<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 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
For Quarter Ended: October 30, 1999
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
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.10 Par Value - 143,816,034 shares as of October 30, 1999
<PAGE> 2
SAKS INCORPORATED
Index
PART I. FINANCIAL INFORMATION Page No.
---------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - October 30, 1999, January
30, 1999, and October 31, 1998 3
Condensed Consolidated Statements of Income - Three Months and Nine
Months Ended October 30, 1999 and October 31, 1998 4
Condensed Consolidated Statements of Cash Flows - Nine Months Ended
October 30, 1999 and October 31, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
<PAGE> 3
SAKS INCORPORATED and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
October 30, October 31,
1999 January 30, 1998
(Unaudited) 1999 (Unaudited)
---------- ---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $20,949 $32,752 $3,937
Retained interest in accounts
receivable 172,334 159,596 182,898
Merchandise inventories 1,872,257 1,406,182 1,768,242
Other current assets 87,358 110,426 77,301
Deferred income taxes 65,807 83,958 18,648
---------- ---------- ----------
Total current assets 2,218,705 1,792,914 2,051,026
Property and Equipment, net 2,300,596 2,118,555 2,061,741
Goodwill and Intangibles, net 577,420 586,297 518,275
Cash Placed in Escrow for Debt
Redemption - 363,753 -
Deferred Income Taxes 259,498 249,816 339,000
Other Assets 64,251 77,646 73,376
---------- ---------- ----------
TOTAL ASSETS $5,420,470 $5,188,981 $5,043,418
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $596,674 $360,388 $546,752
Accrued expenses and other
current liabilities 495,620 529,128 484,437
Current portion of long-term debt 8,663 15,523 12,632
---------- ---------- ----------
Total current liabilities 1,100,957 905,039 1,043,821
Senior Debt 2,090,011 2,110,395 1,692,538
Other Long-Term Liabilities 157,744 165,972 148,421
Subordinated Debt - - 276,000
---------- ---------- ----------
Total liabilities 3,348,712 3,181,406 3,160,780
Common Equity Put Options 8,875 - -
Shareholders' Equity 2,062,883 2,007,575 1,882,638
---------- ---------- ----------
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY $5,420,470 $5,188,981 $5,043,418
=========== =========== ===========
See notes to condensed consolidated financial statements.
<PAGE> 4
SAKS INCORPORATED and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
------------------- -------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $1,599,171 $1,472,817 $4,570,227 $4,169,163
Cost of sales 1,012,361 978,613 2,919,363 2,720,767
---------- ---------- ---------- ----------
Gross margin 586,810 494,204 1,650,864 1,448,396
Selling, general and
administrative expenses 354,584 356,103 990,270 963,614
Other operating expenses 138,972 124,134 387,235 353,090
Store pre-opening costs 7,268 3,130 10,705 6,128
Merger and integration costs 8,305 92,778 26,754 98,729
Year 2000 expenses 531 951 4,523 5,078
Losses from long-lived
assets and closures 1,903 17,096 1,903 18,950
---------- ---------- ---------- ----------
Operating income (loss) 75,247 (99,988) 229,474 2,807
Other income (expense):
Interest expense (33,847) (27,133) (103,135) (76,425)
Other income (expense),
net 78 (18,407) 2,898 (17,653)
---------- ---------- ---------- ----------
Income (loss) before pro-
vision (benefit) for
income taxes and extra-
ordinary items 41,478 (145,528) 129,237 (91,271)
Provision (benefit) for
income taxes 15,578 (39,374) 50,783 (16,223)
---------- ---------- ---------- ----------
Income (loss) before extra-
ordinary items 25,900 (106,154) 78,454 (75,048)
Extraordinary loss on
extinguishment of debt,
net of taxes - (21,556) (9,261) (21,890)
---------- ---------- ---------- ----------
Net income (loss) $25,900 $(127,710) $69,193 $(96,938)
========== ========== ========== ==========
Basic earnings per common share:
Income (loss) before
extraordinary items $0.18 $(0.74) $0.54 $(0.53)
Extraordinary items - (0.15) (0.06) (0.15)
---------- ---------- ---------- ----------
Net income (loss) $0.18 $(0.89) $0.48 $(0.68)
========== ========== ========== ==========
Diluted earnings per common share:
Income (loss) before
extraordinary items $0.18 $(0.74) $0.53 $(0.53)
Extraordinary items - (0.15) (0.06) (0.15)
---------- ---------- ---------- ----------
Net income (loss) $0.18 $(0.89) $0.47 $(0.68)
========== ========== ========== ==========
Weighted average common shares:
Basic 144,139 143,289 144,446 142,631
Diluted 145,154 143,289 146,686 142,631
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE>
SAKS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended
---------------------------
October 30, October 31,
1999 1998
---------- ----------
<S> <C> <C>
Operating Activities:
Net income (loss) $69,193 $(96,938)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 132,932 111,434
Losses from long-lived assets and closures 1,903 43,951
Extraordinary loss on extinguishment of debt 7,310 8,781
Deferred income taxes 8,469 (27,986)
Change in operating assets and liabilities,
net (253,051) 88,256
--------- ---------
Net Cash Provided By (Used In) Operating
Activities (33,244) 127,498
Investing Activities:
Purchases of property and equipment, net (320,427) (300,488)
Proceeds from the sale of assets 22,514 2,500
Acquisition of Dillard's and Brody's stores (4,500) (484,076)
--------- ---------
Net Cash Used In Investing Activities (302,413) (782,064)
Financing Activities:
Proceeds from long-term borrowings 550,000 1,081,800
Payments on long-term debt and capital lease
obligations (14,701) (235,538)
Net repayments under credit and receivables
facilities (326,700) (261,750)
Repurchase and retirement of common stock (18,745) (474)
Proceeds from issuance of common stock and
put options 6,088 23,601
Release of cash held in escrow for debt
redemption 363,753 -
Payment of REMIC certificates (235,841) -
--------- ---------
Net Cash Provided By Financing Activities 323,854 607,639
Decrease In Cash and Cash Equivalents (11,803) (46,927)
Cash and cash equivalents at beginning of
period 32,752 50,864
--------- ---------
Cash and cash equivalents at end of period $20,949 $3,937
========= =========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of the Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and nine month periods ended October 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending January
29, 2000. The financial statements include the accounts of Saks Incorporated
(the "Company;" formerly Proffitt's, Inc.) and its subsidiaries. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended January 30, 1999.
The accompanying balance sheet at January 30, 1999 has been derived from the
audited financial statements at that date.
In conjunction with the Company's acquisition of Saks Holdings, Inc. ("SHI"),
management adjusted the Company's financial statements in 1998, as required
by pooling of interest accounting, to include the historical results of SHI.
In preparing those financial statements in 1998, management changed SHI's
classification of several items to conform to the Company's classifications.
During this process, management inadvertently classified employee
compensation and similar expenses related to store management and store
merchandise stock employees as Cost of Sales. These costs should have been
classified as Selling, General and Administrative ("SGA") costs.
Accordingly, the accompanying condensed consolidated statements of income
have been revised to reflect the reclassification of $10,156 and $29,422 from
Cost of Sales to SGA for the three month and nine month periods ended October
31, 1998, respectively. These reclassifications have no effect on previously
reported net income and shareholders' equity.
<PAGE> 7
NOTE 2 -- BUSINESS COMBINATIONS
Effective September 17, 1998, Proffitt's, Inc. combined its business with
SHI, the holding company of Saks & Company which did business as Saks Fifth
Avenue, Off 5th, Folio and Bullock & Jones. The merger has been accounted
for as a pooling-of-interests. In conjunction with the merger, Proffitt's,
Inc. changed its corporate name to Saks Incorporated.
