PROSPECTUS
FILED PURSUANT TO
RULE 424 (B) (4)
REGISTRATION NO: 333-75120
Saks Incorporated
Offer to Exchange $141,557,000 of Its
9 7/8% Notes Due 2011,
Registered under the Securities Act,
for $141,557,000 of Its Outstanding Unregistered
9 7/8% Notes Due 2011
This exchange offer will expire at 5:00 p.m.,
New York City time, on February 19, 2002, unless extended.
. We are offering to exchange $141,557,000 aggregate principal amount of
registered 9 7/8% notes due October 1, 2011, registered under the Securities
Act of 1933, for $141,557,000 aggregate principal amount of outstanding
unregistered 9 7/8% notes due October 1, 2011.
. The terms of the registered notes will be substantially identical to the
outstanding unregistered 9 7/8% notes that we issued on October 4, 2001,
except that the registered notes will be registered under the Securities Act
and will not be subject to transfer restrictions or registration rights. The
outstanding unregistered 9 7/8% notes were issued without compliance with
the registration requirements of the Securities Act of 1933 in reliance upon
an available exemption.
. We will pay interest on the registered notes on each April 1 and October 1,
beginning April 1, 2002.
. The registered notes will be fully and unconditionally guaranteed by all of
our existing and future subsidiaries that are or become guarantors of our
credit facility.
. Subject to the terms of this exchange offer, we will exchange the registered
notes for all outstanding 9 7/8% notes that are validly tendered and not
withdrawn prior to the expiration of this exchange offer.
. The exchange of outstanding 9 7/8% notes for registered notes pursuant to
this exchange offer generally will not be a taxable event for U.S. federal
income tax purposes. See "Certain U.S. Federal Income Tax Considerations."
. We will not receive any proceeds from this exchange offer.
Investing in the registered notes involves risks. You should consider
carefully the risk factors beginning on page 10 of this prospectus before
tendering your outstanding 9 7/8% notes in this exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the registered notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Each broker-dealer that receives registered notes for its own account in
exchange for outstanding 9 7/8% notes, where those outstanding 9 7/8% notes
were acquired by the broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of the registered notes. See "Plan of Distribution"
in this prospectus.
The date of this prospectus is January 18, 2002
TABLE OF CONTENTS
Important Information About This Prospectus........................................... ii
Where You Can Find More Information................................................... ii
Cautionary Statement Regarding Forward-Looking Statements............................. iii
Prospectus Summary.................................................................... 1
Saks Incorporated..................................................................... 6
Selected Financial Data............................................................... 8
Risk Factors.......................................................................... 10
Use Of Proceeds....................................................................... 12
Consolidated Ratio Of Earnings to Combined Fixed Charges and Preferred Stock Dividends 12
This Exchange Offer................................................................... 13
Description Of The Registered Notes................................................... 21
Certain U.S. Federal Income Tax Considerations........................................ 35
Plan of Distribution.................................................................. 40
Legal Matters......................................................................... 40
Experts............................................................................... 40
i
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
You should rely only on the information in this prospectus. We have not
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell the registered notes in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations, and prospectus may have changed since that date.
This exchange offer is not being made to, and we will not accept surrenders
for exchange from, holders of outstanding 9 7/8% notes in any jurisdiction in
which this exchange offer or the acceptance of this exchange offer would
violate the securities or blue sky laws of that jurisdiction.
Unless the context otherwise requires, as used in this prospectus:
. the terms "Saks," "our," or "we" refer to the combined entities of Saks
Incorporated and its subsidiaries, including those subsidiaries of Saks
that are guarantors of the notes;
. the term "outstanding 9 7/8% notes" refers to the 9 7/8% notes due 2011
that we issued on October 4, 2001;
. the term "registered notes" refers to the 9 7/8% notes due 2011 that we
registered under the Securities Act and that we are offering in exchange
for the outstanding 9 7/8% notes; and
. the term "notes" refers to the outstanding 9 7/8% notes and the
registered notes, collectively.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
filings with the SEC are available on the Internet at the SEC's EDGAR website
at http://www.sec.gov. You may read and copy any document that we file with the
SEC at the SEC's public reference rooms at the following addresses:
450 Fifth Street, N.W. Woolworth Building Citicorp Center
Room 1024 233 Broadway 500 West Madison Street
Washington, D.C. 20549 New York, New York 10279 Suite 1400
Chicago, Illinois 60661
You can call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms and their copy charges. Our SEC filings are also available at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The SEC allows us to "incorporate by reference" the information that we file
with the SEC. This means that we can disclose important information to you by
referring you to information and documents that we have filed with the SEC. Any
information that we refer to in this manner is considered part of this
prospectus. Any information that we file with the SEC after the date of this
prospectus will automatically update and supersede the corresponding
information contained in this prospectus.
