-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tg+r6PCnx5NB7BD65QT5SbgHoG+eW9XHuzgZQ15VA2QsMtusR9eIwFo2jbkPnmWB 1WiHsZby273WnVIdzdi6pg== 0000906555-96-000020.txt : 19960429 0000906555-96-000020.hdr.sgml : 19960429 ACCESSION NUMBER: 0000906555-96-000020 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19960203 FILED AS OF DATE: 19960426 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROFFITTS INC CENTRAL INDEX KEY: 0000812900 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 620331040 STATE OF INCORPORATION: TN FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15907 FILM NUMBER: 96551897 BUSINESS ADDRESS: STREET 1: 115 NORTH CALDERWOOD CITY: ALCOA STATE: TN ZIP: 37701 BUSINESS PHONE: 6159837000 MAIL ADDRESS: STREET 1: P.O. BOX 9388 CITY: ALCOA STATE: TN ZIP: 37701 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Fiscal Year Ended: February 3, 1996 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________ Commission File Number: 0-15907 Exact name of registrant as specified in its charter: PROFFITT'S, INC. State of Incorporation: Tennessee I.R.S. Employer Identification Number: 62-0331040 Address of principal executive offices (including zip code): P.O. Box 9388, Alcoa, Tennessee 37701 Registrant's telephone number, including area code: (423) 983-7000 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.10 and PREFERRED STOCK PURCHASE RIGHTS Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part II of this Form 10-K or any amendment to this Form 10-K. (X) The aggregate market value of the voting stock held by non- affiliates of the Registrant as of March 22, 1996 was approximately $532,150,352. As of March 22, 1996, the number of shares of the Registrant's Common Stock outstanding was 19,210,024. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Proffitt's, Inc. Annual Report to Shareholders for the Fiscal Year Ended February 3, 1996 are incorporated by reference into Part II. (2) Portions of the Proffitt's, Inc. Proxy Statement dated May 1, 1996 for the Annual Shareholders' Meeting to be held on June 19, 1996 are incorporated by reference into Part III. The Exhibit Index is on page of this document. TABLE OF CONTENTS Item Page Part I 1 Business. 3 2 Properties. 7 3 Legal Proceedings. 13 4 Submission of Matters to a Vote of Security Holders 13 Executive Officers of the Registrant. 13 Part II 5 Market for Registrant's Common Equity and Related Stockholder Matters. 13 6 Selected Financial Data. 18 7 Management's Discussion and Analysis of Financial Condition and Results of Operations. 18 8 Financial Statements and Supplementary Data. 18 9 Changes in and Disagreements with 18 Accountants on Accounting and Financial Disclosure. Part III 10 Directors and Executive Officers of the Registrant. 19 11 Executive Compensation. 19 12 Security Ownership of Certain Beneficial Owners and Management. 19 13 Certain Relationships and Related 19 Transactions. Part IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 20 Signatures 22 PART I Item 1. Business. General. Founded in 1919, Proffitt's is a leading regional department store company primarily offering moderate to better brand name fashion apparel, accessories, cosmetics, and decorative home furnishings. The Company's stores are principally anchor stores in leading regional or community malls. The Company's objective is to be the dominant department store chain in its regions through a strategy which combines fashion leadership in branded and high quality private-label merchandise with opening or acquiring new stores and expanding and renovating existing stores. The Company operates three department store divisions. The Proffitt's Division, headquartered in Knoxville, Tennessee, operates 25 stores in Tennessee (12), Virginia (8), Georgia (2), Kentucky (2), and North Carolina (1). The McRae's Division, headquartered in Jackson, Mississippi, operates 29 stores in Alabama (14), Mississippi (12), Florida (2), and Louisiana (1). The Younkers Division, headquartered in Des Moines, Iowa, operates 49 stores in Iowa (18), Wisconsin (18), Michigan (5), Nebraska (5), Illinois (1), Minnesota (1), and South Dakota (1). The Company has experienced significant growth since 1992. During 1992 and 1993, the Company purchased certain real and personal property and assumed certain operating leases of eighteen store locations from Hess Department Stores, Inc. and Crown American Corporation. The acquired locations were in Tennessee, Virginia, Georgia, and Kentucky. These stores were renovated and placed in service as Proffitt's Division stores in 1992 and 1993. In March 1994, Proffitt's, Inc. acquired all of the outstanding Common Stock of Macco Investments, Inc., a holding company for McRae's, Inc., a privately-owned retail department store chain with 28 stores headquartered in Jackson, Mississippi. The transaction was accounted for as a purchase. In April 1995, the Company completed its purchase of Parks-Belk Company, the owner/operator of four Parks-Belk stores located in northeastern Tennessee. Three stores were renovated and opened as Proffitt's Division stores during 1995; one store was permanently closed. The transaction was accounted for as a purchase. Effective February 3, 1996 (immediately preceding the Company's fiscal year end), Proffitt's, Inc. combined its business with Younkers, Inc., a 51 unit, publicly-owned retail department store chain, headquartered in Des Moines, Iowa. This combination was structured as a tax-free transaction and was accounted for as a pooling of interests. Each outstanding share of Younkers, Inc. Common Stock was converted into ninety-eight one-hundredths (.98) shares of Proffitt's, Inc. Common Stock, with approximately 8.8 million shares issued in the transaction. The Company closed three unproductive units (one Proffitt's store and two Younkers stores) in January 1996. Two additional Younkers units were sold to a third party subsequent to February 3, 1996. A new McRae's store in Selma, Alabama was opened in March 1996. The Company has announced the planned openings of new Proffitt's stores in Morgantown and Parkersburg, West Virginia in fall 1996 and 1997, respectively, and new McRae's stores in Biloxi and Meridian, Mississippi in 1997. The Company is currently negotiating several other new unit opportunities. In addition, several store renovations and expansions are planned for 1996. During 1995, in order to improve efficiencies and reduce overhead costs, the Company centralized certain administrative and support functions, such as accounting, information systems, credit, store planning, and human resources, for the McRae's and Proffitt's Divisions. The Company is in the process of further consolidating these functions to include the Younkers Division, with the majority of this restructuring to be completed by fall 1996. Merchandising, stores, sales promotion/advertising, visual, and various support functions for the Proffitt's, McRae's, and Younkers Divisions will remain headquartered in Knoxville, Jackson, and Des Moines, respectively. Merchandising. The Company's merchandising strategy is to provide middle to upper income customers a wide assortment of quality fashion apparel, shoes, accessories, cosmetics, and decorative home furnishings at competitive prices. The Company's commitment to a branded merchandising strategy, enhanced by its merchandise presentation and high level of customer service, makes it a preferred distribution channel for premier brand-name merchandise. Key brands featured include Liz Claiborne, Marisa Christina, Susan Bristol, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Guess, Haggar, Levi's, Estee Lauder, Clinique, Lancome, Vanity Fair, and Nine West. The Company supplements its branded assortments with high- quality, private-label merchandise in selected areas. Private label offerings are intended to provide national brand quality at lower prices. The Company has developed a thorough knowledge of each of its regional markets and customer bases. Such knowledge, in conjunction with frequent store visits by senior management and merchandising personnel and use of on-line merchandise information, enables the Company to tailor each store's merchandise assortments to the unique characteristics of its markets and respond to demographic and customer profiles. Certain departments in the Company's stores are leased to independent companies in order to provide high quality service and merchandise where specialization and expertise are critical and economics do not justify the Company's direct participation in the business. The leased departments vary by store to complement the Company's own merchandising departments. Leased departments include shoe, fine jewelry, beauty salon, and maternity departments. The terms of the lease agreements typically are between one and three years and require the lessee to pay for fixtures and provide its own employees. Leased department sales are included in the Company's total sales. Management regularly evaluates the performance of the leased departments and requires compliance with established customer service guidelines. The shoe business is currently leased at the Younkers Division and owned at both the Proffitt's and McRae's Divisions. In August 1996, the Company will convert the leased shoe operation at the Younkers Division to owned. Management believes this has positive sales and gross margin implications for the Company. During 1995, the Company's net sales by major merchandise category were as follows: Proffitt's McRae's Younkers Merchandise Category: Division Division Division Total Women's Apparel 32.5% 26.7% 31.9% 30.3% Men's Apparel 13.7 16.6 15.6 15.6 Home 10.6 14.9 15.7 14.4 Cosmetics 14.8 11.3 10.8 11.8 Children's Apparel 8.5 7.6 7.0 7.5 Accessories 6.8 6.7 6.3 6.6 Shoes 7.1 7.8 - 4.0 Intimate Apparel 4.4 3.9 4.6 4.3 Total Owned 98.4 95.5 91.9 94.5 Leased Departments 1.6 4.5 8.1 5.5 Total 100.0% 100.0% 100.0% 100.0% Purchasing and Distribution. The Company purchases merchandise from numerous suppliers. Management monitors the Company's profitability and sales history with each supplier and believes it has alternative sources available for each category of merchandise it purchases. Management believes it has a good relationship with its suppliers. The 85,000 square foot distribution facility serving the Proffitt's Division is located in metropolitan Knoxville, Tennessee, and the 164,000 square foot distribution center for the McRae's Division is located in Jackson, Mississippi. The Younkers Division is served by two distribution facilities. A 182,000 square foot center in Green Bay, Wisconsin serves the Division's northern stores, and a 120,000 square foot facility in Ankeny, Iowa serves the Division's southern stores. The distribution centers utilize certain latest technology. The Company utilizes UPC barcode technology which is designed to move merchandise onto the selling floor quicker and more cost- effectively by allowing vendors to deliver floor-ready merchandise to the distribution facilities. For example, high speed automated conveyor systems are capable of scanning bar coded labels and diverting cartons to the proper merchandise processing areas. Some types of merchandise are being processed in the receiving area and immediately "cross docked" to the shipping dock for delivery to the stores. Certain processing areas are staffed with personnel equipped with hand held radio frequency terminals that can scan a vendor's bar code and transmit the necessary information to a computer to check-in merchandise. This technology, when fully utilized, will create a nearly paperless environment for the distribution function. Management Information Systems. The Company's information systems provide information necessary for management operating decisions, cost reduction programs, and customer service enhancements. Individual data processing systems include point-of-sale and sales reporting, purchase order management, receiving, merchandise planning and control, payroll, general ledger, and accounts payable systems. Bar code ticketing is used, and scanning is utilized at all point-of-sale terminals. Information is made available on-line to merchandising staff and store management on a timely basis, thereby reducing the need for paper reports. The Company uses electronic data interchange technology (EDI) with its top vendors to facilitate timely merchandise replenishment. The Company continually upgrades its information systems to improve operations and support future growth. Advertising and Sales Promotion. The Company's advertising and promotions are coordinated to reinforce its market position as a fashion department store selling quality merchandise at competitive prices. Advertising is balanced among fashion advertising, price promotions, and special events. The Company uses a multi-media approach, including newspaper, television, radio, and direct mail. The Company's advertising and special events are produced by in-house sales promotion staffs in conjunction with outside advertising agencies, when needed. The Company utilizes data captured through the use of the Proffitt's, McRae's, and Younkers credit cards to develop segmented advertising and promotional events targeted at specific customers who have established purchasing patterns for certain brands, departments, and store locations. To promote its image as the fashion leader in its markets, the Company also sponsors fashion shows and in-store special events highlighting the Company's key brands. Customer Service. The Company believes that personal customer attention builds loyalty and that the Company's sales associates provide a level of customer service superior to its competitors. Each store is staffed with knowledgeable, friendly sales associates skilled in salesmanship and customer service. Sales associates maintain customer records, send personalized thank-you notes, and communicate personally with customers to advise them of special promotions and new merchandise offerings. Superior customer service is encouraged through the development and monitoring of sales/ productivity goals and through specific award and recognition programs. Seasonality. The Company's business, like that of most retailers, is subject to seasonal influences, with a significant portion of its net sales and net income realized during the fourth quarter of each year, which includes the Christmas selling season. Generally, more than 30% of the Company's sales and over 50% of its net income are generated during the fourth quarter. Competition. The retail department store business is highly competitive. The Company's stores compete with several national and regional department stores, specialty apparel stores, and other retail stores, some of which have greater financial and other resources than the Company. Management believes that its knowledge of the Company's regional markets and customer base, combined with providing superior customer service and a broad selection of quality fashion merchandise at competitive prices in prime store locations, provides a competitive advantage. Associates At March 31, 1996, the Company employed approximately 14,000 associates, of whom approximately 6,300 were employed on a part- time basis. The Company hires additional temporary employees and increases the hours of part-time employees during seasonal peak selling periods. Approximately twenty associates in the Younkers Division are covered by a collective bargaining agreement. The Company considers its relations with its employees to be good. Item 2. Properties. The Proffitt's Division's leased administrative offices are located in the Midland Shopping Center in metropolitan Knoxville, Tennessee and consist of approximately 44,000 square feet. The Division's owned distribution center is located in metropolitan Knoxville and contains approximately 85,000 square feet. The McRae's Division owns its administrative office building in Jackson, Mississippi. This facility consists of 272,000 square feet of space, of which 168,000 square feet are corporate offices and 104,000 square feet are the Division's processing area for merchandise returns to vendors and a furniture warehouse. The 164,000 square foot distribution center in metropolitan Jackson is owned. The Younkers Division leased administrative office space is located with the Downtown store in Des Moines, Iowa and consists of 127,000 square feet of space. The 120,000 and 182,000 square foot distribution centers in Ankeny, Iowa and Green Bay, Wisconsin, respectively, are owned. The following table summarizes all owned and leased store locations. Store leases generally require the Company to pay the greater of a fixed minimum rent or an amount based on a percentage of sales. Generally, the Company is responsible under its store leases for a portion of mall promotion and common area maintenance expenses and for certain utility, property tax, and insurance expenses. Typically, the Company contributes to common mall promotion, maintenance, property tax, and insurance expenses at its owned locations. APPROX. YEAR GROSS YEAR RENOVATED SQUARE OWNED/ OPENED OR OR STORE LOCATIONS FOOTAGE LEASED ACQUIRED EXPANDED PROFFITT'S DIVISION: KNOXVILLE, TN METROPOLITAN MARKET: West Town 161,800 Leased 1972 1995 East Towne 102,000 Owned 1984 1992 Foothills (Maryville, TN)* 145,000 Owned 1983 1993 Oak Ridge (Oak Ridge, TN)* 111,000 Leased 1974 1993 Proffitt's Plaza (Athens, TN) 54,000 Leased 1965 1992 College Square (Morristown, TN) 50,000 Owned 1993 - CHATTANOOGA, TN METROPOLITAN MARKET: Hamilton Place* 245,000 Owned 1988 1993 Walnut Square (Dalton, GA) 55,000 Owned 1988 1988 Northgate 94,500 Owned 1989 1993 Bradley Square (Cleveland, TN) 50,000 Leased 1992 1992 Mt. Berry Square (Rome, GA) 65,000 Leased 1993 1993 TRI-CITIES, TN/VA METROPOLITAN MARKET: Mall at Johnson City (Johnson City, TN)* 152,000 Leased 1992 1995 Fort Henry (Kingsport, TN)* 141,500 Leased 1992 1995 Bristol Mall (Bristol, VA) 46,000 Leased 1992 - Greeneville Commons (Greeneville, TN) 41,700 Leased 1995 - ASHEVILLE, NC METROPOLITAN MARKET: Biltmore Square Mall 80,000 Owned 1989 - NORFOLK/VA BEACH, VA METROPOLITAN MARKET: Coliseum (Hampton, VA)* 110,600 Leased 1993 1993 Patrick Henry (Newport News, VA) 65,000 Leased 1993 1993 Greenbrier (Chesapeake, VA) 79,600 Leased 1993 1993 Chesapeake Square (Chesapeake, VA) 80,000 Owned 1993 1993 Pembroke (Virginia Beach, VA) 65,000 Owned 1993 1993 RICHMOND, VA METROPOLITAN MARKET: Chesterfield 64,000 Leased 1993 1993 Virginia Commons 80,000 Leased 1993 1993 KENTUCKY: Towne Mall (Elizabethtown, KY) 50,000 Leased 1993 1993 Ashland Town Center (Ashland, KY) 65,000 Leased 1993 1993 TOTAL PROFFITT'S DIVISION 2,253,700 *Dual store operation. APPROX. YEAR GROSS YEAR RENOVATED SQUARE OWNED/ OPENED OR OR STORE LOCATIONS FOOTAGE LEASED ACQUIRED EXPANDED MCRAE'S DIVISION: JACKSON, MS METROPOLITAN MARKET: Meadowbrook Mart 68,900 Leased 1955 1987 Metrocenter 231,400 Owned 1978 1992 Northpark (Ridgeland, MS) 207,200 Owned 1984 - BIRMINGHAM, AL METROPOLITAN MARKET: Roebuck Plaza 65,600 Leased 1960 - Century Plaza 125,100 Leased 1980 1991 Brookwood Village 108,800 Leased 1975 1993 Western Hills (Fairfield, AL) 129,600 Leased 1980 1986 Riverchase Galleria (Hoover, AL) 136,200 Leased 1986 - HUNTSVILLE, AL: Parkway City 75,700 Leased 1961 - Madison Square 99,700 Leased 1984 - FLORIDA PANHANDLE: University (Pensacola, FL) 145,300 Owned 1974 1986 Santa Rosa (Mary Ester, FL) 83,900 Owned 1986 - MOBILE, AL: Springdale 168,300 Owned 1984 - OTHER MISSISSIPPI MARKETS: Greenville (Greenville, MS) 68,100 Leased 1973 - Village Fair (Meridian, MS) 78,700 Leased 1972 - Pemberton (Vicksburg, MS) 63,200 Owned 1970 1985 TurtleCreek (Hattiesburg, MS) 129,000 Owned 1973 1995 Barnes Crossing (Tupelo, MS) 100,200 Owned 1976 1990 Natchez (Natchez, MS) 67,300 Leased 1979 1993 Singing River (Gautier, MS) 89,300 Owned 1980 - Sawmill Square (Laurel, MS) 65,800 Owned 1981 - University (Columbus, MS) 75,700 Owned 1983 - OTHER ALABAMA MARKETS: Eastdale (Montgomery, AL) 69,200 Leased 1977 - Gadsden (Gadsden, AL) 80,500 Leased 1974 1994 Regency Square (Florence, AL) 41,000 Leased 1978 - Selma Mall (Selma, AL) 74,000 Leased 1996 - University (Tuscaloosa, AL) 90,900 Leased 1980 - Wiregrass Commons (Dothan, AL) 96,200 Leased 1986 - LOUISIANA: Pecanland (Monroe, LA) 106,500 Owned 1985 - TOTAL MCRAE'S DIVISION 2,941,300 APPROX. YEAR GROSS YEAR RENOVATED SQUARE OWNED/ OPENED OR OR STORE LOCATIONS FOOTAGE LEASED ACQUIRED EXPANDED YOUNKERS DIVISION: DES MOINES, IA METROPOLITAN MARKET: Merle Hay 195,000 Leased 1959 1995 Valley West 164,000 Leased 1972 1995 Downtown 113,800 Leased 1900 1994 Southridge 105,000 Leased 1975 1994 CEDAR RAPIDS, IA: Lindale 100,000 Leased 1960 - Westdale 100,000 Leased 1980 1995 SIOUX CITY, IA: Sioux City Mall 90,000 Leased 1980 - Town Square Downtown 60,000 Leased 1986 - QUAD CITIES, IA/IL METROPOLITAN MARKET: Southpark (Moline, IL) 100,000 Leased 1974 1990 Northpark (Davenport, IA) 100,000 Leased 1973 1994 Duck Creek Plaza (Bettendorf, IA) 60,000 Leased 1960 - MILWAUKEE, WI: Southridge 204,400 Leased 1992 - Northridge 167,400 Leased 1992 - MADISON, WI: West Towne 139,600 Leased 1992 - East Towne 138,400 Leased 1992 1994 OMAHA, NE: Crossroads 190,000 Leased 1987 - Westroads 172,000 Leased 1968 1994 Oakview 150,000 Leased 1991 - OTHER IOWA MARKETS: North Grand (Ames, IA) 50,000 Leased 1987 - Westland (West Burlington, IA) 47,000 Leased 1977 1994 College Square (Cedar Falls, IA) 83,500 Leased 1986 1986 Kennedy Center (Dubuque, IA) 126,300 Leased 1968 1993 Crossroads Center (Fort Dodge, IA) 54,200 Leased 1979 1994 Old Capitol (Iowa City, IA) 60,000 Leased 1980 - Marshalltown Plaza (Marshalltown, IA) 40,000 Leased 1992 1994 Southbridge (Mason City, IA) 59,500 Leased 1984 1994 APPROX. YEAR GROSS YEAR RENOVATED SQUARE OWNED/ OPENED OR OR STORE LOCATIONS FOOTAGE LEASED ACQUIRED EXPANDED YOUNKERS DIVISION (cont.): OTHER WISCONSIN MARKETS: Fox River (Appleton, WI) 113,000 Leased 1992 - London Square (Eau Claire, WI) 98,800 Leased 1992 - Forest (Fond du Lac, WI) 78,400 Leased 1992 - Port Plaza (Green Bay, WI) 255,000 Leased 1992 - Edgewater Plaza (Manitowoc, WI) 44,300 Leased 1992 - Pine Tree (Marinette, WI) 43,300 Leased 1992 - Northway (Marshfield, WI) 44,400 Leased 1992 - Park Plaza (Oshkosh, WI) 98,600 Leased 1992 - Regency (Racine, WI) 113,600 Leased 1992 - Downtown (Sheboygan, WI) 136,900 Leased 1992 - Downtown (Sturgeon Bay, WI) 57,100 Leased 1992 - Mariner (Superior, WI) 43,300 Leased 1992 - Wausau Center (Wausau, WI) 98,900 Leased 1992 - Rapids (Wisconsin Rapids, WI) 44,400 Leased 1992 - MICHIGAN MARKETS: Bay City (Bay City, MI) 67,700 Leased 1992 - West Shore (Holland, MI) 67,900 Leased 1992 - Marquette Plaza (Marquette, MI) 44,300 Leased 1992 - Birchwood (Port Huron, MI) 67,900 Leased 1992 - Cherryland (Traverse City, MI) 48,800 Leased 1992 - MINNESOTA: Oak Park (Austin, MN) 45,000 Leased 1975 1993 SOUTH DAKOTA: The Empire Mall (Sioux Falls, SD) 105,000 Leased 1975 1989 NEBRASKA MARKETS: Conestoga (Grand Island, NE) 60,000 Leased 1974 1993 Gateway (Lincoln, NE) 103,000 Leased 1987 1989 TOTAL YOUNKERS DIVISION 4,749,700 GRAND TOTAL 9,944,700 Item 3. Legal Proceedings The Company is involved in several legal proceedings arising from its normal business activities. Management believes that none of these legal proceedings will have a material adverse effect on the financial condition or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders. A special meeting of the shareholders of Proffitt's, Inc. was held on February 2, 1996. 7,718,904, or 75.3%, of the 10,257,055 shares of Common Stock entitled to vote, were represented in person or by proxy at the meeting. The matters submitted to a vote of the shareholders and the vote on these matters were as follows: 1) Approval of the Agreement and Plan of Merger, dated as of October 22, 1995 (the "Merger Agreement") among Proffitt's, Inc. (the "Company"), Baltic Merger Corporation, a Delaware corporation and wholly-owned subsidiary of the Company ("Sub") and Younkers, Inc. ("Younkers"), pursuant to which Sub will merge with and into Younkers, which will result in Younkers becoming a wholly-owned subsidiary of the Company (the "Merger"). For - 7,708,535 Against - 5,794 Abstain - 4,575 2) Approval of the issuance of shares of the Company's Common Stock, par value $0.10 per share (the "Company Common Stock"), in connection with the Merger Agreement, including the issuance of shares of Company Common Stock in the Merger and upon the exercise of stock options of Younkers which, pursuant to the terms of the Merger Agreement, following the Merger will constitute options to purchase shares of Company Common Stock (the "Younkers Options"). For - 7,666,449 Against - 47,174 Abstain - 5,281 3) Approval and adoption of an amendment to the Company's 1994 Long-Term Incentive Plan (the "Incentive Plan") to increase the number of shares of Company Common Stock issuable under the Incentive Plan by 1,711,000 shares from 1,200,000 shares to 2,911,000 shares, 711,000 shares of which will be reserved for issuance upon exercise of Younkers Options. For - 6,937,211 Against - 773,607 Abstain - 8,086 EXECUTIVE OFFICERS OF THE REGISTRANT. The name, age, and position held with the Company of each of the executive officers of the Company are set forth below. Name Age Position Proffitt's, Inc. Corporate Officers: R. Brad Martin 44 Chairman of the Board and Chief Executive Officer W. Thomas Gould 49 Vice Chairman of the Board and Chairman of the Younkers Division of Proffitt's, Inc. James A. Coggin 54 President and Chief Operating Officer Tom R. Amerman 58 Executive Vice President of Special Projects David W. Baker 59 Senior Vice President of Operations Julia A. Bentley 37 Senior Vice President of Investor Relations and Planning and Secretary James E. Glasscock 54 Executive Vice President, Chief Financial Officer, and Treasurer Brian J. Martin 39 Senior Vice President of Human Resources and Law and General Counsel Michael R. Molitor 36 Senior Vice President of Merchandise Planning and Analysis James E. VanNoy 56 Senior Vice President of Systems Support John J. White 45 Senior Vice President of Profit Improvement and Special Projects William L. White, III 42 Senior Vice President of Systems Development Proffitt's Division Officers: Frederick J. Mershad 53 President and Chief Executive Officer A. Coleman Piper 49 Executive Vice President of Stores McRae's Division Officers: Gary L. Howard 53 President and Chief Executive Officer Robert Oliver 61 Executive Vice President of Stores Younkers Division Officers: Robert M. Mosco 47 President and Chief Executive Officer Toni E. Browning 39 Senior Vice President of Stores Proffitt's, Inc. Corporate Officers: R. Brad Martin became Chairman of the Board in February 1987 and Chief Executive Officer in July 1989. Mr. Martin previously served as President from July 1989 until March 1994 and from September 1994 to March 1995. W. Thomas Gould became Vice Chairman of the Board of the Company and Chairman of the Younkers Division in February 1996. Mr. Gould served with Younkers, Inc. as Chief Executive Officer from 1987 to January 1996, Chairman of the Board from 1992 to January 1996, and President from 1985 until 1992. Prior to joining Younkers, Mr. Gould served in various executive, management, and merchandising positions with Lazarus, Gimbel's, and Maas Brothers. James A. Coggin was named President and Chief Operating Officer of Proffitt's, Inc. in March 1995 and served as Executive Vice President and Chief Administrative Officer of the Company from March 1994 to March 1995. From June 1978 to March 1994, Mr. Coggin served as Executive Vice President and Chief Administrative Officer of McRae's, Inc. Mr. Coggin joined McRae's, Inc. in 1971. Tom R. Amerman was named Executive Vice President of Special Projects in February 1996. Mr. Amerman served as Senior Vice President of Human Resources for Younkers, Inc. from September 1994 to January 1996. Prior to joining Younkers, Inc., Mr. Amerman was Executive Vice President of Human Resources and Operations for Parisian from 1977 to 1994. David W. Baker was named Senior Vice President of Operations for the Company in March 1994. Mr. Baker joined McRae's, Inc. in February 1985 and served as Senior Vice President of Operations until March 1994. Julia A. Bentley was named Senior Vice President of Investor Relations and Planning and Secretary of Proffitt's, Inc. in March 1994. In January 1993, Ms. Bentley became Senior Vice President, and in March 1989 became Vice President of Finance, Chief Financial Officer, Secretary, and Treasurer. Ms. Bentley joined the Company in 1987. Ms. Bentley is a Certified Public Accountant with several years of public accounting experience. James E. Glasscock was appointed Executive Vice President, Chief Financial Officer, and