For the three month and nine month periods ended October 30, 1999 and October
31, 1998, the Company incurred certain merger and integration costs ("M&I")
related to several prior business combinations, including SHI. The costs
were (before income taxes) $8.3 million and $92.8 million, respectively, for
the three months ended October 30, 1999 and October 31, 1998 and $26.8
million and $98.7 million, respectively, for the nine months ended October
30, 1999 and October 31, 1998. The costs for 1999 primarily consisted of the
consolidation and conversion of redundant systems and administrative
operations. The costs for 1998 were primarily comprised of the initial
abandonment of assets and professional fees associated with the SHI
acquisition.
A reconciliation of the aforementioned costs to the amounts of merger and
integration costs remaining unpaid at October 30, 1999 is as follows (in
thousands):
Amounts unpaid at January 30, 1999
related to prior M&I events $ 31,951
M&I costs for the period 26,754
Amounts paid during the period (48,553)
Amounts representing non-cash changes -
----------
Amounts unpaid at October 30, 1999 $ 10,152
==========
The components of the aforementioned amounts unpaid are as follows (in
thousands):
October 30, January 30,
1999 1999
-------- --------
Direct merger costs $ 6,058 $17,530
Severance 2,577 6,638
Contractual obligations to be paid within one
year of merger - 5,900
Contractual obligations with extended
payment terms (such as rents on abandoned
leases and payments on abandoned contracts) 273 348
Other (includes all merger and integration efforts) 1,244 1,535
------- -------
Total $10,152 $31,951
======== ========
<PAGE> 8
NOTE 3 -- EARNINGS PER COMMON SHARE
Calculations of earnings per common share ("EPS") for the three and nine
months ended October 30, 1999 and October 31, 1998 are as follows (income and
shares in thousands):
<TABLE>
For the Three Months Ended For the Three Months Ended
October 30, 1999 October 31, 1998
------------------------ ------------------------
Weighted Per Weighted Per
Average Share Income Average Share
Income(a) Shares Amount (loss)(a) Shares Amount
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $25,900 144,139 $0.18 $(106,154) 143,289 $(0.74)
Effect of dilutive stock options
(based on the treasury stock
method using the average price) 1,015 -
------- ------- ------- ------- ------- -------
Diluted EPS $25,900 145,154 $0.18 $(106,154) 143,289 $(0.74)
======== ======== ======= ========= ======== ========
For the Nine Months Ended For the Nine Months Ended
October 30, 1999 October 31, 1998
------------------------ ------------------------
Weighted Per Weighted Per
Average Share Income Average Share
Income(a) Shares Amount (loss)(a) Shares Amount
------- ------- ------- ------- ------- -------
Basic EPS $78,454 144,446 $0.54 $(75,048) 142,631 $(0.53)
Effect of dilutive stock options
(based on the treasury stock
method using the average price) 2,240 -
------- ------- ------- ------- ------- -------
Diluted EPS $78,454 146,686 $0.53 $(75,048) 142,631 $(0.53)
======== ======== ======= ========= ======== ========
(a) Income (loss) before extraordinary items.
</TABLE>
<PAGE> 9
NOTE 4 -- CONTINGENCIES
The Company is involved in several legal proceedings arising in the normal
course of business activities, and accruals for losses have been established
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.
NOTE 5 -- SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 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 stores. The catalog and furniture stores
segments represent less than three percent of the Company's total revenues,
assets and operating profit. Consistent with its practice in 1998, the three
identified segments are combined within the Company's condensed consolidated
financial statements.
NOTE 6 -- NEW ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133," which amended the effective date provisions of SFAS No.
133. The new statement defers application to all fiscal quarters of all
fiscal years beginning after June 15, 2000. Thus, SFAS No. 133 will be
effective for the Company in the first quarter of fiscal year 2001, 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 the year ended January
30, 1999 included the net loss of $0.9 million and a minimum pension
liability adjustment of $7.5 million, net of taxes. The Company had no
changes to the components of comprehensive income for the three month or nine
month periods ended October 30, 1999 and October 31, 1998 other than net
income.
<PAGE> 10
NOTE 7 - SHARE REPURCHASES
In July 1999, the Board of Directors of the Company authorized a share
repurchase program for up to five million shares, or approximately 3.5% of
the outstanding common stock. As of October 30, 1999, 1,100,000 shares had
been repurchased under the program for an aggregate amount of $18.7 million.
Also outstanding at the end of the third quarter were common equity put
options written by the Company on 500,000 shares at an exercise price of
$17.75 per share that were exercised in late November and early December of
1999.
NOTE 8 -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following tables present condensed consolidating financial information
for: 1) Saks Incorporated; 2) on a combined basis, the guarantors of Saks
Incorporated's Senior Notes (which are the subsidiaries of Saks Incorporated
with material assets, except for Saks Credit Corporation ("SCC"), Saks
Transitional Credit Corporation ("STCC"), National Bank of the Great Lakes
("NBGL"), and SHI real estate financing subsidiaries and related trusts
("REMICs"); and 3) on a combined basis, SCC, STCC, NBGL, and REMICs, the only
active subsidiaries that do not guarantee the Senior Notes.
On June 30, 1999, in connection with the Company's restructured accounts
receivable securitization program (see Management's Discussion and Analysis,
"Liquidity and Capital Resources"), the Company formed SCC and STCC as
special purpose entities. These entities replaced Proffitt's Credit
Corporation and SFA Finance Company as the Company's special purpose
entities.
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.
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 the majority of the Company's
long-term debt. The consolidating financial statements presented for the
three and nine months ended October 30, 1999 reflect this new legal entity
composition. The consolidating financial statements presented for the three
and nine months ended October 31, 1998 reflect the legal entity composition
in place at the time. Certain prior year reclassifications to the condensed
consolidating financial statements have been made to conform to current year
presentation. Borrowings and the related interest expense under Saks
Incorporated's revolving credit facility are allocated to Saks Incorporated
and the guarantor subsidiaries under arrangements among Saks Incorporated and
the subsidiaries.
