minus (d) the amount of
Class B Subordinated Principal Collections allocated on all prior Distribution
Dates pursuant to Section 4.9(a), minus (e) an amount equal to the amount by
which the Class B Investor Amount has been reduced on all prior Distribution
Dates pursuant to Section 4.7(a), plus (f) the sum of the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available on
all prior Distribution Dates pursuant to Section 4.8(e) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e)
and, without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Class B Investor Amount pursuant to Section
4.7(f) prior to such date; provided, however, that the Class B Investor Amount
may not be reduced below zero.
"Class B Investor Charge Offs" shall have the meaning
specified in Section 4.7(b).
"Class B Investor Default Amount" shall mean, with respect to
each Distribution Date, an amount equal to the product of (i) the Default Amount
for the related Monthly Period and (ii) the applicable Class B Investor
Percentage for such Monthly Period.
- 7 -
<PAGE> 11
"Class B Investor Percentage" shall be calculated by
substituting the Class B Adjusted Investor Amount and the Class B Initial
Investor Amount in all references to the Adjusted Investor Amount and the
Initial Investor Amount respectively, in the definition of Investor Percentage.
"Class B Monthly Interest" shall have the meaning specified in
Section 4.3(b).
"Class B Monthly Principal" shall have the meaning specified
in Section 4.4(b).
"Class B Penalty Rate" shall mean the sum of the Class B
Certificate Rate and 2.00% per annum.
"Class B Principal Commencement Date" shall mean the
Distribution Date on which the Class A Investor Amount is paid in full or, if
the Class A Investor Amount is paid in full on the Class A Expected Payment Date
and a Pay Out Event has not commenced, the Distribution Date following the Class
A Expected Payment Date.
"Class B Required Amount" shall have the meaning specified in
Section 4.5(b).
"Class B Servicing Fee" shall have the meaning specified in
Section G hereof.
"Class B Subordinated Principal Collections" shall mean, with
respect to any Monthly Period, an amount equal to the product of (i) the
applicable Class B Investor Percentage with respect to Collections of Principal
Receivables and (ii) the aggregate amount of Collections of Principal
Receivables for such Monthly Period.
"Class D Additional Interest" shall have the meaning specified
in Section 4.3(d).
"Class D Adjustment Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class D
Investor Amount and the denominator of which is the Adjusted Investor Amount,
each as of the last day of the Monthly Period preceding the related Monthly
Period.
"Class D Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class D Investor Default Amount and the Class
D Adjustment Amount.
- 8 -
<PAGE> 12
"Class D Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the applicable Class D Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
"Class D Certificate Rate" shall mean, for any Interest Period
with respect to the Class D Certificates, the rate designated in the letter
agreement, dated as of May 21, 1998, between the Transferor and the Trustee;
provided, in no event shall the Class D Certificate Rate exceed LIBOR plus 1.00%
per annum.
"Class D Certificateholder" shall mean any Person in whose
name a Class D Certificate is registered in the Certificate Register.
"Class D Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3.
"Class D Initial Investor Amount" shall mean the aggregate
initial principal amount of the Class D Certificates, which is $16,000,000.
"Class D Interest Shortfall" shall have the meaning specified
in Section 4.3(d).
"Class D Investor Amount" shall mean, on any date of
determination, an amount equal to (a) the Class D Initial Investor Amount (plus
the aggregate initial principal amount of any Additional Class D Certificates
issued during the Revolving Period), minus (b) the aggregate amount of principal
payments made to the Class D Certificateholders prior to such date, minus (c)
the amount of Class D Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to Section 4.9(a), (b) and (c), minus (d) an amount
equal to the amount by which the Class D Investor Amount has been reduced on all
prior Distribution Dates pursuant to Section 4.7(a), (b), (c) and (d), plus (e)
the sum of the amount of Excess Spread and Shared Excess Finance Charge
Collections allocated and available on all prior Distribution Dates pursuant to
Section 4.8(n) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c) and (d) and, without duplication, the aggregate amount of
the reductions of the Series Adjustment Amounts allocable to the Class D
Investor Amount pursuant to Section 4.7(f) prior to such date; but in no event
shall the Class D Investor Amount be reduced below zero.
"Class D Investor Charge Off" shall have the meaning provided
in Section 4.7(d).
"Class D Investor Default Amount" shall mean, with respect to
each Distribution Date, an amount equal to the product of (i) the Default Amount
for the
- 9 -
<PAGE> 13
related Monthly Period and (ii) the applicable Class D Investor Percentage for
such Monthly Period.
"Class D Investor Percentage" shall be calculated by
substituting the Class D Investor Amount and the Class D Initial Investor Amount
in all references to the Adjusted Investor Amount and the Initial Investor
Amount, respectively, in the definition of Investor Percentage.
"Class D Monthly Interest" shall have the meaning specified in
Section 4.3(d).
"Class D Monthly Principal" shall have the meaning specified
in Section 4.4(d).
"Class D Penalty Rate" shall mean, for any Interest Period,
the sum of the Class D Certificate Rate for such Interest Period and 2.00% per
annum.
"Class D Servicing Fee" shall have the meaning specified in
Section G hereof.
"Class D Subordinated Principal Collections" shall mean, with
respect to any Monthly Period, an amount equal to the product of (i) the
applicable Class D Investor Percentage with respect to Collections of Principal
Receivables and (ii) the aggregate amount of Collections of Principal
Receivables for such Monthly Period.
"Closing Date" shall mean May 21, 1998.
"Collateral Additional Interest" shall have the meaning
specified in Section 4.3(c).
"Collateral Adjustment Amount" shall mean, with respect to
each Distribution Date, an amount equal to the product of (i) the Series
Adjustment Amount for Series 1998-2 with respect to the related Monthly Period
and (ii) the percentage equivalent of a fraction the numerator of which is the
Collateral Indebtedness Amount and the denominator of which is the Adjusted
Investor Amount, each as of the last day of the Monthly Period preceding the
related Monthly Period.
"Collateral Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Collateral Default Amount and the Collateral
Adjustment Amount.
"Collateral Available Funds" shall mean, with respect to any
Monthly Period, an amount equal to the applicable Collateral Investor Percentage
of Collections of Finance Charge Receivables and any other amounts that are to
be treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
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<PAGE> 14
"Collateral Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Collateral Investor
Percentage during such Monthly Period.
"Collateral Indebtedness Amount" shall mean, on any date of
determination, an amount equal to (a) the Collateral Initial Indebtedness
Amount, minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder on or prior to such date, minus (c) the amount of
Collateral Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to Sections 4.9(a) and 4.9(b), minus (d) an amount
equal to the amount by which the Collateral Indebtedness Amount has been reduced
on all prior Distribution Dates pursuant to Sections 4.7(a) and 4.7(b), plus (e)
the sum of the Excess Spread and Shared Excess Finance Charge Collections
allocated and available on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) and,
without duplication, reductions of the Series Adjustment Amount allocable to the
Collateral Indebtedness Interest pursuant to Section 4.7(f) prior to such date;
but in no event shall the Collateral Indebtedness Amount be reduced below zero.
"Collateral Indebtedness Charge Off" shall have the meaning
specified in Section 4.7(c).
"Collateral Indebtedness Holder" shall mean the entity
designated as such in the Loan Agreement.
"Collateral Indebtedness Interest" shall mean a fractional
undivided interest in the Trust which shall consist of the right to receive, to
the extent necessary to make the required payments to the Collateral
Indebtedness Holder under this Series Supplement, the portion of Collections
allocable thereto under the Agreement and this Series Supplement, funds held in
the Collection Account allocable thereto pursuant to the Agreement and this
Series Supplement and, subject to the rights of the Series 1998-2
Certificateholders with respect thereto, funds held in the Cash Collateral
Account and the Reserve Account.
"Collateral Initial Indebtedness Amount" shall mean the
aggregate initial principal amount of the Collateral Indebtedness Interest,
which is $24,000,000.
"Collateral Interest Shortfall" shall have the meaning
specified in Section 4.3(c).
"Collateral Investor Percentage" shall be calculated by
substituting the Collateral Indebtedness Amount and the Collateral Initial
Indebtedness Amount in all references to the Adjusted Investor Amount and the
Initial Investor Amount, respectively, in the definition of Investor Percentage.
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<PAGE> 15
"Collateral Interest Shortfall" shall have the meaning
specified in Section 4.3(c).
"Collateral Monthly Interest" shall have the meaning specified
in Section 4.3(c).
"Collateral Monthly Principal" shall have the meaning
specified in Section 4.4(c).
"Collateral Penalty Rate" shall mean, for any Interest Period,
the sum of the Collateral Rate for such Interest Period and 2.00% per annum.
"Collateral Rate" shall mean the rate designated as such in
the Loan Agreement.
"Collateral Required Amount" shall have the meaning specified
in Section 4.5(c).
"Collateral Servicing Fee" shall have the meaning specified in
Section G hereof.
"Collateral Subordinated Principal Collections" shall mean,
with respect to any Monthly Period, an amount equal to the product of (i) the
applicable Collateral Investor Percentage with respect to Collections of
Principal Receivables and (ii) the aggregate amount of Collections of Principal
Receivables for such Monthly Period.
"Controlled Accumulation Amount" shall mean (a) for any
Distribution Date with respect to the Class A Accumulation Period, $16,666,667;
provided, however, if the Accumulation Period Length shall be determined to be
less than 12 months in accordance with Section 4.15, the Controlled Accumulation
Amount with respect to the Class A Certificates shall be equal to (i) the
product of (x) the Class A Initial Investor Amount and (y) the Accumulation
Period Factor for such Monthly Period divided by (ii) the Required Accumulation
Factor Number and (b) for any Distribution Date with respect to the Class B
Accumulation Period, $21,500,000.
"Controlled Deposit Amount" shall mean, for any Distribution
Date with respect to the Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.
"Covered Amount" shall mean (a) for any Distribution Date with
respect to the Class A Accumulation Period or the first Special Distribution
Date, if such Special Distribution Date occurs on or prior to the Distribution
Date on which the Class A Investor Amount shall be paid in full, an amount equal
to the product of (i) a fraction, the numerator of which is the actual number of
days in the related Interest Period and the
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<PAGE> 16
denominator of which is 360, (ii) the Class A Certificate Rate and (iii) the
Principal Account Balance, if any, as of the preceding Distribution Date and (b)
for any Distribution Date with respect to the Class B Accumulation Period or the
first Special Distribution Date, if such Special Distribution Date occurs after
the Distribution Date on which the Class A Investor Amount shall have been paid
in full, an amount equal to the product of (i) a fraction, the numerator of
which is the actual number of days in the related Interest Period and the
denominator of which is 360, (ii) the Class B Certificate Rate and (iii) the
Principal Account Balance, if any, as of the preceding Distribution Date.
"Defaulted Receivables" shall mean for any Monthly Period, the
Principal Receivables in Accounts which became Defaulted Accounts during such
Monthly Period.
"Deficit Controlled Accumulation Amount" shall mean (a) on the
first Distribution Date with respect to the Class A Accumulation Period or the
Class B Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation Amount for such Distribution Date over the amount deposited into
the Principal Account as Class A Monthly Principal or Class B Monthly Principal,
as the case may be, for such Distribution Date, and (b) on each subsequent
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled Deposit
Amount for such subsequent Distribution Date over the amount deposited into the
Principal Account as Class A Monthly Principal or Class B Monthly Principal, as
the case may be, for such subsequent Distribution Date.
"Enhancement Provider" shall mean the CIA Lenders and other
Collateral Indebtedness Holders identified in the Loan Agreement.
"Enhancement Surplus" shall mean, with respect to any
Distribution Date, the excess, if any, of (a) the sum of the amount held in and
available to be withdrawn from the Cash Collateral Account, the Collateral
Indebtedness Amount and the Class D Investor Amount over (b) the Required
Enhancement Amount.
"Excess Spread" shall mean, with respect to any Distribution
Date, the sum of the amounts, if any, specified pursuant to Sections 4.6(a)(iv),
4.6(b)(iii), 4.6(c)(ii), 4.6(d)(ii) and 4.12(b) with respect to such
Distribution Date.
"Finance Charge Shortfall" shall have the meaning specified in
Section 4.11.
"Initial Investor Amount" shall mean the aggregate initial
principal amount of the Series 1998-2 Certificates, which is $261,500,000.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the Distribution Date immediately preceding
such Distribution
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<PAGE> 17
Date (or, in the case of the first Distribution Date, from and including the
Closing Date) to, but excluding, such Distribution Date.
"Investor Amount" shall mean, as of any date of determination,
an amount equal to the sum of the Class A Investor Amount, the Class B Investor
Amount, the Collateral Indebtedness Amount and the Class D Investor Amount, in
each case as of such date.
"Investor Default Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Default Amount for
the immediately preceding Monthly Period and (b) the applicable Investor
Percentage applicable to Allocable Amounts for such Monthly Period.
"Investor Monthly Servicing Fee" shall have the meaning
specified in Section G hereof.
"Investor Percentage" shall mean:
(a) with respect to (A) Principal Receivables during any
Monthly Period with respect to the Revolving Period, (B) Finance Charge
Receivables during any Monthly Period other than during a Rapid
Amortization Period, and (C) the Allocable Amount during any Monthly
Period, the percentage equivalent of a fraction the numerator of which
is equal to the Adjusted Investor Amount as of the last day of the
immediately preceding Monthly Period (or the Initial Investor Amount,
in the case of the first Monthly Period applicable to Series 1998-2)
and the denominator of which is the greater of (i) the sum of the
Aggregate Principal Receivables and the Excess Funding Amount, in each
case at the close of business on the last day of the immediately
preceding Monthly Period and (ii) the sum of the numerators used to
calculate the applicable investor percentages with respect to Principal
Receivables, Finance Charge Receivables or the Allocable Amount, as
applicable, for all Series outstanding as of the date on which such
determination is being made;
(b) with respect to Finance Charge Receivables (and any other
amounts treated as Finance Charge Receivables) during any Monthly
Period with respect to a Rapid Amortization Period, the percentage
equivalent of a fraction the numerator of which is equal to the
Investor Amount as of the last day of the Revolving Period and the
denominator of which is the greater of (i) the sum of the Aggregate
Principal Receivables and the Excess Funding Amount, in each case at
the close of business on the last day of the immediately preceding
Monthly Period and (ii) the sum of the numerators use to calculate the
investor percentages with respect to Finance Charge Receivables for all
Series outstanding as of the date on which such determination is being
made; and
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<PAGE> 18
(c) with respect to Principal Receivables during any Monthly
Period with respect to an Amortization Period, the percentage
equivalent of a fraction the numerator of which is equal to the
Investor Amount as of the last day of the Revolving Period and the
denominator of which is the greater of (i) the sum of the Aggregate
Principal Receivables and the Excess Funding Amount, in each case at
the close of business on the last day of the immediately preceding
Monthly Period and (ii) the sum of the numerators used to calculate the
investor percentages with respect to Principal Receivables for all
Series outstanding as of the date on which such determination is being
made; provided, however, that if the Series 1998-2 Certificates are
paired with a Paired Series and a Rapid Amortization Period commences
for such Paired Series, the Transferor may, by written notice to the
Trustee and Servicer, designate a different numerator to be used to
determine such percentage, (provided that such numerator is not less
than the Adjusted Investor Amount as of the last day of the revolving
period for such Paired Series).
"LIBOR" shall have the meaning specified in the Loan
Agreement.
"Loan Agreement" shall mean the agreement among the
Transferor, the Servicer, the Trustee and the Collateral Indebtedness Holder,
dated as of the date hereof, as amended, supplemented or otherwise modified from
time to time in accordance with its terms.
"Minimum Transferor Interest Percentage" shall have the
meaning specified in Section C.
"Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of the Class A Monthly Interest, the Class B Monthly
Interest, the Collateral Monthly Interest and the Class D Monthly Interest for
such Distribution Date.
"Paired Series" shall have the meaning specified in Section
L2.
"Portfolio Adjusted Yield" shall mean, with respect to any
Monthly Period, the Portfolio Yield with respect to such Monthly Period minus
the Base Rate with respect to such Monthly Period.
"Portfolio Yield" shall mean, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, the numerator of
which is (x) the sum of (i) the amount of collections of Finance Charge
Receivables and Shared Excess Finance Charge Collections allocated to the Series
1998-2 Certificates for such Monthly Period, plus (ii) the amount of investment
earnings (net of investment expenses and losses), if any, on the Principal
Account and Reserve Account balances, plus (iii) interest and earnings (net of
investment expenses and losses), if any, on funds held in the Cash Collateral
Account and included as Excess Spread pursuant to Section 4.12(b), plus (iv) the
amount of funds withdrawn from the Reserve Account minus (v) an amount equal to
the Default Amount allocable to the Series 1998-2 Certificates for such Monthly
Period,
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<PAGE> 19
and the denominator of which is (y) the Investor Amount as of the last day of
the preceding Monthly Period.
"Principal Account" shall have the meaning specified in
Section 4.13(a).
"Principal Account Balance" shall mean, with respect to any
date of determination during the Accumulation Period, the amount, if any, of
funds held in the Principal Account on such date of determination.
"Principal Investment Proceeds" shall have the meaning
specified in Section 4.13(b).
"Principal Shortfall" shall have the meaning specified in
Section 4.10.
"Rapid Amortization Period" shall mean the period commencing
at the close of business on the day on which a Pay Out Event with respect to
Series 1998-2 is deemed to have occurred, and ending on the first to occur of
(a) the payment in full of the Class A Investor Amount, the Class B Investor
Amount, the Collateral Indebtedness Amount and the Class D Investor Amount,
respectively or (b) the Stated Series Termination Date.
"Rating Agencies" shall mean Moody's, Standard & Poor's, and,
if applicable, such other nationally recognized statistical rating organization
that has rated the Certificates at the request of the Company.
"Reallocated Principal Collections" shall mean, with respect
to any Monthly Period, an amount equal to the sum of Class B Subordinated
Principal Collections, Collateral Subordinated Principal Collections and Class D
Subordinated Principal Collections for such Monthly Period.
"Reference Banks" shall mean four major banks in the London
interbank market selected by the Servicer upon notice to the Trustee.
"Required Accumulation Factor Number" shall be a fraction,
rounded upwards to the nearest whole number, the numerator of which is one and
the denominator of which is equal to the lowest monthly principal payment rate
on the Accounts for the 12 months preceding the date of such calculation (or any
lower monthly principal payment rate selected by the Servicer at its option in
its sole discretion), expressed as a decimal.
"Required Cash Collateral Amount" shall mean the amount
specified as such in the Loan Agreement or such higher amount designated by the
Transferor.
"Required Draw Amount" shall have the meaning specified in
Section 4.12(c).
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<PAGE> 20
"Required Enhancement Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of the Adjusted Investor
Amount (after giving effect to all reductions thereof to be made on such
Distribution Date) and 15%, but not less than $7,845,000; provided, however,
that (i) if a Pay Out Event shall have occurred, the Required Enhancement Amount
for each Distribution Date thereafter (subject to clause (ii) below) shall equal
the Required Enhancement Amount for the Distribution Date immediately preceding
the occurrence of such Pay Out Event, (ii) in no event shall the Required
Enhancement Amount exceed the sum of the Class A Adjusted Investor Amount and
the Class B Adjusted Investor Amount on such date and (iii) the Required
Enhancement Amount may be reduced without the consent of the Series 1998-2
Certificateholders if (x) the Transferor shall have received written notice from
each Rating Agency (with a copy delivered to the Trustee) that the Rating Agency
Condition is satisfied, (y) the Transferor shall have delivered to the Trustee
an Officer's Certificate to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Transferor, such reduction
will not cause a Pay Out Event or an event that, after the giving of notice or
the lapse of time, would constitute a Pay Out Event, to occur with respect to
Series 1998-2 and (z) the Transferor shall have provided an Opinion of Counsel
addressed to the Trustee, dated the date of such reduction, that such reduction
will not (a) adversely affect the tax characterization of any outstanding Series
or Class with respect to which an Opinion of Counsel addressed to the Trustee
was delivered at the time of their issuance that such Investor Certificates
would be characterized as debt, (b) cause the Trust to be classified, for
federal income tax purposes, as an association (or publicly traded partnership)
taxable as a corporation and (c) cause or constitute an event in which gain or
loss would be recognized by any Certificateholder.
"Required Reserve Account Amount" shall mean, with respect to
any Distribution Date prior to the Reserve Account Funding Date, $0, and on or
after the Reserve Account Funding Date, an amount no less than (a) 1.50% of the
Class A Investor Amount as of the preceding Distribution Date (after giving
effect to all changes therein on such date) or (b) any other amount designated
by the Transferor; provided, however, that if such designation pursuant to (b)
above is of a lesser amount, (i) the Rating Agency Condition shall have been
satisfied, (ii) the Enhancement Provider shall have consented to such lower
amount and (iii) the Transferor shall have delivered to the Trustee an Officer's
Certificate to the effect that, based on the facts known to such officer at such
time, in the reasonable belief of such officer, such designation will not cause
a Pay Out Event or an event that, after the giving of notice or the lapse of
time, would cause a Pay Out Event, to occur with respect to Series 1998-2.
"Reserve Account" shall have the meaning specified in Section
4.14(a).
"Reserve Account Funding Date" shall mean the Distribution
Date with respect to the Monthly Period which commences no later than three (3)
months prior to the Class A Accumulation Period, provided that the Reserve
Account Funding Date shall be accelerated to (a) the Distribution Date with
respect to the Monthly Period which commences no later than four (4) months
prior to the Class A Accumulation Period if the
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<PAGE> 21
average of the Portfolio Adjusted Yields for any three consecutive Monthly
Periods shall be less than 6.0%; (b) the Distribution Date with respect to the
Monthly Period which commences no later than six (6) months prior to the Class A
Accumulation Period if the average of the Portfolio Adjusted Yields for any
three (3) consecutive Monthly Periods shall be less than 3.0%; or (c) the
Distribution Date which commences no later than nine (9) months prior to the
Class A Accumulation Period if the average of the Portfolio Adjusted Yields for
any three (3) consecutive Monthly Periods shall be less than 2.0%.
"Reserve Account Surplus" shall mean, as of any date of
determination, the amount, if any, by which the amount held in the Reserve
Account exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in
Section 4.14(c).
"Revolving Period" shall mean the period beginning on the
Closing Date and ending on the earlier of (a) the close of business on the day
preceding the commencement of the Class A Accumulation Period and (b) the close
of business on the day preceding the commencement of the Rapid Amortization
Period.
"Series Adjustment Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) any unpaid Adjustment
Payment Obligation for the related Monthly Period and (ii) the Investor
Percentage applicable to allocations of Allocable Amounts during the related
Monthly Period, as calculated on the last day of the Monthly Period preceding
the related Monthly Period.
"Series 1998-2" shall mean the Series the terms of which are
specified in this Series Supplement.
"Series 1998-2 Certificate" shall mean a Class A Certificate,
a Class B Certificate, a Class D Certificate and/or, unless the context requires
otherwise, the Collateral Indebtedness Interest.
"Series 1998-2 Certificateholder" shall mean a Class A
Certificateholder, a Class B Certificateholder, a Class D Certificateholder
and/or, unless the context requires otherwise, the Collateral Indebtedness
Holder.
"Servicing Fee" shall mean the amount paid monthly from the
Trust to the Servicer and which shall be equal to one-twelfth (1/12th) of the
product of the Servicing Fee Percentage and the Adjusted Investor Amount.
"Servicing Fee Percentage" shall mean 2.00% per annum.
"Shared Excess Finance Charge Collections" shall mean, with
respect to any Monthly Period, the aggregate amount for all outstanding Series
in Group One of
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<PAGE> 22
Collections of Finance Charge Receivables which the related Supplements specify
are to be treated as "Shared Excess Finance Charge Collections" for such Monthly
Period.
"Shared Principal Collections" shall mean, with respect to any
Monthly Period, the aggregate amount for all outstanding Series in Group One of
Collections of Principal Receivables available after covering required
distributions and deposits under each Series Supplement and that are to be
treated as "Shared Principal Collections" pursuant to Section 4.6(e)(iii) and
Section 4.6(f)(v) and the respective applicable sections of any Supplement for
other Series in Group One.
"Special Distribution Date" shall mean each Distribution Date
with respect to the Rapid Amortization Period.
"Stated Series Termination Date" shall mean the September 2004
Distribution Date.
"Telerate Page 3750" shall mean the display page currently so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for the purpose of displaying comparable rates or
prices).
"Treasury" shall mean the United States Department of the
Treasury and any successor Governmental Authority thereto.
SECTION C. MINIMUM TRANSFEROR INTEREST PERCENTAGE. The Minimum
Transferor Interest Percentage applicable to the Series 1998-2 Certificates
shall be 0%; provided, however, that (a) the Transferor may, at its option and
in its sole discretion, designate a higher percentage as the Minimum Transferor
Interest Percentage so long as, after giving effect to such designation and any
repurchase of Investor Certificates or designation of Additional Accounts, the
Transferor Amount shall equal or exceed the Minimum Transferor Amount and (b) if
on any Distribution Date during the Revolving Period (after giving effect to all
distributions and adjustments to be made on such Distribution Date), the portion
of the Class D Investor Amount owned by the Transferor is less than 2% of the
Investor Amount and the Minimum Transferor Interest Percentage is less than 2%,
the Transferor shall, on or before the last day of the second Monthly Period
following the Monthly Period in which such Distribution Date occurred (unless
the portion of the Class D Investor Amount owned by the Transferor shall then
equal or exceed 2% of the Investor Amount), (i) repurchase or otherwise repay
Investor Certificates (to the extent permitted by any Supplement) or designate
Additional Accounts to the extent necessary to permit the designation of a
Minimum Transferor Interest Percentage of 2% without causing the Transferor
Amount to be less than the Minimum Transferor Amount and (ii) upon compliance
with clause (i), designate 2% as the Minimum Transferor Interest Percentage. In
the event that the Transferor shall have designated a Minimum Transferor
Interest Percentage in excess of 0%, the Transferor may, during the Revolving
Period, designate a lower percentage (but not less than 0%) if the portion of
the Class D Investor Amount owned by the Transferor as a percentage of
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<PAGE> 23
the Investor Amount averaged over the three Distribution Dates preceding such
designation (after giving effect to all distributions and adjustments made on
each such Distribution Date) shall equal or exceed 4%; provided, however, that
such lower percentage may not be less than 2% if the portion of the Class D
Investor Amount owned by the Transferor as a percentage of the Investor Amount
on the Distribution Date preceding such designation (after giving effect to all
distributions and adjustments made on such Distribution Date) shall not equal or
exceed 2%.
SECTION D. OPTIONAL PURCHASE; REASSIGNMENT AND TRANSFER TERMS. All the
Series 1998-2 Certificates may be repurchased by, and reassigned and transferred
to, the Transferor in the Transferor's sole discretion, on any Distribution Date
on or after the Distribution Date on which the sum of the Class A Adjusted
Investor Amount, the Class B Adjusted Investor Amount, the Collateral
Indebtedness Amount and the amount of the Class D Investor Amount held by
parties other than the Transferor or any of its Affiliates is less than or equal
to 10% of the sum of the Class A Investor Amount on the Closing Date, the Class
B Investor Amount on the Closing Date, the Collateral Indebtedness Amount on the
Closing Date and the highest amount of the Class D Investor Amount held by
parties other than the Transferor or any of its affiliates since the Closing
Date. The repurchase price for the Series 1998-2 Certificates will be equal to
(a) the Adjusted Investor Amount, plus (b) accrued and unpaid interest on the
1998-2 Certificates, less (c) the amount held in the Collection Account
allocable to Series 1998-2 to be applied other than to deposits to the Reserve
Account, with any excess payable to the Transferor as holder of the Exchangeable
Transferor Certificate. The provisions of this Section are subject to the
provisions of Section 12.2 of the Agreement.
SECTION E. DELIVERY AND PAYMENT FOR THE CERTIFICATES. The Trustee shall
deliver the Series 1998-2 Certificates when authenticated in accordance with
Section 6.2 of the Agreement (except in the case of the Collateral Indebtedness
Interest, which shall be in uncertificated form). The Class D and Collateral
Indebtedness Interest shall bear legends appropriately limiting their transfer
in accordance herewith and applicable securities laws.
SECTION F. FORM OF DELIVERY OF THE SERIES 1998-2 CERTIFICATES. The
Class A Certificates and the Class B Certificates shall be delivered as provided
in Section 6.11 of the Agreement. The Class A Certificates and the Class B
Certificates will initially be held by the Trustee as custodian for The
Depository Trust Company, and will be registered in the name of Cede & Co., as
nominee of The Depository Trust Company. The Class D Certificates shall be
delivered in registered form. The Collateral Indebtedness Interest shall be
issued in uncertificated form.
SECTION G. SERVICING COMPENSATION. The share of the Monthly Servicing
Fee allocable to the Series 1998-2 Certificateholders with respect to any
Distribution Date (the "Investor Monthly Servicing Fee") shall be equal to
one-twelfth (1/12th) of the product of (a) the Servicing Fee Percentage and (b)
each of the Class A Adjusted Investor Amount, the Class B Adjusted Investor
Amount, the Collateral Indebtedness Amount and
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<PAGE> 24
the Class D Investor Amount, respectively, as of the last day of the immediately
preceding Monthly Period; provided, however, with respect to the first
Distribution Date, the Investor Monthly Servicing Fee shall be equal to
$348,667. The share of the Investor Monthly Servicing Fee allocable to the Class
A Certificateholders with respect to any Distribution Date (the "Class A
Servicing Fee") shall be equal to the product of (a) one-twelfth ((1/12th) of
the Servicing Fee Percentage and (b) the Class A Adjusted Investor Amount;
provided, however, that with respect to the first Distribution Date, the Class A
Servicing Fee shall be equal to $266,667. The share of the Investor Monthly
Servicing Fee allocable to the Class B Certificateholders with respect to any
Distribution Date (the "Class B Servicing Fee") shall be equal to the product of
(a) (1/12th) of the Servicing Fee Percentage and (b) the Class B Adjusted
Investor Amount; provided, however, that with respect to the first Distribution
Date, the Class B Servicing Fee shall be equal to $28,667. The share of the
Investor Monthly Servicing Fee allocable to the Collateral Indebtedness Holder
with respect to any Distribution Date (the "Collateral Servicing Fee") shall be
equal to the product of (a) one-twelfth (1/12th) of the Servicing Fee Percentage
and (b) the Collateral Indebtedness Amount; provided, however, that with respect
to the first Distribution Date, the Collateral Servicing Fee shall be equal to
$32,000. The share of the Investor Monthly Servicing Fee allocable to the Class
D Certificateholders with respect to any Distribution Date (the "Class D
Servicing Fee") shall be equal to the product of (a) one-twelfth (1/12th) of the
Servicing Fee Percentage and (b) the Class D Investor Amount; provided, however,
that with respect to the first Distribution Date, the Class D Servicing Fee
shall be equal to $21,333. The Class A Servicing Fee, the Class B Servicing Fee,
the Collateral Servicing Fee and the Class D Servicing Fee shall be payable
solely to the extent amounts are available for distribution in respect thereof
pursuant to this Series Supplement. The remainder of the Monthly Servicing Fee
shall be paid from amounts allocable to other Series (as provided in the
Agreement and the Supplements relating to such other Series) or by the
Transferor and in no event shall the Trust, the Trustee or the Series 1998-2
Certificateholders be liable for the share of the Monthly Servicing Fee to be
paid from amounts allocable to any other Series or by the Transferor.
SECTION H. ARTICLE IV OF THE AGREEMENT. Any provisions of Article IV of
the Agreement which distribute Collections to the Transferor on the basis of the
Transferor Percentage shall continue to apply irrespective of the issuance of
the Series 1998-2 Certificates. Section 4.1 of the Agreement shall read in its
entirety as provided in the Agreement. Article IV of the Agreement (except for
Section 4.1) as it relates to Series 1998-2 shall read in its entirety as
follows:
ARTICLE IV
RIGHTS OF SERIES 1998-2 CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2. COLLECTIONS AND ALLOCATIONS. The Servicer shall apply, or
shall instruct the Trustee to apply, all Collections, and other funds held in
the Collection
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Account that are allocated to the Series 1998-2 Certificates as described in
this Article IV. Provided that daily deposits of Collections into the Collection
Account are required pursuant to Section 4.1(f) of the Agreement, the applicable
Investor Percentage of Finance Charge Collections shall be deposited into the
Collection Account on a daily basis. During the Revolving Period, so long as the
Available Enhancement Amount is not less than the Required Enhancement Amount,
Collections of Principal Receivables allocable to Series 1998-2 with respect to
each Monthly Period need not be deposited into the Collection Account on a daily
basis during such Monthly Period; provided, however, that in the event that the
Minimum Transferor Amount exceeds the Transferor Amount on any date, such
Collections of Principal Receivables shall be deposited into the Excess Funding
Account until the Transferor Amount equals the Minimum Transferor Amount; and
provided, further, that on any date on which the sum of the Aggregate Principal
Receivables and the Excess Funding Amount is less than the Aggregate Adjusted
Investor Amount, such Collections of Principal Receivables shall be deposited
into the Collection Account on a daily basis. During the Accumulation Period,
after an amount of Collections of Principal Receivables allocable to Series
1998-2 equal to the Controlled Deposit Amount with respect to each Monthly
Period has been deposited into the Collection Account, and so long as the
Available Enhancement Amount is not less than the Required Enhancement Amount,
Collections of Principal Receivables allocable to Series 1998-2 with respect to
each Monthly Period need not be deposited into the Collection Account on a daily
basis during such Monthly Period; provided, however, that in the event that the
Minimum Transferor Amount exceeds the Transferor Amount on any date, such
Collections of Principal Receivables shall be deposited into the Excess Funding
Account until the Transferor Amount equals the Minimum Transferor Amount; and,
provided, further, that on any date on which the sum of the Aggregate Principal
Receivables and the Excess Funding Amount is less than the Aggregate Investor
Amount, such Collections of Principal Receivables shall be deposited into the
Collection Account on a daily basis. Notwithstanding the foregoing, the Servicer
need not make daily deposits of Collections into the Collection Account at any
time when the requirements of Section 4.1(f) of the Agreement are satisfied.
SECTION 4.3 DETERMINATION OF MONTHLY INTEREST.
(a) The amount of monthly interest ("Class A Monthly
Interest") distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class A Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class A
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class A Monthly Interest shall be equal to
$800,000.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class A Interest
Shortfall"), of (x) the Class A Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class A
Monthly Interest on such Distribution Date.
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If the Class A Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Class A Additional Interest") equal to
one-twelfth (1/12th) of the product of (i) the Class A Penalty Rate for the
related Interest Period, and (ii) such Class A Interest Shortfall (or the
portion thereof which has not theretofore been paid to Class A
Certificateholders), shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such Distribution Date
to and including the Distribution Date on which such Class A Interest Shortfall
is paid to Class A Certificateholders. Notwithstanding anything to the contrary
herein, Class A Additional Interest shall be payable or distributed to Class A
Certificateholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly
Interest") distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class B Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class B Monthly Interest shall be equal to $88,150.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class B Interest
Shortfall"), of (x) the Class B Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class B
Monthly Interest on such Distribution Date. If the Class B Interest Shortfall
with respect to any Distribution Date is greater than zero, an additional amount
("Class B Additional Interest") equal to one-twelfth (1/12th) of the product of
(i) the Class B Penalty Rate for the related Interest Period, and (ii) such
Class B Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class B Certificateholders), shall be payable as provided herein
with respect to the Class B Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class B Interest Shortfall is paid to Class B Certificateholders.
Notwithstanding anything to the contrary herein, Class B Additional Interest
shall be payable or distributed to Class B Certificateholders only to the extent
permitted by applicable law.
(c) The amount of monthly interest ("Collateral Monthly
Interest") distributable from the Collection Account with respect to the
Collateral Indebtedness Interest on any Distribution Date shall be an amount
equal to the product of (i) the outstanding principal amount of the Collateral
Indebtedness Interest as of the preceding Record Date,(ii) the Collateral Rate
for the related interest Period, and (iii) a fraction, the numerator of which is
the actual number of days in such Interest Period and the denominator of which
is 360; provided, however, with respect to the first Distribution Date, the
Collateral Monthly Interest shall be equal to $106,770.83.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Collateral Interest
Shortfall"), of (x) the Collateral
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Monthly Interest for such Distribution Date over (y) the aggregate amount of
funds allocated and available to pay such Collateral Monthly Interest on such
Distribution Date. If the Collateral Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("Collateral
Additional Interest") equal to the product of (i) (A) a fraction, the numerator
of which is the actual number of days in such Interest Period and the
denominator of which is 360, times (B) the Collateral Penalty Rate and (ii) such
Collateral Interest Shortfall (or the portion thereof which has not theretofore
been paid to the Collateral Indebtedness Holder) shall be payable as provided
herein with respect to the Collateral Indebtedness Interest on each Distribution
Date following such Distribution Date to and including the Distribution Date on
which such Collateral Interest Shortfall is paid to the Collateral Indebtedness
Holder. Notwithstanding anything to the contrary herein, Collateral Additional
Interest shall be payable or distributed to the Collateral Indebtedness Holder
only to the extent permitted by applicable law.
(d) The amount of monthly interest ("Class D Monthly
Interest") distributable from the Collection Account with respect to the Class D
Certificates on any Distribution Date shall be an amount equal to the product of
(i) the Class D Certificate Rate for the related Interest Period; (ii) the
outstanding principal amount of the Class D Certificates as of the preceding
Record Date; and (iii) a fraction, the numerator of which is the actual number
of days in such Interest Period and the denominator of which is 360; provided,
however, with respect to the first Distribution Date, Class D Monthly Interest
shall be equal to $73,958.33.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class D Interest
Shortfall"), of (x) the Class D Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class D
Monthly Interest on such Distribution Date. If the Class D Interest Shortfall
with respect to any Distribution Date is greater than zero, an additional amount
("Class D Additional Interest") equal to the product of (i) (A) the actual
number of days in the related Interest Period divided by 360, times (B) the
Class D Penalty Rate and (ii) such Class D Interest Shortfall (or the portion
thereof which has not theretofore been paid to Class D Certificateholders) shall
be payable as provided herein with respect to the Class D Certificates on each
Distribution Date following such Distribution Date to and including the
Distribution Date on which such Class D Interest Shortfall is paid to Class D
Certificateholders. Notwithstanding anything to the contrary herein, Class D
Additional Interest shall be payable or distributed to Class D
Certificateholders only to the extent permitted by applicable law.
SECTION 4.4 DETERMINATION OF MONTHLY PRINCIPAL.
(a) The amount of monthly principal ("Class A Monthly
Principal") distributable or available for deposit into the Principal Account
from the Collection Account with respect to the Class A Certificates on each
Distribution Date, beginning with the Distribution Date in the month following
the month in which an Amortization Period begins, shall be equal to the least of
(x) the Available Principal Collections held in
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the Collection Account and available for distribution with respect to such
Distribution Date, (y) with respect to the Accumulation Period prior to the
Class A Expected Payment Date, the Controlled Deposit Amount for such
Distribution Date and (z) the Class A Adjusted Investor Amount on such
Distribution Date.
(b) The amount of monthly principal ("Class B Monthly
Principal") distributable or available for deposit into the Principal Account
from the Collection Account with respect to the Class B Certificates on each
Distribution Date relating to an Amortization Period, beginning with the Class B
Principal Commencement Date, shall be equal to the least of (x) the Available
Principal Collections held in the Collection Account and available for
distribution with respect to such Distribution Date, minus the portion of such
amounts applied to Class A Monthly Principal on such Distribution Date, (y) for
each Distribution Date with respect to the Accumulation Period prior to the
Class B Expected Payment Date, the Controlled Deposit Amount for such
Distribution Date and (z) the Class B Adjusted Investor Amount on such
Distribution Date.
(c) The amount, if any, of monthly principal ("Collateral
Monthly Principal") distributable with respect to the Collateral Indebtedness
Interest on each Distribution Date shall be equal to:
(i) on any Distribution Date prior to the payment in full
of the Class B Certificates, the lesser of (x) the
Available Principal Collections held in the
Collection Account and available for distribution
with respect to such Distribution Date minus the
portion of Available Principal Collections held in
the Collection Account and available for distribution
as Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date and (y) the
Enhancement Surplus on such Distribution Date,
provided that the Transferor shall have elected to
pay such Collateral Monthly Principal (after giving
effect to any increase in the amount held in the Cash
Collateral Account or increase in the Class D
Investor Amount on such Distribution Date); and
(ii) beginning with the Distribution Date on which the
Class B Certificates have been paid in full, the
lesser of (x) the Available Principal Collections
held in the Collection Account and available for
distribution with respect to such Distribution Date
minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal
or Class B Monthly Principal on such Distribution
Date and (y) the Collateral Indebtedness Amount on
such Distribution Date.
(d) The amount of monthly principal ("Class D Monthly
Principal") distributable with respect to the Class D Certificates on each
Distribution Date, beginning with the Distribution Date on which the Collateral
Indebtedness Amount has been paid in
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full, or prior thereto subject to the consent of the Enhancement Provider and
otherwise subject to the satisfaction of the requirements of the Loan Agreement
(and provided that such distribution would not require the Transferor to
designate a Minimum Transferor Interest Percentage in accordance with Section C
hereof), shall be equal to the least of (x) the Available Principal Collections
held in the Collection Account with respect to such Distribution Date minus the
amount portion of such Available Principal Collections applied to any Class A
Monthly Principal, Class B Monthly Principal or Collateral Monthly Principal on
such Distribution Date, (y) the Enhancement Surplus on such Distribution Date
and (z) the Class D Investor Amount on such Distribution Date.
SECTION 4.5 REQUIRED AMOUNTS.
(a) On each Determination Date, the Servicer shall determine
the amount (the "Class A Required Amount"), if any, by which (x) the sum of (i)
Class A Monthly Interest for the following Distribution Date, (ii) any Class A
Monthly Interest previously due but not paid to the Class A Certificateholders
on a prior Distribution Date, (iii) any Class A Additional Interest for the
following Distribution Date and any Class A Additional Interest previously due
but not paid to Class A Certificateholders on a prior Distribution Date, (iv)
the Class A Allocable Amount, if any, for such Distribution Date and (v) if
Proffitt's, Inc. is no longer the Servicer, the Class A Servicing Fee for the
related Distribution Date and the amount of any Class A Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date exceeds (y)
the Class A Available Funds with respect to the preceding Monthly Period. In the
event that the Class A Required Amount for such Distribution Date is greater
than zero, the Servicer shall give written notice to the Trustee of such
positive Class A Required Amount on the date of computation and all or a portion
of the Excess Spread and the Shared Excess Finance Charge Collections allocable
to Series 1998-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period in an amount equal to the Class A Required Amount for such Distribution
Date shall be distributed from the Collection Account on such Distribution Date
pursuant to Section 4.8(a). In the event that the Class A Required Amount for
such Distribution Date exceeds the amount of the Excess Spread and the Shared
Excess Finance Charge Collections allocable to Series 1998-2 with respect to the
related Monthly Period, all or a portion of the Available Cash Collateral Amount
with respect to such Distribution Date in an amount equal to such excess shall
be applied to fund the Class A Required Amount. In the event that the Class A
Required Amount for such Distribution Date exceeds the amount of the Excess
Spread, the Shared Excess Finance Charge Collections allocable to Series 1998-2
with respect to the related Monthly Period and the Available Cash Collateral
Amount with respect to such Distribution Date, all or a portion of the
Reallocated Principal Collections with respect to such Monthly Period in an
amount equal to such excess shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.9(a).
(b) On each Determination Date, the Servicer shall determine
the amount (the "Class B Required Amount"), if any, equal to the sum of (x) the
amount, if any, by which the sum of (i) Class B Monthly Interest for the
following Distribution Date, (ii)
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any Class B Monthly Interest previously due but not paid to the Class B
Certificateholders on a prior Distribution Date, (iii) any Class B Additional
Interest for the following Distribution Date and any Class B Additional Interest
previously due but not paid to Class B Certificateholders on a prior
Distribution Date and (iv) if Proffitt's, Inc. is no longer the Servicer, the
Class B Servicing Fee for the related Distribution Date and the amount of any
Class B Servicing Fee previously due but not distributed to the Servicer on a
prior Distribution Date exceeds Class B Available Funds with respect to the
preceding Monthly Period and (y) the amount, if any, by which the Class B
Allocable Amount, if any, for such Distribution Date exceeds the amount
available to make payments with respect thereto pursuant to Section 4.8(d). In
the event that the Class B Required Amount for such Distribution Date is greater
than zero, the Servicer shall give written notice to the Trustee of such
positive Class B Required Amount on the date of computation and all or a portion
of the Excess Spread and the Shared Excess Finance Charge Collections allocable
to Series 1998-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period shall be distributed from the Collection Account on such Distribution
Date pursuant to Sections 4.8(c) and (d). In the event that the Class B Required
Amount for such Distribution Date exceeds such amounts distributed pursuant to
Sections 4.8(c) and (d), all or a portion of the Available Cash Collateral
Amount with respect to such Distribution Date (other than that portion of the
Available Cash Collateral Amount applied to fund the amounts described in
Sections 4.8(a) and (b) with respect to such Distribution Date) in an amount
equal to such excess shall be applied to fund the Class B Required Amount. In
the event that the Class B Required Amount for such Distribution Date exceeds
such portion of the Available Cash Collateral Amount and the amounts distributed
pursuant to Sections 4.8(c) and (d), all or a portion of the Reallocated
Principal Collections with respect to such Monthly Period (other than the
portion of the Reallocated Principal Collections applied to fund the Class A
Required Amount and other than Class B Subordinated Principal Collections) in an
amount equal to such excess shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.9(b).
(c) On each Determination Date, the Servicer shall determine
the amount (the "Collateral Required Amount"), if any, equal to the sum of (x)
the amount, if any, by which the sum of (i) Collateral Monthly Interest for the
following Distribution Date, (ii) any Collateral Monthly Interest previously due
but not paid to the Collateral Indebtedness Holder on a prior Distribution Date,
(iii) any Collateral Additional Interest for the following Distribution Date and
any Collateral Additional Interest previously due but not paid to the Collateral
Indebtedness Holder on a prior Distribution Date and (iv) if Proffitt's, Inc. is
no longer the Servicer, the Collateral Servicing Fee for the related
Distribution Date and the amount of any Collateral Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date exceeds the
amount available to make payments with respect thereto pursuant to Sections
4.6(c)(i) and 4.8(f) with respect to the preceding Monthly Period and (y) the
amount, if any, by which the Collateral Allocable Amount, if any, for such
Distribution Date exceeds the amount available to make payments with respect
thereto pursuant to Section 4.8(h). In the event that the Collateral Required
Amount for such Distribution Date is greater than zero, the Servicer
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shall give written notice to the Trustee of such positive Collateral Required
Amount on the date of computation and all or a portion of the Available Cash
Collateral Amount with respect to such Distribution Date (other than that
portion of the Available Cash Collateral Amount applied to fund the amounts
described in Sections 4.8(a), (b), (c) (d) and (e) with respect to such
Distribution Date) in an amount equal to such excess shall be applied to fund
the Collateral Required Amount. In the event that the Collateral Required Amount
for such Distribution Date exceeds the portion of the Available Cash Collateral
Amount with respect to such Distribution Date not used to fund the amounts
described in Sections 4.8(a), (b), (c), (d) and (e) with respect to such
Distribution Date, all or a portion of the Reallocated Principal Collections
with respect to such Monthly Period (other than the portion of the Reallocated
Principal Collections applied to fund the Class A Required Amount or the Class B
Required Amount and other than Class B Subordinated Principal Collections or
Collateral Subordinated Principal Collections) in an amount equal to such excess
shall be distributed from the Collection Account on such Distribution Date
pursuant to Section 4.9(c).
SECTION 4.6 APPLICATION OF CLASS A AVAILABLE FUNDS, CLASS B AVAILABLE
FUNDS, COLLATERAL AVAILABLE FUNDS, CLASS D AVAILABLE FUNDS AND COLLECTIONS OF
PRINCIPAL RECEIVABLES.
The Servicer shall apply or shall instruct the Trustee to
apply, on each Distribution Date, Class A Available Funds, Class B Available
Funds, Collateral Available Funds, Class D Available Funds and Collections of
Principal Receivables allocable to Series 1998-2 held in the Collection Account
with respect to the Monthly Period immediately preceding such Distribution Date
to make the following distributions:
(a) On each Distribution Date, Class A Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date shall
be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A
Monthly Interest previously due but not paid to Class
A Certificateholders on a prior Distribution Date,
plus the amount of any Class A Additional Interest
for such Distribution Date and any Class A Additional
Interest previously due but not distributed to Class
A Certificateholders on a prior Distribution Date,
shall be distributed to the Paying Agent for payment
to the Class A Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A
Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be
distributed to the Servicer;
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(iii) an amount equal to the Class A Allocable Amount for
such Distribution Date shall be treated as a portion
of Available Principal Collections allocable to
Series 1998-2 for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread
and shall be allocated and distributed as set forth
in Section 4.8.
(b) On each Distribution Date, Class B Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date shall
be applied in the following priority:
(i) an amount equal to the Class B Monthly Interest for
such Distribution Date plus the amount of any Class B
Monthly Interest previously due but not distributed
to Class B Certificateholders on a prior Distribution
Date, plus the amount of any Class B Additional
Interest for such Distribution Date and any Class B
Additional Interest previously due but not
distributed to Class B Certificateholders on a prior
Distribution Date, shall be distributed to the Paying
Agent for payment to the Class B Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B
Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess Spread
and shall be allocated and distributed as set forth
in Section 4.8.
(c) On each Distribution Date, Collateral Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date shall
be applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Collateral Servicing Fee for such
Distribution Date, plus the amount of any Collateral
Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread
and shall be allocated and distributed as set forth
in Section 4.8.
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(d) On each Distribution Date, Class D Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date shall
be applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Class D Servicing Fee for such
Distribution Date, plus the amount of any Class D
Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread
and shall be allocated and distributed as set forth
in Section 4.8.
(e) On each Distribution Date with respect to the Revolving
Period, all such Available Principal Collections, shall be applied in the
following priority:
(i) an amount equal to Collateral Monthly Principal for
such Distribution Date shall be applied in accordance
with the Loan Agreement;
(ii) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying
Agent for payment to the Class D Certificateholders;
and
(iii) the balance, if any, shall be treated as "Shared
Principal Collections" with respect to Group One to
be applied in accordance with Section 4.1(h) (and be
retained in the Excess Funding Account if required by
such provision).
(f) On each Distribution Date following the commencement of an
Amortization Period, all such Available Principal Collections shall be applied
in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date shall, during the Class A
Accumulation Period, be deposited in the Principal
Account for payment to Class A Certificateholders on
the earlier to occur of the Class A Expected Payment
Date or the first Special Distribution Date or,
during the Rapid Amortization Period, be distributed
to the Paying Agent for payment to the Class A
Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date shall, during the Class B
Accumulation Period, be deposited in the Principal
Account for payment to Class B Certificateholders on
the earlier to occur of the Class B Expected
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Payment Date or the first Special Distribution Date
or, during the Rapid Amortization Period, be
distributed to the Paying Agent for payment to the
Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for
such Distribution Date shall be applied in accordance
with the Loan Agreement;
(iv) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying
Agent for payment to the Class D Certificateholders;
and
(v) the balance, if any, shall be treated as "Shared
Principal Collections" as provided in Section 4.1(h)
and allocated among each Series in Group One as
specified in each Supplement for Series included in
Group One.
SECTION 4.7 DEFAULTED AMOUNTS; ADJUSTMENT AMOUNTS; INVESTOR CHARGE
OFFS; REDUCTIONS OF ADJUSTMENT AMOUNTS.
(a) On each Determination Date, the Servicer shall calculate
the Class A Required Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class A Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1998-2 with respect to such
Distribution Date, (y) the Available Cash Collateral Amount with respect to such
Distribution Date and (z) the amount of Reallocated Principal Collections
available pursuant to Section 4.9(a) with respect to the preceding Monthly
Period, the Class D Investor Amount (after giving effect to any reduction
thereof pursuant to Section 4.7(d)) shall be reduced by the amount of such
excess, but not by more than the excess of the Class A Allocable Amount for such
Distribution Date over the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class D Investor Amount to be a negative number, the Class D
Investor Amount shall be reduced to zero and the Collateral Indebtedness Amount
(after giving effect to any reduction thereof pursuant to Section 4.7(c)) shall
be reduced by the amount by which the Class D Investor Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class A
Allocable Amount for such Distribution Date over the amount of such reduction,
if any, of the Class D Investor Amount with respect to such Distribution Date
and the amount of Excess Spread and Shared Excess Finance Charge Collections,
the amount withdrawn from the Cash Collateral Account and the amount of
Reallocated Principal Collections used to fund the Class A Allocable Amount for
such Distribution Date. In the event that such reduction would cause the
Collateral Indebtedness Amount to be a negative number, the Collateral
Indebtedness Amount shall be reduced to zero and the Class B Investor
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Amount (after giving effect to any reduction thereof pursuant to Section 4.7(b))
shall be reduced by the amount by which the Collateral Indebtedness Amount would
have been reduced below zero, but not by more than the excess, if any, of the
Class A Allocable Amount for such Distribution Date over the aggregate amount of
the reductions, if any, of the Collateral Indebtedness Amount and the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class A Allocable Amount for such Distribution Date. In the
event that such reduction would cause the Class B Investor Amount to be a
negative number, the Class B Investor Amount shall be reduced to zero, and the
Class A Investor Amount shall be reduced by the amount by which the Class B
Investor Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Allocable Amount for such Distribution Date over
the aggregate amount of the reductions, if any, of the Class D Investor Amount,
the Collateral Indebtedness Amount and the Class B Investor Amount for such
Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Investor Allocable Amount for such Distribution Date (a "Class A Investor Charge
Off"). Class A Investor Charge Offs shall thereafter be reimbursed and the Class
A Investor Amount increased (but not by an amount in excess of the aggregate
unreimbursed Class A Investor Charge Offs) on any Distribution Date by (i) the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available for that purpose pursuant to Section 4.8(b), and (ii) without
duplication, the aggregate amount of the reductions of the Series Adjustment
Amounts allocable to the Class A Investor Amount pursuant to Section 4.7(f).
(b) On each Determination Date, the Servicer shall calculate
the Class B Required Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1998-2 with respect to such
Distribution Date which are not used to fund the Class A Required Amount and
Class A Investor Charge Offs on the related Distribution Date, (y) the portion,
if any, of the Available Cash Collateral Amount which is remaining after
applying the Available Cash Collateral Amount to fund the Class A Required
Amount with respect to such Distribution Date and (z) the amount of Reallocated
Principal Collections which are available to fund the Class B Required Amount on
such Distribution Date pursuant to Section 4.9(b), then the Class D Investor
Amount (after giving effect to any reduction thereof pursuant to Sections 4.7(a)
and (d)) shall be reduced by the amount of such excess, but not by more than the
excess of the Class B Allocable Amount for such Distribution Date over the
amount of Excess Spread and Shared Excess Finance Charge Collections, the amount
withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections used to fund the Class B Allocable Amount for such
Distribution Date. In the event that such reduction would cause the Class D
Investor Amount to be a negative number, the Class D Investor Amount shall be
reduced to zero, and the Collateral Indebtedness Amount (after giving effect to
any
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reduction thereof pursuant to Sections 4.7(a) and (c)) shall be reduced by the
amount by which the Class D Investor Amount would have been reduced below zero,
but not by more than the excess, if any, of the Class B Allocable Amount for
such Distribution Date over the amount of the reductions, if any, of the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class B Allocable Amount for such Distribution Date. In the
event that such reduction would cause the Collateral Indebtedness Amount to be a
negative number, the Collateral Indebtedness Amount shall be reduced to zero,
and the Class B Investor Amount shall be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class B Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Collateral Indebtedness Amount and the Class D Investor Amount with respect to
such Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class B
Allocable Amount for such Distribution Date (a "Class B Investor Charge Off").
Class B Investor Charge Offs shall thereafter be reimbursed and the Class B
Investor Amount increased (but not by an amount in excess of the aggregate
unreimbursed Class B Investor Charge Offs) on any Distribution Date by (i) the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available for that purpose pursuant to Section 4.8(e), and (ii) without
duplication, the aggregate amount of the reductions of the Series Adjustment
Amounts allocable to the Class B Investor Amount pursuant to Section 4.7(f).
(c) If, on any Distribution Date, the Collateral Required
Amount exceeds (x) the portion, if any, of the Available Cash Collateral Amount
after applying the Available Cash Collateral Amount to fund the Class A Required
Amount and the Class B Required Amount with respect to such Distribution Date
and (y) the amount of Reallocated Principal Collections which are available to
fund the Collateral Required Amount on such Distribution Date pursuant to
Section 4.9(c), then the Class D Investor Amount (after giving effect to any
reduction thereof pursuant to Sections 4.7(a), (b) and (d)) shall be reduced by
the amount of such excess, but not by more than the excess of the Collateral
Allocable Amount for such Distribution Date over the amount of Excess Spread and
Shared Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount of Reallocated Principal Collections used to
fund the Collateral Allocable Amount for such Distribution Date. In the event
that such reduction would cause the Class D Investor Amount to be a negative
number, the Class D Investor Amount shall be reduced to zero, and the Collateral
Indebtedness Amount shall be reduced by the amount by which the Class D Investor
Amount would have been reduced below zero, but not by more than the excess, if
any, of the Collateral Allocable Amount for such Distribution Date over the
amount of the reductions, if any, of the Class D Investor Amount with respect to
such Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to
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fund the Collateral Allocable Amount for such Distribution Date; provided,
however, that the Collateral Indebtedness Amount shall not be reduced below zero
(a "Collateral Indebtedness Charge Off"). Collateral Indebtedness Charge Offs
shall thereafter be reimbursed and the Collateral Indebtedness Amount increased
(but not by an amount in excess of the aggregate unreimbursed Collateral
Indebtedness Charge Offs) on any Distribution Date by (i) the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available for
that purpose pursuant to Section 4.8(i), and (ii) without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Collateral Indebtedness Amount pursuant to Section 4.7(f).
(d) If, on any Distribution Date, the Class D Allocable Amount
exceeds the amount of Excess Spread and Shared Excess Finance Charge Collections
available to fund the Class D Allocable Amount pursuant to Section 4.8(m) on
such Distribution Date, then the Class D Investor Amount shall be reduced by the
amount of such excess; provided, however, that the Class D Investor Amount shall
not be reduced below zero (a "Class D Investor Charge Off"). Class D Investor
Charge Offs shall thereafter be reimbursed and the Class D Investor Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class D
Investor Charge Offs) on any Distribution Date by (i) the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available for
that purpose pursuant to Section 4.8(n), and (ii) without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Collateral Indebtedness Amount pursuant to Section 4.7(f).
(e) Whenever funds or other amounts are available hereunder in
respect of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount or the Class D Allocable Amount, as the case may be,
such funds or other amounts shall be applied first to the elimination of any
deficiency resulting from Default Amounts and then to any deficiency resulting
from Series Adjustment Amounts.
(f) Any reduction of the Series Adjustment Amount for Series
1998-2 as a result of the deposit of funds into the Excess Funding Account, the
repurchase or other repayment of Investor Certificates or the increase of
Principal Receivables in the Trust shall be allocated first to the Class A
Certificates, then to the Class B Certificates, then to the Collateral
Indebtedness Interest and finally to the Class D Certificates, in each case to
the extent of any unreimbursed reduction of the Investor Amount thereof
attributable to Series Adjustment Amounts.
SECTION 4.8 EXCESS SPREAD; SHARED EXCESS FINANCE CHARGE COLLECTIONS.
The Servicer shall apply, or shall instruct the Trustee to apply, on each
Distribution Date, Excess Spread (including interest and earnings on funds held
in the Cash Collateral Account and included as Excess Spread pursuant to Section
4.12(b)) and Shared Excess Finance Charge Collections allocable to Series 1998-2
pursuant to Section 4.1(i) with respect to the related Monthly Period, in the
following priority:
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(a) an amount up to the Class A Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to fund
any deficiency pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of
priority;
(b) an amount equal to the aggregate amount of Class A
Investor Charge Offs which have not been previously reimbursed shall be treated
as a portion of Available Principal Collections allocable to Series 1998-2 for
such Distribution Date;
(c) an amount up to the Class B Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to fund
any deficiency pursuant to Sections 4.6(b)(i) and (ii), in that order of
priority;
(d) an amount equal to any remaining portion of the Class B
Required Amount for such Distribution Date shall be treated as a portion of
Available Principal Collections allocable to Series 1998-2 for such Distribution
Date;
(e) an amount equal to the aggregate amount by which the Class
B Investor Amount has been reduced pursuant to clauses (c), (d) and (e) of the
definition of "Class B Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1998-2 for such Distribution Date;
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of Collateral Monthly Interest previously due
but not distributed to the Collateral Indebtedness Holder on a prior
Distribution Date, plus the amount of Collateral Additional Interest for such
Distribution Date and any Collateral Additional Interest previously due but not
distributed to the Collateral Indebtedness Holder shall be applied in accordance
with the Loan Agreement;
(g) an amount equal to the Class A Servicing Fee, the Class B
Servicing and the Collateral Servicing Fee for such Distribution Date (or if
Proffitt's, Inc. is no longer the Servicer, the portion thereof not paid
pursuant to Section 4.6), plus the amount of any Class A Servicing Fee, Class B
Servicing Fee or Collateral Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount for
such Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1998-2 for such Distribution Date;
(i) an amount equal to the aggregate amount by which the
Collateral Indebtedness Amount has been reduced pursuant to clauses (c) and (d)
of the definition of "Collateral Indebtedness Amount" (but not in excess of the
aggregate amount of such reductions which have not been previously reimbursed)
shall be treated as a portion of Available Principal Collections allocable to
Series 1998-2 for such Distribution Date;
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(j) an amount equal to the greater of (i) the excess, if any,
of the Required Cash Collateral Amount over the Available Cash Collateral
Amount, and (ii) the excess, if any, of the Required Enhancement Amount over the
Available Enhancement Amount (in either case, without giving effect to any
deposit made on such date hereunder and after giving effect to any payment of
Collateral Monthly Principal or Class D Monthly Principal being made on such
date) shall be deposited into the Cash Collateral Account;
(k) an amount equal to the Class D Allocable Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1998-2 for such Distribution Date;
(l) an amount equal to the aggregate amount by which the Class
D Investor Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1998-2 for such Distribution Date;
(m) an amount equal to the excess, if any, of the Required
Reserve Account Amount over the amount held in the Reserve Account shall be
deposited into the Reserve Account;
(n) an amount equal to the aggregate of any other amounts then
due to the Collateral Indebtedness Holder pursuant to the Loan Agreement shall
be applied in accordance with the Loan Agreement;
(o) an amount equal to Class D Monthly Interest for such
Distribution Date, plus the amount of Class D Monthly Interest previously due
but not distributed to the Class D Certificateholders on a prior Distribution
Date, plus the amount of Class D Additional Interest for such Distribution Date
and any Class D Additional Interest previously due but not distributed shall be
distributed to the Paying Agent for payment to the Class D Certificateholders;
(p) an amount equal to the Class D Servicing Fee for such
Distribution Date (or if Proffitt's, Inc. is no longer the Servicer, the portion
of the Class D Servicing Fee for such Distribution Date not paid pursuant to
Section 4.6(d)(i)), plus the amount of any Class D Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(q) the balance, if any, shall constitute "Shared Excess
Finance Charge Collections" with respect to Group One to be applied in
accordance with Section 4.1(i).
SECTION 4.9 REALLOCATED PRINCIPAL COLLECTIONS. The Servicer shall
apply, or shall instruct the Trustee to apply, on each Distribution Date,
Reallocated Principal
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Collections (applying all Class D Subordinated Principal Collections prior to
applying any Collateral Subordinated Principal Collections, and applying all
Collateral Subordinated Principal Collections prior to applying any Class B
Subordinated Principal Collections, and applying no Class B Subordinated
Principal Collections with respect to the Class B Required Amount pursuant to
clause (b) below and applying no Class B Subordinated Principal Collections or
Collateral Subordinated Principal Collections with respect to the Collateral
Required Amount pursuant to clause (c) below) with respect to such Distribution
Date, to make the following distributions in the following priority:
(a) an amount equal to the excess, if any, of (i) the Class A
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period and (y) the Available Cash Collateral Amount with respect to such
Distribution Date shall be distributed by the Trustee to fund any deficiency
pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of priority;
(b) an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period available in respect of the Class B Required Amount pursuant to Section
4.8(c) and (d) on such Distribution Date and (y) the amount withdrawn from the
Cash Collateral Account in respect of the Class B Required Amount with respect
to such Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.8(c) and (d), in that order of priority; and
(c) an amount equal to the excess, if any, of (i) the
Collateral Required Amount, if any, with respect to such Distribution Date over
(ii) the sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period available in respect of the Collateral Required Amount pursuant to
Sections 4.8(f) and (h) on such Distribution Date and (y) the amount withdrawn
from the Cash Collateral Account in respect of the Collateral Required Amount
with respect to such Distribution Date shall be distributed by the Trustee to
fund any deficiency pursuant to Section 4.6(c)(i) and Sections 4.8(f) and (h),
in that order of priority.
SECTION 4.10 PRINCIPAL SHORTFALL. The "Principal Shortfall" for Series
1998-2 shall be equal to (a) for any Distribution Date with respect to the
Revolving Period zero, or such higher amount designated by the Servicer in an
Officer's Certificate, (b) for any Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Payment Date), the
excess, if any, of the Controlled Deposit Amount with respect to such
Distribution Date over the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections), (c) for each Distribution Date with respect to a Rapid
Amortization Period, unless and until the Collateral Indebtedness Amount has
been paid in full, the excess, if any, of the sum of the Class A Investor
Amount, the Class B Investor Amount and the
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Collateral Indebtedness Amount over the amount of Available Principal
Collections for such Distribution Date (excluding any portion thereof
attributable to Shared Principal Collections) and (d) for each Distribution Date
after the Class A Investor Amount and the Class B Investor Amount have been paid
in full, the excess, if any, of the Investor Amount over the amount of Available
Principal Collections for such Distribution Date, or such lesser amount
designated by the Servicer.
SECTION 4.11 FINANCE CHARGE SHORTFALL. The "Finance Charge Shortfall"
for Series 1998-2 for any Distribution Date shall be equal to the excess, if
any, of (a) the full amount required to be paid, without duplication, pursuant
to Sections 4.6(a), 4.6(b), 4.6(c) and 4.6(d) and Sections 4.8 (a)-(o) on such
Distribution Date over (b) the Investor Percentage of Collections of Finance
Charge Receivables with respect to the related Monthly Period.
SECTION 4.12 CASH COLLATERAL ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Cash Collateral
Account"), bearing a designation clearly indicating that the funds held therein
are held for the benefit of the Series 1998-2 Certificateholders. The Cash
Collateral Account shall initially be established with the Trustee. The Trustee
shall possess all right, title and interest in all funds held from time to time
in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-2 Certificateholders. If, at any time, the
institution holding the Cash Collateral Account ceases to be a Qualified
Institution, the Trustee (or the Servicer on its behalf) shall within five (5)
Business Days establish a new Cash Collateral Account meeting the conditions
specified above with a Qualified Institution and shall transfer any cash and/or
any investments to such new Cash Collateral Account. The Trustee, at the
direction of the Servicer, shall make deposits to and withdrawals from the Cash
Collateral Account in the amounts and at the times set forth in this Agreement
and the Loan Agreement. All withdrawals from the Cash Collateral Account shall
be made in the priority set forth below. The interest of the Collateral
Indebtedness Holder in the Cash Collateral Account shall be subordinated to the
interests of the Class A Certificateholders and the Class B Certificateholders
as provided herein and in the Loan Agreement. The Collateral Indebtedness Holder
shall not be entitled to reimbursement from the Trust Property for any
withdrawals from the Cash Collateral Account except as specifically provided in
this Agreement and the Loan Agreement.
(b) Funds held in the Cash Collateral Account shall be
invested at the direction of the Servicer by the Trustee in Permitted
Investments. Funds held in the Cash Collateral Account on any Distribution Date,
after giving effect to any withdrawals from the Cash Collateral Account on such
Distribution Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Distribution Date. No Permitted Investment shall be disposed of
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prior to its maturity; provided, however, that the Trustee may sell, liquidate
or dispose of a Permitted Investment before its maturity, if so directed by the
Servicer, the Servicer having reasonably determined that the interest of the
1998-2 Certificateholders may be adversely affected if such Permitted Investment
is held to its maturity. The proceeds of any such investments shall be invested
in such investments that will mature so that such funds will be available for
withdrawal on or prior to the Distribution Date immediately following the date
of such investment. The Trustee shall maintain for the benefit of the Series
1998-2 Certificateholders possession of the negotiable instruments or
securities, if any, evidencing such Permitted Investments. On each Distribution
Date, all interest and earnings (net of losses and investment expenses) on funds
held in the Cash Collateral Account shall be treated as a portion of Excess
Spread for such Distribution Date and applied in accordance with Section 4.8.
(c) On each Determination Date, the Servicer shall calculate
the amount (the "Required Draw Amount") by which the amounts specified in
clauses (a) through (f) and clauses (h) and (i) of Section 4.8 with respect to
the related Distribution Date exceed the amount of Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1998-2 with respect to the
related Monthly Period available to pay such specified amounts. In the event
that for any Distribution Date the Required Draw Amount is greater than zero,
the Servicer shall give written notice to the Trustee of such positive Required
Draw Amount on the related Determination Date. On the Distribution Date, the
Required Draw Amount, if any, up to the Available Cash Collateral Amount, shall
be withdrawn from the Cash Collateral Account and distributed to fund any
deficiency pursuant to clauses (a) through (f) and clause (h) of Section 4.8 (in
the order of priority set forth in Section 4.8).
(d) In the event that the Cash Enhancement Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account and all payments of principal to Series 1998-2
Certificateholders with respect to such Distribution Date, is greater than zero,
the Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Cash Collateral Account, and apply and pay in accordance with
the Loan Agreement, an amount equal to such Cash Enhancement Surplus; provided,
however, that the Transferor, at its option, to be exercised in its sole
discretion, may instruct the Servicer not to instruct the Trustee to withdraw
such Cash Enhancement Surplus (or any portion thereof), in which event the
Trustee shall not withdraw such Cash Enhancement Surplus (or portion thereof)
from the Cash Collateral Account.
SECTION 4.13 PRINCIPAL ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Principal Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-2 Certificateholders. The Principal
Account shall initially be established with the Trustee.
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The Trustee shall possess all right, title and interest in all funds held from
time to time in the Principal Account and in all proceeds thereof. The Principal
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-2 Certificateholders. If, at any time, the
institution holding the Principal Account ceases to be a Qualified Institution,
the Trustee (or the Servicer on its behalf) shall within five (5) Business Days
establish a new Principal Account meeting the conditions specified above with a
Qualified Institution and shall transfer any cash and/or any investments to such
new Principal Account. Pursuant to the authority granted to the Servicer in
Section 3.1(b) of the Agreement, the Servicer shall have the power, revocable by
the Trustee, to make withdrawals and payments or to instruct the Trustee to make
withdrawals and payments from the Principal Account for the purposes of carrying
out the Servicer's or the Trustee's duties hereunder.
(b) Funds held in the Principal Account shall be invested at
the direction of the Servicer by the Trustee in Permitted Investments. All such
Permitted Investments shall be held by the Trustee for the benefit of the Series
1998-2 Certificateholders; provided, however, that on each Distribution Date all
interest and other investment income (net of losses and investment expenses)
("Principal Investment Proceeds") on funds held therein shall be applied as set
forth in Section 4.13(c) below. Funds held in the Principal Account shall be
invested in Permitted Investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. No
Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1998-2 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
(c) On each Distribution Date with respect to the Accumulation
Period, the Servicer shall direct the Trustee to withdraw from the Principal
Account and deposit into the Collection Account all Principal Investment
Proceeds then held in the Principal Account and such Principal Investment
Proceeds shall be treated as a portion of (x) prior to the payment in full of
the Class A Investor Amount, Class A Available Funds and (y) thereafter, Class B
Available Funds, in each case for such Distribution Date.
(d) Reinvested interest and other investment income on funds
deposited in the Principal Account shall not be considered to be principal
amounts held therein for purposes of this Agreement.
SECTION 4.14 RESERVE ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-2 Certificateholders. The Reserve
Account shall initially be established with the Trustee.
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The Trustee shall possess all right, title and interest in all funds held from
time to time in the Reserve Account and in all proceeds thereof. The Reserve
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-2 Certificateholders. If at any time the institution
holding the Reserve Account ceases to be a Qualified Institution, the Trustee
(or the Servicer on its behalf) shall within five (5) Business Days establish a
new Reserve Account meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash and/or any investments to such new
Reserve Account. The Trustee, at the direction of the Servicer, shall (i) make
withdrawals from the Reserve Account from time to time in an amount up to the
Available Reserve Account Amount at such time, for the purposes set forth in
this Agreement, and (ii) on each Distribution Date (from and after the Reserve
Account Funding Date) prior to the termination of the Reserve Account shall make
a deposit into the Reserve Account in the amount specified in, and otherwise in
accordance with, Section 4.8(p).
(b) Funds held in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Permitted Investments. Funds held in
the Reserve Account on any Distribution Date, after giving effect to any
withdrawals from the Reserve Account on such Distribution Date, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. The
Trustee shall maintain for the benefit of the Series 1998-2 Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. No Permitted Investment shall be disposed of prior to its
maturity; provided, however, that the Trustee may sell, liquidate or dispose of
an Permitted Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the Series 1998-2
Certificateholders may be adversely affected if such Permitted Investment is
held to its maturity. On each Distribution Date, all interest and earnings (net
of losses and investment expenses) on funds held in the Reserve Account shall be
retained in the Reserve Account (to the extent that the Available Reserve
Account Amount is less than the Required Reserve Account Amount) and the
balance, if any, shall be deposited in the Collection Account and treated as a
portion of (x) until the payment in full of the Class A Investor Amount, Class A
Available Funds and (y) thereafter, Class B Available Funds, in each case for
such Distribution Date. For purposes of determining the availability of funds or
the balance in the Reserve Account for any reason under this Agreement, except
as otherwise provided in the preceding sentence, investment earnings on such
funds shall be deemed not to be available or held.
(c) On the Determination Date preceding each Distribution Date
with respect to the Accumulation Period (prior to the Class B Expected Payment
Date) and the first Special Distribution Date, the Servicer shall calculate the
"Reserve Draw Amount" which shall be equal to the excess, if any, of the Covered
Amount with respect to such Distribution Date or Special Distribution Date over
the Principal Investment Proceeds with respect to such Distribution Date or
Special Distribution Date.
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(d) In the event that for any Distribution Date the Reserve
Draw Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on such
Distribution Date by the Trustee (acting in accordance with the instructions of
the Servicer), deposited into the Collection Account and included in (i) until
the payment in full of the Class A Investor Amount, Class A Available Funds and
(ii) thereafter, Class B Available Funds, in each case for such Distribution
Date.
(e) In the event that the Reserve Account Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Reserve Account with respect to such Distribution Date, is greater than
zero, the Trustee, acting in accordance with the instructions of the Servicer,
shall withdraw from the Reserve Account, and pay an amount equal to such Reserve
Account Surplus in accordance with the Loan Agreement.
(f) Upon the earliest to occur of (i) the termination of the
Trust pursuant to Article XII of the Agreement, (ii) the day on which the Class
A Investor Amount and Class B Investor Amount have been paid in full, (iii) if
the Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to Series 1998-2 and (iv) if the Accumulation Period has commenced,
the earlier of the first Special Distribution Date and the Class B Expected
Payment Date, the Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the Series 1998-2
Certificateholders which are payable from the Reserve Account as provided
herein, shall withdraw from the Reserve Account and pay in accordance with the
Loan Agreement all amounts, if any, held in the Reserve Account, and the Reserve
Account shall be deemed to have terminated for all purposes of the Agreement.
SECTION 4.15 POSTPONEMENT OF ACCUMULATION PERIOD. The Accumulation
Period is scheduled to commence at the end of the day on the last day of the
April 2000 Monthly Period; provided, however, that, if the Accumulation Period
Length (determined as described below) shall be less than 12 months, the date on
which the Accumulation Period actually commences may, at the option of the
Transferor, be delayed to the first day of any month that is a number of whole
months prior to the Class A Expected Payment Date at least equal to the
Accumulation Period Length and, as a result, the number of Monthly Periods in
the Accumulation Period shall at least equal the Accumulation Period Length. On
each Determination Date until the Accumulation Period begins, the Servicer shall
determine the "Accumulation Period Length," which shall equal the number of
whole months such that the sum of the Accumulation Period Factors for each month
during such period will be equal to or greater than the Required Accumulation
Factor Number; provided, however, that the Accumulation Period Length shall not
be determined to be less than one month.
SECTION 4.16 ADDITIONAL ISSUANCES OF CLASS D CERTIFICATES.
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(a) On any day in the Revolving Period, the Trustee shall
issue to the Transferor for execution, upon the Transferor's request, and the
Trustee shall authenticate and deliver, in accordance with the Transferor's
instructions, an additional principal amount of Class D Certificates
("Additional Class D Certificates") as provided below.
(b) Additional Class D Certificates may be issued, executed
and delivered upon satisfaction of the following conditions:
(i) after giving effect to the issuance of such
Additional Class D Certificates, the Transferor
Amount shall be at least equal to the Minimum
Transferor Amount and the Aggregate Principal
Receivables shall be at least equal to the Minimum
Aggregate Principal Receivables;
(ii) the Transferor shall have given notice by 10:00 A.M.,
New York City time, on the date such Additional Class
D Certificates are to be issued to the Trustee, the
Paying Agent, the Servicer and the Collateral
Indebtedness Holder of the proposed issuance of such
Additional Class D Certificates;
(iii) on or before the date on which such Additional Class
D Certificates are issued, the Transferor shall have
delivered an Opinion of Counsel addressed to the
Trustee, dated the date of such issuance, to the
effect that such issuance will not adversely affect
the tax characterization as debt of Investor
Certificates of any outstanding Series or Class with
respect to which an Opinion of Counsel addressed to
the Trustee was delivered at the time of their
issuance that such Investor Certificates would be
characterized as debt, cause the Trust to be
classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable
as a corporation, and cause or constitute an event in
which gain or loss would be recognized by any
Certificateholder; and
(iv) on or before the date such Additional Class D
Certificates are issued, the Transferor shall deliver
to the Trustee an Officer's Certificate confirming
the matters set forth in clause (i) above. The
Trustee may conclusively rely on such certificate,
shall have no duty to make inquiries with regard to
matters set forth therein and shall incur no
liability in so relying; and
(v) consent of the Enhancement Provider shall have been
obtained (but only to the extent that the Additional
Class D Certificates are issued to satisfy the
Required Cash Collateral Amount provision pursuant to
the Loan Agreement).
- 43 -
<PAGE> 47
SECTION I. ARTICLE V OF THE AGREEMENT. Article V of the Agreement as it
relates to Series 1998-2 shall read in its entirety as follows:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS.
(a) On each Determination Date, the Servicer shall deliver to
the Trustee and Paying Agent a certificate substantially in the form of Exhibit
B prepared by the Servicer. The Trustee shall be under no duty to recalculate,
verify or recompute the information on such certificate.
(b) On each Distribution Date, the Paying Agent shall
distribute to each Class A Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class A Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class A
Certificates pursuant to this Agreement.
(c) On the Class A Expected Payment Date and each Special
Distribution Date, the Paying Agent shall distribute to each Class A
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class A
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class A Certificates pursuant to this Agreement.
(d) On each Distribution Date, the Paying Agent shall
distribute to each Class B Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class B Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class B
Certificates pursuant to this Agreement.
(e) On the Class B Expected Final Distribution Date and each
Special Distribution Date, the Paying Agent shall distribute to each Class B
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class B
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class B Certificates pursuant to this Agreement.
(f) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class D
Certificates pursuant to this Agreement.
- 44 -
<PAGE> 48
(g) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such date to pay principal of the Class D Certificates
pursuant to this Agreement.
(h) Except as provided in Section 12.2 with respect to a final
distribution and Section 5.3 with respect to payments to the Collateral
Indebtedness Holder, distributions to Series 1998-2 Certificateholders hereunder
shall be made by check mailed to each such Certificateholder at such
Certificateholder's address appearing in the Certificate Register without
presentation or surrender of any such Series 1998-2 Certificate or the making of
any notation thereon; provided, however, that with respect to such Certificates
registered in the name of a Clearing Agency, such distributions shall be made to
such Clearing Agency in immediately available funds.
SECTION 5.2 STATEMENTS TO SERIES 1998-2 CERTIFICATEHOLDERS. On each
Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to
each Series 1998-2 Certificateholder, including, for the avoidance of doubt, the
Collateral Indebtedness Holder, a statement substantially in the form of Exhibit
C prepared by the Servicer setting forth certain information relating to the
Trust and the Series 1998-2 Certificates.
On or before January 31 of each calendar year, beginning with
1998, the Paying Agent, on behalf of the Trustee, shall furnish or cause to be
furnished to each Person who at any time during the preceding calendar year was
a Series 1998-2 Certificateholder a statement prepared by the Servicer
containing the information which is required to be contained in Exhibit C,
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Certificateholder of such Series, together with other
information as is required to be provided by an issuer of indebtedness under the
Code and such other customary information as is necessary to enable the
Certificateholders of such Series to prepare their tax returns. Such obligation
of the Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall have been provided by the Paying
Agent pursuant to any requirements of the Code as from time to time in effect.
SECTION 5.3 DISTRIBUTIONS TO COLLATERAL INDEBTEDNESS HOLDER.
Notwithstanding the foregoing provisions of this Article V, amounts payable to
the Collateral Indebtedness Holder pursuant to this Series Supplement shall be
distributed in the manner provided for in the Loan Agreement.
[END OF ARTICLE V]
- 45 -
<PAGE> 49
SECTION J. PAY OUT EVENTS. If any one of the events specified in
Section 9.1 of the Agreement or any of the following events shall occur during
either the Revolving Period or the Accumulation Period with respect to the
Series 1998-2 Certificates:
(a) failure on the part of the Transferor or the Servicer (x)
to make any payment or deposit required by the terms of the Agreement or this
Series Supplement on or before the date occurring five (5) Business Days after
the date such payment or deposit is required to be made or (y) duly to observe
or perform in any material respect any other covenants or agreements applicable
to such party set forth in the Agreement or this Series Supplement, which
failure has a material adverse effect on the Series 1998-2 Certificateholders,
and which continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Transferor by the Trustee, or to the Transferor and the
Trustee by the Series 1998-2 Certificateholders representing not less than 50%
of the Investor Amount, and continues to materially and adversely affect the
Series 1998-2 Certificateholders for such period;
(b) any representation or warranty made by the Transferor in
the Agreement or this Series Supplement, or information contained in a computer
file, microfiche or written list required to be delivered by the Transferor
pursuant to the Agreement, shall prove to have been incorrect in any material
respect when made or when delivered, (i) which continues to be incorrect in any
material respect for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Series
1998-2 Certificateholders representing not less than 50% of the Investor Amount,
and (ii) as a result of which the interests of the Series 1998-2
Certificateholders are materially and adversely affected and continue to be
materially and adversely affected for such period; provided, however, a Pay Out
Event shall not be deemed to have occurred if the Transferor has accepted
reassignment of the related Receivable, or all of such Receivables, if
applicable, during such period in accordance with the provisions of the
Agreement;
(c) the average of the Portfolio Yields for any three (3)
consecutive Monthly Periods is less than the average Base Rate for such three
(3) Monthly Periods;
(d) the failure to pay the Class A Investor Amount on the
Class A Expected Payment Date or the failure to pay the Class B Investor Amount
on the Class B Expected Payment Date;
(e) the Transferor shall fail to designate, or be unable to
designate, Additional Accounts, the Receivables of which will be Eligible
Receivables, as required by the Agreement, and such failure shall continue for a
period of five (5) Business Days;
(f) any Servicer Default shall occur which would have a
material adverse effect on the Series 1998-2 Certificateholders; or
- 46 -
<PAGE> 50
(g) the Available Enhancement Amount shall be less than the
Required Enhancement Amount for three consecutive Monthly Periods; then, (i) in
the case of any event described in clause (a), (b) or (f), after the applicable
grace period set forth in such subparagraphs, either the Trustee or Series
1998-2 Certificateholders representing more than 50% of the Investor Amount, by
notice then given in writing to the Transferor and the Servicer (and to the
Trustee, if given by the Series 1998-2 Certificateholders) may declare that a
Pay Out Event has occurred with respect to only the Series 1998-2 Certificates
as of the date of such notice and (ii) in the case of any event described in
Section 9.1 of the Agreement or in clauses (c), (d), (e) or (g) above, a Pay Out
Event with respect to only the Series 1998-2 Certificates will be deemed to have
occurred without any notice or other action on the part of the Trustee or the
Series 1998-2 Certificateholders or all certificateholders, as appropriate,
immediately upon the occurrence of such event.
SECTION K. RESTRICTIONS ON TRANSFER.
(a) The Collateral Indebtedness Interest shall be subject to
the restrictions on transfer set forth in the Loan Agreement.
(b) The Transferor may at any time, without the consent of the
Class A Certificateholders and Class B Certificateholders, (i) sell or transfer
all or a portion of the Class D Certificates, provided that (A) the Transferor
shall have given notice to the Trustee, the Servicer and the Rating Agencies of
such proposed sale or transfer of the Class D Certificates at least five (5)
Business Days prior to the consummation of such sale or transfer; (B) the Rating
Agency Condition shall have been satisfied; (C) no Pay Out Event shall have
occurred prior to the consummation of such proposed sale or transfer of Class D
Certificates; (D) the Transferor shall have delivered an Officer's Certificate
dated the date of the consummation of such proposed sale or transfer to the
effect that, in the reasonable belief of the Transferor, such action will not,
based on the facts known to such officer at the time of such certification,
cause a Pay Out Event to occur with respect to any Series, and (E) the
Transferor shall have provided an Opinion of Counsel addressed to the Trustee,
dated the date of such certificate with respect to such action, that such
proposed sale or transfer will not adversely affect the tax characterization as
debt of Investor Certificates of any outstanding Series or Class with respect to
which an Opinion of Counsel addressed to the Trustee was delivered at the time
of their issuance that such Investor Certificates would be characterized as
debt, cause the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation and cause
or constitute an event in which gain or loss would be recognized by any
Certificateholder.
(c) Each initial transferee of the Class D Certificates or any
interest therein and any assignee thereof or participant therein (each a
"holder") shall certify to the Transferor, the Servicer and the Trustee that it
has neither acquired nor will it sell,
- 47 -
<PAGE> 51
transfer, assign participate, pledge, hypothecate, or otherwise dispose (any
such act, a "transfer") of any interest in its Class D Certificates or cause an
interest in its Class D Certificates to be marketed on or through (i) an
"established securities market" within the meaning of Section 7704(b)(1) of Code
and any Treasury regulation thereunder, including, without limitation, an
over-the-counter market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations or (ii) a "secondary market" within the
meaning of Section 7704(b)(2) of the Code and any Treasury regulation
thereunder, including, without limitation, a market wherein interests in the
Class D Certificates are regularly quoted by any Person making a market in such
interests and a market wherein any Person regularly makes available bid or offer
quotes with respect to interests in the Class D Certificates and stands ready to
effect buy or sell transactions at the quoted price for itself or on behalf of
others. In addition, each holder shall certify, prior to any delivery or
transfer to it of a Class D Certificate or interest therein, that it is not and
will not become a partnership, Subchapter S corporation or grantor trust for
United States federal income tax purposes. If a holder cannot make the
certification described in the preceding sentence, the Transferor, the Trustee
or the Servicer may prohibit a transfer to such entity; provided, however, that
if the Transferor, the Trustee or the Servicer agrees to permit such a transfer,
the Transferor, the Servicer or the Trustee may require additional
certifications in order to prevent the Trust from being treated as a publicly
traded partnership. Each holder acknowledges that special tax counsel to the
Transferor may render Opinions of Counsel from time to time to the Transferor
and others that the Trust will not be treated as an association or as a publicly
traded partnership taxable as a corporation, and that such Opinions of Counsel
will rely in part on the accuracy of the certifications in this subsection K(c).
SECTION K1. TAX CHARACTERIZATION OF THE CLASS D CERTIFICATES AND THE
COLLATERAL INDEBTEDNESS INTEREST. It is the intention of the parties hereto that
the Class D Certificates and the Collateral Indebtedness Interest be treated
under applicable tax law as indebtedness. In the event that either the Class D
Certificates or the Collateral Indebtedness Interest are not so treated, it is
the intention of the parties that the Class D Certificates or the Collateral
Indebtedness Interest, as the case may be, be treated under applicable tax law
as interests in a partnership that owns the Receivables. In the event that
either the Class D Certificates or the Collateral Indebtedness Interest are
treated under applicable tax law as interests in a partnership, it is the
intention of the parties that the Class D Certificates or the Collateral
Indebtedness Interest, as the case may be, be treated as guaranteed payments
and, if for any reason they are not so treated, that the holders of the Class D
Certificates or the Collateral Indebtedness Interest, as the case may be, be
specially allocated gross interest income equal to the interest accrued during
each Interest Period on the Class D Certificates and on the Collateral
Indebtedness Interest.
SECTION L. RATIFICATION OF MASTER POOLING AND SERVICING AGREEMENT. As
supplemented by this Series Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by this Series
Supplement shall be read, taken, and construed as one and the same instrument.