Treasurer of the Company in March 1995. Mr. Glasscock served as Senior Vice President, Chief Financial Officer, and Treasurer between March 1994 and March 1995. From May 1985 to March 1994, Mr. Glasscock served as Senior Vice President of Finance for McRae's, Inc. Mr. Glasscock is a Certified Public Accountant with several years of public accounting and private industry experience. Brian J. Martin was promoted to Senior Vice President of Human Resources and Law and General Counsel in August 1995 and served as Senior Vice President and General Counsel of the Company from March 1995 to August 1995. He joined Proffitt's, Inc. in 1994 as Vice President and General Counsel. From June 1990 to May 1994, Mr. Martin was affiliated with the Indianapolis, Indiana law firm of Barnes and Thornburg. Mr. Martin served as Assistant Solicitor General of the United States between January 1988 and June 1990. Michael R. Molitor was appointed Senior Vice President of Merchandise Planning and Analysis in February 1996. Mr. Molitor served as Vice President of Merchandise Strategies at Younkers, Inc. between March 1994 and January 1996. Mr. Molitor held various merchandising and financial positions with Saks Fifth Avenue between September 1993 and February 1994 and with May Department Stores Company between January 1988 and August 1993. James E. VanNoy was named Senior Vice President of Systems Support in February 1996. He became Senior Vice President and Chief Information Officer of the Company in March 1994. Mr. VanNoy joined McRae's, Inc. in February 1980 as Director of Management Information Systems and was promoted to Vice President of Management Information Systems in February 1982. John J. White was named Senior Vice President of Profit Improvement and Special Projects for the Company in February 1996. Mr. White served as Vice President and Controller of Younkers, Inc. from July 1995 to January 1996. Prior to that, Mr. White served as Vice President and Controller from January 1987 to December 1994 with Broadway Stores. Mr. White obtained previous experience with Allied Stores and May Department Stores Company. William L. White, III was appointed Senior Vice President of Systems Development in February 1996. Mr. White served as MIS (Management Information Systems) Director of Younkers, Inc. between June 1992 and January 1996. Before joining Younkers, Mr. White was with Maison Blanche for eighteen years, where he served in various MIS positions. Proffitt's Division Officers: Frederick J. Mershad was promoted to President and Chief Executive Officer of the Proffitt's Division of Proffitt's, Inc. in February 1996 and served as President of the Proffitt's Division between March 1995 and January 1996. Mershad joined the Company in May 1994 as Executive Vice President of Merchandising and Sales Promotion for the Proffitt's Division. Mr. Mershad had over 25 years of retail experience and has held executive merchandising positions with such retailers as Rich's, a division of Federated Department Stores, and McRae's. A. Coleman Piper was named Executive Vice President of Stores for the Proffitt's Division in March 1995. He served with Proffitt's, Inc. as Executive Vice President for Human Resources and Proffitt's Division Stores from September 1994 to March 1995 and Executive Vice President of Operations and Real Estate from March 1994 to September 1994. He has been with the Company since 1972 and previously served as its Vice President of Operations. McRae's Division Officers: Gary L. Howard was promoted to President and Chief Executive Officer of the McRae's Division of Proffitt's, Inc. in February 1996 and served as President of the McRae's Division between March 1995 and January 1996. Between March 1994 and March 1995, Mr. Howard served as Executive Vice President for Merchandising and Marketing for the McRae's Division. Mr. Howard joined McRae's, Inc. in November 1993 as Executive Vice President of Merchandising and Marketing. Mr. Howard has over 30 years of prior experience in the retail industry, including service as Senior Vice President and General Merchandise Manager of Maas Brothers and Woodward and Lothrop. Robert Oliver was promoted to Executive Vice President of Stores for the McRae's Division in March 1995. Mr. Oliver served as Vice President of Stores for the McRae's Division from March 1994 to March 1995. He joined McRae's, Inc. in 1991 as Vice President of Stores after gaining 33 years of merchandising and store management experience with Foley's. Younkers Division Officers: Robert M. Mosco was named President and Chief Executive Officer of the Younkers Division of Proffitt's, Inc. in February 1996. Mr. Mosco served as President and Chief Operating Officer of Younkers, Inc. between 1992 and January 1996. From 1989 to 1992, he held the position of Executive Vice President of Merchandising and Marketing for Younkers, Inc. Mr. Mosco joined Younkers, Inc. in 1987. Mr. Mosco began his retail career with Gimbel's and later worked for Rich's. Toni E. Browning was named Senior Vice President of Stores in February 1996 for the Younkers Division of Proffitt's, Inc. She served as Senior Vice President of Stores for Younkers, Inc. from February 1994 to January 1996. She joined Younkers, Inc. in February 1993 as Vice President, Regional Director of the Western Stores and was promoted to Senior Vice President of Southern Stores that same year. Ms. Browning was in store management with Dayton Hudson Department Stores from 1989 to January 1993 and gained prior experience with Federated-Allied Stores. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The information set forth under the caption "Market Information," appearing on page 30 of the Proffitt's, Inc. Annual Report to Shareholders for the Fiscal Year Ended February 3, 1996 (the "Annual Report"), is incorporated herein by reference. Item 6. Selected Financial Data. The information set forth under the caption "Five-Year Financial Summary" appearing on page 4 of the Annual Report is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information set forth under the caption "Management's Discussion and Analysis" appearing on pages 5 through 10 of the Annual Report is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The Consolidated Financial Statements and the Report of Independent Accountants appearing on pages 11 through 28 of the Annual Report are incorporated herein by reference. Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information set forth under the caption "Election of Directors" contained on pages 5 through 7 of the Proffitt's, Inc. Proxy Statement dated May 1, 1996 (the "Proxy Statement"), with respect to Directors of the Company, is incorporated herein by reference. The information required under this item with respect to the Company's Executive Officers is incorporated by reference from Part I of this report under "Executive Officers of the Registrant." The information set forth under the caption "Section 16(a) of the Securities Exchange Act of 1934" contained on page 14 of the Proxy Statement, with respect to Director and Executive Officer compliance with Section 16(a), is incorporated herein by reference. Item 11. Executive Compensation. The information set forth under the caption "Executive Compensation" contained on pages 8 through 12 of the Proxy Statement with respect to executive compensation and the information set forth under the caption "Directors' Fees" on page 7 of the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information set forth under the caption "Outstanding Voting Securities" contained on pages 3 through 5 of the Proxy Statement with respect to security ownership of certain beneficial owners and management is incorporated herein by reference. Item 13 Certain Relationships and Related Transactions. The information set forth under the captions "Further Information Concerning Directors" and "Certain Transactions" contained on pages 7 and 13 and 14, respectively, of the Proxy Statement with respect to certain relationships and related transactions is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) (1) and (2)--The response to this portion of Item 14 is submitted as a separate section of this report. (3)--The response to this portion of Item 14 is submitted as a separate section of this report. (b) Reports on Form 8-K filed during the fourth quarter. A report on Form 8-K was filed with the Commission on January 16, 1996 regarding fourth quarter and year-end performance updates for Proffitt's, Inc. and Younkers, Inc. A report on Form 8-K was filed with the Commission on February 16, 1996 regarding the consummation of the business combination between Proffitt's, Inc. and Younkers, Inc. (c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial statement schedules--The response to this portion of Item 14 is submitted as a separate section of this report. FORM 10-K--ITEM 14(a)(1) AND (2) AND (d) PROFFITT'S, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this report: (1) Consolidated Financial Statements The following consolidated financial statements of Proffitt's, Inc. and subsidiaries and the Report of Independent Accountants, included on pages 11 through 28 of the Proffitt's, Inc. Annual Report to Shareholders for the Fiscal Year Ended February 3, 1996, are incorporated by reference in Item 8: Consolidated Balance Sheets as of February 3, 1996 and January 28, 1995 Consolidated Statements of Income for Fiscal Years Ended February 3, 1996, January 28, 1995, and January 29, 1994 Consolidated Statements of Shareholders' Equity for Fiscal Years Ended February 3, 1996, January 28, 1995, and January 29, 1994 Consolidated Statements of Cash Flows for Fiscal Years Ended February 3, 1996, January 28, 1995, and January 29, 1994 Notes to Consolidated Financial Statements Report of Independent Accountants (2) Schedules to Financial Statements The following consolidated financial statement schedules of Proffitt's, Inc. and subsidiaries are included in item 14(d): Report of Independent Accountants for the Fiscal Year Ended February 3, 1996 Schedule II - Valuation and Qualifying Accounts and Reserves All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Proffitt's, Inc. __________________________ Registrant Date: May 1, 1996 /s/ James E. Glasscock ___________________________ James E. Glasscock Executive Vice President, Chief Financial Officer, and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ R. Brad Martin /s/ Michael S. Gross ___________________________ ______________________________ R. Brad Martin Michael S. Gross Chairman of the Board Director and Chief Executive Officer /s/ W. Thomas Gould /s/ G. David Hurd __________________________ ______________________________ W. Thomas Gould G. David Hurd Vice Chairman of the Board Director /s/ James A. Coggin /s/ Richard D. McRae __________________________ ______________________________ James A. Coggin Richard D. McRae President and Chief Director Operating Officer /s/ Bernard E. Bernstein /s/ C. Warren Neel _________________________ _______________________________ Bernard E. Bernstein C. Warren Neel Director Director /s/ Edmond D. Cicala /s/ Harwell W. Proffitt ___________________________ _______________________________ Edmond D. Cicala Harwell W. Proffitt Director Director /s/ Ronald de Waal /s/ Gerald Tsai, Jr. ___________________________ _______________________________ Ronald de Waal Gerald Tsai, Jr. Director Director /s/ Gerard K. Donnelly /s/ Julia A. Bentley __________________________ ________________________________ Gerard K. Donnelly Julia A. Bentley Director Senior Vice President and Secretary /s/ Donald F. Dunn __________________________ Donald F. Dunn Director REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Proffitt's, Inc. We have audited the accompanying consolidated balance sheets of Proffitt's, Inc. and Subsidiaries as of February 3, 1996 and January 28, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended February 3, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger with Younkers, Inc., which has been accounted for as a pooling of interests as described in Note A to the consolidated financial statements. We did not audit the financial statements of Younkers for the years ended January 28, 1995 and January 29, 1994. Such statements reflect aggregate total assets constituting 38.3% and 54.7% in 1994 and 1993, respectively, and aggregate total revenues constituting 49.3% and 74.9% in 1994 and 1993, respectively, of the related consolidated totals. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it related to the amounts included for Younkers, Inc., is based solely on the respective reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the respective reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the respective reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Proffitt's, Inc. and Subsidiaries as of February 3, 1996 and January 28, 1995 and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 3, 1996, in conformity with generally accepted accounting principles. As described in Note N to the financial statements, the Company changed its method of costing inventory, accounting for store pre- opening expenses and accounting for income taxes in the year ended January 29, 1994 and changed its method of valuing inventory in the year ended January 28, 1995. /s/ COOPERS & LYBRAND, L.L.P. Atlanta, Georgia March 15, 1996 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders Younkers, Inc. We have audited the accompanying consolidated balance sheet of Younkers, Inc. and subsidiary as of January 28, 1995, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The Company's financial statements as of January 29, 1994 and January 30, 1993 were audited by other auditors whose report, dated March 3, 1994, expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1995 consolidated financial statements present fairly, in all material respects, the consolidated financial position of Younkers, Inc. and subsidiary at January 28, 1995, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Deloitte & Touch LLP Des Moines, Iowa March 3, 1995 Report of Independent Auditors The Shareholder Younkers, Inc. We have audited the consolidated statements of earnings, shareholders' equity, and cash flows of Younkers, Inc. for the year ended January 29, 1994 (not separately presented herein), prior to the adjustments relating to the changes in methods of accounting for certain items as described in Note N to the financial statements of Proffitt's, Inc. for the year ended February 3, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements, prior to restatement for changes in methods of accounting, referred to above present fairly, in all material respects the consolidated results of their operations and their cash flows for the year ended January 29, 1994, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Des Moines, Iowa March 3, 1994 REPORT OF INDEPENDENT ACCOUNTANTS Our report on the consolidated financial statements of Proffitt's, Inc. has been incorporated by reference in this Form 10-K from page 32 of the 1995 Annual Report to Shareholders of Proffitt's, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a)2 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ COOPERS & LYBRAND L.L.P. Atlanta, Georgia March 15, 1996
PROFFITT'S, INC. AND SUBSIDIARIES ALLOWANCE FOR DOUBTFUL ACCOUNTS Balance at Charged to Charged to Balance at Beginning costs and other end Description of period expenses accounts Deductions(b) of period Year ended February 3, 1996: Allowance for doubtful accounts 4,723,170 8,723,463 0 (6,845,551) 6,601,082 Year ended January 28, 1995: Allowance for doubtful accounts 3,255,043 4,956,351 1,431,988 (a) (4,920,212) 4,723,170 Year ended January 29, 1994: Allowance for doubtful accounts 3,149,670 2,448,838 0 (2,343,465) 3,255,043 (a) Balance in account of company (McRae's, Inc.) acquired at March 31, 1994. (b) Uncollectible accounts written off, net of recoveries. FORM 10-K -- ITEM 14(a)(3) AND 14(c) PROFFITT'S, INC. AND SUBSIDIARIES EXHIBITS Exhibit No. Description 2.1 Agreement and Plan of Merger, dated as of October 22, 1995, among Proffitt's, Inc., Baltic Merger Corporation and Younkers, Inc. (13) 3.1 Charter of the Company, as amended (1), (6), (12), (9) 3.2 * Articles of Amendment to the Charter of Proffitt's, Inc., increasing the number of authorized shares of Series C Preferred Stock 3.3 Amended and Restated Bylaws of the Company (12) 4.1 Form of 7.5% Junior Subordinated Debentures due 2004 (6) 4.2 Form of 4.75% Convertible Subordinated Debentures due 2003 (4) 10.1 Registration Rights Agreement made as of March 31, 1994 by and among Proffitt's, Inc. and Richard D. McRae, Jr., as Representative of the former shareholders of Macco Investments, Inc. (6) 10.2 Non-competition Agreement by and between Proffitt's, Inc. and Richard D. McRae dated March 31, 1994 (6) 10.3 Credit Facilities and Reimbursement Agreement by and among Proffitt's, Inc., the lenders from time to time party thereto and NationsBank of Texas, National Association, as agent, dated March 31, 1994 (6) 10.4 Amendment No. 1 to Credit Facilities and Reimbursement Agreement between Proffitt's, Inc. and NationsBank of Texas, National Association, as agent, dated November 15, 1994 (10) 10.5 Amendment No. 2 to Credit Facilities and Reimbursement Agreement between Proffitt's, Inc. and NationsBank of Texas, National Association, as agent, dated March 7, 1995 (10) 10.6 * Amendment No. 3 to Credit Facilities and Reimbursement Agreement between Proffitt's, Inc. and NationsBank of Texas, National Association, as agent, dated October 25, 1996 10.7 * Amendment No. 4 to Credit Facilities and Reimbursement Agreement between Proffitt's, Inc. and NationsBank of Texas, National Association, as agent, dated February 3, 1996 10.8 * Form of letter extending termination date of Credit Facilities and Reimbursement Agreement between Proffitt's, Inc. and NationsBank of Texas, National Association, as agent, dated June 8, 1995 10.9 Guaranty Agreement made and entered into as of March 31, 1994, by and between each of Proffitt's Investments, Inc., PDS Agency, Inc., Macco Investments, Inc., McRae's, Inc., and McRae's of Alabama, Inc., and NationsBank of Texas, National Association (6) 10.10 Transfer and Administration Agreement dated as of January 27, 1993, and amended by Amendment dated as of March 31, 1994 thereto, by and between Enterprise Funding Corporation and McRae's, Inc. (6) 10.11 Amendment to Transfer and Administration Agreement by and between Enterprise Funding Corporation and McRae's, Inc. dated March 31, 1995 (10) 10.12 * Amendment to Transfer and Administration Agreement by and between Enterprise Funding Corporation and McRae's, Inc. dated May 11, 1995 10.13 * Amendment to Transfer and Administration Agreement by and between Enterprise Funding Corporation and McRae's, Inc. dated September 30, 1995 10.14 * Amendment to Transfer and Administration Agreement by and between Enterprise Funding Corporation and McRae's, Inc. dated October 25, 1995 10.15 Securities Purchase Agreement dated March 3, 1994, between Proffitt's, Inc. and Apollo Specialty Retail Partners, L.P. (6) 10.16 Registration Rights Agreement made and entered into as of March 31, 1994, by and among Proffitt's, Inc. and Apollo Specialty Retail Partners, L.P. (6) 10.17 Land Deed of Trust dated April 1, 1994 by and among McRae's, Inc., Don B. Cannada, and Park Real Estate Company (6) 10.18 Secured Promissory Note, dated April 1, 1994, for the principal amount of $3,906,558 by McRae's, Inc. payable to Park Real Estate Company (6) 10.19 Assumption, Consent, and Release Agreement, entered into between McRae's, Inc. and Deposit Guaranty National Bank dated April l, 1994 (6) 10.20 Amended and Restated Promissory Note dated April 1, 1994 for the principal amount of $2,075,000 by McRae's, Inc. payable to First Tennessee Bank National Association (Gautier) (6) 10.21 Assumption, Consent, and Release Agreement, entered into between McRae's, Inc. and First Tennessee Bank National Association dated April 1, 1994 (6) 10.22 Secured Promissory Note, dated April 1, 1994, for the principal amount of $556,851 by McRae's, Inc. payable to Arvey Real Estate Company (Gautier) (6) 10.23 Land Deed of Trust dated April 1, 1994 by and among McRae's, Inc., Don B. Cannada, and Arvey Real Estate Company (Gautier) (6) 10.24 Assumption, Consent, and Release Agreement, entered into between McRae's, Inc. and First Tennessee Bank National Association dated April 1, 1994 (Gautier) (6) 10.25 Secured Promissory Note, dated April 1, 1994, for the principal amount of $1,487,919 by McRae's, Inc. payable to Green's Crossing Real Estate Company (6) 10.26 Assumption, Consent, and Release Agreement, entered into between McRae's, Inc. and Deposit Guaranty National Bank dated April 1, 1994 (6) 10.27 Land Deed of Trust dated April 1, 1994 by and among McRae's, Inc., Don B. Cannada, and Green's Crossing Real Estate Company (6) 10.28 Secured Promissory Note, dated April 1, 1994, for the principal amount of $1,779,223 by McRae's, Inc. payable to Arvey Real Estate Company (Laurel) (6) 10.29 Assumption, Consent, and Release Agreement, entered into between McRae's, Inc. and AmSouth Bank National Association dated April 1, 1994 (6) 10.30 Leasehold Deed of Trust dated April 1, 1994 by and among McRae's, Inc., Don B. Cannada, and Arvey Real Estate Company (Laurel) (6) 10.31 Indemnification and Confirmation of Lease Agreement dated March 31, 1994, entered into among McRae's, Inc., Richard D. McRae, Jr., Susan McRae Shanor, and Vaughan McRae (Heritage Building) (6) 10.32 Guaranty Agreement dated March 31, 1994 of McRae's, Inc. to guarantee Richard D. McRae, Jr., Carolyn McRae, Susan McRae Shanor, and Vaughan W. McRae giving or extending credit to Proffitt's, Inc. (6) 10.33 Land Deed of Trust dated April 1, 1994 by and among McRae's, Inc., Don B. Cannada, and Green's Crossing Real Estate Company (6) 10.34 Guaranty Agreement by Proffitt's, Inc. to AmSouth Bank guaranteeing credit extended to McRae's, Inc. (6) 10.35 Promissory Note dated January 25, 1983 by McRae's, Inc. payable to Selby W. McRae in the principal sum of $l,346,442 (5) 10.36 Form of Rights Certificate and Rights Agreement, dated as of March 28, 1995 between Proffitt's, Inc. and Union Planters National Bank as Rights Agent (9) 10.37 Pooling and Servicing Agreement dated as of June 13, 1995 among Younkers Credit Corporation, Younkers, Inc. and Chemical Bank, as Trustee (20) 10.38 Series 1995-1 Supplement dated as of June 13, 1995 to Pooling and Servicing Agreement dated as of June 13, 1995 among Younkers Credit Corporation, Younkers, Inc. and Chemical Bank, as Trustee (20) 10.39 Receivables Purchase Agreement dated as of June 13, 1995 between Younkers Credit Corporation and Younkers, Inc. (20) 10.40 Series 1995-2 Supplement dated as of July 18, 1995 to Pooling and Servicing Agreement dated as of June 13, 1995 among Younkers Credit Corporation, Younkers, Inc. and Chemical Bank, as Trustee (20) 10.47 ISDA Master Agreement and Schedule thereto, each dated as of July 19, 1995, between Younkers, Inc. and NationsBank of Texas, N.A., with Confirmation of Interest Rate Cap Transaction dated July 19, 1995, and Assignment Agreement dated as of July 19, 1995 between Younkers Credit Corporation, Younkers, Inc. and Chemical Bank, as Trustee (20) MANAGEMENT CONTRACTS, COMPENSATORY PLANS, OR ARRANGEMENTS, ETC. 10.42 Proffitt's, Inc. 1987 Stock Option Plan, as amended (3) 10.43 Proffitt's, Inc. Employee Stock Purchase Plan (8) 10.44 Proffitt's, Inc. 1994 Long-Term Incentive Plan (7) 10.45 Proffitt's, Inc. 401(k) Retirement Plan (5) 10.46 $500,000 Loan Agreement dated February 1, 1989 between Proffitt's, Inc. and R. Brad Martin (2) 10.47 Form of Amended and Restated Employment Agreement by and between Proffitt's, Inc. and R. Brad Martin dated March 28, 1995 (11) 10.48 Form of Employment Agreement by and between Proffitt's, Inc. and James A. Coggin dated March 28, 1995 (10) 10.49 Form of Employment Agreement by and between Proffitt's, Inc. and James E. Glasscock dated March 28, 1995 (10) 10.50 Form of Employment Agreement by and between Proffitt's, Inc. and Frederick J. Mershad dated March 28, 1995 (10) 10.51 Form of Employment Agreement by and between Proffitt's, Inc. and Gary L. Howard dated March 28, 1995 (10) 10.52 Form of Employment Agreement by and between Proffitt's, Inc. and Brian J. Martin dated March 28, 1995 (10) 10.53 * Form of Employment Agreement by and between Proffitt's, Inc. and James E. VanNoy dated April 1, 1996 10.54 * Form of Employment Agreement by and between Proffitt's, Inc. and David W. Baker dated April 1, 1996 10.55 Form of Employment Agreement by and between Proffitt's, Inc. and A. Coleman Piper dated March 28, 1995 (10) 10.56 Form of Employment Agreement by and between Proffitt's, Inc. and Robert Oliver dated March 28, 1995 (10) 10.57 Form of Employment Agreement by and between Proffitt's, Inc. and Julia A. Bentley dated March 28, 1995 (10) 10.58 Form of Employment Agreement by and between Proffitt's, Inc. and Anne Breier Pope dated March 28, 1995 (10) 10.59 * Form of Employment Agreement by and between Proffitt's, Inc. and William White dated February 2, 1996 10.60 * Form of Employment Agreement by and between Proffitt's, Inc. and John White dated February 2, 1996 10.61 * Form of Employment Agreement by and between Proffitt's, Inc. and Tom Amerman dated February 2, 1996 10.62 * Form of Employment Agreement by and between Proffitt's, Inc. and W. Thomas Gould dated October 22, 1995 10.63 * Form of Employment Agreement by and between Proffitt's, Inc. and Robert M. Mosco dated October 22, 1995 10.64 Younkers, Inc. Stock and Incentive Plan (14) 10.65 Younkers, Inc. Management Stock Option Plan (14) 10.66 Deferred Compensation Agreement between Younkers, Inc. and W. Thomas Gould, as amended (14) 10.67 Deferred Compensation Agreement between Younkers, Inc. and Robert M. Mosco, as amended (14) 10.68 Younkers, Inc. 1993 Long-Term Incentive Plan (16) 10.69 Amended and Restated Younkers Associate Profit Sharing and Savings Plan (15) 10.70 First Amendment to Younkers Associate Profit Sharing and Savings Plan effective as of June 1, 1993 (17) 10.71 Second Amendment to Younkers Associate Profit Sharing and Savings Plan effective as of July 7, 1993 (18) 10.72 Form of Younkers, Inc. Deferred Compensation Plan (17) 10.73 Form of Severance Agreement between Younkers, Inc. and its executive officers (19) 11.1 * Statement re: computation of earnings per share 13.1 * Annual Report to Shareholders for the fiscal year ended February 3, 1996 (not to be deemed filed except for those portions thereof which are incorporated herein by reference in this Annual Report) 21.1 * Subsidiaries of the registrant 23.1 * Consents of Independent Accountants 27.1 * Financial Data Schedule * Previously unfiled documents are noted with an asterisk. (1) Incorporated by reference from the Exhibits to the Form S-1 Registration Statement No. 33-13548 of Proffitt's, Inc. dated June 3, 1987. (2) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 28, 1989. (3) Incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-46306 of Proffitt's, Inc. dated March 10, 1992. (4) Incorporated by reference from the Exhibits to the Form S-3 Registration Statement No. 33-70000 of Proffitt's, Inc. dated October 19, 1993. (5) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 29, 1994. (6) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated April 14, 1994. (7) Incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-80602 of Proffitt's, Inc. dated June 23, 1994. (8) Incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-88390 of Proffitt's, Inc. dated January 11, 1995. (9) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated April 3, 1995. (10) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 28, 1996. (11) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended April 29, 1995. (12) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended July 29, 1995. (13) Incorporated by reference from the Exhibits to the Form S-4 Registration Statement No. 333-00029 of Proffitt's, Inc. dated January 3, 1996. (14) Incorporated by reference from the Exhibits to the Form S-1 Registration Statement No. 33-45771 of Younkers, Inc. (15) Incorporated by reference from the Exhibits to the Form S-1 Registration Statement No. 33-60060 of Younkers, Inc. (16) Incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-59224 of Younkers, Inc. (17) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended May 1, 1993. (18) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended July 31, 1993. (19) Incorporated by reference from Exhibit 4 of Younkers, Inc. Solicitation/Recommendation Statement on Schedule 14D-9 dated January 9, 1995. (20) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended July 29, 1995.