<PAGE> 11
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING BALANCE SHEETS AT OCTOBER 30, 1999 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents ($6,518) 27,467 $20,949
Retained interest in accounts
receivable 172,334 172,334
Merchandise inventories 1,872,257 1,872,257
Deferred income taxes 65,812 (5) 65,807
Intercompany borrowings $4,786 ($4,786)
Other current assets 84,298 3,060 87,358
-------- -------- -------- -------- --------
Total Current Assets 4,786 2,015,849 202,856 (4,786) 2,218,705
Property and Equipment, net 1,759,978 540,618 2,300,596
Goodwill and Intangibles, net 577,420 577,420
Other Assets 58,369 5,882 64,251
Deferred Income Taxes 259,498 259,498
Investment in and Advances to
Subsidiaries 4,057,895 1,625,928 (5,683,823)
-------- -------- -------- -------- --------
Total Assets $4,062,681 $6,297,042 $749,356 ($5,688,609) $5,420,470
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $596,674 $596,674
Accrued expenses and other
current liabilities $44,009 447,393 $4,218 495,620
Intercompany borrowings 4,786 ($4,786)
Current portion of long-
term debt 8,663 8,663
-------- -------- -------- -------- --------
Total Current Liabilities 44,009 1,052,730 9,004 (4,786) 1,100,957
Senior Debt 1,931,300 158,711 2,090,011
Deferred Income Taxes (8,237) 8,237
Other Long-Term Liabilities 15,614 142,130 157,744
Investment By and Advances
From Parent 4,951,708 732,115 (5,683,823)
Common Equity Put Options 8,875 8,875
Shareholders' Equity 2,062,883 2,062,883
-------- -------- -------- -------- --------
Total Liabilities and
Shareholders' Equity $4,062,681 $6,297,042 $749,356 ($5,688,609) $5,420,470
========== ========== ========== ========== ==========
</TABLE>
<PAGE> 12
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS FOR INCOME
FOR THE THREE MONTHS ENDED OCTOBER 30, 1999 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $1,599,171 $1,599,171
Costs and expenses
Cost of sales 1,012,361 1,012,361
Selling, general and admin-
istrative expenses $2,696 371,305 $25,529 ($44,946) 354,584
Other operating expenses 313 148,941 (10,282) 138,972
Store pre-opening costs 7,268 7,268
Merger and integration costs 8,305 8,305
Year 2000 expenses 531 531
Losses from long-lived assets
and closures 1,903 1,903
-------- -------- -------- -------- --------
Operating income (loss) (3,009) 48,557 (15,247) 44,946 75,247
Other income (expense)
Finance charge income, net 44,946 (44,946)
Intercompany exchange fees (9,356) 9,356
Intercompany servicer fees 11,701 (11,701)
Equity in earnings of sub-
sidiaries 51,685 3,372 (55,057)
Interest expense, net (33,366) (1,219) 738 (33,847)
Other income (expense), net 78 78
-------- -------- -------- -------- --------
Income before provision (benefit)
for income taxes 15,310 53,133 28,092 (55,057) 41,478
Provision (benefit) for income
taxes (10,590) 15,993 10,175 15,578
-------- -------- -------- -------- --------
Net income $25,900 $37,140 $17,917 ($55,057) $25,900
======== ======== ======== ======== ========
</TABLE>
<PAGE> 13
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 30, 1999 (Unaudited)
(Dollars Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $4,570,227 $4,570,227
Costs and expenses
Cost of sales 2,919,363 2,919,363
Selling, general and admin-
istrative expenses $7,591 1,041,566 $73,612 ($132,499) 990,270
Other operating expenses 1,180 416,901 (30,846) 387,235
Store pre-opening costs 10,705 10,705
Merger and integration costs 26,754 26,754
Year 2000 expenses 4,523 4,523
Losses from long-lived assets
and closures 1,903 1,903
-------- -------- -------- -------- --------
Operating income (loss) (8,771) 148,512 (42,766) 132,499 229,474
Other income (expense)
Finance charge income, net 132,499 (132,499)
Intercompany exchange fees (25,152) 25,152
Intercompany servicer fees 30,331 (30,331)
Equity in earnings of sub-
sidiaries 136,540 11,783 (148,323)
Interest expense, net (96,063) (7,072) (103,135)
Other income (expense), net 2,898 2,898
-------- -------- -------- -------- --------
Income before provision (benefit)
for income taxes and
extraordinary items 31,706 161,300 84,554 (148,323) 129,237
Provision (benefit) for income
taxes (37,487) 57,096 31,174 50,783
-------- -------- -------- -------- --------
Income before extraordinary
items 69,193 104,204 53,380 (148,323) 78,454
Extraordinary items, net of
taxes (9,261) (9,261)
-------- -------- -------- -------- --------
Net income $69,193 $104,204 $44,119 ($148,323) $69,193
======== ======== ======== ======== ========
</TABLE>
<PAGE> 14
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 30, 1999 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $69,193 $104,204 $44,119 ($148,323) $69,193
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Equity in earnings (losses)
of subsidiaries (136,540) (11,783) 148,323
Extraordinary loss on
extinguishment of debt 7,310 7,310
Depreciation and amortization 122,477 10,455 132,932
Deferred income taxes 8,469 8,469
Losses from long-lived assets
and closures 1,903 1,903
Changes in operating assets
and liabilities, net (216,578) (36,473) (253,051)
-------- -------- -------- -------- --------
Net Cash Provided By (Used In)
Operating Activities (67,347) 8,692 25,411 (33,244)
INVESTING ACTIVITIES
Purchases of property and
equipment, net (274,788) (45,639) (320,427)
Proceeds from the sale of
assets 22,514 22,514
Acquisition of Dillard's
stores (4,500) (4,500)
-------- -------- -------- -------- --------
Net Cash Used In Investing
Activities (256,774) (45,639) (302,413)
FINANCING ACTIVITIES
Inter-company borrowings,
contributions and distr-
ibutions (163,662) (80,737) 244,399
Proceeds from long-term
borrowings 550,000 550,000
Payments on long-term debt
and capital lease obli-
gations (14,701) (14,701)
Net repayments under credit
and receivables facilities (326,700) (326,700)
Repurchase and retirement of
common stock (18,745) (18,745)
Proceeds from issuance of
stock and put options 6,088 6,088
Release of cash held in
escrow for debt redemption 363,753 363,753
Payment of REMIC certificates (235,841) (235,841)
-------- -------- -------- -------- --------
Net Cash Provided By
Financing Activities 46,981 268,315 8,558 323,854
Increase (Decrease) In Cash
and Cash Equivalents (20,366) 20,233 (11,670) (11,803)
Cash and cash equivalents
at beginning of period 20,366 (26,751) 39,137 32,752
-------- -------- -------- -------- --------
Cash and cash equivalents
at end of period $0 ($6,518) $27,467 $20,949
======== ======== ======== ======== ========
</TABLE>
<PAGE> 15
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING BALANCE SHEETS AT OCTOBER 31, 1998 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
<S> <C> <C> <C> <C> <C>
ASSETS --------- --------- --------- --------- ---------
Current Assets
Cash and cash equivalents $10,022 ($49,792) $43,707 $3,937
Retained interest in accounts
receivable 53 227 182,618 182,898
Merchandise inventories 308,183 1,460,059 1,768,242
Deferred income taxes 12,956 2,281 3,411 18,648
Intercompany borrowings 25,188 ($25,188)
Other current assets 16,091 57,762 3,448 77,301
-------- -------- -------- -------- --------
Total Current Assets 372,493 1,470,537 233,184 (25,188) 2,051,026
Property and Equipment, net 283,902 1,192,435 585,404 2,061,741
Goodwill and Intangibles, net 98,386 419,889 518,275
Other Assets 4,421 45,344 23,611 73,376
Deferred Income Taxes (22,346) 361,346 339,000
Investment in and Advances
to Subsidiaries 2,593,867 1,433,860 (4,027,727)
-------- -------- -------- -------- --------
Total Assets $3,330,723 $4,923,411 $842,199 ($4,052,915) $5,043,418
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $85,226 $461,526 $546,752
Accrued expenses and other
current liabilities 41,773 413,904 $28,760 484,437
Intercompany borrowings 25,188 ($25,188)
Current portion of long-
term debt 452 12,180 12,632
-------- -------- -------- -------- --------
Total Current Liabilities 127,451 887,610 53,948 (25,188) 1,043,821
Senior Debt 1,293,006 163,691 235,841 1,692,538
Other Long-Term Liabilities 27,628 119,018 1,775 148,421
Subordinated Debt 276,000 276,000
Investment by and Advances
from Parent 3,477,092 550,635 (4,027,727)
Shareholders' Equity 1,882,638 1,882,638
-------- -------- -------- -------- --------
Total Liabilities and
Shareholders' Equity $3,330,723 $4,923,411 $842,199 ($4,052,915) $5,043,418
======== ======== ======== ======== ========
</TABLE>
<PAGE> 16
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 (Unaudited)
(Dollars Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $194,349 $1,278,468 $1,472,817
Costs and expenses
Cost of sales 120,116 858,497 978,613
Selling, general and admin-
istrative expenses 36,802 347,543 $21,390 ($49,632) 356,103