We are incorporating by reference the following documents that we have
previously filed with the SEC:
. Our annual report on Form 10-K for the fiscal year ended February 3,
2001;
. Our quarterly reports on Form 10-Q for the quarters ended May 5, 2001,
August 4, 2001 and November 3, 2001; and
. Our current reports on Form 8-K filed on August 27, 2001, August 30,
2001, September 28, 2001, October 11, 2001 and November 21, 2001.
ii
We are also incorporating by reference any future filings that we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 after the date of this prospectus. In no event, however, will any of
the information that we disclose under Item 9 of any Current Report on Form 8-K
that we may from time to time file with the SEC be incorporated by reference
into, or otherwise included in, this prospectus. You may request a free copy of
any documents referred to above, including exhibits specifically incorporated
by reference in those documents, by contacting us at the following address and
telephone number:
Saks Incorporated
750 Lakeshore Parkway
Birmingham, Alabama 35211
Telephone: (205) 940-4000
Facsimile: (205) 940-4468
Attention: Charles J. Hansen
If you would like to request documents, please do so by no later than
February 11, 2002 in order to receive the documents before this exchange offer
expires on February 19, 2002.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus, including the information
incorporated into this prospectus by reference to other documents, may
constitute "forward-looking statements" for purposes of the Securities Act and
the Exchange Act. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by forward-looking statements.
When used in this prospectus or in documents incorporated by reference in this
prospectus, the words "believe," "anticipate," "estimate," "project," "intend,"
"expect," "may," "will," "plan," "should," "would," "contemplate," "possible,"
"attempt," "seek" and similar expressions are intended to identify these
forward-looking statements. These forward-looking statements were based on
various factors and were derived utilizing numerous assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements. Assumptions and other important
factors that could cause our actual results to differ materially from those in
the forward-looking statements include, but are not limited to:
. general economic and business conditions, both nationally and in those
trade areas in which we operate;
. changes in merchandise mixes, site selection and related traffic and
demographic patterns;
. prospects for the retail industry;
. the level of consumer spending for apparel and other consumer goods;
. the level of consumer confidence;
. levels of consumer debt and bankruptcies;
. changes in interest rates;
. changes in our customers' buying, credit usage, and payment behaviors;
. the effects of weather conditions on seasonal sales in the trade areas
we serve;
. competition among department and specialty stores and other retailers,
including luxury goods retailers, general merchandise stores, mail order
retailers and off-price and discount stores;
. the competitive pricing environment among retailers;
. the effectiveness of our planned advertising, marketing and promotional
campaigns;
. our ability to determine or cause and implement appropriate
merchandising strategies, merchandise flow and inventory turnover levels;
. our ability to respond quickly to changes in fashions trends and
consumer preferences;
iii
. adequate and stable sources of merchandise;
. our ability to effectively integrate our Saks Direct business into our
core Saks Fifth Avenue business and favorable customer response to the
integration;
. favorable customer response to changes in our customer-service formats;
. favorable customer response to our proprietary credit card loyalty
programs;
. effective expense control;
. effective operation of the credit card business of National Bank of the
Great Lakes, our wholly owned credit card bank;
. realization of planned synergies and cost savings in our existing
operations and in future acquisitions;
. our ability to integrate acquired businesses;
. changes in our business strategy or development plans;
. our loss of key personnel;
. the availability of capital to fund capital expenditures to enhance our
stores and the expansion of our business;
. the effect on the retail department store industry, and the economy
generally, of the terrorist attacks of September 11, 2001, subsequent
terrorist attacks and activities and the response by the United States
to any such events; and
. other factors referenced in this prospectus, as well as the information
incorporated herein by reference. In particular, see Exhibit 99.1 to our
Form 10-K for the fiscal year ended February 3, 2001 filed with the SEC,
which is incorporated by reference in this prospectus and which may be
accessed via EDGAR through the Internet at www.sec.gov.