EX-3.2 2 ARTICLES OF AMENDMENT TO THE CHARTER OF PROFFITT'S, INC. Pursuant to the provisions of Section 6.02 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Charter. A. The name of the corporation is PROFFITT'S, INC. (the "Corporation"). B. The Charter is amended by increasing the number of authorized shares of Series C Junior Preferred Stock from 200,000 shares to 500,000 shares. C. As of the date of this Amendment, no shares of Series C Junior Preferred Stock have been issued. D. The Amendment was duly adopted on November 17, 1995 by the Board of Directors of the Corporation. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be duly executed by R. Brad Martin, its Chairman and Chief Executive Officer, and attested by Julia A. Bentley, its Secretary, this 6th day of February, 1996. PROFFITT'S, INC. By:___________________ R. Brad Martin, Chairman and Chief Executive Officer ATTEST: By:_______________________ Julia A, Bentley, Secretary EX-10.6 3 AMENDMENT NO. 3 TO CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT THIS AMENDMENT NO. 3 TO CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT (this "Agreement") is made and entered into as of this 25th day of October, 1995 among: PROFFITT'S, INC., a Tennessee corporation having its principal place of business in Alcoa, Tennessee (the "Borrower"); and Each lender executing and delivering a signature page hereto (hereinafter such lenders may be referred to individually as a "Lender" or collectively as the "Lenders"); and NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America ("NationsBank"), in its capacity as agent for the Lenders (in such capacity, the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Agent have entered into a Credit Facilities and Reimbursement Agreement dated as of March 31, 1994, pursuant to which the Lenders agreed to make certain Advances to the Borrower; WHEREAS, the Borrower, the Lenders and the Agent amended the Credit Agreement pursuant to Amendment No. 1 to Credit Facilities and Reimbursement Agreement dated as of November 15, 1994 ("Amendment No. 1") and Amendment No. 2 to Credit Facilities and Reimbursement Agreement dated as of March 7, 1995 ("Amendment No. 2") (as amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested that the Credit Agreement be amended in the manner set forth herein and the Agent and the Lenders are willing to agree to such amendment; NOW, THEREFORE, in consideration of the mutual covenants and the fulfillment of the conditions set forth herein, the parties hereto do hereby agree as follows: 1. Definitions. Any capitalized terms used herein without definition shall have the meaning set forth in the Credit Agreement. 2. Amendment. Subject to the terms and conditions set forth herein, and in accordance with Section 11.06 of the Credit Agreement, the Credit Agreement is hereby amended as follows: (a) The definition of "Borrowing Base Factor" in Section 1.01 is hereby amended and restated in its entirety to read as follows: " ' Borrowing Base Factor' means 55%;" (b) Section 7.20 (i) is hereby amended and restated in its entirety to read as follows: 7.20 New Subsidiaries. Simultaneously with the acquisition or creation of any subsidiary, or upon any previously existing Persons becoming a Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders each of the following: (i) a Guaranty executed by such Subsidiary, with appropriate insertions of identifying information and such other changes to which the Agent may consent in its discretion; (c) Section 8.04 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 8.04 Consolidated Fixed Charge Ratio. Permit at any time during any Four-Quarter Period of the Borrower ending during the periods set forth below, the Consolidated Fixed Charge Ratio for such Four Quarter Period to be equal to or less than the ratios set forth opposite the respective periods below: Period Ratio Closing Date through and including January 31, 1997 1.50 to 1.00 February 1, 1997 through and including May 2, 1997 1.60 to 1.00 May 3, 1997 and thereafter 1.75 to 1.00 (d) Section 8.06 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 8.06 Consolidated Funded Indebtedness to EBITDA. Permit at any time the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA to be equal to or greater than the following ratios set forth opposite the following periods below: Period Ratio Closing Date through and including January 27, 1995 4.50 to 1.00 January 28, 1995 3.50 to 1.00 January 29, 1995 through and including February 2, 1996 3.90 to 1.00 February 3, 1996 through and including January 31, 1997 3.60 to 1.00 February 1, 1997 3.25 to 1.00 First, second and fourth quarter of each Fiscal Year commencing with Fiscal Year 1997 3.25 to 1.00 Third quarter of each Fiscal Year commencing with iscal Year 1997 3.50 to 1.00 3. Waivers. The Agent and the Lenders hereby waive any Default or Event of Default created under Section 8.05 of the Credit Agreement with respect to and for the twelve month period ending October 28, 1995. 4. Representations and Warranties. In order to induce the Agent and the Lenders to enter into this Agreement, the Borrower represents and warrants to the Agent and the Lenders as follows: (a) The representations and warranties made by Borrower in Article VI of the Credit Agreement are true and correct on and as of the date hereof; (b) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, since the date of the most recent financial reports of the Borrower received by the Agent and the Lenders under Section 7.01(a) of the Credit Agreement, other than changes in the ordinary course of business; (c) The business and properties of the Borrower and its Subsidiaries, taken as a whole, are not, and since the date of the most recent financial report of the Borrower and its Subsidiaries received by the Agent and the Lenders under Section 7.01(a) of the Credit Agreement, have not been adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout,combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; and (d) No event has occurred and is continuing which constitutes, and no condition exist which upon the consummation of the transaction contemplated hereby would constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement. 5. Conditions Precedent. The effectiveness of this Agreement is subject to the receipt by the parties hereto of the following: (a) The Agent shall have received: (i) eight (8) counterparts of this Agreement duly executed by all signatories hereto; (ii) copies of all additional agreements, instruments and documents which the Agent may reasonably request, such documents, when appropriate, to be certifie by appropriate governmental authorities. (b) All proceedings of the Borrower relating to the matters provided for herein shall be satisfactory to the Lenders, the Agent and their counsel. 6. Entire Agreement. This Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and not one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as in this Agreement otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Agreement may be changed, modified, waived or cancelled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 7. Full Force and Effect of Agreement. Except as hereby specifically amended, modified, waived or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 9. Governing Law. This Amendment Agreement shall in all respects be governed by the laws and judicial decisions of the state of Tennessee. 10. Enforceability. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 11. Credit Agreement. All references in any of the Loan Documents to the Credit Agreement shall mean the Credit Agreement as amended hereby. 12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the Borrower, the Lenders and the Agent and their respective successors, assigns and legal representatives; provided, however, that the Borrower, without the prior consent of the Agent, may not assign any rights, powers, duties or obligations hereunder. 13. Consent of Guarantors. Each of the Guarantors by their execution and delivery hereof (i) consent and agree to the amendments to the Credit Agreement set forth herein and in Amendment No. 1 and Amendment No. 2 and (ii) reaffirm their obligations set forth in each Guaranty. Parks-Belk Company hereby acknowledges and agrees that as a result of the amendment of Section 7.20 (i) of the Credit Agreement hereby the limitation set forth in the third paragraph of Section 1 of the Guaranty Agreement dated as of March 7, 1995 among the Guarantors party thereto and the Agent is no longer applicable and shall be of no force or effect and is deleted hereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER ATTEST: PROFFITT, INC. By:___________________ By:_________________________ Name:_________________ Name:_______________________ Title:________________ Title:______________________ (CORPORATE SEAL) LENDERS: NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION By:_________________________ Name:_______________________ Title:______________________ FIRST AMERICAN NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ FIRST TENNESSEE BANK NATIONAL ASSOCIATION By:_________________________ Name:_______________________ Title:______________________ TRUST COMPANY BANK By:_________________________ Name:_______________________ Title:______________________ By:_________________________ Name:_______________________ Title:______________________ (Signature Page 1 of 2) DEPOSIT GUARANTY NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ HIBERNIA NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ AGENT: NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as Agent for the Lenders By:_________________________ Name:_______________________ Title:______________________ Acknowledged, agreed and consented to, this the 25th day of October, 1995. PROFFITT'S INVESTMENTS, INC. PDS AGENCY, INC. MACCO INVESTMENT, INC. McRAE'S, INC. McRAE'S OF ALABAMA, INC. PARKS ENTERPRISES, INC. PARKS-BELK COMPANY By:_________________________ Name:_______________________ Title:______________________ (Signature Page 2 of 2) EX-10.7 4 AMENDMENT NO. 4 TO CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT THIS AMENDMENT NO. 4 TO CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT (this "Agreement") is made and entered into as of this 3rd day of February, 1996 among: PROFFITT'S, INC., a Tennessee corporation having its principal place of business in Alcoa, Tennessee (the "Borrower"); and Each lender executing and delivering a signature page hereto (hereinafter such lenders may be referred to individually as a "Lender" or collectively as the "Lenders"); and NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America ("NationsBank"), in its capacity as agent for the Lenders (in such capacity, the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Agent have entered into a Credit Facilities and Reimbursement Agreement dated as of March 31, 1994, pursuant to which the Lenders agreed to make certain Advances to the Borrower; WHEREAS, the Borrower, the Lenders and the Agent amended the Credit Agreement pursuant to Amendment No. 1 to Credit Facilities and Reimbursement Agreement dated as of November 15, 1994, Amendment No. 2 to Credit Facilities and Reimbursement Agreement dated as of March 7, 1995 and Amendment No. 3 to Credit Facilities and Reimbursement Agreement dated as of October 25, 1995 (as amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested that the Credit Agreement be amended in the manner set forth herein and the Agent and the Lenders are willing to agree to such amendment; NOW, THEREFORE, in consideration of the mutual covenants and the fulfillment of the conditions set forth herein, the parties hereto do hereby agree as follows: 1. Definitions. Any capitalized terms used herein without definition shall have the meaning set forth in the Credit Agreement. 2. Amendment. Subject to the terms and conditions set forth herein, and in accordance with Section 11.06 of the Credit Agreement, the Credit Agreement is hereby amended as follows: (a) the definition of "Applicable Interest Addition" in Section 1.01 is hereby amended to delete the table appearing at the end thereof and to substitute in its place the following table: Consolidated Funded Indebtedness/ Applicable Consolidated EBITDA Ratio* Interest Addition Greater than 3.50 to 1.00 1.25% Greater than 2.50 to 1.00 and 1.00% less than or equal to 3.50 to 1.00 Greater than 1.25 to 1.00 .75% and less than or equal to 2.50 to 1.00 Less than or equal to 1.25 to 1.00 .50% __________________________ * Commencing with the Borrower's fiscal quarter ending May 4, 1996, an adjustment to the Applicable Interest Addition will not occur unless the ratio determined on the Determination Date for the fiscal quarter then ended and the ratio determined on the previous Determination Date each would result in an adjustment to the Applicable Interest Margin. (b) The definition of "Capital Expenditures" in Section 1.01 is hereby amended to amend and restate the proviso to clause (iii) thereof to read in its entirety as follows: provided, however, there shall be excluded from the determination of Capital Expenditures (i) McRae's purchase of certain real property as part of the Macco Acquisition and as set forth in the Purchase Agreement and (ii) the acquisition by the Borrower of all the stock of Younkers, Inc. ("Younkers") pursuant to that certain Agreement and Plan of Merger among Proffitt's, Inc., Baltic Merger Corporation and Younkers, Inc. dated as of October 22, 1995 (the "Younkers Acquisition"). (c) Section 8.05 is hereby amended and restated to read in its entirety as follows: 8.05 Capital Expenditures. Make or become committed to make in any consecutive twelve month period Capital Expenditures greater than $80,000,000 in the aggregate or greater than $30,000,000 on any particular item or project. (d) Section 8.07 (v), (vii), (viii), (x) and (xii) are hereby amended and restated to read in their entirety as follows: (v) additional unsecured Indebtedness not to exceed an aggregate outstanding amount of $15,000,000; (vii) standby letters of credit in the aggregate face amount not to exceed $40,000,000 issued to provide credit enhancement for account receivable securitizations; (viii) conveyances, notes, certificates of participation or evidences of indebtedness associated with account receivable securitizations; (x) additional standby letters of credit in an aggregate face amount not to exceed $20,000,000; (xii) Indebtedness incurred directly by the Borrower or any Subsidiary exclusively to finance machinery, equipment, and other fixed assets purchased after the Closing Date provided that such indebtedness (i) is secured, if at all, solely by a Lien upon the items of property being acquired, (ii) represents not less than 75% of the purchase price of the asset financed, (iii) shall not be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing and (iv) does not in the aggregate exceed the principal amount of $60,000,000 incurred during any consecutive twelve month period; (e) Section 8.07 is further amended to add a new subsection (xv) thereto which shall read in its entirety as follows: (xv) additional indebtedness not to exceed $0.00 of Younkers assumed by the Borrower in connection with the Younkers Acquisition; provided, such Indebtedness (A) is recorded in the financial books and records of Younkers prior to the Younkers Acquisition and (B) was not incurred by Younkers in anticipation of the Younkers Acquisition. (f) Section 8.08 is amended to add the following new Section 8.08 (ix), which shall read in its entirety as follows: (ix) Liens granted in connection with that certain $150,000,000 Credit Agreement dated October 27, 1993 between Younkers, Inc., the Lenders named therein, Chemical Bank as Administrative Agent and the Co-Agents and Fronting Banks named therein, as amended (the "Existing Younkers Credit") which secure the inventory of Younkers, Inc. or the capital stock of Younkers Credit Corporation (the "Existing Younkers Liens"); provided, however, this exception to the otherwise applicable prohibition against pledges, liens, charges and encumbrances as set forth in Section 8.08 shall not apply upon the occurrence or failure of any of the following: (a) the failure to terminate the Existing Younkers Credit on or before April 30, 1996, or (b) the failure to terminate all of the Existing Younkers Liens on or before April 30, 1996, or (c) the making of any draws, advances or other borrowings under the Existing Younkers Credit. (g) Section 8.09 as hereby amended and restated to read in its entirety as follows: 8.09 Transfer of Assets During any consecutive twelve (12) month period, sell, lease, transfer or otherwise dispose of any assets of Borrower or any Subsidiary, other than assets sold in the ordinary course of business and accounts receivable transferred pursuant to account receivable securitizations, which have an aggregate book value in excess of five percent (5%) of the book value of the consolidated total assets of the Borrower and its Subsidiaries. 3. Representations and Warranties. In order to induce the Agent and the Lenders to enter into this Agreement, the Borrower represents and warrants to the Agent and the Lenders as follows: (a) The representations and warranties made by Borrower in Article VI of the Credit Agreement are true and correct on and as of the date hereof; (b) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, since the date of the most recent financial reports of the Borrower received by the Agent and the Lenders under Section 7.01(a) of the Credit Agreement, other than changes in the ordinary course of business; (c) The business and properties of the Borrower and its Subsidiaries, taken as a whole, are not, and since the date of the most recent financial report of the Borrower and its Subsidiaries received by the Agent and the Lenders under Section 7.01(a) of the Credit Agreement, have not been adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; (d) No event has occurred and is continuing which constitutes, and no condition exists which upon the consummation of the transaction contemplated hereby would constitute, a Default or an Event of Default on the part of the Borrower under the Credit Agreement; and (e) There currently is no outstanding indebtedness, advances or other borrowings under the Existing Younkers Credit; and (f) Pursuant to that certain Agreement and Plan of Merger dated January 19, 1996, filed with the office of the Mississippi Secretary of State and effective as of January 24, 1996, MACCO Investments, Inc. has been merged into McRae's, Inc. the surviving entity of this merger is McRae's, Inc., which has assumed all liabilities and obligations of MACCO Investments, Inc. 4. Conditions Precedent. the effectiveness of this Agreement is subject to the following: (a) The Agent shall have received: (i) eight (8) counterparts of this Agreement duly executed by all signatories hereto; (ii) payment of an amendment fee in the aggregate amount of 1/8 of 1% of the Total Revolving Credit Commitment in immediately available funds payable to the Lenders pro rata based on their respective Applicable Commitment Percentages; (iii) copies of all additional agreements, instruments and documents which the Agent may reasonably request, such documents, when appropriate, to be certified by appropriate governmental authorities. (b) The Younkers Acquisition shall have closed and be effective and the Agent shall have received a certified copy of all Articles of Merger filed in connection therewith as evidence thereof. (c) All proceedings of the Borrower relating to the matters provided for herein shall be satisfactory to the Lenders, the Agent and their counsel. 5. Younkers Acquisition Charges. The parties hereto agree that certain one-time extraordinary charges incurred by the Borrower as a result of the Younkers Acquisition (the "Extraordinary Acquisition Charges") will be excluded from the covenant compliance calculations contained in Sections 8.01-8.06 of the Credit Agreement; provided, the Agent shall make the final determination as to whether specific items qualify as Extraordinary Acquisition Charges. 6. Effective Date. This Agreement shall be effective as of the effective date of the Younkers Acquisition. 7. Entire Agreement. This Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and not one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as in this Agreement otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 8. Full Force and Effect of Agreement. Except as hereby specifically amended, modified, waived or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 10. Governing Law. This Amendment Agreement shall in all respects be governed by the laws and judicial decisions of the state of Tennessee. 11. Enforceability. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 12. Credit Agreement. All references in any of the Loan Documents to the Credit Agreement shall mean the Credit Agreement as amended hereby. 13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the Borrower, the Lenders and the Agent and their respective successors, assigns and legal representatives; provided, however, that the Borrower, without the prior consent of the Agent, may not assign any rights, powers, duties or obligations hereunder. 14. Consent of Guarantors. Each of the Guarantors by their execution and delivery hereof (i) consent and agree to the amendments to the Credit Agreement set forth herein and (ii) reaffirm their obligations set forth in each Guaranty. (signatures on following pages) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER: ATTEST: PROFFITT, INC. By:___________________ By:_________________________ Name:_________________ Name:_______________________ Title:________________ Title:______________________ (CORPORATE SEAL) LENDERS: NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION By:_________________________ Name:_______________________ Title:______________________ FIRST AMERICAN NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ FIRST TENNESSEE BANK NATIONAL ASSOCIATION By:_________________________ Name:_______________________ Title:______________________ SUNTRUST BANK, ATLANTA By:_________________________ Name:_______________________ Title:______________________ By:_________________________ Name:_______________________ Title:______________________ (Signature Page 1 of 2) DEPOSIT GUARANTY NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ HIBERNIA NATIONAL BANK By:_________________________ Name:_______________________ Title:______________________ AGENT: NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as Agent for the Lenders By:_________________________ Name:_______________________ Title:______________________ Acknowledged, agreed and consented to, this the 29th day of January, 1996. PROFFITT'S INVESTMENTS, INC. PDS AGENCY, INC. McRAE'S, INC. McRAE'S OF ALABAMA, INC. PARKS ENTERPRISES, INC. PARKS-BELK COMPANY By:_________________________ Name:_______________________ Title:______________________ (Signature Page 2 of 2) EX-10.8 5 NationsBank 600 Peachtree Street, N.E. 21st Floor Atlanta, GA 30308-2213 June 8, 1995 Mr. James E. Glasscock Executive Vice President & Chief Financial Officer Proffitt's, Inc. P.O. Box 20080 Jackson, MS 39209 RE: Credit Facilities and Reimbursement Agreement by and among Proffitt's, Inc., NationsBank of Texas, N.A., as Agent, and the Lenders dated March 31, 1994, (the "Credit Agreement") Dear Jim: In accordance with Section 2.16 of the above referenced Credit Agreement, please accept this letter as confirmation that the Revolving Credit Termination Date has been extended to March 31, 1998. All other terms and conditions of the Credit Agreement shall remain in full force and effect. As always, please feel free to give me a call with any questions and/or comments you may have on (404) 607-5530. Sincerely, Shawn B. Welch Vice President EX-10.12 6 ENTERPRISE FUNDING CORPORATION c/o MERRILL LYNCH MONEY MARKETS, INC. World Financial Center - South Tower 225 Liberty Street New York, New York 10281 May 11, 1995 Mr. James E. Glasscock Executive Vice President & CFO Proffitt's, Inc./McRae's, Inc. Highway 80-West Jackson, Mississippi 39209 Dear Jim: At your request, Enterprise Funding Corporation (the "Company") hereby agrees to amend the Transfer and Administration Agreement between the Company and McRae's, Inc. dated January 27, 1993 (incorporating all amendments to date, the "Agreement") as follows: In Section 9.01, clause (19) of the Agreement, subparagraph (i) shall be deleted in its entirety and replaced by the following: (i) Proffitt's, Inc. permits the sum of Consolidated Tangible Net Worth and Consolidated Subordinated Debt at any time to be less than (x) $210,000,000, at any time from March 31, 1994 until (but excluding) the last day of fiscal quarter immediately following the fiscal quarter in which March 31, 1994 occurs, and (y) as of the last date of the fiscal quarter immediately following the fiscal quarter in which March 31, 1994 occurs and of each succeeding fiscal quarter of Proffitt's, Inc. (each such fiscal quarter in which such last day occurs being a "Prior Period") and until (but excluding) the last day of the fiscal quarter of Proffitt's, Inc. immediately following the Prior Period, the sum of (A) the amount of Consolidated Tangible Net Worth and Consolidated Subordinated Debt required to be maintained pursuant to this subsection during the Prior Period plus (B) an amount equal to one hundred percent (100%) of the Net Proceeds of each sale of capital stock or other equity interest (including those instruments and securities exchangeable, convertible, or exercisable into capital stock or other equity interests) in Proffitt's, Inc. or any Subsidiary during the Prior Period, plus (C) an amount equal to one hundred percent (100%) of the Net Proceeds of each sale of Consolidated Subordinated Debt during the Prior Period, plus (D) an amount equal to seventy-five percent (75%) of Consolidated Net Income of Proffitt's, Inc. or any Subsidiary (without deduction for any negative Consolidated Net Income) during the Prior Period. The Transferor hereby represents and warrants that the representations and warranties of the Transferor set forth in Section 3.01 of the Agreement are true and correct as of the date hereof (except those representations and warranties set forth therein which specifically relate to an earlier date). All other terms and conditions of the Agreement not amended by this letter agreement shall remain unchanged and in full force and effect. This letter agreement shall be considered effective as of December 12, 1994. Please signify your concurrence with this amendment to the Agreement by signing the enclosed duplicate original of this letter and returning it to Michelle M. Heath, NationsBank Investment Banking, NationsBank Corporate Center - 10th Floor, 100 N. Tryon Street, Charlotte, North Carolina 28255. Sincerely, ENTERPRISE FUNDING CORPORATION By: Name: Thomas S. Dunstan Title: Vice President ACCEPTED AND AGREED this 28th day of May, 1995 MCRAE'S, INC. By: Name: James E. Glasscock Title: Executive Vice President & CFO EX-10.13 7 ENTERPRISE FUNDING CORPORATION c/o MERRILL LYNCH MONEY MARKETS, INC. World Financial Center - South Tower 225 Liberty Street New York, New York 10281 September 30, 1995 Mr. James E. Glasscock Executive Vice President & CFO Proffitt's, Inc./McRae's, Inc. Highway 80-West Jackson, Mississippi 39209 Dear Jim: At your request, Enterprise Funding Corporation (the "Company") hereby agrees to amend the Transfer and Administration Agreement between the Company and McRae's, Inc. dated January 27, 1993 (incorporating all amendments to date, the "Agreement") as follows: In Section 1.01 of the Agreement, the definition of Termination Date shall be amended such that the reference to the date appearing in such definition shall be amended to read "March 31, 1997". The Tranferor hereby represents and warrants that the representations and warranties of the Transferor set forth in Section 3.01 of the Agreement are true and correct as of the date hereof (except those representations and warranties set forth therein which specifically relate to an earlier date). All other terms and conditions of the Agreement not amended by this letter agreement shall remain unchanged and in full force and effect. This letter agreement shall be effective as of the date hereof. Please signify your concurrence with this amendment to the Agreement by signing the enclosed duplicate original of this letter and returning it to Michelle M. Heath, NationsBank, N.A. (Carolinas), NationsBank Corporate Center - 10th Floor, 100 N. Tryon St., Charlotte, NC 28255. Sincerely, ENTERPRISE FUNDING CORPORATION By: Name: Thomas S. Dunstan Title: Vice President Proffitt's, Inc./McRae's, Inc. ACCEPTED AND AGREED this 28th day of September, 1995. MCRAE'S, INC. BY: Name: James E. Glasscock Title: Executive Vice President & CFO EX-10.14 8 ENTERPRISE FUNDING CORPORATION c/o MERRILL LYNCH MONEY MARKETS, INC. World Financial Center - South Tower 225 Liberty Street New York, New York 10281 October 25, 1995 Mr. James E. Glasscock Executive Vice President & CFO McRae's, Inc./Proffitt's, Inc. Highway 80-West Jackson, Mississippi 39209 Dear Jim: At your request, Enterprise Funding Corporation (the "Company") hereby agrees to amend as of the date hereof the Transfer and Administration Agreement between the Company and McRae's, Inc. dated January 27, 1993 (incorporating all amendments to date, the "Agreement"). Capitalized terms used herein and not otherwise defined shall have those meanings assigned in the Agreement. In Section 9.01, Clause 19 of the Agreement, the table in subparagraph (iii) shall be deleted in its entirety and replaced by the following: Period Ratio November 1 through January 31, 1997 1.50 to 1.00 February 1, 1997 through May 2, 1997 1.60 to 1.00 May 3, 1997 and thereafter 1.75 to 1.00 In Section 9.01, Clause 19 of the Agreement, the table in subparagraph (iv) shall be deleted in its entirety and replaced by the following: Period Ratio November 1 through January 27, 1995 4.50 to 1.00 January 28, 1995 3.50 to 1.00 January 29, 1995 through February 2, 1996 3.90 to 1.00 February 3, 1996 through January 31, 1997 3.60 to 1.00 February 1, 1997 3.25 to 1.00 First, second and fourth quarter of each Fiscal Year commencing with Fiscal Year 1997 3.25 to 1.00 Third quarter of each Fiscal Year commencing with Fiscal Year 1997 3.50 to 1.00 In Section 1.01 of the Agreement, subparagraph (g) of the definition of "Eligible Account" shall be deleted in its entirety and replaced by the following: "(g) the Obligor on which has not been identified by the Servicer or the Transferor in its computer files as having (i) died, (ii) commenced, or had commenced in respect of such Obligor, a case, action or proceeding under any law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking relief with respect to such Obligor's debts, or seeking to have such Obligor adjudicated bankrupt or insolvent, or to have a receiver, trustee, custodian or other similar official appointed for such Obligor or for all or any substantial part of such Obligor's assets, or (iii) made a general assignment of such Obligor's assets for the benefit of such Obligor's creditors, which assignment is then in full force and effect, or (iv) which has not been identified by the Servicer or the Transferor in its computer files as having sought consumer credit counseling services." The Transferor hereby represents and warrants that the representations and warranties of the Transferor set forth in Section 3.01 of the Agreement are true and correct as of the date hereof (except those representations and warranties set forth therein which specifically relate to an earlier date). All other terms and conditions of the Agreement not amended by this letter agreement shall remain unchanged and in full force and effect. This letter agreement shall be effective as of October 25, 1995. Please signify your concurrence with this amendment to the Agreement by signing the enclosed duplicate original of this letter and returning it to Michelle M. Heath, NationsBank Structured Finance, NationsBank Corporate Center - 10th Floor, 100 N. Tryon Street, Charlotte, North Carolina 28255. Sincerely, ENTERPRISE FUNDING CORPORATION By: Name: Thomas S. Dunstan Title: Vice President ACCEPTED AND AGREED this 25th day of October, 1995 McRAE'S, INC. By: Name: James E. Glasscock Title: Executive Vice President & CFO EX-10.53 9 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement ("Agreement") is entered into as of the 1st day of April 1996, by and between Proffitt's, Inc. ("Company"), and James VanNoy ("Executive"). Company and Executive agree as follows: 1. Employment. Company hereby employs Executive as Senior Vice President\Systems Support 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 $195,000 per year (beginning on April 1, 1996). In addition, the Board of Directors of Company shall, in good faith, consider granting increases in such Base Salary based upon such factors as Executive's performance and the growth and/or profitability of Company. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law. (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus of up to 30% 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 shall be and hereby is granted a non-qualified option as of March 27, 1996, ("Option") to purchase five thousand (5,000) shares of Company common stock at an option price equal to the closing price of the stock on March 27, 1996, as reported in the Wall Street Journal. The Option is granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable on or after March 27, 1996, (the "Grant Date") to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. As long as Executive remains employed by Company, the Option may be exercised (as provided in the 1994 LTIP) up to ten (10) years from the Grant Date. Any portion of the Option not exercised within said ten (10) year period shall expire. Notwithstanding the preceding paragraph, the Option granted under this Agreement shall not be exercisable if Executive has been demoted from the position stated in paragraph 1 or otherwise been reassigned duties at a lower level in the Company. In the case of such a demotion or reassignment of duties at a lower position, Company retains the right to reduce the number of option shares granted under this Agreement and, in such a case, vesting will occur as if the reduced number of option shares had been granted on the Grant Date. (d) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the 1994 LTIP) any Options granted to Executive prior to such Change of Control shall immediately vest. 4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position. 5. Term. The term of this Agreement shall be for two (2) years, beginning April 1, 1996, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid thereafter in regular payroll installments. In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any plan maintained by Company. 6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors. (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate. 7. Change in Control. If Executive's employment is terminated primarily as a result of a Change in Control of Company or a Potential Change in Control of Company as defined below, Executive shall receive his Base Salary (at the rate in effect at the time of termination) for a period of two years or through the end of the term of this Agreement, whichever is longer. As used herein, the term "Change in Control" means the happening of any of the following: (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period. As used herein, the term "Potential Change in Control" means the happening of any of the following: (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement. 8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year. 9. Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9: (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company. 10. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt. If to Executive: James VanNoy 124 Rollingmeadows Jackson, MS 39211 If to Company: Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. (d) Entire Agreement. Except for any prior grants of options or other forms of incentive compensation evidenced by a written instrument, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach. (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROFFITT'S, INC. BY: _____________________ James A. Coggin President _____________________ James VanNoy Executive EX-10.54 10 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement ("Agreement") is entered into as of the 1st day of April 1996, by and between Proffitt's, Inc. ("Company"), and David Baker ("Executive"). Company and Executive agree as follows: 1. Employment. Company hereby employs Executive as Senior Vice President of Operations 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 $195,000 per year (beginning on April 1, 1996). In addition, the Board of Directors of Company shall, in good faith, consider granting increases in such Base Salary based upon such factors as Executive's performance and the growth and/or profitability of Company. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law. (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus of up to 30% 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 shall be and hereby is granted a non-qualified option as of March 27, 1996, ("Option") to purchase five thousand (5,000) shares of Company common stock at an option price equal to the closing price of the stock on March 27, 1996, as reported in the Wall Street Journal. The Option is granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable on or after March 27, 1996, (the "Grant Date") to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. As long as Executive remains employed by Company, the Option may be exercised (as provided in the 1994 LTIP) up to ten (10) years from the Grant Date. Any portion of the Option not exercised within said ten (10) year period shall expire. Notwithstanding the preceding paragraph, the Option granted under this Agreement shall not be exercisable if Executive has been demoted from the position stated in paragraph 1 or otherwise been reassigned duties at a lower level in the Company. In the case of such a demotion or reassignment of duties at a lower position, Company retains the right to reduce the number of option shares granted under this Agreement and, in such a case, vesting will occur as if the reduced number of option shares had been granted on the Grant Date. (d) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the 1994 LTIP) any Options granted to Executive prior to such Change of Control shall immediately vest. 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 one (1) year, beginning April 1, 1996, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid thereafter in regular payroll installments. In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any plan maintained by Company. 6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors. (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate. 7. Change in Control. If Executive's employment is terminated primarily as a result of a Change in Control of Company or a Potential Change in Control of Company as defined below, Executive shall receive his Base Salary (at the rate in effect at the time of termination) for a period of one year or through the end of the term of this Agreement, whichever is longer. As used herein, the term "Change in Control" means the happening of any of the following: (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or (c) During any period of two consecutive years, individuals who at the beginning of any such periodconstitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period. As used herein, the term "Potential Change in Control" means the happening of any of the following: (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement. 8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year. 9. Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9: (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company. 10. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt. If to Executive: David Baker 5359 Briarfield Road Jackson, MS 39211 If to Company: Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. (d) Entire Agreement. Except for any prior grants of options or other forms of incentive compensation evidenced by a written instrument, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach. (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROFFITT'S, INC. BY: _____________________ James A. Coggin President _____________________ Dave Baker Executive EX-10.59 11 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into as of the 2nd day of February 1996, by and between Proffitt's, Inc. ("Company"), and William White ("Executive"). Company and Executive agree as follows: 1. Employment. Company hereby employs Executive as Senior Vice President of Systems Development 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 $155,000 per year (beginning on February 4, 1996). In addition, the Board of Directors of Company shall, in good faith, consider granting increases in such Base Salary based upon such factors as Executive's performance and the growth and/or profitability of Company. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law. (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus of up to 30% 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 shall be and hereby is granted a non-qualified option as of February 4, 1996, ("Option") to purchase ten thousand (10,000) shares of Company common stock at an option price equal to the closing price of the stock on February 2, 1996, as reported in the Wall Street Journal. The Option is granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable on or after February 4, 1996, (the "Grant Date") to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. The Option may be exercised (as provided in the 1994 LTIP) up to ten (10) years from the Grant Date. Any portion of the Option not exercised within said ten (10) year period shall expire. Notwithstanding the preceding paragraph, the Option granted under this Agreement shall not be exercisable if Executive has been demoted from the position stated in paragraph 1 or otherwise been reassigned duties at a lower level in the Company. In the case of such a demotion or reassignment of duties at a lower position, Company retains the right to reduce the number of option shares granted under this Agreement and, in such a case, vesting will occur as if the reduced number of option shares had been granted on the Grant Date. (d) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the 1994 LTIP) any Options granted to Executive prior to such Change of Control shall immediately vest. 4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position. 5. Term. The term of this Agreement shall be for two (2) years, beginning February 4, 1996, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid thereafter in monthly installments. In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any plan maintained by Company. 6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors. (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate. 7. Change in Control. If Executive's employment is terminated primarily as a result of a Change in Control of Company or a Potential Change in Control of Company as defined below, Executive shall receive his Base Salary (at the rate in effect at the time of termination) for a period of two years or through the end of the term of this Agreement, whichever is longer. As used herein, the term "Change in Control" means the happening of any of the following: (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period. As used herein, the term "Potential Change in Control" means the happening of any of the following: (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement. 8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year. 9. Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9: (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company. 10. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt. If to Executive: William White c/o Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 If to Company: Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. (d) Entire Agreement. Except for any prior grants of options or other forms of incentive compensation evidenced by a written instrument, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto (and between Younkers, Inc. and Executive) with respect to employment of Executive by Company or Younkers, Inc., and contains all of the covenants and agreements between the parties, and between Younkers, Inc. and Executive, with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach. (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROFFITT'S, INC. BY: _____________________ James A. Coggin President _____________________ William White Executive EX-10.60 12 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into as of the 2nd day of February 1996, by and between Proffitt's, Inc. ("Company"), and John White ("Executive"). Company and Executive agree as follows: 1. Employment. Company hereby employs Executive as Senior Vice President of Profit Improvement and Special Projects, reporting to the President of the 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 $175,000 per year (beginning on February 4, 1996). In addition, the Board of Directors of Company shall, in good faith, consider granting increases in such Base Salary based upon such factors as Executive's performance and the growth and/or profitability of Company. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law. (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus of up to 30% 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 shall be and hereby is granted a non-qualified option as of February 4, 1996, ("Option") to purchase twelve thousand five hundred (12,500) shares of Company common stock at an option price equal to the closing price of the stock on February 2, 1996, as reported in the Wall Street Journal. The Option is granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable on or after February 4, 1996, (the "Grant Date") to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. The Option may be exercised (as provided in the 1994 LTIP) up to ten (10) years from the Grant Date. Any portion of the Option not exercised within said ten (10) year period shall expire. Notwithstanding the preceding paragraph, the Option granted under this Agreement shall not be exercisable if Executive has been demoted from the position stated in paragraph 1 or otherwise been reassigned duties at a lower level in the Company. In the case of such a demotion or reassignment of duties at a lower position, Company retains the right to reduce the number of option shares granted under this Agreement and, in such a case, vesting will occur as if the reduced number of option shares had been granted on the Grant Date. (d) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the 1994 LTIP) any Options granted to Executive prior to such Change of Control shall immediately vest. 4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position. 5. Term. The term of this Agreement shall be for two (2) years, beginning February 4, 1996, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid thereafter in monthly installments. In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any plan maintained by Company. 6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects egatively on Company, provided that Executive shall first be provided with written notice of the claim and with an pportunity to contest said claim before the Board of Directors; or (iii) Executive's material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors. (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate. 7. Change in Control. If Executive's employment is terminated primarily as a result of a Change in Control of ompany or a Potential Change in Control of Company as defined below, Executive shall receive his Base Salary (at the rate in effect at the time of termination) for a period of two years or through the end of the term of this Agreement, whichever is longer. As used herein, the term "Change in Control" means the happening of any of the following: (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then utstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period. As used herein, the term "Potential Change in Control" means the happening of any of the following: (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement. 8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year. 9. Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9: (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company. 10. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt. If to Executive: John White c/o Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 If to Company: Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. (d) Entire Agreement. Except for any prior grants of options or other forms of incentive compensation evidenced by a written instrument, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto (and between Younkers, Inc. and Executive) with respect to employment of Executive by Company or Younkers, Inc., and contains all of the covenants and agreements between the parties, and between Younkers, Inc. and Executive, with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach. (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROFFITT'S, INC. BY: _____________________ James A. Coggin President _____________________ John White Executive EX-10.61 13 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into as of the 2nd day of February 1996, by and between Proffitt's, Inc. ("Company"), and Tom R. Amerman ("Executive"). Company and Executive agree as follows: 1. Employment. Company hereby employs Executive as Executive Vice President of Special Projects 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 $300,000 per year (beginning on February 4, 1996) -- $200,000 per year will be compensation for services and $100,000 per year will be compensation for cancellation of Executive's Severance Agreement with Younkers, Inc. dated January 8, 1995. 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) Incentive Compensation. Executive shall be and hereby is granted a non-qualified option as of February 4, 1996, ("Option") to purchase twenty-five thousand (25,000) shares of Company common stock at an option price equal to the closing price of the stock on February 4, 1996, as reported in the Wall Street Journal. The Option is granted pursuant to Company's 1994 Long- Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable on or after February 4, 1996, (the "Grant Date") to the extent of one- third of the shares covered thereby; exercisable to the extent of an additional one-third of the shares covered thereby on and after the first anniversary of the Grant Date; and exercisable to the extent of an additional one-third of the shares covered thereby on and after the second anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. The Option may be exercised (as provided in the 1994 LTIP) up to ten (10) years from the Grant Date. Any portion of the Option not exercised within said ten (10) year period shall expire. Notwithstanding the preceding paragraph, the Option granted under this Agreement shall not be exercisable if Executive has been demoted from the position stated in paragraph 1 or otherwise been reassigned duties at a lower level in the Company. In the case of such a demotion or reassignment of duties at a lower position, Company retains the right to reduce the number of option shares granted under this Agreement and, in such a case, vesting will occur as if the reduced number of option shares had been granted on the Grant Date. (c) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the 1994 LTIP) any Options granted to Executive prior to such Change of Control shall immediately vest. (d) Other Compensation. Company will pay Executive $100,000 before February 15, 1996, as compensation for cancellation of Executive's Severance Agreement with Younkers, Inc. dated January 8, 1995. (e) Bonus. Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly bonus up to 30% of his Base Salary based upon certain objective criteria, set in advance, all as approved by the Board of Directors. 4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position. 5. Term. The term of this Agreement shall be for two (2) years, beginning February 4, 1996, provided, however, that Company may terminate this Agreement at any time upon hirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid thereafter in monthly installments. In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any plan maintained by Company. 6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have beenexhausted 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 egatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors. (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate. 7. Change in Control. If Executive's employment is terminated primarily as a result of a Change in Control of Company or a Potential Change in Control of Company as defined below, Executive shall receive his Base Salary (at the rate in effect at the time of termination) for a period of two years or through the end of the term of this Agreement, whichever is longer. As used herein, the term "Change in Control" means the happening of any of the following: (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period. As used herein, the term "Potential Change in Control" means the happening of any of the following: (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement. 8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year. 9. Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9: (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company. 10. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt. If to Executive: Tom Amerman c/o Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 If to Company: Proffitt's, Inc. Post Office Box 9388 Alcoa, TN 37701 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. (d) Entire Agreement. Except for any prior grants of options or other forms of incentive compensation evidenced by a written instrument, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto (and between Younkers, Inc. and Executive) with respect to employment of Executive by Company or Younkers, Inc., and contains all of the covenants and agreements between the parties, and between Younkers, Inc. and Executive, with respect to such employment. Specifically, this Agreement supersedes the Severance Agreement between Younkers, Inc. and Tom Amerman dated January 8, 1995. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach. (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROFFITT'S, INC. BY: _____________________ James A. Coggin President _____________________ Tom R. Amerman Executive EX-10.62 14 EMPLOYMENT AGREEMENT AGREEMENT, dated as of October 22, 1995, by and between PROFFITT'S, INC., a Tennessee corporation (the "Company"), and W. THOMAS GOULD (the "Executive"). WHEREAS, the Company, BALTIC MERGER CORPORATION ("Merger Sub"), and YOUNKERS, INC. ("Younkers"), a Delaware corporation, have entered into an Agreement and Plan of Merger, dated as of October 22, 1995 (the "Merger Agreement") providing for the merger of Merger Sub with and into Younkers; WHEREAS, the Company desires to employ, as of the Effective Time (as such term is defined in the Merger Agreement), the Executive as Vice Chairman of the Company, and as Chairman of Younkers, and the Executive desires to serve the Company in this role; NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I Employment Section 1.1.Position. The Company hereby agrees to employ Executive, and Executive hereby agrees to serve the Company, as Vice Chairman of the Company, subject to the direction of the Chief Executive Officer of the Company ("CEO"), on the terms and conditions set forth herein. In addition to its obligations under Section 6.1(g) of the Merger Agreement, the Company agrees to appoint the Executive to both the Board of Directors of the Company and the Board of Directors of Younkers until their next annual meetings, and thereafter shall, subject to fiduciary concerns, utilize its best efforts to have Executive nominated for reelection to each of the Boards during his employment under this Agreement. Section 1.2.Duties. For the period the Executive is employed by the Company hereunder, the Executive shall devote his reasonable time and attention in advising the CEO with respect to matters relating to the transaction of the business of the Company as the CEO shall reasonably request. Notwithstanding the foregoing, the Executive may serve as a member of the Board of Directors and the Executive Committee of both (i) the National Retail Federation, and (ii) Frederick Atkins, Inc. Additionally, the Executive may participate in other endeavors which in the determination of the Board of Directors of the Company (the "Board") do not unreasonably interfere with the business of the Company or the performance by Executive of his duties hereunder. Section 1.3.Term. The term of this Agreement and the effectiveness thereof will commence on the Effective Date and end on the fifth anniversary of the Effective Date (the "Term"). For purposes of this Agreement, the "Effective Date" shall be the date of the occurrence of the Effective Time of the Merger Agreement. Section 1.4.Working Facilities. The Executive shall be provided with such office facilities and services as are customary for and commensurate with his position at the Company and are appropriate for the performance of his duties, including without limitation, an Executive Assistant at the principal executive offices of the Company in Alcoa, Tennessee, and at any of the mutually agreed upon places of employment under Section 1.5. Section 1.5.Place of Performance. Executive's employment shall be primarily based at the principal executive offices of the Company in Alcoa, Tennessee, or at any other mutually agreed upon place of employment, or by telephone. Section 1.6.Non-competition; Unauthorized Disclosure. (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of two (2) years thereafter, Executive: (i) shall not engage in any activities, whether as employer, proprietor, partner, stockholder (other than the holder of less than 5% of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market, director, officer, employee or otherwise, in competition with (A) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (B) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period; (ii) shall not solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 1.6: (i) the covenants contained in paragraph (i) and (ii) of Section 1.6(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of the Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 1.6, it is expressly agreed by Executive and the Company that such other remedies cannot fully compensate the Company for any such violation and that the Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 1.6, 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 1.6 shall survive the conclusion of Executive's employment by Company. ARTICLE II Compensation Section 2.1.Base Compensation. The Company shall pay to the Executive $750,000 per year, subject to periodic review for increases ("base compensation"), as consideration for: (a) the cancellation of the Severance Agreement entered into between the Executive and Younkers, Inc. dated January 8, 1995, (b) the cancellation of the Employment Agreement between the Executive and Younkers, Inc. dated April 7, 1995, (c) compensation for services rendered as an officer of Proffitt's, Inc. and (d) in consideration of the non-competition provisions in Section 1.6 of this Agreement, all as allocated on Exhibit A attached hereto as mutually agreed by the parties hereto. Additionally, the Company will grant to the Executive such options as provided in Section 2.3 of this Agreement as compensation and in consideration of items (c) and (d). Such $750,000 shall be paid pursuant to the Company's normal payroll practices for senior management of the Company. Section 2.2.Incentive Compensation. The Executive will be eligible to participate in the Company's bonus or similar incentive plans for senior management, on such terms and conditions as are established from time to time by the Compensation Committee of the Board; provided, however, that Executive's actual participation, as well as the extent of his participation, in such plans shall (as is the case with all other senior management) be determined by the Compensation Committee, in its sole discretion. Section 2.3.Stock Options. The Company shall grant on the Effective Date to the Executive an option to purchase 100,000 shares of the common stock of the Company (the "Option") under the Company's 1994 Long-Term Incentive Plan ("LTIP"), unless the Company and the Executive agree to an alternative arrangement to compensate the Executive. The exercise price of the Option shall be equal to the closing price at the end of the first business day coincident with or following the Effective Date (the "Grant Date"). Pursuant to the Company's policies for senior executives, the Option shall be exercisable on the Grant Date to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. If Executive's employment is terminated pursuant to this Agreement, then all portions of this Option shall become immediately exercisable. Section 2.4.Benefits and Perquisites. Executive shall participate in all employee pension and welfare benefit plans, programs, and arrangements, and shall receive all other fringe benefits as are from time to time made generally available to the senior management of the Company. The Executive shall be entitled to take time off for vacation or illness in accordance with the Company's policies with respect thereto established from time to time with respect to its senior management. Section 2.5.Expense Reimbursements. All travel and other expenses incurred by the Executive in connection with the performance of services hereunder shall be paid by the Company in accordance with the Company's then applicable customary expense reimbursement policy. If such expenses are paid in the first instance by the Executive, the Company will reimburse the Executive for all such expenses upon the Executive's presentation of an itemized account of such expenditures in a form acceptable to the Company. Section 2.6.Miscellaneous. The entire amount of base compensation hereunder shall be treated as base salary for purposes of any incentive plan under Section 2.2 or benefit plan under Section 2.4. To the extent Executive owes any self-employment tax or state tax with respect to the payments under Section 2.1 or 2.2 which would not have been owed had such payments been treated as base salary, the Company shall reimburse Executive in an amount such that after payment by Executive of all taxes on such amounts Executive retains an amount of such reimbursement equal to the amount of such additional tax owed as a result of not treating the entire amount as base salary. ARTICLE III Termination of Employment Section 3.1.Accrued Amounts. Either the Company or Executive may terminate the Executive's employment relationship before the expiration of the Term by providing the other party written notice at least thirty (30) calendar days prior to the date on which such termination is to be effective; provided, however, that the Company and the Executive agree not to provide such written notice for a period of one (1) year from the Effective Time. Following the termination of Executive's employment hereunder for any reason whatsoever, the Company shall pay Executive his unpaid base compensation accrued through the Date of Termination and any unpaid amounts owed to Executive pursuant to the terms and conditions of the employee pension and welfare benefit plans, programs, and arrangements of the Company at the time such payments are due. For purposes of this Agreement, "Date of Termination" shall mean the date of Executive's death or the date otherwise set forth on a notice of termination provided by one party hereof to the other (which shall be no earlier than 30 days following such notice). Section 3.2.Severance Amounts. If the Executive's employment terminates for any reason, other than by the Company upon conviction of the Executive of, or plea by the Executive of guilty or nolo contendere to, a felony involving moral turpitude with respect to the business of the Company, the Company shall, in addition to the payments under Section 3.1, for the duration of the balance of the Term, (a) continue to pay Executive (or his designated beneficiary) his base compensation (at the rate in effect on the day prior to the Executive's Date of Termination), payable at such intervals as such base compensation would ordinarily be paid, (b) continue to allow the Executive (or his designated beneficiary) to exercise his Option (and any subsequently granted options) to purchase common stock of the Company pursuant to the terms set forth in the LTIP, and (c) continue to provide medical and life insurance coverage in accordance with such Company's programs for similarly situated senior management (and their dependents) as it may exist from time to time. If the Executive's employment is terminated by his death, the Company shall direct that all amounts described in Section 3.1 and this Section 3.2 be paid to the Executive's designated beneficiaries, or to the executors, administrators or other legal representatives of the Executive (in such order of priority) as the Executive may have filed with the Company. Section 3.3.Gross-up Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its affiliated companies to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 3.3) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) All determinations required to be made under this Section 3.3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3.3, shall be paid by the Company to Executive within five (5) days of the receipt of the Determination. The Determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding which has been finally and conclusively resolved that the Executive is required to make payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive, together with interest on such amount at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date such amount would have been paid to Executive until the date of payment. ARTICLE IV Miscellaneous Section 4.1.Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Section 4.2.Binding Agreement. This Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. Section 4.3.Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: W. Thomas Gould Younkers, Inc. 115 North Calderwood Alcoa, Tennessee 37701-9388 If to the Company: Proffitt's, Inc. 3455 Highway 80 West Jackson, Mississippi 39209 Attn: Brian J. Martin, Esquire or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. Section 4.4.Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and such officer of the Company as may be specifically designated by its Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. Section 4.5.Applicable Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee without regard to its conflicts of law principles. Section 4.6.Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Section 4.7.No Mitigation. The Executive shall not be required to mitigate amounts payable pursuant to this Agreement hereof by seeking other employment or otherwise, and no amount shall be subject to mitigation. Section 4.8.Withholding Taxes. The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. Section 4.9.Reimbursement of Legal Fees and Expenses. If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chemical Bank from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive's statement of such fees and expenses through the date of payment thereof. Section 4.10.Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein, including the Employment Agreement dated April 7, 1995, between Executive and Younkers, Inc. and the Severance Agreement dated January 8, 1995, between Executive and Younkers, Inc., is hereby terminated and cancelled. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. PROFFITT'S, INC. By: R. Brad Martin Chairman of the Board and and Chief Executive Officer ATTEST: By: James E. Glasscock Executive Vice President and Chief Financial Officer EXECUTIVE W. Thomas Gould EX-10.63 15 EMPLOYMENT AGREEMENT AGREEMENT, dated as of October 22, 1995, by and between PROFFITT'S, INC., a Tennessee corporation (the "Company"), and ROBERT M. MOSCO (the "Executive"). WHEREAS, the Company, BALTIC MERGER CORPORATION ("Merger Sub"), and Younkers, Inc. ("YOUNKERS"), a Delaware corporation, have entered into an Agreement and Plan of Merger, dated as of October 22, 1995 (the "Merger Agreement") providing for the merger of Merger Sub with and into Younkers; WHEREAS, the Company desires to employ, as of the Effective Time (as such term is defined in the Merger Agreement), the Executive as President and Chief Executive Officer of Younkers, and the Executive desires to serve the Company in these roles; NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I Employment Section 1.1.Position. The Company hereby agrees to employ Executive, and Executive hereby agrees to serve the Company, as President and Chief Executive Officer of Younkers, subject to the direction of the Chief Executive Officer of the Company, on the terms and conditions set forth herein. Section 1.2.Duties. For the period the Executive is employed by the Company hereunder, the Executive shall devote his full and undivided business time and attention to the transaction of the business of Younkers and the Company, and shall not engage in any other business activities except with the approval of the Board of Directors of the Company (the "Board"). Notwithstanding the foregoing, the Executive may participate in the affairs of any governmental, educational or other charitable institution so long as the Board does not determine that such activities unreasonably interfere with the business of the Company or the performance by Executive of his duties hereunder. Section 1.3.Term. The term of this Agreement and the effectiveness thereof will commence on the Effective Date and end on the third anniversary of the Effective Date (the "Term"). For purposes of this Agreement, the "Effective Date" shall be the date of the occurrence of the Effective Time of the Merger Agreement. Section 1.4.Working Facilities. The Executive shall be provided with such office facilities and services as are customary for and commensurate with his position at the Company and are appropriate for the performance of his duties. Section 1.5.Place of Performance. Executive's employment shall be based at the principal executive offices of Younkers in Des Moines, Iowa. Section 1.6.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 (A) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (B) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period; (ii) shall not solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged at any time during the term of this Agreement; and (iii)shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or her employment relationship in order to enter into competitive employment. (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive). (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 1.6: (i) the covenants contained in paragraph (i) and (ii) of Section 1.6(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited; (ii) without limiting the right of the Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 1.6, it is expressly agreed by Executive and the Company that such other remedies cannot fully compensate the Company for any such violation and that the Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; (iii)each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 1.6, 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 1.6 shall survive the conclusion of Executive's employment by Company. ARTICLE II Compensation Section 2.1.Base Compensation. The Company shall pay to the Executive, as compensation for his services hereunder, a minimum annual base salary of $450,000 (subject to periodic review for increases at the discretion of the Compensation Committee of the Board), with such salary to be paid pursuant to the Company's normal payroll practices for senior management of the Company. Section 2.2.Bonus. The Executive shall be entitled to receive with respect to each year of the Term an annual bonus ("Bonus") pursuant to the terms of the incentive plans of the Company available to senior management, on such terms and conditions as are established from time to time by the Compensation Committee of the Board in its sole discretion; provided, however, that the maximum target Bonus payable for any year shall not exceed 50% of the Executive's base salary for such year. Section 2.3.Benefits and Perquisites. Executive shall participate in all employee pension and welfare benefit plans, programs, and arrangements, and shall receive all other fringe benefits as are from time to time made generally available to the senior management of the Company. The Executive shall be entitled to take time off for vacation or illness in accordance with the Company's policies with respect thereto established from time to time with respect to its senior management. Section 2.4.Stock Options. The Company shall grant on the Effective Date to the Executive an option to purchase 50,000 shares of the common stock of the Company (the "Option") under Company's 1994 Long-Term Incentive Plan ("LTIP"), unless the Company and the Executive agree to an alternative arrangement to compensate the Executive. The exercise price of the Option shall be equal to the closing price at the end of the first business day coincident with or following the Effective Date (the "Grant Date"). Pursuant to the Company's policies applicable to senior executives, the Option shall be exercisable on the Grant Date to the extent of 20% of the shares covered thereby; exercisable to the extent of an additional 20% of the shares covered thereby on and after the first anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the second anniversary of the Grant Date; exercisable to the extent of an additional 20% of the shares covered thereby on and after the third anniversary of the Grant Date; and exercisable to the extent of any remaining shares on and after the fourth anniversary of the Grant Date; provided, however, that no portion of the Option shall be exercisable any earlier than six months from the Grant Date. If Executive's employment is terminated without Cause by the Company or for Good Reason by the Executive, as such phrases are used in Section 3.1, provided, however, that a voluntary termination pursuant to the last sentence of Section 3.1 shall not be Good Reason for purposes of this sentence, then all portions of this Option shall become immediately exercisable. Section 2.5.Expense Reimbursements. All travel and other expenses incurred by the Executive in connection with the performance of services hereunder shall be paid by the Company in accordance with the Company's then applicable customary expense reimbursement policy. If such expenses are paid in the first instance by the Executive, the Company will reimburse the Executive for all such expenses upon the Executive's presentation of an itemized account of such expenditures in a form acceptable to the Company. ARTICLE III Termination of Employment Section 3.1.Events of Termination. The Executive's employment hereunder may be terminated under the following circumstances: (a) Death. The Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness ("Disability"), the Executive shall have been absent from his duties hereunder on a full-time basis for six (6) consecutive months, and within thirty (30) days after written Notice of Termination is given in accordance with Section 4.3 (which may occur before or after the end of such six (6) month period) the Executive shall not have returned to the performance of his duties hereunder on a full-time basis, the Company may terminate the Executive's employment hereunder. (c) Other Termination by the Company. The Company may terminate the Executive's employment hereunder for Cause or without Cause. For purposes of this Agreement, "Cause" shall mean (1) a material breach by Executive of the duties and responsibilities of Executive (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (2) conviction of the Executive of, or plea by the Executive of guilty or nolo contendere to, a felony involving moral turpitude with respect to the business of the Company. Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this subsection and specifying the particulars thereof in detail. (d) Termination by the Executive. The Executive may terminate his employment hereunder for Good Reason (as defined below) or voluntarily in the absence of Good Reason. For purposes of this Agreement, "Good Reason" shall, unless otherwise expressly consented to by the Executive in writing, mean: (i) a material reduction in the nature or status of the Executive's responsibilities, office or title from those in effect under this Agreement; or (ii) a reduction by the Company in the Executive's annual base salary or bonus opportunity as in effect pursuant to this Agreement or as the same may be increased from time to time; or (iii)the Executive's relocation to a work location which is more than fifty (50) miles from the location at which the Executive performed his duties for the Company as of the Effective Date; or (iv) the failure by the Company to continue to provide the Executive with benefits substantially equivalent to those to be received by the Executive pursuant to Section 2.3. Notwithstanding the foregoing, the voluntary termination of employment by the Executive during the first thirty (30) days following the first anniversary of the Effective Date shall also be considered a termination for "Good Reason" under the Agreement. Section 3.2.Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to Section 3.1(a) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 4.3. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Section 3.3.Termination Date. For purposes of this Agreement, "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to Section 3.1(b) above, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period) and (iii) if the Executive's employment is terminated pursuant to Sections 3.1(c) or 3.1(d) above, the date specified in the Notice of Termination, which shall be no earlier than thirty (30) days following the Notice of Termination, unless such termination shall be by the Company for Cause. Section 3.4.Compensation Upon Termination or During Disability. (a) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("Disability Period"), the Executive shall continue to receive his full base salary and bonus set forth in Sections 2.1 and 2.2 until his employment is terminated pursuant to Section 3.1(b), provided that payments so made to the Executive during the Disability Period shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company or under the Social Security disability insurance program. (b) If the Executive's employment shall be terminated due to death or Disability, or by the Company for Cause or by the Executive for other than Good Reason, the Company shall pay the Executive (or his beneficiary or estate), as soon as practicable, but within thirty (30) days following the Date of Termination, his base salary through the Date of Termination and any earned, but unpaid, bonus for the prior calendar year, and the Company shall have no further obligations to the Executive under this Agreement. (c) If (A) the Company shall terminate the Executive's employment other than for Disability pursuant to Section 3.1(b) or Cause or (B) the Executive shall terminate employment for Good Reason, then the Company shall pay to Executive (or Executive's beneficiary or estate) within thirty (30) days following the Date of Termination, as compensation for services rendered to the Company: (1) a lump-sum cash amount equal to the sum of (a) Executive's full annual base salary from the Company through the Date of Termination, (b) Executive's annual bonus in an amount at least equal to the greater of (A) the average bonus (annualized for any fiscal year consisting of less than twelve (12) full months) paid or payable, including by reason of any deferral, to Executive by the Company or Younkers, Inc. in respect of the three (3) fiscal years of the Company or Younkers, Inc. immediately preceding the fiscal year in which the Date of Termination occurs, or (B) 50% of Executive's target bonus for the fiscal year in which the Date of Termination occurs, multiplied by (C) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365) or three hundred sixty-six (366), as applicable, and (c) any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each cause to the extent not theretofore paid; (2) a lump-sum cash amount equal to (a) three (3) times Executive's highest annual rate of base salary from the Company or Younkers, Inc. in effect during the 12- month period prior to the Date of Termination, plus (b) three (3) times the greatest of (A) the average bonus (annualized for any fiscal year consisting of less than twelve (12) full months) paid or payable, including by reason of any deferral, to Executive by the Company or Younkers, Inc. in respect of the three (3) fiscal years of the Company or Younkers, Inc. immediately preceding the fiscal year in which the Date of Termination occurs or (B) 50% of Executive's target bonus for the fiscal year in which the Date of Termination occurs[; provided, however, that in the event there are fewer than thirty-six (36) whole months remaining from the Date of Termination to the date of Executive's 70th birthday, the amount calculated in accordance with this Section 3.4(c)(2) shall be reduced by multiplying such amount by a fraction the numerator of which is the number of months, including a partial month (with a partial month being expressed as a fraction the numerator of which is the number of days remaining in such month and the denominator of which is the number of days in such month), so remaining and the denominator of which is thirty-six (36)]; provided further, that any amount paid pursuant to this Section 3.4(c)(2) shall be paid in lieu of any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any severance plan, policy, employment agreement or arrangement of the Company; (3) if on the Date of Termination Executive shall not be fully vested in his accrued benefit under the Pension Plan, the Company shall pay to Executive within thirty (30) days following the Date of Termination a lump sum cash amount equal to the actuarial equivalent of his unvested accrued benefit under the Pension Plan as of such date. Such lump sum cash amount shall be computed using the same actuarial methods and assumptions then in use for purposes of computing benefits under the Pension Plan; provided that the interest rate used in making such computation shall not be greater than the interest rate permitted under Section 417(a) of the Internal Revenue Code of 1986, as amended (the "Code"), on the Date of Termination. "Pension Plan" means the defined benefit pension plan of the Company or Younkers, Inc. (or any successor plan) and any other employee benefit plans of the Company or Younkers, Inc. that require any minimum period of employment as a condition to the receipt of retirement benefits thereunder; (4) if on the Date of Termination Executive shall not be fully vested in the employer contributions made on his behalf under any defined contribution plan of the Company or Younkers, Inc., the Company shall pay to Executive within thirty (30) days following the Date of Termination a lump sum cash amount equal to the value of the unvested portion of such employer contributions; provided, however, that if any payment pursuant to this subparagraph may or would result in such payment being deemed a transaction which is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the Company shall make such payment so as to meet the conditions for an exemption from such Section 16(b) as set forth in the rules (and interpretative and no-action letters relating thereto) under Section 16. The value of any such unvested employer contributions shall be determined as of the Date of Termination; provided that if the common stock of the Company is traded on a national securities exchange or NASDAQ on the Date of Termination, the value of a share of common stock of the Company shall be the closing price on the national securities exchange or NASDAQ on the Date of Termination or, if such date is not a trading day, on the immediately preceding trading day; (5) For a period of three (3) years commencing on the Date of Termination, the Company shall continue to provide medical and life insurance coverage with respect to Executive and his dependents, with the same level of coverage, upon the same terms and otherwise to the same extent as such policies shall have been in effect immediately prior to the Date of Termination, and the Company and Executive shall share the costs of the continuation of such insurance coverage in the same proportion as such costs were shared immediately prior to the Date of Termination. (d) The maximum payments under this Section (including the value of any medical or life insurance coverage under Subsection (c)(5) above) shall not exceed the maximum amount that could be paid without imposition of an excise tax under Code Section 4999, assuming for purposes of this Subsection that all of the payments under this Section are parachute payments within the meaning of Code Section 280G. The determination of this limit and the reduction of any payments hereunder shall be determined by the Company's Accounting Firm (as defined in Section 3.5) consistent, and in accordance, with Section 3.5. Section 3.5.Excise Tax Limitation. (a) Notwithstanding anything contained in this Agreement or any other agreement or plan to the contrary, the payments and benefits provided to, or for the benefit of, Executive under this Agreement or under any other plan or agreement (the "Payments") shall be reduced (but not below zero) to the extent necessary so that no payment to be made, or benefit to be provided, to Executive or for his benefit under this Agreement or any other plan or agreement shall be subject to the imposition of excise tax under Section 4999 of the Code (such reduced amount is hereinafter referred to as the "Limited Payment Amount"). Unless Executive shall have given prior written notice specifying a different order to the Company, the Company shall reduce or eliminate the Payments to Executive by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Executive's rights and entitlements to any benefits or compensation. (b) All determinations required to be made under this Section 3.5 shall be made by the Company's public accounting firm (the "Accounting Firm"), which shall provide its calculations, together with detailed supporting documentation, both to the Company and Executive within fifteen (15) days after the receipt of notice from Executive that there has been a Payment (or at such earlier times as is requested by the Company) (collectively, the "Determination"). All fees, costs and expenses (including, but not limited to, the costs or retaining experts) of the Accounting Firm shall be borne by the Company. The Determination by the Accounting Firm shall be binding upon the Company and Executive. (c) If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding which has been finally and conclusively resolved, that Payments have been made to, or provided for the benefit of, Executive by the Company, which are in excess of the limitations provided in subsection (a) (hereinafter referred to as an "Excess Payment"), such Excess Payment shall be deemed for all purposes to be a loan to Executive made on the date Executive received the Excess Payment and Executive shall repay the Excess Payment to the Company on demand, together with interest on the Excess Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of Executive's receipt of such Excess Payment until the date of such repayment. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made under this Section 3.5. In the event that it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding which has been finally and conclusively resolved, that an Underpayment has occurred, the Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest on such amount at the applicable federal rate from the date such amount would have been paid to Executive until the date of payment. ARTICLE IV Miscellaneous Section 4.1.Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Section 4.2.Binding Agreement. This Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Section 4.3.Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: Robert M. Mosco Younkers, Inc. 7th and Walnut Street Des Moines, Iowa 50397 If to the Company: Proffitt's, Inc. 3455 Highway 80 West Jackson, Mississippi 39209 Attn:Brian J. Martin, Esquire or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. Section 4.4.Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and such officer of the Company, as may be specifically designated by its Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. Section 4.5.Applicable Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee without regard to its conflicts of law principles. Section 4.6.Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Section 4.7.No Mitigation. The Executive shall not be required to mitigate amounts payable pursuant to this Agreement hereof by seeking other employment or otherwise, and no amounts shall be subject to mitigation. Section 4.8.Withholding Taxes. The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. Section 4.9.Reimbursement of Legal Fees and Expenses. If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chemical Bank from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive's statement for such fees and expenses through the date of payment thereof. Section 4.10.Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein (including the Employment Agreement, dated April 7, 1995, between Executive and Younkers, Inc. and the Severance Agreement, dated January 8, 1995, between Executive and Younkers, Inc.) is hereby terminated and cancelled. IN WITNESS WHEREOF, the parties have executed this agreement on the date and year first above written. PROFFITT'S, INC. By: /s/ R. Brad Martin R. Brad Martin Chairman of the Board and Chief Executive Officer ATTEST: By: /s/ James E. Glascock James E. Glasscock Executive Vice President and Chief Financial Officer EXECUTIVE /s/ Robert M. Mosco Robert M. Mosco EX-11.1 16 EXHIBIT 11.1 STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS PER COMMON SHARE PROFFITT'S, INC. AND SUBSIDIARIES (in thousands, except per share data) Year Ended February 3 January 28 January 29 1996 1995 1994 PRIMARY: Average shares outstanding 18,995 18,575 17,222 Net effect of dilutive stock options -- based on the treasury stock method using average market price 377 347 445 ______ ______ ______ TOTAL 19,372 18,922 17,667 ====== ====== ====== Income (loss) before extraordinary loss and cumulative effect of changes in accounting methods ($6,399) $29,744 $19,245 ________ _______ _______ Less Preferred Dividends (1,950) (1,694) Income (loss) avail- able to common share- holders before extra- ordinary loss and cumulative effect of changes in accounting methods (8,349) 28,050 19,245 Extraordinary Loss (2,060) (1,088) Cumulative effect of changes in accounting methods 1,904 _________ _______ ________ Net income (loss) available to common shareholders ($10,409) $28,050 $20,061 ========= ======= ======= Earnings (loss) per common share before extraordinary loss and cumulative effect of changes in accounting methods ($0.43) $1.48 $1.09 Extraordinary loss (0.11) (0.06) Cumulative effect of changes in accounting methods 0.11 __________ ________ _______ Primary earnings (loss) per share ($0.54) $1.48 $1.14 ========= ======= ======= FULLY DILUTED: Average shares outstanding 18,995 18,575 17,222 Net effect of dilutive stock options - based on the treasury stock method using year-end market price if higher than average price 386 347 445 Assumed conversion of 8% subordinated debenture 52 Assumed conversion of 4.75% subordinated debenture 2,020 2,020 512 Assumed conversion of preferred stock 1,422 1,228 ______ _______ ______ TOTAL 22,823 22,170 18,231 ====== ====== ====== Income (loss) before interest adjustments, extraordinary loss, and cumulative effect of changes in accounting methods ($6,399) $29,744 $19,245 Add 8% convertible subordinated debenture interest, net of federal income tax effect 41 Add 4.75% convertible subordinated debenture interest, net of federal income tax effect 2,500 2,500 633 _______ _______ _______ Adjusted net income (loss) before extra- ordinary loss and cumulative effect of changes in accounting methods ($3,899) $32,244 $19,919 Extraordinary loss (2,060) (1,088) Cumulative effect of changes in accounting methods 1,904 _______ _______ _______ Adjusted net income (loss) ($5,959) $32,244 $20,735 ======== ======= ======= Fully diluted earnings (loss) per common share before extra- ordinary loss and cumulative effect of changes in accounting methods ($0.17) $1.45 $1.09 Extraordinary loss (0.09) (0.06) Cumulative effect of changes in accounting methods 0.11 ________ _______ _______ Fully diluted earnings (loss) per share ($0.26) $1.45 $1.14 Note/For each year shown, dilution is less than 3%; therefore, no fully diluted presentation is needed. EX-13.1 17 TABLE OF CONTENTS Financial Highlights 1 Report to Shareholders 2 Five-Year Financial Summary 4 Management's Discussion and Analysis 5 Consolidated Financial Statements 11 Notes to Consolidated Financial Statements 16 Report of Independent Accountants 28 Report of Management 29 Market Information 30 Commitment to Growth 31 Store Locations 33 Directors and Officers 34 Corporate Information inside back cover The production of this Proffitt's, Inc. Annual Report was based on our commitment to provide accurate, timely information about the Company while incurring only modest production costs. The financial statements of this report are printed on 100% recycled paper. Proffitt's, Inc. is one of the fastest growing specialty retailers in the United States. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics, and decorative home furnishings, featuring assortments of premier brands and unique specialty merchandise. Proffitt's commitment to quality, service, integrity, and style is the cornerstone of the Company's culture and provides the foundation for its future growth. Financial Highlights Fiscal Year Ended February 3, January 28, January 29, 1996 1995 1994 (in thousands, except per share amounts) Net sales $1,333,498 $1,216,498 $ 798,779 Net income (loss)* $ (6,399) $ 29,744 $ 19,245 Net income before special and and non-recurring charges* $ 31,380 $ 29,744 $ 19,245 Earnings (loss) per common share* $ (.43) $ 1.48 $ 1.09 Earnings per common share before special and non-recurring charges* $ 1.52 $ 1.48 $ 1.09 Weighted average common shares 19,372 18,922 17,667 Total assets $ 835,666 $ 878,393 $ 575,449 Shareholders' equity $ 356,852 $ 360,611 $ 290,309 *Prior to extraordinary loss and cumulative effect of changes in accounting methods. TO OUR PARTNERS We experienced another very eventful year in 1995. In spite of the difficult retail environment, Proffitt's, Inc. posted solid comparable store sales gains and earnings prior to non- recurring and other special charges recorded in conjunction with our business combination with Younkers, Inc. Our results for the year reflect this transaction, effective just prior to our February 3, 1996 fiscal year end. The Younkers transaction and the April 1995 acquisition of the Parks-Belk Company permitted us essentially to double the size of the Company during the year. Our operations now consist of 103 department stores in 16 states with nearly 10 million feet of retail space. Our strong cash flow and the Younkers transaction permitted us to substantially strengthen our balance sheet during the year. Debt as a percentage of capitalization declined to approximately 40% at year end from nearly 60% a year ago. Our merchants at Proffitt's, McRae's, and Younkers are focused on the many opportunities to enhance sales and gross margins through strengthened vendor relationships, increased buying power, and selected private label development. In addition, the scheduled August conversion of the Younkers leased shoe operation to an owned business should increase sales and margins at this division. In 1996, store productivity will be enhanced through focused merchandising strategies, increased sales associate productivity, the implementation of certain best practices at the store level, and the recent closing of certain unproductive units. Our associates have identified synergies and best practices throughout the organization which will allow us to reduce total operating expenses in excess of $10 million on an annualized basis. We are well along in this process and expect to realize savings of at least $6 million during the transition year of 1996. Cost reductions are occurring in a variety of areas--the elimination of duplicate corporate expenses, economies of scale, implementation of best practices, and consolidations of certain back office functions. Each of these changes will deliver meaningful continued leverage on expenses and contribute to the competitive cost structure required in today's retail environment. We continue to see numerous growth opportunities for the business. In March 1996, we opened a new McRae's store in Selma, Alabama. We will open a new Proffitt's store in Morgantown, West Virginia this fall, and in 1997, we are scheduled to open McRae's stores in Biloxi and Meridian, Mississippi and a Proffitt's store in Parkersburg, West Virginia. We have also identified and are currently negotiating several other new unit opportunities. In addition, several store renovations and expansions are planned for 1996. We are excited about each of these projects and believe these demonstrate the internal growth opportunities available to the Company. We also see opportunities for more strategic acquisitions enabling us to extend our presence to nearby markets or to enhance our presence in existing markets. Our strong balance sheet and free cash flow provide us substantial capability to fund such opportunities. Proffitt's, Inc. has a very clear and focused operating strategy. The effective execution of that strategy, along with our commitment to the four cornerstones of the Company--Style, Quality, Service, and Integrity--will create more value for our shareholders and increased opportunities for our associates. I believe we have a very bright future. Sincerely, R. Brad Martin Chairman of the Board and Chief Executive Officer We continue to see numerous growth opportunities for the business.