Other operating expenses 16,661 115,759 (8,286) 124,134
Store pre-opening costs 618 2,512 3,130
Merger and integration costs 31,427 61,351 92,778
Losses from long-lived assets 1 17,095 17,096
Year 2000 expenses 951 951
-------- -------- -------- -------- --------
Operating income (loss) (11,276) (125,240) (13,104) 49,632 (99,988)
Other income (expense)
Finance charge income, net 49,632 (49,632)
Intercompany exchange fees (1,654) (2,485) 4,139
Intercompany servicer fees 7,879 (7,879)
Equity in earnings (losses) of
subsidiaries (89,566) (551) 90,117
Interest expense, net (3,400) (18,041) (5,692) (27,133)
Other income (expense), net (9,742) (8,665) (18,407)
-------- -------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes and
extraordinary items (115,638) (147,103) 27,096 90,117 (145,528)
Provision (benefit) for income
taxes 88 (48,772) 9,310 (39,374)
-------- -------- -------- -------- --------
Income (loss) before extra-
ordinary items (115,726) (98,331) 17,786 90,117 (106,154)
Extraordinary items, net
of taxes (11,984) (2,670) (6,902) (21,556)
-------- -------- -------- -------- --------
Net income (loss) ($127,710) ($101,001) $10,884 $90,117 ($127,710)
======== ======== ======== ======== ========
</TABLE>
<PAGE> 17
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $532,181 $3,636,982 $4,169,163
Costs and expenses
Cost of sales 338,945 2,381,822 2,720,767
Selling, general and admin-
istrative expenses 107,373 915,911 $65,439 ($125,109) 963,614
Other operating expenses 44,469 334,922 (26,301) 353,090
Store pre-opening costs 1,242 4,886 6,128
Merger and integration costs 35,374 63,355 98,729
Losses from long-lived assets 357 18,593 18,950
Year 2000 expenses 884 4,194 5,078
-------- -------- -------- -------- --------
Operating income (loss) 3,537 (86,701) (39,138) 125,109 2,807
Other income (expense)
Finance charge income, net 125,109 (125,109)
Intercompany exchange fees (4,385) (15,064) 19,449
Intercompany servicer fees 20,819 (20,819)
Equity in earnings (losses)
of subsidiaries (65,120) 12,562 52,558
Interest expense, net (6,367) (47,943) (22,115) (76,425)
Other income (expense), net (9,738) (7,915) (17,653)
-------- -------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes
and extraordinary items (82,073) (124,242) 62,486 52,558 (91,271)
Provision (benefit) for income
taxes 2,881 (41,213) 22,109 (16,223)
-------- -------- -------- -------- --------
Income (loss) before extra-
ordinary items (84,954) (83,029) 40,377 52,558 (75,048)
Extraordinary items, net
of taxes (11,984) (3,004) (6,902) (21,890)
-------- -------- -------- -------- --------
Net income (loss) ($96,938) ($86,033) $33,475 $52,558 ($96,938)
======== ======== ======== ======== ========
</TABLE>
<PAGE> 18
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 (Unaudited)
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
OPERATING ACTIVITIES --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net income (loss) ($96,938) ($86,033) $33,475 $52,558 ($96,938)
Adjustments to reconcile net
income (loss) to net cash provided
by (used in) operating activities:
Equity in earnings (losses) of
subsidiaries 65,120 (12,562) (52,558)
Depreciation and amortization 11,018 85,416 15,000 111,434
Deferred income taxes 7,504 (36,381) 891 (27,986)
Extraordinary loss on exting-
uishment of debt 8,781 8,781
Losses from long-lived assets 355 43,596 43,951
Changes in operating assets
and liabilities, net (30,696) (116,687) 235,639 88,256
-------- -------- -------- -------- --------
Net Cash Provided By (Used
In) Operating Activities (43,637) (113,870) 285,005 127,498
INVESTING ACTIVITIES
Purchases of property and
equipment, net (32,643) (247,507) (20,338) (300,488)
Proceeds from sale of assets 2,500 2,500
Acquisition of Dillard's
and Brody's stores (230,221) (253,855) (484,076)
-------- -------- -------- -------- --------
Net Cash Used In Investing
Activities (260,364) (501,362) (20,338) (782,064)
FINANCING ACTIVITIES
Inter-company borrowings,
contributions and
distributions (796,993) 911,906 (114,913)
Proceeds from long-term
borrowings 1,081,800 1,081,800
Payments on long-term debt
and capital lease
obligations (7,535) (206,903) (21,100) (235,538)
Net repayments under credit
and receivables facilities (136,750) (125,000) (261,750)
Proceeds from issuance of
common stock 21,820 1,781 23,601
Repurchase and retirement
of common stock (474) (474)
-------- -------- -------- -------- --------
Net Cash Provided By (Used
In) Financing Activities 298,618 570,034 (261,013) 607,639
Increase (Decrease) In Cash
and Cash Equivalents (5,383) (45,198) 3,654 (46,927)
Cash and cash equivalents
at beginning of period 15,405 (4,594) 40,053 50,864
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $10,022 ($49,792) $43,707 $3,937
======== ======== ======== ======== ========
</TABLE>
<PAGE> 19
<TABLE>
SAKS INCORPORATED
CONDENSED CONSOLIDATING BALANCE SHEETS AT JANUARY 30, 1999
(Dollar Amounts In Thousands)
Non-
Saks Guarantor Guarantor
Incorp- Subsid- Subsid- Elimin- Consol-
orated iaries iaries ations idated
ASSETS --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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 20>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Accounts receivable, inventory, accounts payable and debt balances fluctuated
throughout the year due to the seasonal nature of the retail industry.
Retained interest in accounts receivable at October 30, 1999 is lower
compared to October 31, 1998 primarily due to a higher percentage of
receivables being sold under the Company's securitization facility.
Merchandise inventory and property and equipment balances at October 30, 1999
increased over October 31, 1998 balances primarily due to new store locations
opened and expansions of existing stores during the last twelve months, as
well as the acquisition of stores from Dillard's completed in the fourth
quarter 1998.
Goodwill and intangibles at October 30, 1999 increased over October 31, 1998
balances primarily due to the goodwill and intangibles associated with the
acquisition of Dillard's stores completed in the fourth quarter 1998.
<PAGE> 21
Senior debt at October 30, 1999 increased over senior debt at October 31,
1998 primarily due to borrowings related to the replacement of subordinated
debt with senior debt, the acquisition of the Dillard's stores completed in
the fourth quarter 1998 and other new stores opened in last twelve months and
the related working capital requirements for these stores.
In conjunction with the SHI merger and the acquisition of the Dillard's
stores, the Company initiated a series of refinancing activities between
September 1998 and July 1999 that were designed to provide appropriate debt
maturities and increase overall liquidity.
Included within the Company's senior debt are real estate and mortgage notes.
The October 30, 1999 real estate and mortgage notes balance declined from the
October 31, 1998 balance by $240 million primarily due to the repurchase of
$236 million of outstanding REMIC mortgage certificates in February 1999.
Also included within the Company's senior debt are senior notes payable. The
October 30, 1999 notes payable balance increased by $1.65 billion from the
October 31, 1998 balance due to the November and December 1998 issuance of
$1.1 billion in senior notes and the February and July 1999 issuances of $200
million and $350 million in senior notes, respectively, all with maturities
ranging from 2004 to 2019 and interest rates between 7% and 8-1/4%, offset by
the September 1998 purchase of the Company's $125 million 8.125% senior
notes. The Company entered into an interest rate swap agreement for a
notional amount in full in connection with the July 1999 $350 million senior
note issuance, which swaps a fixed rate with a variable interest rate.
At October 30, 1999 the Company had total debt outstanding of approximately
$2.10 billion with an additional $710 million available to borrow under its
existing credit facilities. Of the available amount, $460 million expires in
2003 and $250 million expires in August of 2000. In August of 1999, the
Company replaced its $500 million 364 day revolving credit facility with the
new $250 million 364 day facility that matures in August 2000. No debt was
outstanding on this $250 million facility at October 30, 1999.
At October 30, 1999, subordinated debt decreased from the balance at October
31, 1998 due to the fourth quarter 1998 purchase of $274 million of SHI's
5-1/2% Convertible Subordinated Notes due September 2006. The Company's
acquisition of SHI triggered a change in control provision in the notes that
required the Company to purchase at par plus accrued interest any notes
tendered to it.