- 48 -
<PAGE> 52
SECTION L1. FASIT ELECTION. Each Series 1998-2 Certificateholder, by
acquiring an interest in a Series 1998-2 Certificate, is deemed to consent to
any amendment to the Agreement or this Series Supplement necessary for the
Transferor to elect for the Trust or any portion thereof to be treated as a
FASIT within the meaning of Section 860L of the Code (or any successor provision
thereto), provided that, such election may not be made unless the Transferor
delivers to the Trustee (i) an Opinion of Counsel to the effect that (x) the
issuance of FASIT regular interests will not adversely affect the tax
characterization as debt of Investor Certificates of any outstanding Series or
Class with respect to which an Opinion of Counsel was delivered at the time of
their issuance that such Investor Certificates would be characterized as debt,
(y) following such issuance, the Trust will not be classified, for federal
income tax purposes, as an association (or publicly traded partnership) taxable
as a corporation, and (z) such issuance will not cause or constitute an event in
which gain or loss would be recognized by any Investor Certificateholder, and
(ii) an Officer's Certificate to the effect that such issuance will not have a
material adverse effect on Investor Certificateholders of any outstanding Series
or class (viewed as a Series or a class, as applicable).
SECTION L2. PAIRED SERIES. Subject to obtaining confirmation by each
Rating Agency of the then existing ratings of each class of Series 1998-2
Certificates which are then rated, the consent of the Enhancement Provider, and
prior to a Pay Out Event, the Series 1998-2 Certificates may be paired with one
or more other Series (each a "Paired Series"). Each Paired Series either will be
pre-funded with an initial deposit to a pre-funding account in an amount up to
the initial principal balance of such Paired Series, primarily from the proceeds
of the sale of such Paired Series or will have a variable principal amount. Any
such pre-funding account will be held for the benefit of such Paired Series and
not for the benefit of the Series 1998-2 Certificateholders. As principal is
paid with respect to the Series 1998-2 Certificates, either (i) in the case of a
pre-funded Paired Series, an equal amount of funds held in any pre-funding
account for such pre-funded Paired Series will be released (which funds will be
distributed to the Transferor) or (ii) in the case of a Paired Series having a
variable principal amount, an interest in such variable Paired Series in an
equal or lesser amount may be sold by the Trust (and the proceeds thereof will
be distributed to the Transferor) and, in either case, the invested amount in
the Trust of such Paired Series will increase by up to a corresponding amount.
Upon payment in full of the Certificates, assuming that there have been no
unreimbursed charge offs with respect to any related Paired Series, the
aggregate investor amount of such related Paired Series will have been increased
by an amount up to an aggregate amount equal to the Investor Amount paid to the
Certificateholders since the issuance of such Paired Series. The issuance of a
Paired Series will be subject to the conditions described in Section 6.9(b) of
the Agreement. The numerator of the Investor Percentage with respect to
allocations of Principal Receivables may be changed upon the occurrence of a pay
out event with respect to a Paired Series (provided that such numerator is not
less than the Adjusted Investor Amount as of the last day of the revolving
period for such Paired Series).
- 49 -
<PAGE> 53
SECTION M. COUNTERPARTS. This Series Supplement may be executed in any
number of counterparts (and by different parties on separate counterparts), each
of which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
SECTION N. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION O. SUBORDINATION OF CERTAIN TERMINATION PAYMENTS.
Notwithstanding anything contained in Section 12.2(c) of the Agreement, upon the
sale of Receivables or interests therein as provided in Section 12.2(c) of the
Agreement, the proceeds of any such sale payable in respect of the Series 1998-2
Certificates shall be payable first to the Class A Certificates until paid in
full, then to the Class B Certificates until paid in full, then to the
Collateral Indebtedness Interest until paid in full and then to the Class D
Certificates until paid in full.
[Signatures on next page]
- 50 -
<PAGE> 54
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
-----------------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
PROFFITT'S, INC.,
as Servicer
By:
-----------------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------------
Name:
Title:
- 51 -
<PAGE> 55
EXHIBIT A-1
TO THE
SERIES 1998-2 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
<PAGE> 56
EXHIBIT A-1
TO THE
SERIES 1998-2 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
REGISTERED $200,000,000
NO. A-1 CUSIP NO. 742966 AC 8
Unless this Class A Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1998-2
Class A Expected Payment Date:
May 2001 Distribution Date
Each $1,000 minimum denomination represents a
fractional undivided interest
in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit
Corporation or any Affiliate thereof)
A-1-1
<PAGE> 57
This certifies that Cede & Co. (the "Class A Certificateholder") is the
registered owner of a fractional undivided interest in certain assets of a trust
(the "Trust") created pursuant to the Master Pooling and Servicing Agreement,
dated as of August 21, 1997 (as amended and supplemented, the "Agreement"), as
supplemented by the Series 1998-2 Supplement, dated as of May 21, 1998 (as
amended and supplemented, the "Series Supplement"), among Proffitt's Credit
Corporation, as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank
Minnesota, National Association, a national banking association, as trustee (the
"Trustee"). The corpus of the Trust consists of (i) receivables (the
"Receivables") generated from time to time in a portfolio of consumer revolving
credit card accounts identified under the Agreement (the "Accounts"), (ii) all
monies due or to become due in payment of the Receivables, (iii) all proceeds of
the Receivables and proceeds of Insurance Policies relating to the Receivables,
(iv) all monies held in certain accounts of the Trust (excluding investment
earnings, unless otherwise specified in the Agreement or any Supplement), (v)
all Recoveries and Collections of the Receivables, (vi) any Enhancement with
respect to any Series (or class thereof) and (vii) all other assets and
interests constituting the Trust Property. Although a summary of certain
provisions of the Agreement and the Series Supplement is set forth below and on
the Summary of Terms and Conditions attached hereto and made a part hereof, this
Class A Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at
Norwest Bank Minnesota, N.A., Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479-0070, Attention: Asset Backed Securities Corporate Trust
Department. To the extent not defined herein, the capitalized terms used herein
have the meanings ascribed to them in the Agreement or the Series Supplement, as
applicable.
This Class A Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series Supplement, to
which Agreement and Series Supplement, each as amended and supplemented from
time to time, the Class A Certificateholder by virtue of the acceptance hereof
assents and is bound.
It is the intent of the Transferor and the Investor
Certificateholders (and Certificate Owners) that, for Federal, state and local
income and franchise tax purposes only, the Investor Certificates will qualify
as indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class A Certificateholder (and each
Certificate Owner of a Class A Certificate), by the acceptance of this Class A
Certificate (or its interest therein), is deemed to agree to treat this Class A
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
A-1-2
<PAGE> 58
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Class A
Certificate shall not be entitled to any benefit under the Agreement or the
Series Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class A
Certificate to be duly executed by its undersigned officer thereunto duly
authorized.
PROFFITT'S CREDIT CORPORATION
By:
----------------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
Dated: May 21, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the
within-mentioned Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
------------------------------------
Authorized Officer
Dated: May 21, 1998
A-1-3
<PAGE> 59
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1998-2
SUMMARY OF TERMS AND CONDITIONS
This Class A Certificate is one of a Series of Certificates
entitled "Proffitt's Credit Card Master Trust, Series 1998-2 Certificates" (the
"Series 1998-2 Certificates"), and one of a class thereof entitled "Class A
Asset Backed Certificates, Series 1998-2" (the "Class A Certificates"), each of
which represents a fractional undivided interest in certain assets of the Trust.
The Trust Property is allocated in part to the Investor Certificateholders of
all outstanding Series (the "Certificateholders' Interest") and the interests,
if any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class A Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class A Investor Amount at such time. The Class A Initial Investor
Amount is $200,000,000. The Class A Investor Amount on any date will be an
amount equal to (a) the Class A Initial Investor Amount, minus (b) the aggregate
amount of principal payments made to the Class A Certificateholders prior to
such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge Offs for all prior Distribution Dates over the sum of the
aggregate amount of Class A Investor Charge Offs reimbursed pursuant to the
Series 1998-2 Supplement and, without duplication, the aggregate amount of the
reductions of the Series Adjustment Amounts allocable to the Class A
Certificates; provided, however, that the Class A Investor Amount may not be
reduced below zero. The "Class A Adjusted Investor Amount" shall mean, on any
date of determination while the Class A Certificates are outstanding, an amount
equal to the Class A Investor Amount minus the Principal Account Balance (but
not less than zero). In addition, classes of the Series 1998-2 Certificates
entitled "Class B Asset Backed Certificates, Series 1998-2" (the "Class B
Certificates"), "Collateral Indebtedness Interest, Series 1998-2" (the
"Collateral Indebtedness Interest") and "Class D Asset Backed Certificates,
Series 1998-2" (the "Class D Certificates") will be issued. The Exchangeable
Transferor Certificate has been issued to Proffitt's Credit Corporation pursuant
to the Agreement, which represents the Transferor Interest.
Subject to the terms and conditions of the Agreement, the
Transferor may from time to time direct the Trustee, on behalf of the Trust, to
issue one or more new Series of Investor Certificates, and/or Additional Class D
Certificates, which will represent fractional undivided interests in certain
Trust Property.
Each Class A Certificate represents the right to receive
payments of (i) interest at the rate of 6.00% per annum accruing from May 21,
1998, payable on June 15, 1998 and on the 15th day of each month thereafter (or,
if such 15th day is not a Business Day, the next succeeding Business Day) (each,
a "Distribution Date") and (ii) principal on the May 2001 Distribution Date (the
"Class A Expected Payment Date") (and on each
A-1-4
<PAGE> 60
Distribution Date thereafter, if the Class A Certificates are not paid in full
on the Class A Expected Payment Date) or, upon the occurrence of a Pay Out
Event, on each Distribution Date relating to the Rapid Amortization Period, in
each case funded from a percentage of the payments received with respect to the
Receivables and certain other funds, all as more fully described in the
Agreement and the Series 1998-2 Supplement. Interest on the Class A Certificates
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
The Class B Certificates, the Collateral Indebtedness Interest
and the Class D Certificates are subordinated to the Class A Certificates to the
extent set forth in the Series 1998-2 Supplement.
On each Distribution Date, the Paying Agent shall distribute
to each Class A Certificateholder of record at the close of business on the last
Business Day of the immediately preceding calendar month (each a "Record Date")
such Class A Certificateholder's pro rata share of such amounts (including
amounts held in the Principal Account) as are payable to the Class A
Certificateholders pursuant to the Agreement and the Series 1998-2 Supplement.
Distributions with respect to this Class A Certificate will be made by the
Paying Agent by check mailed to the address of the Class A Certificateholder of
record appearing in the Certificate Register without the presentation or
surrender of this Class A Certificate or the making of any notation thereon
(except for the final distribution in respect of this Class A Certificate),
except that with respect to Class A Certificates registered in the name of Cede
& Co., as nominee for The Depository Trust Company, distributions will be made
in the form of immediately available funds. Final payment of this Class A
Certificate will be made only upon presentation and surrender of this Class A
Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee in accordance with the Agreement and the
Series 1998-2 Supplement.
On any Distribution Date occurring on or after the day on
which the sum of the Class A Adjusted Investor Amount, the Class B Adjusted
Investor Amount, the Collateral Indebtedness Amount and the amount of the Class
D Investor Amount held by parties other than the Transferor or any of its
Affiliates is less than or equal to 10% of the sum of the Class A Investor
Amount on the Closing Date, the Class B Investor Amount on the Closing Date, the
Collateral Indebtedness Amount on the Closing Date and the highest amount of the
Class D Investor Amount held by parties other than the Transferor or any of its
Affiliates since the Closing Date, the Class A Certificates are subject to
optional repurchase by the Transferor, if certain conditions set forth in the
Agreement or the Series 1998-2 Supplement are satisfied. The repurchase price
will be equal to the Class A Adjusted Investor Amount plus accrued and unpaid
interest thereon less the amount held in the Collection Account allocable to
Series 1998-2 to be applied other than to deposits in the Reserve Account, with
any excess payable to the Transferor as holder of the Exchangeable Transferor
Certificate.
A-1-5
<PAGE> 61
Subject to certain conditions in the Agreement, if the
Investor Amount is greater than zero on the September 2004 Distribution Date
(the "Stated Series Termination Date"), the Trustee shall sell or cause to be
sold an amount of Receivables up to 110% of the Adjusted Investor Amount at the
close of business on such date, but not more than the total amount of
Receivables allocable to the Series 1998-2 Certificates, and apply the proceeds
of such sale as provided in the Agreement and the Series 1998-2 Supplement.
This Class A Certificate does not represent a recourse
obligation of, or an interest in, the Transferor, the Servicer or any Affiliate
of any of them and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality. This Class A
Certificate is limited in right of payment to certain Collections with respect
to the Receivables (and certain other amounts), all as more specifically set
forth hereinabove and in the Agreement and the Series 1998-2 Supplement.
The Agreement and any Supplement may be amended from time to
time by the Servicer, the Transferor and the Trustee, without the consent of any
of the Investor Certificateholders, to cure any ambiguity, to revise certain
exhibits and schedules, to correct or supplement any provision therein which may
be inconsistent with any other provision therein or to add other identifying
code numbers or identifying characteristics to the definition of Account or to
add any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. Additionally,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add to, change or eliminate any of the
provisions of the Agreement or any right of Investor Certificateholders or to
enable Bearer Certificates to be issued in conformity with the Bearer Rules, to
provide that Bearer Certificates may be registrable as to principal, to change
or eliminate any restrictions on the payment of principal (or premium, if any)
or any interest on Bearer Certificates to comply with the Bearer Rules, to
permit Bearer Certificates to be issued in exchange for Registered Certificates
(if then permitted by the Bearer Rules), to permit Bearer Certificates to be
issued in exchange for Bearer Certificates of other authorized denominations or
to permit the issuance of Investor Certificates in uncertificated form, provided
any such action shall not adversely affect the interest of the holders of Bearer
Certificates of any Series or any related Coupons in any material respect unless
such amendment is necessary to comply with the Bearer Rules, or any right of the
Investor Certificateholders of any outstanding Series; provided that (i) the
Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of the Investor Certificateholders of any outstanding Series, (ii)
such amendment shall not cause the Trust to be characterized as a corporation
for Federal income tax purposes or otherwise have a material adverse effect on
the Federal income taxation of any Series and (iii) the Servicer shall have
given each Rating Agency ten (10) Business Days' prior
A-1-6
<PAGE> 62
written notice of such amendment and shall have received written confirmation
from each Rating Agency that the Rating Agency Condition will be met. No such
amendment, however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth herein, in the Agreement or the Series
1998-2 Supplement or (i) reduce in any manner the amount of, or delay the timing
of, distributions which are required to be made on any Investor Certificates of
any Series, (ii) change the definition of or the manner of calculating the
interest of any Certificateholder, (iii) alter the requirements for changing the
percentage by which the Minimum Transferor Amount is determined, (iv) change the
manner in which the Transferor Amount is determined, or (v) reduce the
percentage required in Section 13.1(b) of the Agreement to consent to such
amendment. Notwithstanding the foregoing, any amendment providing for the
transfer of Receivables to or by, and the generation of new Receivables by, the
Bank as Seller, Transferor, or Eligible Originator, the appointment of the Bank
as Servicer, and/or the assignment of this Agreement, including any Supplement
to the Bank in connection with such transfer and any amendments necessary to
reflect such Bank and any related special purpose, bankruptcy remote entity that
is an Affiliate of Proffitt's, Inc. and that is organized for the purpose of
purchasing Accounts and Receivables from such Bank and serving as Transferor
will be deemed not to materially and adversely affect the interests of the
Certificateholders.
The Agreement and any Supplement may also be amended from time
to time by the Servicer, the Transferor and the Trustee with the consent of the
Investor Certificateholders evidencing Undivided Interests aggregating not less
than 50% of the Investor Amount of all Series adversely affected, for the
purpose of adding any provisions to, changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of all holders of
the related Investor Certificates; (ii) change the definition of or the manner
of calculating the Investor Amount, the Investor Percentage, the required amount
under any Enhancement or the Investor Default Amount of such Series without the
consent of all holders of the related Investor Certificates; or (iii) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of all holders of the related Investor Certificates of all Series
adversely affected thereby. Any amendment pursuant to this paragraph shall
require prior written confirmation from the applicable Rating Agency that the
Rating Agency Condition will be met.
Subject to Section 13.1(c) of the Agreement, each Certificateholder by
its acceptance of this Certificate or any interest in this Certificate, consents
to any amendment to the Agreement or any Supplement necessary for the Transferor
to elect FASIT status for the Trust or any portion thereof under the Code.
The Class A Certificates are issuable only in minimum
denominations of $1,000 and integral multiples of $1,000. The transfer of this
Class A Certificate shall be
A-1-7
<PAGE> 63
registered in the Certificate Register upon surrender of this Class A
Certificate for registration of transfer at any office or agency maintained by
the Transfer Agent and Registrar, and thereupon one or more new Class A
Certificates in authorized denominations representing like aggregate undivided
interests in the Trust will be issued to the designated transferee or
transferees.
As provided in the Agreement and the Series 1998-2 Supplement
and subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates in authorized denominations of like
aggregate undivided interests in the Trust as requested by the Class A
Certificateholder surrendering such Class A Certificates. No service charge may
be imposed for any transfer or exchange but the Transfer Agent and Registrar and
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent or representative of any of them may treat the person in
whose name this Class A Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent or representative of any of them, shall be affected by
notice to the contrary.
THE AGREEMENT AND THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-1-8
<PAGE> 64
ASSIGNMENT
Social Security or other Taxpayer Identification number (T.I.N.) of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
------------------------------
the within Certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ----------------------, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: *
----------------------------
Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
A-1-9
<PAGE> 65
EXHIBIT A-2
TO THE
SERIES 1998-2 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
<PAGE> 66
EXHIBIT A-2
TO THE
SERIES 1998-2 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
REGISTERED $21,500,000
NO. B-1 CUSIP NO. 742966 AD 6
Unless this Class B Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1998-2
Class B Expected Payment Date:
June 2001 Distribution Date
Each $1,000 minimum denomination represents a
fractional undivided interest
in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit
Corporation or any Affiliate thereof)
A-2-1
<PAGE> 67
This certifies that Cede & Co. (the "Class B Certificateholder") is the
registered owner of a fractional undivided interest in certain assets of a trust
(the "Trust") created pursuant to the Master Pooling and Servicing Agreement,
dated as of August 21, 1997, (as amended and supplemented, the "Agreement"), as
supplemented by the Series 1998-2 Supplement, dated as of May 21, 1998 (as
amended and supplemented, the "Series Supplement"), among Proffitt's Credit
Corporation, as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank
Minnesota, National Association, a national banking association, as trustee (the
"Trustee"). The corpus of the Trust consists of (i) receivables (the
"Receivables") generated from time to time in a portfolio of consumer revolving
credit card accounts identified under the Agreement (the "Accounts"), (ii) all
monies due or to become due in payment of the Receivables, (iii) all proceeds of
the Receivables and proceeds of Insurance Policies relating to the Receivables,
(iv) all monies held in certain bank accounts of the Trust (excluding investment
earnings, unless otherwise specified in the Agreement or any Supplement), (v)
all Recoveries and Collections of the Receivables, (vi) any Enhancement with
respect to any Series (or class thereof) and (vii) all other assets and
interests constituting the Trust Property. Although a summary of certain
provisions of the Agreement and the Series 1998-2 Supplement is set forth below
and on the Summary of Terms and Conditions attached hereto and made a part
hereof, this Class B Certificate does not purport to summarize the Agreement and
the Series 1998-2 Supplement and reference is made to the Agreement and the
Series 1998-2 Supplement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and obligations of the Trustee. A copy of the Agreement and the Series
1998-2 Supplement (without schedules) may be requested from the Trustee by
writing to the Trustee at Norwest Bank Minnesota, N.A., Norwest Center, Sixth
and Marquette, Minneapolis, Minnesota 55479-0070, Attention: Asset Backed
Securities, Corporate Trust Department. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Agreement or the Series 1998-2 Supplement, as applicable.
This Class B Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series 1998-2
Supplement, to which Agreement and Series 1998-2 Supplement, each as amended and
supplemented from time to time, the Class B Certificateholder by virtue of the
acceptance hereof assents and is bound.
It is the intent of the Transferor and the Investor
Certificateholders (and Certificate Owners) that, for Federal, state and local
income and franchise tax purposes only, the Investor Certificates will qualify
as indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class B Certificateholder (and each
Certificate Owner of a Class B Certificate), by the acceptance of this Class B
Certificate (or its interest therein), is deemed to agree to treat this Class B
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
A-2-2
<PAGE> 68
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Class B
Certificate shall not be entitled to any benefit under the Agreement or the
Series 1998-2 Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class B
Certificate to be duly executed by its undersigned officer thereunto duly
authorized.
PROFFITT'S CREDIT CORPORATION
By:
---------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
Dated: May 21, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the
within-mentioned Agreement and Series 1998-2 Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: ---------------------------
Authorized Officer
Dated: May 21, 1998
A-2-3
<PAGE> 69
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1998-2
SUMMARY OF TERMS AND CONDITIONS
This Class B Certificate is one of a Series of Certificates
entitled "Proffitt's Credit Card Master Trust, Series 1998-2 Certificates" (the
"Series 1998-2 Certificates"), and one of a class thereof entitled "Class B
Asset Backed Certificates, Series 1998-2" (the "Class B Certificates"), each of
which represents a fractional undivided interest in certain assets of the Trust.
The Trust Property is allocated in part to the Investor Certificateholders of
all outstanding Series (the "Certificateholders' Interest") and the interests,
if any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class B Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class B Investor Amount at such time. The Class B Initial Investor
Amount is $21,500,000. The Class B Investor Amount on any date will be an amount
equal to (a) the Class B Initial Investor Amount, minus (b) the aggregate amount
of principal payments made to the Class B Certificateholders prior to such date,
minus (c) the aggregate amount of Class B Investor Charge Offs for all prior
Distribution Dates, minus (d) the amount of Class B Subordinated Principal
Collections allocated to certain shortfalls in respect of the Class A
Certificates on all prior Distribution Dates pursuant to the Series 1998-2
Supplement (excluding any Class B Subordinated Principal Collections that have
resulted in a reduction in the Collateral Indebtedness Amount or the Class D
Investor Amount pursuant to the Series 1998-2 Supplement), minus (e) an amount
equal to the amount by which the Class B Investor Amount has been reduced on all
prior Distribution Dates to avoid certain reductions in respect of the Class A
Allocable Amount, plus (f) the sum of the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available on all prior
Distribution Dates pursuant to the Series 1998-2 Supplement for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e)
and, without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Class B Investor Amount pursuant to the
Series 1998-2 Supplement prior to such date; provided, however, that the Class B
Investor Amount may not be reduced below zero. The "Class B Adjusted Investor
Amount" shall mean, on any date of determination, an amount equal to the Class B
Investor Amount minus, prior to the payment in full of the Class A Investor
Amount, the excess of the Principal Account Balance over the Class A Investor
Amount, and after the payment in full of the Class A Investor Amount, the
Principal Account Balance, if any (but not less than zero). In addition, classes
of the Series 1998-2 Certificates entitled "Class A Asset Backed Certificates,
Series 1998-2" (the "Class A Certificates"), "Collateral Indebtedness Interest,
Series 1998-2" (the "Collateral Indebtedness Interest") and "Class D Asset
Backed Certificates, Series 1998-2" (the "Class D Certificates") will be issued.
The Exchangeable Transferor Certificate has been issued to Proffitt's Credit
Corporation pursuant to the Agreement, which represents the Transferor Interest.
A-2-4
<PAGE> 70
Subject to the terms and conditions of the Agreement, the
Transferor may from time to time direct the Trustee, on behalf of the Trust, to
issue one or more new Series of Investor Certificates, and/or Additional Class D
Certificates, which will represent fractional undivided interests in certain
Trust Property.
Each Class B Certificate represents the right to receive
payments of (i) interest at the rate of 6.15% per annum accruing from May 21,
1998, payable on June 15, 1998, and on the 15th day of each month thereafter
(or, if such 15th day is not a Business Day, the next succeeding Business Day)
(each, a "Distribution Date") and (ii) principal on the June 2001 Distribution
Date (the "Class B Expected Payment Date") (and each Distribution Date
thereafter, if the Class B Certificates are not paid in full on the Class B
Expected Payment Date) or, upon the occurrence of a Pay Out Event, on each
Distribution Date relating to the Rapid Amortization Period, provided that no
principal payments will be made on the Class B Certificates until the Class A
Certificates have been paid in full, in each case funded from a percentage of
the payments received with respect to the Receivables and certain other funds,
all as more fully described in the Agreement and the Series 1998-2 Supplement.
Interest on the Class B Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
THE CLASS B CERTIFICATES ARE SUBORDINATED TO THE CLASS A
CERTIFICATES TO THE EXTENT SET FORTH IN THE SERIES 1998-2 SUPPLEMENT. THE
COLLATERAL INDEBTEDNESS INTEREST AND THE CLASS D CERTIFICATES ARE SUBORDINATED
TO THE CLASS A CERTIFICATES AND TO THE CLASS B CERTIFICATES TO THE EXTENT SET
FORTH IN THE SERIES 1998-2 SUPPLEMENT.
On each Distribution Date, the Paying Agent shall distribute
to each Class B Certificateholder of record on the last Business Day of the
immediately preceding calendar month (each a "Record Date") such Class B
Certificateholder's pro rata share of such amounts (including, after the Class A
Certificates have been paid in full, amounts held in the Principal Account) as
are payable to the Class B Certificateholders pursuant to the Agreement and the
Series 1998-2 Supplement. Distributions with respect to this Class B Certificate
will be made by the Paying Agent by check mailed to the address of the Class B
Certificateholder of record appearing in the Certificate Register without the
presentation or surrender of this Class B Certificate or the making of any
notation thereon (except for the final distribution in respect of this Class B
Certificate), except that with respect to Class B Certificates registered in the
name of Cede & Co., as nominee for The Depository Trust Company, distributions
will be made in the form of immediately available funds. Final payment of this
Class B Certificate will be made only upon presentation and surrender of this
Class B Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee in accordance with the Agreement and the
Series 1998-2 Supplement.
On any Distribution Date occurring on or after the day on
which the sum of the Class A Adjusted Investor Amount, the Class B Adjusted
Investor Amount, the
A-2-5
<PAGE> 71
Collateral Indebtedness Amount and the amount of the Class D Investor Amount
held by parties other than the Transferor or any of its Affiliates is less than
or equal to 10% of the sum of the Class A Investor Amount on the Closing Date,
the Class B Investor Amount on the Closing Date, the Collateral Indebtedness
Amount on the Closing Date and the highest amount of the Class D Investor Amount
held by parties other than the Transferor or any of its Affiliates since the
Closing Date, the Class B Certificates are subject to optional repurchase by the
Transferor, if certain conditions set forth in the Agreement or the Series
1998-2 Supplement are satisfied. The repurchase price will be equal to the Class
B Adjusted Investor Amount plus accrued but unpaid interest thereon less the
amount held in the Collection Account allocable to Series 1998-2 to be applied
other than to deposits in the Reserve Account and any excess payable to the
Transferor as holder of the Exchangeable Transferor Certificate.
Subject to certain conditions in the Agreement, if the
Investor Amount is greater than zero on the September 2004 Distribution Date
(the "Stated Series Termination Date"), the Trustee shall sell or cause to be
sold an amount of Receivables up to 110% of the Adjusted Investor Amount at the
close of business on such date, but not more than the total amount of
Receivables allocable to the Series 1998-2 Certificates, and apply the proceeds
of such sale as provided in the Agreement and the Series 1998-2 Supplement.
This Class B Certificate does not represent a recourse
obligation of, or an interest in, the Transferor, the Servicer, or any Affiliate
of any of them and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality. This Class B
Certificate is limited in right of payment to certain Collections with respect
to the Receivables (and certain other amounts), all as more specifically set
forth hereinabove and in the Agreement and the Series 1998-2 Supplement.
The Agreement and any Supplement may be amended from time to
time by the Servicer, the Transferor and the Trustee, without the consent of any
of the Investor Certificateholders, to cure any ambiguity, to revise certain
exhibits and schedules, to correct or supplement any provision therein which may
be inconsistent with any other provision therein or to add other identifying
code numbers or identifying characteristics to the definition of Account or to
add any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. Additionally,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add to, change or eliminate any of the
provisions of the Agreement or right of Investor Certificateholders or to enable
Bearer Certificates to be issued in conformity with the Bearer Rules, to provide
that Bearer Certificates may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal (or premium, if any) or
any interest on Bearer Certificates to comply with the Bearer Rules, to permit
Bearer
A-2-6
<PAGE> 72
Certificates to be issued in exchange for Registered Certificates (if then
permitted by the Bearer Rules), to permit Bearer Certificates to be issued in
exchange for Bearer Certificates of other authorized denominations or to permit
the issuance of Investor Certificates in uncertificated form, provided any such
action shall not adversely affect the interest of the holders of Bearer
Certificates of any Series or any related Coupons in any material respect unless
such amendment is necessary to comply with the Bearer Rules, or any right of the
Investor Certificateholders of any outstanding Series; provided that (i) the
Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of the Investor Certificateholders of any outstanding Series, (ii)
such amendment shall not cause the Trust to be characterized as a corporation
for Federal income tax purposes or otherwise have a material adverse effect on
the Federal income taxation of any Series and (iii) the Servicer shall have
given each Rating Agency ten (10) Business Days' prior written notice of such
amendment and shall have received written confirmation from each Rating Agency
that the Rating Agency Condition will be met. No such amendment, however, may
effect any of the amendments that require unanimous Certificateholder consent as
set forth herein in the Agreement or the Series 1998-2 Supplement or (i) reduce
in any manner the amount of, or delay the timing of, distributions which are
required to be made on any Investor Certificates of any Series, (ii) change the
definition of or the manner of calculating the interest of any
Certificateholder, (iii) alter the requirements for changing the percentage by
which the Minimum Transferor Amount is determined, (iv) change the manner in
which the Transferor Amount is determined, or (v) reduce the percentage required
in Section 13.1(b) of the Agreement to consent to such amendments.
Notwithstanding the foregoing, any amendment providing for the transfer of
Receivables to or by, and the generation of new Receivables by, the Bank as
Seller, Transferor, or Eligible Originator, the appointment of the Bank as
Servicer, and/or the assignment of this Agreement, including any Supplement, to
the Bank in connection with such transfer and any amendments necessary to
reflect Bank and any related special purpose, bankruptcy remote entity that is
an Affiliate of Proffitt's, Inc. and that is organized for the purpose of
purchasing Accounts and Receivables from such Bank and serving as Transferor
will be deemed not to materially and adversely affect the interests of the
Certificateholders.
The Agreement and any Supplement may also be amended from time
to time by the Servicer, the Transferor and the Trustee with the consent of the
Investor Certificateholders evidencing Undivided Interests aggregating not less
than 50% of the Investor Amount of all Series adversely affected, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of all holders of
the related Investor Certificates; (ii) change the definition of or the manner
of calculating the Investor Amount, the Investor Percentage, the required amount
under any Enhancement or the Investor Default Amount of such Series without the
consent of all
A-2-7
<PAGE> 73
holders of the related Investor Certificates; or (iii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of all
holders of the related Investor Certificates of all Series adversely affected
thereby. Any amendment pursuant to this paragraph shall require prior written
confirmation from the applicable Rating Agency that the Rating Agency Condition
will be met.
Subject to Section 13.1(c) of the Agreement, each
Certificateholder, by its acceptance of this Certificate or any interest in this
Certificate, consents to any amendment to the Agreement or any Supplement
necessary for the Transferor to elect FASIT status for the Trust or any portion
thereof under the Code.
The Class B Certificates are issuable only in minimum
denominations of $1,000 and integral multiples of $1,000. The transfer of this
Class B Certificate shall be registered in the Certificate Register upon
surrender of this Class B Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and Registrar, and thereupon one or
more new Class B Certificates in authorized denominations representing like
aggregate undivided interests in the Trust will be issued to the designated
transferee or transferees.
As provided in the Agreement and the Series 1998-2 Supplement
and subject to certain limitations therein set forth, Class B Certificates are
exchangeable for new Class B Certificates in authorized denominations of like
aggregate undivided interests in the Trust as requested by the Class B
Certificateholder surrendering such Class B Certificates. No service charge may
be imposed for any transfer or exchange but the Transfer Agent and Registrar and
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent or representative of any of them may treat the person in
whose name this Class B Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent or representative of any of them, shall be affected by
notice to the contrary.
THE AGREEMENT AND THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-2-8
<PAGE> 74
ASSIGNMENT
Social Security or other Taxpayer Identification Number (T.I.N.) of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
------------------------------
the within Certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ----------------------, attorney, to transfer said
Certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: *
----------------------------
Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
A-2-9
<PAGE> 75
EXHIBIT A-3
TO THE
SERIES 1998-2 SUPPLEMENT
FORM OF CLASS D CERTIFICATE
<PAGE> 76
EXHIBIT A-3
TO THE
1998-2 SERIES SUPPLEMENT
FORM OF CLASS D CERTIFICATE
REGISTERED $16,000,000
NO. D-1
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
OR "BLUE SKY" LAWS, AND MAY NOT DIRECTLY OR INDIRECTLY BE OFFERED OR SOLD OR
OTHERWISE DISPOSED OF WITHOUT COMPLIANCE WITH SUCH LAWS. PRIOR TO ANY TRANSFER
OF THIS CERTIFICATE, THE TRUSTEE OR THE TRANSFER AGENT AND REGISTRAR AND THE
SERVICER SHALL REQUIRE A TRANSFEREE AGREEMENT FROM THE TRANSFEREE DEMONSTRATING
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND CONTAINING CERTAIN
REPRESENTATIONS AND COVENANTS AS TO VARIOUS ERISA MATTERS. THE TRUSTEE OR THE
TRANSFER AGENT AND REGISTRAR AND THE SERVICER ALSO MAY REQUIRE AN OPINION OF
COUNSEL WITH RESPECT THERETO. IN ADDITION, THE TRANSFEROR SHALL NOT TRANSFER
THIS CERTIFICATE UNLESS THE TRANSFEROR SHALL HAVE DELIVERED TO THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED TRANSFER WOULD NOT ADVERSELY
AFFECT THE TAX CHARACTERIZATION OF THE TRUST.
THIS CERTIFICATE MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS CERTIFICATE BE MARKETED, ON OR THROUGH
(I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)(1)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT
REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET"
WITHIN THE MEANING OF SECTION 7704(B)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY
OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN
THE CLASS D CERTIFICATES ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN
SUCH INTERESTS AND A
A-3-1
<PAGE> 77
MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH
RESPECT TO INTERESTS IN THE CLASS D CERTIFICATES AND STANDS READY TO EFFECT BUY
OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS D ASSET BACKED CERTIFICATE, SERIES 1998-2
Representing an undivided interest
in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving proprietary credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit
Corporation or any Affiliate thereof)
This certifies that Proffitt's Credit Corporation (the "Class D
Certificateholder") is the registered owner of a fractional undivided interest
in certain assets of a trust (the "Trust") created pursuant to the Master
Pooling and Servicing Agreement, dated as of August 21, 1997 (as amended and
supplemented, the "Agreement"), as supplemented by the Series 1998-2 Supplement,
dated as of May 21, 1998 (as amended and supplemented, the "Series 1998-2
Supplement"), among Proffitt's Credit Corporation, as Transferor, Proffitt's,
Inc. as Servicer, and Norwest Bank Minnesota, National Association, a national
banking association, as trustee (the "Trustee"). The corpus of the Trust
consists of (i) receivables (the "Receivables") generated from time to time in a
portfolio of consumer revolving credit card accounts identified under the
Agreement (the "Accounts"), (ii) all monies due or to become due in payment of
the Receivables, (iii) all proceeds of the Receivables and proceeds of Insurance
Policies relating to the Receivables, (iv) all monies held in certain accounts
of the Trust (excluding investment earnings, unless otherwise specified in the
Agreement or any Supplement), (v) all Recoveries and Collections of the
Receivables, (vi) any Enhancement with respect to any Series (or class thereof)
and (vii) all other assets and interests constituting the Trust Property.
Although a summary of certain provisions of the Agreement and the Series 1998-2
Supplement is set forth below and on the Summary of Terms and Conditions
attached hereto and made a part hereof, this Class D Certificate does not
purport to summarize the Agreement and the Series 1998-2 Supplement and
reference is made to the Agreement and the Series 1998-2
A-3-2
<PAGE> 78
Supplement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee. A copy of the Agreement and the Series 1998-2
Supplement (without schedules) may be requested from the Trustee by writing to
the Trustee at the Corporate Trust Office: Norwest Bank Minnesota, N.A., Norwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0070, Attention: Asset
Backed Securities Corporate Trust Department. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to them in the
Agreement or the Series 1998-2 Supplement, as applicable.
This Class D Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series 1998-2
Supplement, to which Agreement and Series 1998-2 Supplement, each as amended and
supplemented from time to time, the Class D Certificateholder by virtue of the
acceptance hereof assents and is bound.
It is the intent of the Transferor and the Investor
Certificateholders (and Certificate Owners) that, for Federal, state and local
income and franchise tax purposes only, the Investor Certificates will qualify
as indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class D Certificateholder (and each
Certificate Owner of a Class D Certificate), by the acceptance of this Class D
Certificate (or its interest therein), is deemed to agree to treat this Class D
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Class D
Certificate shall not be entitled to any benefit under the Agreement or the
Series 1998-2 Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class D
Certificate to be duly executed.
PROFFITT'S CREDIT CORPORATION
By:
-----------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
Dated: May 21, 1998
A-3-3
<PAGE> 79
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class D Certificates described in the
within-mentioned Agreement and Series 1998-2 Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee,
By:
-----------------------------------------
Authorized Officer
Dated: May 21, 1998
A-3-4
<PAGE> 80
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS D ASSET BACKED CERTIFICATE, SERIES 1998-2
SUMMARY OF TERMS AND CONDITIONS
This Class D Certificate is one of a Series of Certificates
entitled Proffitt's Credit Card Master Trust, Series 1998-2 Certificates (the
"Series 1998-2 Certificates"), and one of a class thereof entitled "Class D
Asset Backed Certificates, Series 1998-2" (the "Class D Certificates"), each of
which represents a fractional undivided interest in certain assets of the Trust.
The Trust Property is allocated in part to the Investor Certificateholders of
all outstanding Series (the "Certificateholders' Interest") and the interests,
if any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class D Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class D Investor Amount at such time. The Class D Initial Investor
Amount is $16,000,000. The Class D Investor Amount on any date will be an amount
equal to (a) the Class D Initial Investor Amount (plus the aggregate initial
principal amount of any Additional Class D Certificates issued pursuant to the
Series 1998-2 Supplement), minus (b) the aggregate amount of principal payments
made to the Class D Certificateholders prior to such date, minus (c) the amount
of Class D Subordinated Principal Collections used to make payments in respect
of the Class A Certificates, the Class B Certificates and the Collateral
Indebtedness Interest on all prior Distribution Dates pursuant to the Series
1998-2 Supplement, minus (d) an amount equal to the amount by which the Class D
Investor Amount has been reduced on all prior Distribution Dates in respect of
the Class A Allocable Amount, the Class B Allocable Amount, the Collateral
Allocable Amount and the Class D Allocable Amount, plus (e) the sum of the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available on all prior Distribution Dates pursuant to the Series 1998-2
Supplement for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c) and (d) and, without duplication, the aggregate amount of
the reductions of the Series Adjustment Amounts allocable to the Class D
Investor Amount pursuant to the Series 1998-2 Supplement; provided, however,
that the Class D Investor Amount may not be reduced below zero. In addition,
classes of the Series 1998-2 Certificates entitled Class A Asset Backed
Certificates, Series 1998-2 (the "Class A Certificates"), Class B Asset Backed
Certificates, Series 1998-2 (the "Class B Certificates") and Collateral
Indebtedness Interest, Series 1998-2 (the "Collateral Indebtedness Interest")
will be issued. The Exchangeable Transferor Certificate has also been issued to
Proffitt's Credit Corporation pursuant to the Agreement, which represents the
Transferor Interest.
Subject to the terms and conditions of the Agreement, the
Transferor may from time to time direct the Trustee, on behalf of the Trust, to
issue one or more new Series of Investor Certificates, which will represent
fractional undivided interests in certain Trust Property.
A-3-5
<PAGE> 81
Each Class D Certificate represents the right to receive
payments of (i) interest at the rate determined in accordance with the Series
1998-2 Supplement, accruing from May ____, 1998, payable on June 15, 1998 and on
the 15th day of each month thereafter (or, if such 15th day is not a Business
Day, the next succeeding Business Day) (each, a "Distribution Date") and (ii)
principal on each Distribution Date on and after the Distribution Date on which
the Collateral Indebtedness Interest has been paid in full (subject to certain
exceptions), in each case funded from a percentage of the payments received with
respect to the Receivables and certain other funds, all as more fully described
in the Agreement and the Series 1998-2 Supplement.
The Class D Certificates are subordinated to the Class A
Certificates, the Class B Certificates and the Collateral Indebtedness Interest
to the extent set forth in the Series 1998-2 Supplement.
On each Distribution Date, the Paying Agent shall distribute
to each Class D Certificateholder of record at the close of business on the last
Business Day of the immediately preceding calendar month (each a "Record Date")
such Class D Certificateholder's pro rata share of such amounts as are payable
to the Class D Certificateholders pursuant to the Agreement and the Series
1998-2 Supplement. Distributions with respect to this Class D Certificate will
be made by the Paying Agent by check mailed to the address of the Class D
Certificateholder of record appearing in the Certificate Register without the
presentation or surrender of this Class D Certificate or the making of any
notation thereon (except for the final distribution in respect of this Class D
Certificate). Final payment of this Class D Certificate will be made only upon
presentation and surrender of this Class D Certificate at the office or agency
specified in the notice of final distribution delivered by the Trustee in
accordance with the Agreement and the Series 1998-2 Supplement.
On any Distribution Date occurring on or after the day on
which the Class A Adjusted Investor Amount, the Class B Adjusted Investor
Amount, the Collateral Indebtedness Amount and the amount of the Class D
Investor Amount held by parties other than the Transferor or any of its
Affiliates is less than or equal to 10% of the sum of the Class A Investor
Amount on the Closing Date, the Class B Investor Amount on the Closing Date, the
Collateral Indebtedness Amount on the Closing Date and the highest amount of the
Class D Investor Amount held by parties other than the Transferor or any of its
Affiliates since the Closing Date, the Class D Certificates are subject to
optional repurchase by the Transferor if certain conditions set forth in the
Agreement or Series 1998-2 Supplement are satisfied. The retransfer price will
be equal to the Class D Adjusted Investor Amount plus accrued and unpaid
interest thereon less the amount held in the Collection Account allocable to
Series 1998-2 to be applied other than to deposits in the Reserve Account, with
any excess payable to the Transferor as holder of the Exchangeable Transferor
Certificate.
Subject to certain conditions in the Agreement, if the
Investor Amount is greater than zero on the September 2004 Distribution Date
(the "Stated Series
A-3-6
<PAGE> 82
Termination Date"), the Trustee shall sell or cause to be sold an amount of
Receivables up to 110% of the Adjusted Investor Amount at the close of business
on such date, but not more than the total amount of Receivables allocable to the
Series 1998-2 Certificates, and apply the proceeds of such sale as provided in
the Agreement and the Series 1998-2 Supplement.
This Class D Certificate does not represent a recourse
obligation of, or an interest in, the Transferor, the Servicer, or any Affiliate
of any of them and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality. This Class D
Certificate is limited in right of payment to certain Collections with respect
to the Receivables (and certain other amounts), all as more specifically set
forth hereinabove and in the Agreement and the Series 1998-2 Supplement.
The Agreement and any Supplement may be amended from time to
time by the Servicer, the Transferor and the Trustee, without the consent of any
of the Investor Certificateholders, to cure any ambiguity, to revise certain
exhibits and schedules, correct or supplement any provision therein which may be
inconsistent with any other provision therein or to add other identifying code
numbers or identifying characteristics to the definition of Account or to add
any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. Additionally,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add to, change or eliminate any of the
provisions of the Agreement or any right of Investor Certificateholders or to
enable Bearer Certificates to be issued in conformity with the Bearer Rules, to
provide that Bearer Certificates may be registrable as to principal, to change
or eliminate any restrictions on the payment of principal (or premium, if any)
or any interest on Bearer Certificates to comply with the Bearer Rules, to
permit Bearer Certificates to be issued in exchange for Registered Certificates
(if then permitted by the Bearer Rules), to permit Bearer Certificates to be
issued in exchange for Bearer Certificates of other authorized denominations or
to permit the issuance of Investor Certificates in uncertificated form, provided
any such action shall not adversely affect the interest of the holders of Bearer
Certificates of any Series or any related Coupons in any material respect unless
such amendment is necessary to comply with the Bearer Rules, or any right of the
Investor Certificateholders of any outstanding Series; provided that (i) the
Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of the Investor Certificateholders of any outstanding Series, (ii)
such amendment shall not cause the Trust to be characterized as a corporation
for Federal income tax purposes or otherwise have a material adverse effect on
the Federal income taxation of any Series and (iii) the Servicer shall have
given each Rating Agency ten (10) Business Days' prior written notice of such
amendment and shall have received written confirmation from each Rating Agency
that the Rating Agency Condition will be met. No such amendment,
A-3-7
<PAGE> 83
however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth herein, in the Agreement or the Series
1998-2 Supplement or (i) reduce in any manner the amount of, or delay the timing
of, distributions which are required to be made on any Investor Certificates of
any Series, (ii) change the definition of or the manner of calculating the
interest of any Certificateholder, (iii) alter the requirements for changing the
percentage by which the Minimum Transferor Amount is determined, (iv) change the
manner in which the Transferor Amount is determined or (v) reduce the percentage
required in Section 13(b) to consent to such amendments. Notwithstanding the
foregoing, any amendment providing for the transfer of Receivables to or by, and
the generation of new Receivables by, the Bank as Seller, Transferor, or
Eligible Originator, the appointment of the Bank as Servicer, and/or the
assignment of this Agreement, including any Supplement, to the Bank in
connection with such transfer and any amendments necessary to reflect such Bank
and any related special purpose, bankruptcy remote entity that is an Affiliate
of Proffitt's, Inc. and that is organized for the purpose of purchasing Accounts
and Receivables from such Bank and serving as Transferor will be deemed not to
materially and adversely affect the interests of the Certificateholders.
The Agreement and any Supplement may also be amended from time
to time by the Servicer, the Transferor and the Trustee with the consent of the
Investor Certificateholders evidencing undivided interests aggregating not less
than 50% of the Investor Amount of all Series adversely affected, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of all holders of
the related Investor Certificates; (ii) change the definition of or the manner
of calculating the Investor Amount, the Investor Percentage, the required amount
under any Enhancement or the Investor Default Amount of such Series without the
consent of the holders of the related Investor Certificates; or (iii) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of all holders of the related Investor Certificates of all Series
adversely affected thereby. Any amendment pursuant to this paragraph shall
require prior written confirmation from the applicable Rating Agency that the
Rating Agency Condition will be met.
Subject to Section 13.1(c) of the Agreement, each
Certificateholder by its acceptance of this Certificate or any interest in this
Certificate, consents to any amendment to the Agreement or any Supplement
necessary for the Transferor to elect FASIT status for the Trust or any portion
thereof under the Code.
The Class D Certificates are issuable only in minimum
denominations of $500,000 and integral multiples of $1,000. The transfer of this
Class D Certificate shall be registered in the Certificate Register upon
surrender of this Class D Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and
A-3-8
<PAGE> 84
Registrar, and thereupon one or more new Class D Certificates in authorized
denominations representing like aggregate undivided interests in the Trust will
be issued to the designated transferee or transferees.
As provided in the Agreement and the Series 1998-2 Supplement
and subject to certain limitations therein set forth, Class D Certificates are
exchangeable for new Class D Certificates in authorized denominations of like
aggregate undivided interests in the Trust as requested by the Class D
Certificateholder surrendering such Class D Certificates. No service charge may
be imposed for any transfer or exchange but the Transfer Agent and Registrar and
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent or representative of any of them may treat the person in
whose name this Class D Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent or representative of any of them, shall be affected by
notice to the contrary.
THE AGREEMENT AND THIS CLASS D CERTIFICATE SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-3-9
<PAGE> 85
ASSIGNMENT
Social Security or other Taxpayer Identification Number (T.I.N.)of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
------------------------------
the within Certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ----------------------, attorney, to transfer said
Certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: *
-----------------------------
Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
A-3-10
<PAGE> 86
EXHIBIT B
TO THE
1998-2 SERIES SUPPLEMENT
FORM OF MONTHLY PAYMENT INSTRUCTIONS AND
NOTIFICATION TO THE TRUSTEE
[RESERVED]
<PAGE> 87
EXHIBIT C
TO THE
1998-2 SERIES SUPPLEMENT
FORM OF MONTHLY CERTIFICATEHOLDER'S STATEMENT
<PAGE> 1
Exhibit 10.45
RECEIVABLES PURCHASE AGREEMENT
among
NATIONAL BANK OF THE GREAT LAKES,
Seller
and
SFA FINANCE COMPANY,
Purchaser
and
SAKS & COMPANY,
Servicer
Dated as of September 17, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS................................................... 2
SECTION 1.1. Definitions.......................................... 2
SECTION 1.2. Other Terms.......................................... 7
SECTION 1.3. Computation of Time Periods.......................... 7
ARTICLE II - PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES............ 7
SECTION 2.1. Sale................................................. 7
SECTION 2.2. Addition of Accounts................................. 9
SECTION 2.3. Servicing of Receivables............................. 9
ARTICLE III - CONSIDERATION AND PAYMENT; RECEIVABLES...................... 10
SECTION 3.1. Purchase Price....................................... 10
SECTION 3.2. Payment of Purchase Price............................ 10
SECTION 3.3. Monthly Report....................................... 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES............................... 12
SECTION 4.1. Seller's Representations and Warranties.............. 12
SECTION 4.2. Reaffirmation of Representations and
Warranties by the Seller; Notice of Breach.................... 15
SECTION 4.3. Repurchase of Ineligible Receivables................. 15
ARTICLE V - COVENANTS OF THE SELLER....................................... 15
SECTION 5.1. Covenants of the Seller.............................. 15
SECTION 5.2. Negative Covenants of the Seller..................... 17
SECTION 5.3. Indemnification...................................... 19
ARTICLE VI - REPURCHASE OBLIGATION........................................ 19
SECTION 6.1. Mandatory Repurchase................................. 19
SECTION 6.2. Dilutions, etc....................................... 20
ARTICLE VII - CONDITIONS PRECEDENT........................................ 20
SECTION 7.1. Conditions to the Purchaser's Obligations
Regarding Receivables......................................... 20
ARTICLE VIII - TERM AND TERMINATION....................................... 21
SECTION 8.1. Term................................................. 21
SECTION 8.2. Effect of Termination................................ 21
ARTICLE IX - AMENDMENTS TO THIRD RESTATED AGREEMENT....................... 22
SECTION 9.1. Amendment to Third Restated Agreement................ 22
SECTION 9.2. Continuation of Third Restated Agreement............. 22
ARTICLE X - MISCELLANEOUS PROVISIONS...................................... 22
SECTION 10.1. Amendment............................................ 22
SECTION 10.2. Governing Law........................................ 23
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 10.3. Notices.............................................. 23
SECTION 10.4. Severability of Provisions........................... 24
SECTION 10.5. Assignment........................................... 24
SECTION 10.6. Further Assurances................................... 25
SECTION 10.7. No Waiver; Cumulative Remedies....................... 25
SECTION 10.8. No Bankruptcy Petition Against the Purchaser
or Trust...................................................... 25
SECTION 10.10. Counterparts......................................... 25
SECTION 10.10. Binding Effect; Third-Party Beneficiaries............ 25
SECTION 10.11. Merger and Integration............................... 25
SECTION 10.12. Headings............................................. 26
SECTION 10.13. Exhibits............................................. 26
SECTION 10.14. Effectiveness of Amendment and Restatement
of Existing Agreement......................................... 26
</TABLE>
EXHIBITS
Exhibit A Form of Confirming Assignment
Exhibit B Form of Subordinated Note
Exhibit C Location of Records, Principal Place of Business, etc.
Exhibit D Subsidiaries, Divisions, Trade Names, Bankruptcy Proceedings
-ii-
<PAGE> 4
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of September 17, 1998 (as
amended, supplemented, restated or otherwise modified and in effect from time to
time, this "Agreement"), by and among NATIONAL BANK OF THE GREAT LAKES,
Elmhurst, Illinois, a national banking association, as seller (the "Seller"),
SFA FINANCE COMPANY, a Delaware corporation, as purchaser (the "Purchaser"), and
SAKS & COMPANY, a New York corporation, as servicer (the "Servicer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Receivables Transfer Agreement, dated as
of September 10, 1991 (the "Original Agreement"), among Saks & Company as
"Seller" (the "Original Seller"), the Servicer and the Purchaser, the Original
Seller agreed to sell to the Purchaser, and the Purchaser agreed to buy from the
Original Seller, all of the Original Seller's right, title and interest in, to
and under the Receivables (as hereinafter defined) then existing or thereafter
created and in the rights of the Original Seller into and under all guarantees
thereof;
WHEREAS, pursuant to that certain Pooling and Servicing Agreement, dated
as of October 21, 1991 (the "Original P&S Agreement"), among the Purchaser, the
Servicer and Bankers Trust Company, as Trustee (the "Original Trustee") the
Purchaser agreed to sell to the Trust created pursuant to the Original P&S
Agreement (the "Original Trust"), for the benefit of the Certificateholders
referred to in the Original P&S Agreement, all of its right, title and interest
in, to and under such Receivables;
WHEREAS, pursuant to the Amended and Restated Receivables Purchase
Agreement, dated as of October 21, 1991 (the "First Restated Agreement"), the
Original Agreement was amended and restated in its entirety;
WHEREAS, pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of December 16, 1991 (the "Second P&S Agreement"), among the
Purchaser, the Servicer and the Original Trustee, the Original P&S Agreement was
amended and restated in its entirety;
WHEREAS, pursuant to the Second Amended and Restated Receivables Purchase
Agreement, dated as of December 16, 1991 (the "Second Restated Agreement"), the
First Restated Agreement was amended and restated in its entirety;
WHEREAS, the Original Trust transferred to a new trust created pursuant to
the Pooling and Servicing Agreement, dated as of April 25, 1996 (as the same may
be amended, supplemented, restated or otherwise modified and in effect from time
to time, the "Pooling and Servicing Agreement"), among the Purchaser, the
Servicer and Bankers Trust Company, as
<PAGE> 5
Trustee (the "Trustee"), for the benefit of the Certificateholders referred to
in the Pooling and Servicing Agreement, all of the Original Trust's right, title
and interest in, to and under the Receivables;
WHEREAS, in connection with the execution and delivery of the Pooling and
Servicing Agreement, and pursuant to the Third Amended and Restated Receivables
Purchase Agreement dated as of April 25, 1996 (the "Third Restated Agreement"),
among the Original Seller, the Purchaser and the Servicer, the Second Restated
Agreement was amended and restated in its entirety;
WHEREAS, in connection with the transactions contemplated by the Agreement
and Plan of Merger dated as of July 4, 1998 (as amended, the "Merger
Agreement"), by and among Proffitt's Inc., a Tennessee corporation
("Proffitt's"), Fifth Merger Corporation and Saks Holdings, Inc., the Original
Seller will become a wholly-owned subsidiary of Proffitt's and Proffitt's will
change its name to "Saks Incorporated");
WHEREAS, pursuant to the Contribution and Assumption Agreement between
Saks Incorporated and National Bank of the Great Lakes dated as of September 17,
1998 (the "Contribution Agreement"), all of the credit card accounts providing
for extensions of open end credit ("Accounts") of the Original Seller have been
contributed to the Seller, and the Seller has assumed, among other things, all
obligations of the Original Seller under the related Charge Account Agreements;
WHEREAS, the Seller, the Servicer and the Purchaser desire to adopt this
Agreement to provide for the sale of all Receivables in Accounts to SFA pursuant
to this Agreement and to terminate all provisions of the Third Restated
Agreement with respect to Receivables and Accounts (as defined in this
Agreement) and to confirm that all other receivables in accounts retained by the
Original Seller will continue to be sold by the Original Seller pursuant to the
Third Restated Agreement, which shall remain in full force and effect with
respect to such retained accounts and receivables arising thereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Seller, the Servicer and the Purchaser,
intending to be legally bound, agree that the Third Agreement is amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All capitalized terms used herein shall have the
meanings specified herein or, if not so specified, the meaning specified in, or
incorporated by reference into, the Pooling and Servicing Agreement:
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"Account" shall mean (a) each "Account" and "Additional Account" included
as an Account prior to the Existing Trust Termination Date pursuant to the
Second Restated Agreement, (b) each additional charge account existing on the
Existing Trust Termination Date and not previously included as an Account prior
to such date and (c) subject to Section 2.2, as of each Addition Date, each
Additional Account included as an Account on such Addition Date by the Seller or
the Original Seller pursuant to such Section for or on behalf of customers of
Saks & Company. The definition of Account shall include each Transferred Account
(as defined in the Third Restated Agreement into which an Account shall be
transferred provided that such transfer was made in accordance with the Charge
Account Guidelines. The term "Account" shall be deemed to refer to an Additional
Account only from and after the Addition Date with respect thereto.
Notwithstanding the foregoing, for purposes of this Agreement "Account" and
"Additional Account" shall only include each consumer revolving credit card
account originated or acquired by the Seller, which account has been established
or exists pursuant to a Charge Account Agreement, which are Accounts of the
Original Seller contributed to the Bank and which provide for the extension of
open end credit.
"Addition Date" shall having the meaning specified in Section 2.2
hereof.
"Additional Account" shall have the meaning specified in Section 2.2
hereof.
"Advance" shall have the meaning specified in Section 3.2(a) hereof.
"Benefit Plan" shall mean any employee benefit plan as defined in Section
3(3) of ERISA which the Seller maintains.
"Charge Account Agreement" shall have the meaning specified in the Pooling
and Servicing Agreement).
"Charge Account Guidelines" shall have the meaning specified in the
Pooling and Servicing Agreement.
"Closing Date" shall mean the beginning of business on the Business Day
immediately following the effective date and time of the Merger (as defined in
the Merger Agreement) occurs.
"Collections" shall mean all payments by or on behalf of Obligors
(including Insurance Proceeds and Recoveries) received by the Servicer in
respect of the Receivables, in the form of cash, checks, wire transfers or any
other form of payment in accordance with an Account Agreement in effect from
time to time, including any Account Adjustments.
"Cut-Off Date" shall mean the close of business on [September 1], 1998
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
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"ERISA Affiliate" shall mean, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
such Person; or (iii) for purposes of Section 412 of the Internal Revenue Code,
a member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as such Person, any corporation described
in clause (i) above or any trade or business described in clause (ii) above.
"Insolvency Event" shall mean, with respect to a Person, (i) such Person
shall commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
such Person shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against such Person any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against such Person or any of its subsidiaries any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 such days from the entry thereof; or (iv) such Person or any of its
subsidiaries shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) such Person shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated as of
July 4, 1998 by and among Proffitt's, Inc., Fifth Merger Agreement and Saks
Holdings, Inc., as amended.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Seller or Eligible
Originator or any ERISA Affiliate of the Seller or Eligible Originator on behalf
of its employees.
"Purchase Date" shall have the meaning assigned in Section 3.2(b)
hereof.
"Purchase Period" shall mean, with respect to Receivables sold by the
Seller to the Purchaser after the Closing Date, the Monthly Period reported upon
in the most recent Monthly Servicer Report delivered after the Closing Date.
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"Purchase Rate" shall mean the percentage equivalent of the decimal
representation of the following expression:
(1.00 + APY) minus (BDA + SF + PCF + OE + RF) where:
APY = average portfolio yield of the aggregate receivables
(expressed as the decimal equivalent of a percentage) as
reasonably determined over the preceding twelve (12) months
(or such other period mutually agreed upon by the Purchaser
and the Seller);
BDA = an allowance for bad debts (expressed as the decimal
equivalent of a percentage), based on, among other relevant
factors, historical rates for the previous twelve (12)
months (or such other period mutually agreed upon by the
Purchaser and the Seller);
SF = a Servicer fee equal to 2.00% (expressed as the decimal
equivalent of a percentage) per annum;
PCF = the Purchaser's cost of funds, as calculated from time
to time, equal to the sum (expressed as the decimal
equivalent of a percentage) of (i) the product of a
fraction equal to the adjusted investor amount of all
classes of Certificates issued by the Trust (other than
those held by the Purchaser) divided by the Aggregate
Principal Receivables multiplied by the prime rate (as
published in the Money Rates Section of The Wall Street
Journal) plus (ii) the product of (x) 20% (to be
adjusted from time to time based on changes to the
Purchaser's reasonably estimated marginal cost of
capital) multiplied by (y) a fraction equal to the sum
of the Seller Amount plus the investor amount of any
class of Certificates held by the Purchaser divided by
the Aggregate Principal Receivables;
OE = the fraction (expressed as the decimal equivalent of a
percentage), the numerator of which is the Purchaser's
annualized estimate of projected operating expenses for
the next twelve (12) months and the denominator of which
is the estimated outstanding principal balance of
Receivables expected to be sold by the Seller to the
Purchaser in the next twelve (12) months; and
RF = a contingency risk factor (expressed as the decimal
equivalent of a percentage) based on industry and economic
considerations, as determined by the Purchaser in its
reasonable discretion and as agreed upon between the
Purchaser and the Seller.
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"Purchase Price" shall have the meaning set forth in Section 3.1.
"Receivable" shall mean any amount owing by an Obligor under an Account
with the Seller, including any Additional Account, from time to time, including,
without limitation, amounts owing for the payment of merchandise and services,
Charge Account Fees, service contract charges, premiums for Credit Insurance,
Finance Charge Receivables and all other fees and charges. In calculating the
aggregate amount of Receivables on any day, the amount of Receivables shall be
reduced by the aggregate amount of Credit Adjustments stated in Section 4.3(d)
of the Pooling and Servicing Agreement, in the Accounts on such day.
"Records" shall mean all Account Agreements and other documents, books,
records and other information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors.
"Related Security" means, with respect to any Receivable, all of the
Seller's rights, title and interest in, to and under the following, as and to
the extent applicable:
(i) all of the Seller's interest, if any, in the merchandise
(including returned or repossessed merchandise), if any, the
sale of which gave rise to such Receivable;
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Account
related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any
collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or
securing payment of such Receivable whether pursuant to the
Account related to such Receivable or otherwise;
(iv) all records related to such Receivable; and
(v) all proceeds of any of the foregoing.]
"Relevant UCC" shall mean the Uniform Commercial Code as in effect in the
State of Illinois.
"Secured Obligations" shall have the meaning set forth in Section
2.1(d) hereof.
"Subordinated Note" shall have the meaning specified in Section 3.2(b)
hereof.
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"Termination Date" shall have the meaning specified in Section 8.1
hereof.
SECTION 1.2. OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained herein shall control. All terms used in
Article 9 of the Relevant UCC, and not specifically defined herein, are used
herein as defined in such Article 9. The definitions of all terms defined herein
shall include the singular as well as the plural form of such terms and the
masculine of such terms as well as the feminine and neuter genders of such
terms. The terms "include", "including" or "includes" shall mean including
without limitation by way of enumeration or otherwise.
SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. SALE. (a) Upon the terms and subject to the conditions
specifically set forth herein, the Seller hereby sells, assigns, transfers,
sets-over and conveys to the Purchaser on each Business Day, without recourse,
and the Purchaser hereby purchases from the Seller, all of the Seller's right,
title and interest, whether now owned or hereafter acquired, in, to and under
the Receivables now existing or hereafter created, and owned by the Seller,
through any Termination Date (but not thereafter), together with all Related
Security, if any, and all Collections and other monies due or to become due with
respect thereto (including all Finance Charge Receivables, Recoveries, all
guarantees thereof and interchange, if any) and all proceeds of the foregoing,
including Insurance Proceeds. The foregoing sale, assignment, transfer and
conveyance does not constitute an assumption by the Purchaser of any obligations
of the Seller or any other Person to Obligors or to any other Person in
connection with the Receivables or under any Related Security, Account Agreement
or other agreement and instrument relating to the Receivables. With respect to
Receivables sold by the Seller on the Closing Date, such Receivables shall be
deemed to be all the Receivables of the Seller that exist as of the close of
business on the Cut-Off Date together with any Receivables created thereafter
prior to the Closing Date and in each case, that have not been sold by the
Original Seller pursuant to the Third Restated Agreement. With respect to
Receivables to be sold pursuant to this Agreement by the Seller after the
Closing Date, such Receivables shall be deemed to be all the Receivables created
after the close of business on the Cut-Off Date.]
(b) In connection with the foregoing sale, the Seller agrees to record and
file on or prior to the Closing Date or within 10 days thereafter, at its own
expense, a financing statement
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or statements with respect to the Receivables and the other property described
in Section 2.1(a) sold by the Seller hereunder meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect and protect the interests of the Purchaser created hereby under the
Relevant UCC (subject, in the case of Related Security constituting returned
inventory and proceeds, to the applicable provisions of Section 9-306 of the
Relevant UCC) against all creditors of and purchasers from the Seller, and to
deliver either the originals of such financing statements or a file-stamped copy
of such financing statements or other evidence of such filings to the Purchaser
on the Closing Date.
(c) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents and take all actions
as may be necessary or as the Purchaser may reasonably request in order to
perfect or protect the interest of the Purchaser in the Receivables purchased
hereunder or to enable the Purchaser to exercise or enforce any of its rights
hereunder. Without limiting the foregoing, the Seller will, in order to
accurately reflect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assignments
thereof (as permitted pursuant hereto) as may be requested by the Purchaser, and
shall indicate clearly and unambiguously in the Seller's computer files and
other Records that the Receivables transferred hereby have been sold to the
Purchaser pursuant to this Agreement and subsequently transferred to the Trustee
pursuant to the Pooling and Servicing Agreement. The Seller shall, upon request
of the Purchaser, obtain such additional search reports as the Purchaser shall
request. To the fullest extent permitted by applicable law, the Purchaser shall
be permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Seller's signature. Carbon, photographic or
other reproduction of this Agreement or any financing statement shall be
sufficient as a financing statement.
(d) It is the express intent of the Seller and the Purchaser that the
conveyance of the Receivables, all Related Security, if any, and all Collections
and proceeds thereof by the Seller to the Purchaser pursuant to this Agreement
be construed as a sale of such Receivables and other property by the Seller to
the Purchaser, which sale is absolute and irrevocable (except as expressly
provided otherwise herein) and provides the Purchaser with the full benefits of
ownership of such Receivables and other property. Further, it is not the
intention of the Seller and the Purchaser that such conveyance be deemed a grant
of a security interest in the Receivables and such other property by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the express intent of the parties, the
Receivables and such other property are construed to constitute property of the
Seller, then (i) this Agreement also shall be deemed to be, and hereby is, a
security agreement within the meaning of the Relevant UCC; and (ii) the
conveyance by the Seller provided for in this Agreement shall be deemed to be,
and the Seller hereby grants to the Purchaser, a security interest in, to and
under all of the Seller's right, title and interest in, to and under the
Receivables and such other property outstanding on the Closing Date and
thereafter owned by the Seller, together with all Related Security, if any, and
all Collections and other monies due or to become due with respect thereto
(including all Finance Charge Receivables, Recoveries and all guarantees thereof
and interchange, if any) and all proceeds of the foregoing, including Insurance
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Proceeds, to secure the rights of the Purchaser set forth in this Agreement or
as may be determined in connection therewith by applicable law (collectively,
the "Secured Obligations"). The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Receivables and such other property, such security interest would be deemed to
be a perfected first priority security interest in favor of the Purchaser under
applicable law and will be maintained as such throughout the term of this
Agreement.
SECTION 2.2. ADDITION OF ACCOUNTS. On each Business Day (each, an
"Addition Date") (i) each charge account established pursuant to a Charge
Account Agreement since the preceding Business Day (or in the case of the
Business Day immediately following the Existing Trust Termination Date which is
an Eligible Account) and (ii) each Restored Account (any such account referred
to in the foregoing clauses (i) and (ii), an "Additional Account") shall be
included as an Account. The Seller shall convey to the Purchaser the Receivables
in any Additional Accounts on each Addition Date with respect thereto. On each
Determination Date, the Seller shall deliver to the Purchaser a written
assignment (including an acceptance by the Purchaser) in substantially the form
of Exhibit A (a "Confirming Assignment") and a computer file, microfiche or
written list containing a true and complete schedule identifying all Additional
Accounts conveyed to the Purchaser during the preceding Monthly Period and
specifying for each such Account, as of the last billing date for such Account,
its account number and the aggregate amount outstanding in such Account, and
such computer file, microfiche or written list shall be incorporated into and
made part of such Confirming Assignment and this Agreement as of the date of
such Confirming Assignment. On each Addition Date, the Seller shall indicate in
its computer files that the Receivables created in the Additional Accounts
conveyed to the Purchaser on such date have been conveyed to the Purchaser for
further conveyance to the Trust for the benefit of the Certificateholders
referred to in the Pooling and Servicing Agreement.
SECTION 2.3. SERVICING OF RECEIVABLES. (a) The servicing, administering
and collection of the Receivables shall be conducted by the Servicer, which
hereby agrees to perform, take or cause to be taken all such action as may be
necessary or advisable to collect each Receivable from time to time, all in
accordance with applicable laws, rules and regulations and with the care and
diligence which the Servicer employs in servicing similar receivables for its
own account, in accordance with the Charge Account Guidelines. As provided in,
and subject to the terms of, Section 8.7 of the Pooling and Servicing Agreement,
the Servicer may delegate certain functions to other Persons who agree to
conduct such duties in accordance with the Charge Account Guidelines; provided,
however, no such delegation shall relieve the Servicer of its obligations
hereunder. The Purchaser hereby appoints the Servicer as its agent to enforce
the Purchaser's rights and interests in, to and under the Receivables, the
Related Security, if any, and the Collections with respect thereto, and the
Seller agrees to cooperate with and assist the Purchaser and the Servicer in
connection with any such efforts, including acting as agent for and on behalf of
the Purchaser and the Servicer in connection therewith. The Servicer shall hold
in trust for the Purchaser, in accordance with its interests, all records which
evidence or relate to the Receivables or Related Security, if any, Collections
and proceeds with respect thereto. Notwithstanding anything to the contrary
contained herein, from and after a Servicer Default, a
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Successor Servicer shall be appointed as provided in Article X of the Pooling
and Servicing Agreement. The Purchaser agrees to pay the Servicer the Monthly
Servicing Fee for the Servicer's performance of the duties and obligations
described in this Agreement and in the Pooling and Servicing Agreement.
(b) The Seller hereby grants to each of the Purchaser and the Servicer an
irrevocable, non-exclusive license to use, without royalty or payment of any
kind, all software used by the Seller to account for the Receivables, to the
extent necessary to administer the Receivables, whether such software is owned
by the Seller or is owned by others and used by the Seller under license
agreements with respect thereto, provided, however, should the consent of any
licensor of the Seller to such grant of the license described herein be
required, the Seller hereby agrees that upon the request of the Purchaser (or
the Trustee as the Purchaser's assignee), the Seller will use its reasonable
efforts to obtain the consent of such third-party licensor. The license granted
hereby shall be irrevocable, and shall terminate on the date this Agreement
terminates in accordance with its terms.
ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. PURCHASE PRICE. The Purchase Price for the Receivables and
related property conveyed on any date shall be the dollar amount equal to the
product of (i) the aggregate outstanding principal balance of the Receivables
sold during the applicable Purchase Period as reflected in the applicable
Monthly Servicer's Statement or any other certificate delivered pursuant thereto
or pursuant to this Agreement as in effect prior to the date hereof and (ii) the
Purchase Rate on such date.
SECTION 3.2. PAYMENT OF PURCHASE PRICE. (a) The Purchase Price for the
Receivables sold on and after the Closing Date shall be paid or has been paid by
payment of cash in immediately available funds. The Purchaser may obtain the
cash to pay the Purchase Price from the sale of Eligible Receivables to the
Trust, and pursuant to advances pursuant to a Subordinated Note between either
Saks Incorporated or Saks & Company, as lender (the "Subordinated Note Lender")
and the Purchaser (such advance and any advance thereunder as contemplated by
Section 3.2(b), each an "Advance") and contributions to the capital of the
Purchaser by the Subordinated Note Lender.
(b) The Purchase Price for the Receivables sold by the Seller on any
purchase date after the initial date of the Receivables Purchase Agreement
(each, a "Purchase Date") shall be paid in cash to the Seller from proceeds from
(i) the sale by the Purchaser of the Receivables to the Trust or (ii) from
proceeds of (A) an Advance under the Subordinated Note or (iii) a capital
contribution by the Subordinated Note Lender to the Purchaser or (iv) any
combination of the foregoing. In the event the Purchaser does not have
sufficient cash to pay the Purchase Price due on any Purchase Date, or the
Subordinated Note Lender determines, in its sole discretion not to
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make a capital contribution to the Purchaser, the Subordinated Note Lender,
subject to the terms hereof, irrevocably agrees to make an Advance on such
Purchase Date in an original principal amount equal to such cash insufficiency.
All Advances made by the Subordinated Note Lender to the Purchaser shall be
evidenced by a single subordinated note, duly executed on behalf of the
Purchaser, in substantially the form of Exhibit B annexed hereto.
(c) The terms and conditions of the Subordinated Note and all Advances
thereunder shall be as follows:
(i) Repayment of Advances. All amounts paid by the Purchaser with
respect to the Advances shall be allocated first to the repayment of accrued
interest until all such interest is paid, and then to the outstanding principal
amount of the Advances. Subject to the provisions of this Agreement, the
Purchaser may borrow, repay and reborrow Advances on and after the date hereof
and prior to the termination of this Agreement, subject to the terms, provisions
and limitations set forth herein.
(ii) Interest. The Subordinated Note shall bear interest from its
date on the outstanding principal balance thereof at a rate per annum equal to
one month LIBOR as published in the Money Rates Section of The Wall Street
Journal. Interest on each Advance shall be computed and paid based on the actual
number of days elapsed and upon a year of 360 days.
(iii) Sole and Exclusive Remedy; Subordination. The Subordinated
Note shall be fully subordinated to any rights of the Trustee, the
Certificateholders and their permitted assigns pursuant to the Pooling and
Servicing Agreement, all on the terms and conditions set forth in the
Subordinated Note, and shall not evidence any rights in the Receivables.
SECTION 3.3. MONTHLY REPORT. On each Determination Date, the Seller shall
deliver or cause to be delivered to the Purchaser a report covering the
preceding Monthly Period, substantially in the form of the Monthly Servicer's
Statement attached as Exhibit E to the Pooling and Servicing Agreement, showing
(i) the aggregate Purchase Price of Receivables acquired or generated by the
Seller in the preceding Monthly Period and (ii) the aggregate outstanding
principal balance of such Receivables that are Eligible Receivables as of the
last day of such preceding Monthly Period.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. SELLER'S REPRESENTATIONS AND WARRANTIES. The Seller
represents and warrants to the Purchaser as of the Closing Date and shall be
deemed to represent and warrant as of the date of any sale of any interest in
Receivables, including Receivables in Additional Accounts to the Purchaser
pursuant to this Agreement that:
(a) Corporate Existence and Power. The Seller is a national banking
association, duly incorporated, validly existing and in good standing under the
laws of the United States of America, and has full power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement. The Seller is duly
qualified to do business and is in good standing (or is exempt from such
requirements) and has obtained all necessary licenses and approvals with respect
to the Seller, in each jurisdiction in which failure to so qualify or to obtain
such licenses and approvals would render any Account Agreement relating to an
Account or any Receivable unenforceable by it, the Purchaser or the Trust and
would have a material adverse effect on the Certificateholders or on the
Purchaser's or the Servicer's ability to perform their respective obligations
under this Agreement, the Pooling and Servicing Agreement or any Supplement
thereto.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Seller of this Agreement are within
the Seller's corporate powers, have been duly authorized by all necessary
corporate action, and require no action by or in respect of, or filing with, any
Governmental Authority or official thereof (except for the filing of UCC
financing and continuation statements, and amendments thereto, as required by
this Agreement). The execution and delivery of this Agreement by the Seller, the
performance by the Seller of the transactions contemplated by this Agreement and
the fulfillment by the Seller of the terms hereof and thereof will not conflict
with, violate or result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any Requirements of Law applicable to the Seller or any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Seller is a party or by which it or any of its properties are bound
and which conflict, violation, breach or default would have a material adverse
effect on the Purchaser or the Certificateholders or on the Purchaser's or the
Servicer's ability to perform their respective obligations under the Pooling and
Servicing Agreement.
(c) Binding Effect. This Agreement constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency, receivership,
conservatorship, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
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general and except as such enforceability may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(d) Perfection. Immediately preceding the sale, transfer and assignment of
the Receivables and the related property pursuant to this Agreement, the Seller
had good and marketable title to all of the Receivables and such related
property, free and clear of all Liens (except those Liens permitted by the
Pooling and Servicing Agreement). On or prior to the date of each sale of
Receivables and such related property pursuant to this Agreement, all financing
statements and other documents required to be recorded or filed in order to
perfect and protect the ownership interest of the Purchaser in and to the
Receivables and such related property against all creditors of and purchasers
from the Seller will have been duly filed in each filing office necessary for
such purpose and all filing fees and taxes, if any, payable in connection with
such filings shall have been paid in full.
(e) Tax Status. The Seller has filed all material tax returns (federal,
state and local) required to be filed and has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges.
(f) Action, Suits. There are no proceedings or investigations pending or,
to the knowledge of the Seller, threatened against the Seller before any
Governmental Authority (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement, (iii) seeking any determination or ruling that, in the
reasonable judgment of the Seller, would materially and adversely affect the
performance by the Seller of its obligations under this Agreement, (iv) seeking
any determination or ruling that would materially and adversely affect the
validity or enforceability of this Agreement or (v) seeking to affect adversely
the federal income tax attributes of the Trust.
(g) Place of Business. The principal place of business and chief executive
office of the Seller is located at 140 Industrial Drive, Elmhurst, Illinois
60126, and the offices where the Seller keeps all its records with respect to
its Accounts and Receivables, are located at the address(es) described on
Exhibit C hereto or such other locations notified to the Purchaser in accordance
with this Agreement in jurisdictions where all action required by the terms of
this Agreement has been taken and completed.
(h) True Sale. This Agreement constitutes a valid sale, transfer and
assignment to the Purchaser of all right, title and interest of the Seller in
and to the Receivables and related property to be transferred hereby, whether
existing on the date of this Agreement or hereafter created in the Accounts and
the proceeds thereof which is effective as to each Receivable upon the creation
thereof, and upon such transfer to the Purchaser hereunder, the Purchaser shall
obtain good and marketable title to such Receivables and related property, free
and clear of all Liens (except those Liens permitted by the Pooling and
Servicing Agreement).
(i) Trade Names, etc. As of the date hereof: (i) the Seller's chief
executive office is located at the address set forth in the immediately
preceding subsection (g); (ii) the Seller has
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only the subsidiaries and divisions listed on Exhibit D hereto; and (iii) the
Seller has, within the last five (5) years, operated only under the trade names
identified in Exhibit D hereto, and, within the last five (5) years, has not
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under Title 11, United States Code
(Bankruptcy), except as disclosed in Exhibit D hereto.
(j) Nature of Receivables. As of the applicable Addition Date with respect
to Additional Accounts, and as of the applicable Determination Date with respect
to Additional Accounts conveyed to the Purchaser during the preceding Monthly
Period, the related computer file, microfiche or written list referred to in
Section 2.2 is in all material respects an accurate and complete listing of all
the Accounts of the Seller the Receivables of which have been sold, transferred
and assigned to the Purchaser since the last day of the preceding Monthly
Period, and the information contained therein with respect to the identity of
such Accounts and the Receivables existing thereunder is true and correct in all
material respects as of the last day of such preceding Monthly Period.
(k) Eligibility of Accounts. No selection procedures adverse to the
Purchaser or the Certificateholders have been employed in selecting the
Accounts.
(l) [Reserved]
(m) Not an Investment Company. The Seller is not, and is not controlled
by, an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or is exempt from all provisions of such Act.
(n) ERISA. The Seller and each of its ERISA Affiliates is in compliance in
all material respects with ERISA and no lien exists in favor of the Pension
Benefit Guaranty Corporation on any of the Receivables.
(o) Bulk Sales. No transaction contemplated by this Agreement requires
compliance with any bulk sales act or similar law.
(p) No Insolvency. The Seller is not insolvent immediately prior to any
transfer of Receivables hereunder, and will not be rendered insolvent
immediately following such transfer.
(q) Reasonably Equivalent Value. The Purchaser has given reasonably
equivalent value to the Seller in consideration for the transfer and sale to the
Purchaser of the applicable Receivables and other property from such Seller, and
each such transfer shall not have been made for or on account of an antecedent
debt owed by such Seller to the Purchaser. The Seller acknowledges that it will
receive reasonably equivalent value in consideration for the transfer to the
Purchaser of all Receivables and other property now or hereafter to be
transferred and sold hereunder.
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The Purchaser and the Servicer may rely upon any of these representations
and warranties, and any of the covenants and agreements of the Seller contained
herein in connection with any transactions pursuant to the Pooling and Servicing
Agreement.
SECTION 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE
SELLER; NOTICE OF BREACH. On each Addition Date, the Seller shall be deemed to
have certified that all representations and warranties described in Section 4.1
are true and correct on and as of such date as though made on and as of such
date and that all the covenants to be performed by the Seller have been
performed. The representations and warranties set forth in Section 4.1 shall
survive the conveyance of the Receivables to the Purchaser, and termination of
the rights and obligations of the Purchaser and the Seller under this Agreement.
Upon discovery by the Purchaser or the Seller of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other within three (3) Business Days of
such discovery.
SECTION 4.3. AUTOMATIC REPURCHASE OF INELIGIBLE RECEIVABLES. In the event
that a Receivable is not an Eligible Receivable as a result of the failure to
satisfy the conditions set forth in clause (d) of the definition of Eligible
Receivable in the Pooling and Servicing Agreement, and either of the following
two conditions is met:
(i) the Lien on the subject Receivable (1) ranks prior to the Lien
created pursuant to this Agreement, (2) arises in favor of the United
States of America or any state or any agency or instrumentality thereof or
involves taxes or liens arising under Title IV of ERISA, or (3) has been
consented to by the Seller; or
(ii) the Lien on the subject Receivable is not of the types
described in clause (i) above, but, as a result of such breach or event,
such Receivable becomes a Receivable in a Defaulted Account or the
Purchaser's rights in, to or under such Receivable or its proceeds are
materially impaired or the proceeds of such Receivable are not available
for any reason to the Purchaser free and clear of any Lien except Liens
permitted hereby;
then, upon the earlier to occur of the discovery of such breach or event by the
Seller or receipt by the Seller of written notice of such breach or event given
by the Purchaser, the Servicer or the Trustee, each such Receivable or, at the
option of the Seller, all such Receivables with respect to the related Account,
automatically shall be repurchased by the Seller on the terms and conditions set
forth in Article VI hereof.
SECTION 4.4. REPURCHASE AFTER CURE PERIOD. In the event of a breach
of any of the representations and warranties set forth in Section 4.1(j) or (k)
with respect to a Receivable (other than in the event that a Receivable is not
an Eligible Receivable as a result of the failure to satisfy the conditions set
forth in clause (c) of the definition of Eligible Receivable), and as a result
of such breach or event such Receivable becomes a Receivable in a Defaulted
Account or the Purchaser's rights in, to or under such Receivable or its
proceeds are materially impaired or the proceeds of such Receivable are not
available for any reason to the Purchaser free and clear
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of any Lien except Liens permitted hereby, then, upon the expiration of 90 days
or any longer period specified by the Servicer (not to exceed an additional 90
days) from the earlier to occur of (x) the discovery of any such event by the
Transferor or the Servicer or (y) receipt by the Purchaser or the Servicer of
written notice of any such event given by the Trustee, each such Receivable or,
at the option of the Purchaser, all such Receivables with respect to the related
Account, shall be repurchased by the Seller on the terms and conditions set
forth in Article VI hereof; provided, however, that no such repurchase shall be
required to be made if, on any day within such applicable period, (A) such
representation and warranty with respect to such Receivable shall then be true
and correct in all material respects as if such Receivable had been transferred
to the Trust on such day, and (B) the related Account is no longer a Defaulted
Account as the result of the breach of such representation and warranty, and the
Trust's rights in, to or under such Receivable or its proceeds are no longer
materially impaired as a result of a breach of such representation and warranty,
and the proceeds of such Receivable are available to the Trust free and clear of
all Liens resulting in the breach of such representation and warranty, as
applicable.
SECTION 4.5 REPURCHASE OF ALL RECEIVABLES. In the event that any of
the representations or warranties set forth in Sections 4.1(a), 4.1(b), 4.1(c),
4.1(d) or 4.1(j) are breached and such breach results in a requirement that the
Purchaser repurchase such Receivable under the Pooling and Servicing Agreement
or a material amount of Receivables are deemed not to be Eligible Receivables,
and such event has a materially adverse effect on the Purchaser or the
Certificateholders, and the Transferor is required to accept reassignment of all
Receivables at the order of the Trustee or the Certificateholders, then the
Seller shall repurchase all Receivables on the terms and conditions set forth in
Article VI hereof.
ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. COVENANTS OF THE SELLER. The Seller hereby covenants and
agrees with the Purchaser that, for so long as this Agreement and the Pooling
and Servicing Agreement are in effect, and until all Receivables, an interest in
which has been sold to the Purchaser pursuant hereto, shall have been paid in
full or charged off, and all amounts owed by the Seller pursuant to this
Agreement have been paid in full, unless the Purchaser otherwise consents in
writing, the Seller covenants and agrees as follows:
(a) Conduct of Business. The Seller will carry on and conduct its credit
card business in substantially the same manner as it is presently conducted and
do all things necessary to remain duly organized, validly existing and in good
standing as a national banking association. The Seller will maintain all
authority required to conduct its business in each jurisdiction in which its
business is conducted, the failure of which would render any Account Agreement
relating to an Account or any Receivable unenforceable by it, the Purchaser or
the Trustee and
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would have a material adverse effect on the Certificateholders or on the
Purchaser's or the Servicer's ability to perform their respective obligations
under this Agreement, the Pooling and Servicing Agreement or any Supplement
thereto.
(b) Compliance with Laws. The Seller will comply in all material respects
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its properties may be subject.
(c) Furnishing of Information and Inspection of Records. The Seller will
furnish or cause to be furnished to the Purchaser from time to time such
information with respect to the Receivables as the Purchaser may reasonably
request, including, without limitation, a computer file, microfiche or written
list showing each Account, identified by account number, and Receivable balance
and any information which the Purchaser may be required to deliver pursuant to
the Pooling and Servicing Agreement or any Supplement thereto. The Seller will
at any time and from time to time during regular business hours and upon
reasonable prior notice permit the Purchaser, or its agents or representatives
(which may include any purchasers of certificates not sold to the public), (i)
to examine and make copies of and abstracts from all records and (ii) to visit
the offices and properties of the Seller for the purpose of examining such
records, and to discuss matters relating to Receivables or the Seller's
performance hereunder with any of the officers, directors, employees or
independent public accountants of the Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account. The Seller will maintain a
system of accounting established and administered in accordance with generally
accepted accounting principles except to the extent required otherwise by
applicable regulatory authorities and then consistent with regulatory accounting
principles, consistently applied, and will maintain and implement administrative
and operating procedures (including, without limitation, an ability to produce
or recreate records evidencing Receivables in the event of the destruction of
the originals thereof), and keep and maintain, all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of each new Receivable and all Collections of and adjustments to
each existing Receivable). The Seller will give the Purchaser and the Trustee
notice of any material change in the administrative and operating procedures of
the Seller referred to in the previous sentence.
(e) Account Agreements and Charge Account Guidelines. The Seller shall
comply with and perform, its obligations under the applicable Account Agreements
relating to the Accounts, the Charge Account Guidelines, and the related
Certificate Purchase Agreement, except insofar as any failure so to comply or
perform would not materially and adversely affect the rights of the Purchaser,
the Trust or the Certificateholders, the ability of the Servicer to collect the
Receivables, the validity or enforceability of this Agreement, the Pooling and
Servicing Agreement, or any documents or agreements related thereto, or the
performance by any party of its obligations hereunder or thereunder.
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(f) Reduction of Charges. Except as otherwise required by Requirement of
Law or as the Seller shall deem necessary to maintain the Saks credit card
program based on a good faith assessment by the Seller, in its sole discretion,
of the various factors affecting the use of its Accounts, the Seller will not
reduce the finance charges or other fees on the Accounts if, as a result of such
reduction, the Servicer reasonably expects that the Portfolio Yield with respect
to all Series outstanding as of the time of, and giving effect to, such
reduction would be less than the weighted average Base Rate for all such
outstanding Series. In addition, the Seller covenants that, unless required by
law, it will not reduce the annual percentage rate, if its reasonable
expectation of Portfolio Yield would be less than the highest Certificate Rate
for any outstanding Series.
(g) Collections Received. The Seller shall direct or cause all Collections
of Receivables to be remitted as directed by the Purchaser. In the event that
the Seller receives any such Collection, the Seller shall hold in trust for and
on behalf of the Purchaser and the Trust, as their interests may appear, and
remit, immediately, but in any event not later than the close of business on the
second Business Day following its receipt thereof, to the Servicer, all
Collections received from time to time by the Seller.