FIVE-YEAR FINANCIAL SUMMARY 53 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended Ended February 3, January 28, January 29, January 30, February 1, 1996 1995 1994 1993 (a) 1992 (b) Consolidated Income Statement Data: Net sales, including leased departments $1,333,498 $1,216,498 $ 798,779 $ 601,677 $ 435,284 Costs and expenses: Cost of sales 873,218 795,353 520,987 362,620 273,040 Selling, general, and administrative expenses 324,650 284,748 192,028 158,920 112,793 Other operating expenses 105,021 97,821 66,617 44,016 34,934 Expenses related to hostile takeover defense 3,182 Impairment of long- lived assets 19,121 Merger, restructuring, and integration costs 20,822 -------- -------- --------- -------- -------- Operating income (loss) (12,516) 38,576 19,147 36,121 14,517 Other income (expense): Finance charge income, net of allocation to purchaser of accounts receivab le 31,273 27,934 19,312 15,401 15,194 Interest expense (26,098) (20,781) (9,245) (9,445) (15,102) Other income (expense), net 2,848 3,865 2,923 (380) 1,817 ------- -------- -------- -------- -------- Income (loss) before provision for income taxes, extraordinary loss, and cumulative effect of changes in accounting methods (4,493) 49,594 32,137 41,697 16,426 Provision for income taxes 1,906 19,850 12,892 15,567 7,045 ------ ------ ------- ------ ------ Income (loss) before extraordinary loss and cumulative effect of changes in accounting methods (6,399) 29,744 19,245 26,130 9,381 Extraordinary loss (net of tax) (2,060) (1,088) Cumulative effect of changes in accounting methods (net of tax) 1,904 (1,794) ------- ------- ------- ------- ------- Net income (loss) $ (8,459) $29,744 $20,061 $24,336 $ 9,381 Earnings (loss) per common share before extraordinary loss and cumulative effect effect of changes in accounting methods $ (.43) $ 1.48 $ 1.09 $ 2.06 $ 1.07 Extraordinary loss (.11) (.06) Cumulative effect of changes in accounting methods .11 (.14) Earnings (loss) per common share $ (.54) $ 1.48 $ 1.14 $ 1.92 $ 1.07 Weighted average common shares 19,372 18,992 17,667 12,707 8,788 Consolidated BALANCE SHEET Data: Trade accounts receivable, less allowance for doubtful accounts $ 44,878 $120,185 $143,520 $128,965 $ 93,011 Working capital $ 212,122 $283,162 $286,351 $180,091 $126,026 Total assets $ 835,666 $878,393 $575,449 $455,295 $274,441 Senior long-term debt, less current portion $ 134,255 $190,216 $ 95,777 $193,555 $106,066 Subordinated debentures $ 100,505 $100,269 $ 86,250 Shareholders' equity $ 356,852 $360,611 $290,309 $143,107 $101,229 <> (a) Includes 53 weeks for Younkers. (b) Includes 52 weeks ended January 25, 1992 for Younkers.
MANAGEMENT'S DISCUSSION AND ANALYSIS Proffitt's, Inc. is a leading regional department store company primarily offering moderate to better brand name fashion apparel, accessories, cosmetics, and decorative home furnishings. The Company's stores are principally anchor stores in leading regional or community malls. The Company operates three department store divisions. The Proffitt's Division, headquartered in Knoxville, Tennessee, operates 25 stores in Tennessee, Virginia, North Carolina, Georgia, and Kentucky. The McRae's Division, headquartered in Jackson, Mississippi, operates 29 stores in Mississippi, Alabama, Louisiana, and Florida. The Younkers Division, headquartered in Des Moines, Iowa, operates 49 stores in Iowa, Wisconsin, Nebraska, Michigan, Illinois, Minnesota, and South Dakota. On a combined basis, the Company currently operates 103 stores in 16 states. Proffitt's, Inc. combined its business with Younkers, Inc., a publicly-owned retail department store chain, effective February 3, 1996, immediately before the Company's fiscal year end. This combination was structured as a tax-free transaction and has been accounted for as a pooling of interests. Each outstanding share of Younkers, Inc. Common Stock was converted into ninety eight one- hundredths (.98) shares of Proffitt's, Inc. Common Stock, with approximately 8.8 million shares issued in the transaction. On April 12, 1995, the Company acquired the Parks-Belk Company, a family-owned department store company with four stores in northeastern Tennessee. Three stores were renovated and opened as Proffitt's Division stores during 1995; one store was permanently closed. On March 31, 1994, the Company acquired all of the outstanding Common Stock of Macco Investments, Inc., a holding company for McRae's, Inc., a family-owned retail department store chain headquartered in Jackson, Mississippi. The transaction was accounted for as a purchase. The Company closed three unproductive units (one Proffitt's store and two Younkers stores) in January 1996. Two additional Younkers units were sold to a third party subsequent to February 3, 1996. Income statement information for each year presented has been restated to reflect the Younkers merger, which was accounted for as a pooling of interests. The operations of McRae's and Parks- Belk have been included in the income statements subsequent to their respective purchase dates. The following table sets forth, for the periods indicated, certain items from the Company's Consolidated Statements of Income, expressed as percentages of net sales: 53 Weeks 52 Weeks 52 Weeks Ended Ended Ended February 3, January 28, January 29, 1996 ("1995") 1995 ("1994") 1994 ("1993") Net sale 100.0% 100.0% 100.0% Costs and expenses: Cost of sales 65.5 65.4 65.2 Selling, general, and administrative expenses 24.3 23.4 24.0 Other operating expenses 7.9 8.0 8.3 Expenses related to hostile takeover defense 0.2 Impairment of long-lived assets 1.4 Merger, restructuring, and integration costs 1.6 ---- ---- ---- Operating income (loss) (0.9) 3.2 2.5 Other income (expense): Finance charge income, net of allocation to purchaser of accounts receivable 2.3 2.3 2.4 Interest expense (2.0) (1.7) (1.2) Other income (expense), net 0.2 0.3 0.3 Income (loss) before provision for income taxes, extraordinary loss, and cumulative effect of changes in accounting methods (0.4) 4.1 4.0 Provision for income taxes (0.1) 1.6 1.6 Income (loss) before extra- ordinary loss] and cumulative effect of changes in accounting methods (0.5) 2.5 2.4 Extraordinary loss (net of tax) (0.1) (0.1) Cumulative effect of changes in accounting methods (net of tax) 0.2 Net income (loss) (0.6)% 2.5% 2.5% NET SALES Total Company net sales increased by 10%, 52%, and 33% in 1995, 1994, and 1993, respectively. The 1995 sales increase was due to a comparable store sales increase of 3%, revenues generated from the Parks-Belk stores acquired in April 1995, and a full year of sales generated from the McRae's stores acquired in March 1994. The 1995 sales performance was adversely affected by weak fourth quarter sales due to a weak consumer climate and severe weather problems. The 1994 sales increase was due to revenues of $379.1 million generated from the McRae's stores acquired in March 1994, along with a comparable store sales increase of 3% and volume generated from new stores opened in 1994 not reflected in the comparable stores sales gain. GROSS MARGINS Gross margins were 34.5%, 34.6%, and 34.8% in 1995, 1994, and 1993, respectively. The Company uses a full-cost method to account for inventories, which includes certain purchasing and distribution costs. Costs related to obtaining merchandise and preparing it for sale are included in cost of sales. The slight decrease in gross margin percent from 34.8% in 1993 to 34.6% in 1994 and 34.5% in 1995 was primarily a result of increased markdowns over prior years. The Company is taking steps which may enhance gross margin performance over time. The Younkers Division currently operates a low margin, leased shoe business. The Company will convert the Younkers shoe operation from leased to owned in August 1996. The Company also intends, over time, to expand its higher margin private label business, which currently represents approximately 5% of total sales, to 10% or more of total sales. Management believes the conversion of the leased shoe business and further private label development, along with strengthened vendor relationships, increased buying power, and appropriate inventory management, will lead to enhancements in gross margins. As of February 3, 1996, management believes the Company's inventories were well balanced and appropriately assorted. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES Selling, general, and administrative expenses ("SG&A") were 24.3% of net sales in 1995, 23.4% of net sales in 1994, and 24.0% of net sales in 1993. In 1995, in conjunction with the Younkers business combination, the Company revised certain estimates and recorded other charges to SG&A in the fourth quarter totaling $13.7 million, or 1.0% of net sales. The most significant components of these charges were: (i) a $2.4 million charge for the conversion of the Younkers leased shoe operation; (ii) a $2.0 million charge to strengthen the Company's bad debt reserve, and (iii) a $5.0 million reserve for various Younkers legal claims. Excluding these charges, SG&A was flat with the prior year, as a percent of net sales. The Company consolidated certain administrative support areas for the Proffitt's and McRae's Divisions during 1995. The Company anticipated leverage of selling, general, and administrative expense in 1995 due to these consolidations and expense control efforts. However, leverage was not achieved primarily due to lower than planned sales in the fourth quarter of 1995. 1993 SG&A included $5.0 million, or 0.6% of net sales, of store pre-opening expenses. These expenses were immaterial for 1994 and 1995. In conjunction with the Younkers merger, tangible synergies and best practices have been identified that management believes will reduce total operating expense by more than $10 million on an annualized basis. Management believes $6 million of reductions should be realized in the transition year of 1996. Cost reductions have been targeted in several areas--the elimination of duplicate corporate expenses, economies of scale, implementation of best practices, and consolidation of certain administrative support functions. These changes should deliver leverage on expenses and will also contribute to the Company's competitive cost structure. OTHER OPERATING EXPENSES Other operating expenses were 7.9% of net sales in 1995, compared to 8.0% in 1994 and 8.3% in 1993. The percent decline in 1995 over 1994 and 1993 levels resulted from leverage of these expenses over a larger sales base, primarily due to the addition of the McRae's stores in 1994. EXPENSES RELATED TO HOSTILE TAKEOVER DEFENSE During 1995, the Company incurred expenses of approximately $3.2 million, or 0.2% of net sales, related to the defense of the attempted hostile takeover of Younkers by Carson Pirie Scott & Co. IMPAIRMENT OF LONG-LIVED ASSETS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company adopted the provision of this new accounting standard in the fourth quarter of 1995. As a result of adopting this new accounting standard and as a result of closing certain stores and warehouses, the Company incurred impairment charges totaling $19.1 million, or 1.4% of net sales. Of the total, $15.9 million related to the write-down in carrying value of six store properties currently in operation and $3.2 million related to the write-down of abandoned property. MERGER, RESTRUCTURING, AND INTEGRATION COSTS In connection with the merger of Proffitt's, Inc. and Younkers, Inc., the two companies incurred certain costs to effect the merger and other costs to restructure and integrate the combined operating companies. Those costs totaled $20.8 million, or 1.6% of net sales, and are comprised of $8.8 million of merger transaction costs (principally investment banking, legal, and other direct merger costs); $3.2 million of severance and related benefits; $7.4 million for the write-off of duplicate administrative facilities; and $1.4 million of miscellaneous costs. Management also expects to incur certain additional integration costs in 1996, such as transition payroll, training, and relocation expenses. FINANCE CHARGE INCOME, NET Net finance charge income was 2.3% of net sales in 1995 and 1994 compared with 2.4% in 1993. For 1995, gross finance charge income (before allocation to the third party purchasers of accounts receivable (see "Liquidity") of finance charges) increased to 3.0% of net sales from 2.8% in 1994. This increase was due to increased customer usage of the Company's proprietary charge cards, increased finance charge rates charged in certain states (McRae's Division), the October 1995 implementation of late fee penalties on past due charge account balances for the McRae's and Proffitt's Divisions, and a full year's benefit of the May 1994 implementation of late fee penalties on past due charge account balances at the Younkers Division. For 1994, gross finance charge income (before allocation to the third party) increased to 2.8% of net sales from 2.4% in 1993. The increase was due to increased customer usage of the Company proprietary charge cards and the May 1994 implementation of late fee penalties on past due charge account balances at the Younkers Division. The allocation to the third party purchaser of accounts receivable of finance charges totaled approximately $8.8 million, or 0.7% of net sales, in 1995 and $5.6 million, or 0.5% of net sales, in 1994. There was no such allocation in 1993. INTEREST EXPENSE Interest expense as a percentage of net sales was 2.0% for 1995, 1.7% for 1994, and 1.2% for 1993. Total interest expense was $26.1 million, $20.8 million, and $9.2 million in 1995, 1994, and 1993, respectively. The increase in interest expense in 1995 over 1994 was attributable to higher borrowings associated with the purchase and operation of the Parks-Belk stores acquired in April 1995 and the acquisition of McRae's in March 1994, along with higher interest rates. The significant increase in interest expense in 1994 over 1993 primarily was attributable to larger borrowings associated with the purchase and operation of the McRae's stores in March 1994 and new stores opened in 1993. INCOME TAXES For 1995, excluding the special and other non-recurring charges (previously outlined) which resulted in the net loss, the effective tax rate was 40.2%. For 1994 and 1993, effective income tax rates were 40.0% and 40.1%, respectively. NET INCOME Net loss (prior to extraordinary item) was $6.4 million in 1995, or 0.5% of net sales; net income totaled $29.7 million, or 2.5% of net sales, in 1994 and $19.2 million, or 2.4% of net sales, in 1993. 1995 earnings were negatively affected by such items as fourth quarter charges to SG&A in conjunction with the Younkers transaction, expenses related to the Younkers hostile takeover attempt, charges for the impairment of long-lived assets, and merger, restructuring, and integration costs previously discussed. Without these items, 1995 net income would have totaled $31.4 million, or 2.4% of net sales. Net income in 1994 rose over 1993 due to incremental sales and gross margin dollars and SG&A reductions previously discussed. EXTRAORDINARY ITEM On February 3, 1996, Younkers replaced its debt financing of accounts receivable with sales of ownership interests in its accounts receivable. In addition, Younkers cancelled its $150 million revolving credit agreement. As a result of these early extinguishments of debt, certain deferred costs associated with the debt facilities, such as loan origination costs and a loss from an interest rate swap, were written off. This write-off of $3.4 million ($2.1 million net of income taxes) was recorded as an extraordinary item in 1995. INFLATION Inflation affects the costs incurred by the Company in its purchase of merchandise and in certain components of its selling, general, and administrative expenses. The Company attempts to offset the effects of inflation through price increases and control of expenses, although the Company's ability to increase prices is limited by competitive factors in its markets. SEASONALITY The Company's business, like that of most retailers, is subject to seasonal influences, with a significant portion of net sales and net income realized during the fourth quarter of each year, which includes the Christmas selling season. In light of these patterns, selling, general, and administrative expenses are typically higher as a percentage of net sales during the first three quarters of each year, and working capital needs are greater in the last quarter of each year. The fourth quarter increases in working capital needs have typically been financed with internally generated funds, the sale of interests in the Company's accounts receivable, and borrowings under the Company's revolving credit facility. Generally, more than 30% of the Company's net sales and over 50% of net income are generated during the fourth quarter. LIQUIDITY The Company's primary needs for liquidity are to acquire, renovate, or construct stores, to provide working capital for new and existing stores, and to repay borrowings. Net cash provided by operating activities was $55.1 million in 1995 and $131.7 million in 1994. In addition to the net loss, depreciation and amortization charges, and the $19.1 million write- down for impairment of long-lived assets, net cash provided in 1995 resulted from reduced working capital needs. In addition to net income and depreciation and amortization charges, the net cash provided in 1994 included $53.0 million generated from the sale of ownership interests in the Company's accounts receivable (see below) as well as a reduction in inventory levels over the prior year. Net cash used in investing activities for 1995 totaled $59.9 million, of which $49.5 million was for new store construction, store renovations, systems enhancements, and other capital expenditures, and $10.5 million was the cash portion of the Parks- Belk acquisition purchase price. Net cash used in investing activities for 1994 totaled $229.1 million, of which $184.1 million was for the purchase of Macco Investments, Inc. and $43.3 million was related to store renovation and construction, management information systems enhancements, and other capital expenditures. Net cash provided by financing activities for 1995 totaled $15.8 million, which was primarily due to proceeds of $32.3 million from borrowings on long-term debt netted against payments on long-term debt of $16.7 million. Net cash provided by financing activities for 1994 totaled $85.7 million which was primarily a result of proceeds from long-term borrowings of $91.0 million and the issuance of a $30 million convertible preferred security netted against debt payments of $33.5 million. The Company utilizes a $175 million facility ("Accounts Receivable Facility") with a financial institution for the sale of ownership interests in accounts receivable (for the Proffitt's and McRae's Divisions), which expires in September 1997. The Accounts Receivable Facility requires a portion of finance charges earned be allocated to the purchaser of the ownership interests in the accounts receivable, sufficient to cover the yield on commercial paper utilized by the purchaser to finance the transaction, plus fees and expenses. As of March 27, 1996, the interest rate on the Accounts Receivable Facility was 5.34%, and $134.1 million of receivables were sold on the Accounts Receivable Facility at that date. The maximum receivables sold on the Accounts Receivable Facility during 1995 totaled $163.4 million. Amounts sold are limited to between 94% and 96% of total accounts receivable. Prior to February 3, 1996, Younkers utilized an accounts receivable securitization program under which its receivables were used as collateral for commercial paper issued by a wholly-owned special purpose subsidiary. Effective with the February 3, 1996 merger, Younkers replaced amounts borrowed under the securitization program with the sale of: (i) a fixed ownership interest of $75 million and (ii) a variable ownership interest of up to $50 million in its trade receivables. The $75 million receivables sold under this arrangement is from a pool of $91.5 million of trade receivables and remains fixed until 2000 at which time a portion of collections of outstanding receivables will be retained by the purchaser until the $75 million is extinguished. The purchaser retains an allocation of finance charges earned on the $75 million of receivables in an amount sufficient to provide a return of 6.45%. Additional sales of receivables up to $50 million are restricted on the basis of the level of eligible receivables in excess of the $91.5 million supporting the fixed pool and a minimum ownership interest to be retained by Younkers. Younkers may obtain additional proceeds by increasing the ownership interest transferred to the purchaser or reduce the purchaser's interest by allowing a portion of the collections to be retained by the purchaser. The purchaser retains an allocation of finance charge income equal to a variable rate based on commercial paper or Eurodollar rates. The agreement expires in 2000. As of March 27, 1996, the interest rate was 5.42%, and $8.0 million of Younkers' receivables were sold under this facility at that date. No receivables were sold under this facility during 1995. The Company utilizes a $125 million revolving credit facility with several banks ("Revolver"), which expires in 1999. The Revolver provides various borrowing options, including prime rate and LIBOR- based rates. As of March 27, 1996, the LIBOR-based interest rate on the $125 million Revolver was 6.17%. Borrowings on the Revolver are limited to 55% of merchandise inventories. As of March 27, 1996, the Company had borrowings totaling $10.9 million outstanding under the Revolver and unused availability of $114.1 million. The maximum amount outstanding under the Revolver during 1995 was $112.0 million. At that time, the Company had unused availability on the Revolver of $9.6 million. During 1995, the maximum amount outstanding under the $150 million Younkers revolving credit facility (cancelled on February 3, 1996; see "Extraordinary Item") was $12 million. At that time, the Company had unused availability on this facility of $59 million. At February 3, 1996, total debt was 42% of total capitalization, down from 47% at January 28, 1995. Excluding the Company's $100 million of subordinated debentures, which the Company treats as permanent capital, senior debt was 26% of total capitalization, down from 32% at January 28, 1995. The Company carries $97 million of real estate and mortgage debt related to its 21 owned store locations and other owned properties. Management believes the market value of these properties significantly exceeds the related indebtedness. Due to the consummation of the Younkers transaction and the resulting strengthened balance sheet, both Standard & Poor's and Moody's Investors Service raised their corporate credit ratings on the Company's $86.3 million 4.75% convertible subordinated debentures to B+ and B1, respectively. The Company estimates capital expenditures for the combined organization in 1996 will be approximately $50 million, primarily for the construction of two stores to be opened in 1996, initial construction related to five to seven stores to be opened in 1997, three store expansions, five store renovations, and enhancements to management information systems. The Company anticipates its capital expenditures and working capital requirements relating to planned new and existing stores will be funded through cash provided by operations, borrowings, and cash reserves. The Company expects to generate adequate cash flows from operating activities to sustain current levels of operations. The Company maintains favorable banking relations and anticipates the necessary credit agreements will be extended or new agreements will be entered into in order to provide future borrowing requirements as needed. The Company's goal is to continue to maintain a strong balance sheet, providing the Company flexibility to capitalize on attractive opportunities for growth, thereby enhancing shareholder value. RECENT ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," was issued in 1995 to be effective beginning February 4, 1996 for the Company. Management intends to comply with the disclosure requirements of this statement. Accordingly, it is the opinion of management that the statement will not have a material impact on the Company's financial position or results of operations. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Proffitt's, Inc. and Subsidiaries Year Ended February 3, January 28, January 29, 1996 1995 1994 NET SALES $ 1,333,498 $ 1,216,498 $ 798,779 COSTS AND EXPENSES Cost of sales 873,218 795,353 520,987 Selling, general and administrative expenses 324,650 284,748 192,028 Other operating expenses Property and equipment rentals 39,668 37,439 27,890 Depreciation and amortization 35,709 32,802 19,816 Taxes other than income taxes 29,644 27,580 18,911 Expenses related to hostile takeover defense 3,182 Impairment of long- lived assets 19,121 Merger, restructuring and integration costs 20,822 ________ ________ _______ OPERATING INCOME (LOSS) (12,516) 38,576 19,147 OTHER INCOME (EXPENSE) Finance charge income 31,273 27,934 19,312 Interest expense (26,098) (20,781) (9,245) Other income (expense), net 2,848 3,865 2,923 ------- ------ ------ INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES, EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING METHODS (4,493) 49,594 32,137 Provision for income taxes (1,906) (19,850) (12,892) ------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING METHODS (6,399) 29,744 19,245 Extraordinary loss on early extinguishment of debt (net of tax) (2,060) (1,088) ------- ------- ------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING METHODS (8,459) 29,744 18,157 Cumulative effect of changes in accounting methods (net of tax) 1,904 ------- ------- ------ NET INCOME (LOSS) (8,459) 29,744 20,061 Preferred stock dividends 1,950 1,694 ------ ------ ------ NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $(10,409) $28,050 $20,061 ======= ====== ====== Earnings (loss) per common share before extraordinary loss and cumulative effect of changes in accounting methods $ (0.43) $ 1.48 $ 1.09 Extraordinary loss (0.11) (0.06) Cumulative effect of changes in accounting methods 0.11 --------- -------- ------- Earnings (loss) per common share $ (0.54) $ 1.48 $ 1.14 ======== ======== ======= Weighted average common shares 19,372 18,922 17,667 The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) Proffitt's, Inc. and Subsidiaries February 3, January 28, 1996 1995 ASSETS CURRENT ASSETS Cash and cash equivalents $ 26,157 $ 15,181 Trade accounts receivable, less allowance for doubtful accounts of $6,601 in 1995 and $4,723 in 1994 44,878 120,185 Accounts receivable - other 9,469 9,917 Merchandise inventory 286,474 275,357 Prepaid supplies and expenses 8,024 9,024 Deferred income taxes 3,750 ---------- ---------- TOTAL CURRENT ASSETS 378,752 429,664 PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 381,839 376,461 GOODWILL, net of amortization 52,838 46,522 OTHER ASSETS 2,237 25,746 --------- --------- TOTAL ASSETS $ 835,666 $ 878,393 The accompanying notes are an integral part of these consolidated financial statements. February 3, January 28, 1996 1995 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable $ 75,377 $ 68,203 Accrued expenses 48,597 28,599 Accrued compensation and related items 10,920 12,629 Sales taxes payable 11,513 11,696 Income taxes payable 2,954 7,606 Deferred income tax liability 2,500 Current portion of long-term debt and capital lease obligations 17,269 15,269 TOTAL CURRENT LIABILITIES 166,630 146,502 SENIOR DEBT 134,255 190,216 CAPITAL LEASE OBLIGATIONS 10,846 11,319 DEFERRED INCOME TAXES 52,250 58,400 OTHER LONG-TERM LIABILITIES 14,328 11,076 SUBORDINATED DEBENTURES 100,505 100,269 -------- -------- TOTAL LIABILITIES 478,814 517,782 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred Stock, $1.00 par value, 10,000 total shares authorized: Series A - 600 shares authorized, issued and outstanding, $50 per share liquidation preference 28,850 28,850 Common Stock, $.10 par value, 100,000 shares authorized, 19,120 and 18,760 shares issued and outstanding at February 3, 1996 and January 28, 1995, respectively 1,912 1,876 Additional paid-in capital 243,279 236,665 Retained earnings 82,811 93,220 ------- ------- TOTAL SHAREHOLDERS' EQUITY 356,852 360,611 Total liabilities and shareholders' equity $ 835,666 $ 878,393 ========== ========= The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands of dollars)