We also used other factors and assumptions not identified above in deriving
the forward-looking statements. Our failure to realize these other assumptions
or the impact of the other factors may also cause actual results to differ
materially from those projected.
All written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by the foregoing cautionary statement.
You are cautioned not to rely on the forward-looking statements, which speak
only as of the date of this prospectus. We assume no obligation to update or to
publicly announce the results of any revisions to any of the forward-looking
statements to reflect actual results, future events or developments, changes in
assumptions or changes in other factors affecting the forward-looking
statements.
iv
PROSPECTUS SUMMARY
This brief summary highlights selected information from this prospectus. It
may not contain all the information that is important to you. For a more
complete understanding of this exchange offer, our company, and the registered
notes, we encourage you to read this entire prospectus carefully, including the
risk factors and financial statements.
This Exchange Offer
Background.................. On October 4, 2001, we issued $141,557,000 of our
outstanding 9 7/8% notes due 2011 in a private
offering. In connection with this private
offering, we entered into a registration rights
agreement in which we agreed, among other things,
to deliver this prospectus to you and to complete
an exchange offer for the outstanding 9 7/8%
notes.
General..................... We are offering to exchange $1,000 principal
amount of our registered notes due October 1,
2011, for each $1,000 principal amount of our
outstanding 9 7/8% notes due October 1, 2011.
Currently, there is $141,557,000 in principal
amount of outstanding 9 7/8% notes.
The terms of the registered notes are identical
in all material respects to the terms of the
outstanding 9 7/8% notes, except that the
registered notes are registered under the
Securities Act and are not subject to transfer
restrictions or registration rights.
Outstanding 9 7/8% notes may be exchanged only in
minimum denominations of $1,000 and integral
multiples of $1,000 in excess of $1,000.
Registered notes will be issued only in minimum
denominations of $1,000 and integral multiples of
$1,000 in excess of $1,000.
Subject to the terms of this exchange offer, we
will exchange registered notes for all of the
outstanding 9 7/8% notes that are validly
tendered and not withdrawn prior to the
expiration of this exchange offer. The registered
notes will be issued in exchange for
corresponding outstanding 9 7/8% notes in this
exchange offer, if consummated, on the fifth
business day following the expiration date of
this exchange offer or as soon as practicable
after that date.
Expiration Date............. This exchange offer will expire at 5:00 p.m., New
York City time, on February 19, 2002, unless we
extend it. We do not currently intend to extend
the expiration date.
Withdrawal of Tenders....... You may withdraw the surrender of your
outstanding 9 7/8% notes at any time prior to the
expiration date.
Taxation.................... The exchange of outstanding 9 7/8% notes for
registered notes in this exchange offer will not
be a taxable event for U.S. federal income tax
purposes.
1
Conditions to this Exchange
Offer..................... This exchange offer is subject to customary
conditions, which we may assert or waive. See
"This Exchange Offer--Conditions to this Exchange
Offer; Waivers."
Procedures for Tendering.... If you wish to accept this exchange offer and
your outstanding 9 7/8% notes are held by a
custodial entity such as a bank, broker, dealer,
trust company or other nominee, you must instruct
this custodial entity to tender your outstanding
9 7/8% notes on your behalf pursuant to the
procedures of the custodial entity. If your
outstanding 9 7/8% notes are registered in your
name, you must complete, sign and date the
accompanying letter of transmittal, or a
facsimile of the letter of transmittal, according
to the instructions contained in this prospectus
and the letter of transmittal. You must also mail
or otherwise deliver the letter of transmittal,
or a facsimile of the letter of transmittal,
together with the outstanding 9 7/8% notes and
any other required documents, to the exchange
agent at the address set forth on the cover page
of the letter of transmittal.
Custodial entities that are participants in The
Depository Trust Company, or DTC, must tender
outstanding 9 7/8% notes through DTC's Automated
Tender Offer Program, or ATOP, which enables a
custodial entity, and the beneficial owner on
whose behalf the custodial entity is acting, to
electronically agree to be bound by the letter of
transmittal. A letter of transmittal need not
accompany tenders effected through ATOP.