(h) Sale Treatment. The Seller agrees to treat this conveyance for all
purposes (including, without limitation, tax and financial accounting purposes)
as a sale and, to the extent any such reporting is required, shall report the
transactions contemplated by this Agreement on all relevant books, records, tax
returns, financial statements and other applicable documents as a sale of the
Receivables to the Purchaser.
(i) ERISA. The Seller shall promptly give the Purchaser written notice
upon becoming aware that any ERISA Lien on any of the Receivables exists.
SECTION 5.2. NEGATIVE COVENANTS OF THE SELLER. During the term of this
Agreement, unless the Trustee and the Purchaser shall otherwise consent in
writing:
(a) No Sales, Liens, Etc. Except for the conveyances hereunder, the Seller
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on (or the filing of any financing
statement with respect to) any Receivable, whether now existing or hereafter
created, or any interest therein; the Seller will notify the Purchaser and the
Trustee of the existence of any Lien on any Receivable transferred and sold by
the Seller to Purchaser hereby; and immediately upon discovery thereof, the
Seller will defend the right, title and interest of the Purchaser and the Trust
in, to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Seller;
provided, however, that nothing in this Section 5.2(a) shall prevent or be
deemed to prohibit the Seller from suffering to exist upon any of the
Receivables any Liens for, municipal or other local taxes and other governmental
charges if such taxes or governmental charges shall not at the time be due and
payable or if the Transferor shall currently be contesting the validity thereof
in good faith by appropriate proceedings and shall have set aside on its books
adequate reserves under generally accepted accounting principles with respect
thereto.
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(b) Account Agreements and Charge Account Guidelines. Subject to
compliance with all Requirements of Law, the failure to comply with which would
have a material adverse effect on the rights of the Purchaser, the Trust or the
Certificateholders, and subject further to Section 5.1(f), the Seller or the
Servicer may change the terms and provisions of the Charge Account Agreements or
the Charge Account Guidelines in any respect, so long as such changes are made
applicable to comparable segments of those Charge Accounts serviced by the
Servicer which have characteristics the same as, or substantially similar to,
the Accounts which are subject hereto, and so long as such changes would not be
reasonably likely to cause the occurrence of a Pay Out Event.
(c) Change of Name, Etc. The Seller shall not change its name, identity or
structure or location of its chief executive office, unless at least ten (10)
Business Days prior to the effective date of any such change the Seller delivers
to the Purchaser such documents, instruments or agreements, including, without
limitation, appropriate financing statements under the Relevant UCC, executed by
the Seller necessary to reflect such change and to continue the perfection of
the Purchaser's and any assignee's first priority interest in the Receivables.
(d) No Change in Business or Charge Account Guidelines. The Seller will
not make any change in the Charge Account Guidelines or any change in the
character of its business, which change would, in either case, impair the
collectibility of any substantial portion of the Receivables or otherwise
materially and adversely affect the rights of the Purchaser, the Trust or the
Certificateholders, the ability of the Servicer to collect the Receivables, the
validity or enforceability of this Agreement, the Pooling and Servicing
Agreement, or any documents or agreements related thereto, or the performance by
any party of its obligations hereunder or thereunder.
(e) ERISA Matters. The Seller will not (i) engage in any prohibited
transaction (as defined in Section 4975 of the Internal Revenue Code and Section
406 of ERISA) for which an exemption is not available or has not previously been
obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of
the Internal Revenue Code) or funding deficiency with respect to any Defined
Benefit Plan other than a Multiemployer Plan that could reasonably result in the
PBGC or IRS filing a lien; (iii) fail to make any payments to any Multiemployer
Plan that the Seller or any ERISA Affiliate of the Seller is required to make
under the agreement relating to such Multiemployer Plan or any law pertaining
thereto; (iv) terminate any Defined Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any Reportable Event which
represents a material risk of a liability to the Seller or any ERISA Affiliate
of the Seller under ERISA or the Internal Revenue Code.
(f) Transfers of Accounts. The Seller will not convey, transfer or assign
any Accounts to any Person, except for Removed Accounts, unless the Rating
Agency Condition is satisfied.
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SECTION 5.3. INDEMNIFICATION. The Seller agrees to indemnify, defend and
hold the Purchaser harmless from and against any and all loss, liability,
damage, judgment, claim, deficiency, or expense (including interest, penalties,
reasonable attorneys' fees and amounts paid in settlement) (collectively,
"Indemnified Amounts") to which the Purchaser or any assignee thereof may become
subject insofar as such loss, liability, damage, judgment, claim, deficiency, or
expense arises out of or is based upon a breach by the Seller of its
representations, warranties and covenants contained herein, or any information
certified in any written schedule or certificate delivered by the Seller
hereunder being untrue in any material respect at the time so certified;
provided, however, neither the Purchaser nor any of its assignees shall be
entitled to indemnification hereunder for any Indemnified Amount to the extent
the same resulted from the gross negligence or willful misconduct of the
Purchaser or any of its assignees. The obligations of the Seller under this
Section 5.3 shall be considered to have been relied upon by the Purchaser and
shall survive the execution, delivery, performance and termination of this
Agreement and any sale or transfer of the Receivables or any interest therein by
the Purchaser, regardless of any investigation made by the Purchaser or on its
behalf.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. MANDATORY REPURCHASE. (a) If, on any day, the repurchase of
any Receivable which has been sold by the Seller hereunder shall be required
pursuant to Section 4.3 or 4.4 hereof, the Seller shall be deemed to have
received on such day a Collection of such Receivable in full and shall on such
day pay to the Purchaser an amount equal to the aggregate outstanding principal
balance of such Receivable, plus outstanding Finance Charge Receivables accrued
thereon through the date of such repurchase; provided that, prior to the
Termination Date, such amount may be paid, at the election of the Purchaser, by
a reduction in or an offset to the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a payment in
respect of such breach pursuant to the Pooling and Servicing Agreement;
provided, however, in all events at least the amount of any cash deposit
required to be made by the Purchaser under the Pooling and Servicing Agreement
in respect of the retransfer of such Ineligible Receivable shall be paid in
immediately available funds by the Seller.
(b) Repurchase of Receivables. If on any day the repurchase of all
Receivables which have been sold by the Seller hereunder shall be required
pursuant to Section 4.5 hereof, the Seller shall be deemed to have received on
such day a Collection of such Receivables in full and shall on such day pay to
the Purchaser an amount equal to the aggregate outstanding principal balance of
such Receivable, plus Finance Charges Receivables accrued thereon through the
date of such repurchase; provided, however, in all events at least the amount of
any cash deposit required to be made by the Purchaser under the Pooling and
Servicing Agreement in respect of the retransfer of such Ineligible Receivable
shall be paid in immediately available funds by the Seller.
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SECTION 6.2. DILUTIONS, ETC. If the Servicer or the Seller adjusts
downward the amount of any Receivable without receiving Collections therefor or
without charging off such amount as uncollectible, because of a rebate, refund,
unauthorized charge or billing error to an Obligor, or because such Receivable
was created in respect of merchandise or services which were refused, returned
or not received by an Obligor, then the Seller shall be deemed to have received
on such day a Collection of such Receivable in the amount of such reduction,
cancellation or payment made by the Obligor and shall on such day pay to the
Purchaser an amount equal to such reduction or cancellation; provided that,
prior to the Termination Date, such amount may be paid by a reduction in the
Purchase Price paid to the Seller on the next occurring Purchase Date, unless
the Purchaser is required to make a payment in respect of such breach sooner
pursuant to the Pooling and Servicing Agreement. Similarly, if the Servicer or
the Seller adjusts downward the amount of any Receivable because such Receivable
was discovered as having been created through a fraudulent or counterfeit charge
or with respect to which the covenant contained in Section 5.2(a) hereof was
breached, then the Seller shall be deemed to have received on such day a
Collection of such Receivable in the amount of such reduction, cancellation or
payment made by the Obligor and shall on such day pay to the Purchaser an amount
equal to such reduction or cancellation; provided that, prior to the Termination
Date, such amount may be paid by a reduction in the Purchase Price paid to the
Seller on the next occurring Purchase Date; provided, however, in all events at
least the amount of any cash deposit required to be made by the Purchaser under
the Pooling and Servicing Agreement in respect of any such adjustment shall be
paid in immediately available funds by the Seller. Any adjustment ("Adjustment
Payment Obligation"), required pursuant to either of the two preceding sentences
shall be made within two (2) Business Days of the making of the Adjustment
Payment Obligation, and in no event later than the end of the Monthly Period in
which such adjustment obligation arises.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. CONDITIONS TO THE PURCHASER'S OBLIGATIONS REGARDING
RECEIVABLES. The obligations of the Purchaser to purchase the Receivables on the
Closing Date and any Purchase Date shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Seller contained in this
Agreement shall be true and correct on the Closing Date and on each Purchase
Date thereafter with the same effect as though such representations and
warranties had been made on such date (except to the extent any such
representation or warranty specifically related to an earlier date, in which
case such representation or warranty shall have been true as of such earlier
date);
(b) All information concerning the Receivables provided to the Purchaser
shall be true and correct in all material respects as of the Closing Date, in
the case of any Receivables
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existing on the Closing Date, or each Addition Date, in the case of any
Receivables created after the Closing Date, and in each Confirming Assignment;
(c) The Seller shall have substantially performed all other obligations
required to be performed by the provisions of this Agreement;
(d) The Seller shall have filed or caused to be filed the financing and
continuation statement(s) and all amendments thereto required to be filed
pursuant to Section 2.1(b); and
(e) All corporate and legal proceedings and all instruments in connection
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to the Purchaser, and the Purchaser shall have received from
the Seller copies of all documents (including, without limitation, records of
corporate proceedings) relevant to the transactions herein contemplated as the
Purchaser may reasonably have requested.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. TERM. This Agreement shall continue in full force and effect
from the date of its effectiveness as provided in Section 9.14 hereof until the
date following the earlier of (i) the date on which the Trustee declares a Pay
Out Event with respect to all outstanding Series of the Trust pursuant to the
Pooling and Servicing Agreement and any Supplements, (ii) the date on which the
Trust terminates, (iii) the date on which an Insolvency Event occurs with
respect to the Seller, (iv) the close of business on the third Business Day
following a conveyance of Receivables to the Purchaser for which the Purchaser
does not pay the Purchase Price in accordance with the provisions hereof, or (v)
the date on which either the Purchaser or the Seller becomes unable for any
reason to purchase or repurchase any Receivable in accordance with the
provisions of this Agreement or defaults on its obligations hereunder, which
default continues unremedied for more than thirty (30) days after written notice
(any such date being a "Termination Date"); provided, however, that the
termination of this Agreement pursuant to this Section 8.1 hereof shall not
discharge any Person from any obligations incurred prior to such termination,
including, without limitation, any obligations to make any payments with respect
to the interest of the Purchaser in any Receivable sold prior to such
termination.
SECTION 8.2. EFFECT OF TERMINATION. Following the termination of this
Agreement pursuant to Section 8.1, the Seller shall not sell, and the Purchaser
shall not purchase, any Receivables. No termination or rejection or failure to
assume the executory obligations of this Agreement in any proceeding regarding
an Insolvency Event with respect to the Seller or the Purchaser shall be deemed
to impair or affect the obligations pertaining to any executed sale or executed
obligations, including, without limitation, pre-termination breaches of
representations and warranties by the Seller or the Purchaser. Without limiting
the foregoing, prior to termination, the failure of the Seller to deliver or
cause to be delivered computer records of
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Receivables or any reports regarding the Receivables shall not render such
transfer or obligation executory, nor shall the continued duties of the parties
pursuant to Article V or Section 9.1 of this Agreement render an executed sale
executory.
ARTICLE IX
AMENDMENTS TO THIRD RESTATED AGREEMENT
SECTION 9.1. AMENDMENT TO THIRD RESTATED AGREEMENT. This Agreement amends
the Third Restated Agreement, Section 1.1 and the Definitions contained therein
of "Accounts," "Additional Accounts," "Eligible Receivable" and "Receivable" to
provide that all such terms, wherever used in such Third Restated Agreement
shall mean and refer only to those accounts, additional accounts, eligible
receivables and receivables that are not the subject of this Agreement and which
relate solely to accounts and additional accounts which have not been
contributed to and assumed by the Bank pursuant to the Contribution Agreement or
otherwise. It is the intent of the parties, as of the date of this Agreement,
that only open end revolving proprietary credit card accounts be contributed to
the Bank and that only receivables arising thereunder shall be the subject of
this Agreement. All other forms of accounts, additional accounts and receivables
thereunder shall remain subject to the Third Restated Agreement.
SECTION 9.2. CONTINUATION OF THIRD RESTATED AGREEMENT The Third Restated
Agreement shall be terminated as to all Accounts, Additional Accounts, Eligible
Receivables and Receivables with respect to open end revolving credit cards
accounts and all open end credit card credit offered to customers of Saks, all
of which shall be governed solely hereby upon and following the Effective Time.
With respect to all closed end credit granted under any other types of accounts
to customers of Saks, the Third Restated Agreement shall continue to control and
provide for the sale and transfer of all closed end receivables, which shall be
purchased by the purchaser named therein pursuant to the terms and upon the
conditions of the Third Restated Agreement, which shall continue in full force
and effect solely for such purpose.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT. This Agreement and the rights and obligations of
the parties hereunder may not be changed orally, but only by an instrument in
writing signed by the Purchaser and the Seller. Any reconveyance executed in
accordance with the provisions hereof shall not be considered an amendment to
this Agreement.
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SECTION 10.2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.3. NOTICES. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify for the purposes
of notice to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
applicable telecopy number specified in (or pursuant to) this Section 10.3 and
confirmation is received, (ii) if given by mail three (3) Business Days
following such posting, postage prepaid, U.S. first class or overnight mail,
(iii) if given by overnight courier, such as FedEx, one Business Day after
deposit thereof with a national overnight courier service, or (iv) if given by
any other means, when received at the address specified in (or pursuant to) this
Section 10.3.
(a) in the case of the Purchaser: with a copy to:
SFA Finance Company Saks Incorporated
c/o Oliver Richardson 750 Lakeshore Parkway
The Richardson Company Birmingham, Alabama 35211
599 Lexington Ave., 23rd Floor Telephone: (205) 940-4735
New York, New York Telecopy: (205) 940-4098
Attn: Treasurer Attn: Douglas E. Coltharp
Telephone: (212) 940-5140 Executive Vice President and
Telecopy: (212) 940-5159 Chief Financial Officer
(b) in the case of the Seller:
National Bank of the Great Lakes
140 Industrial Drive
Elmhurst, Illinois 60126
Telephone: (630) 516-8080
Telecopy: (630) 516-8031
Attn: Douglas E. Coltharp
Chairman
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<PAGE> 28
with a copy to:
Saks Incorporated
750 Lakeshore Parkway
Birmingham, Alabama 35211
Telephone: (205) 940-4735
Telecopy: (205) 940-4098
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(c) in the case of the Servicer:
Saks & Company
c/o 12 East 49th Street
New York, NY 10017
Telephone: (212) 940-5140
Telecopy: (212) 940-5159
Attn: Treasurer
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
SECTION 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
SECTION 10.5. ASSIGNMENT. This Agreement may not be assigned by the
parties hereto, except that the Purchaser may assign its rights hereunder
pursuant to the Pooling and Servicing Agreement to the Trustee, for the benefit
of the Certificateholders. The Purchaser hereby notifies (and the Seller hereby
acknowledges that) the Purchaser, pursuant to the Pooling and Servicing
Agreement, has assigned all its rights hereunder to the Trustee. All rights of
the Purchaser hereunder may be exercised by the Trustee or its assignees, to the
extent of their respective rights pursuant to such assignments.
SECTION 10.6. FURTHER ASSURANCES. The Purchaser and the Seller agree to do
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the other party more
fully to effect the purposes of this Agreement, including, without limitation,
the execution of any financing statements or continuation statements or
equivalent documents relating to the Receivables for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
-25-
<PAGE> 29
SECTION 10.7. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the Purchaser, the Seller or the Trustee
(as assignee of the Purchaser), any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privilege provided by law.
SECTION 10.8. NO BANKRUPTCY PETITION AGAINST THE PURCHASER OR TRUST. Each
of the Seller and the Servicer hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of all
Certificates, it will not institute against, or join any other Person in
instituting against, the Purchaser or the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
SECTION 10.10. COUNTERPARTS. This Agreement may be executed in two or
more counterparts including telecopy transmission thereof (and by different
parties on separate counterparts), each of which shall be an original, but all
of which together shall constitute one and the same instrument.
SECTION 10.10. BINDING EFFECT; THIRD-PARTY BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. The Trustee on behalf of the
Certificateholders is intended by the parties hereto to be a third-party
beneficiary of this Agreement, but otherwise no Person not a party is intended
to or shall have any rights hereunder, whether as a third party beneficiary or
otherwise.
SECTION 10.11. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein or incorporated hereby, this Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except in writing
executed by the parties as provided herein.
SECTION 10.12. HEADINGS. The cover page, table of contents, and article
and section headings hereof are for purposes of convenience of reference only
and shall not otherwise affect the meaning or interpretation of any provision
hereof.
SECTION 10.13. EXHIBITS. The schedules and exhibits referred to
herein shall constitute a part of this Agreement and are incorporated into
this Agreement for all purposes.
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<PAGE> 30
SECTION 10.14. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT OF EXISTING
AGREEMENT. The effectiveness of this Agreement, and the amendments made hereto
to the Third Restated Agreement, shall be conditioned upon the occurrence of,
and shall become effective at the beginning of business in the first business
day immediately following, the Effective Time of the Merger.
IN WITNESS WHEREOF, the Seller, the Purchaser and the Servicer each have
caused this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
NATIONAL BANK OF THE GREAT LAKES, as
Seller
By:_________________________________
Name:____________________________
Title:___________________________
SFA FINANCE COMPANY, as Purchaser
By:_________________________________
Name:____________________________
Title:___________________________
SAKS & COMPANY, as Servicer
By:_________________________________
Name:____________________________
Title:___________________________
-27-
<PAGE> 31
EXHIBIT A
TO THE
RECEIVABLES PURCHASE AGREEMENT
FORM OF CONFIRMING ASSIGNMENT OF RECEIVABLES
IN ADDITIONAL ACCOUNTS
CONFIRMING ASSIGNMENT NO. ___ OF ADDITIONAL RECEIVABLES IN ACCOUNTS, dated
as of [insert applicable Determination Date] (the "Confirming Assignment"), by
and between NATIONAL BANK OF THE GREAT LAKES, a national banking association
(the "Seller"), and SFA FINANCE COMPANY, a Delaware corporation, (the
"Purchaser"), pursuant to the Receivables Purchase Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Seller, Saks & Company (the "Servicer") and the Purchaser are
parties to a Receivables Purchase Agreement, dated as of September 17, 1998 (as
such agreement may have been or may from time to time be, amended, supplemented,
restated or otherwise modified, the "Receivables Purchase Agreement");
WHEREAS, pursuant to subsection 2.2 of the Receivables Purchase Agreement,
Additional Accounts created during the Monthly Period immediately preceding the
date hereof have been included as Accounts, and Receivables in such Additional
Accounts, whether then existing or thereafter created, have been conveyed to the
Purchaser; and
WHEREAS, the Seller and the Purchaser are required to execute and deliver
this Confirming Assignment pursuant to subsection 2.2 of the Receivables
Purchase Agreement:
NOW, THEREFORE, the Seller and the Purchaser hereby agree as follows:
1. Defined Terms. All capitalized terms used herein shall have the
meanings ascribed to them in the Receivables Purchase Agreement unless otherwise
defined herein.
2. Designation of Additional Accounts. The Seller is delivering herewith a
computer file, written list or microfiche list containing a true and complete
schedule identifying all Additional Accounts created and included as Accounts
during the Monthly Period immediately preceding the date hereof and specifying
for each such Account, as of the last billing date for such Account, its account
number and billing cycle, its collection status, the aggregate Amount
outstanding in such Account and the aggregate amount of Principal Receivables in
such Account. Such computer file, microfiche or written list shall be as of the
date of this Confirming Assignment incorporated into and made part of this
Confirming Assignment and the Receivables Purchase Agreement and is marked as
Schedule 1 to this Confirming Assignment.
A-1
<PAGE> 32
3. Conveyance of Receivables.
(a) The Seller does hereby confirm that on each Addition Date during the
Monthly Period immediately preceding the date hereof the Seller has transferred,
assigned, set over and otherwise conveyed to the Purchaser, without recourse
(except as expressly provided in the Receivables Purchase Agreement), all of its
right, title and interest in, to and under the Receivables then existing and
thereafter created in connection with the Additional Accounts added during such
Monthly Period and listed on Schedule 1, all monies due or to become due and all
amounts received with respect thereto after the Addition Date with respect
thereto and all proceeds thereof. The above described transfer, assignment,
set-over and conveyance does not constitute and is not intended to result in a
creation or an assumption by the Purchaser of any obligation of the Servicer,
the Seller or any other Person in connection with the Accounts, the Receivables
or under any agreement or instrument relating thereto, including, without
limitation, any obligation to any Obligors.
(b) In connection with such transfer, the Seller agrees to record and
file, if necessary to perfect the Purchaser's interest in the Receivables in
such Additional Accounts, at its own expense, financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables now existing and hereafter created
in connection with the Additional Accounts listed on Schedule 1 for the transfer
of accounts meeting the requirements of applicable state law in such manner and
in such jurisdictions as are necessary to perfect the transfer and assignment of
the Receivables to the Purchaser, and to deliver file stamped copies of such
financing statements or other evidence of such filing to the Purchaser on or
prior to the date hereof. The Purchaser shall be under no obligation whatsoever
to file such financing statements, or any continuation statement to such
financing statements, or make any other filing under the UCC in connection with
such transfer.
(c) In connection with such transfer, the Seller further confirms that it
has, at its own expense, with respect to each Additional Account included on
Schedule 1, on or prior to the Addition Date relating thereto, indicated in its
books, records and computer files that all Receivables created in connection
with such Additional Account have been conveyed to the Purchaser.
4. Acceptance by Purchaser. Subject to the satisfaction of the conditions
set forth in Section 6 of this Confirming Assignment, the Purchaser hereby
acknowledges its acceptance on each Addition Date of all right, title and
interest to the property, then existing and thereafter created, conveyed to the
Purchaser by the Seller as described in subsection 3(a) of this Confirming
Assignment. The Purchaser further acknowledges that, prior to or simultaneously
with the execution and delivery of this Confirming Assignment, the Seller
delivered to the Purchaser the written list, computer file or microfiche list
described in Section 2 of this Confirming Assignment.
A-2
<PAGE> 33
5. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Purchaser that, as of each Addition Date, each of
the representations and warranties contained in Article IV of the Receivables
Purchase Agreement to the extent the same relate to any Additional Accounts were
true and correct.
6. Conditions Precedent. The acceptance of the Purchaser set forth in
Section 4 hereof and the amendment of the Receivables Purchase Agreement as set
forth in Section 7 hereof, are subject to the satisfaction, on or prior to the
date hereof, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 5 of this Confirming Assignment
shall have been true and correct as of the Addition Date.
(b) Additional Information. The Seller shall have delivered to the
Purchaser such information, if any, as was reasonably requested by the
Purchaser to satisfy itself as to the accuracy of the representations and
warranties set forth in this Confirming Assignment.
7. Amendment of the Receivables Purchase Agreement. The Receivables
Purchase Agreement is hereby amended by providing that all references to the
"Receivables Purchase Agreement", to "this Confirming Assignment" and "herein"
shall be deemed from and after the date hereof to be a dual reference to the
Receivables Purchase Agreement as supplemented by this Confirming Assignment.
Except as expressly amended hereby, all of the representations, warranties,
terms, covenants and conditions of the Receivables Purchase Agreement shall
remain unamended and shall continue to be, and shall remain in full force and
effect in accordance with their terms and except as expressly provided herein,
this Confirming Assignment shall not constitute or be deemed to constitute a
waiver of compliance with or consent to noncompliance with any term or provision
of the Receivables Purchase Agreement.
8. Counterparts. This Confirming Assignment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument.
A-3
<PAGE> 34
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned have caused this Confirming Assignment
of Additional Accounts to be duly executed and delivered by their respective
duly authorized officers on the day and the year first above written.
NATIONAL BANK OF THE GREAT LAKES, as
Seller
By:_________________________________
Name:____________________________
Title:___________________________
SFA FINANCE COMPANY, as Purchaser
By:_________________________________
Name:____________________________
Title:___________________________
SAKS & COMPANY, as Servicer
By:_________________________________
Name:____________________________
Title:___________________________
A-4
<PAGE> 35
EXHIBIT B
TO THE
RECEIVABLES PURCHASE AGREEMENT
FORM OF SUBORDINATED NOTE
US$100,000,000
August 17, 1998
FOR VALUE RECEIVED, the undersigned, SFA FINANCE COMPANY, a Delaware
corporation (the "Maker"), hereby unconditionally promises to pay to the order
of ____________________________ or any successor holder (the "Payee"), on the
earlier of December 31, 2000 or 91 days following termination of the Trust, the
lesser of the principal sum of up to ONE HUNDRED MILLION DOLLARS and NO/100
($100,000,000.00), or the aggregate unpaid principal amount of all advances of
funds hereunder ("Advances") to the Maker from the Payee pursuant to Section
3.2, and the other terms, of the Receivables Purchase Agreement, dated as of the
date hereof among the Maker, the Payee and National Bank of the Great Lakes (as
such agreement may from time to time be amended, supplemented, restated or
otherwise modified and in effect, the "Receivables Purchase Agreement"), in
lawful money of the United States of America in immediately available funds, and
to pay interest from the date thereof on the principal amount hereof from time
to time outstanding, in like funds, at said office, at the rate per annum equal
to one month LIBOR as published in the Money Rates Section of The Wall Street
Journal and shall be payable in arrears on the first day of each calendar month
(or if any such day is not a Business Day, on the succeeding Business Day).
Interest on each Advance shall be computed and paid based upon the actual number
of days elapsed and a year of 360 days.
The Maker hereby waives diligence, presentment, demand, protest and notice
of any kind whatsoever. The non-exercise by the holder hereof of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Subordinated Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that (a) the failure of the holder hereof
to make such a notation or record or (b) any error in such a notation, shall not
in any manner affect the obligation of the Maker to make payments of principal
and interest in accordance with the terms of this Subordinated Note and the
Receivables Purchase Agreement. Any such notation or record shall be conclusive
and binding as to the date and amount of such Advance, or payment of principal
or interest thereon, absent manifest error.
The Maker shall have the right to borrow, repay and, subject to the
limitations set forth in the Receivables Purchase Agreement, reborrow Advances
made to it without penalty, premium or charge. The Maker shall be obligated to
repay Advances to the Payee only to the extent of
B-1
<PAGE> 36
funds available to the Purchaser from Collections on the Receivables and, to the
extent that such payments are insufficient to pay all amounts owing to the
Seller under this Subordinated Note, the Seller shall not have any claim against
the Purchaser for such amounts and no further or additional recourse shall be
available against Purchaser.
This Subordinated Note is the Subordinated Note referred to in the
Receivables Purchase Agreement. The indebtedness evidenced by this Subordinated
Note is subordinated to the prior payment in full of all of the Maker's recourse
obligations under the Pooling and Servicing Agreement. The subordination
provisions contained herein are for the direct benefit of, and may be enforced
by, the Trustee, the Certificateholders and/or any of their respective permitted
assignees pursuant to the Pooling and Servicing Agreement (collectively, the
"Senior Claimants") under the Pooling and Servicing Agreement. Until the date on
which all obligations of the Maker and/or the Servicer under the Pooling and
Servicing Agreement (all such obligations, collectively, the "Senior Claims")
have been indefeasibly paid and satisfied in full, the Payee shall not demand,
accelerate, sue for, take, receive or accept from the Maker, directly or
indirectly, in cash or other property or by set-off or any other manner
(including, without limitation, from or by way of collateral) any payment or
security of all or any of the indebtedness under this Subordinated Note or
exercise any remedies or take any action or proceeding to enforce the same;
provided, however, that nothing in this paragraph shall restrict the Maker from
paying, or the Payee from requesting, any payments under this Subordinated Note
so long as the Maker is not required under the Pooling and Servicing Agreement
to set aside for the benefit of, or otherwise pay over to, the funds used for
such payments to any of the Senior Claimants and further provided that the
making of such payment would not otherwise violate the terms and provisions of
the Pooling and Servicing Agreement. Should any payment, distribution or
security or proceeds thereof be received by the Payee in violation of the
immediately preceding sentence, the Payee agrees that such payment shall be
segregated, received and held in trust for the benefit of, and deemed to be the
property of, and shall be immediately paid over and delivered to the Trustee for
the benefit of the Senior Claimants.
Upon the occurrence of any Insolvency Event with respect to the Maker,
then and in any such event the Senior Claimants shall receive payment in full of
all amounts due or to become due on or in respect of the Senior Claims before
the Payee is entitled to receive payment on account of this Subordinated Note,
and to that end, any payment or distribution of assets of the Maker of any kind
or character, whether in cash, securities or other property, in any applicable
insolvency proceeding, which would otherwise be payable to or deliverable upon
or with respect to any or all indebtedness under this Subordinated Note, is
hereby assigned to and shall be paid or delivered by the Person making such
payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Trustee for application to, or
as collateral for the payment of, the Senior Claims until such Senior Claims
shall have been paid in full and satisfied.
Capitalized terms not otherwise defined herein are used herein with the
respective meanings given them in the Receivables Purchase Agreement.
B-2
<PAGE> 37
This Subordinated Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Subordinated Note as of the date first written above.
SFA FINANCE COMPANY
By:_________________________________
Name:____________________________
Title:___________________________
B-3
<PAGE> 38
ADVANCES AND PAYMENTS
<TABLE>
<CAPTION>
Date and Amount Payments Unpaid Principal Name of Person
of Advance Principal/Interest Balance of Note Making Notation
---------- ------------------ --------------- ---------------
<S> <C> <C> <C>
</TABLE>
B-4
<PAGE> 39
EXHIBIT C
TO THE
RECEIVABLES PURCHASE AGREEMENT
LOCATION OF RECORDS OF SELLER
140 Industrial Drive
Elmhurst, Illinois 60126
331 West Wisconsin Avenue
Milwaukee, Wisconsin 53203
3455 Highway 80 West
P.O. Box 20080
Jackson, Mississippi 39289-0080
9750 Walnut Street
Dallas, Texas 75243
13526 Nacogdoches Road
San Antonio, Texas 78217
C-1
<PAGE> 40
EXHIBIT D
TO THE
RECEIVABLES PURCHASE AGREEMENT
SUBSIDIARIES, DIVISIONS, TRADE NAMES, BANKRUPTCY PROCEEDINGS
Great Lakes Credit Corporation
140 Industrial Drive
Elmhurst, Illinois 60126
D-1
<PAGE> 1
Exhibit 10.46
SFA FINANCE COMPANY
AS SELLER,
SAKS & COMPANY
AS SERVICER,
AND
BANKERS TRUST COMPANY
AS TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
OF THE
SAKS MASTER TRUST
------------------------------
AMENDMENT NO. 1
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF APRIL 25, 1996
------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 1 TO POOLING AND SERVICING AGREEMENT is dated as of
September 17, 1998 (the "Amendment"), and is by and among SFA FINANCE COMPANY, a
Delaware corporation (the "Seller"), SAKS & COMPANY, a New York corporation (the
"Servicer"), and BANKERS TRUST COMPANY, a New York banking corporation, not in
its individual capacity but solely as trustee (the "Trustee").
WHEREAS, the Seller, the Servicer and the Trustee are parties to that
certain Pooling and Servicing Agreement dated as of April 25, 1996 (as the same
has been amended, supplemented, restated or otherwise modified and as in effect
immediately prior to the effectiveness of this Amendment, the "Pooling and
Servicing Agreement");
WHEREAS, upon the consummation of the transactions (the "Merger")
contemplated by the Agreement and Plan of Merger dated as of July 4, 1998 (as
amended, the "Merger Agreement"), by and among Proffitt's, Inc. ("Proffitt's"),
Fifth Merger Corporation and Saks Holdings, Inc. ("Saks Holdings"), Saks &
Company ("Saks") will become a subsidiary of Proffitt's;
WHEREAS, following the Merger, it is anticipated that all of the
existing open end credit Accounts of Saks will be contributed to National Bank
of the Great Lakes, a national banking association (the "Bank") that is a
Proffitt's subsidiary, and the Bank will assume, among other things, all
obligations of Saks under the related Charge Account Agreements;
WHEREAS, the Seller, the Servicer and the Trustee desire to amend the
terms of the Pooling and Servicing Agreement (including the Receivables Purchase
Agreement that is an exhibit to the Pooling and Servicing Agreement), to
provide, among other things, and subject to the terms of the Pooling and
Servicing Agreement, (a) for the contribution (the "Contribution") of all the
open end credit Accounts to the Bank; (b) for the Bank to originate open end
credit Accounts and Receivables therein following such contribution, and (c) for
all Eligible Receivables originated in connection with such open end credit
Accounts to be conveyed to the Trust; and
WHEREAS, the parties hereto are authorized by Section 13.1 of the
Pooling and Servicing Agreement to amend the Pooling and Servicing Agreement so
as to add to, change or eliminate any of the provisions of the Pooling and
Servicing Agreement, including the exhibits from time to time;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, in the Pooling and Servicing Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
all of the parties hereto, each of the parties hereto, intending to be legally
bound agrees as follows:
<PAGE> 3
SECTION 1. AMENDMENTS UPON SATISFACTION OF CONDITIONS PRECEDENT. The
Pooling and Servicing Agreement shall be deemed to be amended as follows upon
the satisfaction of the conditions precedent contained in Section 4 hereof:
(a) The Pooling and Servicing Agreement is hereby amended, effective as
of the effective date and time (the "Effective Time") of the Merger, by adding
to Section 1.1 the following new definition in the appropriate alphabetical
location:
"Bank" shall mean National Bank of the Great Lakes, Elmhurst,
Illinois, and any national banking association or banking corporation
organized under the laws of the United States or any state thereof that
is an Affiliate of Saks & Company that may, as part of its activities,
originate, acquire, transfer and/or service Accounts and Receivables,
together with its permitted successors and assigns.
(b) The Pooling and Servicing Agreement is hereby amended, effective as
of the Merger's Effective Time by amending and restating the definitions of the
terms "Charge Account Agreement", "Charge Account Guidelines", "Receivables
Purchase Agreement", "Saks" and "Servicer" contained in Section 1.1 to read in
their entirety as follows:
"Charge Account Agreement" shall mean, in the case of each
account originated or acquired by Saks or the Bank, the agreement (and
the related credit application) for a credit card account between any
Obligor and Saks or the Bank, as the same may be amended, modified or
otherwise changed from time to time.
"Charge Account Guidelines" shall mean the policies and
procedures of Saks, the Bank and the Servicer relating to customers'
Accounts, including, without limitation, the policies and procedures
for determining the creditworthiness of charge account customers, the
extension of credit to charge account customers, the terms on which
repayments are required to be made, and relating to the maintenance of
charge accounts and collection of charge account receivables, as such
policies and procedures, as applicable, may be amended from time to
time.
"Saks" shall mean Saks & Company, a New York corporation, in
its capacity as an originator of the Receivables and as a seller of the
Receivables pursuant to a Receivables Purchase Agreement, and following
the contribution of the open end credit Accounts to the Bank, shall
include the Bank as the holder of such open end credit Accounts, as an
originator or acquirer of Receivables and as a seller of the
Receivables pursuant to a Receivables Purchase Agreement.
"Receivables Purchase Agreement" shall mean, as the context
may require, the Third Amended and Restated Receivables Purchase
Agreement, dated as of April 25, 1996 between Saks and SFA Finance
Company, and the Receivables Purchase Agreement dated as of September
17, 1998, between the Seller and the
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<PAGE> 4
Bank, substantially in the form of Exhibit B hereto, as such agreements
may be amended, supplemented, restated or otherwise modified from time
to time.
"Servicer" shall mean initially Saks & Company, a New York
corporation, and its permitted successors and assigns, and thereafter
any Person appointed as successor as herein provided to service the
Receivables, but shall not include the Bank.
(c) The Pooling and Servicing Agreement is hereby amended by amending
and restating clause (v) of the definition of "Eligible Account" contained in
Section 1.1 to read in its entirety as follows:
(v) such Account was originated or acquired by Saks:
(d) The Pooling and Servicing Agreement is amended by amending and
restating Section 2.5(f) thereof to read in its entirety as follows:
(f) Finance Charges and Other Fees. The Seller agrees that,
except as otherwise required by any Requirement of Law or as is
reasonably deemed by Saks to be necessary to maintain the credit card
business relating to credit cards issued to customers of Saks &
Company, the Seller shall maintain Saks' commitment as set forth in the
Receivables Purchase Agreement, that Saks shall not reduce at any time
(x) the finance charges assessed in respect of any Accounts, or (y) any
other fees charged on any of the Accounts if, as a result of such
reduction, the Servicer reasonably expects that the Portfolio Yield
with respect to any Series as of such date, after giving effect to such
reduction, would be less than the Base Rate for such Series.
(e) The Pooling and Servicing Agreement is amended by amending and
restating subsection (i) of Section 2.5(q) thereof to read in its entirety as
follows:
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking institutions. The
funds of the Seller will not be diverted to any other Person or for
other than corporate uses of the Seller, nor will such funds be
commingled with the funds of Saks or any other subsidiary of Saks;
provided, however, in the event that payments received on the Accounts
in stores or at the corporate offices of the Servicer or through
electronic funds transfers are not deposited in an account of the
Seller until the second Business Day after receipt, until such deposit
such payments may be commingled with funds of Saks or any of its
Affiliates.
(f) The Pooling and Servicing Agreement is amended by amending and
restating the first two sentences of Section 3.1(a) thereof as follows:
-3-
<PAGE> 5
Saks & Company agrees to act as the Servicer under this Agreement. The
Investor Certificateholders by their acceptance of the Investor
Certificates consent to any affiliate of Saks & Company acting as
subservicer.
SECTION 2. AMENDMENT OF EXHIBIT B UPON EFFECTIVE TIME OF MERGER.
Subject to the satisfaction of the conditions precedent contained in Section 4
hereof, the Pooling and Servicing Agreement shall be deemed to be amended upon
the Effective Time of the Merger by adding a new Exhibit B-1 in the form
attached hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Seller and the
Servicer represents and warrants that:
(a) The execution, delivery and performance of this Amendment have been
duly authorized by all necessary corporate action on the part of the Seller, the
Servicer and as to the Receivables Purchase Agreement, by the Bank. All
appraisals, authorizations, consents, orders or other actions of any Person or
of any governmental body or official required in connection with the execution
and delivery of this Amendment, the performance of the transactions contemplated
hereby, and the fulfillment of or terms hereof, have been obtained.
(b) This Amendment, and the Pooling and Servicing Agreement and the
Receivables Purchase Agreement, as amended by this Amendment, each constitute
the legal, valid and binding obligation of the Seller, the Servicer and the
Bank, to the extent they are parties to such agreements, enforceable against
such Persons in accordance with their respective terms, except as enforceability
may be limited by Debtor Relief Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a proceeding in
law or in equity).
SECTION 4. CONDITIONS PRECEDENT. This Amendment shall become effective
as of its date, provided that all of the following conditions are met:
(a) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that this Amendment will not materially and adversely
affect the interests of any Certificateholder;
(b) Delivery of an Opinion of Counsel to the effect that this Amendment
will not cause the Trust to be characterized for Federal or New York State
income or franchise tax purposes as an association (or publicly traded
partnership) taxable as a corporation or have any material adverse effect on the
characterization as indebtedness for Federal and New York State income or
franchise tax purposes of any outstanding Investor Certificate that was
characterized as indebtedness upon its issuance;
(c) The Servicer shall have provided at least ten Business Days' prior
written notice to each Rating Agency of this Amendment;
-4-
<PAGE> 6
(d) The Servicer shall have received written confirmation from each
Rating Agency to the effect that the rating of any Series or any Class of any
Series will not be reduced or withdrawn as a result of this Amendment;
(e) If requested by the Trustee, the Trustee shall have received an
Opinion of Counsel from the Seller or the Servicer to the effect that this
Amendment complies with all requirements of the Pooling and Servicing Agreement.
SECTION 5. EFFECT ON THE POOLING AND SERVICING AGREEMENT. Except as
expressly herein amended, the terms and conditions of the Pooling and Servicing
Agreement remain in full force and effect. In all respects not inconsistent with
the terms and provisions of this Amendment, the provisions of the Pooling and
Servicing Agreement are hereby ratified, approved and confirmed.
SECTION 6. HEADINGS. The captions in this Amendment are for convenience
of reference only and shall not define or limit the provisions hereof.
SECTION 7. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute but one and the same instrument.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 9. DEFINITIONS. Capitalized terms not otherwise defined herein
have the respective meanings given them in the Pooling and Servicing Agreement.
[Signatures on Following Page]
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to Pooling and Servicing to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written above.
SFA FINANCE COMPANY,
as Seller
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
SAKS & COMPANY,
as Servicer
By:
-------------------------------------
Name:
-------------------------------
Title:
-----------------------------
BANKERS TRUST COMPANY,
as Trustee
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-6-
<PAGE> 8
EXHIBIT B
FORM OF FOURTH AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
B-1
<PAGE> 1
Exhibit 10.47
SFA FINANCE COMPANY
SELLER
SAKS & COMPANY
SERVICER
AND
BANKERS TRUST COMPANY
TRUSTEE
------------------------------
AMENDMENT NO. 2
DATED AS OF DECEMBER 17, 1998
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF APRIL 25, 1996
------------------------------
<PAGE> 2
THIS AMENDMENT NO. 2 ("Amendment") dated as of December 17, 1998, to
the Pooling and Servicing Agreement, dated as of April 25, 1996, as heretofore
amended and supplemented (the "Pooling and Servicing Agreement"), is by and
among SFA Finance Company, as Seller (the "Seller"), Saks & Company, as Servicer
(the "Servicer"), and Bankers Trust Company, as trustee (the "Trustee").
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Pooling and Servicing Agreement.
W I T N E S S E T H
WHEREAS, the parties hereto are authorized by Section 13.1(b) of the
Pooling and Servicing Agreement to enter into this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, in the Pooling and Servicing Agreement and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE POOLING AND SERVICING AGREEMENT
1.1 The reporting obligations set out in Sections 3.4(b) and
3.5 of the Pooling and Servicing Agreement shall be deleted in their entirety
and replaced by the following provisions:
"Section 3.4(b) Monthly Servicer's Statement. Unless
otherwise stated in the related Supplement with respect to any
Series, on each Determination Date the Servicer shall prepare,
and within two days thereafter shall deliver to the Trustee,
the Paying Agent, any Rating Agency and any Enhancement
Provider, a report and certificate of a Servicing Officer
substantially in the form of Exhibit A to Amendment No. 2 to
this Agreement dated as of December 17, 1998 ("Amendment No.
2) (the "Monthly Servicer's Certificate").
Section 3.5 Annual Servicer's Certificate. The
Servicer will deliver to the Trustee, any Enhancement Provider
and any Rating Agency on or before June 30 of each calendar
year, beginning with June 30, 1999, an Officer's Certificate
substantially in the form of Exhibit B to Amendment No. 2 (a)
stating that a review of the activities of the Servicer during
the preceding Fiscal Year and of its performance under this
Agreement was made under the supervision of the officer
signing such certificate and (b) stating that to the best of
such officer's knowledge, based on such review, either there
has occurred no event which, with the giving of notice or
passage of time or both, would constitute a Servicer Default
and the Servicer has fully performed all its obligations under
this Agreement throughout such year, or, if there has occurred
such an event, specifying each such event known to such
officer and the nature and status thereof. A copy of such
Officer's Certificate may be obtained by any
<PAGE> 3
Investor Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
1.2 Section 13.2(d)(ii) of the Pooling and Servicing Agreement
shall be deleted in its entirety and replaced by the following provision:
"(ii) on or before June 30 of each year,
beginning with June 30, 1999, an Opinion of Counsel,
dated as of a date within 90 days of such day,
substantially in the form of Exhibit C to Amendment
No. 2."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer represents and warrants that:
(a) Its execution, delivery and performance of this Amendment are
within its corporate powers, have been duly authorized by all necessary
corporate action and do not require any consent or approval which has not been
obtained.
(b) This Amendment and the Pooling and Servicing Agreement as amended
hereby are legal, valid and binding obligations of it, enforceable in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
SECTION 3. CONDITIONS PRECEDENT
This Amendment shall become effective as of its date, provided that all
of the following conditions are met:
(a) This Amendment shall have been executed and delivered by the
parties hereto;
(b) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that (i) this Amendment will not materially and adversely
affect the interests of any Certificateholder, (ii) the Servicer provided at
least ten Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating Agency to the
effect that the rating of any Series rated by such Rating Agency will not be
reduced or withdrawn as a result of this Amendment, and (iii) all of the
conditions precedent to the effectiveness of this Amendment have been satisfied;
and
(c) The Seller and Servicer shall have provided Opinions of Counsel to
the Trustee to the effect that (i) this Amendment shall not cause the Trust to
be characterized for Federal income tax purposes as an association taxable as a
corporation, or otherwise have any material adverse impact on the Federal income
taxation of any outstanding
<PAGE> 4
Series of Investor Certificates or any Certificate Owner, and (ii) this
Amendment complies with all the requirements of the Pooling and Servicing
Agreement.
SECTION 4. MISCELLANEOUS
(a) Applicability of the Pooling and Servicing Agreement
In all respects not inconsistent with the terms and provisions of this
Amendment, the provisions of the Pooling and Servicing Agreement are hereby
ratified, approved and confirmed.
(b) Headings
The captions in this Amendment are for convenience of reference only
and shall not define or limit the provisions hereof.
(c) Counterparts
This Amendment may be executed in counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute
but one and the same instrument.
(d) Governing Law
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
(e) The Trustee
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the sufficiency of this Amendment or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Seller
and the Servicer.
[Signatures on next page]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
SFA FINANCE COMPANY,
as Seller
By: ____________________________________
Name: James S. Scully
Title: Vice President and Treasurer
SAKS & COMPANY,
as Servicer
By: ____________________________________
Name: James S. Scully
Title: Vice President and Treasurer
BANKERS TRUST COMPANY,
as Trustee
By: ____________________________________
Name:
Title:
<PAGE> 6
EXHIBIT A
MONTHLY SERVICER'S CERTIFICATE
<PAGE> 7
EXHIBIT B
FORM OF ANNUAL SERVICER'S CERTIFICATE
SAKS & COMPANY
SAKS MASTER TRUST
The undersigned, a duly authorized representative of Saks & Company
("Saks"), as Servicer, pursuant to the Pooling and Servicing Agreement dated as
of April 25, 1996 , as heretofore amended (the "Pooling and Servicing
Agreement"), between SFA Finance Company, as Seller, Saks, as Servicer, and
Bankers Trust Company, as Trustee, does hereby certify that:
1. Capitalized terms used but not defined in this
Officer's Certificate have their respective meanings
set forth in the Pooling and Servicing Agreement.
2. As of the date hereof, Saks is the Servicer under the
Pooling and Servicing Agreement.
3. The undersigned is duly authorized pursuant to the
Pooling and Servicing Agreement to execute and
deliver this Officer's Certificate to the Trustee.
4. This Officer's Certificate is delivered pursuant to
Section 3.5 of the Pooling and Servicing Agreement.
5. A review of the activities of the Servicer during the
fiscal year ended ________ and of its performance
under the Pooling and Servicing Agreement was made
under my supervision.
6. Based on such review, to the best of the
undersigned's knowledge, the Servicer has fully
performed all its obligations under the Pooling and
Servicing Agreement throughout such fiscal year and
no event which, with the giving of notice or passage
of time or both, would constitute a Servicer Default
has occurred or is continuing except as set forth in
paragraph 7 below.
7. The following is a description of each Servicer
Default under the provisions of the Pooling and
Servicing Agreement known to me to have been made
during the fiscal year ended _________, which sets
forth in detail the (i) nature of each such Servicer
Default, (ii)
<PAGE> 8
the action taken by the Servicer, if any, to remedy
each such Servicer Default and (iii) the current
status of each such Servicer Default:
IN WITNESS WHEREOF, the undersigned, a duly authorized Servicing
Officer of the Servicer, has duly executed this Officer's Certificate this
________ day of __________, ____.
SAKS & COMPANY,
as Servicer
By:________________________________
Name:
Title:
<PAGE> 9
EXHIBIT C
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED IN ANNUAL OPINION OF COUNSEL
The Opinion set forth below, which is to be delivered pursuant to
subsection 13.2(d)(ii) of the Pooling and Servicing Agreement, may be subject to
certain qualifications, assumptions, limitations and exceptions taken or made in
the Opinion of Counsel delivered on the Initial Closing Date with respect to
similar matters.
No filing or other action, other than such filing or action described
in such Opinion, is necessary from the date of such Opinion through _________ of
the following year to continue the perfected status of interest of the Trust in
the collateral described in the financing statements referred to in such
opinion.
<PAGE> 1
EXHIBIT 10.48
SFA FINANCE COMPANY
SELLER
SAKS & COMPANY
SERVICER
AND
BANKERS TRUST COMPANY
TRUSTEE
------------------------------
AMENDMENT NO. 1
DATED AS OF DECEMBER 17, 1998
TO THE
SERIES 1996-1 SUPPLEMENT
DATED AS OF APRIL 25, 1996
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF APRIL 25, 1996
------------------------------
<PAGE> 2
THIS AMENDMENT NO. 1 ("Amendment") dated as of December 17, 1998, to
the Series 1996-1 Supplement dated as of April 25, 1996 (the "Series
Supplement") to the Pooling and Servicing Agreement dated as of April 25, 1996
(as amended or supplemented, the "Pooling and Servicing Agreement"), is by and
among SFA Finance Company, as Seller (the "Seller"), Saks & Company, as Servicer
(the "Servicer"), and Bankers Trust Company, as trustee (the "Trustee").
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Pooling and Servicing Agreement or the Series
Supplement.
W I T N E S S E T H
WHEREAS, the parties hereto are authorized by Section 13.1(b) of the
Pooling and Servicing Agreement to enter into this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, in the Pooling and Servicing Agreement and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE SERIES SUPPLEMENT
1.1 Section 5.2 of the Series Supplement shall be deleted in
its entirety and replaced by the following provision:
"Section 5.2 Monthly Certificateholders' Statement.
On each Determination Date the Paying Agent shall forward to
each Series 1996-1 Certificateholder and each Rating Agency a
statement substantially in the form of Exhibit A hereto."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer represents and warrants that:
(a) Its execution, delivery and performance of this Amendment are
within its corporate powers, have been duly authorized by all necessary
corporate action and do not require any consent or approval which has not been
obtained.
(b) This Amendment and the Series Supplement as amended hereby are
legal, valid and binding obligations of it, enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
2
<PAGE> 3
SECTION 3. CONDITIONS PRECEDENT
This Amendment shall become effective as of its date, provided that all
of the following conditions are met:
(a) This Amendment shall have been executed and delivered by the
parties hereto;
(b) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that (i) this Amendment will not materially and adversely
affect the interests of any Certificateholder, (ii) the Servicer provided at
least ten Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating Agency to the
effect that the rating of any Series rated by such Rating Agency will not be
reduced or withdrawn as a result of this Amendment, and (iii) all of the
conditions precedent to the effectiveness of this Amendment have been satisfied;
and
(c) The Seller and Servicer shall have provided Opinions of Counsel to
the Trustee to the effect that (i) this Amendment shall not cause the Trust to
be characterized for Federal income tax purposes as an association taxable as a
corporation, or otherwise have any material adverse impact on the Federal income
taxation of any outstanding Series of Investor Certificates or any Certificate
Owner, and (ii) this Amendment complies with all the requirements of the Pooling
and Servicing Agreement.
SECTION 4. MISCELLANEOUS
(a) Applicability of the Series Supplement
In all respects not inconsistent with the terms and provisions of this
Amendment, the provisions of the Series Supplement are hereby ratified, approved
and confirmed.
(b) Headings
The captions in this Amendment are for convenience of reference only
and shall not define or limit the provisions hereof.
(c) Counterparts
This Amendment may be executed in counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute
but one and the same instrument.
(d) Governing Law
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
OBLIGATIONS, RIGHTS AND
3
<PAGE> 4
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
(e) The Trustee
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the sufficiency of this Amendment or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Seller
and the Servicer.
[Signatures on next page]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
SFA FINANCE COMPANY,
as Seller
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
SAKS & COMPANY,
as Servicer
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
BANKERS TRUST COMPANY,
as Trustee
By: _____________________________
Name:
Title:
5
<PAGE> 6
EXHIBIT A
MONTHLY SERVICER'S CERTIFICATE
A-1
<PAGE> 1
EXHIBIT 10.49
SFA FINANCE COMPANY
SELLER
SAKS & COMPANY
SERVICER
AND
BANKERS TRUST COMPANY
TRUSTEE
AMENDMENT NO. 1
DATED AS OF DECEMBER 17, 1998
TO THE
SERIES 1996-2 SUPPLEMENT
DATED AS OF APRIL 25, 1996
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF APRIL 25, 1996
<PAGE> 2
THIS AMENDMENT NO. 1 ("Amendment") dated as of December 17, 1998, to the
Series 1996-2 Supplement dated as of April 25, 1996 (the "Series Supplement") to
the Pooling and Servicing Agreement dated as of April 25, 1996 (as amended or
supplemented, the "Pooling and Servicing Agreement"), is by and among SFA
Finance Company, as Seller (the "Seller"), Saks & Company, as Servicer (the
"Servicer"), and Bankers Trust Company, as trustee (the "Trustee"). Capitalized
terms used and not otherwise defined herein shall have the meanings ascribed to
them in the Pooling and Servicing Agreement or the Series Supplement.
W I T N E S S E T H
WHEREAS, the parties hereto are authorized by Section 13.1(b) of the
Pooling and Servicing Agreement to enter into this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
in the Pooling and Servicing Agreement and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE SERIES SUPPLEMENT
1.1 Section 5.2 of the Series Supplement shall be deleted in its
entirety and replaced by the following provision:
"Section 5.2 Monthly Certificateholders' Statement. On each
Determination Date the Paying Agent shall forward to each Series
1996-2 Certificateholder and each Rating Agency a statement
substantially in the form of Exhibit A hereto."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer represents and warrants that:
(a) Its execution, delivery and performance of this Amendment are within
its corporate powers, have been duly authorized by all necessary corporate
action and do not require any consent or approval which has not been obtained.
(b) This Amendment and the Series Supplement as amended hereby are legal,
valid and binding obligations of it, enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
2
<PAGE> 3
SECTION 3. CONDITIONS PRECEDENT
This Amendment shall become effective as of its date, provided that all of
the following conditions are met:
(a) This Amendment shall have been executed and delivered by the parties
hereto;
(b) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that (i) this Amendment will not materially and adversely
affect the interests of any Certificateholder, (ii) the Servicer provided at
least ten Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating Agency to the
effect that the rating of any Series rated by such Rating Agency will not be
reduced or withdrawn as a result of this Amendment, and (iii) all of the
conditions precedent to the effectiveness of this Amendment have been satisfied;
and
(c) The Seller and Servicer shall have provided Opinions of Counsel to the
Trustee to the effect that (i) this Amendment shall not cause the Trust to be
characterized for Federal income tax purposes as an association taxable as a
corporation, or otherwise have any material adverse impact on the Federal income
taxation of any outstanding Series of Investor Certificates or any Certificate
Owner, and (ii) this Amendment complies with all the requirements of the Pooling
and Servicing Agreement.
SECTION 4. MISCELLANEOUS
(a) Applicability of the Series Supplement
In all respects not inconsistent with the terms and provisions of this
Amendment, the provisions of the Series Supplement are hereby ratified, approved
and confirmed.
(b) Headings
The captions in this Amendment are for convenience of reference only and
shall not define or limit the provisions hereof.
(c) Counterparts
This Amendment may be executed in counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute
but one and the same instrument.
(d) Governing Law
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS
3
<PAGE> 4
CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(e) The Trustee
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the sufficiency of this Amendment or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Seller
and the Servicer.
[Signatures on next page]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
SFA FINANCE COMPANY,
as Seller
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
SAKS & COMPANY,
as Servicer
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
BANKERS TRUST COMPANY,
as Trustee
By: _____________________________
Name:
Title:
5
<PAGE> 6
EXHIBIT A
MONTHLY SERVICER'S CERTIFICATE
A-1
<PAGE> 1
EXHIBIT 10.50
SFA FINANCE COMPANY
SELLER
SAKS & COMPANY
SERVICER
AND
BANKERS TRUST COMPANY
TRUSTEE
------------------------------
AMENDMENT NO. 1
DATED AS OF DECEMBER 17, 1998
TO THE
SERIES 1998-1 SUPPLEMENT
DATED AS OF AUGUST 31, 1998
TO THE
POOLING AND SERVICING AGREEMENT
DATED AS OF APRIL 25, 1996
------------------------------
<PAGE> 2
THIS AMENDMENT NO. 1 ("Amendment") dated as of December 17, 1998, to
the Series 1998-1 Supplement dated as of August 31, 1998 (the "Series
Supplement") to the Pooling and Servicing Agreement dated as of April 25, 1996
(as amended or supplemented, the "Pooling and Servicing Agreement"), is by and
among SFA Finance Company, as Seller (the "Seller"), Saks & Company, as Servicer
(the "Servicer"), and Bankers Trust Company, as trustee (the "Trustee").
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Pooling and Servicing Agreement or the Series
Supplement.
W I T N E S S E T H
WHEREAS, the parties hereto are authorized by Section 13.1(b) of the
Pooling and Servicing Agreement to enter into this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, in the Pooling and Servicing Agreement and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE SERIES SUPPLEMENT
1.1 Section 5.2B of the Series Supplement shall be deleted in
its entirety and replaced by the following provision:
"Section 5.2B Monthly Certificateholders' Statement. On
each Determination Date the Paying Agent shall forward to each
Series 1998-1 Certificateholder and each Rating Agency a
statement substantially in the form of Exhibit A hereto."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Servicer represents and warrants that:
(a) Its execution, delivery and performance of this Amendment are
within its corporate powers, have been duly authorized by all necessary
corporate action and do not require any consent or approval which has not been
obtained.
(b) This Amendment and the Series Supplement as amended hereby are
legal, valid and binding obligations of it, enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
2
<PAGE> 3
SECTION 3. CONDITIONS PRECEDENT
This Amendment shall become effective as of its date, provided that all
of the following conditions are met:
(a) This Amendment shall have been executed and delivered by the
parties hereto;
(b) The Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that (i) this Amendment will not materially and adversely
affect the interests of any Certificateholder, (ii) the Servicer provided at
least ten Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating Agency to the
effect that the rating of any Series rated by such Rating Agency will not be
reduced or withdrawn as a result of this Amendment, and (iii) all of the
conditions precedent to the effectiveness of this Amendment have been satisfied;
and
(c) The Seller and Servicer shall have provided Opinions of Counsel to
the Trustee to the effect that (i) this Amendment shall not cause the Trust to
be characterized for Federal income tax purposes as an association taxable as a
corporation, or otherwise have any material adverse impact on the Federal income
taxation of any outstanding Series of Investor Certificates or any Certificate
Owner, and (ii) this Amendment complies with all the requirements of the Pooling
and Servicing Agreement.
SECTION 4. MISCELLANEOUS
(a) Applicability of the Series Supplement
In all respects not inconsistent with the terms and provisions of this
Amendment, the provisions of the Series Supplement are hereby ratified, approved
and confirmed.
(b) Headings
The captions in this Amendment are for convenience of reference only
and shall not define or limit the provisions hereof.
(c) Counterparts
This Amendment may be executed in counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute
but one and the same instrument.
(d) Governing Law
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
OBLIGATIONS, RIGHTS AND
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<PAGE> 4
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
(e) The Trustee
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the sufficiency of this Amendment or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Seller
and the Servicer.
[Signatures on next page]
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
SFA FINANCE COMPANY,
as Seller
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
SAKS & COMPANY,
as Servicer
By: _____________________________
Name: James S. Scully
Title: Vice President and Treasurer
BANKERS TRUST COMPANY,
as Trustee
By: _____________________________
Name:
Title:
5
<PAGE> 6
EXHIBIT A
MONTHLY SERVICER'S CERTIFICATE
A-1
<PAGE> 1
EXHIBIT 10.52
SAKS INCORPORATED
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED EFFECTIVE 1/30/98)
1. Purpose. The purpose of the Saks Incorporated Amended and Restated
Employee Stock Purchase Plan is to provide a method whereby employees
of Saks Incorporated and its subsidiaries have an opportunity to
purchase shares of Common Stock of the Corporation. The Plan is
intended to qualify as an Employee Stock Purchase Plan under Section
423 of the Internal Revenue Code of 1986, as amended, and all
provisions of the Plan shall be construed in a manner to effect that
intent.
2. Definitions. As used in this Plan, the following words shall have the
following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall include that
section and any comparable section of any future legislation
that amends, supplements, or supersedes that section.
(b) "Common Stock" shall mean the common stock of the Corporation.
(c) "Compensation Committee" shall mean the Compensation Committee
of the Board of Directors, to which the administrative duties
and responsibilities under the Plan are delegated.
(d) "Corporation" shall mean Saks Incorporated, a Tennessee
corporation.
(e) "Employee" shall mean any individual who is employed by the
Corporation or a subsidiary on a full-time or part-time basis
and who is regularly scheduled to work more than 20 hours per
week.
(f) "Offering" shall mean any opportunity to purchase Common Stock
granted to Participants, the terms and conditions of which
have been established by the Compensation Committee pursuant
to the Plan.
(g) "Offering Commencement Date" shall mean the date on which any
Offering commences.
(h) "Offering Termination Date" shall mean the date on which any
Offering ends.
(i) "Option" shall mean any opportunity to purchase Common Stock
granted to a Participant pursuant to an Offering.
(j) "Participant" shall mean each Employee who becomes a
participant as provided in Section 5.
<PAGE> 2
(k) "Plan" shall mean the Saks Incorporated Amended and Restated
employee stock Employee Stock Purchase Plan.
(l) "Subsidiary" shall mean McRae's, Inc., McRae's of Alabama,
Inc., and any present or future corporation which: (i) would
be a "subsidiary corporation" of the Company as that term is
defined in Section 424 of the Code, and (ii) is designated as
a participant in the Plan by the Board of Directors.
3. Administrative.
(a) Appointment. The Plan shall be administered by the
Compensation Committee. The Compensation Committee may, from
time to time, delegate nondiscretionary administrative
responsibilities under the Plan to Employees who shall
continue to be eligible to participate in accordance with
Section 4(a).
(b) Powers. The Compensation Committee shall determine: (i) the
time or times when Options shall be granted; (ii) the number
of shares subject to the Offering; and (iii) the limitations,
restrictions, and conditions applicable to any Options.
(c) Interpretations. Subject to the express provisions of the
Plan, the Compensation Committee may interpret the Plan,
prescribe, amend, and rescind rules and regulations relating
to it, determine the terms and conditions of the Options, and
make all other determinations it deems necessary or advisable
for the administration of the Plan.
(d) Determinations. The determinations of the Compensation
Committee on all matters regarding the Plan shall be
conclusive. No member of the Compensation Committee shall be
liable for any action taken or determination made in good
faith.
4. Eligibility.
(a) Initial Eligibility. Each Employee as defined in Section 2(e)
who shall have completed twelve (12) months of employment and
is employed by the Corporation or a Subsidiary on the date his
or her participation in the Plan is to become effective shall
be eligible to participate in Offerings under the Plan that
commence on or after such twelve (12) month period has
concluded.
(b) Restrictions on Participation. Notwithstanding any provisions
of the Plan to the contrary, no Employee shall be granted an
Option under the Plan:
(i) if, immediately after the grant, such Employee would
own stock, and/or hold outstanding Options to
purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of
stock of the Corporation (for
<PAGE> 3
purposes of this paragraph, the rules of Section 423
of the Code shall apply in determining stock
ownership of any Employee); or
(ii) which permits the Employee's right to purchase stock
under all employee stock purchase plans, within the
meaning of Section 423 of the Code, to accrue at a
rate that exceeds $25,000 in fair market value of the
stock (determined at the time such Options are
granted) for each year in which such Options are
outstanding.
5. Commencement of Participation.
(a) Participation. An eligible Employee may become a Participant
by completing an authorization for payroll deductions on the
form provided by the Corporation and delivering it to an
authorized representative of the Corporation. Payroll
deductions for a Participant shall commence on the applicable
Offering Commencement Date and shall end on the applicable
Offering Termination Date unless sooner terminated by the
Participant. All such Participant contributions shall be
credited to the Participant's account.
(b) Participant Elections. Each Participant is required to sign a
written participation form (hereinafter referred to as the
"Participation Agreement") for each Offering. The terms of the
Participation Agreement shall provide that the Participant
elects to have payroll deductions credited to the
Participant's account, subject to the limitations hereinafter
described, that will in no event exceed Two Thousand Four
Hundred and 00/100 Dollars ($2,400.00) during the initial
Offering. The Compensation Committee retains the right to
adjust this amount for subsequent offerings. Elections to
participate hereunder shall be made no later than ten (10)
days prior to an Offering Commencement Date. Contributions may
be increased or decreased for subsequent Offerings.
6. Stock Options.
(a) Number of Option Shares. On the initial Offering Commencement
Date, each Participant shall be granted an Option to Purchase
the number of shares of Common Stock equal to the number
determined by dividing Two Thousand Four Hundred and 00/100
Dollars ($2,400.00) by 85% of the fair market value of the
Common Stock. The Compensation Committee retains the
discretion to adjust this amount for subsequent offerings.
(b) Option Price. The price to purchase Common Stock subject to
the Option shall be an amount not less than the lower of:
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<PAGE> 4
(i) 85% of the closing bid price per share of the Common
Stock as listed on the New York Stock Exchange on the
last business day preceding grant of such Option; or
(ii) 85% of the closing bid price per share of the Common
Stock as listed on the New York Stock Exchange on the
first business day preceding exercise thereof.
(c) Maximum Shares Issuable Under the Plan. The maximum number of
shares of Common Stock issuable under Plan pursuant to Options
to buy shares of Common Stock is 700,000, subject to
adjustments pursuant to Section 9. Shares of Common Stock
issued pursuant to the Plan may be either authorized but
unissued shares or shares held in the treasury of the
Corporation. In the event that any Option under the Plan
expires unexercised or is terminated without being exercised,
in whole or in part, for any reason, the number of shares
theretofore subject to such Option or the unexercised or
terminated portion thereof, shall be added to the remaining
number of shares of Common Stock available for grant as an
Option under the Plan upon such terms and conditions as the
Compensation Committee shall determine, which terms may be
more or less favorable than those applicable to such former
Option.
7. Exercise of Option.
(a) Automatic Exercise. Unless a Participant gives written notice
of withdrawal to the Corporation, the Participant's Option for
the purchase of Common Stock with payroll deductions made
during any Offering will be deemed to have been exercised
automatically on the Offering Termination Date applicable to
such Offering, for the purchase of the number of full shares
of Common Stock that the accumulated payroll deductions
credited to his or her account at that time will purchase at
the applicable Option price (but not in excess of the number
of shares for which Options have been granted to the
Employee), and any excess in his account at that time will be
returned to him. An Option may be exercised only by a
Participant during his or her lifetime or by a designated
beneficiary within ninety (90) days of the date of death.
(b) Withdrawal From Account. A Participant who is not subject to
Section 16 of the Securities Exchange Act may withdraw from
the Plan, in whole but not in part, at any time prior to the
Offering Termination Date applicable to any Offering by
delivering written notice to the Corporation's authorized
representative indicating such Participant's intent to
withdraw. A Participant subject to Section 16 of the
Securities Exchange Act may not voluntarily withdraw during an
Offering. Upon withdrawal by a Participant, the Corporation
will promptly refund the entire balance of a Participant's
deductions accumulated during the year. A Participant who
withdraws from the Plan may reenter for a subsequent Offering
by filing a new authorization at least ten (10) days prior to
an Offering Commencement Date.
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<PAGE> 5
(c) Fractional Shares. Fractional shares will be issued under the
Plan to the extent it is practicable.
(d) Delivery of Stock. As soon as practicable after the Offering
Termination Date of each Offering, the Corporation will
purchase the shares issued upon exercise of the Option and
place those shares in an account in the name of the
Participant.
8. Transferability. No Option may be transferred, assigned, pledged or
hypothecated (other than to the laws of descent and distribution), and
no Option shall be subject to execution, attachment or similar process.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option or levy of attachment or similar process upon
the Option not specifically permitted herein shall be null and void and
without effect.
9. Adjustment Provisions. The aggregate number of shares of Common Stock
with respect to which Options may be granted, the aggregate number of
shares of Common Stock subject to each outstanding Option, and the
Option price per share of each such Option, may all be appropriately
adjusted as the Compensation Committee may determination for any
increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of shares, whether
through reorganization, recapitalization, stock split, stock
distribution, combination of shares, or the payment of a share dividend
or other increase in the number of such shares outstanding effected
without receipt of consideration by the Corporation. Adjustments under
this Section 9 shall be made in the sole discretion of the Compensation
Committee, and its decision shall be binding and conclusive.
10. Dissolution, Merger and Consolidation. Upon the dissolution or
liquidation of the Corporation, or upon a merger or consolidation of
the Corporation in which the Corporation is not the surviving
corporation, each Option granted hereunder shall expire as of the
effective date of such transaction; provided, however, that the
Compensation Committee shall give at least thirty (30) days prior
written notice of such event to each Participant during which time he
or she shall have a right to exercise his or her wholly or partially
unexercised Option and, subject to prior expiration pursuant to Section
12(a) or (b), each Option shall be exercisable after receipt of such
written notice and prior to the effective date of such transaction.
11. Effective Date and Conditions Subsequent to Effective Date. The Plan
shall become effective on the date of the approval of the Plan by the
majority of the shareholders of the Corporation, and the Plan shall be
null and void and of no effect if such condition is not fulfilled, and
in such event each Option granted hereunder shall, notwithstanding any
of the preceding provisions of the Plan, be null and void and of no
effect.
12. Termination of Employment. Notwithstanding anything contained herein to
the contrary, each Option shall expire on the earlier of:
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<PAGE> 6
(a) the expiration of ninety (90) days commencing with
the death of the Participant;
(b) the expiration of ninety (90) days commencing with
the date that the employment of the Participant with
the Corporation terminates for any reason; or
(c) the Offering Termination Date.
Upon expiration of any Option prior to the applicable Offering
Termination Date, any payroll deductions credited to the Participant
under the Plan shall be promptly returned to the Participant or his
designated beneficiary in the event of his death, without interest.
13. Miscellaneous.
(a) Legal and Other Requirements. The obligations of the
Corporation to sell and deliver Common Stock under the Plan
shall be subject to all applicable laws, regulations, rules
and approvals, if deemed necessary or appropriate by the
Corporation. Certificates for shares of Common Stock issued
hereunder may contain a legend as the Compensation Committee
deems appropriate.
(b) No Obligation to Exercise Options. The granting of an Option
shall impose no obligation upon a Participant to exercise such
Option.
(c) Termination and Amendment of Plan. The Compensation Committee,
without further action on the part of the shareholders of the
Corporation, may from time to time alter, amend or suspend the
Plan or any Option granted hereunder or may at any time
terminate the Plan, except that, unless approved by the
shareholders in accordance with Section 11 hereof, it may not:
(i) change the total number of shares of Common Stock
authorized to be issued under the Plan; or (ii) change the
class of employees eligible to be granted Options under the
Plan. No action taken by the Compensation Committee under this
Section may materially and adversely affect any outstanding
Option without the consent of the holder thereof.
(d) Application of Funds. The proceeds received by the Corporation
from the sale of Common Stock Pursuant to Options will be used
for general corporate purposes.
(e) Right to Terminate Employment. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon
any Employee or Participant the right to continue in the
employment of the Corporation or affect any right which the
Corporation may have to terminate the employment of such
Employee or Participant.
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<PAGE> 7
(f) Rights as a Shareholder. No Participant shall have any rights
or privileges as a shareholder in Common Stock covered by an
Option until such Option has been exercised.
(g) Leaves of Absence and Disability. A Participant shall continue
to be treated as an Employee for all purposes of the Plan
during the first ninety (90) days of any leave of absence,
whether such leave is with or without pay. Upon expiration of
such ninety (90) day period, unless a Participant has resumed
employment, his employment for purposes of the Plan shall be
deemed to terminate on such date. During the first ninety (90)
days of a leave of absence the Participant shall continue to
have all rights otherwise provided pursuant to the Plan and
the additional right to supplement the payroll deductions (if
any) made during such period with out-of-pocket payments to
the extent necessary to continue his Plan election in effect
for the applicable Offering.
(h) Fair Market Value. Whenever the fair market value of Common
Stock is to be determined under the Plan as of a given date,
such fair market value shall be determined as the closing bid
price per share as listed on the New York Stock Exchange on
the last business day preceding the valuation.
(i) Notices. Every direction, revocation, or notice authorized or
required by the Plan shall be deemed delivered to the
Corporation: (A) on the date it is personally delivered to the
Secretary of the Corporation at its principal executive
offices; or (B) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to
the Secretary at such offices; and shall be deemed delivered
to a Participant: (1) on the date it is personally delivered
to him or her, or (2) three (3) business days after it is sent
by registered or certified mail, postage prepaid, addressed to
him or her at the last address shown for him or her on the
records of the Corporation.
(j) Applicable Law. All questions pertaining to the validity,
construction and administration of the Plan granted hereunder
shall be determined in conformity with the laws of the State
of Tennessee.
(k) Limitations on Sale of Stock Purchased Under the Plan. The
Plan is intended to provide Common Stock for long-term
investment. The Corporation does not, however, intend to
restrict or influence any Employee in the conduct of his or
her own affairs. An Employee may, therefore, sell stock
purchased under the Plan at any time he or she chooses;
provided, however, that because of certain federal income tax
requirements each Employee will agree by entering the Plan to
give the Corporation prompt notice of any such stock disposed
of within two (2) years after the date of grant of the
applicable Option showing the number of such shares disposed
of, and an appropriate legend requiring such notice shall be
placed on the certificate of
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Common Stock issued hereunder. The Employee assumes the risk
of any market fluctuations in price of such stock.
Officers and directors should note that, pursuant to federal
securities laws, certain restrictions apply to the number of
shares they may sell, the manner of sale, and the timing of
sales with respect to the resale of shares acquired under the
Plan; therefore, officers and directors must consult with the
office of the Senior Vice President of Investor Relations
prior to any such sales.
IN WITNESS WHEREOF, the Corporation has adopted the foregoing
instrument as of January 30, 1998.
SAKS INCORPORATED
------------------------------------
Signature
------------------------------------
Printed Name, Title
ATTEST:
- ------------------------------------
Signature
- ------------------------------------
Printed Name, Title
8
<PAGE> 1
EXHIBIT 10.53
SAKS INCORPORATED
AMENDED AND RESTATED
1994 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of the Saks Incorporated Amended and Restated 1994
Long-Term Incentive Plan (the "Plan") is to further the earnings of Saks
Incorporated, a Tennessee corporation, and its subsidiaries (collectively, the
"Company") by assisting the Company in attracting, retaining and motivating
management employees and directors of high caliber and potential. The Plan
provides for the award of long-term incentives to those officers, other key
executives and directors who make substantial contributions to the Company by
their loyalty, industry and invention.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
selected by the Board of Directors of the Company (the "Board of Directors")
consisting solely of two or more members who are "outside directors" as
described in Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). Except to the extent permitted under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act") (or any successor
rule of similar import), each Committee member shall be ineligible to receive,
and shall not have been, during the one-year period prior to appointment
thereto, granted or awarded stock options, stock appreciation rights,
performance units, or restricted stock pursuant to this Plan or any other
similar plan of the Company or any affiliate of the Company. Without limiting
the foregoing, the Committee shall have full and final authority in its
discretion to interpret the provisions of the Plan and to decide all questions
of fact arising in its application. Subject to the provisions hereof, the
Committee shall have full and final authority in its discretion to determine the
employees and directors to whom awards shall be made under the Plan; to
determine the type of awards to be made and the amount, size and terms and
conditions of each such award; to determine the time when awards shall be
granted; to determine the provisions of each agreement evidencing an award; and
to make all other determinations necessary or advisable for the administration
of the plan.
3. STOCK SUBJECT TO THE PLAN
The Company may grant awards under the Plan with respect to not more
than a total of 10,822,000 shares of $.10 par value common stock of the Company
(the "Shares") (subject, however, to adjustment as provided in paragraph 20,
below). Such shares may be authorized and unissued Shares or treasury Shares.
Except as otherwise provided herein, any Shares subject to an option or right
which for any reason is surrendered before exercise or expires or is terminated
unexercised as to such Shares shall again be available for the granting of
awards under the Plan. Similarly, if any Shares granted pursuant to restricted
stock awards are forfeited, such forfeited Shares shall again be available for
the granting of awards under the Plan.
<PAGE> 2
4. ELIGIBILITY TO RECEIVE AWARDS
Persons eligible to receive awards under the Plan shall be limited to
those officers, other key employees and directors of the Company who are in
positions in which their decisions, actions and counsel have a significant
impact upon the profitability and success of the Company (but excluding members
of the Committee, except as provided in paragraphs 6(h) and 8(e)).
5. FORM OF AWARDS
Awards may be made from time to time by the Committee in the form of
stock options to purchase Shares, stock appreciation rights, performance units,
restricted stock, or any combination of the above. Stock options may be options
which are intended to qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422(b) of the Code, or options which are
not intended to so qualify ("Nonqualified Stock Options").
6. STOCK OPTIONS
Stock options for the purchase of Shares shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time; provided that the maximum number of options which may
be granted to any one grantee during any twelve-month period is 1,000,000 (as
adjusted pursuant to paragraph 20, below). Such agreement shall contain the
terms and conditions applicable to the options, including in substance the
following terms and conditions:
(a) Type of Option. Each option agreement shall identify the options
represented thereby as Incentive Stock Options or Nonqualified Stock Options, as
the case may be, and shall set forth the number of Shares subject to the
options.
(b) Option Price. The option exercise price to be paid by the optionee
to the Company for each Share purchased upon the exercise of an option shall be
determined by the Committee, but shall in no event be less than the fair market
value of a Share on the date of grant. The option exercise price shall not be
changed after the option is granted.
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the option may be exercised, in whole or in part,
as determined by the Committee and subject to such terms and conditions as are
prescribed for such purpose by the Committee, provided that no option shall be
exercisable after ten years from the date of grant thereof. The Committee, in
its discretion, may provide in the option agreement circumstances under which
the option shall become immediately exercisable, in whole or in part, and,
notwithstanding the foregoing, may accelerate the exercisability of any option,
in whole or in part, at any time.
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<PAGE> 3
(d) Payment for Shares. The purchase price of the Shares with respect
to which an option is exercised shall be payable in full at the time of exercise
in cash, shares at fair market value, or a combination thereof, as the Committee
may determine and subject to such terms and conditions as may be prescribed by
the Committee for such purpose. If the purchase price is paid by tendering
Shares, the Committee in its discretion may grant the optionee a new stock
option for the number of Shares used to pay the purchase price.
(e) Rights Upon Termination. In the event of Termination (as defined
below) of an optionee's status as an employee or director of the Company for any
cause other than Retirement (as defined below), death or Disability, (as defined
below), the optionee shall have the right to exercise the option during its term
within a period of three months after such Termination to the extent that the
option was exercisable at the time of Termination, or within such other period,
and subject to such terms and conditions, as may be specified by the Committee.
As used herein, "Termination" means, (i) in the case of an employee, the
cessation of the grantee's employment by the Company for any reason, and (ii) in
the case of a director, the cessation of the grantee's service as a director of
the Company; and "Terminates" has the corresponding meaning. As used herein,
"Retirement" means retirement from active employment (in the case of an
employee), or active service (in the case of a director) with the Company on or
after age 65, or such earlier age with the express written consent for purposes
of the Plan of the Company at or before the time of such retirement, and
"Retires" has the corresponding meaning. As used herein, "Disability" means a
condition that, in the judgment of the Committee, has rendered a grantee
completely and presumably permanently unable to perform any and every duty of
his regular occupation, and "Disabled" has the corresponding meaning. In the
event that an optionee Retires, dies or becomes Disabled prior to the expiration
of his option and without having fully exercised his option, the optionee or his
Beneficiary (as defined below) shall have the right to exercise the option
during its term within a period of (i) one year after Termination due to
Retirement, death or Disability, or (ii) one year after death if death occurs
either within one year after Termination due to Retirement or Disability or
within three months after Termination for other reasons, to the extent that the
option was exercisable at the time of death or Termination, or within such other
period, and subject to such terms and conditions, as may be specified by the
committee. (As used herein, "Beneficiary" means the person or persons designated
in writing by the grantee as his beneficiary with respect to an award under the
Plan; or, in the absence of an effective designation or if the designated person
or persons predecease the grantee, the grantee's Beneficiary shall be the person
or persons who acquire by bequest or inheritance the grantee's rights in respect
of an award.) In order to be effective, a grantee's designation of a Beneficiary
must be on file with the Committee before the grantee's death, but any such
designation may be revoked and a new designation substituted therefor at any
time before the grantee's death.
(f) Nontransferability. Options granted under the Plan shall not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, other than by will or by the laws of descent and distribution.
During the lifetime of the optionee the option is exercisable only by the
optionee.
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<PAGE> 4
(g) Incentive Stock Options. In the case of an Incentive Stock Option,
each option shall be subject to such other terms conditions and provisions as
the Committee determines necessary or desirable in order to qualify such option
as an incentive stock option within the meaning of Section 422(b) of the Code
(or any amendment or substitute or successor thereto or regulation thereunder),
including in substance, without limitation, the following:
(i) The purchase Price of stock subject to an Incentive Stock
Option shall not be less than 100 percent of the fair market value of
such stock on the date the option is granted, as determined by the
Committee.
(ii) The aggregate fair market value (determined as of the
time the option is granted) of the stock with respect to which
incentive stock options are exercisable for the first time by an
optionee in any calendar year under all plans of the Company and its
subsidiary corporations (which term, as used hereinafter, shall have
the meaning ascribed thereto in Section 424(f) of the Code or successor
provision of similar import) shall not exceed $100,000.
(iii) No Incentive Stock Option shall be granted to any
employee if at the time the option is granted the individual owns stock
possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of a subsidiary corporation of
the Company, unless at the time such option is granted the option price
is at least 110 percent of the fair market value (as determined by the
Committee) of the stock subject to the option and such option by its
terms is not exercisable after the expiration of five years from the
date of grant.
(iv) Directors who are not employees of the Company shall not
be eligible to receive Incentive Stock Options.
(v) In the event of Termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section
422 of the Code, the option will thereafter be treated as a
Nonqualified Stock Option.
(h) Automatic Grant of Options to Nonemployee Directors.
Notwithstanding any other provision of the Plan, the grant of options hereunder
to directors who are not also employees of the Company ("Nonemployee Directors")
shall be subject to the following terms and conditions:
(i) Immediately following each annual meeting of the
shareholders of the Company ("Annual Meeting"), each Nonemployee
Director of the Company who is then incumbent shall be granted a
Nonqualified Stock Option to purchase 3,000 Shares (as adjusted
pursuant to paragraph 20, below).
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<PAGE> 5
(ii) If a person is elected or appointed as a Nonemployee
Director of the Company other than at an Annual Meeting, such person
shall thereupon be granted a Nonqualified Stock Option to purchase
3,000 shares (as adjusted pursuant to paragraph 20, below).
(iii) The purchase price of stock subject to an option granted
to Nonemployee Directors under this paragraph 6(h) shall be equal to
100 percent of the fair market value of such stock on the date the
option is granted, as determined by the Committee.
(iv) Except as provided in paragraph 18, each option granted
to Nonemployee Directors under this paragraph 6(h) shall be exercisable
to the extent of (a) 20% of the Shares covered thereby on or after the
date which is six months after the date of grant; (b) an additional 20%
of the Shares covered thereby on or after the first anniversary of the
date of grant; (c) an additional 20% of the Shares covered thereby on
or after the second anniversary of the date of grant; (d) an additional
20% of the Shares covered thereby on or after the third anniversary of
the date of grant; and (e) exercisable to the extent of the remaining
20% of the Shares covered thereby on or after the fourth anniversary of
the date of grant; provided, however, that no portion of the option
shall be exercisable any earlier than the date the Plan is approved by
the shareholders of the Company.
(v) Unless otherwise provided in the Plan, all provisions with
respect to the terms of Nonqualified Stock Options hereunder shall be
applicable to options granted to Nonemployee Directors under this
paragraph 6(h).
(vi) The automatic grants described in this paragraph 6(h) and
the restricted stock awards under paragraph 8(e) shall constitute the
only awards under the Plan permitted to be made to Nonemployee
Directors.
7. STOCK APPRECIATION RIGHTS
Stock appreciation rights (SARs) shall be evidenced by written SAR
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time; provided that the maximum number of SARs which may be
granted to any one grantee during any twelve-month period is 125,000 (as
adjusted pursuant to paragraph 20, below). Such SAR agreements shall contain the
terms and conditions applicable to the SARs, including in substance the
following terms and conditions:
(a) Award. SARs may be granted in connection with a previously or
contemporaneously granted stock option, or independently of a stock option. SARs
shall entitle the grantee, subject to such terms and conditions as may be
determined by the Committee, to receive upon exercise thereof all or a portion
of the excess of (i) the fair market value at the time of exercise, as
determined by the Committee, of a specified number of Shares with respect to
which the SAR is exercised, over (ii) a specified price which shall not be less
than 100 percent of the fair market value of the Shares at the time the SAR is
granted, or, if the SAR is granted in connection with a previously issued stock
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<PAGE> 6
option, not less than 100 percent of the fair market value of the Shares at the
time such option was granted. Upon exercise of a SAR, the number of Shares
reserved for issuance hereunder shall be reduced by the number of Shares covered
by the SAR. Shares covered by a SAR shall not be used more than once to
calculate the amount to be received pursuant to the exercise of the SAR.
(b) SARs Related to Stock Options. If a SAR is granted in relation to a
stock option, (i) the SAR shall be exercisable only at such times, and by such
persons, as the related option is exercisable; (ii) the grantee's right to
exercise the related option shall be canceled if and to the extent that the
Shares subject to the option are used to calculate the amount to be received
upon the exercise of the related SAR; (iii) the grantee's right to exercise the
related SAR shall be canceled if and to the extent that the Shares subject to
the SAR are purchased upon the exercise of the related option; and (iv) the SAR
shall not be transferable other than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the grantee only
by him.
(c) Term. Each SAR agreement shall state the period or periods of time
within which the SAR may be exercised, in whole or in part, as determined by the
Committee and subject to such terms and conditions as are prescribed for such
purpose by the Committee, provided that no SAR shall be exercisable earlier than
six months after the date of grant or later than ten years after the date of
grant. The Committee may, in its discretion, provide in the SAR agreement
circumstances under which the SARs shall become immediately exercisable, in
whole or in part, and may, notwithstanding the foregoing, accelerate the
exercisability of any SAR, in whole or in part, at any time.
(d) Termination. SARs shall be exercisable only during the grantee's
tenure as an employee or director of the Company, except that, in the discretion
of the Committee, a SAR may be made exercisable for up to three months after the
grantee is Terminated for any reason other than Retirement, death or Disability,
and for up to one year after the grantee is Terminated because of Retirement,
death or Disability.
(e) Payment. Upon exercise of a SAR, payment shall be made in cash, in
shares at fair market value on the date of exercise, or in a combination
thereof, as the Committee may determine at the time of exercise.
(f) Other Terms. SARs shall be granted in such manner and such form,
and subject to such additional terms and conditions, as the Committee in its
sole discretion deems necessary or desirable, including without limitation: (i)
if granted in connection with an Incentive Stock Option, in order to satisfy any
requirements set forth under Section 422 of the Code; or, (ii) in order to avoid
any insider-trading liability in connection with a SAR under Section 16(b) of
the 1934 Act.
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8. RESTRICTED STOCK AWARDS
Restricted stock awards under the Plan shall consist of Shares free of
any purchase price or for such purchase price as may be established by the
Committee restricted against transfer, subject to forfeiture, and subject to
such other terms and conditions (including attainment of performance objectives)
as may be determined by the Committee. Restricted stock shall be evidenced by
written restricted stock agreements in such form not inconsistent with the Plan
as the Committee shall approve from time to time, which agreement shall contain
the terms and conditions applicable to such awards, including in substance the
following terms and conditions:
(a) Restriction Period. Restrictions shall be imposed for such period
or periods as may be determined by the Committee. Except as provided in
paragraph 18, restriction periods shall not expire until at least three years
after the date of grant unless restrictions on the Shares lapse on the basis of
achieving performance targets. The Committee, in its discretion, may provide in
the agreement circumstances under which the restricted stock shall become
immediately transferable and nonforfeitable, or under which the restricted stock
shall be forfeited.
(b) Restrictions Upon Transfer. Restricted stock and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered, except
as herein provided, during the restriction period applicable to such Shares.
Notwithstanding the foregoing, and except as otherwise provided in the Plan, the
grantee shall have all of the other rights of a shareholder, including, but not
limited to, the right to receive dividends and the right to vote such Shares.
(c) Certificates. A certificate or certificates representing the number
of restricted Shares granted shall be registered in the name of the grantee. The
Committee, in its sole discretion, shall determine when the certificate or
certificates shall be delivered to the grantee (or, in the event of the
grantee's death, to his Beneficiary), may provide for the holding of such
certificate or certificates in escrow or in custody by the Company or its
designee pending their delivery to the grantee or Beneficiary, and may provide
for any appropriate legend to be borne by the certificate or certificates.