Proffitt's, Inc. and Subsidiaries Additional Total Preferred Stock Common Paid-In Retained Shareholders' Series A Series B Stock Capital Earnings Equity Balance at January 30, 1993 $ - $ - $ 1,282 $ 96,716 $ 45,109 $143,107 Net income 20,061 20,061 Issuance of Common Stock 525 125,833 126,358 Income tax benefits related to exercised stock options 783 783 Balance at January 29, 1994 1,807 223,332 65,170 290,309 Net income 29,744 29,744 Issuance of Stock 28,850 3,296 53 9,941 42,140 Income tax benefits related to exercised stock options 112 112 Conversion of Series B Preferred Stock (3,296) 16 3,280 Preferred Dividends (1,694) (1,694) Balance at January 28, 1995 28,850 1,876 236,665 93,220 360,611 Net loss (8,459) (8,459) Issuance of Common Stock 36 6,241 6,277 Income tax benefits related to exercised stock options 373 373 Preferred dividends (1,950) (1,950) Balance at February 3, 1996 $28,850 $ - $1,912 $243,279 $82,811 $356,852
The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) Proffitt's, Inc. and Subsidiaries Year Ended February 3, January 28, January 29, 1996 1995 1994 OPERATING ACTIVITIES Net income (loss) $ (8,459) $ 29,744 $ 20,061 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary loss on extinguishment of debt 3,433 1,832 Cumulative effect of changes in accounting methods (3,201) Depreciation and amortization 36,322 33,510 20,361 Deferred income taxes (13,319) 4,474 4,296 Impairment of long- lived assets 19,121 Other 377 854 (821) Changes in operating assets and liabilities: Trade accounts receivable 4,034 52,961 (19,593) Merchandise inventory (8,097) 13,183 (47,346) Prepaid expenses and other current assets 1,797 (141) (3,267) Accounts payable, accrued expenses and income taxes payable 20,917 (2,575) 6,004 Other (1,028) (347) (258) ------- ------- ------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 55,098 131,663 (21,932) ------ ------- -------- INVESTING ACTIVITIES Purchases of property and equipment, net (49,458) (43,289) (78,475) Proceeds from sale- lease back 31,138 Acquisition of Parks-Belk (1995)/Macco (1994) (10,483) (184,067) Collections of acquired receivables 5,038 Other (1,719) (2,653) -------- --------- -------- NET CASH USED IN INVESTING ACTIVITIES (59,941) (229,075) (44,952) FINANCING ACTIVITIES Proceeds from long- term borrowings 32,273 90,983 145,615 Payments on long-term debt and capital lease obligations (16,714) (33,544) (183,651) Proceeds from issuance of Stock 2,210 29,166 119,957 Dividends paid to preferred shareholders (1,950) (888) ------- ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 15,819 85,717 81,921 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,976 (11,695) 15,037 Cash and cash equivalents at beginning of year 15,181 26,876 11,839 ------- ------- ------ Cash and cash equivalents at end of year $ 26,157 $ 15,181 $ 26,876 ======== ======== ======== Noncash investing and financing activities are described in Notes C, D, and F. The accompanying notes are an integral part of these consolidated financial statements. Note A - Basis of Presentation On February 3, 1996, Proffitt's, Inc. ("Proffitt's") issued 8,816 shares of its Common Stock for all the outstanding Common Stock of Younkers, Inc. ("Younkers") (collectively, "the Company"). The merger has been accounted for as a pooling of interests, and accordingly, these consolidated financial statements have been restated for all periods to include the results of operations and financial position of Younkers. Separate results of the combined entities were as follows: Year ended February 3, January 28, January 29, 1996 1995 1994 Revenue: Proffitt's $ 720,148 $ 617,363 $ 200,884 Younkers 613,350 599,135 597,895 ---------- ---------- --------- $1,333,498 $1,216,498 $ 798,779 ========== ========== ========= Extraordinary item: Proffitt's $ 0 $ 0 $ 0 Younkers (2,060) $ 0 $ (1,088) ---------- ----------- --------- $ (2,060) $ 0 $ (1,088) ========== =========== ========= Cumulative effect of changes in accounting methods: Proffitt's $ 0 $ 0 $ 333 Younkers 0 0 1,571 ----------- ----------- --------- $ 0 $ 0 $ 1,904 ========== =========== ========= Net income (loss): Proffitt's $ 5,181 $ 16,128 $ 6,063 Younkers (13,640) 13,616 13,998 ----------- ----------- --------- $ (8,459) $ 29,744 $ 20,061 ========== =========== ========= Historically, Younkers' inventory costs consisted only of "direct costs", principally invoice cost plus freight. Proffitt's followed the same method until the year ended January 29, 1994 at which time Proffitt's adopted the "full cost" method which includes the direct costs plus certain purchasing and distribution costs. Additionally, Younkers has included the cost of certain operating supplies, such as shopping bags, in prepaid supplies and expenses. Proffitt's policy is to expense such when issued to a store. Hence, Younkers' financial statements have been restated to conform to Proffitt's accounting methods, including adopting the change in inventory costs with a "cumulative effect" adjustment in 1993. The restated financial statements also reflect certain reclassifications without any impact on previously reported income or shareholders' equity. Note B - Description of Business and Summary of Significant Accounting Policies Description of business At February 3, 1996, the Company operated the Proffitt's Division with twenty-five department stores in the Southeast, the McRae's Division with twenty-nine department stores in the Southeast, and the Younkers Division with fifty-one department stores in the Midwest. The Company's fiscal year ends on the Saturday nearest January 31 and consisted of 53 weeks for the year ended February 3, 1996 and 52 weeks for the years ended January 28, 1995 and January 29, 1994. Consolidation The financial statements include the accounts of Proffitt's and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Revenues Retail sales are recorded on the accrual basis, and profits on installment sales are recognized in full when the sales are recorded. Sales are net of returns which are reflected as a period cost at the time of return. Trade accounts receivable Trade accounts consist of revolving charge accounts with terms which, in some cases, provide for payments exceeding one year. In accordance with usual industry practice, such receivables are included in current assets. Finance charge income is accrued monthly based on a percentage of uncollected customer account balances. A portion of finance charge income is earned by financial institutions in connection with the sales of interests in accounts receivable (see Note D). Inventories Inventories are valued at the lower of cost or market as determined by the retail inventory method applied on the last-in, first-out (LIFO) method for approximately 84% and 86% of the inventories at February 3, 1996 and January 28, 1995, respectively, and on the first-in, first-out (FIFO) method for the balance. Prior to the fiscal year ended January 28, 1995, the Company used the FIFO method for all inventories. As of February 3, 1996 and January 28, 1995, the LIFO value of inventory exceeded market, and as a result, inventory was stated at the lower market amount. Prior to January 31, 1993, inventory costs consisted only of "direct costs," principally invoice cost plus freight. Effective January 31, 1993, the Company adopted the "full cost" method. Under the full cost method, inventory costs include the direct costs plus certain purchasing and distribution costs. The impact of this change is further discussed in Note N. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method for financial reporting purposes over the estimated useful lives of the assets, which are 45 years for buildings and range from 4 to 20 years for fixtures, leasehold improvements, and equipment. Cash equivalents The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. Leased department sales The Company includes leased department sales as part of net sales. Leased department sales were $73,977, $71,369, and $49,266 for the years ended February 3, 1996, January 28, 1995, and January 29, 1994, respectively. Store pre-opening expenses Prior to January 31, 1993, new store pre-opening costs for Proffitt's were deferred and amortized over the 12 months immediately following the individual store openings. Effective January 31, 1993, Proffitt's changed its method to expense such costs when incurred. The impact of this change is further discussed in Note N. Younkers has historically expensed such costs when incurred. Income taxes The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109. Deferred income taxes reflect the impact of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by enacted tax rules and regulations. Earnings per common share Earnings per common share have been computed based on the weighted average number of common shares outstanding, including common stock equivalents, after recognition of preferred stock dividends of $1,950 and $1,694 for the years ended February 3, 1996 and January 28, 1995, respectively. There were no preferred dividends in the prior year. The Company's 4.75% convertible subordinated debentures issued in October 1993 and 7.5% junior subordinated debentures issued in March 1994 are not common stock equivalents, and therefore, shares issuable upon their conversion are included only in the computation of fully diluted earnings per share. The difference between primary and fully diluted earnings per share was not significant in any year. Goodwill The Company records goodwill for the cost in excess of fair value of net assets acquired in purchase transactions. Goodwill is being amortized on a straight-line method over 15 to 40 years, and the Company recognized amortization charges of $1,523, $1,100 and $151 for the years ended February 3, 1996, January 28, 1995 and January 29,1994, respectively. At each balance sheet date, the Company evaluates the realizability of goodwill based upon expectations of nondiscounted cash flows and operating income. Based upon its most recent analysis, the Company believes that no impairment of goodwill exists at February 3, 1996. New Accounting Pronouncement Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," was issued in 1995 to be effective beginning February 4, 1996 for the Company. Management intends to comply with the disclosure requirements of this statement. Accordingly, it is the opinion of management that the statement will not have a material impact on the Company's financial position or results of operations. Note C - Acquisitions On March 31, 1994, Proffitt's acquired all of the Common Stock of Macco Investments, Inc. ("Macco"), a privately held corporation and the parent company of McRae's, Inc. ("McRae's") which operated 28 stores in the Southeast. The total acquisition price of approximately $212 million consisted of a cash payment of $176 million and the issuance of (i) 436 shares of Proffitt's, Inc. Common Stock, (ii) the Company's 7.5% Junior Subordinated Debentures due March 31, 2004 in an aggregate face amount equal to $17.5 million, (iii) 33 shares of Series B Cumulative Junior Perpetual Preferred Stock, (iv) the Company's promissory notes to certain of the Macco shareholders for $2 million, and (v) transaction costs of approximately $6 million. In addition and in connection with the acquisition, the Company purchased, for $18.5 million, four regional mall stores owned by McRae family partnerships and leased to McRae's. The operations of McRae's and its subsidiaries are included in these consolidated financial statements after March 31, 1994. The financing of the acquisition included a $175 million accounts receivable financing program through a financial institution; a $125 million bank revolving credit facility; $20 million of mortgage financing on certain Proffitt's and McRae's properties; and a private sale of $30 million Series A Cumulative Convertible Exchangeable Preferred Stock. The allocation of the purchase price was as follows: Working capital $ 68,396 Property and equipment 176,907 Goodwill 45,574 Other assets 10,409 Long-term debt (32,877) Capital lease obligations (11,695) Deferred income taxes (42,432) Other long-term liabilities (2,484) ------- $ 211,798 In April 1995, Proffitt's acquired the Parks-Belk Company, the owner and operator of four department stores in northeast Tennessee. Specific terms of the transaction were not disclosed, but consideration was paid in Proffitt's, Inc. Common Stock and cash (aggregated less than $20 million). Three of the Parks-Belk locations were converted into Proffitt's Division stores, and one was permanently closed. Note D - Sale of Accounts Receivable On April 1, 1994, Proffitt's began selling an undivided ownership interest in its accounts receivable. Under the agreement with the purchaser, which expires September 1997, Proffitt's may obtain additional proceeds by increasing the ownership interest transferred to the purchaser or reduce the purchaser's interest by allowing a portion of the collections to be retained by the purchaser. The ownership interest which may be transferred to the purchaser is limited to $175,000 and is further restricted on the basis of the level of eligible receivables and a minimum ownership interest to be maintained by Proffitt's. Proffitt's sold $370,874 and $333,473 of its accounts receivable for the years ended February 3, 1996 and January 28, 1995, respectively. Prior to February 3, 1996, Younkers utilized an accounts receivable securitization program under which its receivables were used as collateral for commercial paper issued by a wholly-owned special purpose subsidiary. Effective with the February 3, 1996 merger, Younkers replaced amounts borrowed under the securitization program with the sale of (i) a fixed ownership interest of $75 million and (ii) a variable ownership interest of up to $50 million in its trade receivables. The $75 million receivables sold under this arrangement is from a pool of $91.5 million of trade receivables and remains fixed until 2000 at which time a portion of collections of outstanding receivables will be retained by the purchaser until the $75 million is extinguished. Additional sales of receivables up to $50 million are restricted on the basis of the level of eligible receivables in excess of the $91.5 million supporting the fixed pool and a minimum ownership interest to be retained by Younkers. Younkers may obtain additional proceeds by increasing the ownership interest transferred to the purchaser or reduce the purchaser's interest by allowing a portion of the collections to be retained by the purchaser. The purchasers retain an allocation of finance charge income equal to 6.45% on the Younkers $75 million program and equal to a variable rate based on commercial paper or Eurodollar rates on the Proffitt's $175 million and Younkers $50 million programs. The balance of finance charges is retained by the Company. Finance charges retained by the purchaser were $8,809 and $5,567 for the years ended February 3, 1996 and January 28, 1995, respectively. The Company is contingently liable for the collection of the receivables sold. The ownership interest transferred to the purchaser, which is reflected as a reduction of accounts receivable, was $220,229 and $138,740 at February 3, 1996 and January 28, 1995, respectively. Management believes that the allowance for doubtful accounts of $6,601 at February 3, 1996 is adequate for losses under this recourse provision. The agreements contain certain covenants requiring the maintenance of various financial ratios. If these covenants are not met or if an event of default was to occur, the purchasers could be entitled to terminate the agreement. Note E - Property and Equipment A summary of property and equipment was as follows: February 3, January 28, 1996 1995 Land and land improvements $ 39,345 $ 39,192 Buildings 136,827 131,723 Leasehold improvements 80,543 80,122 Fixtures and equipment 242,911 246,813 Construction in progress 17,134 11,951 -------- -------- 516,760 509,801 Accumulated depreciation (134,921) (133,340) --------- --------- $381,839 $376,461 ======== ======== In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company adopted the provisions of this new accounting standard in the fourth quarter of the year ended February 3, 1996. As a result of adopting this new accounting standard and as a result of closing certain stores and warehouses, the Company incurred impairment charges as follows: Write-down in carrying value of six operating stores (3 Proffitt's, 1 McRae's and 2 Younkers) due to recurring poor operating results and adoption of SFAS No. 121 $ 15,897 Abandonment of duplicate warehouses and leasehold improvements related to the Parks-Belk acquisition and the Younkers merger 1,797 Loss on abandonment of leasehold improvements related to closed stores 1,427 -------- $ 19,121 Note F - Income Taxes The components of income tax expense were as follows: Year Ended February 3, January 28, January 29, 1996 1995 1994 Current: Federal $ 10,940 $ 12,066 $ 7,280 State 2,912 3,310 1,868 --------- -------- -------- 13,852 15,376 9,148 --------- -------- -------- Deferred: Federal (10,834) 3,853 3,738 State (2,485) 621 558 --------- -------- -------- (13,319) 4,474 4,296 --------- -------- -------- $ 533 $ 19,850 $ 13,444 ======== ======== ======== Components of the net deferred tax asset or liability recognized in the consolidated balance sheets were as follows: February 3, January 28, 1996 1995 Current: Deferred tax assets: Allowance for doubtful accounts $ 2,400 $ 1,700 Accrued expenses 9,900 3,000 Other 250 500 -------- --------- 12,550 5,200 -------- --------- Deferred tax liabilities: Inventory (8,300) (7,300) Other (500) (400) -------- --------- (8,800) (7,700) Net deferred tax asset (liability) $ 3,750 $(2,500) ======= ======== Noncurrent: Deferred tax assets: Capital leases $ 900 $ 1,000 Other long-term liabilities 3,800 4,000 Deferred compensation 950 1,000 -------- -------- 5,650 6,000 -------- -------- Deferred tax liabilities: Property and equipment (51,200) (57,000) Other assets (5,400) (6,000) Junior subordinated debentures (1,300) (1,400) -------- -------- (57,900) (64,400) Net deferred tax liability $ (52,250) $ (58,400) Income tax expense varies from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference were as follows: Year ended February 3, January 28, January 29, 1996 1995 1994 Expected tax/rate (benefit) $(2,774) (35.0%) 35.0% 35.0% State income taxes, net of federal benefit (743) (9.4) 4.3 5.0 Nondeductible merger transaction costs 2,997 37.8 Amortization of goodwill 518 6.5 Other items, net 535 6.8 0.7 0.1 ------ ----- ----- ----- Actual tax/rate (benefit) $ 533 6.7% 40.0% 40.1% ====== ===== ===== ===== The Company made income tax payments, net of refunds received, of $6,899, $13,507, and $8,365 during the years ended February 3, 1996, January 28, 1995 and January 29, 1994, respectively. Note G - Senior Debt A summary of senior debt was as follows: February 3, January 28, 1996 1995 Real estate and mortgage notes, interest ranging from 3.35% to 10.17%, maturing 1996 to 2008, collateralized by property and equipment with a carrying amount of approximately $122,000 at February 3, 1996 $ 97,365 $ 73,791 Revolving credit agreements and commercial paper notes 41,400 121,114 Notes payable, interest ranging from 7.88% to 13.00%, maturing 1996 to 1998 12,287 10,154 -------- -------- 151,052 205,059 Current portion (16,797) (14,843) -------- -------- $134,255 $190,216 ======== ======== Prior to February 3, 1996, Younkers utilized an accounts receivable securitization program under which its receivables were used as collateral for commercial paper issued by a wholly-owned special purpose subsidiary. At January 28, 1995, borrowings of $76,114 were outstanding under this program at a weighted average interest rate of 6.0%. Effective February 3, 1996, Younkers replaced the debt financing of its accounts receivable with sales of ownership interests in the receivables (see Note D). At the same time, Younkers cancelled its revolving credit facility. As a result of this early extinguishment of debt, certain deferred costs associated with the debt financing of receivables and the revolving credit facility, such as loan origination costs and a loss from a related interest rate swap, were written off. This write-off of $3,433 ($2,060 net of income taxes) is reflected in the income statement as an extraordinary item. In conjunction with a real estate mortgage note having a balance of $6,750 at February 3, 1996, Proffitt's entered into an interest rate swap agreement for the management of interest rate exposure. This agreement extends to June 30, 2003 and swaps the variable rate for a fixed rate of 5.7%. The differential to be paid or received is included in interest expense. The Company continually monitors its position and the credit rating of the interest rate swap counterparty. While the Company may be exposed to credit losses in the event of nonperformance by the counterparty, it does not anticipate such losses. At February 3, 1996, the Company owed $41,400 under a revolving credit agreement ("Revolver") with banks. Borrowings under the Revolver are limited to 55% of merchandise inventories up to a maximum borrowing of $125,000, and interest rate options include LIBOR-based rates, prime rate and competitive bid rates. The agreementexpires in 1999. In addition to certain general requirements, the credit agreement requires the Company to meet specific covenants related to current ratio, fixed charges, funded debt, capitalization and tangible net worth. Certain other note agreements also impose restrictions and financial maintenance requirements. Maturities of senior debt for the next five years, and thereafter, giving consideration to lenders' call privileges, are as follows: Fiscal Year End 1997 $ 16,797 1998 13,495 1999 17,077 2000 68,678 2001 6,417 Thereafter 28,588 --------- $ 151,052 ========= The Company made interest payments of $25,601, $18,282 and $9,232 during the years ended February 3, 1996, January 28, 1995 and January 29, 1994, respectively. Capitalized interest was $285, $467 and $787 for the years ended February 3, 1996, January 28, 1995 and January 29, 1994, respectively. Note H - Leases The Company is committed under long-term leases primarily for the rentals of certain retail stores. The leases generally provide for minimum annual rentals (including executory costs such as real estate taxes and insurance) and contingent rentals based on a percentage of sales in excess of stated amounts. Generally, the leases have primary terms ranging from 20 to 30 years and include renewal options ranging from 10 to 15 years. At February 3, 1996, minimum rental commitments under capital leases and operating leases with terms in excess of one year are as follows: Capital Operating Fiscal Year End Leases Leases 1997 $ 2,179 $ 24,621 1998 2,179 23,754 1999 2,179 23,050 2000 2,165 20,900 2001 2,009 19,116 Thereafter 19,209 157,776 -------- -------- Total minimum rental commitments 29,920 $ 269,217 ========= Estimated insurance, taxes, maintenance and utilities (7,413) Net minimum rental commitments 22,507 Imputed interest (rates ranging from 8.00% to 17.80%) (11,189) -------- Present value of net minimum rental commitments 11,318 Less current installments of capital lease obligations (472) -------- Capital lease obligations, excluding current installments $ 10,846 ======== Contingent rentals on capital leases are insignificant. Total rental expense for operating leases was approximately $41,000, $39,000 and $30,000 for the years ended February 3, 1996, January 28, 1995 and January 29, 1994, respectively, including contingent rents of $5,000, $4,300 and $3,100. Note I - Subordinated Debentures In October 1993, the Company issued $86,250 of 4.75% convertible subordinated debentures, due November 1, 2003, with interest due semi-annually. The debentures are convertible into the Company's Common Stock at any time prior to maturity, unless previously redeemed, at a conversion price of $42.70 per share. The debentures are redeemable for cash at any time on or after November 15, 1996, at the option of the Company at specified redemption prices. In March 1994, the Company issued 7.50% junior subordinated debentures with a face value of $17,500. The debentures were discounted to reflect their fair value and have an accreted carrying value of $14,255 at February 3, 1996. During the year ended January 29, 1994, a $5,000 convertible subordinated debenture was converted into Common Stock at a conversion price of $16 per share. Note J - Retirement and Savings Plan and Other Benefits Proffitt's and Younkers sponsor profit sharing and savings plans that cover substantially all full-time employees. Employees may contribute a portion of their salary, subject to limitation, to the plans. The Company contributed an additional amount, subject to limitation, based on the voluntary contribution of the employee. In addition, Younkers contributes to the plan an amount based on a percentage of income or an amount authorized by the Board of Directors. Company contributions charged to expense under these plans, or similar predecessor plans, for the years ended February 3, 1996, January 28, 1995, and January 29, 1994 were $1,216, $1,106 and $1,905, respectively. As a part of a 1987 acquisition, Younkers assumed certain obligations under a frozen defined benefit pension plan. Younkers' funding policy with respect to the plan is consistent with the funding requirements of federal laws and regulations. The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheets: February 3, January 28, 1996 1995 Accumulated benefit obligation, entirely vested $ 5,204 $ 4,903 ======== ======== Plan assets at fair value (primarily funds on deposit with a financial institution) $ 5,327 $ 4,903 Projected benefit obligation for service rendered to date (5,204) (4,903) -------- -------- Plan assets in excess of projected benefit obligation 123 0 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 1,239 1,535 Prepaid pension cost $ 1,362 $ 1,535 ======== ======== Net periodic cost (benefit) included in the Company's operating results for the frozen plan is insignificant. The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 8.5% for the years ended February 3, 1996 and January 28, 1995 and 7.0% for the year ended January 29, 1994. The expected long-term rate of return on plan assets was 8.0% for each year. Younkers provides certain health care benefits for eligible retired employees who have 20 years of service with the Company and who have been covered under the Company's active medical insurance plan. In addition, another group of retirees, resulting from a 1987 acquisition, are eligible for certain life insurance benefits. The plans are not funded. At February 3, 1996 and January 28, 1995, the Company's accrued liability for such benefits was $3,225 and $3,372, respectively, with approximately one-half representing the accumulated postretirement benefit obligation for current retirees and one-half representing unrecognized prior service cost and unrecognized net gains. Net periodic postretirement benefit costs included in the Company's operating results for these health care benefits were insignificant. The Company has certain deferred compensation plans providing benefits to selected current and former employees. The liability for deferred compensation was approximately $2.5 million for the years ended February 3, 1996 and January 28, 1995. Note K - Stock Transactions During April 1993, Younkers issued 2,371 shares of Common Stock through a public offering. The total proceeds received from the sale of these shares were approximately $69.1 million after offering expenses. Proceeds of the shares sold, along with proceeds from the sale and lease back transaction, were used to repay the remaining balance of term debt associated with the acquisition of the department store division of the H.C. Prange Company in September 1992 and to pay down the Younkers previous revolving line of credit. In February and March 1993, Proffitt's sold 2,395 shares of Common Stock at $22.25 per share in a public offering. Net proceeds to the Company were approximately $50.2 million after the underwriting discount and offering expenses. On March 31, 1994, Proffitt's issued 600 shares of Series A Cumulative Convertible Exchangeable Preferred Stock in a private offering. Net proceeds to the Company were approximately $28.9 million after offering expenses. Dividends are cumulative and are paid in March and September at $3.25 per annum per share. The Preferred Stock is convertible into Common Stock at a price of $21.10 per share and has a liquidation preference of $50 per share. The Company may redeem the stock, in whole or in part, at $52.50 per share after two years based on certain conditions, and in any event after four years. The stock is exchangeable at the Company's option in whole on any dividend payment date on the basis of $50 of 6.50% exchange debentures for each share. The stock gains voting rights when three semi-annual dividends are in arrears, and at that time, the shareholder may appoint one representative to the Company's Board of Directors. In March 1995, the Board of Directors of Proffitt's, Inc. adopted a shareholder rights plan. Each outstanding share of Common Stock has one preferred stock purchase right attached. The rights generally become exercisable ten days after an outside party acquires, or makes an offer for, 20% or more of the Common Stock. Each right entitles its holder to buy 1/100 share of Proffitt's, Inc. Series C Junior Preferred Stock at an exercise price of $85. Once exercisable, if the Company is involved in a merger or other business combination or an outside party acquires 20% or more of the Common Stock, each right will be modified to entitle its holder (other than the acquiror) to purchase common stock of the acquiring company or, in certain circumstances, Proffitt's, Inc. Common Stock having a market value of twice the exercise price of the right. The rights expire on March 28, 2005. The Company has available 33 shares of authorized, unissued Series B Preferred Stock. Note L - Stock Option and Stock Purchase Plans The Company's 1987 Stock Option Plan, as amended, provided for the granting of options of Common Stock not to exceed 490 shares to officers, key employees and Directors. No additional options are to be granted under the 1987 Plan. On March 1, 1994, the Company's Board of Directors adopted the Proffitt's, Inc. 1994 Long-Term Incentive Plan pursuant to which stock options, stock appreciation rights, restricted shares of Common Stock and performance units may be awarded to officers, key employees and Directors. The 1994 Plan, as amended, provides for granting of 2,911 shares of Common Stock of the Company. At February 3, 1996, 30 restricted shares of Common Stock have been awarded under the 1994 Plan. At February 3, 1996, the 1994 Plan has available for grant 1,239 shares of Common Stock of the Company. Stock option activity was as follows: Shares Stock Option Price Range Balance at January 30, 1993 951 $ 5.250 $ 23.470 Granted 213 23.625 34.950 Exercised (127) 5.250 12.000 Cancelled (7) 23.470 23.470 ----- Balance at January 29, 1994 1,030 5.250 34.950 Granted 783 14.540 24.500 Exercised (118) 5.250 23.625 Cancelled (43) 7.500 34.180 ----- Balance at January 28, 1995 1,652 5.250 34.950 Granted 455 17.470 32.250 Exercised (178) 5.250 25.375 Cancelled (89) 5.250 32.650 ----- Balance at February 3, 1996 1,840 7.500 34.950 ===== On February 3, 1996 (merger effective date), Younkers' stock options were assumed by the Company using the conversion number of .98. On this date, these stock options became fully vested. The above stock option activity has been restated to include Younkers' option activity for the fiscal years presented. At February 3, 1996, incentive and nonqualified stock options for 1,143 shares were exercisable. All options were granted at not less than fair market value at dates of grant, and the maximum term of an option may not exceed ten years. The Proffitt's, Inc. 