By tendering your outstanding 9 7/8% notes in
either of these manners, you will represent and
agree with us that:
. you are acquiring the registered notes in the
ordinary course of your business for
investment purposes;
. you are not engaged in, and do not intend to
engage in, the distribution of the registered
notes (within the meaning of the Securities
Act);
. you have no arrangement or understanding with
anyone to participate in a distribution of
the registered notes; and
. you are not an affiliate of Saks within the
meaning of Rule 405 under the Securities Act.
See "This Exchange Offer--Effect of Surrendering
Outstanding 9 7/8% Notes."
If you are a broker-dealer that will receive
registered notes for your own account in exchange
for outstanding 9 7/8% notes that you acquired as
a result of your market-making or other trading
activities, you will be required to acknowledge
in the letter of transmittal that you will
deliver a prospectus in connection with any
resale of these registered notes.
Resale of Registered Notes.. We believe that you can resell and transfer your
registered notes without registering them under
the Securities Act and delivering a
2
prospectus, if you can make the representations
that appear under "This Exchange Offer--Effect of
Surrendering Outstanding 9 7/8% Notes." Our
belief is based on interpretations expressed in
some of the SEC's no-action letters to other
issuers in exchange offers like ours.
We cannot guarantee that the SEC would make a
similar decision about this exchange offer. If
our belief is wrong, or if you cannot truthfully
make the necessary representations, and you
transfer any registered note issued to you in
this exchange offer without meeting the
registration and prospectus delivery requirements
of the Securities Act, or without an exemption
from these requirements, then you could incur
liability under the Securities Act. We are not
indemnifying you for any liability that you may
incur under the Securities Act. A broker-dealer
can only resell or transfer registered notes if
it delivers a prospectus in connection with the
resale or transfer.
Consequences of Failure to
Exchange.................. For a description of the consequences of a
failure to exchange the outstanding 9 7/8% notes,
see "Risk Factors."
Exchange Agent.............. Bank One Trust Company, National Association, is
the exchange agent for this exchange offer. The
address and telephone number of the exchange
agent are on page 20 of this prospectus.
3
The Registered Notes
Issuer...................... Saks Incorporated
Maturity Date of the
Registered Notes.......... October 1, 2011
Interest.................... 9 7/8%
Interest will be payable semi-annually on each
April 1 and October 1, commencing April 1, 2002.
Guarantees.................. The registered notes will be fully and
unconditionally guaranteed by all of our
subsidiaries that are guarantors of our credit
facility. These guarantors include the following
subsidiaries: Parisian, Inc., McRae's, Inc.,
McRae's Stores Partnership, McRae's Of Alabama,
Inc., New York City Saks, LLC, Saks Holdings,
Inc., Saks & Company, Saks Fifth Avenue, Inc.,
Saks Fifth Avenue Of Texas, Inc., Saks Fifth
Avenue Texas, L.P., Saks Direct, Inc.,
saksfifthavenue.com, inc., Saks Fifth Avenue
Distribution Company, Herberger's Department
Stores, LLC, Carson Pirie Holdings, Inc., Saks
Distribution Centers, Inc., Saks Shipping
Company, Inc., McRae's Stores Services, Inc.,
Jackson Leasing, LLC, McRIL, LLC, SCCA, LLC,
SCIL, LLC, SFAILA, LLC, SCCA Store Holdings,
Inc., Tex SFA, Inc., Saks Wholesalers, Inc. and
PMIN General Partnership. In addition, if our
other subsidiaries become guarantors under our
credit facility, those subsidiaries will also
become guarantors of the registered notes.
Ranking..................... The registered notes and the guarantees will be
general, unsecured obligations. The registered
notes and the guarantees will rank equally in
right of payment with all of our and the
guarantors' other unsecured and unsubordinated
obligations. The registered notes and the
guarantees will effectively rank junior to any of
our and the guarantors' secured indebtedness to
the extent of our and their assets that secure
secured indebtedness. The registered notes will
also be effectively subordinated to all
obligations of our subsidiaries that are not
guarantors. See "Risk Factors--Some of Our Other
Debt Ranks Ahead of the Registered Notes in Right
of Repayment," "Description of the Registered
Notes--General" and "--Guarantees."