(d) Lapse of Restrictions. The restricted stock agreement shall specify
the terms and conditions upon which any restriction upon restricted stock
awarded under the Plan shall expire, lapse, or be removed, as determined by the
Committee. Upon the expiration, lapse, or removal of such restrictions, Shares
free of the restrictive legend shall be issued to the grantee or his legal
representative.
(e) Automatic Award of Restricted Stock to Nonemployee Directors.
Notwithstanding any other provision of the Plan, awards of restricted stock
hereunder to Nonemployee Directors shall be subject to the following terms and
conditions:
(i) Until the 2003 Annual Meeting, if a person is elected or
appointed as a Nonemployee Director of the Company other than at an
Annual Meeting, such person shall
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<PAGE> 8
thereupon be awarded 2,000 Shares of restricted stock (as adjusted
pursuant to paragraph 20, below).
(ii) The shares of restricted stock awarded pursuant to this
paragraph 8(e) shall have a restriction period of ten years. The
restrictions shall lapse with respect to 10 percent of the Shares
awarded hereunder on the anniversary date of the award during each of
the ten consecutive calendar years following the date on which the
award is made, but only if the grantee has been a director of the
Company continuously from the grant date of the restricted stock award
to such anniversary date; provided, however, that all restrictions
shall lapse, and the grantee of such restricted Shares shall be
entitled to the delivery of a stock certificate or certificates
evidencing the restricted Shares, upon (a) the date of the grantee's
death or Disability while serving as a director, or (b) the date on
which the Board Directors determines that the holder will not be
nominated for election as a director by reason of Retirement. Upon any
other Termination, all shares still subject to the restrictions hereof
shall be returned to or canceled by the Company and shall be deemed to
have been forfeited by the grantee.
(iii) No Shares awarded under this paragraph 8(e) may be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered unless, until and then only to the extent that the
restrictions shall have lapsed in accordance with paragraph 8(e) (iii)
hereof.
(iv) Stock certificates evidencing restricted Shares awarded
under this paragraph 8(e) shall be issued in the sole name of the
grantee (but shall be held by the Company until the restrictions shall
have lapsed in accordance herewith) and shall bear a legend which, in
part, shall provide that such Shares (a) are subject to the terms and
restrictions of the Plan, (b) are subject to forfeiture or cancellation
under the terms of the Plan, and (c) shall not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered
except pursuant to the provisions of the Plan.
(v) Unless otherwise provided in the Plan, all provisions with
respect to the terms of restricted stock awards hereunder shall be
applicable to restricted stock awarded to Nonemployee Directors under
this paragraph 8(e).
(vi) The restricted stock awards under this paragraph 8(e) and
the automatic grants described in paragraph 6(h) shall constitute the
only awards under the Plan permitted to be made to Nonemployee
Directors.
9. PERFORMANCE UNITS
Performance unit awards under the Plan shall entitle grantees to future
payments based upon the achievements of preestablished long-term performance
objectives and shall be evidenced by written performance unit agreements in such
form not inconsistent with this Plan as the Committee
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<PAGE> 9
shall approve from time to time. Such agreements shall contain the terms and
conditions applicable to the performance unit awards, including in substance the
following terms and conditions:
(a) Performance Period. The Committee shall establish with respect to
each unit award a performance period of not fewer than two years.
(b) Unit Value. The Committee shall establish with respect to each unit
award value for each unit which shall not thereafter change, or which may vary
thereafter pursuant to criteria specified by the Committee.
(c) Performance Targets. The Committee shall establish with respect to
each unit award maximum and minimum performance targets to be achieved during
the applicable performance period. Achievement of maximum targets shall entitle
grantees to payment with respect to the full value of a unit award. Grantees
shall be entitled to payment with respect to a portion of a unit award according
to the level of achievement of targets as specified by the Committee for
performance which achieves or exceeds the minimum target but fails to achieve
the maximum target.
(d) Performance Measures. Performance targets established by the
Committee shall relate to corporate, subsidiary, division, or unit performance
and may be established in terms of growth in gross revenue, earnings per share,
ratios of earnings to equity or assets, or such other measures or standards as
may be determined by the Committee in its discretion. Multiple targets may be
used and may have the same or different weighing, and they may relate to
absolute performance or relative performance measured against other companies or
businesses.
(e) Adjustments. At any time prior to the payment of a unit award, the
Committee may adjust previously established performance targets or other terms
and conditions, including the Company's or other corporations' financial
performance for Plan purposes, to reflect major unforeseen events such as
changes in laws, regulations or accounting practices, mergers, acquisitions or
divestitures or other extraordinary unusual or non-recurring items or events.
(f) Payment of Unit Awards. Following the conclusion of each
performance period, the Committee shall determine the extent to which
performance targets have been attained and any other terms and conditions
satisfied for such period. The Committee shall determine what, if any, payment
is due on the unit award and whether such payment shall be made in cash, Shares,
or a combination thereof. Payment shall be made in a lump sum or installments,
as determined by the Committee, commencing as promptly as practicable following
the end of the performance period unless deferred subject to such terms and
conditions and in such form as may be prescribed by the Committee.
(g) Termination. In the event that a grantee is Terminated as an
employee or director by the Company prior to the end of the performance period
by reason of death, Disability, or Retirement with the consent of the Company,
any unit award, to the extent earned under the applicable performance targets,
shall be payable at the end of the performance period according to the portion
of the performance period during which the grantee was employed by or served as
a director of the
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<PAGE> 10
Company, provided that the Committee shall have the power to provide for an
appropriate settlement of a unit award before the end of the performance period.
Upon any other Termination, participation shall terminate forthwith and all
outstanding unit awards shall be canceled.
10. LOANS AND SUPPLEMENTAL CASH
The Committee, in its sole discretion to further the purpose of the
Plan, may provide for supplemental cash payments or loans to individuals in
connection with all or any part of an award under the Plan. Supplemental cash
payments shall be subject to such terms and conditions as shall be prescribed by
the Committee at the time of grant, provided that in no event shall the amount
of payment exceed:
(a) In the case of an option, the excess fair market value of a Share
on the date of exercise over the option price multiplied by the number of Shares
for which such option is exercised, or
(b) In the case of a SAR, performance unit, or restricted stock award,
the value of the Shares and other consideration issued in payment of such award.
Any loan shall be evidenced by a written loan agreement or other
instrument in such form and containing such terms and conditions (including,
without limitation, provisions for interest, payment schedules, collateral,
forgiveness or acceleration) as the Committee may prescribe from time to time.
11. GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that if
at any time the Company shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of Shares, or (iv) the satisfaction of withholding
tax or other withholding liabilities is necessary or desirable as a condition of
or in connection with the granting of such award or the issuance or purchase of
Shares thereunder, such award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval, agreement,
or withholding shall have been effected or obtained free of any conditions not
acceptable to the Company. Any such restriction affecting an award shall not
extend the time within which the award may be exercised; and neither the Company
nor its directors or officers nor the Committee shall have any obligation or
liability to the grantee or to a Beneficiary with respect to any Shares with
respect to which an award shall lapse or with respect to which the grant,
issuance or purchase of Shares shall not be effected, because of any such
restriction.
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<PAGE> 11
12. SINGLE OR MULTIPLE AGREEMENTS
Multiple awards, multiple forms of awards, or combinations thereof may
be evidenced by a single agreement or multiple agreements, as determined by the
Committee.
13. RIGHTS OF THE SHAREHOLDER
The recipient of any award under the Plan, shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares are
issued to him, and the issuance of Shares shall confer no retroactive right to
dividends.
14. RIGHTS TO TERMINATE
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any person the right to continue in the employment of the
Company or to serve as a director, or affect any right which the Company may
have to terminate the employment or directorship of such person.
15. WITHHOLDING
(a) Prior to the issuance or transfer of Shares under the Plan, the
recipient shall remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax requirements. The recipient may satisfy
the withholding requirement in whole or in part by electing to have the Company
withhold Shares having a value equal to the minimum amount required to be
withheld. No additional amount may be withheld. The value of the Shares to be
withheld shall be the fair market value, as determined by the Committee, of the
stock on the date that the amount of tax to be withheld is determined (the "Tax
Date"). Such election must be made prior to the Tax Date, must comply with all
applicable securities law and other legal requirements, as interpreted by the
Committee, and may not be made unless approved by the Committee, in its
discretion.
(b) Whenever payments to a grantee in respect of an award under the
Plan are to be made in cash, such payments shall be net of the amount necessary
to satisfy any federal, state or local withholding tax requirements.
16. NON-ASSIGNABILITY
No award under the Plan shall be sold, assigned, transferred,
exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or
by the laws of descent and distribution, or by such other means as the Committee
may approve. Except as otherwise provided herein, during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.
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17. NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount and
timing of such awards, the terms and provisions of such awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made selectively among persons who
receive, or are eligible to receive, awards under the Plan, whether or not such
persons are similarly situated.
18. CHANGE IN CONTROL PROVISIONS
(a) In the event of (1) a Change in Control (as defined) or (2) a
Potential Change in Control (as defined), but only if and to the extent so
determined by the Board of Directors at or after grant (subject to any right of
approval expressly reserved by the Board of Directors at the time of such
determination), the following acceleration and valuation provisions shall apply:
(i) Any SARs outstanding for at least six months and any stock
options awarded under the Plan not previously exercisable and vested
shall become fully exercisable and vested.
(ii) Any restrictions and deferral limitations applicable to
any restricted stock, performance units or other stock-based awards, in
each case to the extent not already vested under the Plan, shall lapse
and such shares, performance units or other stock-based awards shall be
deemed fully vested.
(iii) The value of all outstanding stock options, SARs,
restricted stock, performance units and other stock-based awards, in
each case to the extent vested, shall, unless otherwise determined by
the Committee in its sole discretion at or after grant but prior to any
Change in Control, be cashed out on the basis of the Change in Control
Price (as defined) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control.
(b) As used herein, the term "Change in Control" means the happening of
any of the following:
(i) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the 1934 Act, other than the Company, a subsidiary
of the Company, or any employee benefit plan of the Company or its
subsidiaries, becomes the beneficial owner of the Company's securities
having 25 percent or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election
for directors of the Company (other than as a result of an issuance of
securities initiated by the Company in the ordinary course of
business), or
(ii) As the result of, or in connection with, any cash tender
or exchange offer, merger
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or other business combination, sale of assets or contested election, or
any combination of the foregoing transactions, less than a majority of
the combined voting power of the then outstanding securities of the
Company or any successor corporation or entity entitled to vote
generally in the election of directors of the Company or such other
corporation or entity after such transaction, are held in the aggregate
by holders of the Company's securities entitled to vote generally in
the election of directors of the Company immediately prior to such
transactions; or
(iii) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Company's shareholders, of each director of the Company first elected
during such period was approved by a vote of at least two-thirds of the
directors of the Company then still in office who were directors of the
Company at the beginning of any such period.
(c) As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(i) The approval by shareholders of an agreement by the
Company, the consummation of which would result in a Change in Control
of the Company; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company, a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or its subsidiaries, including any trustee of such plan acting
as such trustee) of securities of the Company representing 5 percent or
more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors of a resolution
to the effect that a Potential Change in Control of the Company has
occurred for purposes of this Plan.
(d) As used herein, the term "Change in Control Price" means the
highest price per share paid in any transaction reported on the New York Stock
Exchange, or paid or offered in any bona fide transaction related to a Potential
or actual Change in Control of the Company at any time during the 60 day period
immediately preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control event), in each
case determined by the Committee except that, in the case of Incentive Stock
Options and SARs relating to Incentive Stock Options, such price shall be based
only on transactions reported for the date on which the optionee exercises such
SARs or, where applicable, the date on which a cash out occurs under Section
18(a)(iii).
19. NON-COMPETITION PROVISION
Unless the award agreement relating to a stock option, SAR, restricted
stock or performance unit specifies otherwise, a grantee shall forfeit all
unexercised, unearned and/or unpaid awards, including, but not by way of
limitation, awards earned but not yet paid, all unpaid dividends and
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dividend equivalents, and all interest, if any, accrued on the foregoing if, (i)
in the opinion of the Committee, the grantee without the written consent of the
Company, engages directly or indirectly in any manner or capacity as principal,
agent, partner, officer, director, employee or otherwise, in any business or
activity competitive with the business conducted by the Company or any of its
subsidiaries; or (ii) the grantee performs any act or engages in any activity
which in the opinion of the Chief Executive Officer of the Company is inimical
to the best interests of the Company.
20. ADJUSTMENTS
In the event of any change in the outstanding common stock of the
Company, by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, reorganization, split-up, combination, exchange of Shares
or the like, the Board of Directors, in its discretion, may adjust
proportionately the number of Shares which may be issued under the Plan, the
number of Shares subject to outstanding awards, and the option exercise price of
each outstanding option, and may make such other changes in outstanding options,
SARs, performance units and restricted stock awards, as it deems equitable in
its absolute discretion to prevent dilution or enlargement of the rights of
grantees, provided that any fractional Shares resulting from such adjustments
shall be eliminated.
21. AMENDMENT
The Board of Directors may terminate, amend, modify or suspend the Plan
at any time, except that the Board shall not, without the authorization of the
holders of a majority of Company's voting securities, increase the maximum
number of Shares which may be issued under the Plan (other than increases
pursuant to paragraph 20 hereof), extend the last date on which awards may be
granted under the Plan, extend the date on which the Plan expires, change the
class of persons eligible to receive awards, or change the minimum option price.
In no event, however, shall the provisions of paragraphs 6(h) and 8(e) be
amended more often than once every six months, other than to comport with
changes in the Code, the Employment Retirement Income Security Act of 1974, as
amended, or the rules thereunder. No termination, modification, amendment or
suspension of the Plan shall adversely affect the rights of any grantee or
Beneficiary under an award previously granted, unless the grantee or Beneficiary
shall consent; but it shall be conclusively presumed that any adjustment
pursuant to paragraph 20 hereof does not adversely affect any such right.
22. EFFECT ON OTHER PLANS
Participation in this Plan shall not affect a grantee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided
therein.
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23. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective when adopted by the Board of Directors,
provided that the Plan is approved by the holders of a majority of the Company's
voting securities on the date of its adoption by the Board or before the first
anniversary of that date. Unless it is sooner terminated in accordance with
paragraph 21 hereof, the Plan shall remain in effect until all awards under the
Plan have been satisfied by the issuance of Shares or payment of cash or have
expired or otherwise terminated, but no award shall be granted more than ten
years after the earlier of the date the Plan is adopted by the Board of
Directors or is approved by the holders of the Company's voting securities.
24. UNFUNDED PLAN
The Plan shall be unfunded, except to the extent otherwise provided in
accordance with Section 8 hereof. Neither the Company nor any affiliate shall be
required to segregate any assets that may be represented by stock options, SARs,
or performance units, and neither the Company nor any affiliate shall be deemed
to be a trustee of any amounts to be paid under any stock option, SAR or
performance unit. Any liability of the Company or any affiliate to pay any
grantee or Beneficiary with respect to an option, SAR or performance unit shall
be based solely upon any contractual obligations created pursuant to the
provisions of the Plan; no such obligations will be deemed to be secured by a
pledge or encumbrance on any property of the Company or an affiliate.
25. GOVERNING LAW
The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the State of Tennessee except to the
extent that such laws may be superseded by any federal law.
Adopted by the Board of Directors of Saks Incorporated on the seventh day of
April 1999.
By /s/ R. BRAD MARTIN
-----------------------------------------------
R. Brad Martin, Chairman of the Board of Directors
and Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.54
SAKS INCORPORATED
AMENDED AND RESTATED
1997 STOCK-BASED INCENTIVE PLAN
1. Purpose.
The purpose of the SAKS INCORPORATED AMENDED AND RESTATED 1997 STOCK-BASED
INCENTIVE PLAN (the "Plan") is to further the earnings of SAKS INCORPORATED, a
Tennessee corporation, and its affiliated companies (collectively, the
"Company") by assisting the Company in attracting, retaining and motivating
employees and directors of high caliber and potential. The Plan provides for the
award of stock-based incentives to certain employees and directors who make
substantial contributions to the Company by their loyalty, industry and
invention.
2. Administration.
The Plan shall be administered by a committee (the "Committee") selected by the
Board of Directors of the Company (the "Board of Directors") consisting solely
of two or more non-employee directors. The Committee shall have full and final
authority in its discretion to interpret the provisions of the Plan and to
decide all questions of fact arising in its application. Subject to the
provisions hereof, the Committee shall have full and final authority in its
discretion to determine the employees and directors to whom awards shall be made
under the Plan; to determine the type of awards to be made and the amount, size
and terms and conditions of each such award; to determine the time when awards
shall be granted; to determine the provisions of each agreement evidencing an
award; and to make all other determinations necessary or advisable for the
administration of the plan.
3. Stock Subject to the Plan.
The Company may grant awards under the Plan with respect to not more than a
total of 2,300,000 shares of $.10 par value common stock of the Company (the
"Shares") (subject, however, to adjustment as provided in paragraph 21, below).
Such shares may be authorized and unissued Shares or treasury Shares and may be
purchased on the open market or otherwise. Except as otherwise provided herein,
any Shares subject to an option or right which for any reason is surrendered
before exercise, or expires or is terminated unexercised as to such Shares,
shall again be available for the granting of awards under the Plan. Similarly,
if any Shares granted pursuant to restricted stock awards are forfeited, such
forfeited Shares shall again be available for the granting of awards under the
Plan.
4. Eligibility to Receive Awards.
All employees and directors of the Company are eligible to receive awards under
the Plan.
5. Form of Awards.
Awards may be made from time to time by the Committee in the form of stock
options to purchase
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Shares, stock appreciation rights, performance units, restricted stock, bonus
shares or any combination of the above. Stock options granted under the Plan are
nonqualified stock options, which are not intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code.
6. Stock Options.
Stock options for the purchase of Shares shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time; provided that the maximum number of options which may
be granted to any one grantee during any twelve-month period is 125,000 (as
adjusted pursuant to paragraph 21, below). Such agreement shall contain the
terms and conditions applicable to the options, including in substance the
following terms and conditions:
(a) Number of Option. Each option agreement shall set forth the number of Shares
subject to the options.
(b) Option Price. The option exercise price to be paid by the optionee to the
Company for each Share purchased upon the exercise of an option shall be
determined by the Committee, but shall in no event be less than the fair market
value of a Share on the date the option is granted.
(c) Exercise Term. Each option agreement shall state the period or periods of
time within which the option may be exercised, in whole or in part, as
determined by the Committee, and subject to such terms and conditions as are
prescribed for such purpose by the Committee, provided that no option shall be
exercisable after ten years from the date of grant thereof. The Committee, in
its discretion, may provide in the option agreement circumstances under which
the option shall become immediately exercisable, in whole or in part, and,
notwithstanding the foregoing, may accelerate the exercisability of any option,
in whole or in part, at any time.
(d) Payment for Shares. The purchase price of the Shares with respect to which
an option is exercised shall be payable in full at the time of exercise in cash,
shares at fair market value, or a combination thereof, as the Committee may
determine and subject to such terms and conditions as may be prescribed by the
Committee for such purpose. If the purchase price is paid by tendering Shares,
the Committee in its discretion may grant the optionee a new stock option for
the number of Shares used to pay the purchase price.
(e) Rights Upon Termination. In the event of Termination (as defined below) of
an optionee's status as an employee or director of the Company for any cause
other than Retirement (as defined below), death or Disability, (as defined
below), the optionee shall have the right to exercise the option during its term
within a period of three months after such Termination to the extent that the
option was exercisable at the time of Termination, or within such other period,
and subject to such terms and conditions, as may be specified by the Committee.
(As used herein, "Termination"
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<PAGE> 3
means the cessation of the grantee's employment or service by the Company for
any reason, and "Terminates" has the corresponding meaning. As used herein,
"Retirement" means retirement from active employment or service with the Company
on or after age 65, or such earlier age with the express written consent for
purposes of the Plan of the Company at or before the time of such retirement,
and "Retires" has the corresponding meaning. As used herein, "Disability" means
a condition that, in the judgment of the Committee, has rendered a grantee
completely and presumably permanently unable to perform any and every duty of
his regular occupation, and "Disabled" has the corresponding meaning.) In the
event that an optionee Retires, dies or becomes Disabled prior to the expiration
of his option and without having fully exercised his option, the optionee or his
Beneficiary (as defined below) shall have the right to exercise the option
during its term within a period of (i) one year after Termination due to
Retirement, death or Disability, or (ii) one year after death if death occurs
either within one year after Termination due to Retirement or Disability or
within three months after Termination for other reasons, to the extent that the
option was exercisable at the time of death or Termination, or within such other
period, and subject to such terms and conditions, as may be specified by the
Committee. (As used herein, "Beneficiary" means the person or persons designated
in writing by the grantee as his beneficiary with respect to an award under the
Plan; or, in the absence of an effective designation or if the designated person
or persons predeceases the grantee, the grantee's Beneficiary shall be the
person or persons who acquire by bequest or inheritance the grantee's rights in
respect of an award). In order to be effective, a grantee's designation of a
Beneficiary must be on file with the Committee before the grantee's death, but
any such designation may be revoked and a new designation substituted therefor
at any time before the grantee's death.
(f) Transferability. Except as provided in paragraph 12, options granted under
the Plan shall not be sold, assigned, transferred, exchanged, pledged,
hypothecated, or otherwise encumbered, other than by will or by the laws of
descent and distribution until such options become vested.
7. Stock Appreciation Rights.
Stock appreciation rights ("SARs") shall be evidenced by written SAR agreements
in such form not inconsistent with the Plan as the Committee shall approve from
time to time; provided that the maximum number of SARs which may be granted to
any one grantee during any twelve-month period is 125,000, (as adjusted pursuant
to paragraph 21, below). Such SAR agreements shall contain the terms and
conditions applicable to the SARs, including in substance the following terms
and conditions:
(a) Award. SARs may be granted in connection with a previously or
contemporaneously granted stock option, or independently of a stock option. SARs
shall entitle the grantee, subject to such terms and conditions as may be
determined by the Committee, to receive upon exercise portion of the excess of
(i) the fair market value at the time of exercise, as determined by the
Committee, of a specified number of Shares with respect to which the SAR is
exercised, over (ii) a specified price which shall not be less than 100% of the
fair market value of the Shares at the time
3
<PAGE> 4
the SAR is granted, or, if the SAR is granted in connection with a previously
issued stock option, not less than 100% of the fair market value of the Shares
at the time such option was granted. Upon exercise of an SAR, the number of
Shares reserved for issuance hereunder shall be reduced by the number of Shares
covered by the SAR. Shares covered by an SAR shall not be used more than once to
calculate the amount to be received pursuant to the exercise of the SAR.
(b) SARs Related to Stock Options. If an SAR is granted in relation to a stock
option, (i) the SAR shall be exercisable only at such times, and by such persons
as the related option is exercisable; (ii) the grantee's right to exercise the
related option shall be canceled if and to the extent that the Shares subject to
the option are used to calculate the amount to be received upon the exercise of
the related SAR; (iii) the grantee's right to exercise the related SAR shall be
canceled if and to the extent that the Shares subject to the SAR are purchased
upon the exercise of the related option; and (iv) the SAR shall not be
transferable other than by will or by the laws of descent and distribution until
the SAR vests, at which time the vested portion of the SAR will become
transferable as provided in paragraph 12, below.
(c) Term. Each SAR agreement shall state the period or periods of time within
which the SAR may be exercised, in whole or in part, as determined by the
Committee and subject to such terms and conditions as are prescribed for such
purpose by the Committee, provided that no SAR shall be exercisable earlier than
six months after the date of grant or later than ten years after the date of
grant. The Committee may, in its discretion, provide in the SAR agreement
circumstances under which the SARs shall become immediately exercisable, in
whole or in part, and may, notwithstanding the foregoing, accelerate the
exercisability of any SAR, in whole or in, Part, at any time.
(d) Termination. SARs shall be exercisable only during the grantee's tenure as
an employee or director of the Company, except that, in the discretion of the
Committee, an SAR may be made exercisable for up to three months after the
grantee is Terminated for any reason other than Retirement, death or Disability,
and for up to one year after the grantee is Terminated because of Retirement,
death or Disability.
(e) Payment. Upon exercise of an SAR, payment shall be made in cash, in Shares
valued at fair market value on the date of exercise, or in a combination
thereof, as the Committee may determine at the time of exercise.
(f) Other Terms. SARs shall be granted in such manner and such form, and subject
to such additional terms and conditions, as the Committee in its sole discretion
deems necessary or desirable, including without limitation, in order to avoid
any insider-trading liability in connection with an SAR under Section 16(b) of
the 1934 Act.
8. Restricted Stock Awards.
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<PAGE> 5
Restricted stock awards under the Plan shall consist of Shares free of any
purchase price, or for such purchase price as may be established by the
Committee, restricted against transfer, subject to forfeiture, and subject to
such other terms and conditions (including attainment of performance objectives)
as may be determined by the Committee. Restricted stock shall be evidenced by
written restricted stock agreements in such form not inconsistent with the Plan
as the Committee shall approve from time to time, which agreement shall contain
the terms and conditions applicable to such awards, including in substance the
following terms and conditions:
(a) Restriction Period. Restrictions shall be imposed for such period or periods
as may be determined by the Committee. The Committee, in its discretion, may
provide in the agreement circumstances under which the restricted stock shall
become immediately transferable and nonforfeitable, or under which the
restricted stock shall be forfeited, and, notwithstanding the foregoing, may
accelerate the expiration of the restriction period imposed on any Shares at any
time.
(b) Restrictions Upon Transfer. Restricted stock and the right to vote such
Shares and to receive dividends thereon, may not be sold, assigned, transferred,
exchanged, pledged, hypothecated, or otherwise encumbered, except as herein
provided, during the restriction period applicable to such Shares.
Notwithstanding the foregoing, and except as otherwise provided in the Plan, the
grantee shall have all of the other rights of a stockholder, including, but not
limited to, the right to receive dividends and the right to vote such Shares.
(c) Certificates. A certificate or certificates representing the number of
restricted Shares granted shall be registered in the name of the grantee. The
Committee, in its sole discretion, shall determine when the certificate or
certificates shall be delivered to the grantee (or, in the event of the
grantee's death, to his Beneficiary), may provide for the holding of such
certificate or certificates in escrow or in custody by the Company or its
designee pending their delivery to the grantee or Beneficiary, and may provide
for any appropriate legend to be borne by the certificate or certificates.
(d) Lapse of Restrictions. The restricted stock agreement shall specify the
terms and conditions upon which any restriction upon restricted stock awarded
under the Plan shall expire, lapse, or be removed, as determined by the
Committee.
9. Performance Units.
Performance unit awards under the Plan shall entitle grantees to future payments
based upon the achievements of preestablished long-term performance objectives
and shall be evidenced by written performance unit agreements in such form not
inconsistent with this Plan as the Committee shall approve from time to time.
Such agreements shall contain the terms and conditions applicable to the
performance unit awards, including in substance the following terms and
conditions:
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<PAGE> 6
(a) Performance Period. The Committee shall establish with respect to each unit
award a performance period.
(b) Unit Value. The Committee shall establish with respect to each unit award
value for each unit which shall not thereafter change, or which may vary
thereafter pursuant to criteria specified by the Committee.
(c) Performance Targets. The Committee shall establish with respect to each unit
award maximum and minimum performance targets to be achieved during the
applicable performance period. Achievement of maximum targets shall entitle
grantees to payment with respect to the full value of a unit award. Grantees
shall be entitled to payment with respect to a portion of a unit award according
to the level of achievement of targets as specified by the Committee for
performance which achieves or exceeds the minimum target but fails to achieve
the maximum target.
(d) Performance Measures. Performance targets established by the Committee shall
relate to corporate, subsidiary, division, unit or individual performance and
may be established in terms of growth in gross revenue, earnings per share,
stock price, ratios of earnings to equity or assets, individual sales, or such
other measures or standards as may be determined by the Committee in its
discretion. Multiple targets may be used and may have the same or different
weighing, and they may relate to absolute performance or relative performance
measured against other companies or businesses.
(e) Adjustments. At any time prior to the payment of a unit award, the Committee
may adjust previously established performance targets or other terms and
conditions, including the Company's financial performance for Plan purposes, to
reflect major unforeseen events such as changes in laws, regulations or
accounting practices, mergers, acquisitions or divestitures or other
extraordinary, unusual or non-recurring items or events.
(f) Payment of Unit Awards. Following the conclusion of a performance period,
the Committee shall determine the extent to which performance targets have been
attained and any other terms and conditions satisfied for such period. The
Committee shall determine what, if any, payment is due on the unit award and
whether such payment shall be made in cash, Shares, or a combination thereof.
Payment shall be made in a lump sum or installments, as determined by the
Committee, commencing as promptly as practicable following the end of the
performance period unless deferred subject to such terms and conditions and in
such form as may be prescribed by the Committee.
(g) Termination. In the event that a grantee is Terminated as an employee by the
Company prior to the end of the performance period by reason of death,
Disability, or Retirement with the consent of the Company, any unit award, to
the extent earned under the applicable performance targets may, in the
Committee's sole discretion, be payable at the end of the performance period
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<PAGE> 7
according to the portion of the performance period during which the grantee was
employed by or provided services to the Company, provided that the Committee
shall have the power to provide for an appropriate settlement of a unit award
before the end of the performance period. Upon any other Termination,
participation shall terminate forthwith and all outstanding unit awards shall be
canceled.
10. Loans and Supplemental Cash.
The Committee, in its sole discretion to further the purpose of the Plan, may
provide for supplemental cash payments or loans to employees or directors in
connection with all or any part of an award under the Plan. Supplemental cash
payments shall be subject to such terms and conditions as shall be prescribed by
the Committee at the time of grant, provided that in no event shall the amount
of payment exceed:
(a) In the case of an option, the excess fair market value of a Share on the
date of exercise over the option price multiplied by the number of Shares for
which such option is exercised, or
(b) In the case of an SAR, performance unit, or restricted stock award, the
value of the Shares and other consideration issued in payment of such award.
Any loan shall be evidenced by a written loan agreement or other instrument in
such form and containing such terms and conditions (including, without
limitation, provisions for interest, payment schedules, collateral, forgiveness
or acceleration) as the Committee may prescribe from time to time.
11. Stock Bonuses
The Committee may, in its sole discretion, award a bonus to any employee or
director in the form of Company Shares in addition to, or in lieu of a cash
bonus. In addition, the Company may, in its sole discretion, permit an employee
to elect to receive a cash bonus in the form of Company Shares.
12. Restrictions on Transfer of Awards.
Except as permitted by this paragraph 12, no awardholder may sell, transfer,
assign, convey or otherwise dispose of or alienate any of his awards or any
right or interest therein (whether voluntarily, by operation of law, by gift or
otherwise) or enter into any contract or agreement or grant any option with
respect to the sale, transfer, assignment, conveyance or other disposition of
his awards or any right or interest therein. Any purported transfer of awards in
violation of this paragraph shall be void and ineffective and shall not operate
to transfer any interest in or title to such awards to the purported Award
Transferee and the Company shall not record any such purported transfer in its
transfer records.
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<PAGE> 8
(a) Permitted Transfers of Awards by Participants. Upon ten (10) days prior
written notice to the Company (or such lesser number of days as the Company may
agree to in writing) an awardholder may sell, transfer or assign all or any
number of his awards to an Award Transferee who (or which) is an Award
Transferee (defined below) only if, prior to such transfer, such Award
Transferee has agreed in writing, in form and substance satisfactory to the
Company, in its sole discretion, that such Award Transferee and the award
transferred to him shall be bound by the provisions of this Plan including,
without limitation, those of this paragraph 12. Such notice shall specify the
name and address of the proposed Award Transferee, the relationship between the
Participant and the proposed transferee which establishes the proposed
transferee as an Award Transferee of the Participant and the number and prices
(if any) of the awards to be transferred to such proposed Award Transferee.
Notwithstanding the foregoing provisions of this paragraph, if awards are
transferred to an Award Transferee which is a Qualified Trust and the written
document pursuant to which such Qualified Trust was established is later amended
without the prior written approval of the Company then, on the effective date of
such amendment, ownership of all awards then owned by such Qualified Trust shall
revert to its Transferor.
(b) Permitted Transfers of Awards By Other Awardholders. Upon ten (10) days
prior written notice to the Company (or such lesser number of days as the
Company may agree to in writing), an awardholder other than a Participant may
sell, transfer or assign all or any number of his awards to his Transferor if,
prior to such transfer, such Transferor has agreed in writing, in form and
substance satisfactory to the Company, that such Transferor and the awards
transferred to him shall be bound by the provisions of this Plan including,
without limitation, those of this paragraph 12. Such notice shall specify the
number and prices (if any) of the awards to be transferred to such Transferor.
(c) Effect of Transfer of Awards. The provisions of this subparagraph (c) shall
apply in the event a participant transfers awards to an Award Transferee
pursuant to subparagraph (a).
(i) Forfeitures of Awards. All of an Award Transferee's awards shall be
forfeited on the date any awards owned by his Transferor are or would be
forfeited pursuant to paragraph 20. On the date an Award Transferee's awards are
forfeited pursuant to this paragraph 12, the rights of such Award Transferee
shall be terminated.
(ii) Exercise of Awards. An Award Transferee shall be entitled to exercise his
awards at such times, in such manner, upon such terms and subject to such
conditions, limitations and restrictions as his Transferor is or would be
entitled to exercise any awards owned by such Transferor.
(iii) Beneficiaries. Upon an Award Transferee's receipt of any awards, the
provisions of the Plan governing the determination of a participant's
Beneficiary shall apply to such Award Transferee as if such Award Transferee
were a participant.
(iv) Deemed Ownership of Awards. Each Participant shall be deemed to own all of
the awards
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<PAGE> 9
actually owned by his Award Transferees for the purpose of determining the
number of awards to be granted to a Participant pursuant to paragraph 12.
(d) Rights of Award Transferees. Notwithstanding anything to the contrary
contained in this Plan, the rights of an Award Transferee with respect to all
awards owned by such Award Transferee shall be the same as those of the
individual who first owned such award determined as if such individual then
owned such award.
(e) Definitions. Unless otherwise provided, for purposes of the Plan, the
following terms have the following meaning:
(i) Award Transferee. With respect to a participant, his spouse and lineal
descendants who have attained age 21 and a Qualified Trust, the sole
beneficiaries of which may not include anyone other than the participant, his
spouse and lineal descendants.
(ii) Qualified Trust. A trust established pursuant to a written document which
has been approved in writing by the Company in its sole discretion and which, by
its terms:
(1) authorizes the trustee of such trust to: acquire, own and dispose of shares
of stock and other securities and awards under which shares of stock and other
securities may be issued; exercise any award; grant proxies to vote any
securities owned by such trust; and enter into agreements with respect to such
securities, the term of which may extend beyond the term of the trust;
(2) provides that awards and Shares held by the trustee of such trust shall only
be distributed to a beneficiary of such trust if such beneficiary is an Award
Transferee of the grantor of such trust, and prior to such distribution, has
agreed in writing, in form and substance satisfactory to the Company, in its
sole discretion, that such beneficiary and the awards and Shares distributed to
him shall be bound by the provisions of this Plan including, without limitation,
those of this paragraph 12;
(3) cannot be amended without the prior written approval of the Company which
approval may be withheld by the Company in its sole discretion;
(4) provides that any such amendment which is not so approved by the Company
shall be invalid; and
(5) contains such other terms and provisions as the Company, it its sole
discretion, shall determine to be appropriate.
(iii) Transferor. With respect to an Award Transferee, the participant to whom
the awards owned by such Award Transferee were originally granted.
(iv)
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13. General Restrictions.
Each award under the Plan shall be subject to the requirement that if at any
time the Company shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of Shares, or (iv) the satisfaction of withholding
tax or other withholding liabilities is necessary or desirable as a condition of
or in connection with such award or the issuance or purchase of Shares
thereunder, such award shall not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval, agreement, or
withholding shall have been effected or obtained free of any conditions not
acceptable to the Company. Any restriction affecting an award shall not extend
the time within which the award may be exercised; and neither the Company nor
its directors or officers nor the Committee shall have any obligation or
liability to the grantee or to a Beneficiary or Award Transferee with respect to
any Shares with respect to which an award shall lapse or with respect to which
the grant, issuance or purchase of Shares shall not be effected, because of any
such restriction.
14. Single or Multiple Agreements.
Multiple awards, multiple forms of awards, or combinations thereof may be
evidenced by a single agreement or multiple agreements, as determined by the
Committee.
15. Rights of the Stockholder.
The recipient of any award under the Plan, shall have no rights as a stockholder
with respect thereto unless and until certificates for Shares are issued to him,
and the issuance of shares shall confer no retroactive right to dividends.
16. Rights to Terminate.
Nothing in the Plan or in any agreement entered into pursuant to the Plan shall
confer upon any person the right to continue in the employment or service of the
Company or affect any right which the Company may have to terminate the
employment or service of such person.
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17. Withholding.
(a) Prior to the issuance or transfer of Shares under the Plan, the recipient
shall remit to the Company an amount sufficient to satisfy any federal, state or
local withholding tax requirements. The recipient may satisfy the withholding
requirement in whole or in part by electing to have the Company withhold Shares
having a value equal to the minimum amount required to be withheld. No
additional amount may be withheld. The value of the Shares to be withheld shall
be the fair market value, as determined by the Committee, of the stock on the
date that the amount of tax to be withheld is determined (the "Tax Date"). Such
election must be made prior to the Tax Date, must comply with all applicable
securities law and other legal requirements, as interpreted by the Committee,
and may not be made unless approved by the Committee, in its discretion.
(b) Whenever payments to a grantee in respect of an award under the Plan are
paid in cash, such payments shall be net of the amount necessary to satisfy any
federal, state or local withholding tax requirements.
18. Non-Uniform Determinations.
The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the agreements
evidencing same, and the establishment of values and performance targets) need
not be uniform and may be made selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
19. Change In Control Provisions.
(a) In the event of (1) a Change in Control (as defined) or (2) a Potential
Change in Control (as defined), but only if and to the extent so determined by
the Board of Directors at or after grant (subject to any right of approval
expressly reserved by the Board of Directors at the time of such determination),
the following acceleration and valuation provisions shall apply:
(i) Any SARs outstanding for at least six months and any stock awards awarded
under the Plan not previously exercisable and vested shall become fully
exercisable and vested.
(ii) Any restrictions and deferral limitations applicable to any restricted
stock, performance units or other stock-based awards, in each case to the extent
not already vested under the Plan, shall lapse and such shares, performance
units or other stock-based awards shall be deemed fully vested.
(iii) The value of all outstanding stock awards, SARs, restricted stock,
performance units and other stock-based awards, in each case to the extent
vested, shall, unless otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change in Control, be cashed out
on the basis of the Change in Control Price (as defined) as of the date such
Change in Control
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or such Potential Change in Control is determined to have occurred or such other
date as the Committee may determine prior to the Change in Control.
(b) As used herein, the term "Change in Control" means the happening of any of
the following:
(i) Any person or entity, including a "group" as defined in Section 13(d)(3) of
the 1934 Act, other than the Company, a subsidiary of the Company, or any
employee benefit plan of the Company or its subsidiaries, becomes the beneficial
owner of the Company's securities having 25% or more of the combined voting
power of the then outstanding securities of the Company that may be cast for the
election for directors of the Company (other than as a result of an issuance of
securities initiated by the Company in the ordinary course of business), or
(ii) As the result of, or in connection with, any cash tender or exchange offer,
merger or other business combination, sale of assets or contested election, or
any combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or any
successor corporation or entity entitled to vote generally in the election of
directors of the Company or such other corporation or entity after such
transaction, are held in the aggregate by holders of the Company's securities
entitled to vote generally in the election of directors of the Company
immediately prior to such transactions; or
(iii) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each director of the
Company first elected during such period was approved by a vote of at least
two-thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
(c) As used herein, the term "Potential Change in Control" means the happening
of any of the following:
(i) The approval by stockholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company; or
(ii) The acquisition of beneficial ownership, directly or indirectly, by any
entity, person or group (other than the Company, a wholly-owned subsidiary
thereof or any employee benefit plan of the Company or its subsidiaries
(including any trustee of such plan acting as such trustee)) of securities of
the Company representing five % or more of the combined voting power of the
Company's outstanding securities and the award by the Board of Directors of a
resolution to the effect that a Potential Change in Control of the Company has
occurred for purposes of this Plan.
(d) As used herein, the term "Change in Control Price" means the highest price
per share paid in any transaction reported on the New York Stock Exchange, or
paid or offered in any bona fide
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transaction related to a Potential or actual Change in Control of the Company at
any time during the 60 day period immediately preceding the occurrence of the
Change in Control (or, where applicable, the occurrence of the Potential Change
in Control event), in each case determined by the Committee.
20. Non-Competition Provision.
Unless the award agreement relating to an option, SAR, a restricted stock, stock
bonus or performance unit expressly specifies otherwise, a grantee shall forfeit
all unexercised, unearned and/or unpaid awards, including, but not by way of
limitation, awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing if, (i) in the
opinion of the Committee, the grantee without the written consent of the
Company, engages directly or indirectly in any manner or capacity as principal,
agent, partner, officer, director, employee or otherwise, in any business or
activity competitive with the business conducted by the Company or any of its
subsidiaries; or (ii) the grantee performs any act or engages in any activity
which in the opinion of the Chief Executive Officer of the Company is inimical
to the best interests of the Company.
21. Adjustments.
In the event of any change in the outstanding common stock of the Company, by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, reorganization, split-up, combination, exchange of Shares or the
like, the Board of Directors, in its discretion, may adjust proportionately the
number of Shares which may be issued under the Plan, the number of Shares
subject to outstanding awards, and the option exercise price of each outstanding
option, and may make such other changes in outstanding options, SARs,
performance units and restricted stock awards, as it deems equitable in its
absolute discretion to prevent dilution or enlargement of the rights of
grantees, provided that any fractional Shares resulting from such adjustments
shall be eliminated.
22. Amendment and Termination.
The Board of Directors may terminate, amend, modify or suspend the Plan at any
time. No termination, modification, amendment or suspension of the Plan shall
adversely affect the rights of any grantee, Beneficiary or Award Transferee
under an award previously granted unless the grantee or Beneficiary shall
consent; but it shall be conclusively presumed that any adjustment pursuant to
paragraph 21 hereof does not adversely affect any such right.
23. Effect on Other Plans.
Participation in this Plan shall not affect a grantee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically
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provided therein.
24. Effective Date and Duration of the Plan.
The Plan shall become effective when adopted by the Board of Directors. Unless
it is sooner terminated in accordance with paragraph 22 hereof, the Plan shall
remain in effect until all awards under the Plan have been satisfied by the
issuance of Shares or payment of cash or have expired or otherwise terminated,
but no award shall be granted more than ten years after the date the Plan is
adopted by the Board of Directors.
25. Unfunded Plan.
The Plan shall be unfunded. Neither the Company nor any affiliate shall be
required to segregate any assets that may be represented by stock options, SARs,
stock bonuses or performance units, and neither the Company nor any affiliate
shall be deemed to be a trustee of any amounts to be paid under any stock
option, SAR, stock bonus or performance unit. Any liability of the Company or
any affiliate to pay any grantee, Beneficiary or Award Transferee with respect
to an option, SAR or performance unit shall be based solely upon any contractual
obligations created pursuant to the provisions of the Plan; no such obligations
will be deemed to be secured by a pledge or encumbrance on any property of the
Company or an affiliate.
26. Governing Law.
The Plan shall be construed and its provisions enforced and administered in
accordance with the laws of the State of Tennessee except to the extent that
such laws may be superseded by any federal law.
Adopted by The Board of Directors of Saks Incorporated on the 7th day of April
1999.
By:
----------------------------------------------
R. Brad Martin, Chairman of the Board of Directors
and Chief Executive Officer
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<PAGE> 1
Exhibit 10.55
SAKS INCORPORATED
401(k) RETIREMENT PLAN
Amended and Restated Effective January 1, 1999
(except as otherwise indicated)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
INTRODUCTION i
<S> <C>
DEFINITIONS 1-1
1.01 "Account".........................................................................................1-1
1.02 "Adopting Employer"...............................................................................1-1
1.03 "Allocation Date".................................................................................1-1
1.04 "Beneficiary".....................................................................................1-1
1.05 "Break in Service"................................................................................1-1
1.06 "Code"............................................................................................1-2
1.07 "Committee".......................................................................................1-2
1.08 "Compensation"....................................................................................1-2
1.09 "Controlled Group"................................................................................1-3
1.10 "Disability"......................................................................................1-3
1.11 "Early Retirement Date"...........................................................................1-4
1.12 "Effective Date"..................................................................................1-4
1.13 "Employee"........................................................................................1-4
1.14 "Employer"........................................................................................1-4
1.15 "Employer Account"................................................................................1-4
1.16 "Entry Date"......................................................................................1-4
1.17 "ERISA"...........................................................................................1-5
1.18 "Fiduciary".......................................................................................1-5
1.19 "Forfeiture"......................................................................................1-5
1.20 "Highly Compensated Employee".....................................................................1-5
1.21 "Hour of Service".................................................................................1-5
1.22 "Investment Manager"..............................................................................1-6
1.23 "Leased Employee".................................................................................1-6
1.24 "Matching Contributions"..........................................................................1-7
1.25 "Merged Plans"....................................................................................1-7
1.26 "Non-highly Compensated Employee".................................................................1-7
1.27 "Normal Retirement Age"...........................................................................1-7
1.28 "Normal Retirement Date"..........................................................................1-7
1.29 "Participant".....................................................................................1-7
1.30 "Personal Account"................................................................................1-7
1.31 "Plan"............................................................................................1-8
1.32 "Plan Administrator"..............................................................................1-8
1.33 "Plan Year".......................................................................................1-8
1.34 "Retired Participant".............................................................................1-8
1.35 "Rollover Contributions"..........................................................................1-8
1.36 "Salary Deferral Contributions"...................................................................1-8
1.37 "Service".........................................................................................1-8
1.38 "Sponsor".........................................................................................1-9
1.39 "Spouse"..........................................................................................1-9
1.40 "Trust"...........................................................................................1-9
1.41 "Trust Fund"......................................................................................1-9
1.42 "Trustee".........................................................................................1-9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
1.43 "Vesting Service".................................................................................1-9
1.44 "Year of Service".................................................................................1-9
PARTICIPATION IN THE PLAN 2-1
2.01 Eligibility Date..................................................................................2-1
2.02 Eligibility Determination.........................................................................2-2
2.03 Participation.....................................................................................2-3
2.04 Participation Following Reemployment..............................................................2-3
2.05 Participation Following Change in Classification..................................................2-3
2.06 Absence in the Armed Services.....................................................................2-3
2.07 Family and Medical Leave Act Requirements.........................................................2-3
CONTRIBUTIONS TO THE PLAN 3-1
3.01 Employer Contributions............................................................................3-1
3.02 Contributions By, or On Behalf of, Participants...................................................3-2
3.03 Coverage and Discrimination Requirements..........................................................3-4
3.04 Discrimination Requirements for Other Contributions...............................................3-6
3.05 Multiple Use of Alternative Limitation............................................................3-8
3.06 Trustee to Trustee Transfers......................................................................3-8
3.07 Medium of Financing the Plan......................................................................3-8
3.08 Investment Directions by Participants.............................................................3-9
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 4-1
4.01 Credit of Contributions...........................................................................4-1
4.02 Allocation of Investment Earnings.................................................................4-2
4.03 Adjustment to Accounts............................................................................4-2
4.04 Maximum Annual Additions to Participants' Accounts................................................4-3
4.05 Application of Contributions and Forfeitures Among Employers......................................4-5
4.06 Fair Market Value.................................................................................4-5
IN SERVICE WITHDRAWALS 5-1
5.01 Withdrawals at Age 59-1/2.........................................................................5-1
5.02 Withdrawals from Participants' Personal Accounts..................................................5-1
5.03 Hardship Withdrawals..............................................................................5-1
5.04 Loans to Participants.............................................................................5-2
GENERAL BENEFIT PROVISIONS 6-1
6.01 Form of Benefit Payment...........................................................................6-1
6.02 Time of Payment...................................................................................6-1
6.03 Special Commencement and Distribution of Benefits Rule............................................6-2
6.04 Single Sum Distribution of Small Benefits.........................................................6-5
6.05 Designation of Beneficiary........................................................................6-5
6.06 Eligible Rollover Distributions...................................................................6-6
6.07 Optional Forms of Benefits Under Merged Plans.....................................................6-7
6.08 Purchase of Annuities.............................................................................6-7
6.09 Failure to Locate.................................................................................6-7
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
RETIREMENT, DEATH AND DISABILITY BENEFITS 7-1
7.01 Benefits Upon Retirement..........................................................................7-1
7.02 Death Benefits....................................................................................7-1
7.03 Disability Benefits...............................................................................7-2
TERMINATION BENEFITS 8-1
8.01 Benefits Upon Termination of Service..............................................................8-1
8.02 Forfeitures.......................................................................................8-1
8.03 Payment of Benefits...............................................................................8-2
THE COMMITTEE 9-1
9.01 Plan Administrator and Appointment of Committee...................................................9-1
9.02 Powers and Duties of the Plan Administrator.......................................................9-1
9.03 Plan Administrator Procedures.....................................................................9-2
9.04 Claims and Review Procedures......................................................................9-2
9.05 Election Procedures...............................................................................9-3
ESTABLISHMENT OF TRUST 10-1
10.01 Trust Agreement..................................................................................10-1
10.02 Trust Agreement Part of Plan.....................................................................10-1
AMENDMENT AND TERMINATION OF THE PLAN 11-1
11.01 Amendment of Plan................................................................................11-1
11.02 Intent to Continue the Plan......................................................................11-1
11.03 Termination or Partial Termination of the Plan by the Sponsor....................................11-2
11.04 Termination of the Plan Upon Certain Events......................................................11-2
11.05 Distribution of Trust Fund Upon Complete Termination.............................................11-2
11.06 Termination of Plan With Respect to an Adopting Employer.........................................11-2
CERTAIN PROVISIONS AFFECTING THE EMPLOYER 12-1
12.01 Duties of the Employer...........................................................................12-1
12.02 Right of Employer to Discharge Employees.........................................................12-1
12.03 Information to be Furnished......................................................................12-1
12.04 Communications from Sponsor to Trustee...........................................................12-1
12.05 No Reversion to Employer.........................................................................12-1
12.06 Indemnification by Sponsor.......................................................................12-2
12.07 Adoption of Plan by Adopting Employers...........................................................12-2
SPECIAL MERGED PLAN ISSUES 13-1
13.01 Generally........................................................................................13-1
13.02 Parisian Retirement and Savings Plan.............................................................13-1
13.03 Younkers Associate Profit Sharing and Savings Plan...............................................13-2
13.04 G.R. Herberger's Inc. 401(k) Employee Stock Purchase Plan
and Employee Stock Ownership Plan................................................................13-4
13.05 Brody Brothers Dry Goods Company, Inc. 401(k) Profit Sharing Plan................................13-5
13.06 Mercantile Transfers.............................................................................13-6
13.07 Employees Who Transfer from Saks Holdings, Inc...................................................13-8
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
PROVISIONS APPLICABLE TO A TOP HEAVY PLAN 14-1
14.01 Top Heavy Plans..................................................................................14-1
14.02 Definitions......................................................................................14-1
14.03 Minimum Allocations in Single Plan...............................................................14-4
14.04 Minimum Vesting Schedules........................................................................14-5
14.05 Special Limitations and Allocation in Multiple Plans.............................................14-5
MISCELLANEOUS PROVISIONS 15-1
15.01 Allocation of Responsibility among Fiduciaries for Plan and Trust Administration.................15-1
15.02 Alienation or Assignment of Benefits (QDRO's)....................................................15-1
15.03 Headings.........................................................................................15-2
15.04 Construction of the Plan.........................................................................15-2
15.05 Correction of Errors.............................................................................15-2
15.06 Legally Incompetent..............................................................................15-2
15.07 Successor Organization...........................................................................15-2
15.08 Minimum Benefit in Successor Plan................................................................15-3
15.09 Application of Plan Provisions...................................................................15-3
15.10 Severability of Provisions.......................................................................15-3
15.11 Applicable Law...................................................................................15-3
15.12 Nonassignability of Duties.......................................................................15-3
15.13 Entire Plan......................................................................................15-3
</TABLE>
<PAGE> 6
INTRODUCTION
Effective October 1, 1993, Proffitt's, Inc. adopted the Proffitt's,
Inc. 401(k) Retirement Plan to provide retirement benefits for its eligible
Employees. The Plan has been amended from time to time. The name of the Plan was
changed to "Saks Incorporated 401(k) Retirement Plan" effective October 1, 1998.
Now, in order to make changes to the Plan, the Sponsor hereby amends,
restates and continues the Plan effective January 1, 1999 (except as otherwise
indicated herein for specified provisions or as required by applicable law or
regulations).
The purposes of the Plan are to provide the Employees who qualify to
participate in the Plan and their Beneficiaries certain benefits as stipulated
herein in the event of retirement, death or termination of Service prior to
retirement, and to provide such Employees the opportunity to save for such
events on a tax-deferred incentive basis pursuant to the provisions of section
401(k) of the Code. The Plan is intended to be qualified under section 401(a) of
the Code as a profit sharing plan and its related Trust is intended to qualify
as a tax-exempt trust under section 501(a) of the Code.
Except as otherwise provided herein, the provisions of the Plan shall
apply only to Employees who have Service with the Employer on or after January
1, 1999.
i
<PAGE> 7
ARTICLE 1
DEFINITIONS
The following terms when used herein, unless the context clearly
indicates otherwise, shall have the meanings set forth hereinafter.
1.01 "ACCOUNT" shall mean the total of a Participant's Employer Account and
Personal Account.
1.02 "ADOPTING EMPLOYER" shall mean the Sponsor and any business
organization, sole proprietorship, professional corporation or
corporation affiliated with the Sponsor through complete or partial
ownership by the Sponsor or by any owner therein, or which is otherwise
cooperating with the Sponsor for purposes of establishing and
maintaining a qualified plan, which is authorized by the Sponsor to
adopt the Plan, and which subsequently adopts the Plan.
The term shall also include any business organization or corporation
into which the Adopting Employer may be merged or consolidated or by
which it may be succeeded.
As of January 31, 1999 the following were Adopting Employers:
Saks Incorporated (which is also the Plan Sponsor)
Herberger's Department Stores, LLC
McRae's, Inc.
McRae's of Alabama
McRae's Stores Partnership
Parisian, Inc.
Proffitt's Credit Corporation
Saks Distribution Centers, Inc.
Saks Stores Partnership L.P.
1.03 "ALLOCATION DATE" shall mean each business day that the applicable
trading market and the Plan's recordkeeper are open for business.
1.04 "BENEFICIARY" shall mean the person, persons or legal entity last
designated in accordance with Section 6.05 hereof, who shall receive
any death benefits that may be payable under the Plan after the death
of a Participant or Retired Participant.
1.05 "BREAK IN SERVICE" shall mean a consecutive twelve (12) month period,
during which the Employee does not perform more than five hundred (500)
Hours of Service. For purposes of determining eligibility to
participate in the Plan, pursuant to Article 2 hereof, the initial
twelve (12) month period shall commence on the date the Employee first
performs an Hour of Service, and each subsequent twelve (12) month
period shall be the Plan Year, beginning with the Plan Year which
commences prior to the end of the initial twelve (12) month period.
For purposes of determining Vesting Service, the consecutive twelve
(12) month period shall be the Plan Year.
1-1
<PAGE> 8
For purposes of determining whether a Break in Service has occurred,
Hours of Service shall include any period in which the Employee is
absent from work for maternity or paternity reasons for any of the
following:
(a) by reason of the pregnancy of the Employee,
(b) by reason of the birth of a child of the Employee,
(c) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
Provided, however, that Hours of Service credited for such absence from
work shall not exceed the Hours which would normally have been credited
to such individual but for such absence. Such Hours of Service shall be
credited in the Plan Year in which the absence from work begins if an
Employee would be prevented from incurring a Break in Service in such
Plan Year solely because the period of absence is treated as Hours of
Service or, in any other case, in the immediately following Plan Year.
No credit for Hours of Service for absence by reason of such pregnancy
or placement shall be given hereunder unless an Employee furnishes to
the Plan Administrator such timely information as the Plan
Administrator may reasonably require to establish that the absence from
work is for a reason set forth in (a) through (d).
1.06 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and as in effect on the relevant date to be interpreted
hereunder.
1.07 "COMMITTEE" shall mean the committee as provided in Article 9 hereof
which may be appointed to administer the day-to-day operations of the
Plan.
1.08 "COMPENSATION" shall mean, except as otherwise provided, compensation
as defined in (a) or (b) below, as applicable, subject to (c), which is
paid to the Employee by the Employer.
(a) Compensation, for all purposes except Sections 1.20, 3.03 and
3.04, means compensation as reported in the "Wages, Tips and
Other Compensation" box of Form W-2 which shall include wages
within the meaning of Code section 3401(a) and all other payments
of compensation to an Employee by his Employer (in the course of
the Employer's trade or business) for which the Employer is
required to furnish the Employee a written statement under Code
sections 6041(d), 6051(a)(3), and 6052. Compensation shall be
determined without regard to any rules under Code section 3401(a)
that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as
the exception for agricultural labor in Code section 3401(a)(2)).
However, Compensation shall not include (whether or not
includable in the Employee's gross income) reimbursements or
other expense allowances, fringe benefits (cash and noncash),
moving expenses, deferred compensation, welfare benefits or
severance pay. Compensation shall include Compensation only for
the portion of the Plan Year in which the Employee was a
Participant.
Compensation as defined in this Section 1.08(a) shall include any
amount which is contributed by the Employer with respect to the
applicable period pursuant to a salary
1-2
<PAGE> 9
reduction agreement and which is not includable in the gross
income of the Employee under section 125 (dealing with cafeteria
plans), 402(e)(3) (dealing with elective deferrals under 401(k)
plans), 402(h) (dealing with simplified employee pensions) or
403(b) (dealing with tax sheltered annuities) of the Code.
Compensation shall not include any other contribution made by the
Employer under this Plan or under any pension plan or other
employee benefit plan or insurance plan maintained by the
Employer for the benefit of such Employee.
(b) For purposes of Section 3.03 and Section 3.04 hereof,
Compensation shall mean the total compensation for Service by an
Employee for the Employer that is includable in gross income as
provided in section 414(s) of the Code. For purposes of Sections
3.03 and 3.04 hereof, compensation shall be determined for the
period during the Plan Year in which the Employee is a
Participant, or for the entire Plan Year, as determined by the
Plan Administrator.
(c) Notwithstanding any other provision of the Plan to the contrary,
the annual compensation of each Employee taken into account under
the Plan shall not exceed the OBRA '93 annual compensation limit.
The OBRA '93 annual compensation limit is one hundred fifty
thousand dollars ($150,000), as adjusted by the Commissioner for
increases in the cost of living in accordance with section
401(a)(17)(B) of the Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not exceeding
twelve (12) months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than twelve (12) months,
the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is twelve
(12).
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the compensation for that prior determination
period is subject to the OBRA '93 annual compensation limit in
effect for that prior determination period.
1.09 "CONTROLLED GROUP" shall mean, except as modified by section 415(h) of
the Code for purposes of determining limitations under section 415 of
the Code pursuant to Section 4.04 hereof, as follows: any corporation
which is a member of a controlled group of corporations (as defined by
section 414(b) of the Code) of which the Employer is a member, any
other trade or business (whether or not incorporated) which is under
common control (as defined by section 414(c) of the Code) with respect
to the Employer, any organization which is a member of an affiliated
service group (as defined by section 414(m) of the Code) of which the
Employer is a member or any other entity required to be aggregated with
the Employer pursuant to regulations under section 414(o) of the Code;
but only for the period during which such other corporation, trade or
business or organization and the Employer are members of such
controlled group of corporations, are under such common control or are
serving as members of such an affiliated service group.
1.10 "DISABILITY" shall mean a physical or mental condition of a Participant
resulting in:
(a) evidence that the Participant is deemed by the Social Security
Administration to be eligible to receive a Primary Social
Security Disability benefit, or
1-3
<PAGE> 10
(b) evidence that the Participant is eligible for disability benefits
under the long-term disability plan sponsored by the Employer.
1.11 "EARLY RETIREMENT DATE" shall mean, for a Participant, the first day of
the month coinciding with or following the date the Participant
terminates Service, provided (i) the Participant has attained age
fifty-five (55) and completed five (5) years of Vesting Service and
(ii) the date precedes his Normal Retirement Date.
1.12 "EFFECTIVE DATE" shall mean October 1, 1993, the date of establishment
of the Plan; provided, however, that the term shall mean, for an
Employee, the effective date of adoption of the Plan by his Employer if
such date is later than October 1, 1993.
The effective date of this amendment, restatement and continuation of
the Plan shall be January 1, 1999, except as otherwise specifically
indicated for provisions herein or as otherwise required by applicable
law or regulation.
1.13 "EMPLOYEE" shall mean either (a) a person, other than an independent
contractor, who is receiving remuneration from the Employer for
services rendered to, or labor performed for, the Employer (or who
would be receiving such remuneration except for an authorized leave of
absence), or (b) a Leased Employee.
1.14 "EMPLOYER" shall mean the Sponsor or an Adopting Employer, or both, as
required by the context of this Plan; provided, however, that if an
Employee is simultaneously employed (or considered to be employed) by
the Sponsor and one (1) or more Adopting Employers or by two (2) or
more Adopting Employers, the term shall mean all such employers.
1.15 "EMPLOYER ACCOUNT" shall mean the account maintained on behalf of a
Participant to which shall be credited the Participant's share of
Employer contributions, together with the Participant's share of the
investment earnings (or losses) of the Trust Fund allocable to this
account.
For purposes of administrative convenience, each Participant's Employer
Account shall be divided into the following parts:
Part I the portion of the Participant's Employer Account which
is attributable to Matching Contributions, also known as
the Matching Account;
Part II the portion of the Participant's Employer Account which
is attributable to Qualified Matching Contributions made
pursuant to Section 3.01(c) hereof, also known as the QMAC
account; and
Part III the portion of the Participant's Employer Account which
is attributable to trustee to trustee transfers of
Employer contribution accounts, if any, made with respect
to a Participant's benefits pursuant to Section 3.06
hereof, also known as the Employer Transfer Account.
1.16 "ENTRY DATE" shall mean a date upon which an Employee is eligible to
become a Participant in the Plan, following his satisfaction of the
eligibility requirements pursuant to Section 2.01 hereof. The first day
of each calendar month shall be an Entry Date. Provided, however, that,
only with respect to individuals who become Employees as a result of
the merger or
1-4
<PAGE> 11
consolidation of their employing organization into the Employer, or the
acquisition of their employing organization by the Employer, an
additional Entry Date may be named by the Sponsor for such Employees.
1.17 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and as in effect on the relevant date to
be interpreted hereunder.
1.18 "FIDUCIARY" shall mean the Employer, the Plan Administrator, the
Trustee, the Investment Manager, if any, and any other business
organization or corporation designated by such a fiduciary to carry out
fiduciary responsibilities under the Plan, which accepts such
designation, but only with respect to the specific responsibilities for
each such fiduciary described herein.
1.19 "FORFEITURE" shall mean the portion of a Participant's Employer Account
which is forfeited before full vesting occurs or because of the
operation of Section 4.01(b), 4.04 or 8.02 hereof.
1.20 "HIGHLY COMPENSATED EMPLOYEE" shall mean for Plan Years after December
31, 1996:
(a) any Employee who performs Service for the Employer during the
determination year and who, during the look-back year, received
Compensation from the Employer in excess of $80,000 (as adjusted
pursuant to section 415(d) of the Code, except that the base
period shall be the calendar quarter ending September 30, 1996);
or
(b) any Employee who is a five-percent owner (as defined in section
416(i)(1) of the Code) at any time during the look-back year or
determination year.
For this purpose, the "determination year" shall be the Plan Year and
the "look-back year" shall be the twelve (12) month period immediately
preceding the determination year.
A Highly Compensated Employee includes any Employee whose date of
termination of Service occurred prior to the determination year,
performs no Service for the Employer during the determination year, and
was a Highly Compensated active Employee for either the termination
year or any determination year ending on or after the Employee's
fifty-fifth (55th) birthday.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, and the Compensation that is considered, will be made
in accordance with section 414(q) of the Code and the regulations
thereunder. Such determination may also take into account other rulings
and pronouncements issued by the Secretary of the Treasury, the
Internal Revenue Service or other governmental bodies.
1.21 "HOUR OF SERVICE" shall mean the following:
(a) An Hour of Service shall mean each actual hour for which an
Employee is paid, or entitled to payment, for the performance of
duties for the Employer. These Hours of Service shall be credited
to the Employee for the Plan Year in which the duties are
performed.
(b) An Hour of Service shall mean each hour for which an Employee is
paid, or entitled to payment, by the Employer on account of a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including Disability),
layoff, jury duty, military duty
1-5
<PAGE> 12
or authorized Leave of Absence. No more than five hundred and one
(501) Hours of Service shall be credited under this subsection
for any single continuous period (whether or not such period of
service occurs in a single Plan Year). Hours of Service under
this subsection shall be calculated and credited pursuant to
section 2530.200b-2 of the Department of Labor Regulations, which
are incorporated herein by reference as if fully set forth
herein.
(c) An Hour of Service shall mean each hour for which back pay,
irrespective of mitigation of damages, has been either awarded or
agreed to by the Employer. These Hours of Service shall be
credited to the Employee for the Plan Year to which the award or
agreement pertains rather than the Plan Year in which the award,
agreement or payment is made. Hours of Service shall not be
credited under both this and either of the two (2) preceding
subsections of this Section.
(d) No Hour of Service, however, shall be credited for payments made
solely to comply with workmen's or unemployment compensation or
disability insurance laws or as reimbursement for medical
expenses.
Hours of Service shall be credited for employment with other members of
a Controlled Group of which the Employer is a member. Hours of Service
shall also be credited for any individual considered a Leased Employee
for purposes of the Plan.
1.22 "INVESTMENT MANAGER" shall mean any Fiduciary, other than the Trustee,
who
(a) has the power to manage, acquire, or dispose of any asset of the
Plan;
(b) (i) is registered as an investment advisor under the Investment
Advisers Act of 1940; (ii) is a bank, as defined in that Act; or
(iii) is an insurance company qualified to perform services
described in subsection (a) under the laws of more than one (1)
state; and
(c) has acknowledged in writing that he is a Fiduciary with respect
to the Plan.
1.23 "LEASED EMPLOYEE" shall mean any person, other than a common law
employee of the Employer, who provides services for the Employer if the
following conditions are met:
(a) such services are provided pursuant to an agreement between the
Employer and a leasing organization,
(b) such person has performed services for the Employer (or the
Employer and a "related person" as that term is defined in
section 414(n)(6) of the Code) on a substantially full-time basis
for a period of at least one (1) year, and
(c) such services are performed under primary direction or control of
the recipient Employer.
Notwithstanding the foregoing, a Leased Employee shall not be
considered an Employee of the Employer as to services performed after
December 31, 1986 if:
(d) such person is covered by a money purchase pension plan
providing:
1-6
<PAGE> 13
(1) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, as defined in Section
415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction agreement which are
excludable from the employee's gross income under a 401(k)
plan, a cafeteria plan pursuant to Code section 125, a
simplified employee pension (SEP) pursuant to Code section
402(h) or a tax sheltered annuity pursuant to Code section
403(b),
(2) immediate participation, and
(3) full and immediate vesting; and
(e) Leased Employees do not constitute more than twenty percent (20%)
of the recipient's nonhighly compensated workforce.
For purposes of this Plan, contributions or benefits provided to a
Leased Employee by the leasing organization which are attributable to
services performed for the Employer shall be treated as provided by the
Employer.
1.24 "MATCHING CONTRIBUTIONS" shall mean contributions made by the Employer
pursuant to Section 3.01(a) hereof.
1.25 "MERGED PLANS" shall mean the plans that have been merged into the Plan
from time to time. Special issues related to such Merged Plans are
addressed in Article 13.
1.26 "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean an Employee who is not a
Highly Compensated Employee.
1.27 "NORMAL RETIREMENT AGE" shall mean for a Participant the date the
Participant attains sixty-five (65) years of age.
1.28 "NORMAL RETIREMENT DATE" shall mean for a Participant the first day of
the month coinciding with or following the date he attains his Normal
Retirement Age.
1.29 "PARTICIPANT" shall mean an Employee participating in the Plan in
accordance with the provisions of Article 2 hereof.
1.30 "PERSONAL ACCOUNT" shall mean the account maintained on behalf of a
Participant to which shall be credited the amount of any Salary
Deferral Contributions, Rollover Contributions or trustee to trustee
transfers of employee type accounts resulting from Merged Plans,
together with the Participant's share of the investment earnings (or
losses) of the Trust Fund allocable to this account. For purposes of
reference in this Plan, each Participant's Personal Account shall be
divided into the following parts:
Part I the portion of the Participant's Personal Account which
is attributable to Salary Deferral Contributions made
pursuant to 3.02(a) hereof, also known as the Salary
Deferral Account;
Part II the portion of the Participant's Personal Account which
is attributable to Participant Rollover Contributions,
also known as the Rollover Account; and
1-7
<PAGE> 14
Part III the portion of the Participant's Personal Account which
is attributable to trustee to trustee transfers of
employee type accounts, if any, made with respect to a
Participant's benefits pursuant to Section 3.06 hereof,
also known as the Employee Transfer Account.
1.31 "PLAN" shall mean this Plan, entitled "Saks Incorporated 401(k)
Retirement Plan," as it may be amended from time to time, and as in
effect on the relevant date to be interpreted hereunder.
1.32 "PLAN ADMINISTRATOR" shall mean the entity designated as the Plan
Administrator pursuant to Section 9.01 of the Plan to administer the
Plan.
1.33 "PLAN YEAR" shall mean the twelve (12) consecutive month period from
January 1 through the following December 31.
1.34 "RETIRED PARTICIPANT" shall mean a former Participant whose
participation in the Plan has terminated and who is entitled to receive
benefits provided by the Plan.
1.35 "ROLLOVER CONTRIBUTIONS" shall mean the tax-free rollovers made by a
Participant pursuant to Section 3.02(b).
1.36 "SALARY DEFERRAL CONTRIBUTIONS" shall mean contributions made by an
Employer on an employee's behalf pursuant to Section 3.02(a) hereof.
1.37 "SERVICE" shall mean the employment of an Employee by the Employer and
shall be measured in Hours of Service; provided, however, that the
following periods of employment of an Employee shall be considered
Service with the Employer:
(a) employment with any members of a Controlled Group while such
employers are members of the Controlled Group; and
(b) to the extent resolved by the governing body of the Sponsor, any
period of continuous employment of the Employee by any
predecessor organization to the Employer which ended on the date
the predecessor organization merged or consolidated into the
Employer.
In no event shall Service include any period of time during which the
Employee was not a common-law employee, but rather a partner or a
proprietor or an independent contractor. Furthermore, an Employee's
employment with a member of the Controlled Group prior to its becoming
a member shall be considered Service for purposes of determining
eligibility under Section 2.01 of this Plan, except as otherwise
provided in a resolution pursuant to subsection (b) above.
Notwithstanding the foregoing, Service before any period of consecutive
Breaks in Service shall be disregarded if the Employee does not have a
nonforfeitable right to any portion of his Employer Account before such
period of consecutive Breaks in Service, and if the number of
consecutive Breaks in Service equals or exceeds the greater of (i) five
(5) and (ii) the Employee's aggregate number of years of Vesting
Service prior to such period of consecutive Breaks in Service. The
number of years of Vesting Service prior to such period of consecutive
Breaks in Service shall be deemed to exclude any years of Vesting
Service not required to be taken into account by reason of any prior
period of consecutive Breaks in Service.
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<PAGE> 15
1.38 "SPONSOR" shall mean Saks Incorporated (formerly known as Proffitt's,
Inc.), a corporation with corporate offices in Birmingham, Alabama, and
any business organization or corporation into which Saks Incorporated
may be merged or consolidated or by which it may be succeeded.
1.39 "SPOUSE" shall mean the actual spouse or surviving spouse of a
Participant or a former spouse of the Participant, if and to the extent
such former spouse is to be treated as a spouse or surviving spouse of
a Participant under a qualified domestic relations order described in
section 414(p) of the Code.
1.40 "TRUST" shall mean the trust established by the Plan under which the
Employer contributions and any contributions by Participants shall be
received, held, invested and disbursed by the Trustee to, or for the
benefit of, Participants, Retired Participants and their Beneficiaries.
1.41 "TRUST FUND" shall mean any and all cash, securities, real estate and
other property held by the Trustee pursuant to the terms of the Plan.
1.42 "TRUSTEE" shall mean any individual, individuals or financial
institution as shall have accepted the appointment by the Sponsor as
Trustee under the Plan. For purposes hereof, the term "Trustee" shall
include any individual Trustee if more than one (1) Trustee exists.
1.43 "VESTING SERVICE" shall mean the number of Plan Years during which an
Employee completes at least one thousand (1,000) Hours of Service;
provided, however, that Service which is counted or disregarded
pursuant to Section 1.37 hereof shall be accordingly counted or
disregarded in computing a Participant's period of Vesting Service
under the Plan.
1.44 "YEAR OF SERVICE" shall mean a twelve (12) consecutive month period
during which an Employee completes at least one thousand (1,000) Hours
of Service; provided, however, that Service which is counted or
disregarded pursuant to Section 1.37 hereof shall be accordingly
counted or disregarded in computing a Participant's Years of Service
under the Plan.
For purposes of determining eligibility, the initial twelve (12)
consecutive month period shall commence on the date the Employee first
performs an Hour of Service, and each subsequent twelve (12) month
period shall be the Plan Year, beginning with the Plan Year which
commences prior to the end of the initial twelve (12) month period,
regardless of whether or not the Employee is entitled to be credited
with one thousand (1,000) Hours of Service during the initial twelve
(12) month period.
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<PAGE> 16
ARTICLE 2
PARTICIPATION IN THE PLAN
2.01 ELIGIBILITY DATE.
Each Employee on December 31, 1998, who is a Participant in the Plan on
that date and who continues to be an Employee on January 1, 1999, shall
without further requirements, continue as a Participant hereunder.
Each other Employee on January 1, 1999, and each person who becomes an
Employee after January 1, 1999, shall, subject to the overriding
provisions of the following paragraphs, be eligible to become a
Participant as described in (a) or (b) below, whichever results in
earlier eligibility.
(a) NORMAL ELIGIBILITY. An Employee shall be eligible to become a
Participant on the first Entry Date coincident with or next
following the later of attainment of age twenty-one (21) and
completion of one (1) Year of Service, provided he is still an
Employee on such Entry Date.
(b) ACCELERATED ELIGIBILITY. This subsection (b) shall be applicable
only to Employees who are classified as Non-highly Compensated
Employees. Such Employees shall be eligible to become
Participants as follows:
(1) A salaried Employee shall become eligible on the first
Entry Date coincident with or next following the later of
such Employee's date of employment by the Employer and
attainment of age twenty-one (21), provided he is still an
Employee on such Entry Date.
(2) An hourly Employee shall become eligible on the first Entry
Date coincident with or next following the later of
attainment of age twenty-one (21) and completion of two
hundred fifty (250) Hours of Service in the "initial entry
period" (as defined herein).
Except as provided hereinafter, the initial entry period
shall be the first three (3) months of employment with the
Employer. For hourly Employees who were hired before
January 1, 1999 or before attainment of age twenty-one
(21), the initial entry period shall be:
(i) For hourly Employees employed on January 1, 1999 who
have attained age twenty-one (21) and are not
Participants in the Plan on January 1, 1999, the
initial entry period is January 1, 1999 through March
31, 1999.
(ii) For hourly Employees hired after January 1, 1999 who
will have attained age twenty-one (21) on or before
the end of the first three (3) months of employment,
the initial entry period is the first three (3)
months of employment with the Employer.
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<PAGE> 17
(iii) For all other Employees who are not Participants in
the Plan on January 1, 1999, the initial entry period
is the three calendar month period ending with the
calendar month in which the Employee attains age
twenty-one (21).
(c) SUSPENSION OF CERTAIN HIGHLY COMPENSATED EMPLOYEES.
Notwithstanding the foregoing, an Employee who became eligible to
participate pursuant to the terms of subsection (b) above and who
later is classified as a Highly Compensated Employee prior to
satisfying the conditions described in subsection (a) above,
shall become inactive immediately upon being classified as a
Highly Compensated Employee. Such Employee shall be ineligible to
participate again until he satisfies the conditions described in
subsection (a) above or until he ceases to be classified as a
Highly Compensated Employee, whichever occurs first.
However, no Employee shall become a Participant prior to the effective
date of adoption of the Plan by the Employee's Employer.
Notwithstanding the above, the following classes of Employees shall be
considered as excluded classes for purposes of the Plan, and Employees
who are members of such classes shall not be eligible to participate in
the plan:
(i) Employees who are employed at one of the distribution centers for
the Carson operating group;
(ii) Employees who are employed at the home office of the Carson
operating group in Wisconsin or Illinois or at one of the
Wisconsin stores of the Carson operating group;
(iii) Employees who are employed at the Elmhurst, Illinois credit
operation;
(iv) Employees who are employed at one of the Indiana or Minnesota
stores of the Carson operating group;
(v) individuals who are represented by a collective bargaining unit,
except as otherwise provided in any applicable collective
bargaining agreement;
(vi) Leased Employees; and
(vii) individuals not otherwise excluded who are designated by the
Employer as independent contractors or who perform services as
independent contractors, whether or not that categorization is
correct.
2.02 ELIGIBILITY DETERMINATION.
Within a reasonable time prior to the date on which an Employee will
become eligible, if the Employee continues employment with the
Employer, to participate in the Plan, the Plan Administrator shall make
available to the Employee a salary deferral agreement and such
application for participation as the Plan Administrator shall require
and shall notify him of the requirements to become a Participant.
Should any question arise as to eligibility, the Plan Administrator
shall decide such question, and such determination, if made in good
faith and in accordance with the terms of the Plan, shall be final.
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<PAGE> 18
2.03 PARTICIPATION.
An Employee shall become a Participant on the first day on which he is
eligible to become a Participant, and has filed with the Plan
Administrator such application which the Plan Administrator shall
require for participation in the Plan in which he has agreed to abide
by all the provisions hereof and has specified the amount of the
Employee's salary deferral, if any, pursuant to Section 3.02(a) hereof.
Notwithstanding anything in the Plan to the contrary, for purposes of
becoming eligible to make Rollover Contributions, any Employee shall be
eligible regardless of whether the Employee has satisfied the age and
service requirements or the entry date requirements of Section 2.01.
In the event that a Participant's Service terminates, or the
Participant dies, sustains Disability, or retires in accordance with
the provisions of the Plan, he shall thereupon cease to be a
Participant.
2.04 PARTICIPATION FOLLOWING REEMPLOYMENT.
Except as otherwise provided in the following sentence, an individual
who has previously met the Plan's age and service requirements and
whose Service has terminated, shall be eligible to participate
immediately upon again being credited with Service. Such an individual
who is re-employed in an excluded class of employees, as described in
Section 2.01, shall not be eligible to participate while in such
excluded class.
2.05 PARTICIPATION FOLLOWING CHANGE IN CLASSIFICATION.
In the event a Participant becomes ineligible to participate because he
is no longer a member of an eligible class of Employees, but his
Service has not terminated, such Employee shall be eligible to
participate immediately upon his return to an eligible class of
Employees. If such Participant's Service is terminated, his eligibility
to participate shall be determined as a former Participant pursuant to
Section 2.04 hereof.
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee then
shall participate immediately if such Employee has satisfied the
minimum age and Service requirements and would have previously become
eligible to participate had he been in the eligible class. If such an
Employee has not satisfied the minimum age and Service requirements
when he becomes a member of the eligible class, he shall participate as
provided in Section 2.01 hereof, and his employment in the excluded
class shall be treated as Service in determining his eligibility to
participate.
2.06 ABSENCE IN THE ARMED SERVICES.
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Code section
414(u).
2.07 FAMILY AND MEDICAL LEAVE ACT REQUIREMENTS.
Notwithstanding any other provisions of the Plan, in the case of an
Employee who takes family or medical leave as an eligible employee of a
covered employer under the provisions of the Family and Medical Leave
Act of 1993 (FMLA), any period of FMLA leave shall be treated as
continued Service for purposes of eligibility to participate and
Vesting Service to the extent required by applicable law.
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<PAGE> 19
ARTICLE 3
CONTRIBUTIONS TO THE PLAN
3.01 EMPLOYER CONTRIBUTIONS.
Each Plan Year ending after the Effective Date, and during the
continuance of the Plan, the Employer shall make contributions to the
Plan as described below.
(a) MATCHING CONTRIBUTIONS. Each Plan Year the Sponsor shall set the
"match rate" for the Plan Year, which can be zero percent (0%) or
any positive percentage. Each Employer shall make a Matching
Contribution equal to the match rate multiplied by the "matchable
salary deferrals" contributed on behalf of each Participant
entitled to be credited with Matching Contributions, as provided
herein, for the Plan Year. "Matchable salary deferrals" shall be
Salary Deferral Contributions pursuant to Section 3.02(a) hereof
which do not exceed five percent (5%) of the Compensation of each
Participant making Salary Deferral Contributions. However, the
Employer shall not contribute amounts which (i) would, if
allocated to the Employer Account of Highly Compensated Employees
pursuant to Section 4.01(b), create excess aggregate
contributions (as defined in Section 3.04) or (ii) are
attributable to contributions which pursuant to Sections 3.02(a),
3.03 or 3.04 are to be distributed to Employees. Participants
entitled to be credited with Matching Contributions are all
Participants who make Salary Deferral Contributions during the
Plan Year and who are still employed by the Employer on the last
day of the Plan Year.
Matching Contributions shall be:
(i) subject to the vesting schedule provided in Section 8.01
hereof, and
(ii) credited to Part I of the Participant's Employer Account.
(b) QUALIFIED MATCHING CONTRIBUTION. The Employer may, in order to
preserve the qualified status of the Plan, contribute a Qualified
Matching Contribution based on the salary deferral contributions
of Non-highly Compensated Employees. Qualified Matching
Contributions shall be fully vested at all times, shall be
subject to the distribution provisions that are applicable to
Salary Deferral Contributions and shall be credited to Part II of
the Participant's Employer Account.
Employer contributions shall be made no later than the due date
(including extensions) for filing the federal income tax return for the
year for which such contributions are made.
However, any Forfeitures arising since the last Allocation Date or
otherwise becoming available shall be applied to reduce Employer
contributions to the Plan for the current Plan Year, or as soon
thereafter as practicable.
In satisfaction of its contribution obligations under this Section, the
Employer shall deliver or cause to be delivered cash to the Trustee.
Contributions made to the Plan by the Employer shall be made on the
condition that they are deductible under section 404 of the Code.
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<PAGE> 20
3.02 CONTRIBUTIONS BY, OR ON BEHALF OF, PARTICIPANTS.
A Participant may elect contributions to the Plan, as described below.
Such amounts shall be fully vested at all times.
(a) SALARY DEFERRAL CONTRIBUTIONS. Effective with the first payroll
date on or after the date on which he becomes a Participant, a
Participant may voluntarily elect to enter into a salary deferral
agreement with the Employer. Such salary deferral agreement shall
serve to direct the Employer to contribute, and the Employer
shall contribute, to Part I of the Participant's Personal
Account, as Salary Deferral Contributions, a percentage of the
amount which would otherwise be paid to the Participant as direct
Compensation. The amount of his Compensation which the
Participant is to defer for a Plan Year shall be stated in
percentage points of his Compensation, which may not be more than
twenty percent (20%). In addition, such amount shall be subject
also to the limitations on annual additions for the limitation
year under Section 4.04 hereof. Notwithstanding the preceding,
the Committee may establish rules and procedures to facilitate
the administration of Salary Deferral Contributions, including
but not limited to rules regarding minimum amounts of Salary
Deferral Contributions per accounting period, default investment
fund for small contributions, and whether or not contribution
percentages must be in whole percentages.
A Participant's Salary Deferral Contributions to this Plan in any
taxable year of the Participant shall not be greater than seven
thousand dollars ($7,000), or such increase in this amount,
pursuant to section 402(g) of the Code, for any taxable year as
results from the annual adjustment factor determined by the
Commissioner of the Internal Revenue Service and effective on
January 1 of the taxable year. Salary Deferral Contributions to
this Plan in excess of the preceding limit occurring in any Plan
Year (together with any income allocable to such amount) shall be
automatically distributed not later than the first April 15th
following the close of the Plan Year in which such excess
deferrals occurred, to the Participant on whose behalf the excess
was contributed.
If the Participant makes "elective deferrals," as defined in
regulations issued pursuant to section 402(g) of the Code, to
more than one (1) plan, which exceed the limit described above in
the aggregate, such Participant may elect a distribution of a
part or all of such excess amount (together with any income
allocable to such amount) which has been contributed to this
Plan. An election to receive a distribution of such excess
deferrals must be in writing and must include the Employee's
certification that the specified amount is an excess deferral.
Such election must be made not later than the first March 15th
following the close of the Plan Year in which such excess
deferrals occurred. Upon such election, the excess amount
specified by the Participant shall be distributed to the
Participant not later than the first April 15th following the
close of the Plan Year in which such excess deferrals occurred.
Income allocable to such excess amount should be determined in
the same manner as under Section 3.03.
The determination of whether a Participant's elective deferrals
with respect to any taxable year shall exceed the limitations of
Code section 402(g) shall be the sole responsibility of the
Participant and neither the Employer, the Plan Administrator, nor
the Trustee shall have any obligations with respect to such
determination.
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<PAGE> 21
Salary Deferral Contributions shall be made by payroll deduction
and shall be considered to be Salary Deferral Contributions for
the Plan Year in which they are actually made.
The direction and agreement by the Participant to defer a portion
of his Compensation as a Salary Deferral Contribution rather than
receive it as a cash benefit shall be in the form of a salary
deferral agreement as set forth in Section 2.03 hereof. A
Participant's salary deferral agreement may be amended to change
the percentage of the Salary Deferral Contribution,
prospectively, as of the first day of any payroll period.
Provided, however, that the Committee reserves the right to
restrict the number and frequency of such changes if they become
an administrative problem.
A Participant's salary deferral agreement may be terminated and
all Salary Deferral Contributions ended as of the first day of
any payroll period; provided that following such a complete
termination of Salary Deferral Contributions, Salary Deferral
Contributions may be resumed on the first day of any payroll
period after such termination. A Participant who desires to
effect such a change or termination must make such election in
such form and at such time as may be required by the Plan
Administrator prior to the date as of which the change or
termination will become effective.
The Plan Administrator may establish additional procedures for
the renewal, amendment, termination, or revocation of salary
deferral agreements which shall be uniform and nondiscriminatory.
However, the requirement of uniformity (but not
nondiscrimination) may be suspended, and such differences in
procedure (provided such differences are merely procedural) may
be permitted between Highly Compensated Employees and Non-highly
Compensated Employees as are necessary, proper and convenient in
order to bring the Plan into compliance with the coverage and
discrimination requirements of Section 3.03 hereof and thereby
preserve, or assure the preservation of, the qualified status of
the Plan.
As a condition precedent for accepting a Participant's salary
deferral agreement, the Employer also may, at any time, as of any
time, and from time to time, amend, terminate or revoke the
salary deferral agreement of a Participant who is a Highly
Compensated Employee in order to comply with the coverage and
discrimination requirements of Section 3.03 hereof and thereby
preserve, or assure the preservation of, the qualified status of
the Plan, or for other reasons deemed appropriate by the
Committee. However, any such amendment or revocation for a Plan
Year shall be made within the time required for the contribution
of Salary Deferral Contributions for a Plan Year as provided in
Internal Revenue Service Regulations regarding Code section
401(k) and, to the extent applicable, in Department of Labor
regulations regarding salary deferral contributions as plan
assets.
The Employer shall contribute to Part I of the Personal Account
of each Participant an amount equal to the reduction in such
Participant's Compensation pursuant to his salary deferral
agreement. The contribution to be made as a result of such
reduction in Compensation shall be paid to the Trustee as soon as
practicable, but no later than the date required by Department of
Labor regulations concerning the contribution to a trust of
salary deferral contributions that are plan assets. Such Salary
Deferral Contributions shall be considered to be Employer
contributions under the Plan and shall be nonforfeitable when
made.
3-3
<PAGE> 22
If the Committee shall determine that the Salary Deferral
Contributions would exceed the limitations of Section 3.03
hereof, the Plan Administrator shall, before the end of the Plan
Year following the Plan Year during which such excess
contribution occurs, distribute the amount of such excess (and
income, determined in the same manner as under Section 3.03,
allocable thereto) to the Participant on whose behalf the
contribution was made.
(b) ROLLOVER CONTRIBUTIONS. Rollover Contributions by a Participant
(or by an Employee expected to become a Participant) to his
Personal Account in cash or in other property acceptable to the
Trustee shall be allowed from individual retirement accounts,
within the meaning of section 408(a) or (b) of the Code, which
have been established as conduits for other qualified plan
distributions pursuant to section 402 or section 403 of the Code
or from another qualified plan. Acceptance of Rollover
Contributions shall be subject to any procedures governing
acceptance of Rollover Contributions which may be established by
the Committee. However, no portion of any such rollover may be
attributable to nondeductible employee contributions.