On June 30, 1999, as a result of the acquisition of SHI, the Company
terminated SHI's accounts receivable securitization facility and sold the SHI
receivables through the Company's accounts receivable securitization
facilities. The Company's credit card bank, National Bank of the Great
Lakes, sells an undivided interest in its accounts receivable to SCC which
sells the receivables to Saks Credit Card Master Trust ("SCCMT"). At October
30, 1999, the Company had $497 million in fixed rate term certificates
outstanding, $401 million in floating rate term certificates outstanding and
$178 million outstanding under its variable funding certificates.
<PAGE> 22
Results of Operations for the three month and nine month periods ended
October 30, 1999
The following table shows for the periods indicated certain items from the
Company's Condensed Consolidated Statements of Income expressed as
percentages of net sales (numbers may not foot due to rounding).
<TABLE>
Three Months Ended Nine Months Ended
------------------ -------------------
10/30/99 10/31/98 10/30/99 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.3 66.4 63.9 65.3
Selling, general & administrative expenses 22.2 24.2 21.7 23.1
Other operating expenses 8.6 8.4 8.5 8.5
Store pre-opening costs 0.5 0.2 0.2 0.1
Merger and integration costs 0.5 6.3 0.6 2.4
Losses from long-lived assets 0.1 1.2 0.0 0.5
Year 2000 expenses 0.0 0.1 0.1 0.1
----- ----- ----- -----
Operating income (loss) 4.7 (6.8) 5.0 0.1
Other income (expense):
Interest expense (2.1) (1.8) (2.3) (1.8)
Other income (expense), net 0.0 (1.2) 0.1 (0.4)
----- ----- ----- -----
Income (loss) before provision (benefit) for
income taxes and extraordinary items 2.6 (9.9) 2.8 (2.2)
Provision (benefit) for income taxes 1.0 (2.7) 1.1 (0.4)
----- ----- ----- -----
Income (loss) before extraordinary items 1.6 (7.2) 1.7 (1.8)
Extraordinary loss, net of taxes (0.0) (1.5) (0.2) (0.5)
----- ----- ----- -----
NET INCOME (LOSS) 1.6% (8.7)% 1.5% (2.3)%
====== ====== ====== ======
</TABLE>
<PAGE> 23
Net sales
For the three months ended October 30, 1999, total Company sales were $1.60
billion, a 9% increase over $1.47 billion in the prior year. For the nine
months ended October 30, 1999, total Company sales were $4.57 billion, a 10%
increase over $4.17 billion in the prior year. The sales increase for the
quarter and nine months was primarily attributable to additional sales from
new stores opened, the Dillard's stores acquired in October and December
1998, and a comparable store sales increase of 4% for the quarter and 3% on
a year to date basis.
Gross margin
For the three months and nine months ended October 30, 1999, the Company's
gross margin percentage increased 310 and 140 basis points, respectively,
over the prior year. The improvement is primarily due to charges taken in
the prior year related to markdowns in connection with the SHI acquisition,
which negatively impacted margin. The improvement also reflects reduced
levels of clearance merchandise, continued efficiencies in distribution and
logistics, increased penetration of higher margin proprietary brand
merchandise and the conversion of the shoe departments at the Carson Pirie
Scott stores from leased to owned.
Selling, general and administrative expenses ("SGA")
SGA decreased as a percentage of net sales for the three months and nine
months ended October 30, 1999 by 200 and 140 basis points, respectively.
This rate improvement primarily resulted from higher than normal prior year
expenses associated with the SHI acquisition. Additionally, the Company has
achieved targeted cost reductions related to each of the Company's completed
business combinations and certain productivity efficiencies.
<PAGE> 24
Merger and integration costs ("M&I")
The Company incurred M&I costs totaling $8.3 million, or 0.5% of net sales,
for the three months ended October 30, 1999 and $26.8 million, or 0.6% of net
sales, for the nine months ended October 30, 1999 primarily related costs
incurred in the conversion and consolidation of systems and administrative
operations.
Year 2000 expenses ("Y2K")
The Company's Y2K compliance project began in 1997. From commencement of the
Y2K project through October 30, 1999, the Company's Y2K expenses have totaled
$21.5 million. Company management anticipates that additional Y2K expenses
will total approximately $1.9 million for the balance of 1999. The Company
believes its significant systems are Y2K compliant. Modification and testing
of the significant systems has been completed; however, the Company plans to
continue its system testing into the fourth quarter of 1999. For complete
disclosure of the Company's Y2K issues, refer to "Management's Discussion and
Analysis" contained in the Company's Annual Report to Shareholders on Form
10-K for the fiscal year ended January 30, 1999.
Losses from long-lived assets and closures
In June 1999, the Company announced the consolidation of its existing
southeastern distribution centers. Construction of a new southern
distribution center to be located in Steele, Alabama began in October 1999.
This facility is scheduled for completion in late 2000 and will be fully
operational in mid-year 2001 for an estimated cost of approximately $30
million and will employ approximately 220 people. The Company will
consolidate its existing distribution facilities for McRae's, Proffitt's, and
Parisian into the new facility. As part of this consolidation, approximately
350 salaried and hourly employees at the existing facilities will be
terminated. During the quarter ended October 30, 1999, the Company recorded
a liability for these estimated severance costs and termination costs of $1.6
million and reflected the charge as a loss on long-lived assets and closures.
As of October 30, 1999, there were no termination benefits paid and charged
against the liability. The existing facilities are considered "assets held
for use" as defined by SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The exited
facilities had a $12 million carrying value at October 30, 1999 and the Company
will record a gain or loss associated with these facilities, if any, in
accordance with SFAS 121. The remaining losses of $0.3 million related
to the write off of abandoned store assets offset by a gain on the sale of
a partnership interest in a mall.
Interest expense
For the three months ended October 30, 1999, interest expense increased in
dollars and as a percentage of net sales by $6.7 million and 30 basis points,
respectively. For the nine months ended October 30, 1999, interest expense
increased in dollars and as a percentage of net sales by $26.7 million and 50
basis points, respectively. The increase for both the three and nine month
periods was primarily due to additional indebtedness related to the fall 1998
cash purchase of 15 stores from Dillard's and capital expenditures, as well
as a slightly higher average borrowing rate.
<PAGE> 25
Other income (expense), net
The Company incurred other income totaling $0.08 million for the three months
ended October 30, 1999 and $2.9 million for the nine months ended October 30,
1999 versus other expenses of $18.4 million for the three months ended
October 31, 1998 and $17.7 million for the nine months ended October 31,
1998. The prior year expenses relate specifically to charges associated with
the termination of two hedging agreements as a result of the SHI merger.
Income before extraordinary items
Income before extraordinary items for the three months ended October 30, 1999
totaled $25.9 million, or $.18 per diluted share, compared to a loss before
extraordinary items of $106.1 million, or $.74 per diluted share, for the
three months ended October 31, 1998. Income before extraordinary items for
the nine months ended October 30, 1999 totaled $78.5 million, or $.53 per
diluted share, compared to a loss before extraordinary items of $75.1
million, or $.53 per diluted share, for the nine months ended October 31,
1998. The improvement in income over the prior year primarily was due to a
significant decline in merger and integration charges, higher gross margin
performance and leverage on SGA.
Extraordinary item
The extraordinary loss for the nine months ended October 30, 1999 related to
the February 1999 repurchase of $236 million of outstanding REMIC mortgage
certificates. In conjunction with this debt restructuring, the Company
incurred charges related to the early extinguishment of debt totaling $9.3
million after taxes.
Forward-looking information
This Form 10-Q contains "forward-looking" statements within the meaning of
the federal securities laws. Forward-looking information in this Form 10-Q
is premised on many factors, some of which are outlined below. Actual
consolidated results might differ materially from projected forward-looking
information if there are any material changes in management's assumptions.