Restrictive Covenants....... The indenture governing the registered notes will
contain covenants that will, among other things,
limit our ability to:
. engage, or permit our domestic subsidiaries
to engage, in specified sale-leaseback
transactions; and
. enter into specified mergers or
consolidations or dispose of stock or
specified assets.
Use of Proceeds............. We will not receive any proceeds from this
exchange offer.
4
Events of Default........... For a discussion of events that will permit
acceleration of the payment of the principal of
and accrued interest on the registered notes, see
"Description of the Registered Notes--Events of
Default."
Form and Denomination....... The registered notes will be issued only in the
form of one or more global notes. Each global
note will be deposited with DTC, in each case for
credit to the account of a direct or indirect
participant of DTC. Investors in the global notes
who are participants in DTC may hold their
interests in the global notes directly through
DTC. Investors in the global notes who are not
participants in DTC may hold their interests
indirectly through organizations that are
participants in DTC. Interests in the global
notes will be shown on, and transfers of those
interests will be effected only through, records
maintained by DTC and its participants, including
Euroclear and Clearstream. See "Description of
the Registered Notes--Book-Entry, Delivery and
Form."
Except as set forth under "Description of the
Registered Notes--Exchange of Global Notes for
Certificated Notes," participants and indirect
participants will not be entitled to receive
physical delivery of definitive registered notes
or to have registered notes issued and registered
in their names and will not be considered the
owners or holders of the registered notes under
the indenture.
Interests in the global notes and the definitive
registered notes, if any, will be issued in
minimum denominations of $1,000 and integral
multiples of $1,000 in excess of $1,000.
Governing Law............... The registered notes and the indenture will be
governed by, and construed in accordance with,
the laws of the State of New York.
Trustee, Transfer Agent, and
Book-Entry Depository..... Bank One Trust Company, National Association
Paying Agent................ Bank One Trust Company, National Association
Risk Factors
You should read the section entitled "Risk Factors," beginning on page 10 of
this prospectus, as well as the other cautionary statements throughout this
prospectus, to ensure you understand the risks associated with tendering your
outstanding 9 7/8% notes in this exchange offer and receiving registered notes.
5
SAKS INCORPORATED
We are a leading operator of branded department stores in the United States
and currently operate more than 350 luxury, specialty, traditional and
off-price department stores in 39 states. We also operate related
direct-to-consumer and e-commerce businesses. By operating different retail
formats, we intend to benefit from and appeal to a geographically and
demographically diverse group of existing and prospective customers.
Our retail businesses are organized into two main business segments, Saks
Department Store Group, which operates our traditional department stores, and
Saks Fifth Avenue Enterprises, which operates Saks Fifth Avenue full-line
luxury department stores, Off 5/th/ fashion outlet stores, and the Saks Direct
direct-to-consumer and e-commerce businesses. We also provide common support
services, such as distribution, information technology and credit
administration, to Saks Department Store Group and Saks Fifth Avenue
Enterprises.
Saks Department Store Group
Our department store group operates more than 240 department stores in 24
states throughout the Southeastern, Midwestern and Great Plains regions of the
United States. We operate under eight store names, many of which have been in
existence for over 100 years: Younkers, Herberger's, Parisian, Carson Pirie
Scott, McRae's, Proffitt's, Bergner's and Boston Store.
Our department stores are typically leading specialty and department stores
in their communities, with most stores located in premier locations in the
areas they serve. We compete with other retailers based on, among other
factors, levels of service, quality of real estate locations and desirability
of merchandise. Our department stores offer a wide selection of upper-moderate
to better branded fashion and private brand apparel, shoes, accessories,
jewelry, cosmetics and decorative home furnishings. Our department stores also
offer furniture in select locations.
We believe that by positioning our department stores in diverse geographic
locations and by utilizing different store formats and store names, we are able
to appeal to a broader group of potential customers. In smaller communities,
our department stores cater to middle- and upper-income customers with a
selection of name-brand merchandise that is frequently not otherwise available
in that area. In larger metropolitan areas, we compete by operating several
stores, sometimes with different formats, in prime locations.