Rollover Contributions shall be remitted to the Trustee as soon
as practicable, shall be credited to Part II of the Participant's
Personal Account (the "Rollover Account") and shall be fully
vested at all times. Rollover Contributions shall be treated as
Participant contributions for purposes of investment and
allocation of investment earnings (and losses), and shall be
distributed as provided in Articles 6, 7 and 8 hereof.
Rollover Contributions shall not be considered (i) as
contributions by the Employer under Section 3.01 of this Plan,
(ii) in determining the maximum benefits permissible under the
Plan pursuant to Section 4.04 hereof or (iii) in determining the
Top Heavy Ratio in Section 14.02(j) hereof.
3.03 COVERAGE AND DISCRIMINATION REQUIREMENTS.
Salary Deferral Contributions for any Plan Year after December 31, 1996
shall satisfy one (1) of the following tests:
(a) the average deferral percentage for all Highly Compensated
Employees who are eligible to participate in the Plan for the
Plan Year shall not be more than the average deferral percentage
of all Participants who were Non-highly Compensated Employees for
the Plan Year indicated below multiplied by one and twenty-five
hundredths (1.25); or
(b) the excess of the average deferral percentage for all Highly
Compensated Employees who are eligible to participate in the Plan
for the Plan Year over that of all Participants who were
Non-highly Compensated Employees for the Plan Year indicated
below shall not be more than two percent (2%), nor shall the
average deferral percentage for such Highly Compensated Employees
be more than that of the other group multiplied by two (2).
For purposes of the tests described above, "current year testing" will
apply for Plan Years beginning January 1, 1997 and January 1, 1998, and
"prior year testing" will apply for Plan Years beginning on or after
January 1, 1999. For a Plan Year, current year testing involves use of
the average deferral percentage for the current Plan Year for all
Non-highly Compensated Employees who are eligible to participate in the
Plan for the current Plan Year. For a Plan Year, prior year testing
involves use of the average deferral percentage for the Plan Year next
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<PAGE> 23
preceding the current Plan Year for all Non-highly Compensated
Employees who are eligible to participate in the Plan for such
preceding Plan Year.
For purposes of this Section, the term "average deferral percentage"
for a group of Employees shall mean the average of the percentages,
calculated separately for each Employee in the group, of the amount of
Salary Deferral Contributions and, if applicable, Qualified Matching
Contributions, made on behalf of the Employee for a Plan Year, to the
amount of the Employee's Compensation for such Plan Year (the "deferral
percentage"). Qualified Matching Contributions may be included in the
calculation of deferral percentages only if the conditions described in
section 1.401(k)-1(b)(5) of the regulations are satisfied. For purposes
of calculating the average deferral percentage, eligible Employees with
no Salary Deferral Contributions or, if applicable, Qualified Matching
Contributions, shall be included in such calculation with deferral
percentages of zero percent (0%). For purposes of this Section, the
following rules, relating to aggregation of plans, shall apply:
(c) All Salary Deferral Contributions that are made under this Plan
and any other plan that is aggregated with this Plan for purposes
of sections 401(a)(4) and 410(b) (other than section
410(b)(2)(A)(ii)) of the Code shall be treated as made under a
single plan.
(d) If this Plan is permissively aggregated with any other plan or
plans for purposes of section 401(k) of the Code, such aggregated
plans must satisfy sections 401(a)(4) and 410(b) of the Code as
though they were a single plan.
(e) The deferral percentage for any eligible Employee who is a Highly
Compensated Employee and who is eligible to make salary deferral
contributions under this Plan and any other plan maintained by
the Employer (other than plans that may not be permissively
aggregated) shall be determined as if all such plans were a
single plan.
A Salary Deferral Contribution shall be considered to have been made
with respect to a Plan Year if it (i) is allocated to the Account of a
Participant as of any date within that Plan Year and (ii) relates to
Compensation that either would have been received by the Participant in
the Plan Year but for the Participant's election to defer under the
arrangement, or is attributable to services performed by the
Participant in the Plan Year and, but for the Participant's election to
defer, would have been received by the Participant within two and
one-half (2-1/2) months after the close of the Plan Year. A
contribution shall be considered allocated as of any date within a Plan
Year if the following conditions are met:
(f) such allocation is not dependent upon participation in the Plan
as of any date subsequent to the allocation date,
(g) the Employer contributions in addition to those attributable to
Salary Deferral Contributions are actually made to the Plan no
later than the end of the period described in Code section
404(a)(6) applicable to the taxable year with or within which the
Plan Year ends, and
(h) the Employer contributions attributable to salary deferrals are
actually made to the Plan no later than the end of the twelve
(12) month period immediately following the end of the Plan Year
to which the contribution relates.
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<PAGE> 24
Excess contributions shall mean, with respect to any Plan Year, "excess
contributions" as defined in Code section 401(k)(8)(B).
If, for any Plan Year, Salary Deferral Contributions are made with
respect to the Highly Compensated Employees in excess of that
permissible under subsections (a) or (b) of this Section 3.03, the Plan
Administrator shall, before the end of the Plan Year following the Plan
Year during which such excess contribution occurs distribute the amount
of such excess contributions (and the earnings or losses allocable
thereto). Excess contributions are allocated to the Highly Compensated
Employees with the largest amounts of contributions taken into account
in calculating the average deferral percentage test for the year in
which the excess arose, beginning with the Highly Compensated Employee
with the largest amount of such contributions and continuing in
descending order until all the excess contributions have been
allocated. For purposes of the preceding sentence, the "largest amount"
is determined after distribution of any excess deferrals under Section
3.02(a).
The income allocable to such excess contribution shall be equal to the
allocable gain or loss for the Plan Year. The income allocable to
excess contributions for the Plan Year is determined by multiplying the
income for the Plan Year allocable to Salary Deferral Contributions by
a fraction in which the numerator is the excess contributions for the
Employee for the Plan Year and the denominator is the total Account
balance of the Employee attributable to Salary Deferral Contributions
as of the end of the Plan Year, reduced by the gain allocable to such
total amount for the Plan Year and increased by the loss allocable to
such amount for the Plan Year.
Notwithstanding the above, the tests described in this Section and the
corrective measures for insuring passage of such tests may be performed
in any manner permitted under section 401(k) of the Code, the
regulations thereunder and any other related rulings or pronouncements
issued by the Secretary of the Treasury or the Internal Revenue
Service.
3.04 DISCRIMINATION REQUIREMENTS FOR OTHER CONTRIBUTIONS.
The Plan shall satisfy the nondiscrimination requirements of section
401(m) of the Code and the regulations issued thereunder, which are
incorporated herein by reference. The Plan shall satisfy such
requirements if, with respect to any Plan Year after December 31, 1996,
either of the following alternative conditions are met:
(a) the average contribution percentage for all eligible Highly
Compensated Employees for the Plan Year is not greater than the
average contribution percentage for all Participants who were
Non-highly Compensated Employees for the Plan Year indicated
below multiplied by one and twenty-five hundredths (1.25).
(b) the excess of the average contribution percentage for all
eligible Highly Compensated Employees for the Plan Year over that
of all Participants who were Non-highly Compensated Employees for
the Plan Year indicated below is not more than two percent (2%),
nor is the average contribution percentage for such Highly
Compensated Employees more than that of the other group,
multiplied by two (2).
For purposes of the tests described above, "current year testing" will
apply for Plan Years beginning January 1, 1997 and January 1, 1998, and
"prior year testing" will apply for Plan Years beginning on or after
January 1, 1999. For a Plan Year, current year testing involves use
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<PAGE> 25
of the average contribution percentage for the current Plan Year for
all Non-highly Compensated Employees who are eligible to participate in
the Plan for the current Plan Year. For a Plan Year, prior year testing
involves use of the average contribution percentage for the Plan Year
next preceding the current Plan Year for all Non-highly Compensated
Employees who are eligible to participate in the Plan for such
preceding Plan Year.
For purposes of this Section, "Eligible Employee" shall mean any
Employee who is eligible to make or be credited with contribution
percentage amounts. Contribution percentage amounts shall mean Matching
Contributions, voluntary after-tax contributions and (subject to the
conditions hereinafter enumerated and to the extent taken into account
in the calculation of average contribution percentages) Salary Deferral
Contributions and Qualified Matching Contributions. The Employer may
elect to include Salary Deferral Contributions, and must include
Qualified Matching Contributions, to the extent such contributions are
not included in the tests described in Section 3.03 hereof. Salary
Deferral Contributions may be included only if the conditions described
in section 1.401(m)-1(b)(5) of the regulations are satisfied. The term
"average contribution percentage" for a group of Eligible Employees
shall mean the average of the ratios, calculated separately for each
Eligible Employee in the group, of the contribution percentage amounts
made on behalf of an Eligible Employee during the Plan Year to that
Eligible Employee's Compensation for such Plan year (the "contribution
percentage"). For purposes of calculating the average contribution
percentage, Eligible Employees with no contribution percentage amounts
shall be included in such calculation with contribution percentages of
zero percent (0%). For purposes of this Section, the following rules,
relating to aggregation of plans, shall apply:
(c) All contribution percentage amounts that are made under this Plan
and any other plan that is aggregated with this Plan for purposes
of sections 401(a)(4) and 410(b) (other than section
410(b)(2)(A)(ii) of the Code shall be treated as made under a
single plan.
(d) If this Plan is permissively aggregated with any other plan or
plans for purposes of section 401(m) of the Code, such aggregated
plans must satisfy sections 401(a)(4) and 410(b) of the Code as
though they were a single plan.
(e) The contribution percentage for any Eligible Employee who is a
Highly Compensated Employee and who is eligible to have
contribution percentage amounts credited to him under this Plan
and any other plan maintained by the Employer (other than plans
that may not be permissively aggregated) shall be determined as
if all such plans were a single plan.
Notwithstanding anything in the Plan to the contrary, if, for any Plan
Year, "excess aggregate contributions" are made with respect to the
Highly Compensated Employees in excess of that permissible under this
Section 3.04, the Plan Administrator shall, before the end of the Plan
Year following the Plan Year during which such excess aggregate
contribution occurs distribute the amount of such excess aggregate
contributions (and the earnings or losses allocable thereto). Excess
aggregate contributions are allocated to the Highly Compensated
Employees with the largest amounts of employer contributions taken into
account in calculating the average contribution percentage test for the
year in which the excess arose, beginning with the Highly Compensated
Employee with the largest amount of such employer contributions and
continuing in descending order until all the excess aggregate
contributions have been allocated.
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"Excess aggregate contributions" shall mean, with respect to any Plan
Year, "excess aggregate contributions" as defined in section
401(m)(6)(B) of the Code.
The determination of excess aggregate contributions shall be made after
first determining excess elective deferrals pursuant to Section 3.02
and then determining excess contributions pursuant to Section 3.03
hereof.
Excess aggregate contributions shall be adjusted for any income up to
the date of distribution. The income allocable to excess aggregate
contributions for such period is determined in a manner analogous to
the above allocation of income to excess deferrals, but basing the
allocation on excess aggregate contributions and the income allocable
to Matching Contributions.
Forfeitures of excess aggregate contributions shall be applied to
reduce Employer contributions.
Notwithstanding the above, the tests described in this Section and the
corrective measures for insuring passage of such tests may be performed
in any manner permitted under section 401(m) of the Code, the
regulations thereunder and any other related rulings or pronouncements
issued by the Secretary of the Treasury or the Internal Revenue
Service.
3.05 MULTIPLE USE OF ALTERNATIVE LIMITATION.
Compliance with Section 3.03 and Section 3.04 shall not be achieved by
the use of both the limitation in Section 3.03(b) and the limitation in
Section 3.04(b) for the same Plan Year. The determination and
correction of such a multiple use shall be governed by the rules set
forth in section 401(m) of the Code and in regulations interpreting
such section, which are incorporated herein by reference; provided,
however, that the multiple use shall be corrected through reduction of
the average contribution percentage of all Highly Compensated
Employees.
3.06 TRUSTEE TO TRUSTEE TRANSFERS.
A direct transfer to this Plan of plan assets attributable to a
Participant's participation in another qualified defined contribution
plan may be allowed in cash or other property acceptable to the Trustee
to accommodate the merger of such other plan into this Plan. The
Committee shall have the authority to allow additional transfers from
qualified defined contribution plans of any employer or predecessor
organization which has merged with or consolidated with the Employer,
with respect to such Participants as the Committee may deem
appropriate.
The Plan Administrator may allocate Merged Plan accounts and any other
transferred accounts into existing parts of the Participant's Employer
or Personal Accounts, if appropriate, and/or may establish separate
bookkeeping subaccounts for these amounts under Part III of the
Participant's Employer Accounts and/or Part III of the Participant's
Personal Accounts. Any payout rules or restrictions on distributions of
such transferred accounts under such other plan shall be maintained
under this Plan with respect to such accounts, to the extent required
by section 411(d)(6) of the Code and the regulations thereunder.
3.07 MEDIUM OF FINANCING THE PLAN.
Investment of all contributions made in accordance with the Plan and
provision for payment of benefits to Retired Participants and
Beneficiaries shall be accomplished by a Trust, as it may be amended
from time to time, which shall constitute a part of the Plan.
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3.08 INVESTMENT DIRECTIONS BY PARTICIPANTS.
The Committee may permit Participants to direct the investment of their
Accounts or a portion of their Accounts among a variety of separate
investment funds, as specified and identified by the Committee,
including a fund invested primarily in common stock of the Sponsor. The
Committee shall establish uniform and nondiscriminatory rules and
restrictions with respect to such directed investments and communicate
such rules and restrictions to the Trustee.
If the Committee permits Participants to direct the investment of the
Accounts in common stock of the Sponsor, the Committee reserves the
right to limit the percentage of each Participant's Account which is
invested in common stock of the Sponsor.
Elections of investments shall be made pursuant to uniform and
nondiscriminatory rules established by the Committee reserves the right
to, shall be selected in writing on forms, or by such other method,
approved by the Committee, and shall be filed with the Committee or its
designated representative. Such elections must be made by providing
prior notice to the Committee in such form and manner as the Committee
may uniformly and nondiscriminatorily require prior to the date as of
which the transfer is elected. Accounts not directed pursuant to the
Committee's rules shall be invested in one of the funds designated by
the Committee as the default fund.
A Participant may, by providing prior notice to the Committee in such
form and manner as the Committee may uniformly and nondiscriminatorily
require, modify his election with respect to the investment of his
Account balances and future contributions.
The Trustee shall carry out the investment directions of a Participant
made pursuant to such rules and restrictions as soon as practicable
after receipt of each such direction.
Notwithstanding the foregoing, the Committee may suspend Participants'
rights to direct the investment of their accounts at any time, either
temporarily or permanently. In particular, temporary suspension is
permitted during "blackout periods" that result due to transition of
the Plan's recordkeeping services from one entity to another. The
Committee shall attempt to notify all Participants and Retired
Participants with Accounts in the Plan of such a suspension, whether
temporary or permanent, but failure to notify one or more Participants
or Retired Participants shall not prevent the suspension from applying
with respect to such Participants or Retired Participants.
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ARTICLE 4
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
4.01 CREDIT OF CONTRIBUTIONS.
Contributions shall be credited as follows:
(a) SALARY DEFERRALS. Salary Deferral Contributions pursuant to
Section 3.02(a) hereof which have been deposited with the Trustee
shall be credited as of each Allocation Date to Part I of the
Personal Account (the "Salary Deferral Account") of each
Participant on whose behalf such contributions were made.
(b) MATCHING CONTRIBUTIONS. Any Matching Contributions made pursuant
to Section 3.01(a) hereof which have been deposited with the
Trustee shall be credited to Part I of the Employer Account (the
"Matching Account") of each Participant entitled to share in the
allocation of Matching Contributions. Each Participant's share in
Matching Contributions shall be the amount described in Section
3.01(a) hereof. Those Participants who make Salary Deferral
Contributions at any time during the Plan Year and who are still
employed by the Employer on the last day of the Plan Year shall
be eligible to share in the allocation of Matching Contributions
attributable to that Plan Year.
No Matching Contribution shall be credited with respect to any
Salary Deferral Contribution that is returned or distributed to
the Participant in accordance with Section 3.02(a), Section 3.03
(ADP test), Section 3.04 (ACP test) or Section 4.04 (Maximum
Annual Additions). In the event that such a Matching Contribution
is credited to the Matching Account of a Participant, such
Matching Contribution shall be forfeited as of the last day of
the Plan Year in which it was credited. Any Matching
Contributions forfeited in accordance with the preceding sentence
shall not be included in the ACP test in Section 3.04.
(c) QUALIFIED MATCHING CONTRIBUTIONS. Any Qualified Matching
Contributions made pursuant to Section 3.01(b) hereof which have
been deposited with the Trustee shall be credited to Part II of
the Employer Account of each Non-highly Compensated Employee who
was credited with a Matching Contribution for the Plan Year. Each
Participant's share in such Qualified Matching Contributions
shall be that amount which bears the same ratio to the total
Qualified Matching Contributions as the Participant's Matching
Contribution for the Plan Year bears to the total Matching
Contribution for the Plan Year for all Non-highly Compensated
Employees entitled to such a contribution for the Plan Year.
(d) ROLLOVER CONTRIBUTIONS. Rollover Contributions pursuant to
Section 3.02(b) hereof shall be credited to Part II of the
respective Personal Accounts of Participants who contributed such
amounts.
(e) MERGED PLAN TRANSFERS. Amounts transferred to this Plan pursuant
to a Merged Plan shall be credited to Part III of the respective
Employer Accounts and/or Personal Accounts of
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Participants for whom such amounts were transferred, or among the
other Accounts described in Section 4.01(a), (b), (c) or (d), as
determined by the Plan Administrator.
4.02 ALLOCATION OF INVESTMENT EARNINGS.
As of each Allocation Date, the investment earnings, as defined herein,
shall be allocated to each Participant's Employer Account and Personal
Account as described below. Investment earnings, for purposes of this
Section, shall mean the net gain or loss of the Trust Fund from
investments, as reflected by interest payments, dividends, realized and
unrealized gains and losses on securities, other investment
transactions, and expenses paid from the Trust Fund which are not
reimbursed by the Employer or charged directly to the accounts of
Participants. In determining the investment earnings of the Trust Fund
for any period, assets shall be valued on the basis of fair market
value. Investment earnings shall be determined and allocated separately
for each separate investment fund that is established pursuant to
Section 3.08 hereof. The Committee shall determine whether account
recordkeeping is to be maintained on a balance forward recordkeeping
basis or a daily recordkeeping basis for a given period.
(a) BALANCE FORWARD RECORDKEEPING. If the Account recordkeeping for
the period is being maintained on a balance forward basis, the
investment earnings shall be allocated to each Participant's
Accounts in the ratio that the value of each such Account as of
the last Allocation Date bears to the total value of all Accounts
as of the last Allocation Date. These Account values shall
include contributions credited to the Accounts since the last
Allocation Date, adjusted to recognize the timing of such
contributions, but shall not include amounts withdrawn since the
last Allocation Date. For purposes of this subsection only, the
term "Participants" shall include Retired Participants, present
and former Employees and Beneficiaries who have Account balances,
but who would not otherwise be considered to be Participants
under the Plan.
(b) DAILY RECORDKEEPING. If the Account recordkeeping for the period
is being maintained on a daily recordkeeping basis, then
investment earnings shall be allocated in Accordance with the
attributes of the separate investment funds, in a manner
generally consistent with industry standards for daily
recordkeeping. The Committee shall have sole authority to make
determinations and resolve issues for purposes of this
subsection.
Should the Plan Administrator determine that the strict application of
the foregoing allocation procedures will not result in an equitable and
nondiscriminatory allocation among the Accounts of Participants, or
that another method is appropriate for the purpose, it may modify its
procedures for the purpose of achieving an equitable and
nondiscriminatory allocation in accordance with the general concepts of
the Plan and the provisions of this Article.
4.03 ADJUSTMENT TO ACCOUNTS.
As soon as practicable after each Allocation Date, the value of each
Account shall be adjusted to be equal to the value of such Account as
of the last Allocation Date, plus any additions to and minus any
subtractions from the Account since the last Allocation Date.
The Committee may direct that any investment, administrative, trust or
other fees or charges be charged against the Accounts of Participants.
It is the Sponsor's intent that as much of the administrative and
investment fees be paid from Plan assets as is allowed by law. The
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<PAGE> 30
Committee may establish procedures for charging fees against
Participant Accounts, and may modify such procedures at any time and in
such manner as it determines is appropriate and consistent with
applicable law.
4.04 MAXIMUM ANNUAL ADDITIONS TO PARTICIPANTS' ACCOUNTS.
The annual addition to any Participant's Accounts for any Plan Year
beginning after December 31, 1994 shall not exceed the lesser of thirty
thousand dollars ($30,000) or twenty-five percent (25%) of such
Participant's total cash compensation for the Plan Year.
For limitation years beginning after December 31, 1997, compensation
(for purposes of this Section) is Compensation as defined in Section
1.08(a).
For purposes of applying the limitations of this article, compensation
for a limitation year is the compensation actually paid or includable
in gross income during such year.
The term "annual addition" for a Participant means the sum of the
following for the Plan Year:
(a) contributions made by the Employer on behalf of the Participant
(including salary deferral contributions made pursuant to section
401(k) of the Code, if any);
(b) forfeitures allocated to a Participant's Employer Account, if
any; and
(c) contributions made by the Participant, if any;
(d) amounts allocated to an individual medical account which is part
of a defined benefit plan, as described in Code section
415(l)(1); and
(e) amounts attributable to post-retirement medical benefits
allocated to a separate account of a key employee under a welfare
benefit fund as described in Code section 419(A)(d)(2).
If a Participant is, or was, a participant at any time in both a
qualified defined benefit pension plan and a qualified defined
contribution plan ever maintained by the same employer, then, for any
limitation year beginning before January 1, 2000, the sum of the
defined benefit fraction and the defined contribution fraction in any
limitation year may not exceed one (1).
The term "defined benefit fraction" shall mean, for any Plan Year, a
fraction the numerator of which is the projected annual benefit of the
Participant under all qualified defined benefit pension plans
maintained by the Employer (determined as of the close of the Plan
Year), if any, and the denominator of which is the lesser of the
following:
(i) one and four tenths (1.4) multiplied by one hundred percent
(100%) of the Participant's average total cash compensation for
the three (3) consecutive limitation years in which he received
the highest aggregate total cash compensation; or
(ii) one and twenty-five hundredths (1.25) multiplied by ninety
thousand dollars ($90,000) (or such greater amount as may be
determined by the Secretary of the Treasury).
The term "defined contribution fraction" shall mean, for any Plan Year,
a fraction the numerator of which is the sum of the annual additions to
the Participant's accounts under all qualified
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<PAGE> 31
defined contribution plans maintained by the Employer (determined as of
the close of the Plan Year) and the denominator of which is the sum of
the lesser of the following amounts determined for such year and for
each prior year of service with the Employer:
(i) one and twenty-five hundredths (1.25) multiplied by thirty
thousand dollars ($30,000) (or such greater amount as may be
determined by the Secretary of the Treasury); or
(ii) one and four tenths (1.4) multiplied by twenty-five percent (25%)
of the Participant's total cash compensation for such Plan Year.
For purposes of determining annual additions, the limitation year shall
be the Plan Year.
All qualified defined benefit pension plans (whether or not terminated)
of an employer shall be treated as one (1) qualified defined benefit
pension plan for purposes of applying the limitations of sections
415(b), (c) and (e) of the Code.
All qualified defined contribution plans (whether or not terminated) of
an employer shall be treated as one (1) qualified defined contribution
plan for purposes of applying the limitations of sections 415(b), (c)
and (e) of the Code.
In the case of a group of employers which constitutes a Controlled
Group, all such employers shall be considered a single employer for
purposes of applying the limitations of section 415 of the Code.
If as a result of the allocation of Forfeitures, a reasonable error in
estimating the compensation of a Participant, a reasonable error in
determining the amount of elective deferral contributions (within the
meaning of Code section 402(g)(3)) that may be made with respect to any
individual under the limits of Code section 415, or other facts and
circumstances allowed by regulation, the annual additions limitation is
exceeded in any Plan Year, the excess annual addition shall be charged
against the Participant's Accounts in the following order of priority
by the amount required to insure compliance with this Section:
(i) the annual additions to any other qualified defined contribution
plan;
(ii) Salary Deferral Contributions which are not matchable Salary
Deferral Contributions pursuant to Section 3.01(a); and
(iii) matchable Salary Deferral Contributions pursuant to Section
3.01(a) and Matching Contributions, on a pro rata basis.
The portion of such excess which consists of Salary Deferral
Contributions shall be returned to the Participant. The Salary Deferral
Contributions returned or distributed shall include income on such
amounts determined in the same manner as income is determined in
Section 3.03 (however, if such method of determining income is not
permitted by regulations, then income shall be determined in a manner
consistent with any applicable regulations). The portion of such excess
attributable to Matching Contributions shall be treated as a Forfeiture
for the Plan Year and shall be allocated to, and maintained as, a
suspense account under the Plan to which investment gains (or losses)
and other income is not allocated and which will be used to reduce
Employer contributions along with other Plan Forfeitures in accordance
with Section 8.02. In
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<PAGE> 32
addition, no Employer contributions may be made to the Plan until any
excess maintained in a suspense account is exhausted.
Notwithstanding any provision of the Plan to the contrary, if, in any
limitation year, the sum of the defined benefit fraction and the
defined contribution fraction exceed one (1.0), then the rate of the
annual addition for any Participant shall be automatically reduced to
the level necessary to prevent the limitations of this Section from
being exceeded with respect to such Participant.
4.05 APPLICATION OF CONTRIBUTIONS AND FORFEITURES AMONG EMPLOYERS.
The Sponsor and all such Adopting Employers shall be considered to be
the same Employer for purposes of crediting Employer contributions and
applying Forfeitures.
4.06 FAIR MARKET VALUE.
The Plan Administrator shall cause to be determined the fair market
value of all assets held by the Trustee in the Trust hereunder as of
each Allocation Date.
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ARTICLE 5
IN SERVICE WITHDRAWALS
5.01 WITHDRAWALS AT AGE 59-1/2.
At any time on or after a Participant shall have attained age
fifty-nine and a half (59-1/2), if the Participant remains employed by
the Employer, the Participant may elect to receive a distribution of
all or part of the vested amount credited to the Account maintained on
behalf of the Participant as of the immediately preceding Allocation
Date, except such amounts attributable to Merged Plans that are subject
to additional distribution restrictions (such as transfers from a money
purchase pension plan which cannot be withdrawn before the
Participant's Normal Retirement Date). A Participant who makes such a
withdrawal shall continue to be eligible to participate in the Plan on
the same basis as any other Employee. The Committee may limit the
number of withdrawals that may be requested in a uniform and
nondiscriminatory manner during any Plan Year.
5.02 WITHDRAWALS FROM PARTICIPANTS' PERSONAL ACCOUNTS.
While a Participant or a Retired Participant is in the Service of the
Employer, he shall be permitted to withdraw as soon as practicable
following his request (i) all or part of Part II of his Personal
Account (attributable to Rollover Contributions) or (ii) Part III of
his Personal Account attributable to after-tax contributions made under
a Merged Plan. The Committee may limit the number of withdrawals that
may be requested in a uniform and nondiscriminatory manner during any
Plan Year.
5.03 HARDSHIP WITHDRAWALS.
While a Participant or a Retired Participant is in the Service of the
Employer, he shall be permitted to withdraw the contributions to Part I
of his Personal Account (attributable to Salary Deferral Contributions)
to the extent necessary to satisfy an immediate and heavy financial
need arising from a hardship. The Committee shall determine whether an
emergency financial hardship has been proven by the Participant in
accordance with regulations issued by the Secretary of the Treasury
pursuant to section 401(k) of the Code and the Secretary of the U.S.
Department of Labor pursuant to ERISA section 408. The Committee may
limit the number of withdrawals that may be requested in a uniform and
nondiscriminatory manner during any Plan Year.
The determination of whether a Participant or a Retired Participant has
an immediate and heavy financial need and no other resources available
to satisfy such need shall be made in accordance with the following
conditions.
(a) FINANCIAL NEED TEST. The immediate and heavy financial needs for
which a hardship withdrawal may be granted shall be limited to
the following:
(1) Expenses for medical care described in Code section 213(d)
previously incurred by the Participant, the Participant's
spouse, or any dependents of the Participant (as
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defined in Code section 152) or necessary for these
persons to obtain medical care described in Code section
213(d);
(2) Costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage
payments);
(3) Payment of tuition and related education fees for the next
twelve (12) months of post-secondary education for the
Participant, or the Participant's spouse, children, or
dependents (as defined in Code section 152);
(4) Payments necessary to prevent the eviction of the
Participant from the Participant's principal residence or
foreclosure on the mortgage on that residence; or
(5) Other expenses which the Commissioner of the Internal
Revenue Service indicates will be deemed to be made on
account of such need.
The amount of any hardship withdrawal granted pursuant to this
Section 5.03 shall be limited to the lesser of:
(6) the actual amount of the Salary Deferral Contributions
made to Part I of the Participant's or former
Participant's Personal Account, without regard to income
allocable thereto, less the amount of Salary Deferral
Contributions previously withdrawn; and
(7) the amount required to relieve the financial need plus
amounts necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated to result
from the hardship distribution.
(b) RESOURCES TEST. To qualify for a hardship withdrawal pursuant to
Section 5.03(a), the Participant or Retired Participant must
certify that the financial need giving rise to the hardship
cannot be met from other resources that are reasonably available
to the participant, such as:
(1) insurance reimbursement;
(2) liquidation of assets, including those of the spouse and
minor children of the Participant;
(3) cessation of contributions to the Plan;
(4) other plan distributions or commercial loans.
5.04 LOANS TO PARTICIPANTS.
The Committee shall adopt a written instrument which shall be signed
and dated by the Committee, providing rules and regulations and
guidelines concerning loans from the Plan's Trust Fund to participants.
Such written instrument shall include, but need not be limited to the
following:
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<PAGE> 35
(a) The identity of the person or positions authorized to administer
the participant loan program;
(b) A procedure for applying for loans;
(c) The basis on which loans will be approved or denied;
(d) Limitations (if any) on the types and amounts of loans offered;
(e) The procedure under the program for determining a reasonable rate
of interest;
(f) The types of collateral which may secure a participant loan; and
(g) The events constituting default and the steps that will be taken
to preserve Plan assets in the event of such default.
Subject to the rules, regulations and guidelines adopted by the
Committee in such written instrument, the Committee, upon receipt of
written application of a Participant in such manner and form as
required by the Committee, may authorize and direct the Trustee to make
a loan to the Participant from the Trust Fund. For purposes of this
Section 5.04 only, the term "Participant" shall include former
Participants and Beneficiaries who are parties in interest within the
meaning of section 3(14) of ERISA.
Any outstanding loans which were maintained under a Merged Plan shall
be maintained on and after that date under this Plan until all amounts
of principal and interest thereon have been repaid, or in the event of
default, recovered, pursuant to the terms of the documents evidencing
such loans and the provisions of the Participant loan program
established under the Merged Plan. Loans pursuant to the preceding
sentence shall be considered to be an asset of such person's Account
only, and not the Account of any other person.
Loan repayments will be suspended under this Plan as permitted under
section 414(u)(4) of the Code.
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ARTICLE 6
GENERAL BENEFIT PROVISIONS
6.01 FORM OF BENEFIT PAYMENT.
The only form of payment under the Plan shall be a lump sum payment of
the Participant's entire vested Account; provided, however, that
additional forms of payment may apply with regards to Participants who
are covered by the Merged Plan provisions described in Article 13.
6.02 TIME OF PAYMENT.
A Participant may elect to receive distribution of his vested Account
as soon as practicable following termination of Service; provided,
however, that unless the Participant elects to delay such distribution,
the distribution shall begin no later than the sixtieth (60th) day
after the close of the Plan Year in which the latest of the following
events occurs:
(a) the date the Participant attains sixty-five (65) years of age;
(b) the date which is the tenth (10th) anniversary of the first (1st)
day of the Plan Year in which the Participant commenced
participation in the Plan; or
(c) the date the Participant terminates Service with the Employer.
If the amount of the payment required to commence on the date
determined under this Section cannot be ascertained by such date, or if
it is not possible to make such payment on such date because the Plan
Administrator has been unable to locate the Participant after making
reasonable efforts to do so, then a payment retroactive to such date
may be made no later than sixty (60) days after the earliest date on
which the amount can be ascertained under the Plan or the date on which
the Participant is located (whichever is applicable).
A Participant's election to receive a distribution before his
sixty-fifth (65th) birthday must be in writing, in such form as the
Plan Administrator shall uniformly and nondiscriminatorily require, and
may be submitted at any time during the ninety (90) day period
preceding the date the amount is paid and following the date which the
Participant is provided with information concerning the Participant's
right, if any, to defer payment of his benefit. Such notice shall be
provided at least thirty (30) and no more than ninety (90) days before
the date described in the preceding sentence. Such distribution may
commence less than thirty (30) days after the notice required under
section 1.411(a)-11(c) of the Income Tax Regulations is given, provided
that:
(d) the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least thirty (30) days
after receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and
(e) the Participant, after receiving the notice, affirmatively elects
a distribution.
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6.03 SPECIAL COMMENCEMENT AND DISTRIBUTION OF BENEFITS RULE.
Notwithstanding any other provisions of the Plan, but in addition to
such provisions (as applicable), the distribution shall comply with the
requirements contained in this Section.
(a) GENERAL RULES.
(1) The requirements of this Section shall apply to any
distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan.
(2) All distributions required under this Section shall be
determined and made in accordance with any applicable
regulations under section 401(a)(9) of the Code, including
the minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the proposed regulations.
(b) REQUIRED BEGINNING DATE. The entire interest of a Participant
must be distributed or begin to be distributed no later than the
Participant's required beginning date. The consent of the
Participant or of the Participant's Spouse or Beneficiary shall
not be required to make a distribution required under this
Section.
"Required beginning date" shall be determined in accordance with
the following:
(1) NON-FIVE-PERCENT (5%) OWNERS. The required beginning date
of a Participant who is not a "five-percent (5%) owner"
(as defined in (2) below) is the first day of April of the
calendar year following the calendar year in which the
later of retirement and attainment of age seventy and
one-half (70-1/2) occurs.
(2) FIVE-PERCENT (5%) OWNERS. The required beginning date of a
Participant who is a five-percent (5%) owner is the first
day of April following the later of:
(A) the calendar year in which the Participant attains
age seventy and one-half (70-1/2), and
(B) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
five-percent (5%) owner, and the calendar year in
which the Participant retires.
A Participant is treated as a five-percent (5%) owner for
purposes of this subsection (b) if such participant is a
five-percent (5%) owner as defined in section 416(i) of
the Code (determined in accordance with section 416 but
without regard to whether the Plan is top-heavy) at any
time during the Plan Year ending with or within the
calendar year in which such owner attains age sixty-six
and one-half (66-1/2) or any subsequent Plan Year.
(3) Once distributions have begun to a five-percent (5%) owner
under this Section, those distributions must continue even
if the Participant ceases to be a five-percent (5%) owner
in a subsequent year.
(c) DURATION OF BENEFITS. Benefits to a Participant shall be
distributed, beginning not later than the required beginning date
set forth in subsection (b) in accordance with regulations, for a
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<PAGE> 38
period not exceeding the life of such Participant or, if
applicable, the joint lives of such Participant and his
Beneficiary, or over the life expectancy of such Participant or,
if applicable, the joint life expectancies of the Participant and
his Beneficiary. For purposes of this Section, "life expectancy"
shall mean the life expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant
(or designated Beneficiary) as of the Participant's (or
designated Beneficiary's) birthday in the applicable calendar
year, reduced by one (1) for each calendar year which has elapsed
since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy
shall be the life expectancy as so recalculated. The applicable
calendar year shall be the first distribution calendar year, and
if life expectancy is being recalculated such succeeding calendar
year. If annuity payments commence before the required beginning
date, the applicable calendar year is the year such payments
commence. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Treasury Regulations.
(d) MINIMUM AMOUNT TO BE DISTRIBUTED EACH YEAR. If the Participant's
interest is to be distributed in other than a single sum, the
following distribution rules shall apply on or after the required
beginning date.
(1) The amount to be distributed each year, beginning with
distributions for the first distribution calendar year
shall not be less than the quotient obtained by dividing
the Participant's benefit by the lesser of (i) the
applicable life expectancy as described in Section 6.03(c)
or (ii) if the Participant's Spouse is not the designated
Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of section 1.401(a)(9)-2 of the
proposed regulations.
(2) The minimum distribution required for the Participant's
first distribution calendar year must be made on or before
the Participant's required beginning date. The minimum
distribution for other calendar years, including the
minimum distribution for the distribution calendar year in
which the employee's required beginning date occurs, must
be made on or before December 31 of that distribution
calendar year.
(3) Distribution calendar year. For purposes of this Section,
the term "distribution calendar year" means a calendar
year for which a minimum distribution is required. For
distributions beginning before the Participant's death,
the first distribution calendar year is the calendar year
immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions
beginning after the Participant's death, the first
distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section
6.03(e) below.
(e) DEATH DISTRIBUTION PROVISIONS.
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant
dies after distribution of his or her interest has begun,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant
dies before distribution of his or her interest begins,
distribution of the Participant's entire interest shall be
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<PAGE> 39
completed by December 31 of the calendar year containing
the fifth anniversary of the Participant's death except to
the extent that an election is made to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is
payable to a designated Beneficiary, distributions
may be made over the life or over a period certain
not greater than the life expectancy of the
designated Beneficiary commencing on or before
December 31 of the calendar year immediately
following the calendar year in which the Participant
died;
(ii) if the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required
to begin in accordance with (i) above shall not be
earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year
in which the Participant died and (2) December 31 of
the calendar year in which the Participant would have
attained age 70-1/2.
If the Participant has not made an election pursuant to
this subsection (e)(2) by the time of his or her death,
the Participant's designated Beneficiary must elect the
method of distribution no later than the earlier of (1)
December 31 of the calendar year in which distributions
would be required to begin under this Section, or (2)
December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If
the Participant has no designated Beneficiary, or if the
designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar
year containing the fifth anniversary of the Participant's
death.
(3) For purposes of subsection (e)(2) above, if the surviving
Spouse dies after the Participant, but before payments to
such Spouse begin, the provisions of subsection (e)(2),
with the exception of paragraph (ii) therein, shall be
applied as if the surviving Spouse were the Participant.
(4) For the purposes of this subsection (e), distributions of
a Participant's interest is considered to begin on the
Participant's required beginning date (or, if subsection
(e)(3) above is applicable, the date distribution is
required to begin to the surviving Spouse pursuant to
subsection (e)(2) above). If distribution in the form of
an annuity irrevocably commences to the Participant before
the required beginning date, the date distribution is
considered to begin is the date distribution actually
commences.
(f) LIMITATIONS ON DISTRIBUTION OF SALARY DEFERRALS.
Notwithstanding anything expressed or implied to the contrary
elsewhere in this Plan, amounts attributable to Salary Deferral
Contributions pursuant to Section 3.02(a) hereof shall not be
distributed earlier than upon the occurrence of one of the
following events:
(i) the employee's retirement, death, Disability, or
termination of Service;
(ii) the termination of the Plan without the establishment of a
successor plan;
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<PAGE> 40
(iii) the date of the sale or other disposition by the Employer
of substantially all of the assets used by such
corporation in a trade or business of the Employer with
respect to an Employee who continues employment with the
corporation acquiring such assets;
(iv) with regard to an Employee who continues employment with
such subsidiary, the date of the sale or other disposition
by the Employer of such corporation's interest in a
subsidiary;
(v) with regard to distributions of Salary Deferral
Contributions only, the Participant's or former
Participant's hardship, as defined in Section 5.03 hereof.
6.04 SINGLE SUM DISTRIBUTION OF SMALL BENEFITS.
In the event that a Retired Participant or Beneficiary shall become
entitled to receive any benefit under the Plan after December 31, 1997,
and the value of the nonforfeitable benefit attributable to Employer
and Employee contributions is not greater than (or at the time of any
prior distribution was not greater than) five thousand dollars
($5,000), such benefit shall be paid to such person in a single sum
before the end of the second Plan Year following the Plan Year during
which the Participant ceases to participate in the Plan. In addition,
the Plan Administrator shall cause the foregoing amount to be paid if
such distribution would have been paid by the end of the second Plan
Year following the Plan Year during which Service terminates but for
the fact that the value of the vested Account then exceeded the
cash-out limit in effect under Treas. Reg. 1.411(a)-11T(c)(3)(ii).
Payment under this Section shall be in lieu of the form of benefit
otherwise payable under any provision of this Plan.
6.05 DESIGNATION OF BENEFICIARY.
Subject to the rights of a surviving Spouse described herein, each
Participant or Retired Participant shall have the right to designate
the Beneficiary to receive the death benefit on his behalf, and to
revoke any such designation. Each such designation, or revocation
thereof, shall be evidenced by a written instrument filed with the Plan
Administrator and signed by the Participant or Retired Participant.
Unless the conditions which follow for the designation of a Beneficiary
other than the Spouse are satisfied, the Beneficiary of a Participant
or Retired Participant who is married on the date of his death shall be
the surviving Spouse, whether or not so designated in the written
instrument filed with the Plan Administrator and even if no such
instrument is filed. Designation of a Beneficiary other than the Spouse
shall be valid only if either:
(a) the Spouse consents in writing to such designation, acknowledging
the effect thereof, witnessed by a notary public or Plan
representative;
(b) the Retired Participant or Participant, although married at the
time of the designation, is ultimately not survived by his
Spouse; or
(c) the surviving Spouse cannot be located.
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<PAGE> 41
Such spousal consent obtained pursuant to (a) shall be irrevocable. If
the Participant or Retired Participant is survived by a Spouse other
than the Spouse who consented to designation of another as Beneficiary,
the consent of the former Spouse shall be ineffective.
If no designation of Beneficiary is on file with the Plan Administrator
at the time of the death of a Participant or Retired Participant, or if
such designation is not effective for any reason, and if there is no
surviving Spouse, the death benefit shall be payable to the estate of
the Participant or Retired Participant (which shall be conclusively
deemed to be the Beneficiary designated to receive such death benefit).
6.06 ELIGIBLE ROLLOVER DISTRIBUTIONS.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Section, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover. Provided, however, that direct
rollovers are not permitted for amounts under two hundred dollars
($200).
(a) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(b) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is an
individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section
408(b) of the Code, an annuity plan described in section 403(a)
of the Code, or a qualified trust described in section 401(a) of
the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement
annuity.
(c) DISTRIBUTEE. A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving Spouse and the Employee's or former Employee's Spouse
or former Spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the
Code, are distributees with regard to the interest of the Spouse
or former Spouse.
(d) DIRECT ROLLOVER. A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
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<PAGE> 42
6.07 OPTIONAL FORMS OF BENEFITS UNDER MERGED PLANS.
In no event shall any Participant who was a participant of a Merged
Plan be precluded from electing an optional form of payment or feature
that is a protected benefit pursuant to Reg. Section 1.411(d)(4)
offered under the applicable Merged Plan for the payment of the
Participant's vested Account balance under the Plan.
6.08 PURCHASE OF ANNUITIES.
If Merged Plan benefits are to be paid in the form of an annuity for
the life of the Participant or the joint lives of the Participant and
his Beneficiary, then the Trustee shall purchase such annuity contracts
from a life insurance company licensed to do business in the state in
which the Sponsor maintains offices, utilizing for such purchase the
entire amount in the Accounts of the Participant. Any annuity contract
which is purchased hereunder to provide benefits otherwise payable
under the Plan, and which is distributed to a former Participant or
Beneficiary, shall be endorsed as "nontransferable." The terms of any
annuity contract purchased and distributed by the Plan to a Participant
or Spouse shall comply with the requirements of this Plan. If Merged
Plan benefits are to be paid in the form of installments, then the
Committee may purchase an installment annuity contract from a life
insurance company in accordance with the provisions above applicable to
life annuity purchases.
6.09 FAILURE TO LOCATE.
If the Participant or Beneficiary to whom benefits are to be
distributed cannot be located, and reasonable efforts have been made to
find him, including sending notification by certified or registered
mail to his last known address, then the Plan Administrator shall
consider the balances in the Participant's Account forfeited, and such
amounts shall be applied in accordance with Section 8.02. In the event
that such Participant or Beneficiary is subsequently located, the
balance in his Account at the time of forfeiture shall be reinstated
and distributed to him.
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<PAGE> 43
ARTICLE 7
RETIREMENT, DEATH AND DISABILITY BENEFITS
7.01 BENEFITS UPON RETIREMENT.
As of his Normal Retirement Date or his Early Retirement Date, a
Participant may retire from Service or he may elect to continue in
Service. If such a Participant continues in Service, then he shall
continue to be treated in all respects as a Participant until his
actual retirement. Except as provided in Section 6.03 hereof, no
retirement benefit shall be payable until his actual retirement, unless
the Participant elects an in-service withdrawal pursuant to Article 5.
The Participant who retires pursuant to this Section 7.01 shall be
entitled to a retirement benefit equal to one hundred percent (100%) of
the value of both his Employer Account and his Personal Account
determined on the Allocation Date coincident with or immediately
preceding his retirement, increased by any contributions allocated
after such Allocation Date, and reduced by any payments or withdrawals
made from such Accounts since such preceding Allocation Date. Such
benefit shall be subject to the general benefit payment provisions of
Article 6 hereof; provided, however, that upon the Participant's
request, the commencement date of any benefits payable to a Participant
shall be as soon as practicable following his retirement date.
Upon attainment of Normal Retirement Age, a Participant shall be one
hundred percent (100%) vested in the value of his Accounts.
7.02 DEATH BENEFITS.
In the event of the death of a Participant or Retired Participant prior
to the complete distribution of his Accounts, the amount of the death
benefit on his behalf shall be one hundred percent (100%) of both his
Employer Account and Personal Account, determined on the Allocation
Date coincident with or immediately preceding the date of his death,
increased by any contributions allocated after such Allocation Date,
and reduced by any payments or withdrawals made from such Accounts
since such preceding Allocation Date. However, the death benefit to be
distributed from the Employer Account of a Retired Participant whose
participation in the Plan terminated before the date of his death
(other than a disabled Participant pursuant to Section 7.03 hereof)
shall be determined by application of the vested percentage described
in Section 8.01 hereof.
The death benefit shall be subject to the general benefit provisions of
Article 6 hereof. The benefit shall be paid in a single sum, or in such
other optional form as may be elected by the Participant or
Beneficiary, as the case may be, under Section 6.01 hereof, to the
designated Beneficiary of the deceased Participant as soon as
practicable after the last day of the Plan Year during which such death
occurs; provided, however, that upon the Beneficiary's request, the
commencement date of any benefits payable to a Beneficiary shall be as
soon as practicable following the date such death occurs.
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<PAGE> 44
7.03 DISABILITY BENEFITS.
In the event the Committee determines that a Participant incurs
Disability while still an Employee, such Participant shall be entitled
to one hundred percent (100%) of both his Employer Account and Personal
Account, determined on the Allocation Date coincident with or
immediately preceding the date of his Disability, increased by any
contributions allocated after such Allocation Date, and reduced by any
payments or withdrawals made from such Accounts since such preceding
Allocation Date.
Any benefits due a disabled Participant from his Employer Account and
his Personal Account shall be paid or applied for his benefit subject
to the general benefit provisions of Article 6 hereof; provided,
however, that, if the Participant so elects, the commencement date of
any benefits payable to such a Participant may be as soon as
practicable following the date such Disability occurs and prior to the
Participant's Normal Retirement Date.
In the event of the death of the Participant subsequent to the date his
Disability occurred and prior to the commencement of his disability
benefits hereunder, the amount payable on behalf of such Participant
shall be paid as a death benefit as provided otherwise in this article.
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<PAGE> 45
ARTICLE 8
TERMINATION BENEFITS
8.01 BENEFITS UPON TERMINATION OF SERVICE.
A Participant whose Service terminates for reasons other than
retirement on or after his Normal Retirement Date, death or Disability
shall be entitled to (i) a vested percentage, determined at the date
his Service terminates, of Part I of his Employer Account (Matching
Account), (ii) one hundred percent (100%) of Part II of his Employer
Account (QMAC Account) and (iii) one hundred percent (100%) of his
Personal Account. The vested percentage of any Accounts established
under Part III of his Employer Account attributable to a Merged Plan
shall be determined pursuant to Article 13. Such Accounts will be
determined as of the Allocation Date coincident with or immediately
preceding the date the Participant's Service terminates, increased by
any contributions allocated after such Allocation Date, and reduced by
any payments or withdrawals made from the Accounts since such preceding
Allocation Date.
The vested percentage of the Matching Account of a Participant shall be
determined from the following schedule:
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Percentage
--------------- ----------
<S> <C>
Less than 5 0%
5 or more 100%
</TABLE>
Provided, however, that the vested percentage shall be one hundred
percent (100%) for a Participant on and after his Normal Retirement
Age.
8.02 FORFEITURES.
The portion of a former Participant's Employer Account in which he does
not have a nonforfeitable interest shall be treated as a Forfeiture as
of the earlier of the following dates:
(a) the date the Participant is paid the entire vested amount of his
Accounts, or
(b) the date the Participant incurs five (5) consecutive Breaks in
Service.
Forfeitures arising under this Section 8.02 or any other provision of
this Plan shall be first applied to reinstate previously forfeited
Accounts of former Participants which are required to be reestablished
pursuant to Section 6.09 and this Section 8.02. Any additional
Forfeitures shall be applied as a credit against Employer contributions
otherwise due in accordance with the provisions of Section 4.01 hereof.
For purposes of the Section, if the value of an Employee's vested
Account balance is zero, the former Participant shall be deemed to have
received a distribution of such vested Account
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<PAGE> 46
balance and the Employer Account shall be treated as a Forfeiture as of
the date such Employee terminates Service.
If a former Participant receives or is deemed to have received a
distribution from his Employer Account due to termination of
participation in the Plan, no later than the close of the second Plan
Year following the Plan Year during which he ceases to be a
Participant, which distribution is:
(a) equal to his vested Employer Account, but less than one hundred
percent (100%) of such Account, and
(b) in an amount not exceeding five thousand dollars ($5,000) or, if
greater, which the Participant elected to receive,
and he subsequently resumes Service before he incurs five (5)
consecutive Breaks in Service, he may repay such distribution to the
Plan. Such repayment must be made before the earlier of the date the
Participant incurs five (5) consecutive Breaks in Service and the fifth
anniversary of the date of the Participant's resumption of Service
following the Break in Service. In the event of such repayment, the
amount of the Participant's Employer Account at the date of the
distribution shall be reestablished.
8.03 PAYMENT OF BENEFITS.
Any amounts due a Retired Participant pursuant to this article shall be
paid or applied for his benefit in accordance with the general benefit
provisions of Article 6 hereof; provided, however, that upon the
Participant's request, the commencement date of any benefits payable to
a Participant shall be as soon as practicable following the date his
Service terminates and before his Normal Retirement Date.
In the event of the death of the Participant subsequent to the date his
Service terminates and prior to the commencement of his benefits, the
amount payable on behalf of such Participant shall be paid as provided
in Article 7 hereof.
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<PAGE> 47
ARTICLE 9
THE COMMITTEE
9.01 PLAN ADMINISTRATOR AND APPOINTMENT OF COMMITTEE.
The Sponsor shall be the Plan Administrator of the Plan. The Board of
Directors of the Sponsor may appoint a Committee consisting of not less
than three (3) persons to assist the Plan Administrator and to carry
out the day to day administrative functions of the Plan as the Plan
Administrator may delegate to the Committee and as the Plan shall
specifically provide. Members of the Committee shall serve without
compensation, but the reasonable expenses of the Committee in
discharging its responsibilities shall be borne by the Sponsor. Any
member of the Committee may at any time be removed, with or without
cause, and his successor appointed by the Chief Executive Officer of
the Sponsor and any vacancy caused by death, resignation or other
reason shall be filled by the Chief Executive Officer of the Sponsor.
The Sponsor will notify the Trustee in writing of the names of the
members of the Committee and of any changes in Committee membership
that may transpire from time to time.
9.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR.
The Plan Administrator shall administer and supervise the operation of
the Plan in accordance with the terms and provisions of the Plan.
The Plan Administrator shall have all power and authority (including
discretion with respect to the exercise of that power and authority)
necessary, properly advisable, desirable or convenient for the
performance of its duties, which duties shall include, but not be
limited to, the following:
(a) to construe the Plan in good faith;
(b) to determine eligibility of Employees for participation in the
Plan, and to notify Employees of their eligibility and the
requirements for such participation;
(c) to determine and certify eligibility for benefits under the Plan,
and to direct the Trustee concerning the amount, manner and time
of the payment of such benefits and any annuity contracts to be
purchased on behalf of Participants, Retired Participants and
Beneficiaries;
(d) to prepare and distribute, in such manner as the Plan
Administrator determines to be appropriate, information
explaining the Plan;
(e) to require a Participant to complete and file with the Plan
Administrator an application for a benefit and all other forms
approved by the Plan Administrator, and to require that the
Participant furnish all pertinent information requested by the
Plan Administrator, which information may be relied upon by the
Plan Administrator;
(f) to cause the allocations of contributions to the Plan and
investment earnings (or losses) to be made as of each Allocation
Date;
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<PAGE> 48
(g) to adopt such rules as it deems necessary, desirable or
appropriate for the administration of the Plan, provided such
rules are consistent with the terms and provisions of the Plan;
all rules and decisions of the Plan Administrator shall be
uniformly and consistently applied to all Participants in similar
circumstances;
(h) to appoint such agents as it may need in the performance of its
duties; and
(i) to receive and review the reports from the Trustee and other
agents.
9.03 PLAN ADMINISTRATOR PROCEDURES.
The Plan Administrator may adopt such procedures and regulations as it
deems desirable for the administration of the Plan. Such procedures and
regulations shall be nondiscriminatory and shall to the extent feasible
be maintained in writing.
9.04 CLAIMS AND REVIEW PROCEDURES.
The Plan Administrator shall establish reasonable procedures concerning
the filing of claims for benefits hereunder and shall administer such
procedures uniformly. If a claim is wholly or partially denied, the
Plan Administrator shall furnish the claimant, within a reasonable
period of time after receipt of the claim by the Plan Administrator, a
notice of such denial, setting forth at least the following information
in language calculated to be understood by the claimant:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and
(d) an explanation of the claims review procedure in the Plan.
Upon receipt of such a notice of denial, or if such a notice is not
furnished but the claim has not been granted within sixty (60) days of
its filing, the claimant or his duly authorized representative may
appeal to the Plan Administrator for a full and fair review.
In submitting a request for review, the claimant or his duly authorized
representative may request a review upon written application to the
Plan Administrator, may review pertinent documents, and may submit
comments in writing. Such request for review must be made within sixty
(60) days of the receipt by the claimant of the notice of denial (or
within sixty (60) days of the expiry of the sixty (60) day period
beginning with the date of the filing of the claim, if no such notice
is received during such period).
The Plan Administrator shall respond promptly to a request for review
and shall deliver a written decision which shall include, in a manner
calculated to be understood by the claimant, the decision itself,
specific reasons therefor and specific references to the pertinent Plan
provisions on which the decision is based. The decision shall be made
not later than one hundred twenty (120) days after receipt of a request
for review.
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<PAGE> 49
Any decision by the Plan Administrator shall be conclusive and binding
upon all persons, subject to the claims review procedure described in
this Section 9.04 and subject to judicial review where it is shown by
clear and convincing evidence that the Plan Administrator acted in an
arbitrary and capricious manner.
9.05 ELECTION PROCEDURES.
Whenever an election or any other type of action is required to be
communicated to the Plan Administrator in writing or on a form
designated by the Plan Administrator, the communication may be in any
other form acceptable to the Plan Administrator, including by means of
a voice response unit or other electronic media.
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<PAGE> 50
ARTICLE 10
ESTABLISHMENT OF TRUST
10.01 TRUST AGREEMENT.
Contributions made by the Employer and Participants of the Plan and all
other assets of this Plan shall be held in trust under a trust
agreement. The Employer shall enter into a trust agreement with the
Trustee for the administration of the Trust which shall contain the
assets of the Plan. The Trustee shall not be responsible for the
administration of this Plan but only for the Trust established pursuant
to this Plan.
10.02 TRUST AGREEMENT PART OF PLAN
The trust agreement shall be deemed to be a part of this Plan, and any
rights or benefits accruing to any person under this Plan shall be
subject to all of the relevant terms and provisions of the trust
agreement, including any amendments. In addition to the powers of the
Trustee set forth in the trust agreement, the Trustee shall have any
powers, express or implied, granted to it under the Plan. In the event
of any conflict between the provisions of the trust agreement and the
provisions of the Plan, the provisions of the Plan shall control,
except for the duties and responsibilities of the Trustee, in which
case the trust agreement shall control.
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ARTICLE 11
AMENDMENT AND TERMINATION OF THE PLAN
11.01 AMENDMENT OF PLAN.
The Board of Directors of the Sponsor, or its designee, shall have the
right at any time, and from time to time, to modify, alter or amend the
Plan in whole or in part by instrument in writing duly executed.
Notwithstanding the foregoing, the Plan shall not be amended in the
following respects:
(a) the duties, powers and responsibilities of the Trustee shall not
be increased without the written consent of the Trustee;
(b) subject to Section 12.05 hereof, no amendment may be made to
permit any part of the funds of the Trust to be used for or
diverted to purposes other than for the exclusive benefit of
Participants, Retired Participants and their Beneficiaries or for
administration expenses of the Plan;
(c) no amendment may be made, unless it is necessary to meet the
requirements of any federal law or regulation, which shall reduce
the benefits which have accrued or the nonforfeitable percentage
applicable to any Participant, Retired Participant or Beneficiary
prior to the later of the date of adoption or the effective date
of such amendment, nor shall any amendment to the Plan eliminate
an optional form of distribution provided under Section 6.01
hereof except as may be permitted by federal law or regulation;
and
(d) no amendment to the vesting provision in Section 8.01 hereof
shall become effective with respect to a Participant who has
completed three (3) or more years of Service as of the expiration
of the election period described below, unless such Participant
is given the opportunity, for a period of sixty (60) days, to
elect irrevocably to have his nonforfeitable benefits computed
without regard to such amendment after the latest of:
(i) the date of adoption of the amendment,
(ii) the effective date of the amendment, and
(iii) the date written notification of the amendment is furnished
such Participant.
An executed copy of any amendment to the Plan shall be furnished the
Trustee as soon as practicable after the date of adoption thereof.
11.02 INTENT TO CONTINUE THE PLAN.
The Employer has established the Plan with the bona fide intention and
expectation that from year to year it will make contributions as herein
provided. However, the Employer realizes that it may become inadvisable
to continue such contributions. The Employer shall have the right to
11-1
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modify, suspend or discontinue contributions to the Plan at any time
and from time to time, and such action shall not be deemed to be a
termination of the Plan unless it constitutes a complete discontinuance
of Employer contributions to the Plan.
11.03 TERMINATION OR PARTIAL TERMINATION OF THE PLAN BY THE SPONSOR.
In the event the Sponsor concludes that it is impossible or inadvisable
to continue the Plan, the Board of Directors of the Sponsor shall have
the right to terminate the Plan by an appropriate action which shall
specify the date of termination. A certified copy of a writing
reflecting such action shall be delivered to the Committee and to the
Trustee, and as soon as possible thereafter the Committee shall send or
deliver to each then Participant a notice of such action.
If a determination is made that the Plan has experienced a complete or
partial termination, the Accounts of affected Participants shall become
nonforfeitable without regard to Section 8.01 hereof.
11.04 TERMINATION OF THE PLAN UPON CERTAIN EVENTS.
The Plan shall automatically terminate upon the occurrence of any of
the following events:
(a) liquidation of the Sponsor's business unless the sponsorship of
the Plan is transferred to another employer; or
(b) the merger or consolidation of the Sponsor into any other
corporation, or the sale by the Sponsor of substantially all of
its assets to any corporation or other business organization
which shall fail to adopt and continue the Plan within ninety
(90) days from the effective date of such consolidation, merger
or sale of assets.
11.05 DISTRIBUTION OF TRUST FUND UPON COMPLETE TERMINATION.
Upon complete termination of the Plan, or upon complete discontinuance
of Employer contributions to the Plan, the balance in each
Participant's or Retired Participant's Accounts (after payment of all
expenses and proportional adjustment of Participants' Accounts to
reflect such expenses, investment gains or losses and reallocations to
the date of termination) shall become nonforfeitable and each
Participant, Retired Participant or Beneficiary shall be entitled to
receive any amounts then credited to his Accounts in the Trust Fund.
The Trustee may make payment of such amounts in a single sum or annual
installments, either in cash or in assets in kind of the Trust Fund, or
partly in cash and partly in assets in kind of the Trust Fund. In no
event shall any such payment in kind be made in the form of a life
annuity. Upon the distribution of all of the Trust Fund as aforesaid,
the Trustee shall be discharged from all obligations under the Trust
and no Participant, Retired Participant or Beneficiary shall have any
further rights or claim therein.
11.06 TERMINATION OF PLAN WITH RESPECT TO AN ADOPTING EMPLOYER.
Each Adopting Employer reserves the right to terminate the Plan at any
time with respect to Employees of the Adopting Employer by action of
its governing body. The Adopting Employer shall also have the right to
suspend contributions to the Plan from time to time, and such
suspension of contributions shall not be deemed to be a termination of
the Plan with respect to
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<PAGE> 53
the Employees of the Adopting Employer unless it constitutes a complete
discontinuance of Employer contributions to the Plan.
In the event of termination of the Plan only with respect to the
Employees of the Adopting Employer, the Plan Administrator may direct
that the portion of the Trust Fund attributable to Employees of the
Adopting Employer be segregated by the Trustee into a separate fund.
The portion of the Trust Fund which is so segregated shall be retained
in a separate trust fund and applied in one of the following methods,
at the discretion of the Plan Administrator.
(a) If the Adopting Employer shall demonstrate conclusively, within
the one hundred eighty (180) day period immediately following
termination of the Plan with respect to its Employees, that it
has established a successor retirement plan and trust for the
benefit of its Employees which is qualified under sections 401(a)
and 501(a), respectively, of the Code, then such assets shall be
transferred to the successor trustee.
(b) If the Adopting Employer shall fail, within the one hundred
eighty (180) day period immediately following termination of the
Plan with respect to its Employees, to establish a successor
retirement plan and trust which is qualified under sections
401(a) and 501(a), respectively, of the Code, then such assets
shall be distributed for the benefit of the Employees of the
Adopting Employer in accordance with the method described in
Section 11.05 hereof.
At the discretion of the Plan Administrator, the one hundred eighty
(180) day period may be extended.
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ARTICLE 12
CERTAIN PROVISIONS AFFECTING THE EMPLOYER
12.01 DUTIES OF THE EMPLOYER.
The Sponsor shall furnish the Trustee with the information required in
the Trust agreement. Each Employer shall make its contributions as the
same may be appropriated by due action, which contributions may be in
cash or in other property acceptable to the Trustee. The Employer shall
keep accurate books and records with respect to its Employees and their
compensation.
12.02 RIGHT OF EMPLOYER TO DISCHARGE EMPLOYEES.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between the Employer and any Employee, or to be a
consideration for, or an inducement or condition of, the employment of
any person.
12.03 INFORMATION TO BE FURNISHED.
Each Employer shall deliver to the Plan Administrator information
required to perform the allocations described in Article 4 hereof, in
such manner and at such time as is required by the Plan Administrator.
12.04 COMMUNICATIONS FROM SPONSOR TO TRUSTEE.
The Trustee may rely upon and shall be protected in acting upon any
information furnished to it by the Sponsor in writing subscribed by a
duly authorized agent of the Sponsor. Any certification by the Sponsor
of the information required or permitted to be certified to the Trustee
pursuant to the provisions of the Plan, shall, for all purposes of the
Plan, be binding upon all parties in interest.
12.05 NO REVERSION TO EMPLOYER.
The Employer has no beneficial interest in the Trust Fund, and no part
of the Trust Fund shall ever revert or be repaid to the Employer,
directly or indirectly, except, if, and to the extent, permitted by the
Code and applicable regulations thereunder for the following:
(a) in the event that the deduction of an Employer contribution to
the Plan under section 404 of the Code is disallowed, in which
case the contribution (to the extent disallowed) shall be
returned to the Employer, upon the request of the Employer within
one (1) year after the disallowance of the deduction; or
(b) in the event that the Employer contribution is made by mistake of
fact, in which case the amount of such mistaken contribution
shall be returned to the Employer provided no more than one (1)
year has elapsed since the date of payment by the Employer of the
mistaken contribution.
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12.06 INDEMNIFICATION BY SPONSOR.
To the extent permitted by law the Sponsor shall indemnify from any
loss or expense the Plan Administrator, any individual member of the
Committee, or any individual serving as Trustee, in connection with the
good faith discharge of duties under the Plan.
12.07 ADOPTION OF PLAN BY ADOPTING EMPLOYERS.
Notwithstanding anything herein to the contrary, with the authorization
of the Board of Directors of the Sponsor or its designee, any
corporation or entity affiliated with the Sponsor through complete or
partial ownership by the Sponsor or by any owner thereof or which is
otherwise cooperating with the Sponsor for purposes of establishing a
retirement plan may adopt the Plan as an Adopting Employer in a manner
satisfactory to the Board of Directors of the Sponsor. Subject to the
provisions of Code section 413(c), each Adopting Employer's
participation in the Plan shall constitute a single plan, within the
meaning of the regulations under section 414(l) of the Code, with the
participation in the Plan of the Sponsor and/or other Adopting
Employers.
An Adopting Employer may terminate participation in the Plan at any
time with respect to Employees of the Adopting Employer by action of
its Board of Directors as provided in Section 11.06 hereof.
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<PAGE> 56
ARTICLE 13
SPECIAL MERGED PLAN ISSUES
13.01 GENERALLY.
The purpose of this Article is to provide for the merger of the certain
plans into this Plan, and to specify the terms under which participants
of such plans will participate in this Plan. The rules described in
this Article shall override any other provisions of the Plan.
13.02 PARISIAN RETIREMENT AND SAVINGS PLAN.
Parisian, Inc. ("Parisian") and certain of its affiliates ("Parisian
Affiliates") will adopt this Plan and become adopting Employers under
this Plan effective as of February 1, 1997, for the benefit of their
eligible employees, and the Parisian Retirement and Savings Plan (the
"Parisian Plan") will be merged into this Plan as described below.
(a) PARTICIPATION. Effective as of February 1, 1997, this Plan will
be extended to each individual employed by Parisian or a Parisian
Affiliate on February 1, 1997, and who was eligible to
participate in the Parisian Plan on that date (each an "Eligible
Employee"). An individual's employment with Parisian or a
Parisian Affiliate prior to February 1, 1997 will be treated as
employment with an Employer under this Plan. Employment with any
other organization prior to February 1, 1997 that was counted
under the Parisian Plan will also be treated as employment with
an Employer under this Plan. February 1, 1997 will be a special
Entry Date for purposes of this Plan, and each Eligible Employee
of Parisian or a Parisian Affiliate on February 1, 1997 will
automatically become a Participant in this Plan as of that date.
Each Employee of Parisian or a Parisian Affiliate who either is
hired after that date or first satisfies the age and service
requirements of Section 2.01 after that date will become a
Participant in this Plan as described in Article 2.
(b) MERGER OF PLANS. The Parisian Plan will be merged into this Plan
as of January 31, 1997 (the "Merger Date") and continued in the
form of this Plan. The merger of the Parisian Plan into this Plan
and the resulting transfer of assets will be made in accordance
with sections 401(a)(12) and 414(l) of the Code and the
regulations thereunder.
(c) TRANSFER OF ASSETS. The assets of the Trust Fund for the Parisian
Plan will be transferred to the Trustee of this Plan on or as
soon as practicable after the Merger Date.
(d) TRANSFER OF ACCOUNT BALANCES. All Accounts maintained under the
Parisian Plan on January 31, 1997 for Participants and
Beneficiaries of the Parisian Plan will be adjusted as of that
date in accordance with the provisions of the Parisian Plan. The
net credit balances in such Accounts as adjusted as of January
31, 1997 will be transferred to this Plan and credited as of the
Merger Date in such manner as the Committee shall determine. In
addition, the Accounts of any former Participants of the Parisian
Plan which are required to be restored after January 31, 1997,
shall be credited in the same manner as described in the
preceding sentence.
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(e) VESTING OF TRANSFERRED ACCOUNTS. The accounts transferred from
the Parisian Plan attributable to "Elective Deferrals,"
"Qualified Matching Contributions," "Qualified Nonelective
Contributions," "Rollover Contributions" and "Thrift
Contributions" shall be one hundred percent (100%) vested at all
times. The accounts transferred from the Parisian Plan
attributable to "Employer Contributions" shall be subject to the
vesting schedule of Section 8.01, that applies to the Matching
Account.
(f) DISTRIBUTION OF ACCOUNT BALANCES. Any Participant or Beneficiary
who has a transferred account established under Section 13.02(d)
shall be allowed to elect distribution of his vested Account
under the Plan in such manner or form as they could have elected
under the terms of the Parisian Plan as in effect immediately
prior to the Merger Date.
(g) LOANS. Any loans that had previously been made to Participants
under the Parisian Plan and that remain outstanding on the Merger
Date will be maintained on and after that date under this Plan
until all amounts of principal and interest thereon have been
repaid, or, in the event of default, recovered, pursuant to the
terms of the documents evidencing such loans and the provisions
of the Participant loan program established under the Parisian
Plan.
(h) INSURANCE POLICIES. This Plan does not permit any Account to be
applied to purchase an insurance policy. However, this Plan shall
permit the transfer of certain insurance policies from the
Parisian Plan. Such insurance policies shall be liquidated as
soon after such transfer as administratively feasible.
(i) MATCHING CONTRIBUTIONS. The Matching Contribution for 1997 that
is made pursuant to Sections 3.01(a) and 4.01(b) on behalf of
each Participant who was a participant in the Parisian Plan
during the month of January 1997, shall be based upon that
Participant's Compensation as defined in Section 1.08 for the
full calendar year of 1997 and shall be based on all Salary
Deferral Contributions made under this Plan and "Elective
Deferrals" made under the Parisian Plan for calendar year 1997.
13.03 YOUNKERS ASSOCIATE PROFIT SHARING AND SAVINGS PLAN.
Younkers, Inc. ("Younkers") and certain of its affiliates ("Younkers
Affiliates") will adopt this Plan and become Adopting Employers under
this Plan effective as of February 1, 1997, for the benefit of their
eligible employees, and the Younkers Associate Profit Sharing and
Savings Plan (the "Younkers Plan") will be merged into this Plan as
described below.
(a) PARTICIPATION. Effective as of February 1, 1997, this Plan will
be extended to each individual employed by Younkers or a Younkers
Affiliate on February 1, 1997, and who was eligible to
participate in the Younkers Plan on that date (each an "Eligible
Employee"). An individual's employment with Younkers or a
Younkers Affiliate prior to February 1, 1997 will be treated as
employment with an Employer under this Plan. Employment with any
other organization prior to February 1, 1997 that was counted
under the Younkers Plan (specifically including employment with
Shoe Corporation of America for Employees who became Younkers
Employees in 1996) will also be treated as employment with an
Employer under this Plan. February 1, 1997 will be a special
Entry Date for purposes of this Plan, and each Eligible Employee
of Younkers or a Younkers Affiliate on February 1, 1997 will
automatically become a Participant in this Plan as of that date.
Each Employee of Younkers or a Younkers Affiliate who either is
hired after that date or first satisfies the age
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<PAGE> 58
and service requirements of Section 2.01 after that date will
become a Participant in this Plan as described in Article 2.
(b) MERGER OF PLANS. The Younkers Plan will be merged into this Plan
as of January 31, 1997 (the "Merger Date") and continued in the
form of this Plan. The merger of the Younkers Plan into this Plan
and the resulting transfer of assets will be made in accordance
with sections 401(a)(12) and 414(l) of the Code and the
regulations thereunder.
(c) TRANSFER OF ASSETS. The assets of the Trust Fund for the Younkers
Plan will be transferred to the Trustee of this Plan on or as
soon as practicable after the Merger Date.
(d) TRANSFER OF ACCOUNT BALANCES. All Accounts maintained under the
Younkers Plan on January 31, 1997 for Participants and
Beneficiaries of the Younkers Plan will be adjusted as of that
date in accordance with the provisions of the Younkers Plan. The
net credit balances in such Accounts as adjusted as of January
31, 1997 will be transferred to this Plan and credited as of the
Merger Date in such manner as the Committee shall determine. In
addition, the Accounts of any former Participants of the Younkers
Plan which are required to be restored after January 31, 1997,
shall be credited in the same manner as described in the
preceding sentence.
(e) VESTING OF TRANSFERRED ACCOUNTS. The accounts transferred from
the Younkers Plan attributable to "Salary Deferral
Contributions," "Matching Contributions," "Rollover
Contributions" and "Participant Voluntary Contributions" shall be
one hundred percent (100%) vested at all times. The accounts
transferred from the Younkers Plan attributable to "Profit
Sharing Contributions" shall be vested at the greater of (i) the
vesting percentage under the Younkers Plan as of January 31,
1997, and (ii) the vesting percentage that applies to Matching
Contributions under Section 8.01 of this Plan.
(f) DISTRIBUTION OF ACCOUNT BALANCES. Any Participant or Beneficiary
who has a transferred account established under subsection
13.03(d) shall be allowed to elect distribution of his vested
Account under the Plan in such manner or form as they could have
elected under the terms of the Younkers Plan as in effect
immediately prior to the Merger Date. The installment option will
be available for all accounts of such Participants. Terminated or
retired Participants in the Younkers Plan on the Merger Date with
Accounts that are transferred to this Plan shall have the further
option of electing partial lump sums at the times and in the
amounts selected by said Participant. The Committee may establish
rules for the payment of such partial lump sums, and may direct
that expenses associated with the payment of such partial lump
sums be charged against the Accounts of said Participants.
(g) REIMBURSEMENT OF SURRENDER CHARGES AND MARKET VALUE ADJUSTMENTS.
The Employer is expressly permitted to make a contribution to the
Plan to reimburse the Accounts of Participants which were charged
with a surrender charge or market value adjustment as a result of
the liquidation of assets immediately prior to the plan merger.
Such contribution, if made, shall be credited to the Accounts of
affected Participants in proportion to the surrender charge or
market value adjustment that was charged to their Account, and
shall be treated as a reimbursement of expenses and not as an
Employer contribution for purposes of the Plan.
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(h) EXEMPTION FROM EXCLUDED CLASS. Notwithstanding the provisions of
Section 2.01 hereof, Eligible Employees as defined in subsection
(a) above who are represented by a collective bargaining unit on
the Merger Date shall not be considered as being in an excluded
class solely as a result of being represented by a collective
bargaining unit.
(i) AMOUNTS AVAILABLE FOR HARDSHIP. The transferred Matching Account
shall be included in the determination of amounts available for
hardship withdrawal pursuant to Section 5.03 hereof.
13.04 G.R. HERBERGER'S INC. 401(k) EMPLOYEE STOCK PURCHASE PLAN AND EMPLOYEE
STOCK OWNERSHIP PLAN.
G. R. Herberger's, Inc. ("Herberger's") will adopt this Plan and become
an Adopting Employer under this Plan effective as of January 1, 1998,
for the benefit of its eligible employees, and the portion of the G. R.
Herberger's, Inc. 401(k) Employee Stock Purchase Plan and Employee
Stock Ownership Plan attributable to a participant's elective deferral
contributions and matching contributions will be spun-off into a
separate plan (the "Herberger's Plan") and will be merged into this
Plan as described below.
(a) PARTICIPATION. Effective as of January 1, 1998, this Plan will be
extended to each individual employed by Herberger's on January 1,
1998, and who was eligible to participate in the Herberger's Plan
on that date (each an "Eligible Employee"). An individual's
employment with Herberger's prior to January 1, 1998 will be
treated as employment with an Employer under this Plan.
Employment with any other organization prior to January 1, 1998
that was counted under the Herberger's Plan will also be treated
as employment with an Employer under this Plan. Each Eligible
Employee of Herberger's on January 1, 1998 will automatically
become a Participant in this Plan as of that date. Each Employee
of Herberger's who either is hired after that date or first
satisfies the age and service requirements of Section 2.01 after
that date will become a Participant in this Plan as described in
Article 2.
(b) MERGER OF PLANS. The Herberger's Plan will be merged into this
Plan as of midnight on December 31, 1997 (the "Merger Date") and
continued in the form of this Plan. The merger of the Herberger's
Plan into this Plan and the resulting transfer of assets will be
made in accordance with sections 401(a)(12) and 414(l) of the
Code and the regulations thereunder.
(c) TRANSFER OF ASSETS. The assets of the Trust Fund for the
Herberger's Plan will be transferred to the Trustee of this Plan
on or as soon as practicable after the Merger Date.
(d) TRANSFER OF ACCOUNT BALANCES. All Accounts maintained under the
Herberger's Plan on December 31, 1997 for Participants and
Beneficiaries of the Herberger's Plan will be adjusted as of that
date in accordance with the provisions of the Herberger's Plan.
The net credit balances in such Accounts as adjusted as of
December 31, 1997 and as further adjusted between that date and
the actual date of transfer of the assets, will be transferred to
this Plan and credited as of the transfer date in such manner as
the Committee shall determine. In addition, the Accounts of any
former Participants of the Herberger's Plan which are required to
be restored after December 31, 1997, shall be credited in the
same manner as described in the preceding sentence.
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(e) VESTING OF TRANSFERRED ACCOUNTS. The accounts transferred from
the Herberger's Plan attributable to "Salary Deferral
Contributions" and "Rollover Contributions" shall be one hundred
percent (100%) vested at all times. The accounts transferred from
the Herberger's Plan attributable to "Matching Contributions"
shall be vested at the greater of (i) the vesting percentage
under the Herberger's Plan as of December 31, 1997, and (ii) the
vesting percentage that applies to Matching Contributions under
Section 8.01 of this Plan.
(f) DISTRIBUTION OF ACCOUNT BALANCES. Any Participant or Beneficiary
who has a transferred account established under subsection 13.04
(d) shall be allowed to elect distribution of his vested Account
under the Plan in such manner or form as they could have elected
under the terms of the Herberger's Plan as in effect immediately
prior to the Merger Date. The installment option and in-kind
distribution option will be available for all accounts of such
Participants. Terminated or retired Participants in the
Herberger's Plan on the Merger Date with Accounts that are
transferred to this Plan shall have the further option of
electing partial lump sums at the times and in the amounts
selected by said Participant. The Committee may establish rules
for the payment of such partial lump sums, and may direct that
expenses associated with the payment of such partial lump sums be
charged against the Accounts of said Participants.
13.05 BRODY BROTHERS DRY GOODS COMPANY, INC. 401(k) PROFIT SHARING PLAN.
Brody Brothers Dry Goods Company, Inc. ("Brody") was acquired by the
Sponsor. Most employees of Brody became employees of Proffitt's, Inc.
shortly after the acquisition. The Brody Brothers Dry Goods Company,
Inc. 401(k) Profit Sharing Plan (the "Brody Plan") shall be merged into
this Plan as described below.
(a) PARTICIPATION. A person employed by Brody on May 23, 1998 who
became an Employee of Proffitt's, Inc. on or after May 24, 1998
and before June 28, 1998 pursuant to the acquisition of Brody's
by Proffitt's, Inc. shall be allowed to enter the Plan
immediately provided he has satisfied the age and service
requirements of Section 2.01. An individual's employment with
Brody prior to May 24, 1998 will be treated as employment with an
Employer under this Plan. Employment with any other organization
prior to May 24, 1998 that was counted under the Brody Plan will
also be treated as employment with an Employer under this Plan.
The date such person becomes an Employee of the Employer will be
a special Entry Date for purposes of this Plan.
(b) MERGER OF PLANS. The Brody Plan will be merged into this Plan as
of July 31, 1998 (the "Merger Date") and continued in the form of
this Plan. The merger of the Brody Plan into this Plan and the
resulting transfer of assets will be made in accordance with
sections 401(a)(12) and 414(l) of the Code and the regulations
thereunder.
(c) TRANSFER OF ASSETS. The assets of the Trust Fund for the Brody
Plan will be transferred to the Trustee of this Plan on or as
soon as practicable after the Merger Date.
(d) TRANSFER OF ACCOUNT BALANCES. All Accounts maintained under the
Brody Plan on July 31, 1998 for Participants and Beneficiaries of
the Brody Plan will be adjusted as of that date in accordance
with the provisions of the Brody Plan. The net credit balances in
such Accounts as adjusted as of July 31, 1998 will be transferred
to this Plan and credited as of the Merger Date in such manner as
the Committee shall determine. In addition, the
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Accounts of any former Participants of the Brody Plan which are
required to be restored after July 31, 1998, shall be credited in
the same manner as described in the preceding sentence.
(e) VESTING OF TRANSFERRED ACCOUNTS. The accounts transferred from
the Brody Plan attributable to "Elective Contributions," shall be
one hundred percent (100%) vested at all times. The accounts
transferred from the Brody Plan attributable to "Matching
Contributions" shall be subject to the vesting schedule of
Section 8.01, that applies to the Matching Account. The accounts
transferred from the Brody Plan attributable to "Discretionary
Non-Elective Contributions" shall be subject to the following
vesting schedule:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
less than 3 0%
3 20%
4 40%
5 or more 100%
</TABLE>
(f) DISTRIBUTION OF ACCOUNT BALANCES. Any Participant or Beneficiary
who has a transferred account established under Section 13.05(d)
shall be allowed to elect distribution of his vested Account
under the Plan in such manner or form as he could have elected
under the terms of the Brody Plan as in effect immediately prior
to the Merger Date.
(g) LOANS. Any loans that had previously been made to Participants
under the Brody Plan and that remain outstanding on the Merger
Date will be maintained on and after that date under this Plan
until all amounts of principal and interest thereon have been
repaid, or, in the event of default, recovered, pursuant to the
terms of the documents evidencing such loans and the provisions
of the Participant loan program established under the Brody Plan.
13.06 MERCANTILE TRANSFERS.
This Section will describe the special rules applicable to the accounts
of Mercantile Employees, as defined below.
(a) DEFINITIONS. The following terms shall have the meanings set
hereinafter.
(1) "GAYFER PLAN" shall mean the C. J. Gayfer Company, Inc.
Savings and Profit Sharing Plan.
(2) "HAIR SALON EMPLOYEE" shall mean a former employee of
Mercantile who became an Employee of the Employer on or
before February 6, 1999, as a result of being hired by the
Employer from one of the hair and nail salons of the
Mercantile Stores, and who is not a Mercantile Store
Employee.
(3) "MERCANTILE" shall mean Mercantile Stores Company, Inc. or
one of its affiliates.
(4) "MERCANTILE EMPLOYEE" shall mean an individual who is
either a Mercantile Store Employee or a Hair Salon
Employee.
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<PAGE> 62
(5) "MERCANTILE PLAN" shall mean the Mercantile Stores
Savings, Profit Sharing and Supplemental Retirement Plan.
(6) "MERCANTILE STORE EMPLOYEE" shall mean a former employee
of Mercantile who became an Employee of the Employer
directly as a result of the Employer's acquisition of the
Mercantile Stores.
(7) "MERCANTILE STORES" shall mean former Mercantile stores
acquired by the Employer on or about October 3, 1998, and
a former Dillard's, Inc. store acquired by the Employer on
or about December 1, 1998.
(8) "TRANSFER ACCOUNTS" shall mean the accounts transferred
directly from the Mercantile Plan and/or the Gayfer Plan
at the direction of the plan administrator(s) and/or
trustee(s) of such plan(s) in the form of direct
trustee-to-trustee transfers. Transfers wherein the
participants were given the option of receiving
distributions from the Mercantile Plan and/or the Gayfer
Plan shall be treated as Rollover Contributions pursuant
to Section 3.02(b) hereof, and shall not be treated as
Transfer Accounts.
(9) "TRANSFER DATE" shall mean, for a Mercantile Employee, the
date or dates on which such Mercantile Employee's Transfer
Accounts were transferred from the Mercantile Plan and/or
the Gayfer Plan to this Plan.
(b) PARTICIPATION. The participation of Mercantile Employees in this
Plan shall be determined pursuant to this subsection (b).
(1) MERCANTILE STORE EMPLOYEES. Except as otherwise provided
herein, Mercantile Store Employees who were eligible to
participate in the Mercantile Plan on the day before such
individuals became Employees of the Employer shall be
eligible to participate in this Plan on the date that such
individuals became Employees of the Employer. The dates
that such individuals became Employees of the Employer
will be special Entry Dates for purposes of this Plan.
Notwithstanding the foregoing, Mercantile Store Employees
at the Cortana Mall store in Baton Rouge, Louisiana, who
were eligible to participate in the Mercantile Plan on the
day before such individuals became Employees of the
Employer shall be eligible to participate in the Plan on
January 1, 1999. Mercantile Store Employees who were not
eligible to participate in the Mercantile Plan on the day
before such individuals became Employees of the Employer
shall be eligible to participate as provided in Section
2.01 of the Plan.
(2) HAIR SALON EMPLOYEES. Hair Salon Employees shall be
eligible to participate as provided in Section 2.01 of the
Plan.
(c) PRIOR SERVICE. Except as otherwise provided herein, employment of
a Mercantile Employee with Mercantile shall be counted as Service
under this Plan for all purposes. For an individual who was a
participant in the Mercantile Plan on the day prior to the date
such individual became an Employee of the Employer, Vesting
Service under this plan for such prior period of employment shall
equal the years of vesting service for such period determined
under the rules of the Mercantile Plan. Notwithstanding the
foregoing, such
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<PAGE> 63
prior service shall be disregarded in determining eligibility for
participation under this Plan for Hair Salon Employees.
(d) TRANSFER OF ASSETS AND ACCOUNT BALANCES. The Transfer Accounts of
Mercantile Employees, and the assets associated with such
Transfer Accounts, shall be transferred from the Mercantile Plan
and/or the Gayfer Plan to this Plan as soon as administratively
feasible after the plan administrator(s) and/or trustee(s) of
such plan(s) direct that the transfers be made. Such transfers
shall be in the form of direct trustee-to-trustee transfers, and
shall be credited to Accounts in this Plan in such manner as the
Committee shall determine.
(e) VESTING OF TRANSFER ACCOUNTS. The Transfer Accounts which were
automatically one hundred percent (100%) vested under The
Mercantile Plan and/or the Gayfer Plan shall be one hundred
percent (100%) vested under this Plan. The Transfer Accounts
which were not automatically one hundred percent (100%) vested
under such plans shall be subject to the following vesting
schedule:
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Percentage
--------------- ----------
<S> <C>
less than 3 0%
3 20%
4 40%
5 or more 100%
</TABLE>
(f) DISTRIBUTION OF ACCOUNT BALANCES. Any Participant or Beneficiary
who has a Transfer Account established under Section 13.06(d)
shall be allowed to elect distribution of all of his vested
Accounts under the Plan in such manner or form as he could have
elected under the terms of the Mercantile Plan and/or the Gayfer
Plan as in effect immediately prior to the Transfer Date.
(g) LOANS. Any loans that had previously been made to Participants
under the Mercantile Plan that remain outstanding on the Transfer
Date and that were transferred to this Plan as part of a Transfer
Account will be maintained on and after that date under this Plan
pursuant to the terms of the documents evidencing such loans and
the provisions of the loan program established under the
Mercantile Plan.
13.07 EMPLOYEES WHO TRANSFER FROM THE SAKS FIFTH AVENUE DIVISION
This Section, to be effective on the date this document is executed,
will describe the special rules applicable to individuals who become
Employees of the Employer as a result of transferring employment from
the Saks Fifth Avenue Division.
(a) SERVICE. For individuals covered by this Section, employment with
any company in the Saks Fifth Avenue Division will be treated as
employment with the Employer and will be counted as Service under
the Plan.
(b) PARTICIPATION. The date of transfer for such an individual shall
be treated as an Entry Date for such individual pursuant to
Section 1.16 hereof, and such individual will be immediately
eligible to participate in this Plan on such Entry Date, provided
the conditions described in Section 2.01 hereof have been
satisfied as of the transfer date.
(c) ACCOUNTS NOT TO BE TRANSFERRED. The accounts of such individuals
in the 401(k) plan of any company in the Saks Fifth Avenue
Division will not be transferred to this Plan as a trustee to
trustee transfer.
13-8
<PAGE> 64
ARTICLE 14
PROVISIONS APPLICABLE TO A TOP HEAVY PLAN
14.01 TOP HEAVY PLANS.
The provisions of this article are designed to meet the requirements of
section 416 of the Code and shall automatically supersede any
conflicting provisions in the Plan in every Plan Year in which this
Plan is or becomes a Top Heavy Plan. Provided, however, that if the
provisions of this article are in conflict with final regulations
issued by the Secretary of the Treasury with respect to Top Heavy
Plans, then such final regulations shall supercede the provisions of
this article to the extent not otherwise specifically prohibited by
law.
14.02 DEFINITIONS.
For purposes of this article, and only this article, unless a term
defined in this article is the subject of explicit reference elsewhere
in the Plan, the following terms when used herein, unless the context
clearly indicates otherwise, shall have the meanings set forth
hereinafter:
(a) "COMPENSATION" shall mean, for each Employee, Compensation as
that term is defined in Section 4.04 of the Plan, plus, for 1997,
amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the employee's
gross income under section 125, section 402(e)(3), section
402(h)(1)(B) or section 403(b) of the Code. However,
"Compensation" shall not include compensation in excess of the
applicable dollar limits in Section 1.08(c) hereof.