When used throughout this Form 10-Q, 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.
The forward-looking information and statements are based on a series of
projections and estimates and involve certain risks and uncertainties.
Potential risks and uncertainties include such factors as the level of
consumer spending for apparel and other merchandise carried by the Company;
the competitive pricing environment within the department and specialty store
industries; the effectiveness of planned advertising, marketing and
promotional campaigns; appropriate inventory management; realization of
planned synergies; effective cost containment; and solution of Year 2000
systems issues by the Company and its suppliers. 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.
<PAGE> 26
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 and in its press releases.
<PAGE> 27
SAKS INCORPORATED
PART II. OTHER INFORMATION
Item 6. Exhibits.
(a) Exhibits.
10.1 Employment Agreement between Saks Incorporated and James A.
Coggin, President of Administration
10.2 Employment Agreement between Saks Incorporated Douglas E.
Coltharp, Executive Vice President and Chief Financial Officer
10.3 Employment Agreement between Saks Incorporated and Brian J.
Martin, Executive Vice President and General Counsel
10.4 Employment Agreement between Saks Incorporated and Robert M.
Mosco, President of Merchandising and Chief Operating Officer
27.1 Financial Data Schedule
(b) Form 8-K Reports.
There were no 8-Ks filed during the quarter ended October 30, 1999.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAKS INCORPORATED
___________________
Registrant
December 14, 1999
___________________
Date
/s/ Douglas E. Coltharp
__________________________
Douglas E. Coltharp
Executive Vice President and Chief
Financial Officer
EXHIBIT LIST
Exhibit No. Document Page No.
- ----------- ----------------- --------
10.1 Employment Agreement between Saks Incorporated and
James A. Coggin, President of Administration
10.2 Employment Agreement between Saks Incorporated
Douglas E. Coltharp, Executive Vice President
and Chief Financial Officer
10.3 Employment Agreement between Saks Incorporated
and Brian J. Martin, Executive Vice President
and General Counsel
10.4 Employment Agreement between Saks Incorporated
and Robert M. Mosco, President of
Merchandising and Chief Operating Officer
27.1 Financial Data Schedule
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
SAKS INCORPORATED AND SUBSIDIARIES
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 1st day of May 1999, by and between Saks Incorporated (the
"Company"), and James A. Coggin ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
of Administration of Company or in such other capacity with Company
and its subsidiaries as Company's Board of Directors shall
designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $750,000 per year.
Executive's Base Salary shall be paid in installments in accordance
with Company's normal payment schedule for its senior management.
All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible, as long as he holds the position stated in
paragraph 1, for a yearly cash bonus with a target of 60% ("Bonus
Target Potential") of Base Salary based upon his performance in
accordance with specific annual objectives, set in advance, all as
approved by the Board of Directors.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase thirty-eight
thousand, eight hundred and ninety (38,890) shares of Company
common stock at an option price equal to the closing price of the
stock on April 30, 1999, as reported in the Wall Street Journal.
This Option is granted pursuant to Company's 1994 Long-Term
Incentive Plan ("1994 Plan"), and shall be subject to the terms and
conditions thereof. The Option shall be exercisable on or after
May 1, 1999, (the "Grant Date") to the extent of 20% of the shares
covered thereby; exercisable to the extent of an additional 20% of
the shares covered thereby on and after the first anniversary of
the Grant Date; exercisable to the extent of an additional 20% of
the shares covered thereby on and after the second anniversary of
the Grant Date; exercisable to the extent of an additional 20% of
the shares covered thereby on an after the third anniversary of the
Grant Date; and exercisable to the extent of any remaining shares
on and after the fourth anniversary of the Grant Date; provided,
however, that no portion of the Option shall be exercisable any
earlier than six months from the Grant Date. The Option may be
exercised (as provided in the 1994 Plan) up to ten (10) years from
the Grant Date. Any portion of the Option not exercised within
said ten (10) year period shall expire.
(d) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for three years,
provided, however, that Company may terminate this Agreement at any
time upon thirty (30) days' prior written notice (at which time
this Agreement shall terminate except for Section 9, which shall
continue in effect as set forth in Section 9). In the event of
such termination by Company without Cause, as defined below,
Executive shall be entitled to receive his Base Salary (at the rate
in effect at the time of termination) through the end of the term
of this Agreement. Such Base Salary shall be paid thereafter in
regular payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any employee benefit arrangement or
plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for Cause, in which event no salary or bonus shall be paid after
termination for Cause. Termination for cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "Cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is
terminated in any way connected with a Change in Control of Company
or a Potential Change in Control of Company, as defined below,
Executive shall receive a sum equal to two times his Base Salary
then in effect or, if higher, a sum equal to his Base Salary then
in effect for the balance of the term of this Agreement, plus
Executive shall also receive two times his Bonus Target Potential.
If any payment, right or benefit provided for in this Agreement or
otherwise paid to Executive by Company is treated as an "excess
parachute payment" under Section 280(G)(b) of the Internal Revenue
Code of 1986, as amended, (the "Code"), Company shall indemnify and
hold harmless and make whole, on an after-tax basis, Executive for
any adverse tax consequences, including but not limited to
providing to Executive on an after-tax basis the amount necessary
to pay any tax imposed by Code Section 4999.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then outstanding securities of
Company that may be cast for the election for directors of Company
(other than as a result of an issuance of securities initiated by
Company in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined voting
power of the then outstanding securities of Company or any
successor corporation or entity entitled to vote generally in the
election of directors of Company or such other corporation or
entity after such transaction, are held in the aggregate by holders
of Company's securities entitled to vote generally in the election
of directors of Company immediately prior to such transactions; or
(c) During any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board of Directors of Company cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by
Company, the consummation of which would result in a Change of
Control of Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is shorter. For purposes of this Agreement, the
term "disabled" shall mean the inability of Executive (as the
result of a physical or mental condition) to perform the duties of
his position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the
over-the-counter market), director, officer, employee or otherwise,
in competition with (i) the businesses conducted at the date hereof
by Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not do business with any vendor that is
one of the top 100 vendors of the businesses conducted by Company
or its affiliates at the date hereof or at any time during the term
of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or his employment relationship.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of one
year thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by his while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 9:
(i) the covenants contained in paragraph (i) and
(ii) of Section 9(a) shall apply within all the territories in
which Company or its affiliates or subsidiaries are actively
engaged in the conduct of business while Executive is employed
under this Agreement;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect
itself from unfair competition of the type protected under
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: James A. Coggin
3455 Highway 80 West
Jackson, MS 39209
If to Company: General Counsel
Saks Incorporated
750 Lakeshore Parkway
Birmingham, AL 35211
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SAKS INCORPORATED
BY: _____________________
Brian J. Martin
Executive Vice President
_____________________
James A. Coggin
Executive
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
SAKS INCORPORATED AND SUBSIDIARIES
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 1st day of May 1999, by and between Saks Incorporated (the
"Company"), and Douglas E. Coltharp ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Executive
Vice President and Chief Financial Officer of Company or in such
other capacity with Company and its subsidiaries as Company's Board
of Directors shall designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $410,000 per year.
Executive's Base Salary shall be paid in installments in accordance
with Company's normal payment schedule for its senior management.