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan") was adopted on November 12, 1994 by the Board of Directors of the Company. The Stock Purchase Plan provides that an aggregate of 350 shares of the Company's Common Stock is available for purchase. Under the Stock Purchase Plan, an eligible employee may elect to participate by authorizing payroll deductions of not more than $2.4 per Plan year to be applied toward the purchase of the Company's Common Stock. The purchase price per share is 85% of the lesser of the closing price per share on the last business day preceding (i) the Grant Date or (ii) the Exercise Date. Thirteen shares of the Company's Common Stock were purchased under the Stock Purchase Plan for the Plan year ending January 31, 1996. At January 31, 1996, the Stock Purchase Plan has available for future offerings 337 shares of the Company's Common Stock. Note M - Related Party Transactions In February 1989, the Company entered into an agreement with the Chairman of the Board and Chief Executive Officer for an unsecured $500 interest-free loan due January 31, 1999. The loan was made as a supplement to this individual's base compensation, and interest was imputed on this loan at 5.54% for the year ended February 3, 1996. The Company is obligated under 6.50% second mortgage real estate notes to a Director of the Company in the amount of $1,580. A Director of the Company owns $1,637 of the 7.50% junior subordinated debentures. Prior to the merger, Younkers issued shares through a public offering which was managed by Goldman, Sachs & Co., an officer of which served on Younkers Board of Directors. Younkers also engaged Goldman, Sachs & Co. to serve as financial advisors in connection with the hostile takeover defense matter and the Proffitt's merger. During June 1993, Younkers completed the sale and lease back of the eight owned store properties acquired from H. C. Prange Company ("Prange") with net proceeds of approximately $31,000. This was considered in the allocation of the original purchase price and resulted in no gain or loss to Younkers. Younkers incurred sales commissions of $800 on this transaction with a company whose Chairman was on the Younkers Board of Directors. In connection with the acquisition of the Prange department stores, Younkers entered into agreements with Prange for a transitional management information system and distribution services for which it incurred $1,754 for the year ended January 29, 1994. The then-president of Prange became a Director of Younkers subsequent to the acquisition. In June 1993, Younkers purchased from Prange the Green Bay Distribution Center for $2,450 and, during the second quarter of the year ended January 29, 1994, brought in-house the management information systems. Note N - Changes in Accounting Methods Effective January 31, 1993, Proffitt's changed its method of accounting for inventory to include certain purchasing and distribution costs. Previously, these costs were charged to expense in the period incurred rather than in the period in which the merchandise was sold. The cumulative effect of this change (which includes the impact on Proffitt's and Younkers -see Note A) for periods prior to January 31, 1993 was $2,273 (net of income taxes of $1,532). The effect of this change on the fiscal year ended January 29, 1994 was to increase net income before the cumulative effect by $165, or $.01 per common share. Effective January 31, 1993, Proffitt's also changed its method of accounting for store pre-opening costs to expensing such costs when incurred. Previously, these costs were amortized over the 12 months immediately following the individual store openings. Younkers has historically expensed such costs when incurred. The cumulative effect of this change for periods prior to January 31, 1993 was $369 (net of income taxes of $236). The effect of this change on the fiscal year ended January 29, 1994 was to decrease net income before cumulative effect by $1,665, or $.09 per common share. Effective January 30, 1994, Proffitt's changed its method of accounting for inventory to the last-in, first-out (LIFO) method for approximately 76% of its inventories. Previously, all inventories were valued using the first-in, first-out (FIFO) method. Younkers has historically valued its inventories under the LIFO method. The cumulative effect of this change is not presented because it is not determinable. Note O - Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument: The fair values of cash and cash equivalents, accounts receivable, and short-term debt approximates cost due to the immediate or short-term maturity of these instruments. For variable rate notes that reprice frequently, fair value approximates carrying value. The fair value of fixed rate notes are estimated using discounted cash flow analyses with interest rates currently offered for loans with similar terms and credit risk. The fair values of convertible subordinated debentures are based on quoted market prices. For junior subordinated debentures, the fair values are estimated using discounted cash flow analyses with interest rates currently offered for financial instruments with similar terms and credit risk. The fair value of the Preferred Stock is estimated at the market price of Proffitt's, Inc. Common Stock into which the Preferred Stock was convertible at February 3, 1996. The fair values of the Company's aforementioned financial instruments at February 3, 1996 were as follows: Carrying Estimated Amount Fair Value Cash and cash equivalents $ 26,157 $ 26,157 Accounts receivable 44,878 44,878 Fixed rate notes payable 7,887 8,327 Variable rate notes payable 45,800 45,800 Fixed rate real estate and mortgage notes 77,410 77,224 Variable rate real estate and mortgage notes 19,955 19,955 Convertible subordinated debentures 86,250 75,900 Junior subordinated debentures 14,255 14,255 Convertible exchangeable Preferred Stock 28,850 34,834 Note P - Merger, Restructuring and Integration Costs In connection with the merger of Proffitt's and Younkers, the two companies incurred certain costs to effect the merger and other costs to restructure and integrate the combined operating companies. Those costs were comprised of the following: Merger transaction costs, principally investment banking, legal and other direct merger costs $ 8,778 Severance and related benefits 3,235 Abandonment of duplicate administrative office space and property and duplicate data processing equipment and software (including leases) 7,422 Other costs 1,387 ----------- $ 20,822 =========== Included in the February 3, 1996 balance sheet caption "accrued expenses" is $26,247 representing amounts expected to be disbursed in 1996 for merger transaction, severance and other costs. Included in the balance sheet caption "other long-term liabilities" is $2,695 representing the present value of remaining lease payments allocable to the Younkers administrative office space being permanently vacated in 1996. These lease payments will be disbursed through August 2005. Note Q - Quarterly Financial Information In the following summary of quarterly financial information, all adjustments necessary for a fair presentation of each period were included.
(Unaudited) First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal year ended February 3, 1996 Net sales $ 287,125 $ 278,798 $ 322,972 $444,603 Gross margin 100,117 100,314 114,145 145,704 Income (loss) before extraordinary items 3,648 2,479 6,922 (19,448) Net income (loss) 3,648 2,479 6,922 (21,508) Earnings (loss) per common share: Before extraordinary item 0.16 0.10 0.33 (1.02) Extraordinary item (0.11) Earnings (loss) per common share 0.16 0.10 0.33 (1.13) Fiscal year ended January 28, 1995 Net sales 211,715 267,622 310,022 427,099 Gross margin 69,425 93,105 110,976 147,639 Net income 625 1,737 5,598 21,784 Earnings per common share 0.02 0.06 0.27 1.12
In addition to the extraordinary loss on the early extinguishment of debt, the impairment of long-lived assets and the merger, restructuring and integration charges recorded in the fourth quarter for the year ended February 3, 1996, the Company also revised certain estimates and recorded other charges in the fourth quarter as follows: Provision for bad debts $ 2,000 Depreciation 700 Litigation 5,000 Vendor chargebacks 800 Conversion of Younkers' leased shoe operations 2,400 ------------ $ 10,900 ============ REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Proffitt's, Inc. We have audited the accompanying consolidated balance sheets of Proffitt's, Inc. and Subsidiaries as of February 3, 1996 and January 28, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended February 3, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger with Younkers, Inc., which has been accounted for as a pooling of interests as described in Note A to the consolidated financial statements. We did not audit the financial statements of Younkers for the years ended January 28, 1995 and January 29, 1994. Such statements reflect aggregate total assets constituting 38.3% and 54.7% in 1994 and 1993, respectively, and aggregate total revenues constituting 49.3% and 74.9% in 1994 and 1993, respectively, of the related consolidated totals. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Younkers, Inc. is based solely on the respective reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the respective reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the respective reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Proffitt's, Inc. and Subsidiaries as of February 3, 1996 and January 28, 1995 and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 3, 1996, in conformity with generally accepted accounting principles. As described in Note N to the financial statements, the Company changed its method of costing inventory, accounting for store pre-opening expenses and accounting for income taxes in the year ended January 29, 1994 and changed its method of valuing inventory in the year ended January 28, 1995. Atlanta, Georgia March 15, 1996 /s/ COOPERS & LYBRAND, L.L.P. REPORT OF MANAGEMENT The accompanying consolidated financial statements, including the notes thereto, and the other financial information presented in the Annual Report have been prepared by management. The financial statements have been prepared in accordance with generally accepted accounting principles and include amounts that are based upon our best estimates and judgements. Management is responsible for the consolidated financial statements, as well as the other financial information in this Annual Report. The Company maintains an effective system of internal accounting control. We believe that this system provides reasonable assurance that transactions are executed in accordance with management authorization and that they are appropriately recorded in order to permit preparation of financial statements in conformity with generally accepted accounting principles and to adequately safeguard, verify, and maintain accountability of assets. Reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the benefits derived. The consolidated financial statements and related notes have been audited by independent certified public accountants. Management has made available to them all of the Company's financial records and related data and believes all representations made to them during their audits were valid and appropriate. Their reports provide an independent opinion upon the fairness of the financial statements. The Audit Committee of the Board of Directors is composed of four independent Directors. The Committee is responsible for recommending the independent certified public accounting firm to be retained for the coming year, subject to shareholder approval. The Audit Committee meets periodically with the independent auditors, as well as with management, to review accounting, auditing, internal accounting control, and financial reporting matters. The independent auditors have unrestricted access to the Audit Committee. /s/ R. Brad Martin /s/ James E. Glasscock R. Brad Martin James E. Glasscock Chairman of the Board and Executive Vice President, Chief Chief Executive Officer Financial Officer, and Treasurer MARKET INFORMATION The Company's Common Stock trades on the NASDAQ Stock Market under the symbol PRFT. As of March 15, 1996, there were approximately 1,054 shareholders of record. Below is a summary of the high and low bid quotations for the Company's Common Stock for each quarterly period for the prior two years. The source of these quotations is the Monthly Statistical Report of the National Association of Securities Dealers, Inc. These quotations represent inter-dealer prices for actual transactions, without adjustment for retail markup, markdown, or commission. The Company presently follows the policy of retaining earnings to provide funds for the operation and expansion of the business and has no present intention to declare cash dividends in the foreseeable future. Future dividends, if any, will be determined by the Board of Directors of the Company in light of circumstances then existing, including the earnings of the Company, its financial requirements, and general business conditions. The Company declared no dividends to common shareholders in either 1995 or 1994. Fiscal Year Ended February 3, 1996 January 28, 1995 Price Range Price Range Quarter High Low High Low First 26 1/2 20 3/4 25 3/4 16 1/2 Second 33 24 19 3/4 14 3/4 Third 34 1/4 23 1/8 21 3/4 14 3/4 Fourth 29 21 1/2 25 1/4 17 3/4 COMMITMENT TO GROWTH Since becoming a public company in 1987, Proffitt's, Inc. has experienced tremendous growth. At that time, the Company operated only five stores, all located in metropolitan Knoxville, Tennessee, with annual revenues of $40 million. The successful completion of the Lovemans, Hess, McRae's, Parks-Belk, and Younkers transactions, coupled with the construction of several new units, has allowed us to become one of the fastest growing department store companies in the United States. The Company now operates 103 stores in sixteen states and generates annual sales in excess of $1.3 billion. We are committed to and have the resources for continued expansion. Through future acquisitions and new store construction, combined with sales gains in existing stores, particularly in cases where we have made substantial capital investments, Proffitt's, Inc. should continue to grow at an attractive rate and produce the returns expected for our shareholders. HISTORY OF ACQUISITIONS Company Date Stores Gross Square Feet Locations Lovemans 1988 5 340,000 GA, TN Hess 1992 8 526,000 TN, VA Hess 1993 10 674,000 GA, KY, VA McRae's 1994 28 2,806,000 AL, FL, LA, MS Parks-Belk 1995 3 225,000 TN Younkers 1996 51 4,961,400 IA, IL, MI, MN, NE, SD, WI STORE LOCATIONS PROFFITT'S STORES GEORGIA Dalton Walnut Square Rome Mt. Berry Square KENTUCKY Ashland Ashland Town Center Elizabethtown Towne Mall NORTH CAROLINA Asheville Biltmore Square TENNESSEE Athens Proffitt's Plaza Chattanooga Hamilton Place Mall Northgate Mall Cleveland Bradley Square Greeneville Greeneville Commons Johnson City The Mall at Johnson City Kingsport Fort Henry Mall Knoxville East Towne Mall West Town Mall Maryville Foothills Mall Morristown College Square Oak Ridge Oak Ridge Mall VIRGINIA Bristol Bristol Mall Chesapeake Chesapeake Square Greenbrier Mall Hampton Coliseum Mall Newport News Patrick Henry Mall Richmond Chesterfield Town Center Virginia Center Commons Virginia Beach Pembroke Mall McRAE'S STORES alabama Birmingham Brookwood Village Century Plaza Riverchase Galleria Roebuck Plaza Western Hills Mall Dothan Wiregrass Commons Florence Regency Square Gadsden Gadsden Mall Huntsville Madison Square Parkway City Mall Mobile Springdale Mall Montgomery Eastdale Mall Selma Selma Mall Tuscaloosa University Mall Florida Mary Esther Santa Rosa Mall Pensacola University Mall Louisiana Monroe Pecanland Mall Mississippi Columbus University Mall Gautier Singing River Mall Greenville Greenville Mall Hattiesburg TurtleCreek Mall Jackson Meadowbrook Mart Metrocenter Mall Northpark Mall Laurel Sawmill Square Meridian Village Fair Mall Natchez Natchez Mall Tupelo Barnes Crossing Vicksburg Pemberton Mall YOUNKERS STORES Iowa Ames North Grand Mall Bettendorf Duck Creek Plaza Cedar Falls College Square Mall Cedar Rapids Lindale Mall Westdale Mall Davenport Northpark Mall Des Moines Downtown Merle Hay Mall Southridge Mall Valley West Mall Dubuque Kennedy Center Fort Dodge Crossroads Center Iowa City Old Capitol Mall Marshalltown Marshalltown Plaza Mason City Southbridge Mall Sioux City Southern Hills Mall Town Square Downtown West Burlington Westland Mall Illinois Moline Southpark Mall Michigan Bay City Bay City Mall Holland West Shore Mall Marquette Marquette Plaza Port Huron Birchwood Mall Traverse City Cherryland Mall Minnesota Austin Oak Park Mall Nebraska Grand Island Conestoga Mall Lincoln Gateway Shopping Center Omaha Crossroads Mall Oakview Mall Westroads Mall South Dakota Sioux Falls The Empire Mall Wisconsin Appleton Fox River Mall Eau Claire London Square Fond du Lac Forest Mall Green Bay Port Plaza Mall Madison East Towne Mall West Towne Mall Manitowoc Edgewater Plaza Marinette Pine Tree Mall Marshfield Northway Mall Milwaukee Northridge Mall Southridge Mall Oshkosh Park Plaza Racine Regency Mall Sheboygan Downtown Sturgeon Bay Downtown Superior Mariner Mall Wausau Wausau Center Wisconsin Rapids Rapids Mall DIRECTORS AND OFFICERS PROFFITT'S, INC. DIRECTORS Bernard E. Bernstein Partner in the Knoxville, Tennessee law firm of Bernstein, Stair & McAdams Edmond D. Cicala President of Edmond Enterprises, Inc. Retired Chairman and Chief Executive Officer of the Goldsmith's Division of Federated Department Stores Ronald de Waal Chairman of We International, B.V., the Netherlands Gerard K. Donnelly Chairman of Princeton Middletown Partners, Inc. Former President and Chief Executive Officer of H. C. Prange Company Donald F. Dunn Retired Senior Vice President of Allied Stores Corporation Michael S. Gross Vice President of Apollo Capital Management, Inc. G. David Hurd Emeritus Chairman and retired Chief Executive Officer of The Principal Financial Group Richard D. McRae Former Chairman, President, and Chief Executive Officer of McRae's, Inc. C. Warren Neel Dean of the College of Business Administration at the University of Tennessee, Knoxville Harwell W. Proffitt Former Chairman, President, and Chief Executive Officer of Proffitt's, Inc. Gerald Tsai, Jr. Chairman, President, and Chief Executive Officer of Delta Life Corporation PROFFITT'S, INC. OFFICERS R. Brad Martin Chairman of the Board of Directors and Chief Executive Officer W. Thomas Gould Vice Chairman of the Board of Directors and Chairman of the Younkers Division of Proffitt's, Inc. James A. Coggin President and Chief Operating Officer Tom R. Amerman Executive Vice President of Special Projects David W. Baker Senior Vice President of Operations Julia A. Bentley Senior Vice President of Investor Relations and Planning and Secretary James E. Glasscock Executive Vice President, Chief Financial Officer, and Treasurer Brian J. Martin Senior Vice President of Human Resources and Law General Counsel Michael R. Molitor Senior Vice President of Merchandise Planning and Analysis James E. VanNoy Senior Vice President of Systems Support John J. White Senior Vice President of Profit Improvement and Special Projects William L. White, III Senior Vice President of Systems Development PROFFITT'S DIVISION OFFICERS Frederick J. Mershad President and Chief Executive Officer A. Coleman Piper Executive Vice President of Stores Don M. Alexander Vice President of Sales Promotion Linda Kerr Gannaway Vice President and General Merchandise Manager Max W. Jones Vice President and General Merchandise Manager McRAE'S DIVISION OFFICERS Gary L. Howard President and Chief Executive Officer Robert Oliver Executive Vice President of Stores Thomas M. Ford Vice President of Sales Promotion H. R. Harvey Vice President and General Merchandise Manager Sharron Williams Senior Vice President and General Merchandise Manager YOUNKERS DIVISION OFFICERS Robert M. Mosco President and Chief Executive Officer Toni E. Browning Senior Vice President of Stores Robert H. Ferguson Senior Vice President of Marketing and Sales Promotion Frank E. Kulp Senior Vice President and General Merchandise Manager Alan E. Miller Senior Vice President and General Merchandise Manager John T. Parros Senior Vice President and General Merchandise Manager JoAnn R. Sauvageau Senior Vice President and General Merchandise Manager Our Corporate Mission Our Company will provide opportunities for its associates and will create value for its shareholders through the exceptional operation of retail enterprises. Our stores will feature outstanding assortments of premier merchandise and will delight our guests with superior and personalized customer service. Our associates will follow the highest level of ethical standards in conducting our business affairs. Corporate Information Form 10-K Report A copy of the Form 10-K Annual Report, including financial statements and schedules, as filed with the Securities and Exchange Commission, will be furnished without charge on written request to: Senior Vice President of Investor Relations Proffitt's, Inc. P.O. Box 9388 Alcoa, Tennessee 37701 Legal Counsel Sommer & Barnard, PC Indianapolis, Indiana Waring Cox Memphis, Tennessee Independent Accountants Coopers & Lybrand L.L.P. Atlanta, Georgia Transfer Agent and Registrar Union Planters National Bank Memphis, Tennessee (901) 383-6980 PROFFITT'S DIVISION HOME OFFICES 115 North Calderwood Alcoa, Tennessee 37701 (423) 983-7000 PROFFITT'S DIVISION MAILING ADDRESS P.O. Box 9388 Alcoa, Tennessee 37701-9388 McRAE'S DIVISION HOME OFFICES 3455 Highway 80 West Jackson, Mississippi 39209 (601) 968-4400 McRAE'S DIVISION MAILING ADDRESS P.O. Box 20080 Jackson, Mississippi 39289-0080 YOUNKERS DIVISION HOME OFFICES 701 Walnut Street Des Moines, Iowa 50397 (515) 244-1112 YOUNKERS DIVISION MAILING ADDRESS P.O. Box 1495 Des Moines, Iowa 50397 EX-21.1 18 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT PROFFITT'S, INC. AND SUBSIDIARIES Name of Subsidiary State of Incorporation McRae's, Inc. Mississippi McRae's of Alabama, Inc. Alabama Parks Enterprises, Inc. Tennessee PDS Agency, Inc. Tennessee Proffitt's Investments, Inc. Tennessee Proffitt's of Tri-Cities, Inc. Tennessee Younkers Credit Corporation Delaware Younkers Funding Corporation Delaware Younkers, Inc. Delaware EX-23.1 19 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Proffitt's, Inc. on Form S-8 of our report dated March 15, 1996, on our audits of the consolidated financial statements of Proffitt's, Inc. as of February 3, 1996 and January 28, 1995, and for each of the three years in the period ended February 3, 1996, and our report dated March 15, 1996 on our audit of the financial statement schedule listed in Item 14(a)2 of Form 10-K, which reports are incorporated by reference in this Form 10-K. /s/COOPERS & LYBRAND L.L.P. Atlanta, Georgia April 22, 1996 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement No. 33-88390 of Proffitt's, Inc. on Form S-8 of our report dated March 3, 1995, with respect to the consolidated financial statements of Younkers, Inc. and subsidiary for the year ended January 28, 1995 not separately presented, appearing in this Annual Report of Form 10-K of Proffitt's, Inc. for year ended February 3, 1996. /s/Deloitte & Touche LLP Des Moines, Iowa April 22, 1996 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement of Proffitt's, Inc. (Form S-8 No. 33-88390) pertaining to the Proffitt's, Inc. 1994 Employee Stock Purchase Plan of our report dated March 3, 1994 (with respect to the consolidated statements of earnings, shareholders' equity, and cash flows of Younkers, Inc. for the year ended January 29, 1994, not separately presented), appearing in the Annual Report (Form 10-K) of Proffitt's, Inc. for the year ended February 3, 1996. /s/ERNST & YOUNG Des Moines, Iowa April 22, 1996 EX-27 20 EXHIBIT 27 (FDS) FILED WITH FORM 10-K
5 1,000 YEAR FEB-3-1996 FEB-3-1996 26,157 0 44,878 0 286,474 378,752 381,839 0 835,666 166,630 312,184 0 28,850 1,912 326,090 835,666 1,333,498 1,367,619 873,213 873,213 148,146 0 26,098 (4,493) (1,906) (6,399) 0 (2,060) 0 (8,459) (0.54) 0 -----END PRIVACY-ENHANCED MESSAGE-----