(b) "DETERMINATION DATE" shall mean, with respect to any Plan Year
subsequent to the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the Determination
Date shall be the last day of such Plan Year.
(c) "KEY EMPLOYEE" shall mean any Employee or former Employee (or
Beneficiary of such Employee) who, at any time during the
determination period, was (i) an officer of the Employer having
an annual Compensation greater than fifty percent (50%) of the
maximum dollar limitation in effect under section 415(b)(1)(A) of
the Code for any such Plan Year, (ii) an owner of one (1) of the
ten (10) largest interests in the Employer if such interest is
greater than one-half percent (1/2%) and such individual's
Compensation exceeds the maximum dollar limitation under section
415(c)(1)(A) of the Code, (iii) a five percent (5%) or more owner
of the Employer or (iv) a one percent (1%) or more owner of the
Employer who has an annual Compensation of more than one hundred
and fifty thousand dollars ($150,000). The term "determination
period" shall mean the Plan Year containing the Determination
Date and the four (4) preceding Plan Years. The determination of
who is a Key Employee shall be made in accordance with section
416(i)(1) of the Code and regulations thereunder. For purposes
hereof, the term "officer" shall mean an administrative executive
who is in regular and continued service. An Employee who merely
has the title of an officer, but not the authority of an officer,
is not to be considered an officer hereunder. Furthermore, for
purposes hereof, at any time during a determination
14-1
<PAGE> 65
period, no more than fifty (50) Employees of all members of a
Controlled Group, or, if lesser, the greater of three (3)
individuals or ten percent (10%) of such Employees, shall be
treated as officers hereunder. The officers subject to these
preceding limitations shall be comprised of the individual
officers selected from the group of all individuals who were
officers in the current Plan Year of the determination period or
any of the four (4) preceding Plan Years in the determination
period, who had the largest average annual compensation
throughout the total of those five (5) Plan Years in the
determination period. For purposes of (ii) herein, if two (2)
employees have the same interest in the Employer, the Employee
having the greater annual Compensation (without regard to the
dollar limitation of Section 14.02(a) hereof) from the Employer
shall be treated as having a larger interest. Likewise, for
purposes hereof, the term "owner" shall mean an individual
considered to be an owner within the meaning of section 318 of
the Code; provided, however, that subparagraph (c) of section
318(a)(2) shall be applied by substituting "5 percent" for "50
percent".
(d) "NON-KEY EMPLOYEE" shall mean any Employee who is not a Key
Employee.
(e) "PERMISSIVE AGGREGATION GROUP" shall mean the Required
Aggregation Group of plans plus any other plan or plans of the
Employer, as selected by the Employer, which, when considered as
a group with the Required Aggregation Group, would continue to
satisfy the requirements of sections 401(a)(4) and 410 of the
Code.
(f) "PRESENT VALUE" shall mean, if the Employer also now or ever
maintains a qualified defined benefit pension plan, the present
value of a benefit based only on the interest and mortality rates
specified in that plan.
(g) "REQUIRED AGGREGATION GROUP" shall mean as follows:
(1) each qualified plan of the Employer in which at least one
(1) Key Employee participates or participated at any time
during the determination period (regardless of whether or
not the plan terminated), and
(2) any other qualified plan of the Employer which enables a
plan described in the preceding subsection (1) to meet the
requirements of sections 401(a)(4) or 410 of the Code.
(h) "SUPER TOP HEAVY PLAN" shall mean, for any Plan Year, the Plan if
it would be a Top Heavy Plan under Section 14.02(i) hereof if the
words "ninety percent (90%)" were substituted for the words
"sixty percent (60%)" in Section 14.02(i) hereof.
(i) "TOP HEAVY PLAN" shall mean, for any Plan Year, the Plan if any
of the following conditions exists.
(1) If the Top Heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any Required
Aggregation Group or Permissive Aggregation Group of
plans.
(2) If this Plan is a part of a Required Aggregation Group of
plans, but not part of a Permissive Aggregation Group, and
the Top Heavy Ratio for the Required Aggregation Group of
plans exceeds sixty percent (60%).
14-2
<PAGE> 66
(3) If this Plan is a part of a Required Aggregation Group and
also is a part of a Permissive Aggregation Group of plans,
and the Top Heavy Ratio for the Permissive Aggregation
Group exceeds sixty percent (60%).
(j) "TOP HEAVY RATIO" shall mean as follows.
(1) If the Employer maintains one (1) or more defined
contribution plans (including any simplified employee
pension plan under section 408(k) of the Code), and the
Employer has never maintained any defined benefit plan
which has covered or could cover a Participant in this
Plan, then the Top Heavy Ratio is a fraction, the
numerator of which is the sum of the account balances of
all Key Employees as of the Determination Date (including
any part of any account balance distributed in the five
(5) year period ending on the Determination Date), and the
denominator of which is the sum of all account balances
(including any part of any account balance distributed in
the five (5) year period ending on the Determination Date)
of all Participants as of the Determination Date. Both the
numerator and denominator of the Top Heavy Ratio are
adjusted to reflect any contribution which is due but
unpaid as of the Determination Date.
(2) If the Employer maintains one (1) or more defined
contribution plans (including any simplified employee
pension plan under section 408(k) of the Code), and the
Employer maintains or has maintained one (1) or more
defined benefit pension plans which have covered or could
cover a Participant in this Plan, then the Top Heavy Ratio
is a fraction, the numerator of which is the sum of
account balances under the defined contribution plans for
all Key Employees and the present value of accrued
benefits under the defined benefit pension plans for all
Key Employees, and the denominator of which is the sum of
the account balances under the defined contribution plans
for all Participants and the present value of accrued
benefits under the defined benefit pension plans for all
Participants. Both the numerator and denominator of the
Top Heavy Ratio are adjusted for any distribution of an
account balance or an accrued benefit made in the five (5)
year period ending on the Determination Date and any
contribution due, but unpaid, as of the Determination
Date.
(3) For purposes of the preceding subsections (1) and (2), the
value of account balances and the present value of accrued
benefits shall be determined as of the most recent Top
Heavy Valuation Date that falls within or ends with the
twelve (12) month period ending on the Determination Date.
The account balances and accrued benefits of a Participant
who is a Non-Key Employee, but who was a Key Employee in a
prior year, or who has not been credited with at least one
(1) Hour of Service with any Employer maintaining the Plan
at any time during the preceding five (5) year period
ending on the Determination Date, shall be disregarded.
The calculation of the Top Heavy Ratio, and the extent to
which distributions, rollovers and transfers are taken
into account shall be made in accordance with section 416
of the Code and the regulations thereunder. Distributions
shall include distributions under a terminated plan which
if it had not been terminated would have been included in
the Required Aggregation Group. When aggregating plans,
the value of account balances and accrued benefits shall
be calculated with reference to the determination dates
that fall within the same calendar year.
14-3
<PAGE> 67
(4) The accrued benefit of a Participant other than a Key
Employee shall be determined under (a) the method, if any,
that uniformly applies for accrual purposes under all
defined benefit plans maintained by the employer, or (b)
if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional rule of section 411(b)(1)(C) of the Code.
(k) "TOP HEAVY VALUATION DATE" shall mean, with respect to any Plan
Year, for this Plan, the Determination Date, and shall mean with
respect to any Plan Year for a defined benefit pension plan
maintained by the Employer, if any, the day within the twelve
(12) month period ending on the determination date for such
defined benefit pension plan as of which the actuarial
determination of the minimum funding standard is calculated.
14.03 MINIMUM ALLOCATIONS IN SINGLE PLAN.
Notwithstanding the provisions of Section 4.01 hereof, and before any
contributions are allocated thereunder, minimum Employer Contributions
shall be made and allocated pursuant to this Section in a Plan Year in
which the Plan is a Top Heavy Plan.
(a) The minimum Employer contribution for a Participant who is a
Non-Key Employee for any Plan Year in which the Plan is a Top
Heavy Plan shall not be less than the lesser of (i) three percent
(3%) of his Compensation or (ii) the percentage at which Employer
contributions (including salary deferral contributions and
Employer matching contributions) and Forfeitures are allocated
for the Plan Year in respect of the Key Employee for whom such
percentage is the highest for the Plan Year, taking into account
such Key Employee's Compensation.
This minimum allocation shall be made even though, under other
Plan provisions, the Participant would not otherwise be entitled
to receive an allocation, or would have received a lesser
allocation for the Plan Year because of the following:
(1) the Participant's failure to complete one thousand (1,000)
Hours of Service.
(2) the Participant's failure to make mandatory Employee
contributions, if any, required for participation in the
Plan; or
(3) the Participant's Compensation was less than any stated
required amount.
This subsection shall not apply, however, to any Participant who
was not employed by the Employer on the last day of the Plan
Year.
In determining Employer contributions under this Section,
contributions or benefits under Chapter 2 of the Code (relating
to taxes on self-employed income), Chapter 21 of the Code
(relating to the Federal Insurance Contribution Act) or any other
Federal or State laws (including Title II of the Social Security
Act) shall not be taken into account. In determining Employer
contributions under this Section for a Non-Key Employee, Salary
Deferral Contributions and Employer Matching Contributions needed
to satisfy the actual contribution percentage nondiscrimination
test pursuant to Section 3.04 or the actual deferral percentage
nondiscrimination test pursuant to Section 3.03 shall not be
taken into account.
14-4
<PAGE> 68
The minimum allocations required hereunder (to the extent
required to be nonforfeitable under section 416(b) of the Code)
shall not be forfeitable under sections 411(a)(3)(B) (regarding
the suspension of benefits upon reemployment of a retiree) or
411(a)(3)(D) (regarding withdrawal of mandatory contributions) of
the Code.
(b) Any Employer contributions remaining unallocated shall be
allocated pursuant to the provisions of Section 4.01 hereof;
provided, however, that all allocations under the Plan pursuant
to Section 4.01 shall be determined with respect to Compensation
as that term is defined in Section 1.08 hereof, but subject to
the dollar limitations set forth in Section 1.08(c) hereof.
14.04 MINIMUM VESTING SCHEDULES.
Notwithstanding the provisions of Section 8.01 hereof, the
nonforfeitable interest of each Participant in his Employer Account in
a Plan Year in which this Plan is a Top Heavy Plan shall be the vested
percentage set forth in the following table (or the vested percentage
determined in accordance with Section 8.01, if greater):
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Percentage
--------------- ----------
<S> <C>
Less than 3 0%
3 or more 100
</TABLE>
If the vesting schedules under the Plan shift in or out of the
preceding schedule for any Plan Year because of a change in the Plan's
Top Heavy status, then such shift shall be considered an amendment to
the relevant vesting schedule and the election rule for Participants
with three (3) or more years of Service set forth in Section 11.01(d)
hereof shall apply. Furthermore, any contributions that become
nonforfeitable under this minimum vesting schedule for a Top Heavy Plan
shall remain nonforfeitable if the Plan shifts out of Top Heavy status.
The minimum vesting schedule applies to all benefits within the meaning
of section 411(a)(7)(A) of the Code (except those attributable to
voluntary Participant contributions, if any), including benefits
accrued before the effective date of section 416 of the Code and
benefits accrued before the Plan became a Top Heavy Plan. Further, no
reduction in nonforfeitable benefits may occur in the event the Plan's
status as a Top Heavy Plan changes for any Plan Year. However, this
section does not apply to the account balances of any Participant who
does not have an hour of Service after the Plan has initially become a
Top Heavy Plan, and the nonforfeitable percentage and such
Participant's Employer Account shall be determined without regard to
this section.
14.05 SPECIAL LIMITATIONS AND ALLOCATION IN MULTIPLE PLANS.
If for any Plan Year the Plan is a Top Heavy Plan, and the Employer
maintains, or has ever maintained, a qualified defined benefit pension
plan which is part of a Required or Permissive Aggregation Group, as
appropriate, then the provisions of this Section shall apply.
If none of the Employer's plans are considered a Super Top Heavy Plan,
then the Employer shall provide each Participant who would receive an
allocation under Section 14.03 hereof and who is
14-5
<PAGE> 69
a participant also in the qualified defined benefit pension plan an
allocation pursuant only to Section 14.03 hereof in lieu of accruing a
benefit that year under the pension plan, but substituting in Section
14.03(a) hereof the term "seven and one-half percent (7-1/2%)" for the
term "three percent (3%)". The Employer shall provide each Participant
who would receive an allocation under Section 14.03 hereof, but who is
not a participant also in the qualified defined benefit pension plan,
an allocation pursuant to Section 14.03 hereof, but substituting in
subsection (a) thereof the term "four percent (4%)" for the term "three
percent (3%)".
If any of the Employer's plans are considered a Super Top Heavy Plan,
then in applying the limitations of Section 4.04 hereof, the term "one
(1)" shall be substituted for the term "one and twenty-five hundredths
(1.25)" in both the defined benefit fraction and the defined
contribution fraction, as such terms are defined in Section 4.04
hereof. Furthermore, the Employer shall provide each Participant who
would receive an allocation under Section 14.03 hereof and who is a
participant also in the defined benefit pension plan an allocation
pursuant only to Section 14.03 hereof in lieu of accruing a benefit
that year under the pension plan, but substituting in Section 14.03(a)
hereof the term "five percent (5%)" for the term "three percent (3%)".
The Employer shall provide each Participant who would receive an
allocation under Section 14.03 hereof, but who is not a participant
also in the defined benefit pension plan, an allocation only pursuant
to Section 14.03 hereof.
14-6
<PAGE> 70
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.01 ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST
ADMINISTRATION.
Each Fiduciary shall have only those specific powers, duties,
responsibilities and obligations as are specifically given it under the
Plan. Each Fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the
provisions of the Plan authorizing or providing for such direction,
information or action. Furthermore, each Fiduciary may rely upon any
such direction, information or action of any other Fiduciary as being
proper under the Plan and is not required to inquire into the propriety
of any such direction, information or action. It is intended that each
Fiduciary shall be responsible for the proper exercise of its own
powers, duties, responsibilities and obligations under the Plan and
shall not be responsible for any act or failure to act of another
Fiduciary. No Fiduciary guarantees the Trust Fund in any manner against
investment loss or depreciation in asset value.
Each Fiduciary shall discharge its duties set forth in the Plan solely
in the interests of the Participants, Retired Participants and their
Beneficiaries:
(a) for the exclusive purpose of:
(1) providing benefits to such persons; and
(2) defraying reasonable expenses of administering the Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct
of an enterprise of a like character and with like aims.
The Plan is intended to operate in compliance with Department of Labor
Regulations section 2550.404c-1 with respect to certain transactions.
To the extent that the Plan is operated in compliance with those
regulations, the Plan Fiduciaries shall have the protections provided
by section 404(c) of the ERISA, specifically that: (a) a Participant
exercising control over the assets in his Account shall not be deemed a
fiduciary by reason of his exercise of such control; and (b) no person
who is otherwise a fiduciary shall be liable for any loss, or by reason
of any breach, which results from such exercise of control.
15.02 ALIENATION OR ASSIGNMENT OF BENEFITS (QDRO's).
The right of any Participant, Retired Participant or Beneficiary in any
benefit or to any payment hereunder or to any segregated account may
not be anticipated, conveyed, assigned, mortgaged or encumbered either
by voluntary or involuntary action or by operation of law nor shall any
such right or interest be in any manner subject to levy, attachment,
execution, garnishment or any other seizure under legal, equitable or
other process, except pursuant to a qualified domestic relations order,
as defined in section 414(p) of the Code, or pursuant to a domestic
relations order entered before January 1, 1985, under which payment of
benefits under that order has
15-1
<PAGE> 71
commenced as of January 1, 1985. Otherwise, such interest in this Plan
shall be payable only in accordance with the provisions hereof;
provided, however, that distributions pursuant to a qualified domestic
relations order may be made without regard to the age or employment
status of the Participant.
15.03 HEADINGS.
The headings and sub-headings of Articles and Sections are included
solely for convenience of reference, and if there be any conflict
between such headings and the text of the Plan, the text shall control.
15.04 CONSTRUCTION OF THE PLAN.
In the construction of the Plan, the masculine gender shall include the
feminine, the feminine gender shall include the masculine, and the
singular shall include the plural, unless the context clearly indicates
otherwise.
15.05 CORRECTION OF ERRORS.
If any error or change in records results in any Participant, Retired
Participant or Beneficiary receiving from the Plan more or less than he
would have been entitled to receive had the records been correct or had
the error not been made, the Plan Administrator, upon discovery of such
error, shall correct the error by adjusting, as far as practicable, the
payments in such a manner that the benefits to which such person was
correctly entitled shall be paid.
15.06 LEGALLY INCOMPETENT.
If any Participant, Retired Participant or Beneficiary is a minor, or
is in the judgment of the Plan Administrator otherwise legally
incapable of personally receiving and giving a valid receipt for any
payment due him hereunder, the Plan Administrator may, unless and until
claim shall have been made by a guardian or conservator of such person
duly appointed by a court of competent jurisdiction, direct that such
payment, or any part thereof, be made to such person or to such
person's spouse, child, parent, brother or sister, or other person
deemed by the Plan Administrator to be a proper person to receive such
payment. Any payment so made shall be, to the extent of the payment, a
complete discharge to the Employer and Trustee of any liabilities under
the Plan.
15.07 SUCCESSOR ORGANIZATION.
In the event of a merger or consolidation of any Employer into, or
transfer of all or substantially all of its assets to, any legal
entity, unincorporated business organization or corporation, provision
may be made by such successor legal entity, unincorporated business
organization or corporation for its election of the continuance of this
Plan as to such successor entity. Such successor shall, upon its
election to continue this Plan, be substituted in place of the
transferor Employer by an instrument duly authorizing such substitution
and duly executed by such Employer and its successor. Upon notice of
such substitution, accompanied by a certified copy of the resolutions
or other appropriate written instrument of the governing body of such
Employer and its successor authorizing such substitution and delivered
to the Trustee, the Trustee shall be authorized to recognize such
successor in place of the transferor Employer.
15-2
<PAGE> 72
15.08 MINIMUM BENEFIT IN SUCCESSOR PLAN.
In the event of any merger or consolidation of the Plan with, or the
transfer of assets or liabilities of the Plan to, any other qualified
plan or trust, each Participant, Retired Participant and Beneficiary
shall be entitled upon termination of the successor plan or trust
immediately after the merger, consolidation or transfer to a benefit in
an amount not less than he would have been entitled to receive if the
Plan had terminated immediately before the merger, consolidation or
transfer.
15.09 APPLICATION OF PLAN PROVISIONS.
The provisions of the Plan shall apply only to Employees who terminate
Service, or incur Breaks in Service, on or after the Effective Date.
15.10 SEVERABILITY OF PROVISIONS.
The provisions of this Plan are severable, and should any provision be
ruled illegal, unenforceable or void, all other provisions not so ruled
shall remain in full force and effect.
15.11 APPLICABLE LAW.
The provisions of this Plan shall be interpreted and construed
according to the laws of the State of Alabama, unless federal law is
exclusively controlling.
15.12 NONASSIGNABILITY OF DUTIES.
Unless provided herein, the duties and responsibilities of the
Fiduciaries of the Plan shall be nonassignable.
15.13 ENTIRE PLAN.
This Plan constitutes the entire qualified profit sharing and section
401(k) plan of the Sponsor, and no modifications or alterations to this
Plan shall be enforceable unless properly and validly made pursuant to
the amendment provisions of Article 11 hereof.
IN WITNESS WHEREOF, the Sponsor has caused the Plan to be executed by
its duly authorized representative on this ------ day of --------------, 1999.
SPONSOR:
SAKS INCORPORATED
Attest: By:
---------------------- -------------------------------------
Title:
----------------------------------
The Plan may be executed in several
counterparts, each of which shall
be deemed an original.
15-3
<PAGE> 1
EXHIBIT 10.56
TRUST AGREEMENT
FOR THE
SAKS INCORPORATED 401(k) RETIREMENT PLAN
<PAGE> 2
TRUST AGREEMENT
FOR THE
SAKS INCORPORATED 401(k) RETIREMENT PLAN
TABLE OF CONTENTS
Establishment 1
1.1 Establishment of Trust............................................1
1.2 Plan Qualification................................................1
1.3 Other Trusts......................................................1
Administration of Trust Fund 2
2.1 General Administration............................................2
2.2 Contributions to Trust............................................2
2.3 Accounts..........................................................2
2.4 Distributions from Trust..........................................2
Investment Direction 3
3.1 Directed Trustee..................................................3
3.2 Named Fiduciary - Investment Direction............................4
3.3 Participant - Investment Direction................................4
3.4 Appointment of Investment Manager.................................4
3.5 Short-Term Investment Pending Instructions........................6
3.6 Securities Lending................................................7
Powers Of Trustee 7
4.1 Directed Powers of the Trustee....................................7
4.2 Discretionary Powers of the Trustee...............................8
4.3 Voting............................................................9
Accountings 10
5.1 Valuation and Reports............................................10
5.2 Approval of Account..............................................10
Compensation, Fees And Expenses 11
6.1 Trustee Compensation.............................................11
6.2 Taxes and Expenses...............................................11
6.3 Method of Payment................................................11
Resignation Or Removal Of Trustee 12
Protection/Limitation On Liability For Trustee 12
8.1 Trustee's Protection.............................................12
8.2 Reliance by Trustee..............................................13
8.3 Absence of Instructions..........................................13
8.4 Indemnification by the Sponsor and Plan Administrator............13
<PAGE> 3
Prohibition Of Diversion 14
Amendment And Termination Of The Trust 15
10.1 Amendment........................................................15
10.2 Termination......................................................15
Miscellaneous Provisions 15
11.1 Nonalienation....................................................15
11.2 Employment.......................................................16
11.3 Certification of Trust Agreement.................................16
11.4 Governing Law....................................................16
11.5 Segregation of Assets............................................16
11.6 Titles...........................................................16
11.7 Counterparts.....................................................17
11.8 Severability.....................................................17
11.9 Written Notice...................................................17
11.10 Confidentiality of Agreement.....................................17
Definitions 17
12.1 "Act"............................................................17
12.2 "Agreement"......................................................17
12.3 "Code"...........................................................17
12.4 "Named Fiduciary"................................................17
12.5 "Participant"....................................................17
12.6 "Participant Loan"...............................................17
12.7 "Plan"...........................................................18
12.8 "Plan Administrator".............................................18
12.9 "Recordkeeper"...................................................18
12.10 "Trust"..........................................................18
12.11 "Trust Fund".....................................................18
12.12 "Trustee"........................................................18
<PAGE> 4
TRUST AGREEMENT
This agreement, made and entered into the _____ day of
________________, 1999, by and between Saks Incorporated (the "Sponsor"), a
corporation having its principal office in Birmingham, Alabama and AmSouth Bank,
an Alabama banking corporation (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Sponsor has duly established the Saks Incorporated 401(k)
Retirement Plan, hereinafter called the "Plan," for certain of its employees and
the employees of other adopting employers and has authorized the creation of a
Trust Fund to be administered under the Plan by the Trustee, to which Trust Fund
contributions are to be made from time to time by the Sponsor and the other
adopting employers, to be used for the exclusive benefit of its said employees
and their successors in interest in accordance with the provisions of the Plan
and as hereinafter set forth; and
WHEREAS, the Trustee is willing to serve as a directed trustee and to
hold and administer such money and other property pursuant to the terms of the
Plan and this Trust Agreement;
NOW, THEREFORE, the Sponsor and the Trustee agree as follows:
ARTICLE I
ESTABLISHMENT
1.1 ESTABLISHMENT OF TRUST.
The Sponsor hereby continues the Trust previously established, which
consists of amounts contributed and/or transferred to the Trustee,
investments and proceeds thereof and earnings thereon, reduced by
payments from the Trust as provided herein. The Trustee, by executing
this Trust Agreement, accepts the Trust and agrees to administer the
Trust as provided herein.
1.2 PLAN QUALIFICATION.
The Sponsor hereby represents that the Plan is qualified under Code
Section 401(a) and agrees to notify the Trustee if it has reason to
believe the Plan has ceased or will cease to be so qualified. Trustee
will have no liability or responsibility for the validity, legal effect
or tax qualification of the Plan.
1.3 OTHER TRUSTS.
Nothing in this Trust Agreement shall prevent the establishment of
other trusts under the Plan.
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ARTICLE II
ADMINISTRATION OF TRUST FUND
2.1 GENERAL ADMINISTRATION.
This Trust Fund shall be a part of the Plan and shall be administered
for the exclusive purposes of providing benefits to Participants, as
defined in the Plan, and their successors in interest and defraying
reasonable expenses of administering the Plan, and shall be
administered in accordance with the provisions of the Plan and of the
Act. The Trustee, by executing this Trust Agreement, agrees to be bound
by the terms of the Plan applicable to it and by the terms of this
agreement. The Sponsor hereby agrees to provide a copy of the Plan
document to the Trustee to notify the Trustee of any amendment to the
Plan and provide a copy of such amendment to the Trustee within fifteen
days of its effective date.
2.2 CONTRIBUTIONS TO TRUST.
The Trustee will accept such cash contributions made by or on behalf of
Participants as it receives from time to time from the Sponsor, and
such assets as are acceptable to the trustee, as may be transferred by
Participants or by the trustee or custodian of another qualified plan
or individual retirement account, if the Plan Administrator, as defined
in the Plan, has certified that such transfer is in accordance with the
Plan.
The Trustee will have no responsibility for determining the time or
amount of any contribution to the Trust or enforcing the collection of
any contribution. Also, the Trustee will have no responsibility for
determining that contributions satisfy any applicable requirement of
the Plan or law, including, but not limited to, the minimum
contribution requirements of Code Sections 412 and 416. Also, the
Trustee will have no responsibility for determining whether the amount
of any contribution (or the portion of such contribution allocated to
the account(s) of a participant) is within any applicable limit,
including, but not limited to, the limits imposed by Code Sections
401(k) and (m), 402(g), 404 and 415. The contribution or transfer of
any amount to the Trustee hereunder constitutes a certification by the
Sponsor and the Plan Administrator that such contribution or transfer
is in accordance with the Plan.
2.3 ACCOUNTS.
The Trustee will maintain such accounts or funds as are necessary for
the Trustee to carry out its responsibilities under the Plan; and the
Trustee will make credits to or charges against such accounts or funds
as provided therein. The Trustee will not maintain records of
individual Participant accounts.
2.4 DISTRIBUTIONS FROM TRUST.
The Trustee shall pay benefits and expenses (other than taxes and
Trustee compensation and expenses) from the Trust Fund only upon the
written direction of the Plan Administrator.
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(a) The Sponsor will certify to the Trustee the identity of the Plan
Administrator (and of any other person authorized to act on
behalf of the Sponsor for purposes of the Plan) and will provide
specimen signatures of the person or persons serving as Plan
Administrator or on behalf of the Sponsor. The Trustee may
assume that the authority of such person or persons continues
unless the Sponsor advises the Trustee otherwise in writing. The
Trustee shall be fully entitled to rely on such directions and
shall be under no duty to ascertain whether the directions are
in accordance with the provisions of the Plan.
(b) If the Plan Administrator has delegated certain functions to a
Recordkeeper, the Plan Administrator may instruct the Trustee to
take directions from such Recordkeeper. The Plan Administrator
will provide specimen signatures of the person or persons
serving as the Recordkeeper. The Trustee may assume that the
authority of such person(s) continues unless the Plan
Administrator advises the Trustee otherwise in writing. The
Trustee shall be fully entitled to rely on directions from the
Recordkeeper and shall be under no duty to ascertain whether the
directions are in accordance with the provisions of the Plan.
(c) Upon receipt of a written notice from the Plan Administrator
certifying that an amount is payable to a Participant, or other
person under the Plan, the Trustee will promptly pay such amount
in accordance with the notice and will be fully protected in so
doing. The Plan Administrator's notice will include all
information necessary to enable the Trustee to make such
payment, including income tax withholding instructions and the
account or accounts or investment fund or funds to be charged
with such payments. The Plan Administrator's giving of a payment
notice constitutes a certification from the Plan Administrator
to the Trustee that such payment is in accordance with the Plan,
that the Plan Administrator has provided the Participant any and
all notices and explanations required by law and that the Plan
Administrator has properly obtained any waivers or consents of
the Participant, the Partner's spouse or other distributee
required by law. The Trustee will have no responsibility for the
application of any payment by the recipient, for determining the
rights or benefits of any person in the Trust or under the Plan,
for the administration of the Plan, or for the adequacy of the
Trust to meet all liabilities arising under the Plan. The
Trustee shall not have any responsibility for calculating or
determining any amount to be distributed to a Participant and/or
for compliance with any applicable requirements for minimum
distributions.
ARTICLE III
INVESTMENT DIRECTION
3.1 DIRECTED TRUSTEE.
The Trustee shall act only as a directed Trustee and shall exercise no
discretion over the investment or distribution of the Trust Fund. The
Trustee shall invest and reinvest the Trust Fund, without distinction
between principal and income, in accordance with investment directions,
as provided in this Article. The Trustee will have no responsibility to
review or question such investment directions or to review any
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investment to be acquired, held or disposed of pursuant to such
investment directions or to make any recommendations with respect to
the disposition or continued retention of any such investment. When
accepting and implementing such investment directions, the Trustee will
have no responsibility or liability for compliance with any applicable
requirements concerning plan investments under the Plan or the Act or
for any loss or diminution in value which results from the choice of
investments for the Trust Fund. Whenever the Trustee is permitted or
required to act upon instructions or directions of a Named Fiduciary,
Plan Administrator, Participant, or investment manager, the Trustee
will have no responsibility or liability for any action taken or
omitted by the Trustee in reliance thereon.
It is understood and agreed by the parties that although the Trustee
will perform certain ministerial and custodial duties with respect to
the assets held in Trust, such duties will be performed in the normal
course by officers and other employees of the Trustee or by such other
person or persons with whom the Trustee has contracted to perform
services for it, all of whom may be unfamiliar with investment
management, and that such duties will not include the exercise of any
discretionary authority or other authority to manage and control assets
comprising the Trust Fund.
3.2 NAMED FIDUCIARY - INVESTMENT DIRECTION.
Subject to Sections 3.3 and 3.4, the Trustee shall invest the Trust
Fund pursuant to the written direction of the Plan's Named Fiduciary to
whom such responsibility has been assigned. The Sponsor will certify to
the Trustee the identity of such Named Fiduciary (and of any other
person authorized to act on behalf of such Named Fiduciary for purposes
of the Plan) and will provide specimen signatures of such person or
persons. The Trustee may assume that the authority of such person or
persons continues unless the Sponsor notifies the Trustee in writing.
The Trustee will not be liable, or obligated to inquire into, the acts
or omissions of such Named Fiduciary.
3.3 PARTICIPANT - INVESTMENT DIRECTION.
If the Plan permits Participants to direct the investment of some or
all of their Plan accounts, the Trustee will invest the Trust Fund
pursuant to the Plan and the Participants' investment directions. Each
Participant shall convey investment instructions to the Plan
Administrator and the Plan Administrator shall transmit those
instructions, in writing, promptly to the Trustee, unless the Sponsor
and the Trustee have agreed, in a separate written agreement, to accept
Participant directed investment instructions from the Recordkeeper of
the Sponsor.
3.4 APPOINTMENT OF INVESTMENT MANAGER.
(a) The Named Fiduciary to whom such responsibility has been
assigned may in writing appoint an investment manager or
managers to assume responsibility for the investment of any
portion or all of the assets of the Trust Fund for such time as
such Named Fiduciary may determine and, unless such power is
reserved to that Named Fiduciary, for directing the Trustee to
vote or refrain from voting any stocks, bonds or other
securities held in the Trust over which the investment manager
has investment responsibility and to exercise or refrain from
exercising
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any rights to subscribe for additional stocks, bonds or other
securities appurtenant to such securities.
Communication of such appointment to the Trustee by a Named
Fiduciary shall constitute an allocation to the investment
manager of fiduciary responsibility for the part of the Trust
Fund subject to its management and control. If the Plan gives a
Participant investment control over the assets in his account,
the Participant may appoint an investment manager; in such a
case, references to the Named Fiduciary in this Section 3.4 will
be deemed to be references to the Participant.
If the Employer's Plan allows Participants to select individual
securities for their own accounts, the Trustee shall implement
the investment transactions of directing Participants through
brokers designated by Participants, or, in the absence thereof,
through brokers of its own choosing, or shall settle
transactions upon receipt of instructions from Participants.
The Trustee shall not be responsible for any loss caused by a
Participant's inaction, or by action upon any notice, direction
or other certification furnished by a Participant pursuant to
Paragraph 3.4 and which the Trustee reasonably believes to be
genuine. The Trustee shall have no duty to review the securities
or other property held in the account of any such Participant or
to make any suggestions or recommendations to any such
Participant with respect to the investment, reinvestment, or
disposition of investments made by any such Participant. The
Trustee shall not be responsible for investment performance
arising from compliance with the instructions of any such
Participant, unless said Participant shall have directed that
monies standing to the credit of his account be invested in a
portfolio or collective fund managed by the Trustee.
(b) The Sponsor shall ascertain and shall certify to the Trustee
that any investment manager appointed hereunder is (i)
registered as an investment adviser under the Investment
Advisers Act of 1940; (ii) a bank, as defined in that Act; or
(iii) an insurance company qualified to perform investment
management services under the laws of more than one state, and
that the instrument or instruments appointing an investment
manager and evidencing the investment manager's acceptance of
such appointment contains an acknowledgment by the investment
manager that it is a fiduciary with respect to the Plan.
(c) The investment manager(s) will have sole responsibility for the
investment and, unless reserved to a Named Fiduciary, the voting
and subscription action of the portion of the Trust Fund under
its or their respective management and the Trustee shall take
such action only upon the proper instructions of the Investment
Manager. The Trustee will not be liable, or obligated to inquire
into, the acts or omissions of any investment manager appointed
hereunder.
If directed by the Sponsor, the Trustee shall charge
compensation of an Investment Manager and any expenses related
to investments directly by an Investment Manager against such
accounts. The Trustee shall not be responsible for determining
the reasonableness of any compensation paid to or agreed to be
paid to an Investment Manager.
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The Trustee shall not be responsible for any loss caused by its
acting upon any notice, direction or certification of any
Investment Manager appointed by the Sponsor which the Trustee
reasonably believes to be genuine. The Trustee shall have no
duty to question any direction, action or inaction of any
Investment Manager. The Trustee shall have no duty to review the
securities or other property held in any investment manager
account or to make any suggestions to any Investment Manager or
to the Sponsor with respect to the investment, reinvestment, or
disposition of investments in any investment manager account.
The Trustee shall not be responsible for investment performance
arising from its compliance with the instructions of any
Investment Manager.
(d) The investment manager shall from time to time certify to the
Trustee the name of the person or persons authorized to act on
behalf of the investment manager hereunder, and furnish the
Trustee a specimen of the signature of any such person. Any
person so certified shall be deemed to be the authorized
representative of the investment manager. When any person so
certified shall cease to have authority to act on behalf of the
investment manager, the investment manager shall promptly give
notice to that effect to the Trustee. Until such notice is
received by the Trustee, such person shall continue to be an
authorized representative.
(e) All directions to the Trustee by the investment manager shall be
in writing (provided that the Trustee may, in its discretion,
accept oral directions subject to confirmation in writing) and
shall be signed by an authorized representative of the
investment manager (as described above). Notwithstanding
anything herein to the contrary, the Trustee shall be fully
protected in acting in accordance with the following types of
directions, to the same extent as if such directions were given
by the investment manager in writing: (i) directions with
respect to securities transactions (including, without
limitation, the affirmation and/or confirmation of such
transactions) received by it through a system or arrangement for
the coordination of securities transaction settlements operated
by any central securities depository, securities clearing
organization, or book-entry system which serves to link
investment managers, securities brokers, and custodian banks;
and (ii) directions (including, without limitation, the
affirmation and/or confirmation of transactions) received by the
Trustee through authenticated telecommunications facilities,
including, without limitation, communications effected directly
between electronic devices, provided that the Trustee and the
investment manager have agreed that such procedures afford
adequate safeguards. The investment manager's directions may be
given as standing instructions.
(f) If an investment manager resigns or is removed by the Named
Fiduciary, the Named Fiduciary will promptly notify the Trustee
and that portion of the Trust Fund will again be invested
pursuant to Section 3.2 or 3.3 hereof until another investment
manager has been appointed with respect to such portion of the
Trust Fund.
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3.5 SHORT-TERM INVESTMENT PENDING INSTRUCTIONS.
In the event the Trustee fails to receive direction with respect to the
investment of any cash contribution or any cash pending investment,
distribution or payment of expenses, the Trustee shall invest such cash
in a fund designated by the Trustee.
3.6 SECURITIES LENDING.
The Named Fiduciary or, if an investment manager has been appointed,
the investment manager, (hereinafter the "Appointing Fiduciary") may
appoint the Trustee as securities lending fiduciary, if the Trustee
consents to such appointment, to establish, manage and administer a
securities lending program on behalf of the Trust Fund, pursuant to
which the Trustee shall have authority to cause any or all securities
held in the Trust Fund (excluding securities held in any portion of the
Trust Fund which the Appointing Fiduciary identifies in writing to the
Trustee as not being eligible to participate in said program) to be
lent to such one or more borrowers as the Trustee shall determine, in
accordance with Prohibited Transaction Class Exemption 81-6. The
Appointing Fiduciary shall enter into a written agreement with the
Trustee setting forth the terms and conditions of the Trustee's
appointment, including without limitation the compensation to be paid
to the Trustee for its services with respect to such securities lending
program.
ARTICLE IV
POWERS OF TRUSTEE
4.1 DIRECTED POWERS OF THE TRUSTEE.
The Trustee shall have the following powers and authority in the
administration of the Trust; provided, however, that such powers and
authority shall be exercised by the Trustee only upon the receipt of
direction as provided in Article III:
(a) to deal with all or any part of the Trust assets, including the
power to acquire and dispose of assets;
(b) to hold any part of the Trust Fund in cash pending the
investment or distribution thereof, without liability for
interest;
(c) to enforce by suit or otherwise, or to waive its rights on
behalf of the Trust, and to defend claims asserted against it or
the Trust; however, the Trustee will not be required to
institute or defend itself, the Plan, or the Trust in any court
or administrative proceeding unless it has first been
indemnified to its satisfaction for the costs and expenses
thereof;
(d) to compromise, adjust and settle any and all claims against or
in favor of it or the Trust;
(e) to vote, or give proxies to vote, any stock or other security,
and to waive notice of meetings;
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(f) to oppose, or participate in and consent to the reorganization,
merger, consolidation or readjustment of the finances or
capitalization of any enterprise, to pay assessments and
expenses in connection therewith, and to deposit securities
under deposit agreements;
(g) to invest or reinvest principal and income of the funds
belonging to the Trust Fund in common or preferred stocks
(including common stock issued by the Sponsor), bonds, mutual
funds (including mutual funds for which the Trustee serves as
investment advisor), or other securities, or limited partnership
interests, or real or personal properties or interests therein,
or any options, warrants or other instruments representing
rights to receive, purchase, or subscribe for the same, or
evidencing or representing any other rights or interests
therein, or group annuity investment contracts issued by a legal
reserve life insurance company authorized to do business in any
State in the United States, or certificates of deposit, variable
demand notes, and demand or time deposits (including any such
notes and deposits of the Trustee bearing a reasonable rate of
interest) or to hold any reasonable amounts of such principal or
income in cash;
(h) to execute such deeds, leases, contracts, bills of sale, notes,
proxies and other instruments in writing as shall be deemed
requisite or desirable in the proper administration of the Trust
Fund;
(i) unless otherwise provided in the Plan, to cause all or any part
of the money or other property of this Trust to be commingled
with the money or other property of trusts created by others by
causing such assets to be invested as part of any one or more
collective investment funds or group trusts maintained by
fiduciaries with respect to this Plan and Trust, including the
Trustee. The Declaration of Trust under which each such
collective investment fund or group trust is established and
maintained, as from time to time amended, is hereby made a part
of this trust to the same extent as if its terms were set out in
full herein.
(j) to sell for cash, to convert, redeem or exchange for other
securities or other property, to tender securities pursuant to
tender offers, or otherwise to dispose of any securities or
other property at any time held by the Trustee;
(k) to exercise any conversion privilege, subscription or other
rights incident to property in the Trust and to make payments
incidental thereto;
(1) to serve without being required to give bond to any court; and
to do all acts and things, not specified herein, which it deems
advisable to carry out the Trust; and generally to exercise any
of the powers of an owner with respect to all or any part of the
Trust.
(m) Notwithstanding anything else contained in the Plan or this
Agreement, the Trustee may not purchase any employer securities
or employer real property other than Qualifying Employer
Securities or Qualifying Employer Real Property as defined in
section 407 of ERISA and the Trustee shall not invest in
Qualifying Employer Securities or Qualifying Employer Real
Property in excess of the amounts permitted by ERISA. If the
Trustee at any time holds such assets in
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excess of the applicable limits, it shall dispose of such
excess assets as required by ERISA.
4.2 DISCRETIONARY POWERS OF THE TRUSTEE.
The Trustee shall have the following powers and authority in the
administration of the Trust to be exercised in its sole discretion:
(a) to register or cause to be registered any securities held by it
hereunder in its own name or in the name of a nominee with or
without the addition of words indicating that such securities
are held in a fiduciary capacity, to permit securities or other
property to be held by or in the name of others, to hold any
securities in bearer form and to deposit any securities or other
property in a domestic depository, clearing corporation, or
similar corporation or a foreign depository, provided the
requirements of Department of Labor Regulation 2550.404b-1 are
met;
(b) to make, execute, and deliver as Trustee hereunder, any and all
instruments in writing necessary or proper for the
accomplishment of any of the powers referred to in Section 4.1
or in this Section 4.2;
(c) to employ suitable agents, advisers, and counsel and to pay
their reasonable expenses and compensation as expenses of the
Trust;
(d) to contract with another person or persons,, related or
unrelated to the Trustee, to perform any of the Trustee's duties
hereunder, including, but not limited to, Trust Fund
recordkeeping, provided, that the expenses and compensation of
such person or persons shall be an expense of the Trustee, and
not an expense of the Trust;
(e) to bring, join in, or oppose any suits or legal proceedings
involving the Trust where the Trustee may be adversely affected
by the outcome, individually or as trustee, or where it is
advised by counsel that such action is required on its part by
the Act or other applicable law;
(f) to receive all rents, issues, dividends, income, profits, and
properties of every nature, due the Trust Fund, and to hold or
make distribution therefor in accordance with the terms of this
Trust Agreement;
(g) to take any action committed to the Trustee's discretion by
other provisions of this Agreement; and
(h) generally to exercise such powers and to do such acts (exclusive
of powers and acts involving investment management or otherwise
committed to the discretion of the investment manager or any
other party hereunder) whether or not expressly authorized,
which may be considered necessary or desirable by the Trustee
for the protection of the Trust.
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4.3 VOTING.
The Plan Administrator shall be entitled to direct the Trustee as to
the manner in which shares of common stock of the Sponsor are to be
voted, except as may be otherwise provided in the Plan.
ARTICLE V
ACCOUNTINGS
5.1 VALUATION AND REPORTS.
(a) The Trustee will keep full accounts of all its receipts,
disbursements and other transactions hereunder, and, annually,
will determine the fair market value of the assets of the Trust
as of the last business day of the plan year. If any assets of
the Trust Fund are invested in property for which there is no
readily ascertainable market value, the individual who directed
such investment be made under Article III shall supply the
Trustee with a proper valuation. For purposes of such accounts,
the fiscal year of the Trust will coincide with the plan year.
Within a reasonable time after the end of the plan year, or
within a reasonable time after its removal or resignation, or
the termination of the Trust, the Trustee will render to the
Plan Administrator an account of its administration of the Trust
since the last previous such accounting.
(b) With the consent of the Trustee, the Plan Administrator or
Sponsor may establish other valuation dates, and the Trustee
will render to the Plan Administrator an account of the value of
the Trust assets as of the current valuation date and, if
requested, of its transactions hereunder since the preceding
valuation date.
(c) The Trustee's records pertaining to the Trust Fund shall be open
to inspection, copying and audits at reasonable times by the
Plan Administrator and any investment manager. No person other
than the Plan Administrator will have the right to demand or
receive any report or account from the Trustee. In any
proceeding for a judicial settlement of any account or for
instructions, the only necessary parties will be the Trustee and
the Plan Administrator.
5.2 APPROVAL OF ACCOUNT.
The written approval of any account by the Plan Administrator will be
final and binding upon the Plan Administrator, the Sponsor, the
Participants and all persons who then are or thereafter become
interested in the Trust, as to all matters and transactions stated or
shown therein. The failure of the Plan Administrator to notify the
Trustee within 60 days after the Trustee's sending of any account of
its objections (if any) to the account will be the equivalent of
written approval. If the Plan Administrator files any objections within
such 60-day period with respect to any matters or transactions stated
or shown in the account and the Plan Administrator and the Trustee
cannot resolve the questions raised by such objections, the Trustee
will have the right to have such questions settled by judicial
proceedings. Nothing herein will deprive the Trustee of the right to
have a judicial settlement of its accounts.
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ARTICLE VI
COMPENSATION, FEES AND EXPENSES
6.1 TRUSTEE COMPENSATION.
(a) As compensation for its services hereunder, the Trustee shall be
entitled to receive from the Sponsor compensation in accordance
with its schedule of fees, as amended by the Trustee from time
to time, but not in excess of reasonable compensation for such
services. Regardless, the Trustee may not increase its fees
until it has given the Sponsor written notice at least thirty
(30) days preceding such increase.
(b) The Trustee may charge a reasonable fee in addition to its
normal fees if it performs any services not contemplated in the
fee schedule at the request of the Plan Administrator or
Sponsor.
(c) The Trustees fee, unless paid by the Sponsor at its option
within thirty days of the Trustee's invoice, shall be paid from
the Trust.
6.2 TAXES AND EXPENSES.
(a) Any or all real and personal property taxes, income taxes and
other taxes of any and all kinds whatsoever upon or in respect
of the Trust Fund hereby created or any money, income or
property forming a part thereof, and any or all fees and
expenses actually and properly incurred in the administration of
the Plan or the Trust Fund, may be paid directly from the assets
of the Trust Fund. To the extent such taxes, fees and expenses
are not paid from the Trust Fund, they shall be paid by the
Sponsor.
(b) The Trustee may assume that any taxes assessed on or in respect
of the Trust Fund are lawfully assessed unless the Plan
Administrator or the Sponsor shall in writing advise the Trustee
that in the opinion of counsel for the Sponsor such taxes are
not lawfully assessed. In the event that the Plan Administrator
or Sponsor shall so advise the Trustee, the Trustee, if so
requested by the Plan Administrator and suitable provision for
their indemnity having been made, shall contest the validity of
such taxes in any manner deemed appropriate by the Plan
Administrator, Sponsor or counsel for the Sponsor. The word
"taxes" in this Section 6.2 shall be deemed to include any
interest or penalties that may be levied or imposed in respect
to any taxes assessed.
6.3 METHOD OF PAYMENT.
In order to provide for payment of any fees, taxes or expenses as
provided in Sections 6.1 and 6.2, the Trustee in its discretion may
partially or fully liquidate any asset in the Trust Fund and shall not
be liable for any loss occasioned thereby. Any expenses of the Trustee
which are not paid from the Trust for whatever reason will be the
responsibility of the Sponsor. Any payment out of the Trust Fund of any
of the taxes and expenses authorized in this Article VI, and of all
other costs, expenses or compensation authorized
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by this Trust Agreement and by the Sponsor to be paid out of the Trust
Fund, shall be deemed to be for the exclusive benefit of the
Participants and their successors in interest.
ARTICLE VII
RESIGNATION OR REMOVAL OF TRUSTEE
(a) Any Trustee may resign at any time by giving 60 days' written
notice to the Sponsor, and the Sponsor may remove any Trustee at
any time by giving 60 days' written notice to the Trustee; in
either case, the notice period may be reduced to such shorter
period as the Trustee and the Sponsor agree upon. The Trustee's
removal or resignation will be effective upon the last day of
the notice period or, if later, the acceptance of the Trust by
the successor Trustee. Until the effective date of the
appointment of a successor Trustee (or the termination of the
Trust and complete distribution of its assets), the incumbent
Trustee will have full authority and responsibility to act as
Trustee hereunder.
(b) When the Trustee's resignation or removal becomes effective, the
Trustee will perform all acts necessary to transfer the assets
of the Trust to its successor. However, the Trustee may reserve
such portion of the trust assets as it may reasonably determine
to be necessary for payment of its fees and any taxes and
expenses; any balance of such reserve remaining after payment of
such fees, taxes and expenses will be paid over to its
successor.
(c) Resignation or removal of the Trustee will not terminate the
trust. In the event of any vacancy in the position of Trustee,
whether by the resignation or removal of the Trustee, the
Sponsor will appoint a successor trustee and such appointment
will become effective upon the acceptance of its office by the
successor trustee. If the Sponsor does not appoint such a
successor within 60 days after notice of resignation or removal
is given, the Trustee may apply to a court of competent
jurisdiction for such appointment or terminate the Trust and
make distributions in the manner prescribed in the Plan. Each
successor Trustee so appointed and accepting a Trusteeship
hereunder will have all of the rights and powers and all of the
duties and obligations of the original trustee under the
provisions hereof.
(d) No trustee will be liable or responsible for anything done or
omitted to be done in the administration of the Trust before it
became Trustee or after it ceases to be Trustee.
ARTICLE VIII
PROTECTION/LIMITATION ON LIABILITY FOR TRUSTEE
8.1 TRUSTEE'S PROTECTION.
Except as provided in Article III, the Trustee shall have no duty to
take any action other than as herein specified, unless the Sponsor or
the Plan Administrator shall furnish it with instructions in proper
form and such instructions shall have been specifically agreed to by
it, or to defend or engage in any suit unless it shall have first
agreed in writing to
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do so and shall have been fully indemnified to its satisfaction. The
Trustee may designate in a writing to the Sponsor or Plan Administrator
a person or persons to whom instructions may be provided in lieu of
instructions to the Trustee directly, and receipt of instructions by
such person(s) shall be treated as an instructions received by the
Trustee.
8.2 RELIANCE BY TRUSTEE.
(a) The Trustee may rely upon any decision of the Plan Administrator
purporting to be made pursuant to the terms of the Plan, and
upon any information, statements, certifications or directions
submitted by the Sponsor or the Plan Administrator (including
statements concerning the entitlement of any Participant to
benefits under the Plan or directions to make payments), and
will not be bound to inquire as to the basis of any such
decision or information or statements, and will incur no
obligation or liability for any action taken or omitted by the
Trustee in reliance thereon.
(b) Whenever the Trustee is permitted or required to act upon the
instructions or directions of the Sponsor or Plan Administrator,
the Trustee will be fully protected in not acting in the absence
hereof.
(c) The Trustee may conclusively rely upon and shall be protected in
acting in good faith upon any written representation or order
from the Sponsor or the Plan Administrator or any other notice,
request, consent, certificate or other instrument or paper
believed by the Trustee to be genuine and properly executed, or
any instrument or paper if the Trustee believes the signature
thereon to be genuine.
(d) The Trustee may consult with legal counsel (who may be or may
not be counsel for the Sponsor) concerning any questions which
may arise with respect to its rights and duties hereunder, and
the opinion of such counsel will be full and complete protection
in respect of any action taken or omitted by the Trustee
hereunder in good faith and in accordance with the opinion of
such counsel.
8.3 ABSENCE OF INSTRUCTIONS.
If the Trustee receives no instructions from the Sponsor and/or Plan
Administrator in response to communications sent to the Plan
Administrator or the Sponsor at the last known address as shown on the
books of the Trustee, the Trustee may make such determination with
respect to distributions and other administrative matters arising under
the Plan as it considers reasonable. Any determinations so made will be
binding on all persons having or claiming any interest under the Plan
or Trust, and the Trustee will incur no obligation or responsibility
for any such determination made in good faith or for any action taken
in pursuant thereof.
8.4 INDEMNIFICATION BY THE SPONSOR AND PLAN ADMINISTRATOR.
(a) The Sponsor and the Plan Administrator (if different from the
Sponsor) shall indemnify and hold harmless the Trustee and its
officers, directors, employees, shareholders, and agents (the
"Indemnitees") from and against any losses, costs, damages, or
expenses, including reasonable attorneys' fees, which the
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<PAGE> 17
Indemnitees may incur or pay out by reason of (i) the
Indemnitees acting in accordance with the directions the
Sponsor, Plan Administrator, Participant (if such self direction
is permitted by the Plan), or an investment manager or failing
to act in the absence of such certification or other information
provided by the Sponsor, Plan Administrator, Participant, or an
investment manager; (ii) the Trustee's exercise and performance
of its powers and duties hereunder, unless the same are
judicially determined to be due to the Trustee's gross
negligence, bad faith or willful misconduct; or (iii) any
(alleged or actual) action or inaction, including but not
limited to the diversion of assets, on the part of the Sponsor,
Plan Administrator, Participant, or an investment manager,
unless such losses, costs, damages, or expenses arise out of the
Trustee's gross negligence, bad faith, or willful misconduct.
(b) In addition, regardless of whether the Plan meets the
requirements of Section 404(c) of the Act and regulations
thereunder, if the Participant is permitted to direct the
investment of his or her account, the Sponsor and Plan
Administrator (if different from the Sponsor) shall indemnify
and hold harmless the Indemnitees from and against any losses,
costs, damages, or expenses, including reasonable attorneys'
fees, which the Indemnitees may incur or pay out by reason of
the Indemnitees' acting in accordance with a Participant's
directions or failing to act in the absence of such directions
or acting or failing to act in reliance on a Participant's
instructions incorrectly conveyed by the Plan Administrator.
(c) The Sponsor further agrees to indemnify and hold harmless the
Trustee for any losses, costs, damages, or expenses, including
reasonable attorney's fees, which the Indemnitees may incur or
pay out by reason of any (alleged or actual) action or inaction
on the part of any predecessor or successor Trustee.
ARTICLE IX
PROHIBITION OF DIVERSION
(a) Except as provided in subparagraph (b) hereof, at no time prior
to the satisfaction of all liabilities with respect to
Participants and their successor in interest under the Plan
shall any part of the corpus or income of the Trust Fund be used
for, or diverted to, purposes other than for the exclusive
benefit of Participants or their successors in interest or for
defraying reasonable expenses of administering the Plan
including, but not limited, to the Trustee's fee.
(b) The provisions of subparagraph (a) notwithstanding,
contributions made by the Sponsor under the Plan shall be
returned to the Sponsor if the Sponsor certifies to the Trustee
in writing that one or more of the following conditions exists
and agrees to indemnify the Trustee for any loss, costs, damages
or expenses, including reasonable attorneys' fees, which the
Trustee may incur as a result of returning such contribution:
(i) a contribution was made by mistake of fact - such
contribution shall be returned to the Sponsor within one
year of the payment of such contribution;
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<PAGE> 18
(ii) contributions to the Plan are specifically conditioned
upon their deductibility under the Internal Revenue Code
and a deduction has been disallowed - for any such
contribution, the amount disallowed shall be returned to
the Sponsor within one year after the disallowance of the
deduction. Contributions which are not deductible in the
taxable year in which made but are deductible in
subsequent taxable years shall not be considered to be
disallowed for purposes of this subsection; and/or
(iii) the Commissioner of Internal Revenue has determined that
the Plan is not initially qualified under the Internal
Revenue Code - any contribution made incident to that
initial qualification by the Sponsor shall be returned to
the Sponsor within one year after the date the initial
qualification is denied, but only if the application for
the qualification is made by the time prescribed by law
for filing the Sponsor's return for the taxable year in
which the Plan is adopted, or such later date as the
Secretary of the Treasury may prescribe.
For purposes of this Article IX, the term "Sponsor" shall
include other adopting employers under the Plan, to the extent
not inconsistent with the terms of the Plan.
ARTICLE X
AMENDMENT AND TERMINATION OF THE TRUST
10.1 AMENDMENT.
The Trustee may, by delivery to Sponsor of an instrument in writing,
amend this agreement at any time and such amendment shall become
effective on the date 60 days after delivery of such instrument, unless
the Sponsor delivers a written objection to the Trustee prior to the
expiration of such 60 day period. Provided, that no amendment shall
divert any part of the Trust Fund to any purpose other than providing
benefits to Participants and their successors in interest or defraying
reasonable expenses of administering the Plan.
10.2 TERMINATION.
If the Plan is terminated in whole or in part, the Trustee shall
distribute the Trust Fund or any part thereof in such manner and at
such times as the Plan Administrator or its designee shall direct in
writing. The Trust created hereunder will terminate upon the
distribution or application of all the assets of the Trust fund.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 NONALIENATION.
Except as otherwise required in the case of any qualified domestic
relations order within the meaning of Section 414(p) of the Internal
Revenue Code, the benefits or proceeds of any allocated or unallocated
portion of the assets of the Trust Fund and any interest of any
Participant or beneficiary arising out of or created by the Plan either
before or after
15
<PAGE> 19
the Participant's retirement shall not be subject to execution,
attachment, garnishment or other legal or judicial process whatsoever
by any person, whether creditor or otherwise, claiming against such
Participant or successor in interest. No Participant or successor in
interest shall have the right to alienate, encumber or assign any of
the payments or proceeds or any other interest arising out of or
created by the Plan and any action purporting to do so shall be void.
The provisions of this Section shall apply to all Participants and
successors in interest, regardless of their citizenship or place of
residence.
11.2 EMPLOYMENT.
Nothing contained in this Trust Agreement or in the Plan shall require
the Sponsor or any Adopting Employer to retain any employee in its
service.
11.3 CERTIFICATION OF TRUST AGREEMENT.
Any person dealing with the Trustee may rely upon a copy of this
agreement and any amendments thereto certified to be true and correct
by the Trustee.
11.4 GOVERNING LAW.
The construction, validity and administration of this agreement shall
be governed by the laws of the State of Alabama, except to the extent
that such laws have been specifically superseded by the Act.
11.5 SEGREGATION OF ASSETS.
To the extent not inconsistent with the requirements of Code Section
401(a) or the regulations thereunder, the Plan Administrator or its
designee may, if it so determines, at any time and from time to time,
designate any group or groups of the eligible employees or other
beneficiaries covered by the Plan as a separate class and may direct
the Trustee to segregate in a separate fund, to be held for the benefit
of such class, the part of the Trust Fund allocable to such class as
determined by the Plan Administrator or its designee. The Plan
Administrator or its designee shall cause the Trustee to effect such
segregation by delivering to the Trustee a written notice directing
such segregation. The Trustee may rely conclusively and without
investigation upon any such notice and shall segregate such assets as
the Plan Administrator may direct. The Trustee's valuation of such
assets for that purpose shall be conclusive. The Trustee shall hold all
of the assets so segregated under this provision, together with such
payments as shall thereafter be made to the Trust Fund in behalf of
such class, and the income therefrom, as a subpart of the Trust Fund
and subject to the terms of this agreement, or shall dispose of the
same as directed by the Plan Administrator. In the event that the Trust
Fund or any subpart thereof created by this agreement shall be
terminated as to such class, the Plan Administrator shall direct the
disposition of the assets held by the Trustee for such class through
transfer.
11.6 TITLES.
The titles to sections of this Trust Agreement are placed herein for
convenience of reference only, and the Trust Agreement is not to be
construed by reference thereto.
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<PAGE> 20
11.7 COUNTERPARTS.
This Trust Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original but all of which
together shall constitute but one instrument, which may be sufficiently
evidenced by any counterpart.
11.8 SEVERABILITY.
If any provision of this Trust Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions hereof, and this Trust Agreement shall be construed
and enforced as if such provisions had not been included.
11.9 WRITTEN NOTICE.
Any written notice, demand, direction, or instruction given to the
parties to this Agreement shall be duly given if mailed or delivered:
(a) to the Trustee at P.O. Box 830859, Birmingham, Alabama,
35283-0859 or any other address as shall be specified by the
Trustee in writing; and
(b) to the Sponsor, at the address indicated on the signature page
hereto.
11.10 CONFIDENTIALITY OF AGREEMENT.
This Agreement shall be considered and treated as confidential between
the Sponsor and the Trustee and shall only be provided to other persons
to the extent required by the Act.
ARTICLE XII
DEFINITIONS
As used in this Agreement of Trust, the following terms shall have the
meanings given below, unless a different meaning is clearly required by context.
12.1 "ACT" means the Employee Retirement Income Security Act of 1974, as
amended.
12.2 "AGREEMENT" means this Agreement of Trust, as set forth herein and as
subsequently amended pursuant to Section 10.1.
12.3 "CODE" means the United States Internal Revenue Code of 1986, as
amended.
12.4 "NAMED FIDUCIARY" means the Named Fiduciary appointed pursuant to the
Plan, but only with respect to the specific responsibilities for each
such fiduciary as described in the Plan.
12.5 "PARTICIPANT" means a participant in the Plan, as defined therein.
12.6 "PARTICIPANT LOAN" means a loan from the Trust Fund to a Participant
pursuant to the terms of the Plan.
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<PAGE> 21
12.7 "PLAN" means the plan named on page 1 hereof.
12.8 "PLAN ADMINISTRATOR" means the plan administrator appointed pursuant to
the Plan and/or, whenever the Plan Administrator has delegated certain
of its duties to a Recordkeeper, the Recordkeeper.
12.9 "RECORDKEEPER" means the person or persons to whom the Plan
Administrator has delegated certain of its duties.
12.10 "TRUST" means the fiduciary relationship established hereunder with
respect to the Trust Fund.
12.11 "TRUST FUND" means all property received by the Trustee hereunder and
any property into which the same may be converted, together with the
income thereon, excluding amounts properly disbursed by the Trustee
under the terms hereof.
12.12 "TRUSTEE" means the Trustee or Trustees whose signatures are affixed to
this Amendment of Trust, and the Adoption Agreement, as trustee under
this Agreement of Trust, or any successor trustee acting hereunder.
18
<PAGE> 22
IN WITNESS WHEREOF, this Trust Agreement has been executed in behalf of
the parties hereto, all on the day and year first above written.
SPONSOR:
SAKS INCORPORATED
Attest: By:
----------------- -----------------------------------------------
Title:
--------------------------------------------
Address for receipt of notices:
750 Lakeshore Parkway
Birmingham, AL 35211
TRUSTEE:
AMSOUTH BANK
Attest: By:
----------------- -----------------------------------------------
Title:
--------------------------------------------
19
<PAGE> 1
EXHIBIT 10.57
SAKS INCORPORATED
SUPPLEMENTAL SAVINGS PLAN
<PAGE> 2
TABLE OF CONTENTS
INTRODUCTION 1-1
1.01 Establishment and Name of Plan.................................1-1
1.02 Intent and Status of Plan......................................1-1
DEFINITIONS 2-1
ELIGIBILITY AND PARTICIPATION 3-1
3.01 Eligibility....................................................3-1
3.02 Participation..................................................3-1
3.03 Termination of Participation for Purposes of Making Deferrals..3-1
3.04 Special Participation for Purposes of Deferring Stock Awards...3-1
DEFERRED COMPENSATION ACCOUNTS 4-1
4.01 Deferred Compensation Account..................................4-1
4.02 Elective Deferral Amounts......................................4-1
4.03 Interest Credited to Deferred Compensation Accounts............4-2
4.04 Vesting of Accounts............................................4-3
4.05 Stock Award Account............................................4-3
DISTRIBUTION OF DEFERRED COMPENSATION BENEFITS 5-1
5.01 In General.....................................................5-1
5.02 Time of Distribution...........................................5-1
5.03 Hardship Distributions.........................................5-1
5.04 Amount and Method of Distribution of Benefits..................5-1
5.05 Committee Decision.............................................5-2
5.06 Payments After Participant's Death.............................5-2
5.07 Designation of Beneficiaries...................................5-2
5.08 Distributions from Stock Award Account.........................5-2
FINANCING AND UNFUNDED STATUS 6-1
6.01 Costs Borne by the Participating Companies.....................6-1
6.02 Source of Benefit Payments and Medium of Financing the Plan....6-1
6.03 Unfunded Status................................................6-1
ADMINISTRATION 7-1
7.01 General Administration.........................................7-1
7.02 Committee Procedures...........................................7-1
7.03 Facility of Payment............................................7-1
7.04 Indemnification of Committee Members...........................7-1
employer participation 8-1
8.01 Adoption of Plan...............................................8-1
8.02 Employer Accounting............................................8-1
8.03 Withdrawal from the Plan by Employer...........................8-1
AMENDMENT AND TERMINATION OF PLAN 9-1
9.01 Amendment and Termination......................................9-1
GENERAL PROVISIONS 10-1
10.01 Limitation of Rights..........................................10-1
10.02 No Assignment or Alienation of Benefits.......................10-1
10.03 Successors....................................................10-1
10.04 Governing Law.................................................10-2
<PAGE> 3
ARTICLE 1
INTRODUCTION
1.01 ESTABLISHMENT AND NAME OF PLAN.
Proffitt's, Inc. established, as of the Effective Date, an unfunded,
deferred compensation plan primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees of the Participating Companies, entitled the
"Proffitt's, Inc. Supplemental Savings Plan."
This document is an amendment and restatement of the plan and shall be
effective as of the date of execution. Pursuant to this amendment and
restatement, the name of the plan shall be changed to the "Saks
Incorporated Supplemental Savings Plan."
1.02 INTENT AND STATUS OF PLAN.
The Plan is intended to be an unfunded plan maintained by the
Corporation with the Participating Companies primarily for the purpose
of providing deferred compensation for a select group of management or
highly compensated employees (and intended to be within the exemptions
therefore in, without limitation, sections 201(2), 301(a)(3), 401(a)(1)
and 4021(b)(6) of ERISA and section 2520.104-23 of the Labor
Regulations). The Plan is intended to be "unfunded" for purposes of
both ERISA and the Code. The Plan is not intended to be qualified as a
qualified plan under section 401(a) of the Code; rather, the Plan is
intended to be a "nonqualified" plan.
1 - 1
<PAGE> 4
ARTICLE 2
DEFINITIONS
Each following word, term and phrase shall have the following
respective meanings whenever such word, term or phrase is capitalized
and used in any Article of this Plan unless the context clearly
indicates otherwise:
2.01 "BASIC COMPENSATION" means the portion of a Participant's Compensation
that is not Bonus Compensation.
2.02 "BOARD" means the Board of Directors of the Corporation.
2.03 "BONUS COMPENSATION" means the portion of a Participant's Compensation
that is paid in the form of a bonus.
2.04 "COMMITTEE" means the Committee appointed by the Board to administer
the Plan pursuant to Article 8 hereof. If no such Committee has been
appointed, then the term Committee shall mean the Corporation.
2.05 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.06 "COMPENSATION" means the cash compensation which is earned and
otherwise payable in a given Compensation Deferral Period to a
Participant, including any amounts that would be payable as cash
compensation except for the Participant's election to defer such amount
under this plan or a plan under Code section 401(k) or Code section
125.
2.07 "COMPENSATION DEFERRAL AGREEMENT" means the written agreement to defer
Compensation contemplated by Articles 3 and 4 hereof executed by the
Participant and the Participating Company.
2.08 "COMPENSATION DEFERRAL DATE" means the Effective Date in the initial
plan year, and January 1 in each calendar year thereafter.
2.09 "COMPENSATION DEFERRAL PERIOD" means the twelve (12) consecutive month
period beginning on each January 1 and ending on each following
December 31 thereafter (the calendar year).
2.10 "CORPORATION" means Saks Incorporated (formerly Proffitt's, Inc.), an
Alabama corporation and any business organization or corporation into
which Saks Incorporated may be merged or consolidated or by which it
may be succeeded.
2.11 "DEFERRED COMPENSATION ACCOUNT" means the account established by the
Participating Companies pursuant to Article 4 of this Plan for each
Participant to which shall be credited (added) the Participant's
Elective Deferral Amounts; and from which any distributions and any
hardship withdrawal distributions shall be subtracted; and to which
shall be credited interest at the Retirement Rate as described in
Section 4.03 hereof. All amounts which are credited to such Deferred
Compensation Account are credited solely for computation purposes and
are at all times general assets of the Participating Companies and
subject to the claims of the general creditors of the Participating
Companies.
2 - 1
<PAGE> 5
2.12 DISABILITY" means a physical or mental condition of a Participant
resulting in:
(a) evidence that the Participant is deemed by the Social Security
Administration to be eligible to receive a Primary Social
Security disability benefit, or
(b) evidence that the Participant is eligible for disability
benefits under the long-term disability plan sponsored by a
Participating Company, or
(c) evidence satisfactory to the Committee that the Participant is
totally and permanently disabled.
Whether or not a Participant meets any or all of the above conditions
will be determined solely and exclusively by the Committee.
2.13 "DISTRIBUTION DATE" means either (a) the date that is as soon as
administratively possible after the date the Participant terminates
employment with the Participating Companies or (b) the date that is as
soon as administratively possible after the end of the Plan Year in
which the Participant terminates employment, as elected by the
Participant in his Compensation Deferral Agreement.
2.14 "EFFECTIVE DATE" means April 1, 1997, the date the Plan is established.
The effective date of this amendment and restatement is the date this
document is executed.
2.15 "EMPLOYEE" means a person, other than an independent contractor, who is
receiving remuneration from the Employer for services rendered to, or
labor performed for, the Employer (or who would be receiving such
remuneration except for an authorized leave of absence).
2.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.17 "PARTICIPANT" means an eligible Employee participating in the Plan
pursuant to the provisions of Article 3 hereof.
2.18 "PARTICIPATING COMPANY" means the Corporation and any subsidiary or
affiliate of the Corporation which adopts the Plan with the
Corporation's consent as described in Section 8.01.
As of January 31, 1999, the following were Participating Companies:
Saks Incorporated (which is also the Plan sponsor)
Herberger's Department Stores, LLC
McRae's, Inc.
McRae's of Alabama
McRae's Stores Partnership
Parisian, Inc.
Proffitt's Credit Corporation
Saks Distribution Centers, Inc.
Saks Stores Partnership L.P.
2.19 "PLAN" means this Saks Incorporated Supplemental Savings Plan as
established and set forth herein (together with any and all supplements
hereto), and as amended from time to time.
2 - 2
<PAGE> 6
2.20 "PLAN YEAR" means the twelve (12) consecutive month period being on
each January 1 and ending on each following December 31 thereafter (the
calendar year).
2.21 "REGULAR PARTICIPANT" means a Participant who is not a Select Group
Participant.
2.22 "RETIREMENT ACCOUNT" means a Participant's Deferred Compensation
Account, and to which interest is credited at the Retirement Rate.
2.23 "RETIREMENT RATE" means the annual rate of interest that is credited to
the Retirement Account pursuant to Section 4.03 hereof. Until changed
by the Committee, the Retirement Rate shall be seven and one-half
percent (7.5%) per annum. The Committee may change the Retirement Rate
at any time.
2.24 "SELECT GROUP PARTICIPANT" means a Participant who is eligible for
special treatment and privileges under the Plan, as described elsewhere
in the Plan. The following Participants are currently Select Group
Participants:
Brad Martin
James Coggin
Robert Mosco
Douglas Coltharp
Donald Wright
William Capiello
Brian Martin
The Committee shall have the authority to name new Select Group
Participants and to redesignate Select Group Participants as Regular
Participants, at its discretion.
2.25 "TERMINATION ACCOUNT" means the portion of a Participant's Deferred
Compensation Account that would have resulted had the Deferred
Compensation Account always been credited with interest at the
Termination Rate rather than the Retirement Rate.
2.26 "TERMINATION RATE" means the annual rate of interest that is credited
to the Termination Account pursuant to Section 4.03 hereof. Until
changed by the Committee, the Termination Rate shall be five percent
(5%) per annum. The Committee may change the Termination Rate at any
time.
2.27 "VALUATION DATE" means the last day of each calendar quarter, or such
other dates as the Committee, in its discretion, may designate.
2 - 3
<PAGE> 7
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.01 ELIGIBILITY.
Eligibility to participate in the Plan shall be limited to Employees of
the Participating Companies who are in a select group of management or
highly compensated Employees and who are designated, from time to time,
by the Committee as eligible to participate in the Plan. At Plan
inception, the Employees eligible to participant shall be those
eligible Employees as described above whose annual base rate of pay
from one or more Participating Companies is greater than eighty
thousand dollars ($80,000). The Committee shall have the authority to,
at any time and from time to time, change the conditions for
eligibility within the constraints imposed by the first sentence of
this Section 3.01.
Notwithstanding the above, the following classes of Employees shall be
considered as excluded classes for purposes of the Plan, and Employees
who are members of such classes shall not be eligible to participate in
the plan:
(a) Employees who are employed at one of the distribution centers
for the Carson operating group;
(b) Employees who are employed at the home office of the Carson
operating group in Wisconsin or Illinois or at one of the
Wisconsin stores of the Carson operating group;
(c) Employees who are employed at the Elmhurst, Illinois credit
operation;
(d) Employees who are employed at one of the Indiana or Minnesota
stores of the Carson operating group.
3.02 PARTICIPATION.
An Employee eligible to participate in the Plan as provided in Section
3.01 hereof may elect to become a Participant in the Plan by electing
to defer Compensation with respect to any Compensation Deferral Period
under Article 4 hereof.
3.03 TERMINATION OF PARTICIPATION FOR PURPOSES OF MAKING DEFERRALS.
Participation in the Plan for purposes of being able to make Elective
Deferral Amounts pursuant to Section 4.02 hereof under this Plan shall
terminate when a Participant's employment with the Participating
Companies as an Employee terminates or when such Participant is no
longer designated by the Committee as an Employee eligible to
participate in the Plan.
3.04 SPECIAL PARTICIPATION FOR PURPOSES OF DEFERRING STOCK AWARDS
Notwithstanding any other provision of the Plan to the contrary, the
Committee, in its discretion, may allow an Employee eligible to
participate in the Plan who is also an Executive Officer of the
Corporation to elect to defer special compensation that such Employee
may become eligible to receive in the form of an award of Corporation
Stock. Whenever used in this Plan, the term "Corporation Stock" shall
mean the common stock of the Corporation.
3 - 1
<PAGE> 8
ARTICLE 4
DEFERRED COMPENSATION ACCOUNTS
4.01 DEFERRED COMPENSATION ACCOUNT.
On behalf of Participating Companies the Committee shall establish and
maintain for each Participant or former Participant under the Plan a
book reserve account (the Deferred Compensation Account as defined in
Section 2.11 hereof) for the purpose of determining deferred
compensation payable to the Participant. Such Deferred Compensation
Account shall be governed by the provisions of this Article 4.
4.02 ELECTIVE DEFERRAL AMOUNTS.
Elective deferral of Compensation by Participants under the Plan is
governed by the provisions of this Section. Amounts deferred by a
Participant pursuant to this Section shall constitute "Elective
Deferral Amounts" for purposes of this Plan and shall be fully vested
at all times.
(a) COMPENSATION ELECTIVE DEFERRALS. The following provisions
apply to elective deferral of Compensation by Participants
under the Plan.
(i) COMPENSATION DEFERRAL ELECTIONS BY PARTICIPANTS. With
respect to a Compensation Deferral Period, a
Participant may make an election prior to the
Compensation Deferral Date on which such Compensation
Deferral Period begins to defer a specified
percentage of the Basic Compensation and a separate
specified percentage of the Bonus Compensation which
would otherwise be payable by the Participating
Company to the Participant during the Compensation
Deferral Period beginning on such Compensation
Deferral Date. Any such election shall be made on a
Compensation Deferral Agreement which is duly
executed by the Participant and which is delivered by
such Participant to the Committee before such
Compensation Deferral Date and may not be revoked,
changed or modified for and during the applicable
Compensation Deferral Period and the provisions of
subsection 4.02(a)(iii) hereof shall apply to any
such election.
(ii) COMPENSATION DEFERRAL ELECTIONS BY CERTAIN NEW
PARTICIPANTS. In the case of an Employee who first
becomes eligible to participate in the Plan during a
Compensation Deferral Period, such an Employee may
make an election no later than thirty (30) days
following the date such Employee first becomes
eligible to participate in the Plan to defer a
specified percentage of the Basic Compensation and a
separate specified percentage of the Bonus
Compensation which would otherwise be earned by such
employee and be payable by the Participating Employer
after the later of (i) the date the Employee first
becomes eligible to participate in the Plan or (ii)
the date such Compensation Deferral Agreement is
received by the Committee and during the remainder of
the Compensation Deferral Period. Any such election
shall be made on a Compensation Deferral Agreement
which is duly executed by the Employee and which is
delivered by such Employee to the Committee no later
than thirty (30) days following the date the Employee
first becomes eligible to participate in the Plan,
and may not be revoked, changed or modified for and
during the applicable Compensation Deferral Period,
and the provisions of subsection 4.02(a)(iii) shall
apply to any such election. If such Employee does not
make any such election, such Employee may make an
election under Section 4.02(a) with
4 - 1
<PAGE> 9
respect to the next Compensation Deferral Period (or
later Compensation Deferral Periods) pursuant to the
applicable provisions.
(iii) CONTINUATION AND IRREVOCABILITY OF ELECTION. Any
election by a Participant pursuant to subsection
4.02(a)(i) or 4.02(a)(ii) (and any subsequent
election) will continue (and may not be modified,
altered, or changed in any way) until the earliest of
(A) the Compensation Deferral Period commencing after
the date the Participant delivers to the Committee a
written notice to suspend future deferrals of
Compensation under the Plan, (B) the Compensation
Deferral Period commencing after the date on which
the Participant delivers a new Compensation Deferral
Agreement modifying his previous election to the
Committee, (C) the Participant is no longer
designated as eligible to participate in the Plan,
(D) the Participant terminates employment with the
Participating Companies, or (E) the Plan is amended
or terminated such that the Plan no longer permits
deferrals of Compensation.
(iv) LIMITATIONS ON PERCENTAGE AMOUNTS. Except as
hereinafter provided, a Participant may elect to make
a deferral of up to twenty percent (20%) of the
Participant's annual Basic Compensation and up to one
hundred percent (100%) of the Participant's Bonus
Compensation otherwise payable to him. The Chief
Executive Officer of the Corporation may elect to
make a deferral of up to one hundred percent (100%)
of both his annual Basic Compensation and his Bonus
Compensation otherwise payable to him.
(v) DISTRIBUTION ELECTIONS. At the time of a
Participant's initial deferral election, the
Participant must specify the date on which his
Deferred Compensation Account shall be paid or
commence (i.e. the Distribution Date). The
Distribution Date specified at the time of the
Participant's initial election is irrevocable and
shall apply to all amounts payable to the Participant
under the Plan.
(b) WITHHOLDING AND CREDITING OF ELECTIVE DEFERRAL AMOUNTS. The
Participating Company shall withhold the specified percentage
amounts deferred by the Participant hereunder from the
Compensation which is otherwise payable to the Participant.
The Committee shall credit amounts equal to such withheld
amounts to the Participant's Deferred Compensation Account.
4.03 INTEREST CREDITED TO DEFERRED COMPENSATION ACCOUNTS.
Interest shall be credited to the Deferred Compensation Accounts of
Participants as described in this Section 4.03.
(a) RETIREMENT ACCOUNT. As of each Valuation Date, each
Participant's Retirement Account will be credited with
interest at the rate for the period ending on the Valuation
Date which is equivalent to the annual Retirement Rate.
(b) TERMINATION ACCOUNT. As of each Valuation Date, each
Participant's Termination Account will be credited with
interest at the rate for the period ending on the Valuation
Date which is equivalent to the annual Termination Rate.
(c) SELECT GROUP. Notwithstanding the above, and until such time
as changed by the Committee, the Deferred Compensation
Accounts of Select Group Participants will be credited with
interest at rates which, on an annualized basis, are one (1)
percentage point higher than the rates applicable to Regular
Participants. The Committee shall have the
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<PAGE> 10
discretion of changing at any time and from time to time the
rates applicable to the Accounts of Select Group Participants.
4.04 VESTING OF ACCOUNTS.
Participants' Deferred Compensation Accounts will be vested as
described in this Section 4.04.
A Participant's Termination Account will always be fully vested. The
excess of a Participant's Retirement Account over his Termination
Account will become fully vested on the earliest of the following
dates:
(a) the date the Participant attains age sixty-two (62) years,
provided the Participant is actively employed by a
Participating Company on such date;
(b) the date of the Participant's death, provided the Participant
is actively employed by a Participating Company on such date;
(c) the date of the Participant's Disability, provided the
Participant is actively employed by a Participating Company on
such date.
Notwithstanding the above, the Committee may, at its discretion,
designate a Participant as fully vested in his entire Deferred
Compensation Account for any reason it deems appropriate.
The portion of a Participant's Deferred Compensation Account which is
not vested as described above will be forfeited as of the date the
Participant terminates employment.
4.05 STOCK AWARD ACCOUNT.
Notwithstanding any other provision of the Plan to the contrary, the
Committee shall establish and maintain a special stock award account
for each Participant or former Participant who has elected to defer
receipt of future awards of Corporation Stock. Such stock award account
shall be subject to the following provisions.
(a) An Employee who is eligible to defer receipt of a future award
of Corporation Stock may make an election prior to the date
that such Employee has met the requirements established by the
Corporation for receipt of such award. Any such election shall
be made on a stock award deferral agreement which is duly
executed by the Employee and which is delivered by such
Employee to the Committee prior to the date such Employee has
met the requirements for receipt of such award. The deferral
period shall be the period ending on the date that the
Participant is no longer an Executive Officer of the
Corporation. This stock award deferral election may not be
revoked, changed or modified during the deferral period.
(b) Each Participant's stock award account shall be comprised of a
Corporate Stock Subaccount and a Dividend Subaccount. The
Corporate Stock Subaccount shall be credited with an amount
equal to the current market value of the Corporate Stock that
was to have been awarded to the Participant and that was
instead deferred pursuant to the terms of such Participant's
stock award deferral agreement. The Corporate Stock Subaccount
shall be further adjusted from time to time to reflect the
change in the market value of such stock, including the
recognition of any stock splits. The Dividend Subaccount shall
be credited with an amount equal to any dividends that would
have been paid on an amount of Corporate Stock equal to the
amount deferred by the Participant, as adjusted for stock
splits, if any. The Dividend Subaccount shall be credited with
interest as directed by the Committee.
(c) Each Participant's stock award account shall be fully vested
at all times.
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<PAGE> 11
ARTICLE 5
DISTRIBUTION OF DEFERRED COMPENSATION BENEFITS
5.01 IN GENERAL.
The benefits to be paid as deferred compensation are governed by the
provisions of this Article 5. A Participant whose employment with the
Participating Companies terminates for any reason shall be entitled to
distribution of benefits pursuant to this Article, subject to the
provisions of Article 7.
5.02 TIME OF DISTRIBUTION.
The Corporation on behalf of the Participating Company or Companies
shall distribute benefits on the Distribution Date elected by the
Participant with his initial Compensation Deferral Agreement.
5.03 HARDSHIP DISTRIBUTIONS.
Notwithstanding the foregoing, the Committee may, in its sole
discretion, commence distribution of benefits from the vested portion
of a Participant's Deferred Compensation Account at any date earlier
than that provided in Section 5.02 based on a determination of an
unforeseeable financial emergency. A Participant may withdraw in cash
the vested portion of the balance of his deferral account needed to
satisfy the unforeseeable financial emergency, to the extent that the
unforeseeable financial emergency may not be relieved:
(a) through reimbursement or compensation by insurance or
otherwise; or
(b) by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe
financial hardship.
An "unforeseeable financial emergency" is a severe financial hardship
to the Participant resulting from:
(1) a sudden and unexpected illness or accident of the Participant
or of a dependent of the Participant;
(2) loss of the Participant's property due to casualty; or
(3) such other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control
of the Participant as determined by the Committee.
A withdrawal on account of an unforeseeable financial emergency shall
be paid as soon as possible following the date on which the Committee
approves the withdrawal.
5.04 AMOUNT AND METHOD OF DISTRIBUTION OF BENEFITS.
A Participant whose employment with the Participating Companies
terminates shall be entitled to the vested balance of his Deferred
Compensation Account as of the Distribution Date. Distribution of such
deferred compensation benefits to a former Participant under this Plan
shall be made in a single lump sum payment.
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<PAGE> 12
Notwithstanding the foregoing, any hardship distributions which are
made as provided in Section 5.03 above from a Participant's Deferred
Compensation Account shall be made in such amounts and for such periods
of time as may be considered necessary by the Committee to meet the
conditions of such financial hardship; provided, however, that in no
event will amounts in excess of the remaining value of the
Participant's Deferred Compensation Account become payable to the
Participant.
5.05 COMMITTEE DECISION.
Any decision to be made by the Committee under this Article 5 with
respect to the distribution of benefits with respect to a Participant
or former Participant under this Plan shall be made by the Committee,
but such Participant shall exclude himself therefrom for purposes of
those decisions if such Participant is a member of the Committee.
5.06 PAYMENTS AFTER PARTICIPANT'S DEATH.
If the Participant dies before his benefit under the Plan has been
distributed to him, then the deferred compensation benefits otherwise
payable with respect to such Participant under the Plan shall be paid
in a lump sum to the beneficiary or beneficiaries designated by the
Participant.
5.07 DESIGNATION OF BENEFICIARIES.
The Participant may designate in writing (on a form provided by the
Committee and delivered to the Committee before his death) primary and
contingent beneficiaries to receive any deferred compensation benefit
payments which may be payable hereunder following the Participant's
death and the proportions in which such beneficiaries are to receive
such payments. The Participant may change such designation from time to
time and the last written designation delivered to the Committee prior
to the Participant's death will control. If the Participant fails to
specifically designate such a beneficiary, or if no designated
beneficiary survives the Participant, or if all designated
beneficiaries who survive the Participant die before all payments are
made, then the remaining payments shall be made to the Participant's
surviving spouse if such spouse is then living; if such spouse is not
living, then to the executors or administrators of the estate of the
Participant. The Committee may determine the identity of such persons
and shall incur no responsibility by reason of the payment of such
interest in accordance with any such determination made in good faith.
5.08 DISTRIBUTIONS FROM STOCK AWARD ACCOUNT.
Notwithstanding any provision of Article 5 to the contrary, the
distribution of a stock award account described in Section 4.05 shall
be made as described in this Section 5.08. The distribution of a
Participant's stock award account shall be made as of the date the
Participant is no longer an Executive Officer of the Corporation in a
lump sum payment to the Participant or, in the event of the
Participant's death prior to such distribution, to his estate. The
Corporation shall distribute the amount credited to the Participant's
Corporate Stock Subaccount in the form of shares of Corporation Stock.
An amount equal to the Participant's Dividend Subaccount shall be
distributed in cash. If, at the time of distribution, the Participant
does not tender to the Corporation an amount equal to the amount
required to be withheld for income taxes due as a result of the
distribution, then the Participant shall be deemed to have authorized
the Corporation to withhold enough of the distribution to pay such tax
withholding amount.
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<PAGE> 13
ARTICLE 6
FINANCING AND UNFUNDED STATUS
6.01 COSTS BORNE BY THE PARTICIPATING COMPANIES.
The costs of the Plan shall be borne by the Participating Companies or,
at the election of the Committee, by the trust if one is created
pursuant to section 6.02 hereof.
6.02 SOURCE OF BENEFIT PAYMENTS AND MEDIUM OF FINANCING THE PLAN.
Benefits payable under the Plan to any Participant shall be paid
directly by the Participating Company which employs the Participant.
The Participating Company shall not be required to fund or otherwise
segregate assets to be used for payment of benefits under the Plan.
While the Participating Company may, in the discretion of the
Committee, make investments in the funds designated by the Committee as
investment funds in amounts equal or unequal to Participants' Deferred
Compensation Accounts hereunder, the Participating Company shall not be
under any obligation to make such investments and any such investment
shall remain an asset of the Participating Company subject to the
claims of its general creditors. Notwithstanding the foregoing, the
Participating Company, in the discretion of the Committee, may maintain
one or more grantor trusts ("trust") to hold assets to be used for
payment of benefits under the Plan. The assets of the trust with
respect to benefits payable to the employees of each Participating
Company shall remain the assets of such Participating Company subject
to the claims of its general creditors. Any payments by a trust of
benefits provided to a Participant under the Plan shall be considered
payment by the Participating Company and shall discharge the
Participating Company of any further liability under the Plan for such
payments.
6.03 UNFUNDED STATUS.
This Plan is intended to be unfunded for purposes of both ERISA and the
Code.
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<PAGE> 14
ARTICLE 7
ADMINISTRATION
7.01 GENERAL ADMINISTRATION.
The Board shall appoint a Committee consisting of not less than three
(3) persons to administer the Plan. Any member of the Committee may at
any time be removed, with or without cause, and his successor appointed
by the Chief Executive Officer of the Corporation, and any vacancy
caused by death, resignation or other reason shall be filled by the
Chief Executive Officer of the Corporation. The Committee shall be the
plan administrator of the Plan and in general shall be responsible for
the management and administration of the Plan. The Committee shall have
full power to administer the Plan in all of its details (including
establishing claims procedures and other rules), subject to applicable
requirements of law. No member of the Committee who is an employee of
the Participating Companies shall receive compensation for his services
to the Plan. The Committee shall have such duties and powers as may be
necessary to discharge its duties under this Plan.
The fiscal records of the Plan shall be maintained on the basis of the
Plan Year.
7.02 COMMITTEE PROCEDURES.
The Committee may act at a meeting or in writing without a meeting. The
Committee may adopt such by-laws and regulations as it deems desirable
for the conduct of its affairs. All decisions shall be made by majority
vote. No member of the Committee who is at any time a Participant in
this Plan shall vote in a decision of the Committee (whether in a
meeting or by written action) made specifically and uniquely with
respect to such member of the Committee or amount, payment, timing,
form or other aspect of the benefits of such Committee member under
this Plan.