Saks Fifth Avenue Enterprises
Saks Fifth Avenue Enterprises operates Saks Fifth Avenue full-line luxury
department stores, Off 5/th/, our off-price business, and direct-to-consumer
catalog and e-commerce businesses. Our strategy is to sell luxury and designer
merchandise through multiple distribution channels that each take advantage of
the highly recognizable Saks Fifth Avenue brand name. As part of this strategy,
our Off 5/th/ off-price business targets more value conscious customers, while
enabling us to more cost-effectively liquidate markdown inventory from our Saks
Fifth Avenue full-line stores. Saks Fifth Avenue Enterprises operates more than
110 locations in 27 states.
. Our Saks Fifth Avenue full-line stores are free-standing and mall-based
stores located in exclusive shopping destinations or anchor stores in
upscale regional malls, and offer a wide assortment of distinctive
luxury fashion apparel, shoes, accessories, jewelry, cosmetics and
gifts. We believe that because of the highly recognizable Saks Fifth
Avenue brand and its premier locations, our Saks Fifth Avenue stores
serve as destinations that draw customers from a wide geographic area
surrounding each store, as well as from outside the U.S.
6
. Off 5/th/ is a retailer of off-price upscale merchandise, targeting the
more value-conscious customer. Off 5/th/ stores are located in upscale
mixed-use and off-price centers in 23 states and offer apparel, shoes,
accessories, and decorative home furnishings at prices below those
charged by full-line department stores. The merchandise offering
includes branded and private brand merchandise that is being liquidated
from our Saks Fifth Avenue stores. We also purchase brand name
merchandise directly from vendors for sale in our Off 5/th/ Stores in
order to provide consistent, well-rounded merchandise assortments.
. Saks Direct is comprised of our direct-to-consumer and e-commerce
businesses. We are integrating the merchandising, marketing, inventory
management and sales support functions of these businesses with that of
our full-line Saks Fifth Avenue stores.
-----------------
Our principal executive offices are located at 750 Lakeshore Parkway,
Birmingham, Alabama 35211. Our telephone number is (205) 940-4000.
7
SELECTED FINANCIAL DATA
(Dollars in Thousands)
The following table sets forth selected financial data as of and for the
five fiscal years ended February 3, 2001, and summary unaudited financial data
as of and for the thirty-nine weeks ended November 3, 2001 and October 28, 2000.
Thirty-Nine Weeks
Ended Fiscal Year Ended (a)
---------------------- ----------------------------------------------------------
November 3, October 28, February 3, January 29, January 30, January 31, February 1,
2001 2000 2001(g) 2000 1999 1998 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Sales................................ $4,158,609 $4,457,783 $6,581,236 $6,434,167 $5,963,813 $5,515,675 $4,726,766
Cost of sales............................ 2,691,393 2,845,042 4,211,707 4,028,779 3,794,340 3,481,831 3,006,287
Selling, general and administrative
expense................................. 1,027,077 1,030,080 1,433,357 1,359,386 1,332,275 1,203,909 1,059,750
Depreciation and amortization............ 162,157 154,802 214,099 178,775 155,361 136,119 123,533
Property and equipment rentals........... 148,380 142,882 196,813 187,829 181,966 157,018 114,714
Taxes other than income taxes............ 118,662 122,789 163,745 155,724 150,839 134,121 117,355
Store pre-opening costs.................. 5,170 5,698 6,196 13,342 10,567 17,018 11,645
Merger and integration charges(b)........ 1,539 20,559 19,886 35,660 111,307 36,524 16,929
Year 2000 expense(c)..................... -- -- -- 5,917 10,437 6,590 --
(Gains) losses from long-lived assets.... 18,604 1,244 73,572 12,547 61,785 (134) 1,406
ESOP expenses(d)......................... -- -- -- -- -- 9,513 3,910
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss).................. (14,373) 134,687 261,861 456,208 154,936 333,166 271,237
Interest expense......................... (99,354) (109,234) (149,995) (138,968) (110,971) (113,685) (114,881)
Other income (expense), net.............. 746 152 3,733 140 22,201 2,330 (11,780)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before provision for
income taxes and extraordinary items.... (112,981) 25,605 115,599 317,380 66,166 221,811 144,576
Provision (benefit) for income taxes(e).. (42,898) 5,686 40,383 118,476 41,181 (194,426) 50,998
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
items................................... (70,083) 19,919 75,216 198,904 24,985 416,237 93,578