All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible, as long as he holds the position stated in
paragraph 1, for a yearly cash bonus of with a target of 50%
("Bonus Target Potential") of Base Salary based upon his
performance in accordance with specific annual objectives, set in
advance, all as approved by the Board of Directors.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase seventeen thousand
five hundred (17,500) shares of Company common stock at an option
price equal to the closing price of the stock on April 30, 1999, as
reported in the Wall Street Journal. This Option is granted
pursuant to Company's 1994 Long-Term Incentive Plan ("1994 Plan"),
and shall be subject to the terms and conditions thereof. The
Option shall be exercisable on or after May 1, 1999, (the "Grant
Date") to the extent of 20% of the shares covered thereby;
exercisable to the extent of an additional 20% of the shares
covered thereby on and after the first anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on and after the second anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on an after the third anniversary of the Grant
Date; and exercisable to the extent of any remaining shares on and
after the fourth anniversary of the Grant Date; provided, however,
that no portion of the Option shall be exercisable any earlier than
six months from the Grant Date. The Option may be exercised (as
provided in the 1994 Plan) up to ten (10) years from the Grant
Date. Any portion of the Option not exercised within said ten (10)
year period shall expire.
(d) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
(e) Service Award. As compensation for his service,
Company shall issue 15,000 shares of Company stock to Executive as
soon as practicable after he completes three years of uninterrupted
service with Company. Executive shall be entitled to such 15,000
shares of Company stock prior to the completion of three years of
service in the event that his employment is terminated by Company,
and in that event, the award shall be made as soon as practicable
after termination.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for three years,
provided, however, that Company may terminate this Agreement at any
time upon thirty (30) days' prior written notice (at which time
this Agreement shall terminate except for Section 9, which shall
continue in effect as set forth in Section 9). In the event of
such termination by Company without Cause, as defined below,
Executive shall be entitled to receive his Base Salary (at the rate
in effect at the time of termination) through the end of the term
of this Agreement. Such Base Salary shall be paid thereafter in
regular payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any employee benefit arrangement or
plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for Cause, in which event no salary or bonus shall be paid after
termination for Cause. Termination for Cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "Cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is
terminated in any way connected with a Change in Control of Company
or a Potential Change in Control of Company, as defined below,
Executive shall receive a sum equal to three times his Base Salary
then in effect, plus Executive shall also receive three times his
Bonus Target Potential. Executive may voluntarily terminate his
employment in connection with a change in control and receive these
benefits in the event that he is required to relocate from the
Birmingham, Alabama area. If any payment, right or benefit
provided for in this Agreement or otherwise paid to Executive by
Company is treated as an "excess parachute payment" under Section
280(G)(b) of the Internal Revenue Code of 1986, as amended, (the
"Code"), Company shall indemnify and hold harmless and make whole,
on an after-tax basis, Executive for any adverse tax consequences,
including but not limited to providing to Executive on an after-tax
basis the amount necessary to pay any tax imposed by Code Section
4999.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then outstanding securities of
Company that may be cast for the election for directors of Company
(other than as a result of an issuance of securities initiated by
Company in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined voting
power of the then outstanding securities of Company or any
successor corporation or entity entitled to vote generally in the
election of directors of Company or such other corporation or
entity after such transaction, are held in the aggregate by holders
of Company's securities entitled to vote generally in the election
of directors of Company immediately prior to such transactions; or
(c) During any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board of Directors of Company cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by
Company, the consummation of which would result in a Change of
Control of Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months. For purposes of this Agreement, the term
"disabled" shall mean the inability of Executive (as the result of
a physical or mental condition) to perform the duties of his
position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the
over-the-counter market), director, officer, employee or otherwise,
in competition with (i) the businesses conducted at the date hereof
by Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not do business with any vendor that is
one of the top 100 vendors of the businesses conducted by Company
or its affiliates at the date hereof or at any time during the term
of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate their employment relationship.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of one
year thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 9:
(i) the covenants contained in paragraph (i) and
(ii) of Section 9(a) shall apply within all the territories in
which Company or its affiliates or subsidiaries are actively
engaged in the conduct of business while Executive is employed
under this Agreement;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect
itself from unfair competition of the type protected under
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Douglas E. Coltharp
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: General Counsel
Saks Incorporated
750 Lakeshore Parkway
Birmingham, AL 35211
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SAKS INCORPORATED
BY: _____________________
Brian J. Martin
Executive Vice President
_____________________
Douglas E. Coltharp
Executive
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
SAKS INCORPORATED AND SUBSIDIARIES
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 1st day of May 1999, by and between Saks Incorporated (the
"Company"), and Brian J. Martin ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Executive
Vice President and General Counsel of Company or in such other
capacity with Company and its subsidiaries as Company's Board of
Directors shall designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $400,000 per year.
Executive's Base Salary shall be paid in installments in accordance
with Company's normal payment schedule for its senior management.
All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible, as long as he holds the position stated in
paragraph 1, for a yearly cash bonus with a target of 50% ("Bonus
Target Potential") of Base Salary based upon his performance in
accordance with specific annual objectives, set in advance, all as
approved by the Board of Directors.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase fifteen thousand,
five hundred and sixty (15,560) shares of Company common stock at
an option price equal to the closing price of the stock on April
30, 1999, as reported in the Wall Street Journal. This Option is
granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994
Plan"), and shall be subject to the terms and conditions thereof.
The Option shall be exercisable on or after May 1, 1999, (the
"Grant Date") to the extent of 20% of the shares covered thereby;
exercisable to the extent of an additional 20% of the shares
covered thereby on and after the first anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on and after the second anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on an after the third anniversary of the Grant
Date; and exercisable to the extent of any remaining shares on and
after the fourth anniversary of the Grant Date; provided, however,
that no portion of the Option shall be exercisable any earlier than
six months from the Grant Date. The Option may be exercised (as
provided in the 1994 Plan) up to ten (10) years from the Grant
Date. Any portion of the Option not exercised within said ten (10)
year period shall expire.
(d) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for three years,
provided, however, that Company may terminate this Agreement at any
time upon thirty (30) days' prior written notice (at which time
this Agreement shall terminate except for Section 9, which shall
continue in effect as set forth in Section 9). In the event of
such termination by Company without Cause, as defined below,
Executive shall be entitled to receive his Base Salary (at the rate
in effect at the time of termination) through the end of the term
of this Agreement. Such Base Salary shall be paid thereafter in
regular payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any employee benefit arrangement or
plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for Cause, in which event no salary or bonus shall be paid after
termination for Cause. Termination for Cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "Cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is
terminated in any way connected with a Change in Control of Company
or a Potential Change in Control of Company, as defined below,
Executive shall receive a sum equal to two times his Base Salary
then in effect or, if higher, a sum equal to his Base Salary then
in effect for the balance of the term of this Agreement, plus
Executive shall also receive two times his Bonus Target Potential.
If any payment, right or benefit provided for in this Agreement or
otherwise paid to Executive by Company is treated as an "excess
parachute payment" under Section 280(G)(b) of the Internal Revenue
Code of 1986, as amended, (the "Code"), Company shall indemnify and
hold harmless and make whole, on an after-tax basis, Executive for
any adverse tax consequences, including but not limited to
providing to Executive on an after-tax basis the amount necessary
to pay any tax imposed by Code Section 4999.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then outstanding securities of
Company that may be cast for the election for directors of Company
(other than as a result of an issuance of securities initiated by
Company in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined voting
power of the then outstanding securities of Company or any
successor corporation or entity entitled to vote generally in the
election of directors of Company or such other corporation or
entity after such transaction, are held in the aggregate by holders
of Company's securities entitled to vote generally in the election
of directors of Company immediately prior to such transactions; or
(c) During any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board of Directors of Company cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by
Company, the consummation of which would result in a Change of
Control of Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is shorter. For purposes of this Agreement, the
term "disabled" shall mean the inability of Executive (as the
result of a physical or mental condition) to perform the duties of
his position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the
over-the-counter market), director, officer, employee or otherwise,
in competition with (i) the businesses conducted at the date hereof
by Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not do business with any vendor that is
one of the top 100 vendors of the businesses conducted by Company
or its affiliates at the date hereof or at any time during the term
of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or his employment relationship.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of one
year thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by his while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 9:
(i) the covenants contained in paragraph (i) and
(ii) of Section 9(a) shall apply within all the territories in
which Company or its affiliates or subsidiaries are actively
engaged in the conduct of business while Executive is employed
under this Agreement;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect
itself from unfair competition of the type protected under
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Brian J. Martin
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: James A. Coggin
3455 Highway 80 West
Jackson, MS 39209
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SAKS INCORPORATED
BY: _____________________
James A. Coggin
President
_____________________
Brian J. Martin
Executive
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
SAKS INCORPORATED AND SUBSIDIARIES
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 1st day of May 1999, by and between Saks Incorporated (the
"Company"), and Robert M. Mosco ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
of Merchandising and Chief Operating Officer, as well as Chief
Executive Officer of Proffitt's Merchandising Group, or in such
other capacity with Company and its subsidiaries as Company's Board
of Directors shall designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $750,000 per year.