7.03 FACILITY OF PAYMENT.
Whenever, in the Committee's opinion, a person entitled to receive any
payment of a benefit or installment thereof hereunder is under a legal
disability or is incapacitated in any way so as to be unable to manage
his financial affairs, the Committee may direct payments to such person
or to his legal representative or to a relative or friend of such
person for his benefit, or the Committee may direct the payment for the
benefit of such person in such manner as the Committee considers
advisable. Any payment of a benefit or installment thereof in
accordance with the provisions of this Section shall be a complete
discharge to the Committee and the Participating Companies of any
liability for the making of such payment under the provisions of the
Plan.
7.04 INDEMNIFICATION OF COMMITTEE MEMBERS.
The Participating Companies shall indemnify and hold harmless each
member of the Committee against any and all liability, claims, damages
and expense (including all expenses reasonably incurred in his defense
in the event that the Participating Companies fail to provide such
defense upon his written request) which the Committee member may incur
while acting in good faith in the administration of the Plan.
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<PAGE> 15
ARTICLE 8
EMPLOYER PARTICIPATION
8.01 ADOPTION OF PLAN.
Any subsidiary or affiliate of the Corporation may, with the approval
of the Corporation and under such terms and conditions as the Committee
may prescribe, adopt the Plan by filing with the Corporation a
resolution of its Board of Directors to that effect. The Corporation
may amend the Plan as necessary or desirable to reflect the adoption of
the Plan by an employer, provided however, that an adopting employer
shall not have the authority to amend or terminate the Plan under
Article 9.
8.02 EMPLOYER ACCOUNTING.
If a trust is established pursuant to Section 6.02, the Committee shall
maintain a bookkeeping account in the name of each Participating
Company which, pursuant to rules established by the Committee, will
reflect:
(a) deposits made by that Participating Company to the trust;
(b) income, losses, and appreciation or depreciation in the value of
trust assets resulting from investment of the trust to the extent
such items are attributable to such Participating Company's
deposits;
(c) payments made from the trust to Participants employed or formerly
employed by that Participating Company (or to their
beneficiaries) in the form of benefits payable to them under the
plan, or to its creditors; and
(d) any other amounts charged to that Participating Company's
account, including its share of compensation and expenses.
8.03 WITHDRAWAL FROM THE PLAN BY EMPLOYER.
Any such employer shall have the right, at any time, upon the approval
of and under such conditions as may be provided by the Committee, to
withdraw from the Plan by delivering to the Committee written notice of
its election so to withdraw. Upon receipt of such notice by the
Committee, the portion of the deferral account of Participants and
beneficiaries attributable to amounts deferred while the Participants
were employees of such withdrawing employer, plus any net earnings,
gains and losses on such amounts, shall be distributed from the trust
at the direction of the Committee in cash at such time or times as the
Committee, in its sole discretion, may deem to be in the best interest
of such employees and their beneficiaries. To the extent the amounts
held in the trust for the benefit of such Participants and
beneficiaries are not sufficient to satisfy the employer's obligation
to such Participants and their beneficiaries accrued on account of
their employment with the employer, the remaining amount necessary to
satisfy such obligation shall be an obligation of the employer, and the
Corporation and the other Participating Companies shall have no further
obligation to such Participants and beneficiaries with respect to such
amounts.
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<PAGE> 16
ARTICLE 9
AMENDMENT AND TERMINATION OF PLAN
9.01 AMENDMENT AND TERMINATION.
The Board may amend or terminate the Plan (without the consent of any
Participant, former Participant or beneficiary) at any time, provided
that such amendment does not decrease or divest any then Participant or
former Participant of the amounts in his Deferred Compensation Account
as of the date of amendment.
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<PAGE> 17
ARTICLE 10
GENERAL PROVISIONS
10.01 LIMITATION OF RIGHTS.
Neither the establishment of this Plan nor any amendment thereof, nor
the payment of any benefits, will be construed as giving to any
Employee, Participant, beneficiary, or other person any legal or
equitable right against the Participating Companies, except as provided
herein. Neither the establishment of this Plan nor any amendment
thereof, nor the payment of benefits, nor any action taken with respect
to this Plan shall confer upon any person the right to be continued in
the employment of the Participating Companies or Subsidiaries.
10.02 NO ASSIGNMENT OR ALIENATION OF BENEFITS.
The rights of a Participant, former Participant, beneficiary or any
other person to payment of benefits under this Plan shall not be
assigned, transferred, anticipated, conveyed, pledged or encumbered
except by will or the laws of descent or distribution; nor shall any
such right be in any manner subject to levy, attachment, execution,
garnishment or any other seizure under legal, equitable or other
process for payment of any debts, judgments, alimony, or separate
maintenance, or reached or transferred by operation of law in the event
of bankruptcy, insolvency or otherwise. Provided, however, that a
Participant shall have the right to designate in writing and in
accordance with the provisions of Section 5.07 hereof primary and
contingent beneficiaries to receive benefit payments subsequent to the
death of the Participant.
10.03 SUCCESSORS.
The provisions of this Plan shall be binding upon and inure to the
benefit of the Corporation, its successors, and assigns, and each
Participant and his heirs, executors, administrators and legal
representatives. The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise, acquire all or substantially all
of the assets of the Corporation, and successors of any such
corporation or other business entity.
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<PAGE> 18
10.04 GOVERNING LAW.
Except to the extent Federal law is controlling, the provisions of this
Plan shall be interpreted and construed according to the laws of the
State of Alabama to the extent not preempted by applicable law.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be duly
executed for and on behalf of the Corporation by its duly authorized officers on
this the ----- day of --------------, 1999.
SAKS INCORPORATED
By:
-----------------------------------------
Title:
--------------------------------------
ATTEST:
- -----------------------------------------
10 - 2
<PAGE> 1
Exhibit 10.58
TRUST AGREEMENT
FOR THE
SAKS INCORPORATED SUPPLEMENTAL SAVINGS PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1: Establishment of Trust........................................... 1
Section 2. Payments to Plan Participants and Their Beneficiaries............ 2
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
When Company is Insolvent........................................ 2
Section 4. Payments to Company.............................................. 3
Section 5. Investment Authority............................................. 4
Section 6. Disposition of Income............................................ 5
Section 7. Accounting by Trustee............................................ 5
Section 8. Responsibility of Trustee........................................ 6
Section 9. Compensation and Expenses........................................ 6
Section 10. Resignation and Removal of Trustee............................... 6
Section 11. Appointment of Successor......................................... 7
Section 12. Amendment or Termination......................................... 7
Section 13. Miscellaneous.................................................... 8
Section 14. Effective Date................................................... 8
</TABLE>
<PAGE> 3
TRUST AGREEMENT FOR THE
SAKS INCORPORATED SUPPLEMENTAL SAVINGS PLAN
This agreement is made by and between Saks Incorporated, a corporation
organized and existing under the laws of the State of Alabama (the "Company"),
and Trustmark National Bank (the "Trustee");
(a) WHEREAS, Company has adopted the Saks Incorporated Supplemental Savings
Plan;
(b) WHEREAS, Company has incurred or expects to incur liability under the terms
of such Plan with respect to the individuals participating in such Plan;
(c) WHEREAS, Company has established a trust (hereinafter called "Trust") for
the purpose of contributing to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
(d) WHEREAS, the Company and the Trustee desire to amend and restate the trust
agreement establishing the Trust;
(e) WHEREAS, it is the intention of the parties that this Trust shall continue
to constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income Security
Act of 1974;
(f) WHEREAS, it is the intention of Company to continue to make contributions to
the Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby amend and restate the terms of the
Trust and agree that the Trust shall be comprised, held and disposed of as
follows:
SECTION 1: ESTABLISHMENT OF TRUST.
(a) Company will make an initial deposit with Trustee, which shall become the
principal of the Trust to be held, administered and disposed of by Trustee
as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable, except as provided in
Sections 3 and 4 hereof.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held separate
and apart from other funds of Company and shall be used exclusively for the
uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their
1
<PAGE> 4
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Plan and
this Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held by the
Trust will be subject to the claims of Company's general creditors under
federal and state law in the event of Insolvency, as defined in Section 3(a)
herein.
(e) Company, in its sole discretion, may at any time, or from time to time, make
additional deposits of cash or other property in trust with Trustee to
augment the principal to be held, administered and disposed of by Trustee as
provided in this Trust Agreement. Neither Trustee nor any Plan participant
or beneficiary shall have any right to compel such additional deposits.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment
Schedule. The Trustee shall make provision for the reporting and withholding
of any federal, state or local taxes that may be required to be withheld
with respect to the payment of benefits pursuant to the terms of the Plan
and shall pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid by
Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or their
beneficiaries as they become due under the terms of the Plan. Company shall
notify Trustee of its decision to make payment of benefits directly prior to
the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not
sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to
pay its debts as they become due, or (ii) Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
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<PAGE> 5
(b) At all times during the continuance of this Trust, as provided in Section
1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of Company shall
have the duty to inform Trustee in writing of Company's Insolvency. If a
person claiming to be a creditor of Company alleges in writing to
Trustee that Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or has
received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely on
such evidence concerning Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent, Trustee
shall discontinue payments to Plan participants or their beneficiaries
and shall hold the assets of the Trust for the benefit of Company's
general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to
pursue their rights as general creditors of Company with respect to
benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants or
their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Company is not Insolvent (or is
no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by Company in lieu of the
payments provided for hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY.
(a) Except as provided in Section 3 hereof, or in the event of excess trust
funding (defined herein), after the Trust has become irrevocable, Company
shall have no right or power to direct Trustee to return to Company or to
divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms
of the Plan.
(b) "Excess trust funding" shall be defined as trust assets in excess of the
Plan's accrued liability. If and when trust assets exceed the Plan's accrued
liability, unless the Company is Insolvent, the Trustee shall, upon the
written request of the Company, pay to the Company
3
<PAGE> 6
the excess trust funding. For purposes of this Section 4, "accrued
liability" shall mean the total of Participants' "Deferred Compensation
Accounts" under the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) Trustee may invest and reinvest the funds of the trust fund in any property,
real, personal or mixed, wherever situate, and whether or not productive of
income or consisting of wasting assets, including, without limitation,
common and preferred stock, bonds, notes, debentures, leaseholds, mortgages
(including without limiting the generality of the foregoing, any collective
or part interest in any bond and mortgage or note and mortgage),
certificates of deposit, and oil, mineral or gas properties, royalties,
interests or rights (including equipment pertaining thereto), without being
limited to the classes of property in which trustees are authorized by law
or any rule of court to invest trust funds and without regard to the
proportion any such property may bear to the entire amount of the trust
fund.
Trustee may invest and reinvest all or any portion of the trust fund
collectively with other funds through the medium of one (1) or more common,
collective or commingled trust funds which have been or may hereafter be
established and maintained by Trustee, the instrument or instruments
establishing such trust fund or funds, as amended from time to time, being
made part of this Trust by reference as if fully set forth herein so long as
any portion of the trust fund shall be invested through the medium thereof.
Trustee is expressly authorized to invest all or part of the trust fund in
savings accounts, time deposits, certificates of deposit, money market
accounts, repurchase agreements and/or any other interest-bearing accounts
(regardless of the term of such deposits or investments), if any, issued by
Trustee or any of its affiliates, which bear a reasonable interest rate .
Trustee is further expressly authorized to utilize the discount brokerage
operation, if any, offered by Trustee.
(b) Trustee may sell or exchange any property or asset of the trust fund at
public or private sale, with or without advertisement, upon terms acceptable
to Trustee and in such manner as Trustee may deem wise and proper. The
proceeds of any such sale or exchange may be reinvested as is provided
hereunder. The purchaser of any such property from Trustee shall not be
required to look to the application of the proceeds of any such sale or
exchange by Trustee.
(c) Trustee shall have full power to mortgage, pledge, lease or otherwise
dispose of the property of the trust fund without securing any order of
court therefor, without advertisement, and to execute any instrument
containing any provisions which Trustee may deem proper in order to carry
out such actions. Any such lease so made by Trustee shall be binding,
notwithstanding the fact that the term of the lease may extend beyond the
termination of the Plan.
(d) Trustee shall have the power to borrow money upon terms agreeable to Trustee
and pay interest thereon at rates agreeable to Trustee, and to repay any
debts so created.
(e) Trustee may participate in the reorganization, recapitalization, merger or
consolidation of any corporation wherein Trustee may own stock or securities
and may deposit such stock or
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<PAGE> 7
other securities in any voting trust or protective committee or like
committee or trustee, or with the depositaries designated thereby, and may
exercise any subscription rights or conversion privileges, and generally may
exercise any of the powers of any owner with respect to any stock or other
securities or property comprising the trust fund.
(f) Trustee may, through any duly authorized officer or proxy, vote any share of
stock which Trustee may own from time to time.
(g) Trustee shall retain in cash and keep unproductive of income such funds as
from time to time it may deem advisable. Trustee shall not be required to
pay interest on any such cash in its hands pending investment, nor shall
Trustee be responsible for the adequacy of the trust fund to discharge any
and all payments under the Plan. All persons dealing with Trustee are
released from inquiry into the decision or authority of Trustee to act.
(h) Trustee may hold stocks, bonds, or other securities in its own name, or in
the name of a nominee selected by it for the purpose, but said Trustee shall
nevertheless be obligated to account for all securities received by it as
part of the corpus of the trust estate herein created, notwithstanding the
name in which the same may be held.
(i) If Company so desires, Trustee may use the trust fund to purchase insurance
policies or annuity contracts issued by a life insurance company.
(j) Trustee may invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company. All rights associated with
assets of the Trust shall be exercised by Trustee or the person designated
by the Trustee, and shall in no event be exercisable by or rest with Plan
participants, except that voting rights with respect to Trust assets will be
exercised by the Company.
(k) Company shall have the right, at any time, and from time to time in its sole
discretion, to substitute assets of equal fair market value for any asset
held by the Trust.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
Trustees shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days following the close of each calendar
year and within sixty (60) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last preceding
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds or such purchases or sales (accrued interest paid or receivable
being separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
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<PAGE> 8
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims, provided, however, that Trustee shall
incur no liability to any person for any action taken pursuant to a
direction, request or approval given by Company which is contemplated by,
and in conformity with, the terms of the Plan or this Trust and is given in
writing by Company. In the event of a dispute between Company and a party,
Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If Trustee undertakes or defends any litigation arising in connection with
this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for Company
generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any
of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on Trustees by
applicable law, unless expressly provided otherwise herein, provided,
however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the Policy
to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) However, notwithstanding the provisions of Section 8(e) above, Trustee may
loan to Company the proceeds of any borrowing against an insurance policy
held as an asset of the Trust.
(g) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue
Code.
SECTION 9. COMPENSATION AND EXPENSES.
Company may pay some or all of the administrative, trust and other fees
and expenses of operating the Plan and the Trust. To the extent such fees and
expenses are not paid by the Company, they shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company, which shall be
effective sixty (60) days after receipt of such notice unless Company and
Trustee agree otherwise.
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<PAGE> 9
(b) Trustee may be removed by Company on sixty (60) days notice or upon shorter
notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within sixty (60) days after
receipt of notice of resignation, removal or transfer, unless Company
extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses
of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section 10(a) or (b)
hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trustee powers under state law,
as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any prior
Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for
and Company shall indemnify and defend the successor Trustee from any claim
or liability resulting from any action or inaction of any prior Trustee or
from any other past event, or any condition existing at the time it becomes
successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan or shall make the Trust revocable after
it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plan. Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries entitled to payment
of benefits pursuant to the terms of the Plan, Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to Company.
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<PAGE> 10
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be ineffective
to the extent of any such prohibition, without invalidating the remaining
provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance with
the laws of Alabama to the extent not preempted by federal law.
SECTION 14. EFFECTIVE DATE.
The effective date of this amendment and restatement of the Trust
Agreement shall be the date of execution.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their duly authorized representatives on this _______ day of
_____________, 1999.
COMPANY:
SAKS INCORPORATED
Attest:____________________________ By:_________________________________
Title:______________________________
TRUSTEE:
TRUSTMARK NATIONAL BANK
Attest:_____________________________ By:_________________________________
Title:______________________________
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<PAGE> 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Saks Incorporated (formerly Proffitt's, Inc.) listed below of our report dated
March 16, 1999, on our audits of the consolidated financial statements of Saks
Incorporated and Subsidiaries as of January 30, 1999 and January 31, 1998 and
for each of the three years in the period ended January 30, 1999 which report is
incorporated by reference in this Annual Report on Form 10-K for the years ended
January 30, 1999.
Registration Statements on Form S-3
Registration Numbers
333-66755
333-71933
Registration Statements on Form S-4
Registration Numbers
333-09043
333-41563
333-60123
Registration Statements on Form S-8
Registration Numbers
33-46306
33-88390
333-00695
333-25213
333-47535
333-66759
Birmingham, Alabama
April ____, 1999
<PAGE> 12
AMENDED AND RESTATED BYLAWS
OF
SAKS INCORPORATED
(As amended effective April 7, 1999)
ARTICLE I
IDENTIFICATION; OFFICES AND REGISTERED AGENT
Section 1. Identification. The name of the Corporation is SAKS
Incorporated, a Tennessee corporation (the "Corporation").
Section 2. Principal Office. The principal office of this Corporation is
located at 750 Lakeshore Parkway, Birmingham, Alabama 35211, as provided in the
Charter. The Board of Directors may, by resolution, amend the Charter to change
the address of the principal office.
Section 3. Registered Agent. The Corporation has designated and shall
continue to have a registered agent in the State of Tennessee. If the registered
agent resigns or is for any reason unable to perform his duties, the Corporation
shall promptly designate another registered agent. The Corporation may, by
resolution of the Board of Directors, appoint such other agents for the service
of process in such other jurisdictions as the Board of Directors may determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Meetings. All meetings of the shareholders for the election of
directors shall be held in the City of Alcoa, State of Tennessee, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of Tennessee as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of shareholders for any other purpose may be held at such time
and place, within or without the State of Tennessee, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof
Section 2. Annual Meetings. Annual meetings of the shareholders,
commencing with fiscal year 1988, shall be held on the 2nd Monday of June if
said date is not a legal holiday, and if a legal holiday, then on the next day
following which is not a legal holiday, or at such other date and time as shall
be designated from time to time by the Board of Directors, for the purpose of
electing directors of the Corporation and for the transacting of such other
business as may properly come before the meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than 10 days nor more than
60 days before the date of the meeting.
Section 3. Shareholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of the shareholders, a
<PAGE> 13
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for the purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held
(which place shall be specified in the notice of the meeting), or, if not so
specified at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
Section 4. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or by the Chairman of the Board, or by the
President, and shall be called by the Chairman, the President, the Secretary, or
an assistant Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of the holders of record of at least
twenty-five percent (25%) of the outstanding shares of the Corporation entitled
to vote at the meeting. Each special meeting shall be held at such time as the
Board of Directors shall determine, or, in the absence of such determination by
the Board of Directors, at such time as the person or persons calling or
requesting the call of the meeting shall specify in the notice or in the written
request. Written notice of a special meeting stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called, shall
be given to each shareholder entitled to vote at such meeting not less than 10
days or more than 60 days before the date of the meeting. The business
transacted at any special meeting shall be limited to the purposes stated in the
notice.
Section 5. Waiver of Notice. The shareholders may waive the requirement of
written notice of annual and special meetings by written waiver duly executed
and filed with the minutes of the meeting.
Section 6. Quorum. The holders of record of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
Charter. A quorum once present, is not broken by the subsequent withdrawal of
any shareholder. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented by proxy, any business
may be transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Charter a different vote is required, in which case such express provision
shall govern and control the decision of such question.
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<PAGE> 14
Section 7. Meeting Chairman. The Chairman of the Board, or if absent or
unable to serve, the President, or if absent or unable to serve, the Treasurer
or Secretary, shall call meetings of the shareholders to order and act as
Chairman of such meetings. The shareholders may elect any one of their number to
act as Chairman of any meeting in the absence of the aforenamed individuals.
Section 8. Proxies. Every shareholder entitled to vote at a shareholders'
meeting may authorize another person or persons to act for him by proxy. Each
proxy must be in writing and signed by the shareholder or by his attorney in
fact. No proxy shall be valid after the expiration of 11 months from the date
thereof unless otherwise provided in the proxy. Each proxy shall be revocable at
the pleasure of the shareholder executing it, unless it conforms to the
requirements of an irrevocable proxy, as provided by statute. All proxies must
be delivered to the Secretary of the Corporation prior to the opening of the
meeting, except for proxies granted after the meeting has opened, which proxies
shall be delivered to the Secretary as soon as practicable after execution.
Section 9. Determination of Shareholder. In order to determine
shareholders entitled to notice of or to vote at any meeting of shareholders, or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the Stock Transfer Books
be closed for a stated period, but not to exceed 40 days. If the Stock Transfer
Books are closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least 10 days immediately preceding such meeting. In lieu of closing the Stock
Transfer Books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
less than 10 days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the Stock Transfer Books
are not closed and no record date is fixed for determination of shareholders
entitled to notice of or entitled to vote at a meeting of shareholders or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed, or the date on which the resolution of the Board
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders.
Section 10. Shareholder Action By Written Consent. Any action required or
permitted to be taken by the shareholders of the Corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by such holders.
ARTICLE III
NOTICE REQUIREMENTS AND CONDUCT OF SHAREHOLDERS MEETINGS
Section 1. Notice of Nominations. Nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors authorized to make such nominations or by any shareholder
entitled to vote in the election of directors generally. However, any such
shareholder nomination may be made only if written notice of such nomination has
been given, either by personal delivery or the United States mail, postage
prepaid, to the
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<PAGE> 15
Secretary of the Corporation not later than (a) with respect to an election to
be held at an annual meeting of shareholders, one hundred twenty (120) days in
advance of the anniversary date of the proxy statement for the previous year's
annual meeting, and (b) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close of business on
the tenth day following the date on which notice of such meeting is first given
to shareholders. In the case of any nomination by the Board of Directors or a
committee appointed by the Board of Directors authorized to make such
nominations, compliance with the proxy rules of the Securities and Exchange
Commission shall constitute compliance with the notice provisions of the
preceding sentence.
In the case of any nomination by a shareholder, each such notice shall set
forth: (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director, (i) the name, age, business address, and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies with
respect to nominees for election as directors, pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including without limitation
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected); and (b) as to the shareholder giving
the notice (i) the name and address, as they appear on the Corporation's books,
of such shareholder, and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder; and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The President,
Chief Executive Officer, or chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
Section 2. Notice of New Business. At an annual meeting of the
shareholders only such new business shall be conducted, and only such proposals
shall be acted upon, as have been properly brought before the meeting. To be
properly brought before the annual meeting, such new business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a shareholder. For a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the Corporation
and, if the Corporation is a reporting company under the Securities Exchange Act
of 1934 (the "Exchange Act"), the proposal and the shareholder must comply with
Rule 14a-8 under the Exchange Act. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation within the time limits specified by Rule 14a-8, if applicable.
A shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposed to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual
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<PAGE> 16
meeting, (b) the name and address, as they appear on the Corporation's books, of
the shareholder proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the shareholder, and (d) any
financial interest of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 2. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that new business or any
shareholder proposal was not properly brought before the meeting in accordance
with the provisions of this Section 2, and if he or she should so determine, he
or she shall so declare to the meeting and any such business or proposal not
properly brought before the meeting shall not be acted upon at the meeting.
Section 3. Conduct of Shareholders Meetings. The Board of Directors of the
Corporation shall be entitled to make such rules or regulations for the conduct
of meetings of shareholders as it shall deem necessary, appropriate or
convenient. Subject to such rules and regulations of the Board of Directors, if
any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to shareholders of record of the corporation and
their duly authorized and constituted proxies, and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting and matters which are to be voted on by ballot. Unless and to the
extent determined by the board of directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Number of Directors. The affairs of the Corporation shall be
managed by a Board of up to 18 directors.
Effective as of the annual meeting of shareholders in 1997, the Board
shall be divided into three classes, designated as Class I, Class II, and Class
III, as nearly equal in number as possible. The initial term of office of Class
I shall expire at the annual meeting of shareholders in 1998, that of Class II
shall expire at the annual meeting of shareholders in 1999, and that of Class
III shall expire at the annual meeting in 2000, and in all cases as to each
director until his or her successor shall be elected and shall qualify, or until
his or her earlier resignation, removal from office, death, or incapacity.
5
<PAGE> 17
Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified. Vacancies on
the Board for any reason, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled by a vote of the
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
If the number of directors is changed, the Board shall determine the class
or classes to which the increased or decreased number of directors shall be
apportioned; provided that the directors in each class shall be as nearly equal
in number as possible. No decrease in the number of directors shall have the
effect of shortening the term of any incumbent director.
Notwithstanding any other provisions of the Charter or these Bylaws (and
notwithstanding that a lesser percentage may be specified by law, the Charter,
or these Bylaws), the affirmative vote of the holders of 80% or more of the
voting power of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article IV, Section 1 of these Bylaws.
Section 2. Removal of Directors. Any or all directors may be removed by a
vote of a majority of the shareholders entitled to vote, only for cause as
defined by the Tennessee Business Corporation Act.
Section 3. Filling of Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors, for any
reason, may be filled by a vote of the majority of the directors then in office,
although less than a quorum exists, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and qualified, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole board (as constituted immediately prior to any such
increase), the vacancy or newly created directorship may be filled by vote of
the shareholders at any meeting of the shareholders, notice of which shall have
referred to the proposed election. Any director elected by the shareholders to
fill any vacancy shall be elected to hold office until the next annual meeting
of shareholders and until their successors are duly elected and qualified,
unless sooner displaced.
Section 4. Annual Meeting. The annual meeting of the Board of Directors
shall be held immediately after and at the same place as the annual meeting of
the shareholders, provided a quorum be present and no notice of such meeting
shall be necessary. In the event such meeting of the Board of Directors is not
held at such time and place, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.
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<PAGE> 18
Section 5. Notice of Meetings. The annual and all regular meetings of the
Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the Board. Special meetings shall be
held upon written notice not less than one day before the meeting.
Section 6. Special Meetings. Special meetings of the Board may be called
by the Chairman of the Board or President, or if either is absent or unable to
do so, by any Vice President, or by any two directors.
Section 7. Quorum. At all meetings of the Board, a majority of directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law, the Charter or by these Bylaws. If a quorum shall
not be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Dissent to Action. A director who is present at a meeting of
the Board, at which any action is taken, shall be presumed to have concurred in
the action, unless his dissent thereto shall be entered in the Minutes of the
meeting, or unless he shall submit his written dissent to the person acting as
the Secretary of the meeting before the adjournment thereof, or shall deliver or
send such dissent to the Secretary of the Corporation promptly after the
adjournment of the meeting. Such rights to dissent shall not apply to a director
who voted in favor of any such action. A director who is absent from a meeting
at which such action is taken shall be presumed to have concurred in the action
unless he shall deliver or send by registered or certified mail his dissent
thereto to the Secretary of the Corporation or shall cause such dissent to be
filed with the Minutes of the proceedings of the Board within 10 days after
learning of such action.
Section 9. Action without Meeting. Unless otherwise restricted by the
Charter or these Bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing setting forth the actions so taken, signed by all of
the persons entitled to vote thereon, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 10. Board Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, but no such committee shall have the power or authority in
reference to amending the Charter, adopting an agreement of merger or
7
<PAGE> 19
consolidation, recommending to the shareholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the shareholders a dissolution of the Corporation or a revocation of the
dissolution, or amending the Bylaws of the Corporation; and, unless the
resolution or the Charter expressly so provide, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
Section 11. Compensation of Directors. Unless otherwise restricted by the
Charter, the Board of Directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors and/or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 12. Indemnification. The Corporation shall indemnify, to the full
extent authorized or permitted by the Tennessee Business Corporation Act, any
person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was a director of the Corporation or serves or served as a director of any other
enterprise at the request of the Corporation.
Section 13. Mandatory Resignation. Directors who are also officers of the
Corporation shall submit a letter of resignation as such to the Board of
Directors upon any termination of employment as an officer of the Corporation,
and directors who are not officers of the Corporation shall likewise submit a
letter of resignation upon any change in that director's principal business or
other activity in which the director was engaged at the time of his or her
election.
ARTICLE V
OFFICERS
Section 1. Appointment. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chairman of the Board, a
Chief Executive Officer, a President, an Executive Vice President, a Chief
Operating Officer, a Chief Financial Officer, a Treasurer, and a Secretary. The
Board of Directors may also choose additional vice presidents and one or more
assistant secretaries and assistant treasurers. Any two of the aforementioned
offices may be filled by the same person, except that no one person may be
Secretary and also President. No person shall purport to execute or attest any
document or instrument on behalf of the Corporation in more than one capacity.
8
<PAGE> 20
Section 2. Term. The officers of the Corporation shall hold office for one
year or until their successors are chosen and qualified subject, however, to the
removal of any officer pursuant to these Bylaws.
Section 3. Salaries. The salaries of all officers of the Corporation shall
be fixed by the Board of Directors.
Section 4. Removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
Section 5. Duties. All officers shall have such authority to perform such
duties in the management of the Corporation as are normally incident to their
offices and as the directors from time to time provide.
Section 6. The Chairman of the Board and Chief Executive Officer. The
Chairman of the Board and Chief Executive Officer of the Corporation shall
preside at all meetings of the shareholders and the Board of Directors, shall
have general and active management of the business of the Corporation, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
Section 7. Other Duties of the Chairman of the Board. He shall execute
bonds, mortgages and other contracts, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
Section 8. The President. The President shall perform such duties as shall
be prescribed to him from time to time by the Board of Directors.
Section 9. Duties of the President and the Vice President(s). In the
absence of the Chief Executive Officer or in the event of his inability or
refusal to act, the President shall perform the duties of the Chief Executive
Officer and, when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer. The Vice President(s) shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 10. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or the President, under whose supervision he shall be.
9
<PAGE> 21
Section 11. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the assistant secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 12. The Chief Financial Officer and Treasurer. The Chief Financial
Officer and the Treasurer, in his capacity as such officers, shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
Section 13. Duties of the Chief Financial Officer and Treasurer. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as the
Treasurer and of the financial condition of the Corporation.
Section 14. Bond. If required by the Board of Directors, the Chief
Financial Officer and the Treasurer shall give the Corporation a bond (which
shall be renewed every six years) in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
Section 15. Assistant Treasurer(s). The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 16. Indemnification. The Corporation shall indemnify, to the full
extent authorized or permitted by the Tennessee Business Corporation Act, any
person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was an officer of the Corporation or serves or served as a director or officer
of any other enterprise at the request of the Corporation.
10
<PAGE> 22
ARTICLE VI
CAPITAL STOCK
Section 1. Certificate. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by, or in the name of the Corporation by,
the Chairman of the Board, the Chief Executive Officer or the President and the
Chief Operating Officer, a Vice President, the Treasurer (or an Assistant
Treasurer), or the Secretary (or an Assistant Secretary) of the Corporation,
certifying the number of shares owned by him in the Corporation.
Section 2. Facsimile Signatures. Where a certificate is countersigned (1)
by a transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case an officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issuance.
Section 3. Notice of Restrictions. Each certificate of stock which is
restricted or limited as to its transferability or voting rights, or which is
callable under the Charter, which is preferred or limited as to dividends or
rights upon voluntary or involuntary dissolution, shall have a notice of such
restriction, limitation or preference conspicuously stated on the face or back
of the certificate. Upon the removal of expiration of any such restriction or
limitation, the holder of such certificate shall be entitled to receive a new
certificate upon the surrender of the old restricted or limited certificates,
and the payment of the reasonable expenses of the Corporation incurred in
connection therewith.
Section 4. Reissuance of Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. The Corporation shall register a transfer
of a stock certificate presented to it for transfer if:
(a) the certificate is endorsed by the appropriate person or persons;
11
<PAGE> 23
(b) the signature of the appropriate person or persons has been
guaranteed by a national banking association, a bank organized and
operating under the statutes of the State of Tennessee, or a member
of the National Association of Security Dealers, and reasonable
assurance is given that the endorsements are effective, unless the
Secretary of the Corporation waives such requirements;
(c) there has been compliance with any applicable law relating to the
collection of taxes; and
(d) the transfer is in fact rightful or is to a bona fide purchaser.
Section 6. Endorsements. An endorsement of the stock certificate in
registered form is made when an appropriate person signs on it or on a separate
document an assignment or transfer of it, or a power to assign or transfer it,
or when the signature of this person is written without more upon the back of
the certificate. An endorsement may be in blank, which includes an endorsement
to bearer, or special, which specifies the person to whom the stock is to be
transferred, or who has the power to transfer it. The Corporation may elect to
require reasonable assurance beyond that specified in this Section.
Section 7. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Tennessee.
ARTICLE VII
DIVIDENDS, SURPLUS AND RESERVE
Section 1. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property or its own shares, except where the Corporation is insolvent, as
that term is defined in Section 48-1-102 (14), Tennessee Code Annotated, or when
the payment thereof would render the Corporation insolvent, or when the
declaration of payment thereof would be contrary to any restrictions contained
in the Charter, these Bylaws, or in any applicable valid contract. The
declaration and payment of any such dividend shall be in accordance with Section
48-1-511, Tennessee Code Annotated, as it may be amended from time to time.
Section 2. Capital Distributions. The Board of Directors may distribute to
the shareholders of the Corporation out of capital surplus, a portion of its
assets, in cash or property, subject to the following provisions:
12
<PAGE> 24
(a) no such distribution shall be made at a time when the Corporation is
insolvent or when such distribution would render the Corporation
insolvent;
(b) no such distribution shall be made unless such distribution is
authorized by the affirmative vote of the holders of the majority of
all of the outstanding shares of stock entitled to vote thereon;
(c) no such distribution shall be made to the holders of any class of
shares unless all cumulative dividends accrued on all preferred or
special classes of shares entitled to preferential dividends shall
have been fully paid;
(d) no such distribution shall be made to the holders of any class of
shares which would reduce the remaining net assets of the
Corporation below the aggregate preferential amount payable in the
event of voluntary liquidation to the holders of shares having
preferential rights to the assets of the Corporation in the event of
liquidation; and
(e) each such distribution, when made, shall be identified as a
distribution from capital surplus and the amount per share shall be
disclosed to the shareholders receiving the same, concurrently with
the distribution thereof.
Section 3. Increases of Capital Surplus. The capital surplus of the
Corporation may be increased from time to time by resolution of the Board,
directing that all or part of the earned surplus of the Corporation be
transferred to capital surplus. The Board of Directors may, by resolution, apply
any part or all of the capital surplus of the Corporation to the reduction or
elimination of any deficit arising from losses however incurred; provided,
however, that the earned surplus has first been exhausted by charging such
losses to earned surplus and then only to the extent that such losses exceed the
earned surplus. Each such application of capital surplus shall, to the extent
thereof, effect a reduction of capital surplus.
Section 4. Seal. The Corporation shall have a corporate seal. The presence
or absence of a seal on any instrument shall not affect the character, validity,
or legal effect thereof in any respect. The affixing of a seal shall not be
necessary for the execution of any instrument or document by the Corporation.
ARTICLE VIII
AMENDMENTS
Subject to the provisions of the Charter of the Corporation, these Bylaws
may be altered, amended, or repealed or new bylaws may be adopted by the vote of
a majority of all of the shareholders or by the majority vote of the entire
Board of Directors, when such power is conferred upon the Board of Directors by
the Charter, at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
13
<PAGE> 25
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 2. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was or has agreed to become a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him or on his behalf in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article, provided that
such insurance is available on acceptable terms, which determination shall be
made by a vote of a majority of the entire Board of Directors.
Section 3. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation may nevertheless indemnify each director or officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 4. Notices. Whenever, under the provisions of the statutes, the
Charter or these Bylaws, notice is required to be given to any director or
shareholder, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such director or shareholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to directors may
also be given by telegram or electronic facsimile, in which event it shall be
deemed to have been given when deposited with a telegraph or electronic
facsimile office for transmission.
Section 5. Indemnification. Notwithstanding anything in the Charter to the
contrary, the Corporation shall be permitted, but shall not be required, to
indemnify and hold harmless any employee or agent of the Corporation made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative.
14
<PAGE> 1
EXHIBIT 13.11
Saks Incorporated is one of the country's premier retail enterprises, operating
352 stores in 38 states, with over $6 billion in annual revenues, and more than
60,000 associates.
The Company is well positioned to capitalize on a most promising
future. With the retail authority of the Saks Fifth Avenue brand and the
stability and strength of our core department store businesses and
infrastructure, we believe the growth prospects of this company are
extraordinary.
<TABLE>
<CAPTION>
Saks Fifth Avenue Stores
<S> <C>
Full-Line 43 stores
Resort 9 stores
Main Street 7 stores
Parisian Specialty Department Stores 44 stores
Traditional Department Stores
Proffitt's 31 stores
McRae's 29 stores
Younkers 52 stores
Herberger's 38 stores
Carson Pirie Scott 30 stores
Boston Store 12 stores
Bergner's 14 stores
Off 5th Stores 42 stores
Bullock & Jones Men's Store 1 store
Contents
Financial Highlights 1
Letter to Our Shareholders 2
Five-Year Financial Summary 13
Management's Discussion and Analysis 14
Consolidated Financial Statements 23
Notes to Consolidated Financial Statements 27
Report of Independent Accountants 57
Report of Management 57
Market Information 58
Directors and Certain Officers 59
Store Locations 60
Shareholder Information 62
Corporate Information 63
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
January 30, January 31, February 1,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net sales $6,219,893 $5,726,346 $4,926,862
Income before non-routine items $ 153,525 $ 166,222 $ 109,364
Diluted earnings per common
share before non-routine items $ 1.05 $ 1.17 $ 0.81
Income before extraordinary items $ 24,985 $ 416,237 $ 93,578
Diluted earnings per common share $ 0.17 $ 2.86 $ 0.70
before extraordinary items
Diluted weighted average common shares 146,383 149,085 132,583
Total assets $5,188,981 $4,270,253 $3,630,276
Shareholders' equity $2,007,575 $1,944,529 $1,397,934
</TABLE>
<PAGE> 3
Note: Non-routine items include extraordinary items, gains or losses from
long-lived assets, merger and integration charges, year 2000 expenses, ESOP
expenses and the 1997 recognition of a $294,846 deferred tax asset.
A Distinctive Approach
1998 was another great year in your Company's history. Excluding merger-related
and other charges, we again posted record operating results while continuing the
integration process of our recent acquisitions.
The biggest news during 1998 was our September merger with Saks
Holdings, Inc. and our corporate name change from Proffitt's, Inc. to Saks
Incorporated. Saks Fifth Avenue holds a top-tier position in one of the most
attractive and fastest growing segments in retailing, an undisputed reputation
for style leadership and customer service and numerous brand extension
opportunities. Our merger strategy is clear. We acquire companies at a fair
value that have a strong franchise and customer loyalty, quality real estate in
attractive markets, solid financial performance and meaningful synergy
opportunities. The Saks Holdings transaction was consistent with that strategy.
This merger combined two of the most compelling growth companies in
retailing today. Our operating strength and support infrastructure are allowing
Saks Fifth Avenue's management team to focus on merchandising, marketing and
customer relationships. Our financial capacity will provide the resources to
fund the extraordinary growth opportunities for this premier global brand.
In our past transactions, we have successfully integrated the acquired
companies as a result of a systematic process which includes retaining and
incenting the key management personnel of the acquired company, maintaining the
store identity and store level associates to assure the transaction is
transparent to our customers, retaining the merchandising organization to tailor
assortments to customer preferences, engaging in processes of benchmarking and
best practices to improve performance across all operations and centralizing
certain support functions to reduce the expense structure and improve efficiency
and productivity. The same integration process is well underway for Saks Fifth
Avenue. We continue to execute our merchandising synergy plans. We believe
substantial opportunities remain to improve the Company's merchandising
operations as we realize scale opportunities and purchasing power, improve
merchandising execution and inventory management, recognize additional synergies
in distribution and logistics and further intensify private brand offerings.
We have demonstrated our ability to deliver substantial cost savings
and other synergies as a part of our acquisition processes. We remain on
schedule regarding the synergies process with our Younkers, Parisian,
Herberger's and Carson Pirie Scott transactions. During 1998, we achieved our
targeted $39 million of cost savings related to these previous mergers and
expect to achieve an incremental $10 million of savings in 1999 and another $20
million in 2000. In conjunction with the Saks Holdings transaction, we realized
approximately $12 million of cost synergies in 1998 and expect incremental
synergies related to this merger of
<PAGE> 4
approximately $50 million to $60 million in 1999 and $13 million in 2000. We
will continue to focus on other opportunities to improve productivity throughout
our organization.
We remain focused on the quality and size of our proprietary credit
card portfolio, as we continue to benefit from the operating efficiencies and
credit card term changes made possible by our national credit card bank.
During the year, we further refined the Company's capital structure to
strengthen the balance sheet. Our capital structure objectives are to maintain
appropriate leverage, diversified funding sources, an appropriate fixed/floating
interest rate mix and adequate liquidity to fund operations and expansion.
1998 was a year of outstanding new unit growth. We acquired four stores
from North Carolina-based Brody's and 15 former Mercantile stores from
Dillard's, along with opening, expanding and remodeling additional properties.
These activities added approximately 3.6 million square feet to our store base,
an increase of 11 percent. This performance was double the rate of quality
annual square footage growth we previously targeted. Our future internal growth
plans call for an average of 12 to 15 new units annually. To date, we have
commitments for 13 new stores in 1999, totaling 1.2 million square feet of
space, and we continue to negotiate for other new unit, expansion and renovation
opportunities that meet our stringent return criteria. Through the scale
associated with our corporate store development activities and certain
re-engineering processes, we intend to reduce the fixed investment associated
with our new square footage growth. This will result in improved returns on
these future investments, while maintaining the unique design and quality
associated with our store brands.
We have an exceptional ten-year record of shareholder value creation
which ranks among the top performances of all American businesses. I believe we
can maintain this relative performance in our core business through a relentless
focus on improving returns and execution, while developing new distribution
strategies to leverage the power of our franchises, our brands and our customer
relationships.
It is a fascinating time to be in the retail business.
Sincerely,
/s/ R. Brad Martin
Chairman of the Board and Chief Executive Officer
Saks Incorporated
Luxury stores 59
Speciality department stores 44
Traditional department stores 206
Particular attention to detail
Our stores exceed expectations, because we listen to our customers. Then we
simply deliver more. We analyze information on customer preferences, purchasing
patterns and lifestyle requirements. We know what works, on a market to market
basis, as well as why and when.
At each of our stores, we thoughtfully build and nurture long-term
<PAGE> 5
customer relationships. With a customer's initial store visit, our sales
associates begin the clienteling process by tracking personal customer
preferences. This process has become key to growing these valued relationships.
We foster a culture of superior service, designed to personalize each customer
encounter. Customers are greeted and thanked by name. Sales are followed with
notes of appreciation.
Individual communication with our customers also builds interest in new
merchandise arrivals, special promotions and unique events like trunk shows,
fashion shows and designer appearances. This communication increases store
visits, creates additional transactions and strengthens customer loyalty.
Building loyalty builds business. Our host of successful, value-added
affinity programs, like SaksFirst, Parisian Platinum and Younkers Gold, are
designed to reward customers for their loyalty to our stores.
At Saks Incorporated, when it comes to our customers, details make the
difference.
Individual Style
The store nameplates associated with Saks Incorporated--Saks Fifth Avenue,
Parisian, Proffitt's, McRae's, Younkers, Herberger's, Carson Pirie Scott,
Bergner's and Boston Store--have distinct and valuable identities as style
leaders in their markets. Our customers look to us as early indicators of
fashion trends. They count on our ability to address individual needs of style
at every level. And because we tailor the merchandise assortments to meet the
preferences and lifestyles of each customer group and each marketplace, our
product assortments are as distinctive as our geographic reach.
The global power of our name, our reputation, our focus on style and
our attention to customer relationships have allowed Saks Incorporated to forge
strong partner-ships with key vendors and prestigious designers. These valued
partnerships enable us consistently to offer our customers a stylish array of
exceptional merchandise, attractively priced.
Opportunities to Standout
Our style leadership and customer relationships provide a great foundation for
developing additional opportunities for Saks Incorporated.
Our proprietary brands are becoming increasingly important in our
overall merchandise assortments. We have developed and introduced high quality
product offerings which are ours exclusively. These brands will allow us to
deliver exceptional value and style to our customers. Our private brands stand
out in style that's ours alone. Another source for potential growth is our
catalog businesses. With Folio and Bullock & Jones combined, we distributed 55
catalogs to nearly 30 million customers in 1998. We have in place the direct
response infrastructure to expand this business in order to further leverage the
power of our brands in this fast changing, out-of-store arena.
Building on our direct response infrastructure, we are also in the
early stages of developing our Internet strategies and applications, including
business process improvements and more effective communication
<PAGE> 6
and marketing to customers. In addition, there are specific Internet-related
retailing strategies that are appropriate for our Company. We believe that the
long-term viability of an Internet-based retail concept will rely on the power
of its brand. Because of the unique authority and global appeal of the Saks
Fifth Avenue brand, developing electronic commerce opportunities is an important
focus for Saks Incorporated.
Unique Properties
Saks Incorporated operates more than 35 million square feet of premium real
estate across the country, including some of the most prestigious addresses in
fashion retailing today.
Our customers know our stores for their unique design elements. The
lighting, fixturing, decor, aisle-width and special amenities in each of our
stores provide an extraordinary and exciting shopping experience. Our distinct
shopping environments beautifully showcase our outstanding merchandise
assortments.
Our strong balance sheet positions us to further fund new store growth.
We see many opportunities to cultivate this growth across all of our store
formats. New store locations, remodels and expansions are carefully selected and
executed to assure that our stringent return criteria are achieved. We remain
focused on increasing existing store productivity and improving the efficiency
of every asset employed in this business. The orchestration of lighting, traffic
patterns and visual presentation creates an environment that is both beautiful
and accessible.
<PAGE> 7
SAKS INCORPORATED & SUBSIDIARIES FIVE-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended Ended
January 30, January 31, February 1, February 3, January 29,
(In Thousands, Except Per share Amounts) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data:
Net sales $ 6,219,893 $ 5,726,346 $ 4,926,862 $ 4,422,107 $ 4,085,595
Cost of sales 4,093,467 3,731,293 3,208,989 2,900,026 2,665,525
------------ ------------ ------------ ------------ ------------
Gross margin 21,126,426 1,995,053 1,717,873 1,522,081 1,420,070
Selling, general and administrative
expenses 1,289,228 1,165,118 1,057,144 961,407 852,896
Other operating expenses 498,733 444,276 367,247 330,634 317,585
Expenses related to attempted
Younkers takeover 10,017
(Gains) losses from long-lived assets 61,785 (134) 1,406 (36,058)
Merger and integration charges 111,307 36,524 16,929 64,237 2,000
Year 2000 expenses 10,437 6,590
ESOP expenses 9,513 3,910 2,931 2,787
------------ ------------ ------------ ------------ ------------
Operating income 154,936 333,166 271,237 188,913 244,802
Other income (expense)
Interest expense (110,971) (113,685) (114,881) (141,725) (117,065)
Other income (expense), net 22,201 2,330 (11,780) 4,051 4,826
------------ ------------ ------------ ------------ ------------
Income before provision (benefit) for
income taxes and extraordinary items 66,166 221,811 144,576 51,239 132,563
Provision (benefit) for income taxes 41,181 (194,426) 50,998 48,914 58,112
------------ ------------ ------------ ------------ ------------
Income before extraordinary items 24,985 416,237 93,578 2,325 74,451
Extraordinary loss on early extinguish-
ment of debt, net of taxes (25,881) (11,323) (12,746) (8,051) (535)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (896) $ 404,914 $ 80,832 $ (5,726) $ 73,916
============ ============ ============ ============ ============
Basic earnings (loss) per common share:
Before extraordinary items $ 0.17 $ 3.03 $ 0.72 $ 0.00 $ 0.62
After extraordinary items $ (0.01) $ 2.94 $ 0.62 $ (0.07) $ 0.62
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C> <C>
Diluted earnings (loss) per common share:
Before extraordinary items $ 0.17 $ 2.86 $ 0.70 $ 0.00 $ 0.61
After extraordinary items $ (0.01) $ 2.79 $ 0.60 $ (0.07) $ 0.61
Weighted average common shares
Basic 142,856 137,588 125,056 111,974 117,217
Diluted 146,383 149,085 132,583 113,309 118,504
Consolidated Balance Sheet Data:
Working capital $ 887,875 $ 1,096,359 $ 951,752 $ 710,468 $ 777,444
Total assets $ 5,188,981 $ 4,270,253 $ 3,630,276 $ 2,899,565 $ 2,908,258
Senior long-term debt, less current
portion $ 2,110,395 $ 1,093,806 $ 863,475 $ 1,256,349 $ 1,263,147
Subordinated debt $ 4,252 $ 286,964 $ 501,767 $ 150,505 $ 150,269
Shareholders' equity $ 2,007,575 $ 1,944,529 $ 1,397,934 $ 691,059 $ 739,893
</TABLE>
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
Saks Incorporated (formerly Proffitt's, Inc. and hereinafter the "Company") is a
national retailer currently operating 352 premier and traditional department
stores under the following names: Saks Fifth Avenue (59 stores), Proffitt's (31
stores), McRae's (29 stores), Younkers (52 stores), Parisian (44 stores),
Herberger's (38 stores), Carson Pirie Scott ("Carson's") (30 stores), Bergner's
(14 stores), Boston Store (12 stores), Off 5th (42 stores), and Bullock & Jones
(1 store). The Company also operates a direct mail business under the Folio and
Bullock & Jones names.
The Company has experienced significant growth since 1994, principally
through a series of acquisitions. The Company's major acquisitions are outlined
below:
<PAGE> 10
<TABLE>
<CAPTION>
Number of
Stores Accounting
Name Headquarters Acquired Locations Date Acquired Treatment
- ----------- ------------- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
McRae's Jackson, MS 31 Southeast March 31, 1994 Purchase
Younkers Des Moines, IA 50 Midwest February 3, 1996 Pooling
Parisian Birmingham, AL 40 Southeast/Midwest October 11, 1996 Purchase
Herberger's St. Cloud, MN 37 Midwest February 1, 1997 Pooling
Carson Pirie Scott, Milwaukee, WI 55 Midwest January 31, 1998 Pooling
Boston Store,
and Bergner's
Saks Fifth Avenue and New York, NY 95 National September 17, 1998 Pooling
Off 5th ("SFA")
</TABLE>
<PAGE> 11
Additionally, the Company has grown through the construction of new units as
well as through the acquisition of store locations such as the purchase of 15
former Mercantile stores from Dillard's in late 1998.
Merchandising, sales promotion and certain store operating support
functions are conducted in multiple locations. Certain back office
administrative support functions for the Company, such as accounting, credit
administration, store planning and information technology, are centralized.
Income statement information for each year presented has been restated
to reflect the Younkers, Herberger's, Carson Pirie Scott, and SFA mergers, which
were accounted for as poolings of interests. The operations of Parisian and the
15 stores purchased from Dillard's, which were accounted for using the purchase
method of accounting, have been included in the income statements subsequent to
their respective purchase dates. The following table sets forth, for the periods
indicated, certain items from the Company's consolidated statements of income,
expressed as percentages of net sales (numbers may not total due to rounding):
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
January 30, January 31, February 1,
1999 ("1998") 1998 ("1997") 1997 ("1996")
------------ ------------ ------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 65.8 65.2 65.1
-------- -------- --------
Gross margin 34.2 34.8 34.9
Selling, general and
administrative expenses 20.7 20.3 21.5
Other operating expenses 8.0 7.7 7.4
(Gains) losses from long-lived
assets 1.0
Merger and integration charges 1.8 0.6 0.3
Year 2000 expenses 0.2 0.1
ESOP expenses 0.2 0.1
-------- -------- --------
Operating income 2.5 5.8 5.5
Other income (expense)
Interest expense (1.8) (2.0) (2.3)
Other income (expense), net 0.4 (0.2)
-------- -------- --------
Income before provision
(benefit) for income taxes
and extraordinary items 1.1 3.9 2.9
Provision (benefit) for income taxes 0.7 (3.3) 1.0
-------- -------- --------
Income before extraordinary items 0.4 7.3 1.9
Extraordinary loss on early
extinguishment of debt,
net of taxes (0.4) (0.2) (0.3)
-------- -------- --------
Net income (loss) 0.0% 7.1% 1.6%
======== ======== ========
</TABLE>
<PAGE> 12
Net Sales
Total Company net sales increased by 9.0%, 16.0% and 11.0% in 1998, 1997 and
1996, respectively. The 1998 increase was primarily due to a comparable store
sales increase of 4.0% and incremental revenues generated from new store
additions during 1998 and 1997 including the third and fourth quarter sales from
the 15 stores purchased from Dillard's. The 1997 increase was primarily due to a
comparable store sales increase of 5.0% and new store additions during 1997,
combined with the full year inclusion of Parisian which was acquired in October
1996. The 1996 increase was primarily due to a comparable store sales increase
of 6.0%, new store additions during 1996 and 1995 and a partial year of revenues
generated from the Parisian stores.
Gross Margins
Gross margins were 34.2%, 34.8% and 34.9% of net sales in 1998, 1997 and 1996,
respectively. The Company's cost of sales includes certain purchasing and
distribution costs.
The decrease in gross margin percent from 1997 to 1998 was primarily
due to markdowns associated with the aged and excessive quantities of inventory
at SFA recognized contemporaneous with the SFA acquisition. These markdowns at
SFA negatively affected gross margin by approximately 1.5% and were partially
offset by margin improvement resulting from enhanced buying power with core
vendors due to the Company's increased scale.
The decrease in gross margin percent from 1996 to 1997 was primarily
due to increased penetration in certain lower margin merchandise categories,
sales shortfalls in bridge apparel in the spring of 1997 resulting in higher
markdowns and higher inventory shortage and processing costs associated with a
new SFA distribution center offset by enhanced buying power with core vendors
due to the Company's increased scale, expansion of key brands and benchmarking
of operations.
Management believes the merchandising operations of the business can be
further enhanced through continued execution of the Company's best practices and
benchmarking process, more effective controls and disciplines, through the
introduction of a new private brand program in its non-SFA stores, which began
in the fall of 1998, and the expansion of existing private brand offerings in
the SFA stores. While the Company anticipates that it will continue to emphasize
premier national brands and exclusive designer labels in its stores,
management's goal is to increase the private brand business from approximately
8.0% of sales to approximately 12.0% of sales by 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") were 20.7%, 20.3% and
<PAGE> 13
21.5% of net sales in 1998, 1997 and 1996, respectively. The increase in the
SG&A percentage from 1997 to 1998 was primarily due to SFA legal claims and self
insurance liabilities, expenses related to real estate realignments and store
closings and a $23.4 million loss recognized from conforming the delinquent
accounts policies of SFA's proprietary credit card receivables to those of the
Company.
The reduction of the SG&A percentage from 1996 to 1997 was due to
increased economies of scale and realization of synergies associated with the
Company's acquisitions, targeted cost savings programs, increases in net finance
charge income and implementation of cost reduction initiatives during 1997.
Management identified synergies in conjunction with the Younkers,
Parisian, Herberger's, Carson's and SFA business combinations. The
implementation of these synergies reduced operating expenses by a total of $20.0
million in 1997 and $51.0 million in 1998. Incremental savings relating to these
mergers of approximately $60.0 million are planned in 1999. Cost reductions are
being achieved through the elimination of duplicate corporate expenses,
economies of scale, implementation of best practices, and consolidation of
certain administrative support functions. These changes are expected to deliver
additional leverage on expenses in the future.
Finance charge income and securitization gains derived from the
Company's proprietary credit cards is included as a component of SG&A. Gross
finance charge income (before allocation of finance charges to the third party
purchasers of accounts receivable [see "Liquidity"]), was $261,500, $213,500 and
$170,900 in 1998, 1997 and 1996, respectively. The increase since 1996 is due
primarily to the increase in sales, the increase in the number of proprietary
accounts, the increased utilization of the receivables securitization program
and changes in certain credit card terms. The allocation of finance charges to
the third party purchasers of accounts receivable totaled approximately $66,900
in 1998, $47,300 in 1997 and $40,700 in 1996. Utilization of the Company's
accounts receivable securitization programs increased each year presented (see
"Liquidity") commensurate with the Company's growth in proprietary credit card
sales and the securitization of Carson's accounts receivable beginning in
February 1998.
Effective February 1998 (and September 1998 for SFA), all of the
Company's proprietary credit cards are issued by National Bank of the Great
Lakes (the "Bank"), a wholly owned subsidiary of the Company (see "Liquidity").
The Bank has the ability to assess uniform finance charges (including late fees)
in all 38 states in which the Company operates.
Other Operating Expenses
Other operating expenses were 8.0%, 7.7% and 7.4% of net sales in 1998, 1997 and
1996, respectively. The increase in 1998 over 1997 was primarily due to the
additional amortization of approximately $270.0 million in goodwill and
intangibles recorded with the 1998 purchases of Brody Brothers Dry Goods
Company, Inc. ("Brody's"), Bullock & Jones (a direct mail business and one
retail store) and the 15 stores from Dillard's.
<PAGE> 14
In addition to the incremental goodwill and intangibles amortization,
the 1998 rate was negatively affected by incremental depreciation expense and
rental expense from 20 new stores opened and acquired in the third and fourth
quarters of 1998.
(Gains) Losses from Long-Lived Assets
Losses from long-lived assets in 1998 of $61.8 million are principally comprised
of the write-off of the carrying amount of several relocated or closed stores,
costs associated with terminating certain new store projects which did not meet
the Company's investment return criteria and impairment charges related to
several abandoned or under-performing store locations and a distribution
facility. These charges were primarily the result of the Company's review of the
SFA real estate portfolio subsequent to the SFA merger.
Merger and Integration Charges
In connection with the Company's mergers with SFA, Carson's, Herberger's and
Younkers and the acquisition of Parisian and the former Mercantile stores from
Dillard's, the Company incurred certain costs to effect the transactions and
other costs to integrate and combine the operations of the companies.
For 1998, these costs totaled $111.3 million, or 1.8% of net sales. The
1998 costs were comprised of (1) $44.8 million of SFA merger transaction costs
related principally to investment banking, legal and accounting fees, transfer
taxes and other direct merger costs; (2) $42.4 million of integration charges
associated with the SFA merger related principally to such items as severance,
the consolidation of administrative operations and the write-off of redundant
information technology systems and certain development projects; and (3) $24.1
million of continuing integration costs related to mergers and acquisitions from
the prior two years, including the acquisition of the 15 Dillard's stores in the
third and fourth fiscal quarters of 1998.
For 1997, these costs totaled $36.5 million, or 0.6% of net sales. The
1997 charges were comprised of (1) $13.8 million of Carson's merger transaction
costs related principally to investment banking, legal and accounting fees and
other direct merger costs; (2) $17.3 million of integration charges associated
with the Carson's merger related principally to such items as severance, the
consolidation of administrative operations, and the write-off of duplicate
assets; and (3) $12.4 million of continuing integration costs related to mergers
and acquisitions from the prior two years offset by a $7.0 million decrease in
the estimated costs to exit a SFA distribution facility.
For 1996, these costs totaled $16.9 million, or 0.3% of net sales. The
1996 charges were comprised of (1) $2.6 million of Herberger's merger
transaction costs related principally to investment banking, legal and
accounting fees and other direct merger costs; (2) $7.4 million of integration
charges associated with the Herberger's merger related principally to such items
as severance, the consolidation of administrative operations, and the write-off
of duplicate assets; (3) $5.9 million related
<PAGE> 15
to the continuing integration of Younkers' operations; and (4) $1.0 million
relating to consulting and advisory fees paid to a shareholder of SFA.
Management also expects to incur certain additional integration costs
in 1999, primarily related to the integration of duplicate systems and assets
accumulated through the series of acquisitions described above. These expenses
are expected to total approximately $30.0 to $35.0 million.
Year 2000 Expenses
The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Some of the
Company's computer programs that have date-sensitive software may potentially
recognize a date using "00" as the year 1900 rather than the Year 2000 or may
not recognize a date indicated as "00". This incorrect or lack of recognition
could result in a system failure or miscalculations causing disruptions of
operations, including among other things a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The Company's management has recognized the need to address the Y2K
issue within its internal operational systems as well as with suppliers and
other third parties. As with many other companies, a significant number of the
Company's information systems have required and will require modification over
the next year in order to render these systems Y2K compliant. The Company
recognizes that failure to timely resolve internal Y2K issues could result in an
inability of the Company to order merchandise, receive and distribute
merchandise to its stores, pay for merchandise received (which could delay
delivery of merchandise), process purchases and payments made with the Company's
proprietary credit cards, and, in the worst case, sell merchandise and otherwise
process its daily business for an indeterminate period of time (which could
result in default or other events permitting the Company's lenders to terminate
and/or accelerate the Company's credit and accounts receivable facilities), each
of which could materially and adversely affect the Company's financial condition
and results of operations. However, Company management believes these scenarios
are unlikely based on the progress the Company has made in its Y2K compliance
process.
The Company is modifying or replacing significant portions of its
software so that its computer systems will properly utilize dates beyond
December 31, 1999. The Company believes that with modifications to existing
software, conversions to new software, and changes to non-information technology
systems, the Y2K issue can be mitigated.
The Company has initiated formal communications with its material
merchandise suppliers, service suppliers, store landlords and shopping mall
owners to determine the extent to which the Company is vulnerable to failure of
those third parties to remediate their own Y2K issues. The Company believes that
its program to identify supplier and other third party compliance efforts will
minimize the Company's Y2K exposure. However, the Company cannot control the
conduct of its suppliers and other third parties, and it is possible the Company
will experience significant Y2K problems as a result of third party
non-compliance. The Company is also
<PAGE> 16
addressing the Y2K issue with its non-information technology systems ("Non-IT").
Non-IT systems, include among other things security, fire prevention and climate
control. The review of the Non-IT systems is ongoing, and a plan is in place for
resolving Non-IT Y2K issues by mid-1999. The Company is in the process of
developing Y2K contingency plans for its critical business processes; however,
based on the Company's Y2K compliance efforts and project status to date, the
Company does not expect to use these plans. The Company will continue to
evaluate the need for contingency plans as the Y2K project continues and will
develop and implement additional plans if such need is identified.
The Company is utilizing both internal and external resources to
reprogram, replace and test software for Y2K modifications. During 1997 and
1998, the Company substantially completed its assessment of the Y2K issue and
began systems modifications, resulting in charges of $10.4 million in 1998, or
0.2% of net sales. During 1997, the Company incurred $6.6 million of Y2K related
charges, or 0.1% of net sales. The Company expects to incur additional Y2K
charges estimated to be $6.0 million in 1999. The Company is meeting its
internal modification schedule and expects to complete compliance and testing of
Y2K modifications by September 1999.
The costs of the project and the date on which the Company plans to
complete the modifications are based on management's best estimates, which were
derived utilizing assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ materially from those plans. Specific
factors that might cause such differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
ESOP Expenses
Herberger's had an Employee Stock Ownership Plan ("ESOP") which was terminated
on December 31, 1997. Charges related to the ESOP totaled $9.5 million, or 0.2%
of net sales, in 1997. Of this total, $7.9 million related to the termination of
the plan. ESOP charges totaled $3.9 million, or 0.1% of net sales in 1996.
Interest Expense
Total interest expense was $111.0 million, $113.7 million and $114.9 million in
1998, 1997 and 1996, respectively. Interest expense as a percentage of net sales
was 1.8%, 2.0% and 2.3% for 1998, 1997 and 1996, respectively. The decrease in
interest expense in 1998 compared to 1997 was primarily the result of (1)
exchanging high interest rate debt of SFA (REMIC certificates, SFA revolver)
with lower interest rate debt of the Company; (2) replacing the Carson's
accounts receivable debt facility with the Company's accounts receivable
securitization program; and (3) lower interest rates on the Company's revolving
credit facilities, offset by increased borrowing costs associated with the third
and fourth quarter acquisition of 15 stores from Dillard's, increased capital
and inventory
<PAGE> 17
investments throughout 1998 and the Company's election to issue long-term fixed
rate securities in the public debt markets with the proceeds utilized to pay
down outstandings under the revolving credit facility which was being assessed
interest at short-term floating interest rates. The decrease in interest expense
in 1997 compared to 1996 was primarily due to (1) the use of proceeds from SFA's
May 1996 initial public offering (IPO) to repay outstanding indebtedness; (2)
the use of proceeds from SFA's convertible notes offering in September 1996 to
pay down higher cost debt; (3) improved cash flow from operations; and (4) lower
interest rates on the revolving credit facilities, offset by increased borrowing
costs associated with the October 1996 acquisition of Parisian and increased
capital and inventory investments.
Other Income (Expense), Net
In 1998, the Company recorded other income of $22.2 million, or 0.4% of net
sales, which is principally comprised of $42.5 million for the favorable
settlement of pending litigation between Carson's and Bank One, Wisconsin
related to the Carson's 1991 Chapter 11 bankruptcy filing, offset by charges of
$17.4 million related to the termination of certain interest rate hedging
agreements. In 1996, the Company recorded a loss of $10.5 million, or 0.2% of
net sales, related to the write-down of the Carson's County Seat Debentures (the
"Debentures"). Carson's received the Debentures in 1993 when County Seat
Holdings, Inc. exercised its option to exchange the Debentures for other
securities that had been issued to Carson's as part of the sale price for
Carson's 1989 divestiture of County Seat Stores, Inc. to a management-led buyout
group.
Income Taxes
In 1998, 1997 and 1996 the effective income tax rates differ from the statutory
tax rates principally due to non-deductible goodwill amortization, ESOP charges,
and merger related costs. In 1997, the Company recognized a $294.8 million
deferred income tax benefit in the fourth quarter. The benefit reflects the
elimination of the valuation allowance relating to the tax benefit of SFA's net
operating loss carryforwards. The realization of this income tax benefit also
enabled SFA to reduce goodwill by $34.5 million due to SFA recording certain
assets and liabilities at their date of acquisition for financial reporting
purposes which were not recognized for income tax purposes.
Income Before Extraordinary Items
Income before extraordinary loss on early extinguishment of debt was $25.0
million in 1998, or 0.4% of net sales, $416.2 million in 1997, or 7.3% of net
sales and $93.6 million in 1996, or 1.9% of net sales.
Extraordinary Items
In 1998, primarily as a result of the SFA merger, the Company completed various
balance sheet restructuring transactions that were designed to enhance
liquidity, strengthen the Company's balance sheet and position the Company for
future growth. These transactions included (1) the repurchase
<PAGE> 18
of the Company's $125.0 million, 8.125% senior notes, due 2004; (2) the
replacement of the $600.0 million revolving credit facility with a $750.0
million five-year revolving credit facility and a $750.0 million 364 day
revolving credit facility that includes a four-year term-out option; (3) the
repurchase of approximately $272.0 million of the SFA 5.50% convertible
subordinated notes; (4) the repayment and subsequent cancellation of the SFA
revolving credit facility and some other property leases; and (5) the repurchase
of $65.0 million of SFA REMIC certificates. As a result of these five
transactions, the Company incurred an extraordinary loss on early extinguishment
of debt of $25.9 million, net of income taxes. The Company replaced the majority
of this cancelled debt with fixed term senior notes (see Liquidity and Capital
Resources for discussion of debt issued in 1998). Subsequent to the fiscal year
end, the Company prepaid the remaining $236.0 million in SFA REMIC certificates,
which will result in an extraordinary loss in 1999 of approximately $9.5
million, net of income taxes.
During 1997, the Company made certain modifications to its capital
structure, including retiring approximately $114.0 million of 9.875% Parisian
Senior Subordinated Notes due 2003, prepaying approximately $15.0 million of
11.0% 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 1996, the Company recognized $12.7 million of extraordinary charges,
net of income taxes, associated with the prepayment of term borrowings under the
SFA credit facility, the repayment of outstanding balances on the revolving
credit portion of the SFA credit facility and the prepayment of certain
mortgages.
Inflation and Deflation
Inflation and deflation affect the costs incurred by the Company in its purchase
of merchandise and in certain components of its SG&A expenses. The Company
attempts to offset the effects of inflation through price increases and control
of expenses, although the Company's ability to increase prices is limited by
competitive factors in its markets. The Company attempts to offset the effects
of merchandise deflation through control of expenses.
Seasonality
The Company's business, like that of most retailers, is subject to seasonal
influences, with a significant portion of net sales and net income realized
during the fall season, which includes the Christmas selling season. In light of
these patterns, SG&A expenses are typically higher as a percentage of net sales
during the first three quarters of each year, and working capital needs are
greater in the last two quarters of each year. The fall season increases in
working capital needs have typically been financed with internally generated
funds, the sale of interests in accounts receivable and borrowings under the
Company's revolving credit facilities. Generally,
<PAGE> 19
more than 30% of the Company's net sales and over 50% of net income are
generated during the fourth quarter.
Liquidity and Capital Resources
Cash Flow
The Company's primary needs for liquidity are to acquire, renovate or construct
new stores and to provide working capital for new and existing stores. The
Company anticipates that cash generated from operating activities will be
sufficient to meet its financial commitments and to capitalize on opportunities
for future new store growth.
Cash provided by operating activities was $522.9 million in 1998,
$209.3 million in 1997 and $140.7 million in 1996. Cash provided by operating
activities principally represented income before depreciation and amortization
charges, the non-cash portion of extraordinary losses and losses from long-lived
assets and changes in working capital. The increase from 1997 to 1998 was
primarily related to the sale of the Carson's receivables in February 1998 into
the Company's accounts receivable securitization facility.
Cash used in investing activities was $943.7 million in 1998, $319.0
million in 1997 and $330.6 million in 1996. Cash used in investing activities
principally consists of business acquisitions, construction of new stores and
the renovation and expansion of existing stores. The increase in 1998 is
primarily due to the acquisition of former Mercantile stores from Dillard's.
Cash provided by financing activities for 1998, 1997 and 1996 totaled
$402.6 million, $83.6 million, and $186.7 million, respectively. The increase
from 1997 to 1998 is principally comprised of the issuance of $1.1 billion in
senior notes and an increase in the Company's revolving credit facilities
balance to fund (1) the acquisition of the 15 stores from Dillard's; (2)
repayment of the Carson's $125.0 million receivables facility; (3) the repayment
of the Company's $125.0 million, 8.125% senior notes; and (4) the repayment of
$350.0 million of SFA convertible debenture and REMIC certificates (see Capital
Structure discussion below). Cash provided by financing activities in 1996 was
primarily due to proceeds of $457.5 million from the issuance of stock offset by
repayments on the Company's credit and receivables facilities and long-term debt
instruments.
The availability of net operating loss carryforwards and other tax
benefits generated in prior years by SFA and Carson's will enable the Company to
reduce its cash requirements for income tax payments in the next several years.
National Bank of the Great Lakes
On January 31, 1998, in connection with the Company's acquisition of Carson's,
the Company acquired National Bank of the Great Lakes (the "Bank"), which is a
wholly owned subsidiary of the Company. Immediately after this acquisition, the
Company contributed all of its proprietary credit card
<PAGE> 20
accounts and account balances to the Bank. As a result, the Bank became the sole
owner of the Company's proprietary credit card accounts maintained for customers
of the Company and sells 100% of the accounts receivable generated by these
accounts to the Company's special purpose subsidiaries.
Accounts Receivable Securitization: Younkers Master Trust Facility
In 1995, the Younkers Master Trust ("YMT") was established by Younkers Credit
Corporation ("YCC"), a wholly owned, special purpose subsidiary of the Company.
YMT has issued to third parties a total of $75.0 million of asset-backed
securities in two separate classes. On May 6, 1998 YCC was merged into
Proffitt's Credit Corporation.
Accounts Receivable Securitization: Proffitt's Credit Card Master Trust Facility
The Bank sells an undivided interest in its accounts receivable through a wholly
owned special purpose subsidiary, Proffitt's Credit Corporation ("PCC") to
Proffitt's Credit Card Master Trust ("PCCMT"). At January 31, 1998, the PCCMT
funding capacity consisted of $221.0 million in fixed rate certificates and a
variable funding certificate ("VFC") with a capacity of $150.0 million. During
1998, as a result of the initial sale of the Carson's proprietary credit card
receivables into PCCMT, the merging of YCC with and into PCC, and the additional
proprietary credit card sales from the Dillard's stores, PCCMT issued an
additional $245.5 million in fixed rate asset backed securities and also
increased the VFC to $300.0 million.
Accounts Receivable Securitization: Saks Master Trust facility
The Bank also sells an undivided interest in its accounts receivable through a
second wholly owned special purpose subsidiary, Saks Finance Company ("SFC"), to
Saks Master Trust ("SMT"). In 1996, the trust sold two series of certificates of
beneficial interests with subordinated structures. The first series is a term
series with a capacity of $413.0 million. The second series is a variable series
with a maximum capacity of $118.0 million. In August 1998, SFC executed a new
$397.0 million receivables securitization facility to finance the monthly
accumulation of cash required to repay the previously issued and outstanding
term series. The SFA outstanding term series matures in April and June of 1999.
The Company intends to merge the SFA accounts receivable securitization program
into the Company's existing accounts receivable securitization programs after
the accumulation period is completed and the outstanding certificates are
repaid.
Operating Lease Agreement
In June 1997, SFA entered into a $100.5 million operating lease agreement, which
was used to finance qualified properties and related fixtures and leasehold
improvements. Under this agreement, the lessor agreed to acquire and construct
new store sites in order to lease them to SFA. SFA had guaranteed a residual
value of approximately $19.0 million at January 31, 1998 and had approximately
$77.5 million available under this lease agreement to fund capital expenditures.
On September 17, 1998, the Company terminated the operating lease agreement,
which resulted in the purchase of
<PAGE> 21
properties valued at approximately $30.0 million.
Capital Structure
During 1998, primarily resulting from the SFA merger and the acquisition of the
stores from Dillard's, the Company implemented a comprehensive capital
restructure designed to reduce the Company's level of secured indebtedness,
create a more appropriate fixed to floating interest rate balance, lengthen the
duration of debt capital and increase overall liquidity. The restructuring
process included numerous capital transactions throughout 1998. In September
1998, the Company completed a tender offer for the $125.0 million, 8.125% senior
notes, repurchased $65.0 million of the SFA REMIC certificates and replaced its
$600.0 million revolving credit facility with two $750.0 million revolving
credit facilities, with 364 day and five-year terms. In connection with the
revolving credit facility restructuring, the Company terminated and repaid the
SFA credit facility and the SFA real estate operating lease agreement. In
November 1998, the Company issued $850.0 million in senior notes, which were
comprised of $500.0 million, 8.25% notes, due 2008, and $350.0 million, 7.25%
notes, due 2004, and repurchased $267.7 million of SFA's convertible
subordinated notes, due 2006. In December 1998, the Company issued $250.0
million, 7.50% notes, due 2010.
As of January 30, 1999, the Company's debt consisted of $608.0 million
outstanding on its revolving credit facilities, $160.7 million of capital
leases, $235.8 million of REMIC certificates, $17.1 million of mortgage debt and
$1.1 billion in senior notes. On February 10, 1999, the Company prepaid all
outstanding REMIC certificates. The prepayment terms of the REMIC certificates
required the Company to fund an escrow account with $363.8 million on January
29, 1999. The escrow account was funded through the Company's revolving credit
facility. The escrow funds exceeded the amount required to extinguish the debt,
including prepayment premiums and accrued interest, by $115.0 million. This
amount represented the $95.0 million face amount of certificates previously
repurchased by the Company and related prepayment premiums and accrued interest,
and was therefore returned to the Company and used to reduce amounts outstanding
under the revolving credit facility. After adjusting the Company's debt for this
transaction, the Company's total outstanding debt was $1.8 billion, representing
a debt to total capitalization percentage of 47.0% and a $378.3 million increase
over outstanding debt in 1997. This increase over 1997 is principally due to the
Dillard's stores purchase as well as 1998 capital expenditures.
Capital Needs
The Company estimates capital expenditures for 1999 will approximate $425.0
million, primarily for the construction of new store openings in 1999, initial
construction work on stores expected to open in 2000, several store expansions
and renovations, enhancements to management information systems and regular
maintenance capital expenditures.
The Company anticipates its capital expenditures and working capital
requirements relating to planned new and existing stores will be funded
<PAGE> 22
through cash provided by operations, ongoing sales of receivables under the
securitization programs and additional borrowings. The Company expects to
generate adequate cash flows from operating activities to sustain current levels
of operations. The Company maintains favorable banking relations and anticipates
that the necessary credit agreements will be extended or new agreements will be
entered into in order to provide future borrowing requirements as needed. The
Company also believes it has access to a variety of other capital markets.
Segment Reporting
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
objective of this statement is to provide users of financial statements
information about the different types of business activities in which a company
engages and the different economic environments in which it operates. The
statement provides companies the opportunity to aggregate two or more operating
segments into a single operating segment if the segments have similar
characteristics. In applying SFAS No. 131, the Company identified three
reportable segments, which are as follows: department stores, catalog, and
furniture. The department store segment includes all department stores which the
company operates as well as the Company's proprietary credit card operation. The
Company's proprietary credit card operation is considered an integral component
of the department store segment, as its primary purpose is to support and
enhance this segment's retail operations. The catalog segment includes the
Company's direct marketing catalogs of Folio and Bullock & Jones. The Company's
furniture segment includes the Company's four free-standing furniture stores as
well as furniture departments within existing department stores. The combined
operations of the catalog and furniture segments represent less than three
percent of the Company's total revenues, assets and operating profit. As a
consequence, the results of operations of these two segments are not segregated,
and thus the three identified segments are combined within the consolidated
financial statements of the Company.
New Accounting Pronouncements
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires that all derivative
financial instruments be recorded on the financial statements. SFAS No. 133 is
effective for the Company in the first quarter of 2000, and the Company is in
the process of ascertaining the impact this new standard will have on its
financial statements.
Forward-Looking Information
This report contains "forward-looking" statements within the meaning of the
federal securities laws. The forward-looking information and statements
contained throughout Management's Discussion and Analysis are premised on many
factors, some of which are outlined below. Actual consolidated results might
differ materially from projected forward-looking information if there
<PAGE> 23
are any material changes in management's assumptions.
The forward-looking information and statements are based on a series of
projections and estimates that involve certain risks and uncertainties.
Potential risks and uncertainties include such factors as the level of consumer
spending for apparel and other merchandise carried by the Company; the
competitive pricing environment within the department and specialty store
industries; the effectiveness of planned advertising, marketing and promotional
campaigns; appropriate inventory management; realization of planned synergies;
effective cost containment; and solution of Year 2000 systems issues by the
Company and its suppliers. For additional information regarding these and other
risk factors, please refer to the Company's public filings with the Securities
and Exchange Commission, which may be accessed via EDGAR through the Internet at
www.sec.gov.
When used in this report, words such as "believes," "estimates,"
"plans," "expects," "should," "may," "anticipates" and similar expressions as
they relate to the Company or its management are intended to identify
forward-looking statements. Management undertakes no obligation to correct or
update any forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are advised, however, to consult any further
disclosures management makes on related subjects in its reports with the
Securities and Exchange Commission.
<PAGE> 24
SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
January 30, January 31, February 1,
(In thousands, except per share amounts) 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 6,219,893 $ 5,726,346 $ 4,926,862
Cost of sales 4,093,467 3,731,293 3,208,989
----------- ----------- -----------
Gross margin 2,126,426 1,995,053 1,717,873
Selling, general and administrative expenses 1,289,228 1,165,118 1,057,144
Other operating expenses
Property and equipment rentals 181,966 157,018 114,714
Depreciation and amortization 155,361 136,119 123,533
Taxes other than income taxes 150,839 134,121 117,355
Store pre-opening costs 10,567 17,018 11,645
(Gains) losses from long-lived assets 61,785 (134) 1,406
Merger and integration charges 111,307 36,524 16,929
Year 2000 expenses 10,437 6,590
ESOP expenses 9,513 3,910
----------- ----------- -----------
Operating income 154,936 333,166 271,237
Other income (expense)
Interest expense (110,971) (113,685) (114,881)
Other income (expense), net 22,201 2,330 (11,780)
----------- ----------- -----------
Income before provision (benefit) for income taxes
and extraordinary items 66,166 221,811 144,576
Provision (benefit) for income taxes 41,181 (194,426) 50,998
----------- ----------- -----------
Income before extraordinary items 24,985 416,237 93,578
Extraordinary loss on early extinguishment of debt,
net of taxes (25,881) (11,323) (12,746)
----------- ----------- -----------
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
Net income (loss) (896) 404,914 80,832
Preferred stock payments (3,828)
----------- ----------- -----------
Net income (loss) available to common shareholders $ (896) $ 404,914 $ 77,004
----------- ----------- -----------
Earnings per common share:
Basic earnings per common share before extraordinary
loss $ 0.17 $ 3.03 $ 0.72
Extraordinary loss (0.18) (0.09) (0.10)
----------- ----------- -----------
Basic earnings (loss) per common share $ (0.01) $ 2.94 $ 0.62
=========== =========== ===========
Diluted earnings per common share before extraordinary
loss $ 0.17 $ 2.86 $ 0.70
Extraordinary loss (0.18) (0.07) (0.10)
----------- ----------- -----------
Diluted earnings (loss) per common share $ (0.01) $ 2.79 $ 0.60
=========== =========== ===========
Weighted average common shares
Basic 142,856 137,588 125,056
Diluted 146,383 149,085 132,583
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 26
SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 30, January 31,
(In thousands) 1999 1998
----------- -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 32,752 $ 50,864
Retained interest in accounts receivable 159,596 412,209
Merchandise inventories 1,406,182 1,244,682
Other current assets 110,426 111,621
Deferred income taxes 83,958 77,869
----------- -----------
Total Current Assets 1,792,914 1,897,245
Property and Equipment, net of depreciation 2,118,555 1,725,979
Goodwill and Intangibles, net of amortization 586,297 327,307
Deferred Income Taxes 249,816 251,793
Cash Placed in Escrow for Debt Redemption 363,753
Other Assets 77,646 67,929
----------- -----------
Total Assets $ 5,188,981 $ 4,270,253
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $ 360,388 $ 333,794
Accrued expenses 411,505 342,576
Accrued compensation and related items 78,009 69,286
Sales taxes payable 39,614 42,172
Current portion of long-term debt 15,523 13,058
----------- -----------
Total Current Liabilities 905,039 800,886
Senior Debt 2,110,395 1,093,806
Other Long-Term Liabilities 165,972 144,068
Subordinated Debt 286,964
Shareholders' Equity
Common stock 14,401 14,148
Additional paid-in capital 2,099,243 2,028,067
Accumulated other comprehensive income (7,487)
Accumulated deficit (98,582) (97,686)
----------- -----------
Total Shareholders' Equity 2,007,575 1,944,529
----------- -----------
Total Liabilities and Shareholders' Equity $ 5,188,981 $ 4,270,253
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 27
SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Additional Accum- Share-
Preferred Common Paid-In ulated Other holders'
Stock Stock Capital Deficit (Note 12) Equity
--------- ------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 3, 1996 $ 28,850 $ 9,271 $1,332,495 $(641,421) $(38,136) $691,059
Net income 80,832 80,832
Issuance of common stock 1,849 536,733 538,582
Income tax benefits related to
exercised stock options 4,633 4,633
Purchases and retirements of stock (776) (27,973) (7,060) 21,481 (14,328)
Sale of treasury stock 8,809 16,202 25,011
Reclassification of ESOP stock 290 (57) 69,907 (9,778) 60,362
Preferred stock dividends (796) (796)
Decrease in tax valuation allowance 16,000 16,000
Stock compensation 278 286 564
Unrealized gain on ESOP shares 122 122
Conversion of preferred stock (28,850) 142 28,663 (3,032) (3,077)
Common stock dividends,
$.28 per Herberger's share (1,030) (1,030)
-------- ------- ---------- --------- -------- ---------
Balance at February 1, 1997 -- 10,776 1,899,703 (502,600) (9,945) 1,397,934
Net income 404,914 404,914
Issuance of common stock 144 24,839 24,983
Income tax benefits related to
exercised stock options 7,319 7,319
2-for-1 stock split 3,070 (3,070)
Purchases and retirements of stock (53) (13,043) (13,096)
Decrease in tax valuation allowance 16,000 16,000
Stock compensation 9 1,451 167 1,627
Conversion of 4.75% subordinated
debentures 202 86,082 86,284
Termination of ESOP 8,786 9,778 18,564
-------- ------- ---------- --------- -------- ---------
Balance at January 31, 1998 -- 14,148 2,028,067 (97,686) -- 1,944,529
Net loss (896) (896)
Minimum pension liability
(net of taxes of $4,787 ) (7,487) (7,487)
-------- ------- ---------- --------- -------- ---------
Comprehensive income (8,383)
-------- ------- ---------- --------- -------- ---------
Issuance of common stock 228 37,481 37,709
Income tax benefits related to
exercised stock options 16,444 16,444
Decrease in tax valuation allowance 16,000 16,000
Stock compensation 27 1,723 1,750
Stock repurchase (2) (472) (474)
-------- ------- ---------- --------- -------- ----------
Balance at January 30, 1999 $ -- $14,401 $2,099,243 $ (98,582) $ (7,487) $2,007,575
======== ======= ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 28
SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
January 30, January 31, February 1,
(In thousands) 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ (896) $ 404,914 $ 80,832
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Extraordinary loss on extinguishment of debt 14,599 8,356 12,746
Depreciation and amortization 155,361 136,119 123,533
Recognition of NOL carryforwards (283,675)
Deferred income taxes 14,926 23,050 31,628
Write-offs of long-lived assets, merger and
integration items 79,617 (134) 1,406
Loss on County Seat debentures 10,525
ESOP expenses 8,786 1,481
Restructuring items (800) 885
Changes in operating assets and liabilities:
Retained interest in accounts receivable 293,948 (18,327) (38,706)
Merchandise inventories (127,203) (175,912) (90,829)
Other current assets (8,112) 27,704 (13,533)
Accounts payable and accrued liabilities 97,302 99,352 18,831
Other operating assets and liabilities 3,397 (20,128) 1,896
----------- ----------- -----------
Net Cash Provided By Operating Activities 522,939 209,305 140,695
----------- ----------- -----------
Investing Activities
Purchases of property and equipment, net (421,062) (346,876) (247,814)
Proceeds from sale of assets 2,500 27,851 36,282
Acquisitions of Dillard's stores, Brody's and
Bullock & Jones (525,117)
Acquisition of Parisian (119,070)
----------- ----------- -----------
Net Cash Used In Investing Activities (943,679) (319,025) (330,602)
----------- ----------- -----------
Financing Activities
Proceeds from long-term borrowings 1,100,000 175,546 380,837
Payments on long-term debt and capital lease
obligations (506,960) (258,802) (394,256)
Cash placed in escrow for debt redemption (363,753)
Net borrowings (repayments) under credit and
receivables facilities 136,250 148,142 (237,457)
Proceeds from issuance of stock 37,565 23,185 457,532
Purchase of treasury stock (474) (13,096) (14,383)
ESOP loan repayment 9,778
Payments to preferred and common shareholders (1,124) (4,858)
Other (742)
----------- ----------- -----------
Net Cash Provided By Financing Activities 402,628 83,629 186,673
----------- ----------- -----------
Decrease In Cash and Cash Equivalents (18,112) (26,091) (3,234)
Cash and cash equivalents at beginning of year 50,864 76,955 80,189
----------- ----------- -----------
Cash and cash equivalents at end of year $ 32,752 $ 50,864 $ 76,955
=========== =========== ===========
</TABLE>
Noncash investing and financing activities are further described in the
accompanying notes. The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 29
SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies
Saks Incorporated (formerly Proffitt's, Inc.) (the "Company"), is a national
retailer operating department stores under the following names: Saks Fifth
Avenue, Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie Scott
("Carson's"), Bergner's, Boston Store and Off 5th. The Company also operates a
direct mail business under the Folio and Bullock & Jones names. On September 17,
1998, Saks Holdings, Inc. ("SFA") merged with and into a wholly owned subsidiary
of Proffitt's, Inc. SFA was the holding company of Saks & Company which did
business as Saks Fifth Avenue, Off 5th and Folio. In connection with the merger,
Proffitt's, Inc. changed its corporate name to Saks Incorporated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements to conform with the financial statement presentation of the
current period. These reclassifications have no effect on previously reported
net income and shareholders' equity.
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All intercompany accounts and transactions
have been eliminated. These consolidated financial statements have been restated
to include the financial position and results of operations of SFA, which the
Company acquired in 1998 and accounted for the acquisition under the pooling of
interests method of accounting, as if SFA and the Company had operated as one
entity since inception. See Note 3, Mergers and Acquisitions, for further
discussion of this and other business combination transactions.
Note 2 - Summary of Significant Accounting Policies
Fiscal Year
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal
years 1998, 1997 and 1996 contain 52 weeks and ended on January 30, 1999,
January 31, 1998 and February 1, 1997, respectively.
Net Sales
Net sales include sales of merchandise and services and sales of leased
departments, net of returns and exclusive of sales tax. Retail sales are
recorded on the accrual basis and profits on installment sales are recognized in
full when the sales are recorded. Sales of leased departments were $259,615 in
1998, $255,365 in 1997 and $234,902 in 1996.