Extraordinary gain (loss) on debt, net of
tax(f).................................. 16,439 -- -- (9,261) (25,881) (11,323) (12,746)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ (53,644) $ 19,919 $ 75,216 $ 189,643 $ (896) $ 404,914 $ 80,832
========== ========== ========== ========== ========== ========== ==========
Consolidated Balance Sheet Data
Working Capital.......................... $1,131,520 $1,080,388 $1,085,956 $1,110,796 $ 887,875 $1,096,359 $ 951,752
Total assets............................. $5,050,311 $5,466,316 $5,050,611 $5,098,952 $5,188,981 $4,270,253 $3,630,276
Long-term debt, less current portion..... $1,642,707 $1,948,234 $1,801,657 $1,966,802 $2,114,647 $1,380,770 $1,365,242
Shareholders' equity..................... $2,245,071 $2,222,118 $2,293,829 $2,208,343 $2,007,575 $1,944,529 $1,397,934
- --------
(a) Effective September 17, 1998, January 31, 1998, February 1, 1997, and
February 3, 1996, Saks Holdings, Inc. ("Saks Holdings"), Carson Pirie Scott
& Co. ("CPS"), G.R. Herberger's, Inc. ("Herberger's") and Younkers, Inc.
("Younkers"), respectively, were acquired by Saks Incorporated. We
accounted for these acquisitions under the pooling-of-interests method of
accounting. Accordingly, our financial statements were restated for all
periods to include the results of operations and financial position of Saks
Holdings, CPS, Herberger's and Younkers. We completed the purchase of 14
Dillard's stores on October 2, 1998 and one Dillard's store on December 1,
1998, which we accounted for under the purchase method of accounting. As a
consequence, our financial statements include the results of operations for
these stores from the dates of purchase.
(b) During the period ended November 3, 2001, we incurred integration charges
associated with our southern distribution center consolidation. In fiscal
2000, we incurred integration charges associated with the consolidation of
the Herberger's home office into CPS' home office and the McRae's home
office into the Proffitt's home office. We also incurred costs in
connection with our southern distribution center consolidation. In fiscal
1996 through fiscal 1999 in connection with the acquisitions of the
Dillard's stores, Saks Holdings, CPS, Parisian, and Herberger's, we
incurred merger and integration charges, including (i) transaction costs,
(ii) costs associated with severance and related benefits and abandonment
and elimination of duplicate administrative office space, property, data
processing equipment and software, (iii) integration costs and (iv) other
costs.
(c) During fiscal 1997, we undertook the assessment of the effect of the Year
2000 Problem on us and began the necessary systems modifications resulting
in expenses of $5.9 million, $10.4 million and $6.6 million in fiscal 1999,
1998 and 1997, respectively.
(d) In December 1997, we terminated the Herberger's Employee Stock Ownership
Plan.
8
(e) We recorded an income tax benefit of $294.8 million in the fourth quarter
of fiscal 1997, relating to the reduction in the Saks Holdings valuation
allowance associated with certain deferred tax assets .
(f) During the period ended November 3, 2001, we repurchased $440.0 million of
debt at a discount resulting in a gain on extinguishment of debt of $16.4
million. During fiscal 1999, we completed various balance sheet
restructuring transactions that resulted in debt extinguishment charges of
$9.3 million. During fiscal 1998 and as a result of the Saks Holdings
acquisition, we completed various balance sheet restructuring transactions
that resulted in debt extinguishment charges of $25.9 million. These
transactions included the restructuring of our revolving credit facilities,
the repurchase of our 8 1/8% Senior Notes and the prepayment of real estate
secured notes. During fiscal 1997, we modified our capital structure,
including retiring approximately $114 million of 9 7/8% Parisian Senior
Subordinated Notes due 2003, prepaying approximately $15 million of 11%
Junior Subordinated Notes, prepaying certain mortgages and replacing our
existing revolving credit and working capital facilities with new revolving
credit facility. As a result of this early extinguishment of debt, certain
deferred costs and premiums associated with the debt facilities, such as
loan orgination costs, were written off resulting in a loss of $11.3
million. In fiscal 1996, we recognized $12.7 million of extraordinary
charges associated with the prepayment of term borrowings under the Saks
Holdings credit facility, the repayment of outstanding balances on the
revolving credit portion of the Saks Holdings credit facility and the
prepayment of certain mortgages.