Executive's Base Salary shall be paid in installments in accordance
with Company's normal payment schedule for its senior management.
All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible, as long as he holds the position stated in
paragraph 1, for a yearly cash bonus with a target of 60% ("Bonus
Target Potential") of Base Salary based upon his performance in
accordance with specific annual objectives, set in advance, all as
approved by the Board of Directors.
(c) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase thirty-eight
thousand, eight hundred and ninety (38,890) shares of Company
common stock at an option price equal to the closing price of the
stock on April 30, 1999, as reported in the Wall Street Journal.
This Option is granted pursuant to Company's 1994 Long-Term
Incentive Plan ("1994 Plan"), and shall be subject to the terms and
conditions thereof. The Option shall be exercisable on or after
May 1, 1999, (the "Grant Date") to the extent of 20% of the shares
covered thereby; exercisable to the extent of an additional 20% of
the shares covered thereby on and after the first anniversary of
the Grant Date; exercisable to the extent of an additional 20% of
the shares covered thereby on and after the second anniversary of
the Grant Date; exercisable to the extent of an additional 20% of
the shares covered thereby on an after the third anniversary of the
Grant Date; and exercisable to the extent of any remaining shares
on and after the fourth anniversary of the Grant Date; provided,
however, that no portion of the Option shall be exercisable any
earlier than six months from the Grant Date. The Option may be
exercised (as provided in the 1994 Plan) up to ten (10) years from
the Grant Date. Any portion of the Option not exercised within
said ten (10) year period shall expire.
(d) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
Plan), any Options granted to Executive prior to such Change of
Control shall immediately vest.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for three years,
provided, however, that Company may terminate this Agreement at any
time upon thirty (30) days' prior written notice (at which time
this Agreement shall terminate except for Section 9, which shall
continue in effect as set forth in Section 9). In the event of
such termination by Company without Cause, as defined below,
Executive shall be entitled to receive his Base Salary (at the rate
in effect at the time of termination) through the end of the term
of this Agreement. Such Base Salary shall be paid thereafter in
regular payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any employee benefit arrangement or
plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for Cause, in which event no salary or bonus shall be paid after
termination for cause. Termination for Cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "Cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is
terminated in any way connected with a Change in Control of Company
or a Potential Change in Control of Company, as defined below,
Executive shall receive a sum equal to two times his Base Salary
then in effect or, if higher, a sum equal to his Base Salary then
in effect for the balance of the term of this Agreement, plus
Executive shall also receive two times his Bonus Target Potential.
If any payment, right or benefit provided for in this Agreement or
otherwise paid to Executive by Company is treated as an "excess
parachute payment" under Section 280(G)(b) of the Internal Revenue
Code of 1986, as amended, (the "Code"), Company shall indemnify and
hold harmless and make whole, on an after-tax basis, Executive for
any adverse tax consequences, including but not limited to
providing to Executive on an after-tax basis the amount necessary
to pay any tax imposed by Code Section 4999.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then outstanding securities of
Company that may be cast for the election for directors of Company
(other than as a result of an issuance of securities initiated by
Company in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined voting
power of the then outstanding securities of Company or any
successor corporation or entity entitled to vote generally in the
election of directors of Company or such other corporation or
entity after such transaction, are held in the aggregate by holders
of Company's securities entitled to vote generally in the election
of directors of Company immediately prior to such transactions; or
(c) During any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board of Directors of Company cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by
Company, the consummation of which would result in a Change of
Control of Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is shorter. For purposes of this Agreement, the
term "disabled" shall mean the inability of Executive (as the
result of a physical or mental condition) to perform the duties of
his position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the
over-the-counter market), director, officer, employee or otherwise,
in competition with (i) the businesses conducted at the date hereof
by Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not do business with any vendor that is
one of the top 100 vendors of the businesses conducted by Company
or its affiliates at the date hereof or at any time during the term
of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or his employment relationship.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of one
year thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by his while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 9:
(i) the covenants contained in paragraph (i) and
(ii) of Section 9(a) shall apply within all the territories in
which Company or its affiliates or subsidiaries are actively
engaged in the conduct of business while Executive is employed
under this Agreement;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect
itself from unfair competition of the type protected under
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected in writing by personal delivery,
mail, overnight courier, or facsimile. Notices shall be addressed
to the parties at the addresses set forth below, but each party may
change his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Robert M. Mosco
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: General Counsel
Saks Incorporated
750 Lakeshore Parkway
Birmingham, AL 35211
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SAKS INCORPORATED
BY: _____________________
Brian J. Martin
Executive Vice President
_____________________
Robert M. Mosco
Executive
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the Condensed
Consolidated Financial Statements as presented in Saks Incorporated Form 10-Q
for the three and nine periods ended October 30, 1999 and October 31, 1998.
(All amounts accept per share amounts in thousands)
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> JAN-29-2000 JAN-30-1999 JAN-29-2000 JAN-30-1999
<PERIOD-END> OCT-30-1999 OCT-31-1998 OCT-30-1999 OCT-31-1998
<CASH> 20,949 3,937 20,949 3,937
<SECURITIES> 0 0 0 0
<RECEIVABLES> 172,334 182,898 172,334 182,898
<ALLOWANCES> 0 0 0 0
<INVENTORY> 1,872,257 1,768,242 1,872,257 1,768,242
<CURRENT-ASSETS> 2,218,705 2,051,026 2,218,705 2,051,026
<PP&E> 2,300,596 2,061,741 2,300,596 2,061,741
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 5,420,470 5,043,418 5,420,470 5,043,418
<CURRENT-LIABILITIES> 1,100,957 1,043,821 1,100,957 1,043,821
<BONDS> 2,090,011 1,692,538 2,090,011 1,692,538
0 0 0 0
0 0 0 0
<COMMON> 14,309 14,318 14,309 14,318
<OTHER-SE> 2,048,574 1,868,320 2,048,574 1,868,320
<TOTAL-LIABILITY-AND-EQUITY> 5,420,470 5,043,418 5,420,470 5,043,418
<SALES> 1,599,171 1,472,817 4,570,227 4,169,163
<TOTAL-REVENUES> 1,599,171 1,472,817 4,570,227 4,169,163
<CGS> 1,012,361 978,613 2,919,363 2,720,767
<TOTAL-COSTS> 1,012,361 978,613 2,919,363 2,720,767
<OTHER-EXPENSES> 511,563 594,192 1,421,390 1,445,589
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 33,847 27,133 103,135 76,425
<INCOME-PRETAX> 41,478 (145,528) 129,237 (91,271)
<INCOME-TAX> 15,578 (38,374) 50,783 (16,223)
<INCOME-CONTINUING> 25,900 (106,154) 78,454 (75,048)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 (21,556) (9,261) (21,890)
<CHANGES> 0 0 0 0
<NET-INCOME> 25,900 (127,710) 69,193 (96,938)
<EPS-BASIC> .18 (.89) .48 .68
<EPS-DILUTED> .18 (.89) .47 .68
</TABLE>