<PAGE> 30
Cash and Cash Equivalents
Cash and cash equivalents consist of deposits with banks and financial
institutions that have maturities, when purchased, of three months or less. Cash
equivalents are stated at cost, which approximates fair value. On February 10,
1999, the Company prepaid approximately $236,000 of SFA real estate indebtedness
("REMIC certificates"). The prepayment requirements of the REMIC certificates
required the Company to fund an escrow account with the REMIC certificates'
payoff funds ten days prior to repurchase. The Company funded $363,753 into the
escrow account on January 29, 1999. The escrow funds are classified as cash
placed in escrow for debt redemption on the consolidated balance sheet. The
amount funded to the escrow account differs from the amount prepaid due to the
requirement to fund REMIC certificates owned by outside parties as well as
$95,000 of REMIC certificates owned by the Company, prepayment premiums and
accrued interest. The escrow account was relieved on February 10, 1999 with the
prepayment of the REMIC certificates. Approximately $95,000 was refunded to the
Company and the remaining funds satisfied accrued interest and the prepayment
premiums.
Retained Interest in Accounts Receivable
The Company's credit card bank provides credit to and performs ongoing credit
evaluations of its customers. Concentration of credit risk is limited because of
the large number of customers and their dispersion throughout the United States
and other countries.
The Company's credit card bank sells its proprietary credit card
receivables to multiple special purpose subsidiaries and trusts in exchange for
certificates representing undivided interest in such receivables. Gains or
losses on the sale of the receivables depends in part on the previous carrying
amount of retained interests allocated in proportion to their fair values. The
Company estimates fair value based on the present value of future cash flows
expected under management's best estimates of assumptions including credit
losses, payment rates and discount rates commensurate with the risks involved.
Due to the short-term nature of the proprietary credit card portfolio, the
carrying value of the Company's retained interest approximates fair value. The
Company retains the servicing rights to all receivables sold to the special
purpose subsidiaries and trusts.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost (last-in, first-out
["LIFO"] for non-SFA inventories and the retail method for SFA inventories) or
market and include freight and certain purchasing and distribution costs. A
substantial portion of the Company's non-SFA inventory was determined using LIFO
cost. At January 30, 1999 and January 31, 1998, the LIFO value of the non-SFA
inventory exceeded market value, and as a result, inventory was stated at the
lower market amount. At January 30, 1999 and January 31, 1998, SFA inventory was
$554,678 and $529,535, respectively, and was determined using the retail method.
Consignment merchandise on hand of $105,536 and $103,759 at January
<PAGE> 31
30, 1999 and January 31, 1998, respectively, is not reflected in the
consolidated balance sheets.
Advertising
Direct response advertising relates primarily to the production and distribution
of the Company's catalogs and is amortized over the estimated life of the
catalog. Direct response advertising amounts included in other current assets in
the consolidated balance sheets at January 30, 1999 and January 31, 1998 were
$5,451 and $5,145, respectively. All other advertising and sales promotion costs
are expensed in the period incurred. Advertising expenses were $190,143,
$192,154 and $166,927 in fiscal years 1998, 1997 and 1996, respectively.
Store Pre-Opening Costs
Store pre-opening costs are expensed when incurred.
Property and Equipment
Property and equipment are stated at cost. For financial reporting purposes,
depreciation is computed principally using the straight-line method over the
estimated useful lives of the assets. Buildings and improvements are depreciated
over primarily 10 to 40 years while fixtures and equipment are depreciated over
primarily 5 to 15 years. Leasehold improvements are amortized over the shorter
of their estimated useful lives or their related lease terms. Gains or losses on
the sale of assets are recorded at disposal. Internally developed and purchased
computer software is capitalized and amortized using the straight-line method
over 5 to 15 years. Costs incurred for the Year 2000 assessment and resulting
software modifications are expensed as incurred. The carrying value of property
and equipment is periodically reviewed and adjusted by the Company whenever
events or changes in circumstances indicate that the estimated fair value is
less than the carrying amount. See Note 6 for fiscal 1998 adjustments to
carrying values of property and equipment.
Goodwill and Intangibles
The Company has allocated the purchase price of purchase transactions first to
identifiable tangible assets and liabilities based on estimates of their fair
value, with the remainder allocated to goodwill and other intangible assets.
Amortization of goodwill and intangibles is provided on a straight-line basis
over the respective lives of the various intangible assets ranging from 10 to 40
years. In 1998, the Company completed three purchase transactions with resulting
goodwill and intangibles additions. The Company's purchases of Brody Brothers
Dry Goods (six department stores in North Carolina), Bullock & Jones (direct
mail business and one retail store) and 15 store locations from Dillard's
resulted in 1998 additions of approximately $270,000. In 1997, the Company
recorded a net reduction of goodwill of $34,525 due to the recognition of the
tax benefit generated from differences for financial statement purposes and
income tax regulations in the recording of various assets and liabilities at
acquisition. The Company recognized amortization expense of $11,601,
<PAGE> 32
$10,064 and $6,075 in fiscal years 1998, 1997 and 1996, respectively. As of
January 30, 1999 and January 31, 1998, the accumulated amortization of goodwill
and intangible assets was $39,070 and $26,500, respectively.
At each balance sheet date, the Company evaluates the recoverability of
goodwill and intangible assets based upon utilization of the assets and
expectations of related cash flows. Based upon its most recent analysis, the
Company believes that no impairment of goodwill and intangibles exists at
January 30, 1999.
Derivatives Policy
The Company uses financial derivatives only to reduce risk in conjunction with
specific business transactions.
The Company has purchased forward rate lock agreements and interest
rate cap agreements to limit its exposure to adverse movements in interest rates
related to planned debt issuances and floating rate debt costs associated with
its various financing activities and accounts receivable securitization. In
addition, the Company entered into interest rate swap agreements to fix a
portion of the floating rate cost exposure related to the accounts receivable
securitization. The financial institutions associated with these agreements are
considered to be major, well-known institutions. In fiscal 1998, and as a result
of the merger with SFA, the Company terminated two interest rate agreements. The
interest rate agreements were (1) an interest rate hedging agreement which
included an option feature related to the continuation of the SFA receivables
securitization agreement and (2) an interest rate hedging agreement related to a
planned long-term debt offering that was ultimately cancelled. As a result of
terminating these two agreements, the Company recorded charges of $17,400, which
are included in other income (expense) in the consolidated statements of income.
Employee Stock Ownership Plans
Shares acquired after January 30, 1994 were accounted for in accordance with
Statement of Position ("SOP") 93-6, "Employers' Accounting for Employee Stock
Ownership Plans." All other unreleased shares were accounted for in accordance
with SOP 76-3, "Accounting Practices for Certain Employee Stock Ownership
Plans." See Note 13 for discussion of the Herberger's Employee Stock Ownership
Plan ("ESOP") termination during 1997.
Stock-Based Compensation
The Company records compensation expense for all stock-based compensation plans
using the intrinsic value method. Compensation expense, if any, is measured as
the excess of the market price of the stock over the exercise price on the
measurement date. Pro forma disclosures of net income and earnings per share are
presented in Note 13, as if the fair value method had been applied.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are
<PAGE> 33
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Earnings Per Common Share
Basic earnings per common share ("EPS") have been computed based on the weighted
average number of common shares outstanding, after recognition of preferred
stock payments of $3,828 for 1996.
The Company's 4.75% and 5.50% convertible subordinated debentures were
considered in diluted earnings per share, when dilutive. In the fourth quarter
of 1998, the Company repurchased with cash approximately $272,000 of SFA's 5.50%
convertible subordinated notes and during 1997, the Company converted $86,250 of
the 4.75% convertible subordinated debentures into 4,040 shares of common stock.
Common stock issued upon the conversion of the preferred stock in 1996,
and the convertible subordinated debentures in 1997 have been included in the
weighted average number of shares outstanding subsequent to the date of
conversion for computing basic earnings per share.
Computation of Per Share Earnings
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 30, 1999
--------------------------------------
Per
Share
Income Shares Amount
--------- --------- ---------
<S> <C> <C> <C>
BASIC EPS
Income before extraordinary loss $24,985 142,856 $0.17
EFFECT OF DILUTIVE SECURITIES
Stock options 3,527
Convertible subordinated notes/
debentures
-------- -------- --------
DILUTED EPS
Income before extraordinary loss avail-
able to common shareholders plus
assumed conversions $24,985 146,383 $0.17
======== ======== =======
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 31, 1998
----------------------------------------
Per
Share
Income Shares Amount
--------- --------- ---------
<S> <C> <C> <C>
BASIC EPS
Income before extraordinary loss $416,237 137,588 $3.03
EFFECT OF DILUTIVE SECURITIES
Stock options 3,438
Convertible subordinated notes/
debentures 10,664 8,059
-------- -------- --------
DILUTED EPS
Income before extraordinary loss available
to common shareholders plus
assumed conversions $426,901 149,085 $2.86
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FEBRUARY 1, 1997
------------------------------------
Per
Share
Income Shares Amount
--------- --------- ---------
<S> <C> <C> <C>
BASIC EPS
Income before extraordinary loss $89,750 125,056 $0.72
EFFECT OF DILUTIVE SECURITIES
Stock options 3,487
Convertible subordinated notes/
debentures 2,500 4,040
-------- -------- --------
DILUTED EPS
Income before extraordinary loss available
to common shareholders plus
assumed conversions $92,250 132,583 $0.70
======== ======== =======
</TABLE>
Segment Reporting
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
objective of this statement is to provide users of financial statements
information about the different types of business activities in which a company
engages and the different economic environments in which it operates. The
statement provides companies the opportunity to aggregate two or more operating
segments into a single operating segment if the segments have similar
characteristics. In applying SFAS No. 131, the Company identified three
reportable segments, which are as follows: department stores, catalog, and
furniture. The department store segment includes all department stores which the
company operates as well as the Company's proprietary credit card operation. The
Company's proprietary credit card operation is considered an integral component
of
<PAGE> 35
the department store segment, as its primary purpose is to support and enhance
this segment's retail operations. The catalog segment includes the Company's
direct marketing catalogs of Folio and Bullock & Jones. The Company's furniture
segment includes the Company's four free-standing furniture stores as well as
furniture departments within existing department stores. The combined operations
of the catalog and furniture segments represent less than three percent of the
Company's total revenues, assets and operating profit. As a consequence, the
results of operations of these two segments are not segregated, and thus the
three identified segments are combined within the consolidated financial
statements of the Company.
New Accounting Pronouncements
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires that all derivative
financial instruments be recorded on the financial statements. SFAS No. 133 is
effective for the Company in the first quarter of 2000, and the Company is in
the process of ascertaining the impact this new standard will have on its
financial statements.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" in
1998. Components of the Company's comprehensive income for 1998 include the net
loss of $896 and a minimum pension liability adjustment of $7,487, net of taxes,
as presented in the consolidated statements of shareholders' equity. The Company
had no components of comprehensive income in 1997 and 1996.
Note 3 - Mergers and Acquisitions
The Company has experienced significant growth since 1994, primarily through a
series of acquisitions. The Company's significant acquisitions are outlined
below:
<TABLE>
<CAPTION>
Date Accounting Shares Purchase
Acquired Company Acquired Treatment Issued Price
----------------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C>
McRae's March 31, 1994 Purchase 872 $ 256,000
Younkers February 3, 1996 Pooling 17,632
Parisian October 11, 1996 Purchase 5,894 $ 517,000
Herberger's February 1, 1997 Pooling 8,000
Carson Pirie Scott January 31, 1998 Pooling 27,565
Saks Holdings September 17, 1998 Pooling 52,500
</TABLE>
Additionally, the Company acquired 15 former Mercantile stores, including
inventories and proprietary credit card accounts and receivables, from Dillard's
in the third and fourth quarters of 1998 for the aggregate purchase price of
$482,000.
The following unaudited pro forma summary presents the consolidated
results of operations as if the 15 stores purchased from Dillard's had occurred
at the beginning of the periods presented. The summary is neither indicative of
what would have occurred had the acquisition been made as of
<PAGE> 36
those dates nor indicative of results which may occur in the future.
<TABLE>
<CAPTION>
Unaudited
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Pro forma:
Net sales $ 6,491,341 $ 6,142,168
Income before extraordinary items 23,070 414,162
Net income (loss) (2,811) 402,839
Basic earnings (loss) per common share:
Before extraordinary items $ 0.16 $ 3.01
After extraordinary items $ (0.02) $ 2.93
Diluted earnings (loss) per common share:
Before extraordinary items $ 0.16 $ 2.78
After extraordinary items $ (0.02) $ 2.70
</TABLE>
Separate results of the combined entities in the SFA pooling transaction were as
follows:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
January 30, January 31, February 1,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Proffitt's $ 3,801,879 $ 3,544,656 $ 2,992,606
SFA 2,418,014 2,181,690 1,934,256
----------- ----------- -----------
Consolidated $ 6,219,893 $ 5,726,346 $ 4,926,862
=========== =========== ===========
Extraordinary item:
Proffitt's $ (12,319) $ (9,345)
SFA (13,562) (1,978) $ (12,746)
----------- ----------- -----------
Consolidated $ (25,881) $ (11,323) $ (12,746)
=========== =========== ===========
Net income (loss):
Proffitt's $ 116,227 $ 62,737 $ 67,080
SFA (117,123) 342,177 13,752
----------- ----------- -----------
Consolidated $ (896) $ 404,914 $ 80,832
=========== =========== ===========
</TABLE>
SFA's financial statements have been restated to conform to the Company's
accounting methods and financial statement presentation which included changing
SFA's previously reported income and shareholders' equity. SFA
<PAGE> 37
previously included certain store receiving costs in inventory, accrued certain
estimated vendor rebates as receivables and deferred store preopening costs. The
effect of the conformity restatement is to reduce previously reported net income
by $1,627 in 1997 and $10,392 in 1996. Additionally, the Company has changed its
presentation of net finance charge income to include such as a component of
selling, general and administrative expenses with no effect on previously
reported net income.
Note 4 - Marketable Securities Investments in marketable
securities are carried as available-for-sale securities at fair value.
Unrealized holding gains and losses, net of the related tax effect, are excluded
from income and are reported as a component of shareholders' equity until
realized.
Carson's held $23,353 par value of 9.0% Junior Subordinated Exchange
Debentures due 2004 of County Seat Holdings, Inc. In 1996, Carson's wrote down
its entire interest in the County Seat Debentures and reflected such in other
income (expense). In 1997, Carson's sold its County Seat Debentures for an
insignificant amount.
Note 5 - Accounts Receivable Securitizations
The Company has entered into agreements to securitize a majority of the
proprietary credit card receivables of its credit card bank. The securitization
of receivables involves the continual transfer of receivables with limited
recourse from the Company's wholly owned special purpose subsidiaries to its
credit card related trusts: Saks Master Trust ("SMT"), Proffitt's Credit Card
Master Trust ("PCCMT") and Younkers Master Trust ("YMT") in exchange for cash
and subordinated certificates representing undivided interests in the pool of
receivables, and the subsequent issuance by the trusts of certificates of
beneficial interest, also representing undivided interests in the pool of
receivables, to investors.
The Company has the ability to issue securities in fixed or variable
denominations with fixed or variable implicit discount rates. At January 30,
1999, the Company had available the following funding sources:
<PAGE> 38
<TABLE>
<CAPTION>
Amount Average
Outstanding Implicit Funding Expiration
Entity Funding Capacity January 30, 1999 Discount Rate Basis Date
-------- ----------------- ---------------- ------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
SMT Fixed at $413,000 $ 367,829 Variable Libor/CP April, June 1999
SMT Variable up to $118,000 76,800 Variable Libor April 1999
YMT Fixed at $75,000 75,000 6.45% June 2000
PCCMT Fixed at $466,500 466,500 6.20% June 2001,
August 2002
PCCMT Variable up to $300,000 173,007 Variable CP November 1999
------------
$ 1,159,136
</TABLE>
<PAGE> 39
At January 30, 1999, the weighted average variable rate for the commercial paper
based facilities was 5.10%. The various agreements contain covenants requiring
the maintenance of certain financial ratios and receivables portfolio
performance measures. While the Company has no obligations to reimburse the
trust or investors for credit losses, the Company is obligated to repurchase
receivables related to customer credits such as merchandise returns and other
receivables defects.
Finance charges earned by the certificate investors were $66,930,
$47,311 and $40,742 for 1998, 1997 and 1996, respectively. Net finance charge
income included in selling, general and administrative expenses in the
consolidated statements of income totaled $194,590 in 1998, $166,221 in 1997 and
$130,178 in 1996. Gains on sales of accounts receivable included within net
finance charge income were $36,400 and $15,000 in 1998 and 1997, respectively.
The third party interest in the credit card related trusts was
$1,159,136 and $842,394 at January 30, 1999 and January 31, 1998, respectively.
The Company's retained interest was $159,596 and $412,209 at January 30, 1999
and January 31, 1998, respectively. In addition to these ownership interests
transferred to the credit card related trusts, the Company entered into a stand
alone facility to finance its acquisition of accounts receivable from the
Dillard's stores. Under this facility, the Dillard's stores accounts receivable
were purchased by Proffitt's Credit Corporation ("PCC"), one of the Company's
special purpose subsidiaries and subsequently transferred to a third party
commercial paper conduit. As of January 30, 1999, approximately $17,894 was
outstanding under this facility. National Bank of the Great Lakes (the "Bank"),
a wholly owned national credit card bank subsidiary, issues all proprietary
credit cards to the Company's customers, extends all credit, and sells all
accounts receivable generated by the credit cards to the Company's special
purpose subsidiaries, PCC and SFA Finance Company ("SFC").
Note 6 - Property and Equipment
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
----------- -----------
<S> <C> <C>
Land and land improvements $ 286,193 $ 260,862
Buildings 1,137,562 955,981
Leasehold improvements 193,849 155,643
Fixtures and equipment 1,020,443 823,769
Construction in progress 162,296 55,361
----------- -----------
2,800,343 2,251,616
Accumulated depreciation (697,288) (544,637)
----------- -----------
2,103,055 1,706,979
Property held for sale, net
of accumulated depreciation 15,500 19,000
----------- -----------
$ 2,118,555 $ 1,725,979
=========== ===========
</TABLE>
<PAGE> 40
As a part of the Company's merger with SFA, the Company commenced a process to
determine the ongoing utility and value of its existing information technology
systems hardware and software. The valuation process included performing an
inventory of the Company's in-process development projects and significant
operating systems and hardware and determining the future use of the identified
projects and systems. As a result, the Company wrote down its investment in
capitalized information technology systems software and hardware by $23,000 in
1998. This charge, which is included in merger and integration charges in the
consolidated statement of income, primarily represented the termination of SFA
software development projects that were in process before SFA's merger with the
Company.
In 1998, primarily as a result of the merger with SFA, the Company
reviewed the carrying value of several store locations not meeting the Company's
minimum investment return criteria, closed and relocated stores, unused
corporate office space and terminated planned store projects. This process
resulted in an impairment charge comprised of: store closings/relocations,
$28,900; termination of new store projects, $12,600; non-cash flowing store
locations, $12,700; other miscellaneous assets, $1,800; and accrued closure
costs of $6,000. Approximately $42,000 of this aggregate $62,000 charge was
recognized in the fourth quarter.
Note 7 - Income Taxes
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------
January 30, January 31, February 1,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $8,574 $51,562 $14,522
State 1,134 8,845 4,848
------- ------- -------
9,708 60,407 19,370
Deferred:
Federal 14,724 (239,397) 27,572
State 202 (22,598) 4,056
------- ------- -------
14,926 (261,995) 31,628
------- ------- -------
Total expense
(benefit) $24,634 $(201,588) $50,998
========= ========= =========
</TABLE>
<PAGE> 41
The tax effect for extraordinary losses on early extinguishment of debt was a
benefit of $16,547, $7,162, and $0 for fiscal years 1998, 1997 and 1996,
respectively.
Components of the net deferred tax asset or liability recognized in the
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
--------- ---------
<S> <C> <C>
Current:
Deferred tax assets:
Trade accounts receivable $ -- $ 6,123
Accrued expenses 56,844 49,198
AMT credit 800 704
NOL carryforwards 32,999 32,999
Valuation allowance (6,155) (6,155)
--------- ---------
84,488 82,869
Deferred tax liabilities:
Inventory -- (3,788)
Other (530) (1,212)
--------- ---------
(530) (5,000)
--------- ---------
Net current deferred tax asset $ 83,958 $ 77,869
========= =========
Non-current:
Deferred tax assets:
Capital leases $ 20,567 $ 19,205
Other long-term liabilities 44,476 44,644
Deferred compensation 2,657 1,908
NOL carryforwards 294,906 291,552
Valuation allowance (25,251) (41,251)
--------- ---------
337,355 316,058
Deferred tax liabilities:
Property and equipment (53,387) (40,134)
Deferred gain (6,265) (6,491)
Other assets (27,887) (17,640)
--------- ---------
(87,539) (64,265)
--------- ---------
Net non-current deferred tax asset $ 249,816 $ 251,793
========= =========
</TABLE>
At January 30, 1999, the Company has $734,782 and $106,000 in federal and state
tax net operating loss carryforwards related to losses incurred by
<PAGE> 42
SFA and Carson's. The carryforwards will expire between 2003 and 2017. The
future utilization of these carryforwards is restricted under federal income tax
change-in-ownership rules and SFA's and Carson's ability to generate sufficient
taxable income.
The continued improvement in SFA's operating income in fiscal 1997, as
well as estimates of SFA's future profitability, enabled the Company to
recognize a $294,846 deferred tax asset in the fourth quarter of 1997. The
benefit reflects the elimination of the valuation allowance relating to the tax
benefit of SFA's net operating loss carryforwards. The realization of this tax
benefit also enabled SFA to reduce goodwill by $34,525 due to SFA recording
certain assets and liabilities at their date of acquisition for financial
reporting purposes which were not recognized for income tax purposes.
The valuation allowance attributable to Carson's losses and tax basis
differences was reduced by $16,000 for each of the years ended January 30, 1999
and January 31, 1998, based on management's reassessment of the realizability of
the related deferred tax asset in future years. The tax benefit resulting from
the reduction in the valuation allowance is credited directly to shareholders'
equity.
The Company believes it is more likely than not that the benefit of the
net deferred tax assets will be realized.
Income tax expense varies from the amount computed by applying the
statutory federal income tax rate to income before taxes. The reasons for this
difference are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Expected income taxes at 35% $ 8,308 $ 71,164 $ 50,602
State income taxes, net of federal benefit 857 7,015 6,474
Nondeductible merger related costs 14,887 7,004 1,860
Amortization of goodwill 3,100 3,475 1,308
Favorable settlement of tax examination (3,000)
Recognition of NOL carryforward (294,846) (10,880)
Non-deductible ESOP expenses 4,415 1,634
Other items, net 482 185
--------- --------- ---------
Actual income taxes $ 24,634 $(201,588) $ 50,998
========= ========= =========
</TABLE>
The Company made income tax payments, net of refunds received, of $19,852,
$12,664 and $34,172 during 1998, 1997 and 1996, respectively.
Note 8 - Senior Debt A summary of senior debt is as follows:
<PAGE> 43
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
----------- -----------
<S> <C> <C>
SFA real estate financing -- REMIC certificates $ 235,841 $ 300,841
Revolving credit agreements 608,000 346,750
Carson's receivables facility 125,000
Notes, 8.25%, maturing 2008 500,000
Notes, 7.50%, maturing 2010 250,000
Notes, 7.25%, maturing 2004 350,000
Notes, 8.125%, maturing 2004 125,000
Real estate notes, mortgage notes and
industrial revenue bonds 17,144 39,865
Capital lease obligations 160,681 169,408
----------- -----------
2,121,666 1,106,864
Current portion (11,271) (13,058)
----------- -----------
$ 2,110,395 $ 1,093,806
=========== ===========
</TABLE>
Real Estate Financing
In May 1995, SFA, through a subsidiary trust, completed a real estate financing
aggregating $335,000 through the issuance of mortgage loans collateralized by
intercompany leases. Mortgage certificates in the principal amount of $175,000
bore interest at variable rates based on three-month LIBOR, payable quarterly.
The remaining $160,000 in certificates, which were subordinated to the other
certificates, bore interest at annual fixed rates ranging from 8.98% to 12.36%,
payable semiannually.
In fiscal years 1995, 1996, 1997 and 1998, the Company repurchased
$4,159, $15,000, $15,000 and $65,000, respectively, of its outstanding REMIC
certificates. The Company recorded extraordinary charges of $2,951, $3,352 and
$8,174 in fiscal years 1996, 1997 and 1998, respectively, associated with the
repurchase premium and accelerated write-off of deferred financing costs related
to these repurchases. On February 10, 1999, subsequent to the Company's 1998
fiscal year-end, the Company prepaid the remaining $235,841 in outstanding REMIC
certificates. The Company's fiscal 1999 first quarter will reflect an
extraordinary charge of approximately $9,500 associated with the prepayment
premium and accelerated write-off of deferred financing costs related to this
prepayment.
Revolving Credit Facilities
In 1998, the Company twice replaced its revolving credit agreement. The first
occurred in conjunction with the Carson's merger in which the Company replaced
its revolving credit agreement and Carson's revolver with a new $600,000
revolving credit facility. Previously unamortized debt issuance costs associated
with the replaced revolver were written off and reflected in the extraordinary
loss on early extinguishment of debt in 1998. The second replacement was made in
conjunction with the SFA merger, in which the Company replaced its $600,000
revolving credit facility and the SFA credit facility with a $750,000 five-year
term revolving credit facility, and a $750,000 364 day revolving credit facility
(reduced to $500,000 in
<PAGE> 44
March 1999) that includes a four-year term-out option. Previously unamortized
debt issuance costs associated with the replaced revolver and SFA credit
facility were written off and reflected in the extraordinary loss on early
extinguishment of debt in 1998. Interest on the two remaining credit facilities
is variable and the weighted average interest rate at January 30, 1999 was
5.76%.
Prior to the merger with the Company, Carson's financed its credit card
receivables with a $200,000 facility ("Receivables Facility"). In connection
with the merger, the Receivables Facility was terminated and the $125,000
outstanding balance under the Receivables Facility was repaid on February 2,
1998 with proceeds from the sale of receivables under the Company's receivables
securitization agreements (see Note 5).
Other Senior Debt
In connection with the SFA merger, the Company, in the third and fourth quarters
of fiscal 1998, initiated a series of refinancing activities related to other
senior debt designed to enhance liquidity, strengthen its balance sheet and
position the Company for future growth. The refinancing activities included
completing a tender offer for the $125,000, 8.125% notes resulting in an
extraordinary charge on early extinguishment of debt of $11,625 and also issuing
and selling $1,100,000 of unsecured notes with interest rates ranging from 7.25%
to 8.25% and maturities ranging from 2004 to 2010. The Company utilized the
revolving credit agreements to fund the repurchase of the 8.125% notes and
utilized the proceeds from the $1,100,000 in unsecured notes to pay down the
revolving credit agreements.
On February 17, 1999, subsequent to the Company's fiscal year-end, the
Company issued $200,000 in 7.375% notes, due 2019. The net proceeds of the notes
were used to reduce outstanding amounts on the Company's revolving credit
facilities.
In May 1996, SFA completed an initial public offering with net proceeds
of $417,769. The proceeds from the offering were primarily used to prepay term
loan borrowings and outstanding revolving credit balances under SFA's existing
credit facility. The Company recorded an extraordinary loss of $3,340 associated
with the accelerated write-off of deferred financing costs related to these
payments.
Maturities
At January 30, 1999, maturities of senior and subordinated debt for the next
five years and thereafter, giving consideration to lenders' call privileges and
the Company's option to term-out the revolving credit facility, are as follows:
<TABLE>
<CAPTION>
Year Maturities
-------- ------------
<S> <C>
1999 $15,523
2000 7,558
2001 5,609
2002 240,938
2003 616,276
</TABLE>
<PAGE> 45
<TABLE>
<S> <C>
Thereafter 1,240,014
-----------
$2,125,918
===========
</TABLE>
The Company made interest payments, net of capitalized interest, of $93,999,
$97,745 and $94,848 during 1998, 1997 and 1996, respectively.
Note 9 - Subordinated Debt
Subordinated debt represents uncollateralized obligations subordinated in right
of payment to all senior debt and is composed of the following:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---------- -----------
<S> <C> <C>
Convertible debentures, interest at 5.50% $4,252 $276,000
Notes, interest at 9.875% 10,964
-------- ---------
$4,252 $ 286,964
======== =========
</TABLE>
In September 1996, SFA issued $276,000 aggregate principal amount of 5.50%
convertible debentures for net cash proceeds, after offering expenses and
financing costs, of $267,500. During the fourth quarter of 1998, the Company
repurchased $271,748 of the 5.50% convertible subordinated notes and expects to
redeem the remaining notes in 1999. During 1998, the Company recorded an
extraordinary loss of $6,175 relating to the accelerated write-off of deferred
financing costs related to the prepayments.
In October 1997, the Company converted its 4.75% convertible debentures
into 4,040 shares of the Company's common stock. As a result of this conversion,
certain deferred debt issuance costs aggregating $600 were written off as an
extraordinary item.
Effective with the Parisian acquisition, the Company assumed $125,000
of existing Parisian subordinated notes. In 1997, the Company purchased
approximately 90% of these notes which resulted in an extraordinary loss from
the extinguishment of debt of approximately $7,900. In July 1998, the remaining
outstanding notes were repurchased.
Note 10 - Leases
The Company leases certain land and buildings under various non-cancelable
capital and operating leases. The leases generally provide for contingent
rentals based upon sales in excess of stated amounts and require the Company to
pay real estate taxes, insurance and occupancy costs. Generally, the leases have
primary terms ranging from 20 to 30 years and include renewal options ranging
from 5 to 20 years.
At January 30, 1999, future minimum rental commitments under capital
leases and non-cancelable operating leases consisted of the following:
<PAGE> 46
<TABLE>
<CAPTION>
Operating Leases Capital Leases
------------- -------------
<S> <C> <C>
1999 $ 122,339 $ 25,059
2000 117,961 25,151
2001 115,286 23,481
2002 112,975 22,784
2003 111,118 22,586
Thereafter 917,166 342,511
---------- ---------
$1,496,845 $461,572
=========== ========
Amounts representing interest (300,891)
--------
Capital lease obligations $160,681
========
</TABLE>
Total rental expense for operating leases was $181,966, $157,018 and $114,714
during 1998, 1997 and 1996, respectively, including contingent rents of
approximately $22,806, $20,733 and $17,762, respectively.
In June 1997, SFA entered into a $100,500 operating lease agreement,
which was used to finance qualified properties. Under the agreement, the lessor
agreed to construct new store sites in order to lease them to the Company. At
January 31, 1998, the Company guaranteed a residual value of approximately
$18,869 and had approximately $77,500 available under the agreement to fund
capital expenditures. On September 17, 1998, the Company terminated the
operating lease agreement which resulted in the purchase of properties valued at
approximately $30,000.
The Company leases certain selling space within its stores to other
specialty retailers under contingent rental agreements. Rental income related to
these agreements was $12,633, $13,024 and $11,846, in 1998, 1997 and 1996,
respectively.
During 1997 and 1996, the Company consummated the sale and
sale-leaseback of certain property and equipment with proceeds of $4,630 and
$30,269, respectively.
Note 11 - Employee Benefit Plans
Employee Savings Plans
The Company sponsors various qualified savings plans that cover substantially
all full-time employees. Company contributions charged to expense under these
plans, or similar predecessor plans, for 1998, 1997 and 1996 were $8,667, $6,509
and $5,133, respectively.
Defined Benefit Plans
The Company sponsors two noncontributory defined benefit pension plans for
substantially all employees of Carson's and SFA. Benefits are principally based
upon years of service and compensation prior to retirement. The Company
generally funds pension costs currently, subject to regulatory funding
limitations. In 1998, the SFA defined benefit plan was amended and converted to
a cash balance plan.
<PAGE> 47
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net periodic pension expense:
Service cost $ 10,401 $ 10,652 $ 10,978
Interest cost 18,989 17,839 16,937
Expected return on plan assets (20,707) (18,699) (16,827)
Net amortization and deferral of prior
service costs 90 (61) 68
-------- -------- --------
Net pension expense $ 8,773 $ 9,731 $ 11,156
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
--------- ---------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning
of year $ 265,753 $ 232,402
Service cost 10,401 10,652
Interest cost 18,989 17,839
Plan amendment 2,228
Actuarial gain 17,025 19,840
Benefits paid (17,819) (14,980)
--------- ---------
Benefit obligation at end of year $ 296,577 $ 265,753
========= =========
</TABLE>
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
--------- ---------
<S> <C> <C>
Change in plan assets:
Fair value of plan assets at
beginning of year $ 230,422 $ 204,877
Actual return on plan assets 11,992 35,208
Employer contributions 15,142 5,317
Benefits paid (17,819) (14,980)
--------- ---------
Fair value of plan assets at end of year $ 239,737 $ 230,422
========= =========
Pension plans' funding status:
Accumulated benefit obligation $(282,041) $(249,830)
Effect of projected salary increases (14,536) (15,923)
--------- ---------
Projected benefit obligation (296,577) (265,753)
Fair value of plan assets 239,737 230,422
--------- ---------
Funded status (56,840) (35,331)
Unrecognized actuarial loss (gain) 17,843 (7,312)
Unrecognized prior service cost 1,955 (173)
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C>
Contributions subsequent to
measurement date 4,549 159
--------- ---------
Accrued pension cost classified in
other liabilities $ (32,493) $ (42,657)
========= =========
Amounts recognized in the consolidated balance sheet:
Accrued benefit liability $ (46,890) $ (42,657)
Intangible asset 2,123
Additional minimum pension liability
(reflected in equity net of tax) 12,274
--------- ---------
Net amount recognized $ (32,493) $ (42,657)
========= =========
Assumptions:
Discount rate 7.00% 7.39%
Expected long-term rate of return on assets 9.50% 9.50%
Average assumed rate of compensation increase 3.66% 3.66%
Measurement date -- CPS plan 11/1/98 11/1/97
Measurement date -- SFA plan 11/1/98 1/31/98
</TABLE>
Retiree Health Care Plans
The Company provides health care benefits for certain groups of employees who
retired before 1997. The plans were contributory with the Company providing a
frozen annual credit of varying amounts per year of service. The net annual
expense and liabilities for the unfunded plans reflected in the Company's
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net periodic pension expense:
Interest cost $ 749 $ 783 $ 815
Net amortization of (gain) loss (196) (188) (112)
----- ----- -----
Net pension expense $ 553 $ 595 $ 703
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---------- -----------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 10,530 $ 10,649
Interest cost 749 783
Actuarial gain (1,186) (282)
Benefits paid (690) (620)
-------- --------
Benefit obligation at end of year $ 9,403 $ 10,530
======== ========
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
Plan funding status:
Accumulated postretirement benefit obligation $ (9,403) $(10,530)
Fair value of plan assets -- --
-------- --------
Funded status (9,403) (10,530)
Unrecognized actuarial loss (gain) (4,644) (3,653)
Contributions subsequent to measurement date 181 149
-------- --------
Accrued pension cost classified in other
liabilities $(13,866) $(14,034)
======== ========
Sensitivity Analysis:
Effect of a 1.0% increase in health care
cost trend assumption on total of service
cost and interest cost components in 1998 $ 37 $ 37
Effect on benefit obligations $ 526 $ 560
Effect of a 1.0% decrease in health care
cost trend assumption on total of service
cost and interest cost components in 1998 $ (33) $ (33)
Effect on benefit obligation $ (473) $ (504)
Assumptions:
Discount rate 7.00% 7.50%
Pre-medicare medical inflation 7.00% 8.00%
Post-medicare medical inflation 6.25% 7.00%
Ultimate medical inflation (2001) 5.00% 5.00%
Measurement date 11/1/98 11/1/97
</TABLE>
Note 12 - Shareholders' Equity
Preferred Stock
In 1994, the Company issued 600 shares of series A Cumulative Convertible
Exchangeable Preferred Stock in a private offering (10,000 total shares
authorized). Net proceeds to the Company were approximately $28,900 after
offering expenses. Dividends were cumulative and were paid at $3.25 per annum
per share. On June 28, 1996, the holder converted the preferred stock into 2,844
shares of the Company's common stock. The Company paid $3,032 to the holder of
the preferred stock to induce early conversion.
Common Stock
The Company has 500,000 shares of $.10 par value common shares authorized of
which 142,856 and 141,461 shares were issued and outstanding at January 30, 1999
and January 31, 1998, respectively.
In August 1997, the Company's Board of Directors approved a 2-for-1
stock split of the outstanding shares of the Company's common stock. The split
was effected in the form of a stock dividend; each shareholder received one
additional share for each outstanding share of common stock held of record as of
the close of business on October 15, 1997. The per share amounts presented in
the Company's consolidated financial statements are reflective of the 2-for-1
stock split.
Each outstanding share of common stock has one preferred stock
<PAGE> 50
purchase right attached. The rights (which were revised in March 1998) generally
become exercisable ten days after an outside party acquires, or makes an offer
for, 20% or more of the common stock. Each right entitles its holder to buy
1/200 share of Series C Junior Preferred Stock at an exercise price of $278 per
1/100 of a share, subject to adjustment in certain cases. The rights expire in
March 2008. Once exercisable, if the Company is involved in a merger or other
business combination or an outside party acquires 20% or more of the common
stock, each right will be modified to entitle its holder (other than the
acquirer) to purchase common stock of the acquiring company or, in certain
circumstances, common stock having a market value of twice the exercise price of
the right.
Other
Previously, Herberger's was required to repurchase shares from inactive
participants of its ESOP at fair value. Treasury stock transactions were
accounted for under the cost method with gains or losses on transactions
credited or charged to additional paid-in-capital. No shares were purchased in
1998, and 3 and 170 shares were purchased in 1997 and 1996, respectively. In
connection with the rescission of the put option on the ESOP shares (see Note
13), the Company retired all 13,794 shares of the Company's common stock held in
Treasury.
Prior to the merger with the Company, Carson's purchased and retired
700 common shares for $13,096 during the year ended January 31, 1998.
Information regarding other changes in shareholders' equity is
summarized below:
<PAGE> 51
<TABLE>
<CAPTION>
Deferred Unamortized Other
Treasury ESOP Stock Comprehensive
Stock Compensation Compensation Income Total
--------- ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Balance at February 3, 1996 $(37,683) $ -- $ (453) $ -- $(38,136)
Reclassification of ESOP stock (9,778) (9,778)
Stock compensation 286 286
Purchase and retirement of stock 21,481 21,481
Sale of treasury stock 16,202 16,202
--------- --------- --------- --------- ---------
Balance at February 1, 1997 -- (9,778) (167) -- (9,945)
Stock compensation 167 167
Termination of ESOP 9,778 9,778
--------- --------- --------- --------- ---------
Balance at January 31, 1998 -- -- -- -- --
Minimum pension liability (7,487) (7,487)
--------- --------- --------- --------- ---------
Balance at January 30, 1999 $ -- $ -- $ -- $(7,487) $ (7,487)
========= ========= ========= ========= =========
</TABLE>
<PAGE> 52
Note 13 - Employee Stock Plans
ESOP
Herberger's sponsored an employee stock ownership plan for the benefit of its
employees. Contributions to the ESOP were made at the discretion of the Board of
Directors and were $3,670 in 1996. At various times, the ESOP purchased shares
of the Company's common stock using the proceeds of ESOP loans. These shares
were initially held in a suspense account by the Plan trustee. As contributions
were made and dividends were paid and the ESOP debt was repaid, shares were
released from suspense and allocated to the accounts of participants, and the
Company recognized compensation expense. For shares acquired after January 30,
1994, ESOP expense was recorded equal to the estimated fair value of shares
allocated and those shares became outstanding for earnings per share
computations. For all other shares, ESOP expense was recorded equal to the cost
of the shares released. All shares acquired prior to January 30, 1994 were
considered outstanding for earnings per share calculations.
Prior to the merger, Herberger's shares distributed from the ESOP could
be put to Herberger's at fair value for cash under certain conditions. As such,
the shares were carried at fair value and not reflected on the balance sheet in
shareholders' equity. Effective with the merger, the put option was rescinded,
and accordingly, the ESOP shares are reflected in shareholders' equity.
During 1997, the ESOP was terminated. As a result, the Company received
approximately $10,000 in cash representing payment of a $9,000 note receivable
from the ESOP. All previously unallocated common shares of the Company held by
the ESOP were allocated to the ESOP participants, resulting in a primarily
non-cash charge of $7,900.
Stock Options and Grants
The Company utilizes the intrinsic value method of accounting for stock option
grants. As the option exercise price is generally equal to or above fair value
of the common shares at the date of the option grant, no compensation cost is
recognized.
Had compensation cost for the Company's stock-based compensation plans
been determined under the fair value method, using the Black-Scholes
option-pricing model, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below.
<PAGE> 53
<TABLE>
<CAPTION>
January 30, 1999 January 31, 1998 February 1, 1997
--------------------------- ------------------------ -----------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (896) $(21,127) $ 404,914 $395,237 $ 80,832 $ 73,041
Basic earnings (loss)
per common share $(0.01) $ (0.15) $ 2.94 $ 2.87 $ 0.62 $ 0.55
Diluted earnings (loss)
per common share $(0.01) $ (0.14) $ 2.79 $ 2.72 $ 0.60 $ 0.54
</TABLE>
<PAGE> 54
The four assumptions for determining compensation costs under the fair value
method include (1) a risk-free interest rate based on zero-coupon government
issues on each grant date with the maturity equal to the expected term of the
option (5.22%, 6.22% and 6.15% for 1998, 1997 and 1996, respectively), (2) an
expected term of five years, (3) an expected volatility of 32.7%, 39.7% and
34.4% for 1998, 1997 and 1996, respectively, and (4) no expected dividend yield.
The Company maintains stock option plans for the granting of options,
stock appreciation rights and restricted shares to officers, employees and
directors. At January 30, 1999 the Company has available for grant 1,000 shares
of common stock. Options granted generally vest over a four-year period after
issue and have an exercise term of ten years from the grant date. Restricted
shares generally vest ten years after grant date with accelerated vesting at the
discretion of the Company's Board of Directors if the Company meets certain
performance objectives.
A summary of the stock option plans for 1998, 1997 and 1996 is presented below:
<PAGE> 55
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ----------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Range of Exercise Exercise Exercise Exercise
Price Shares Price Shares Price Shares Price
-------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 9,567 $18.17 8,780 $ 14.07 6,859 $ 11.42
Granted 4,111 25.78 3,519 25.90 2,686 22.39
Converted in acquisition 812 11.25
Exercised (2,568) 14.06 (2,027) 11.37 (1,288) 11.46
Forfeited (592) 27.41 (705) 25.27 (289) 12.81
------- ------ ------- ------- ------ -------
Outstanding at end of year 10,518 $21.63 9,567 $ 18.17 8,780 $ 14.07
Options exercisable at year end $ 4,885 $16.89 5,929 $ 13.88 5,115 $ 11.59
------- ------ ------- ------- ------ -------
Weighted average fair value of
options granted during the
year $ 9.83 $ 10.80 $ 6.46
======= ======= ======
</TABLE>
The following table summarizes information about stock options outstanding at
January 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ------------------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable at Average
January 30, Contractual Exercise January 30, Exercise
Range of Exercise Prices 1999 Life (Years) Price 1999 Price
------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
$3.75 to $5.63 89 2 $ 4.67 89 $ 4.67
$5.64 to $8.45 311 5 5.86 311 5.86
$8.46 to $12.69 2,099 5 11.58 1,953 11.52
$12.70 to $19.06 1,513 8 17.89 923 17.43
$19.07 to $28.60 4,069 10 23.43 805 20.45
$28.61 to $42.91 2,361 9 31.72 782 30.90
$42.92 to $48.78 76 9 47.72 22 46.99
------- -------- ------- --------
10,518 $ 21.63 4,885 $ 16.89
======= ======== ======= ========
</TABLE>
<PAGE> 56
The Company also granted restricted stock awards of 383, 176 and 298 shares to
certain employees in 1998, 1997 and 1996, respectively. The fair value of these
awards on the dates of grants was $7,284, $4,600 and $3,763 for 1998, 1997 and
1996, respectively. During 1998, 1997 and 1996, compensation cost of $2,870,
$5,700 and $2,239, respectively, has been recognized in connection with these
awards.
Stock Purchase Plan
The stock purchase plan (the "Plan") provides that an aggregate of 700 shares of
the Company's common stock is available for purchase. Under the Plan, an
eligible employee may elect to participate by authorizing limited payroll
deductions to be applied toward the purchase of common stock at a 15.0% discount
to market value. Under the Plan, 73 and 62 shares of the Company's common stock
were purchased by employees in 1998 and 1997, respectively. At January 30, 1999,
the Plan has available for future offerings 510 shares.
Note 14 - Commitments and Contingencies
Carson's and its subsidiaries emerged from Chapter 11 bankruptcy in 1993. The
Company recognized $1,350, $680 and $1,280 in 1998, 1997 and 1996, respectively,
to reflect the favorable resolution of claims. Management believes Carson's has
adequately provided for the resolution of all bankruptcy claims and other
matters related to the Plan of Reorganization remaining at January 30, 1999. In
the fourth quarter of 1998, pending litigation between Carson's and Bank One,
Wisconsin, related to the Chapter 11 bankruptcy filing was settled resulting in
the Company receiving a settlement payment of $42,500, which is included in
other income (expense) in the 1998 consolidated statement of income.
The Company is involved in several legal proceedings arising from its
normal business activities, and accruals for such claims have been established
where appropriate. Management believes that none of these legal proceedings will
have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
Note 15 - Related Party Transactions
During 1996, the Company paid $796 of preferred stock dividends and a $3,032
payment for early conversion of the preferred stock to an investment group in
which a Director is a partner.
Prior to the merger of Proffitt's and SFA, a shareholder of SFA
provided various consulting and advisory services to SFA under an agreement
which expired in July 1996. The fees paid or payable for such services were
approximately $1,000 in 1996.
Note 16 - Fair Values of Financial Instruments
The Company has entered into interest rate cap agreements to reduce the effect
of increases in interest rates on real estate financing. The Company is also an
indirect beneficiary of interest rate cap agreements relating to the accounts
receivable securitization. At January 30, 1999, there were
<PAGE> 57
five interest rate cap agreements outstanding. Accordingly, the Company is
entitled to receive from various financial institutions the amount, if any, by
which the Company's interest payments on its debt are recorded as a reduction of
interest expense.
Two of the interest rate cap agreements serve to cap $175,000 of SFA's
real estate financing at 9.70% through May 2002. Three of the interest rate cap
agreements serve to cap a decreasing notional amount of the SFA receivables
securitization at 10.0% through May 1999.
The combined fair value of the Company's interest rate agreements were
$0 and $124 as of January 30, 1999 and January 31, 1998, respectively.
During 1996, SFA entered into a financial fixed-rate swap agreement,
which was renegotiated in 1997. SFA used this interest rate swap solely as a
risk management tool with an objective of managing the level of interest rate
risk relating to its accounts receivable securitization. In 1998, as a result of
SFA's merger with the Company and the planned 1999 merger of the SFA accounts
receivable securitization with that of the Company's, the Company terminated the
fixed rate swap agreement resulting in a charge of $7,900, which is included in
other income (expense) in the 1998 consolidated statement of income.
The fair values of the Company's cash and cash equivalents, retained
interest in accounts receivable and accounts payable approximate their carrying
amounts reported in the consolidated balance sheets, due to the immediate or
short-term maturity of these instruments. For variable rate notes that reprice
frequently, such as the revolving credit facilities, fair value approximates
carrying value. The fair value of fixed rate real estate and mortgage notes is
estimated using discounted cash flow analyses with interest rates currently
offered for loans with similar terms and credit risk, and as of January 30, 1999
and January 31, 1998 the fair value of these notes approximated the carrying
value. The fair value of publicly-held REMIC certificates, notes and
subordinated debentures is based on quoted market prices.
The fair values of the Company's financial instruments other than the
instruments considered short-term in nature at January 30, 1999 and January 31,
1998 were as follows:
<TABLE>
<CAPTION>
Carrying Amount Estimated Fair Value
--------------- --------------------
<S> <C> <C>
January 30, 1999
REMIC certificates $235,841 $238,841
8.25% senior notes $500,000 $547,095
7.25% senior notes $350,000 $359,195
7.50% senior notes $250,000 $259,768
5.50% convertible debentures $4,252 $4,243
January 31, 1998
REMIC certificates $300,841 $315,700
8.125% senior notes $125,000 $132,700
9.875% notes $10,964 $11,731
5.50% convertible debentures $276,000 $246,081
</TABLE>
<PAGE> 58
The fair value of the long-term debt and interest rate cap agreements were
estimated based on quotes obtained from financial institutions for those or
similar instruments or on the basis of quoted market prices.
Note 17 - Merger and Integration Charges
Merger and integration charges incurred in fiscal years 1998, 1997 and 1996
(before income taxes) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Related to corresponding year's merger:
Merger transaction costs, principally
investment banking, legal and
other direct merger costs $44,848 $13,800 $2,649
Severance and related benefits 11,096 11,100 3,129
Conversion and consolidation of systems
and administrative operations 8,327 3,355
Abandonment and write-down of information
technology software, hardware and other
assets 23,000 6,200 885
Related to all other mergers and acquisitions:
Termination of Younkers' benefit plan 1,362
Conversion and consolidation of systems 11,564 2,600 4,549
Termination of merchandise purchasing
agreements 3,900
Severance, relocation and other integration
costs associated with all mergers and
acquisitions and consulting fees 12,472 5,924 1,000
Revisions to prior year estimates:
1995 charges associated with exit of a
SFA distribution center (7,000)
-------- -------- --------
$111,307 $36,524 $16,929
======== ======== ========
</TABLE>
A reconciliation of the aforementioned charges to the amounts of merger
and integration costs remaining unpaid at the applicable balance sheet date is
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Amounts unpaid at beginning of year
related to prior merger and
integration events $ 25,994 $ 10,291 $ 16,000
Merger and integration charges 111,307 43,524 16,929
Amounts paid (76,728) (13,321) (20,221)
Amounts representing non-cash charges (28,622) (14,500) (2,417)
-------- -------- --------
Amounts unpaid at end of year $ 31,951 $ 25,994 $ 10,291
======== ======== ========
</TABLE>
<PAGE> 59
The components of the aforementioned amounts unpaid are as follows:
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
---------- ----------
<S> <C> <C>
Direct merger costs* $17,530 $ 5,750
Severance 6,638 12,795
Contractual obligations to be paid within
one year of merger 5,900
Contractual obligations with extended
payment terms (such as rents for abandoned
leases and payments on abandoned contracts) 348 4,500
Other (includes all merger and integration
efforts) 1,535 2,949
------- -------
Totals $31,951 $25,994
======= =======
</TABLE>
*Principally consists of investment banker fees paid subsequent to year end.
<PAGE> 60
Note 18 - Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fiscal year ended January 30, 1999
Net sales $1,412,602 $1,283,744 $1,472,817 $2,050,730
Gross margin $ 490,032 $ 444,894 $ 484,048 $ 707,452
Income (loss) before extraordinary loss $ 28,124 $ 2,982 $ (106,154) $ 100,033
Net income (loss) $ 28,124 $ 2,648 $ (127,710) $ 96,042
Basic earnings (loss) per common share:
Before extraordinary items $ 0.20 $ 0.02 $ (0.74) $ 0.70
After extraordinary items $ 0.20 $ 0.02 $ (0.89) $ 0.67
Diluted earnings (loss) per common share:
Before extraordinary items $ 0.19 $ 0.02 $ (0.74) $ 0.68
After extraordinary items $ 0.19 $ 0.02 $ (0.89) $ 0.65
Fiscal year ended January 31, 1998
Net sales $1,302,118 $1,188,351 $1,417,041 $1,818,836
Gross margin $ 451,103 $ 402,557 $ 513,844 $ 627,549
Income (loss) before extraordinary loss $ 25,198 $ (4,734) $ 39,606 $ 356,167
Net income (loss) $ 21,846 $ (5,854) $ 38,994 $ 349,928
Basic earnings (loss) per common share:
Before extraordinary items $ 0.19 $ (0.03) $ 0.29 $ 2.52
After extraordinary items $ 0.16 $ (0.04) $ 0.28 $ 2.48
Diluted earnings (loss) per common share:
Before extraordinary items $ 0.18 $ (0.03) $ 0.28 $ 2.38
After extraordinary items $ 0.16 $ (0.04) $ 0.27 $ 2.34
</TABLE>
<PAGE> 61
Note 19 - Condensed Consolidating Financial Information
The following tables present condensed consolidating financial information for
1998, 1997 and 1996 for (1) Saks Incorporated; (2) on a combined basis, the
guarantors of Saks Incorporated Senior Notes (which are all of the wholly owned
subsidiaries of Saks Incorporated), except for PCC, YCC, NBGL, SFC and the REMIC
subsidiaries and trusts; and (3) on a combined basis, PCC, YCC, NBGL, SFC and
the REMIC subsidiaries and trusts, the only non-guarantor subsidiaries of the
Senior Notes. Separate financial statements of the guarantor subsidiaries are
not presented because the guarantors are jointly, severally and unconditionally
liable under the guarantees, and the Company believes the condensed
consolidating financial statements are more meaningful in understanding the
financial position of the guarantor subsidiaries. Saks Incorporated is comprised
of substantially all of the Proffitt's and Younkers stores and certain corporate
management and financing functions. Borrowings and the related interest expense
under the Company's revolving credit facility are allocated to Saks Incorporated
and the guaranty subsidiaries under an informal lending arrangement. There are
also management and royalty fee arrangements among Saks Incorporated and the
subsidiaries.
On January 31, 1999, immediately following the Company's fiscal year
end, the Company restructured its legal entity composition. This restructuring
changed the composition of Saks Incorporated to include only the operations of a
small group of corporate employees and all of the Company's long-term debt. The
Proffitt's and Younkers stores, corporate management and financing functions
previously included within the operations of Saks Incorporated were moved to
guarantor subsidiary entities. On February 10, 1999 (subsequent to the 1998 year
end), the Company prepaid the outstanding REMIC certificates that were held by
the REMIC subsidiaries. The condensed financial statements presented do not
reflect the restructured legal entity composition.
<PAGE> 62
SAKS INCORPORATED & SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Year Ended January 30, 1999
<TABLE>
<CAPTION>
Saks Guarantor Non-Guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $800,592 $5,419,301 $6,219,893
Cost of sales 494,355 3,599,112 4,093,467
-------- ---------- -------- --------- ----------
Gross margin 306,237 1,820,189 2,126,426
Selling, general and
administrative expenses 155,531 1,239,310 $ 88,977 $(194,590) 1,289,228
Other operating expenses 59,597 469,700 (41,131) 488,166
Store pre-opening costs 1,448 9,119 10,567
Merger and integration costs 31,952 79,355 111,307
Losses from long-lived assets 331 41,005 20,449 61,785
Year 2000 expenses 884 9,553 10,437
-------- ---------- -------- --------- ----------
Operating income (loss) 56,494 (27,853) (68,295) 194,590 154,936
Other income (expense)
Finance charge income, net 194,590 (194,590)
Intercompany exchange fees (7,000) (19,909) 26,909
Intercompany servicer fees 30,412 (30,412)
Equity in earnings of
subsidiaries 14,321 19,775 (34,096)
Interest expense, net (18,466) (64,983) (27,522) (110,971)
Other income (expense), net (11,536) 33,737 22,201
-------- ---------- -------- --------- ----------
Income (loss) before provision
(benefit) for income taxes
and extraordinary item 33,813 (28,821) 95,270 (34,096) 66,166
Provision (benefit) for income
taxes 22,724 (15,389) 33,846 41,181
-------- ---------- -------- --------- ----------
Income (loss) before
extraordinary item 11,089 (13,432) 61,424 (34,096) 24,985
Extraordinary item, net of taxes (11,985) (6,994) (6,902) (25,881)
-------- ---------- -------- --------- ----------
Net income (loss) $ (896) $ (20,426) $ 54,522 $ (34,096) $ (896)
======== ========== ======== ========= ==========
</TABLE>
<PAGE> 63
SAKS INCORPORATED & SUBSIDIARIES CONDENSED BALANCE SHEETS
As of January 30, 1999
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 20,366 $(26,751) $ 39,137 $32,752
Retained interest in accounts
receivable 54 220 159,322 159,596
Merchandise inventories 221,585 1,184,597 1,406,182
Deferred income taxes (3,217) 87,175 83,958
Intercompany borrowings 11,070 $(11,070)
Other current assets 19,471 90,810 145 110,426
---------- ---------- -------- ----------- ----------
Total Current Assets 269,329 1,336,051 198,604 (11,070) 1,792,914
Property and Equipment, net 342,355 1,270,766 505,434 2,118,555
Goodwill and Intangibles, net 125,717 460,580 586,297
Other Assets 1,196 55,592 20,858 77,646
Deferred Income Taxes 249,816 249,816
Cash Placed in Escrow for
Debt Redemption 363,753 363,753
Investment in and Advances
to Subsidiaries 3,112,552 1,350,621 (4,463,173)
---------- ---------- -------- ----------- ----------
Total Assets $3,851,149 $5,087,179 $724,896 $(4,474,243) $5,188,981
========== ========== ======== =========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $48,768 $311,620 $360,388
Accrued expenses and other
current liabilities 39,118 452,000 $ 38,010 529,128
Intercompany borrowings 11,070 $ (11,070)
Current portion of long-term
debt 452 15,071 15,523
---------- ---------- -------- ----------- ----------
Total Current Liabilities 88,338 778,691 49,080 (11,070) 905,039
Senior Debt 1,709,093 165,461 235,841 2,110,395
Deferred income taxes 18,893 (27,045) 8,152
Other Long-term Liabilities 27,250 136,992 1,730 165,972
Investment by and Advances
from Parent 4,033,080 430,093 (4,463,173)
Shareholders' Equity 2,007,575 2,007,575
---------- ---------- -------- ----------- ----------
Total Liabilities and
Shareholders' Equity $3,851,149 $5,087,179 $724,896 $(4,474,243) $5,188,981
========== ========== ======== =========== ==========
</TABLE>
<PAGE> 64
SAKS INCORPORATED & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Year Ended January 30, 1999
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ (896) $ (20,426) $ 54,522 $(34,096) $(896)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Equity in earnings of
subsidiaries (14,321) (19,775) 34,096
Depreciation and amortization 15,263 126,159 13,939 155,361
Deferred income taxes 20,224 (19,897) 14,599 14,926
Extraordinary loss on
extinguishment of debt 14,599 14,599
Write-offs of long lived
assets, merger and
integration items 59,086 20,531 79,617
Changes in operating assets
and liabilities, net (15,373) 514 274,191 259,332
----------- ---------- ---------- ----------
Net cash provided by
operating activities 4,897 140,260 377,782 522,939
Investing Activities
Purchases of property and
equipment, net (48,277) (327,785) (45,000) (421,062)
Proceeds from sale of assets 2,500 2,500
Acquisition of Dillard's
stores, Brody's and Bullock
& Jones (248,196) (276,921) (525,117)
----------- ---------- ---------- ----------
Net cash used in investing
activities (293,973) (604,706) (45,000) (943,679)
Financing activities
Intercompany borrowings,
contributions and
distributions (1,212,694) 1,375,413 (162,719)
Proceeds from long-term
borrowings 1,100,000 1,100,000
Payments on long-term debt (10,320) (450,661) (45,979) (506,960)
Net borrowings under credit
and receivables facility 398,000 (136,750) (125,000) 136,250
Cash placed in escrow for
debt redemption (363,753) (363,753)
Proceeds from issuance of
stock 19,525 18,040 37,565
Purchase of treasury stock (474) (474)
----------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities 294,037 442,289 (333,698) 402,628
Decrease in cash and cash
equivalents 4,961 (22,157) (916) (18,112)
Cash and cash equivalents
at beginning of period 15,405 (4,594) 40,053 50,864
----------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $ 20,366 $ (26,751) $ 39,137 $ 32,752
=========== ========== ========== ==========
</TABLE>
<PAGE> 65
SAKS INCORPORATED & SUBSIDIARIES CONDENSED STATEMENTS OF INCOME For the Year
Ended January 31, 1998
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $746,896 $4,979,450 $5,726,346
Cost of sales 480,435 3,250,858 3,731,293
-------- ---------- -------- --------- ----------
Gross margin 266,461 1,728,592 1,995,053
Selling, general and
administrative expenses 156,787 1,111,830 $ 62,722 $(166,221) 1,165,118
Other operating expenses 56,343 405,979 (35,064) 427,258
Store pre-opening costs 412 16,606 17,018
Merger and integration costs 11,500 25,024 36,524
(Gains) from long-lived assets (8) (126) (134)
Year 2000 expenses 357 6,233 6,590
ESOP expenses 9,513 9,513
-------- ---------- -------- --------- ----------
Operating income (loss) 41,070 153,533 (27,658) 166,221 333,166
Other income (expense)
Finance charge income, net 166,221 (166,221)
Intercompany exchange fees (4,627) (20,503) 25,130
Intercompany servicer fees 13,372 (13,372)
Equity in earnings of
subsidiaries 397,357 58,804 (456,161)
Interest expense, net (10,612) (59,373) (43,700) (113,685)
Other income (expense), net (178) 2,279 229 2,330
-------- ---------- -------- --------- ----------
Income before provision for
income taxes and
etraordinary item 423,010 148,112 106,850 (456,161) 221,811
Provision (benefit) for income
taxes 14,753 (242,283) 33,104 (194,426)
-------- ---------- -------- --------- ----------
Income before extraordinary
item 408,257 390,395 73,746 (456,161) 416,237
Extraordinary item, net of
taxes (3,343) (6,424) (1,556) (11,323)
-------- ---------- -------- --------- ----------
Net income $404,914 $ 383,971 $ 72,190 $(456,161) $ 404,914
======== ========== ======== ========= ==========
</TABLE>
<PAGE> 66
SAKS INCORPORATED & SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS
As Of January 31, 1998
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $15,405 $(4,594) $40,053 $50,864
Retained interest in accounts
receivable 113 273 411,823 412,209
Merchandise inventories 171,212 1,073,470 1,244,682
Deferred income taxes 6,797 64,625 6,447 77,869
Intercompany borrowings 30,715 90,293 $(121,008)
Other current assets 6,777 98,292 6,552 111,621
---------- ---------- ---------- ----------- ----------
Total Current Assets 231,019 1,322,359 464,875 (121,008) 1,897,245
Property and Equipment, net 186,266 953,642 586,071 1,725,979
Goodwill and Intangibles, net 7,340 319,967 327,307
Other Assets 2,297 39,731 25,901 67,929
Deferred Income Taxes (8,683) 260,476 251,793
Investment in and Advances
to Subsidiaries 1,959,326 1,352,541 (3,311,867)
---------- ---------- ---------- ----------- ----------
Total Assets $2,377,565 $4,248,716 $1,076,847 $(3,432,875) $4,270,253
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $39,713 $294,081 $333,794
Accrued expenses and other
current liabilities 45,563 380,800 $27,671 454,034
Intercompany borrowings 121,008 $(121,008)
Current portion of long-term
debt 452 12,606 13,058
---------- ---------- ---------- ----------- ----------
Total Current Liabilities 85,728 687,487 148,679 (121,008) 800,886
Senior Debt 336,545 331,420 425,841 1,093,806
Other Long-term Liabilities 10,763 131,476 1,829 144,068
Subordinated Debt 286,964 286,964
Investment by and Advances
from Parent 2,811,369 500,498 (3,311,867)
Shareholders' Equity 1,944,529 1,944,529
---------- ---------- ---------- ----------- ----------
Total Liabilities and
Shareholders' Equity $2,377,565 $4,248,716 $1,076,847 $(3,432,875) $4,270,253
========== ========== ========== =========== ==========
</TABLE>
<PAGE> 67
SAKS INCORPORATED & SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOW
For the Year Ended January 31, 1998
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net income $404,914 $383,971 $72,190 $(456,161) $404,914
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in earnings of
subsidiaries (397,357) (58,804) 456,161
Depreciation and
amortization 12,874 103,240 20,005 136,119
Deferred income taxes 222 24,397 (1,569) 23,050
Recognition of NOL
carry-forwards (283,675) (283,675)
Extraordinary loss on
extinguishment of debt 1,425 5,375 1,556 8,356
(Gains) from long-lived assets (8) (126) (134)
ESOP expenses 8,786 8,786
Restructuring items (800) (800)
Changes in operating assets
and liabilities, net 52,575 (124,864) (15,022) (87,311)
-------- -------- ------- --------- --------
Net cash provided by
operating activities 74,645 57,500 77,160 209,305
Investing Activities
Purchases of property and
equipment, net (13,349) (253,807) (79,720) (346,876)
Proceeds from sale of assets 23,221 4,630 27,851
-------- -------- ------- --------- --------
Net cash provided by (used in)
investing activities 9,872 (249,177) (79,720) (319,025)
Financing Activities
Intercompany borrowings,
contributions and
distributions (226,093) 184,610 41,483
Proceeds from long-term
borrowings 175,546 175,546
Payments on long-term debt (32,720) (196,082) (30,000) (258,802)
Net borrowings under credit
and receivables facility 136,750 11,392 148,142
Proceeds from issuance of
stock 15,762 7,423 23,185
Purchase of treasury stock (13,096) (13,096)
ESOP loan repayment 9,778 9,778
Payments to preferred and
common shareholders (1,124) (1,124)
-------- -------- ------- --------- --------
Net cash provided by (used in)
financing activities (80,601) 141,355 22,875 83,629
Increase (decrease) in cash and
cash equivalents 3,916 (50,322) 20,315 (26,091)
Cash and cash equivalents at
beginning of period 11,489 45,728 19,738 76,955
-------- -------- ------- --------- --------
Cash and cash equivalents at
end of period $15,405 $(4,594) $40,053 $50,864
======= ======= ======= ========= =======
</TABLE>
<PAGE> 68
SAKS INCORPORATED & SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Year Ended February 1, 1997
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $737,902 $4,188,960 $4,926,862
Cost of sales 461,117 2,747,872 3,208,989
-------- ---------- -------- --------- ----------
Gross margin 276,785 1,441,088 1,717,873
Selling, general and
administrative expenses 172,219 976,472 $ 38,631 $(130,178) 1,057,144
Other operating expenses 57,026 333,599 (35,023) 355,602
Store pre-opening costs 11,645 11,645
Merger and integration costs 8,729 8,200 16,929
Year 2000 expenses 1,406 1,406
ESOP expenses 3,910 3,910
-------- ---------- -------- --------- ----------
Operating income (loss) 38,811 105,856 (3,608) 130,178 271,237
Other income (expense)
Finance charge income, net 8,500 12,691 108,987 (130,178)
Intercompany exchange fees (2,475) (18,550) 21,025
Intercompany servicer fees 6,749 (6,749)
Equity in earnings of
subsidiaries 55,584 58,868 (114,052)
Interest expense, net (6,404) (63,323) (45,154) (114,881)
Other income (expense), net 7,319 (19,186) 87 (11,780)
-------- ---------- -------- --------- ----------
Income before provision for
income taxes and
extraordinary item 100,935 83,105 74,588 (114,052) 144,576
Provision for income taxes 20,103 20,968 9,927 50,998
-------- ---------- -------- --------- ----------
Income before extraordinary item 80,832 62,137 64,661 (114,052) 93,578
Extraordinary item, net of taxes (10,722) (2,024) (12,746)
-------- ---------- -------- --------- ----------
Net income $ 80,832 $ 51,415 $62,637 $(114,052) $ 80,832
======== ========== ======= ========= ==========
</TABLE>
<PAGE> 69
SAKS INCORPORATED & SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
For the Year Ended February 1, 1997
<TABLE>
<CAPTION>
Saks Guarantor Non-guarantor
(dollars in thousands) Incorporated Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 80,832 $ 51,415 $ 62,637 $(114,052) $ 80,832
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in earnings of
subsidiaries (55,184) (58,868) 114,052
Depreciation and
amortization 14,123 89,545 19,865 123,533
Deferred income taxes 8,901 22,679 48 31,628
Extraordinary loss on
extinguishment of debt 10,722 2,024 12,746
Losses on County Seat Debentures 10,525 10,525
Losses from long-lived assets 1,406 1,406
ESOP expenses 1,481 1,481
Restructuring items 885 885
Changes in operating assets
and liabilities, net (34,394) (61,574) (26,373) (122,341)
--------- --------- --------- --------- ---------
Net cash provided by operating
activities 14,278 68,216 58,201 140,695
Investing Activities
Purchases of property and
equipment, net (8,544) (226,102) (13,168) (247,814)
Proceeds from sale of assets 5,410 30,872 36,282
Acquisition of Parisian (119,070) (119,070)
--------- --------- --------- --------- ---------
Net cash used in investing
activities (3,134) (314,300) (13,168) (330,602)
Financing Activities
Intercompany borrowings,
contributions and distributions (121,314) 125,880 (4,566)
Proceeds from long-term
borrowings 113,037 267,800 380,837
Payments on long-term debt (19,727) (370,370) (4,159) (394,256)
Net borrowings under credit
and receivables facility (201,820) (35,637) (237,457)
Proceeds from issuance of
stock 35,438 422,094 457,532
Purchase of treasury stock (14,383) (14,383)
ESOP loan repayment (742) (742)
Payments to preferred and
common shareholders (4,858) (4,858)
--------- --------- --------- --------- ---------
Net cash provided by(used
in) financing activities (6,949) 237,984 (44,362) 186,673
Increase (decrease) in cash and
cash equivalents 4,195 (8,100) 671 (3,234)
Cash and cash equivalents at
beginning of period 7,294 53,828 19,067 80,189
--------- --------- --------- --------- ---------
Cash and cash equivalents at
end of period $ 11,489 $ 45,728 $ 19,738 $ 76,955
========= ========= ========= ========= =========
</TABLE>
<PAGE> 70
Report of Independent Accountants
To the Board of Directors and Shareholders
Saks Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Saks Incorporated
and Subsidiaries as of January 30, 1999 and January 31, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended January 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 16, 1999
Report of Management
The accompanying consolidated financial statements, including the notes thereto,
and the other financial information presented in the Annual Report have been
prepared by management. The financial statements have been prepared in
accordance with generally accepted accounting principles and include amounts
that are based upon our best estimates and judgments. Management is responsible
for the consolidated financial statements, as well as the other financial
information in this Annual Report.
The Company maintains an effective system of internal accounting
control. We believe that this system provides reasonable assurance that
transactions are executed in accordance with management authorization and that
they are appropriately recorded in order to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
adequately safeguard, verify and maintain accountability of assets. Reasonable
assurance is based on the recognition that the cost of a system of internal
control should not exceed the benefits derived.
The consolidated financial statements and related notes have been
audited by independent certified public accountants. Management has made
<PAGE> 71
available to them all of the Company's financial records and related data and
believes all representations made to them during their audits were valid and
appropriate. Their report provides an independent opinion upon the fairness of
the financial statements.
The Audit Committee of the Board of Directors is composed of four
independent Directors. The Committee is responsible for recommending the
independent certified public accounting firm to be retained for the coming year,
subject to shareholder approval. The Audit Committee meets periodically with the
independent auditors, as well as with management, to review accounting,
auditing, internal accounting control and financial reporting matters. The
independent auditors have unrestricted access to the Audit Committee.
/s/ R. Brad Martin /s/ Douglas E. Coltharp
R. Brad Martin Douglas E. Coltharp
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
Effective July 7, 1997, the Company's common stock began trading on the New York
Stock Exchange under the symbol PFT. Until that time, the Company's stock was
traded on the NASDAQ National Market tier of The NASDAQ Stock Market under the
symbol PRFT. Effective September 18, 1998, the Company changed its corporate
name from Proffitt's, Inc. to Saks Incorporated and its New York Stock Exchange
Symbol from PFT to SKS. As of March 15, 1999, there were approximately 2,600
shareholders of record. The prices in the table below represent the high and low
sales prices for the stock as reported by the New York Stock Exchange (beginning
on July 7, 1997) and by the National Association of Securities Dealers, Inc.
(prior to July 7, 1997). The prices have been adjusted to reflect a 2-for-1
stock split effected in the form of a stock dividend in October 1997.
The Company presently follows the policy of retaining earnings to
provide funds for the operation and expansion of the business and has no present
intention to declare cash dividends in the foreseeable future. Future dividends,
if any, will be determined by the Board of Directors of the Company in light of
circumstances then existing, including the earnings of the Company, its
financial requirements and general business conditions. The Company declared no
dividends to common shareholders in either 1998 or 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
January 30, 1999 January 31, 1998
Price Range Price Range
-------------------- --------------------
Quarter High Low High Low
- --------- ------- ------- ------ -------
<S> <C> <C> <C> <C>
First $ 40.75 $ 29.38 $ 20.69 $ 15.63
Second $ 44.44 $ 29.00 $ 26.67 $ 18.88
Third $ 34.50 $ 16.38 $ 30.63 $ 24.88
Fourth $ 36.94 $ 22.13 $ 32.44 $ 25.00
</TABLE>
<PAGE> 72
Board of Directors
R. Brad Martin
Chairman of the Board and
Chief Executive Officer of
Saks Incorporated
Ronald de Waal
Vice Chairman of the Board;
Chairman of We International, B.V.
Bernard E. Bernstein
Partner in the law firm of
Bernstein, Stair & McAdams LLP
Stanton J. Bluestone
Retired Chairman and
Chief Executive Officer of
Carson Pirie Scott & Co.
John W. Burden
Retail Consultant;
Retired Chairman and CEO of Federated Department Stores
and Allied Stores Corporation
Edmond D. Cicala
President of Edmond Enterprises, Inc.;
Retired Chairman of the Goldsmith's
Division of Federated Department Stores
James A. Coggin
President and Chief Administrative
Officer of Saks Incorporated
Julius W. Erving
President of The Erving Group;
Executive Vice President of the
Orlando Magic
Michael S. Gross
Vice President of Apollo Capital Management, L.P.
Donald E. Hess
Chairman Emeritus of Parisian;
Chief Executive Officer of
Southwood Partners
<PAGE> 73
G. David Hurd
Emeritus Chairman and retired
Chief Executive Officer of
Principal Financial Group
Philip B. Miller
Chairman and Chief Executive Officer
of Saks Fifth Avenue
Robert M. Mosco
President of Merchandising and
Chief Operating Officer
of Saks Incorporated
C. Warren Neel
Dean of the College of Business
at the University of Tennessee
Charles J. Philippin
Member of the Management
Committee of Investcorp
Stephen I. Sadove
President Bristol-Myers
Squibb Co. Worldwide Beauty Care
and Nutritionals
Marguerite W. Sallee
Chief Executive Officer of
Bright Horizons Family Solutions
Gerald Tsai, Jr.
Private Investor
Certain Corporate Officers
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
James A. Coggin
President and Chief
Administrative Officer
Robert M. Mosco
President of Merchandising and
Chief Operating Officer
<PAGE> 74
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Brian J. Martin
Executive Vice President of Law
and General Counsel
Dan C. Smith
Executive Vice President and
Chief Information Officer
Store Officers
Toni E. Browning
President and Chief Executive
Officer of Proffitt's
Christina Johnson
Vice Chairman of Saks Fifth Avenue
Max W. Jones
President and Chief Executive
Officer of Herberger's
Frank E. Kulp, III
President and Chief Executive
Officer of Younkers
Michael R. MacDonald
President and Chief Executive
Officer of Carson Pirie Scott
Philip B. Miller
Chairman and Chief Executive
Officer of Saks Fifth Avenue
W. Travis Saucer
President and Chief Executive
Officer of McRae's
John T. Wyatt
President and Chief Executive
Officer of Parisian
SAKS FIFTH AVENUE
FULL-LINE STORES
<PAGE> 75
ARIZONA
Phoenix
CALIFORNIA
Beverly Hills
Costa Mesa
San Diego
San Francisco
COLORADO
Denver
CONNECTICUT
Stamford
FLORIDA
Bal Harbor
Boca Raton
Ft. Lauderdale
Orlando
Palm Beach Gardens
South Miami
Tampa
GEORGIA
Atlanta
ILLINOIS
Chicago
Oakbrook
Old Orchard
LOUISIANA
New Orleans
MARYLAND
Chevy Chase
MASSACHUSETTS
Boston
MICHIGAN
Dearborn
Troy
MINNESOTA
Minneapolis
MISSOURI
Frontenac
Kansas City
<PAGE> 76
NEVADA
Las Vegas
NEW JERSEY
Hackensack
Short Hills
NEW YORK
Garden City
Huntington
New York City
White Plains
OHIO
Beachwood
Cincinnati
OREGON
Portland
PENNSYLVANIA
Bala Cynwyd
Pittsburgh
TEXAS
Dallas
Houston (2)
San Antonio
VIRGINIA
McLean
SAKS FIFTH AVENUE
RESORT STORES
CALIFORNIA
Carmel
Palm Springs
Palm Desert
FLORIDA
Ft. Myers
Naples
Palm Beach
Sarasota
NEW YORK
Southampton
<PAGE> 77
SOUTH CAROLINA
Hilton Head
SAKS FIFTH AVENUE
MAIN STREET STORES
CALIFORNIA
La Jolla
Pasadena
Santa Barbara
CONNECTICUT
Greenwich
OKLAHOMA
Tulsa
SOUTH CAROLINA
Charleston
TEXAS
Austin
PARISIAN STORES
ALABAMA
Birmingham (5)
Decatur
Dothan
Florence
Huntsville (2)
Mobile
Montgomery (2)
Tuscaloosa
FLORIDA
Jacksonville
Orlando (4)
Pensacola
Tallahassee
GEORGIA
Atlanta (5)
Columbus
Macon
Savannah
INDIANA
Indianapolis (2)
<PAGE> 78
LOUISIANA
Baton Rouge (2)
Lafayette
MICHIGAN
Livonia
MISSISSIPPI
Tupelo
OHIO
Cincinnati (2)
Dayton
SOUTH CAROLINA
Columbia (2)
TENNESSEE
Chattanooga
Knoxville
Nashville
PROFFITT'S STORES
GEORGIA
Dalton
Rome
KENTUCKY
Ashland
Elizabethtown
NORTH CAROLINA
Asheville
Goldsboro
Greenville
Kinston
Rocky Mount
SOUTH CAROLINA
Greenville
Spartanburg
TENNESSEE
Athens
Chattanooga (2)
Cleveland
Greeneville
Johnson City
Kingsport
<PAGE> 79
Nashville (5)
Oak Ridge
VIRGINIA
Bristol
WEST VIRGINIA
Morgantown
Parkersburg
MCRAE'S STORES
ALABAMA
Birmingham (5)
Dothan
Gadsden
Huntsville (2)
Mobile
Selma
Tuscaloosa
FLORIDA
Mary Esther
Pensacola
LOUISIANA
Baton Rouge
Monroe
MISSISSIPPI
Biloxi
Columbus
Gautier
Greenville
Hattiesburg
Jackson (3)
Laurel
Meridian
Natchez
Tupelo
Vicksburg
YOUNKERS STORES
ILLINOIS
Moline
<PAGE> 80
IOWA
Ames
Bettendorf
Cedar Falls
Cedar Rapids (2)
Davenport
Des Moines (4)
Dubuque
Fort Dodge
Iowa City (2)
Marshalltown
Mason City
Sioux City (2)
Waterloo
West Burlington
MICHIGAN
Bay City
Holland
Marquette
Port Huron
Traverse City
MINNESOTA
Austin
Duluth
NEBRASKA
Grand Island
Lincoln
Omaha (3)
SOUTH DAKOTA
Sioux Falls
WISCONSIN
Appleton (2)
Eau Claire
Fond du Lac
Green Bay
Madison (2)
Manitowoc
Marinette
Marshfield
Milwaukee (2)
Racine
Sheboygan
Sturgeon Bay
Superior
Wausau
Wisconsin Rapids
HERBERGER'S STORES
COLORADO
Grand Junction
IOWA
Ottumwa
MINNESOTA
Albert Lea
Alexandria
Bemidji
Brainerd
<PAGE> 81
Wausau
Wisconsin Rapids
HERBERGER'S STORES
COLORADO
Grand Junction
IOWA
Ottumwa
MINNESOTA
Albert Lea
Alexandria
Bemidji
Brainerd
<PAGE> 82
Fergus Falls
Mankato
Minneapolis
Moorhead
New Ulm
St. Cloud
St. Paul
Stillwater
Virginia
Willmar
MONTANA
Billings
Butte
Great Falls
Havre
Kalispell
Missoula
NEBRASKA
Hastings
Kearney
Norfolk
North Platte
Scottsbluff
NORTH DAKOTA
Dickinson
Bismarck
Fargo
Minot
<PAGE> 83
SOUTH DAKOTA
Aberdeen
Rapid City
Watertown
WISCONSIN
Beaver Dam
LaCrosse
Rice Lake
WYOMING
Rock Springs
CARSON PIRIE
SCOTT STORES
ILLINOIS
Aurora (2)
Bloomingdale
Bourbonnais
Calumet City
Chicago (3)
Chicago Ridge
Dundee
Evergreen Park
Hammond
Joliet
Lincolnwood
Lombard (2)
Matteson
Mount Prospect
Norridge
North Riverside
Orland Park
Schaumburg
St. Charles
Vernon Hills
Waukegan
Wilmette (2)
INDIANA
Michigan City
Merrillville
MINNESOTA
Rochester
BOSTON STORES
WISCONSIN
Brookfield (2)
<PAGE> 84
Green Bay
Janesville
Madison (2)
Milwaukee (5)
Racine
BERGNER'S STORES
ILLINOIS
Bloomington
Champaign
Forsyth
Galesburg
Machesney Park
Pekin
Peoria
Peru
Quincy
Rockford (2)
Springfield
Sterling
Urbana
OFF 5TH STORES
ARIZONA
Tempe
Tucson
CALIFORNIA
Anaheim
Cabazon
Camarillo
Folsom
Milpitas
Ontario
Petaluma
San Diego
COLORADO
Castle Rock
CONNECTICUT
Clinton
FLORIDA
Ellenton
Orlando
Sunrise
<PAGE> 85
GEORGIA
Dawsonville
HAWAII
Waipahu
ILLINOIS
Gurnee Mills
Schaumburg
MASSACHUSETTS
Worcester
Wrentham
MICHIGAN
Auburn
Dearborn
MINNESOTA
Minneapolis
NEVADA
Las Vegas
NEW JERSEY
Paramus
NEW YORK
Niagara Falls
Riverhead
Westbury
Central Valley
NORTH CAROLINA
Morrisville
OHIO
Aurora
PENNSYLVANIA
Philadelphia (2)
Grove City
SOUTH CAROLINA
Myrtle Beach
TENNESSEE
Nashville
<PAGE> 86
TEXAS
Grapevine
Stafford
San Marcos
VIRGINIA
Leesburg
Woodbridge
Sales Release Dates for 1999
Sales Period Release Date
February 1999 3/4/99
March 1999 4/8/99
April 1999 5/6/99
May 1999 6/3/99
June 1999 7/8/99
July 1999 8/5/99
August 1999 9/2/99
September 1999 10/7/99
October 1999 11/4/99
November 1999 12/2/99
December 1999 1/6/00
January 2000 2/4/00
Earnings Release Dates for 1999
Quarter Release Date
First 5/18/99
Second 8/17/99
Third 11/16/99
Fourth To be announced
Annual Meeting
The Annual Meeting of Shareholders of Saks Incorporated will be held at 8:30
a.m., June 16, 1999, at Proffitt's Foothills Mall Store (store for women), 173
Foothills Mall, Maryville, Tennessee 37801. Shareholders are cordially invited
to attend.
Inquiries Regarding Your Stock Holdings
Registered shareholders (shares held by you in your name) should address
communications regarding address changes, lost certificates and other
administrative matters to the Company's Transfer Agent and Registrar:
Union Planters National Bank
P.O. Box 387
Memphis, Tennessee 38147
(901) 580-5513 (telephone)
(901) 580-5411 (facsimile)
In all correspondence or telephone inquiries, please mention Saks
<PAGE> 87
Incorporated, your name as printed on your stock certificate, your Social
Security number, your address and your phone number.
Beneficial shareholders (shares held by your broker in the name of the brokerage
house) should direct communications on all administrative matters to your
stockbroker.
Financial and Other Information
Copies of financial documents and other company information such as Saks
Incorporated's Form 10-K and 10-Q reports as filed with the SEC are available
free of charge by contacting:
Investor Relations
Saks Incorporated
P.O. Box 9388
Alcoa, Tennessee 37701
(423) 981-6342
Security analysts, portfolio managers, representatives of financial institutions
and other individuals with questions regarding Saks Incorporated are invited to
contact:
Julia Bentley
Senior Vice President of Investor
Relations and Communications
P.O. Box 9388
Alcoa, Tennessee 37701
(423) 981-6243 (telephone)
(423) 981-6325 (facsimile)
[email protected] (e-mail)
Financial results, corporate news and other Company information are available on
Saks Incorporated's web site: http://www.saksincorporated.com
Corporate Headquarters
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
Saks Fifth Avenue Headquarters
12 East 49th Street
New York, New York 10017
(212) 940-4048
Parisian Headquarters
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
<PAGE> 88
Proffitt's Headquarters
115 North Calderwood
Alcoa, Tennessee 37701
(423) 983-7000
McRae's Headquarters
3455 Highway 80 West
Jackson, Mississippi 39209
(601) 968-4400
Younkers Headquarters
701 Walnut Street
Des Moines, Iowa 50397
(515) 244-1112
Herberger's Headquarters
600 Mall Germain
St. Cloud, Minnesota 56301
(320) 251-5351
Carson Pirie Scott, Boston Store
and Bergner's Headquarters
331 West Wisconsin Avenue
Milwaukee, Wisconsin 53203
(414) 347-4141
Independent Accountants
PriceWaterhouseCoopers LLP
Birmingham, Alabama
1999 Saks Incorporated
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
SAKS INCORPORATED AND SUBSIDIARIES
Name of Subsidiary State of Organization
------------------ ---------------------
Carson Pirie Holdings, Inc. Delaware
Carson Pirie Scott Insurance Services, Inc. Delaware
CPS Acquisition Corp. Delaware
Herberger's Department Stores, LLC Minnesota
McRae's, Inc. Mississippi
McRae's of Alabama, Inc. Alabama
McRae's Stores Partnership, G.P. Mississippi
McRae's Stores Services, Inc. Illinois
National Bank of the Great Lakes United States
P.A. Bergner & Co. Illinois
Parisian, Inc. Alabama
Proffitt's Credit Corporation Nevada
Saks & Company New York
Saks Distribution Centers, Inc. Illinois
Saks Fifth Avenue - Louisiana, Inc. Delaware
Saks Fifth Avenue - Stamford, Inc. Connecticut
Saks Fifth Avenue, Atlanta, Inc. Georgia
Saks Fifth Avenue Distribution Company Delaware
Saks Fifth Avenue, Inc. Massachusetts
Saks Fifth Avenue of Missouri, Inc. Missouri
Saks Fifth Avenue of Ohio, Inc. Delaware
Saks Fifth Avenue of Texas, Inc. Delaware
Saks Holdings, Inc. Delaware
Saks Shipping Company, Inc. Illinois
Saks Specialty Stores, Inc. Delaware
Saks Stores Partnership L.P. Tennessee
Saks Wholesalers, Inc. Alabama
S.F.A. Data Processing, Inc. Delaware
SFA Folio Collections, Inc. New York
SFA Real Estate Company Delaware
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Saks Incorporated (formerly Proffitt's, Inc.) listed below of our report dated
March 16, 1999, on our audits of the consolidated financial statements of Saks
Incorporated and Subsidiaries as of January 30, 1999 and January 31, 1998 and
for each of the three years in the period ended January 30, 1999 which report is
incorporated by reference in this Annual Report on Form 10-K for the years ended
January 30, 1999.
Registration Statements on Form S-3
Registration Numbers
333-66755
333-71933
Registration Statements on Form S-4
Registration Numbers
333-09043
333-41563
333-60123
Registration Statements on Form S-8
Registration Numbers
33-46306
33-88390
333-00695
333-25213
333-47535
333-66759
Birmingham, Alabama
April ____, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS PRESENTED IN SAKS INCORPORATED 1998 ANNUAL
REPORT AS OF JANUARY 30, 1999 AND JANUARY 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-31-1998
<PERIOD-END> JAN-30-1999 JAN-31-1998
<CASH> 32,752,000 50,864,000
<SECURITIES> 0 0
<RECEIVABLES> 159,596,000 412,209,000
<ALLOWANCES> 0 0
<INVENTORY> 1,406,182,000 1,244,682,000
<CURRENT-ASSETS> 1,792,914,000 1,897,245,000
<PP&E> 2,118,555,000 1,725,979,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 5,188,981,00 4,270,253,000
<CURRENT-LIABILITIES> 905,039,000 800,886,000
<BONDS> 2,125,918,000 1,393,828,000
0 0
0 0
<COMMON> 14,401,000 14,148,000
<OTHER-SE> 1,993,174,000 1,930,381,000
<TOTAL-LIABILITY-AND-EQUITY> 5,188,981,000 4,270,253,000
<SALES> 6,219,893,000 5,726,346,000
<TOTAL-REVENUES> 6,219,893,000 5,726,346,000
<CGS> 4,093,467,000 3,731,293,000
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,949,289,000 1,659,557,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 110,971,000 113,685,000
<INCOME-PRETAX> 66,166,000 221,811,000
<INCOME-TAX> 41,181,000 (194,426,000)
<INCOME-CONTINUING> 24,985,000 416,237,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 25,881,000 11,323,000
<CHANGES> 0 0
<NET-INCOME> (896,000) 404,914,000
<EPS-PRIMARY> (0.01) 2.94
<EPS-DILUTED> (0.01) 2.79
</TABLE>