(g) Fiscal year 2000 contained 53 weeks ended on February 3, 2001. Fiscal years
1999, 1998, 1997 and 1996 contained 52 weeks.
9
RISK FACTORS
Before you tender your outstanding 9 7/8% notes, you should be aware that
there are various risks involved in an investment in registered notes,
including those we describe below. You should consider carefully these risk
factors together with all of the other information included in this prospectus
before you decide to tender your outstanding 9 7/8% notes in this exchange
offer.
If You Fail to Exchange Your Outstanding 9 7/8% Notes for Registered Notes, You
Will Continue to Hold Notes Subject to Transfer Restrictions.
We will only issue registered notes in exchange for outstanding 9 7/8% notes
that you timely and properly tender. Therefore, you should allow sufficient
time to ensure timely delivery of the outstanding 9 7/8% notes and you should
carefully follow the instructions on how to tender your outstanding 9 7/8%
notes set forth under "This Exchange Offer--Procedures for Tendering" and in
the letter of transmittal that accompanies this prospectus. Neither we nor the
exchange agent are required to notify you of any defects or irregularities
relating to your tender of outstanding 9 7/8% notes.
If you do not exchange your outstanding 9 7/8% notes for registered notes in
this exchange offer, the outstanding 9 7/8% notes you hold will continue to be
subject to the existing transfer restrictions. In general, you may not offer or
sell the outstanding 9 7/8% notes except under an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. We do not plan to register the outstanding 9 7/8% notes under the
Securities Act. If you continue to hold any outstanding 9 7/8% notes after this
exchange offer is completed, you may have trouble selling them because of these
restrictions on transfer.
If an Active Trading Market Does Not Develop for the Registered Notes, You May
be Unable to Sell the Registered Notes or to Sell Them at a Price You Deem
Sufficient.
The registered notes will be new securities for which there is no
established trading market. We do not intend to list the registered notes on
any exchange or create or maintain a trading market for them. We give no
assurance as to:
. the liquidity of any trading market that may develop;
. the ability of holders to sell their registered notes; or
. the price at which holders would be able to sell their registered notes.
Even if a trading market develops, the registered notes may trade at higher or
lower prices than their principal amount or purchase price, depending on many
factors, including:
. prevailing interest rates;
. the number of holders of the registered notes;
. the interest of securities dealers in making a market for the registered
notes;
. the market for similar debt securities; and
. our financial performance.
We understand that the dealer managers that assisted us in issuing the
outstanding 9 7/8% notes presently intend to make a market in the registered
notes. However, they are not obligated to do so and may discontinue making a
market in the registered notes at any time without notice. Finally, if a large
number of holders of outstanding 9 7/8% notes do not tender outstanding 9 7/8%
notes or tender outstanding 9 7/8% notes improperly, the limited amount of
registered notes that would be issued and outstanding after we complete this
exchange offer could adversely affect the development or viability of a market
for the registered notes.
Some of Our Other Debt Ranks Ahead of the Registered Notes in Right of Repayment
The registered notes and the guarantees of the registered notes will be
unsecured obligations. If we default, your right to payment under the
registered notes will be:
. subordinate to all of our and the guarantors' secured debt;
10
. equal to all of our and the guarantors' unsecured and unsubordinated
debt; and
. senior to all of our and the guarantors' subordinated debt.
On December 1, 2001, our outstanding short-term and long-term debt, combined
with that of our subsidiaries that are acting as guarantors of the registered
notes, was $1.6 billion. Of this amount:
. approximately $444 million outstanding under our credit facility
(secured by, among other collateral, our merchandise inventory and
common stock and other beneficial interests in many of our subsidiaries)
and other indebtedness, was secured debt having priority over the
registered notes; and
. approximately $1.2 billion in the aggregate outstanding under our 7% and
7 1/4% Notes due 2004, our 8 1/4% Notes due 2008, our 7 1/2% Notes due
2010, our 7 3/8% Notes due 2019, and our outstanding 9 7/8% notes, was
unsecured and unsubordinated debt ranking equally in right of payment
with the registered notes.
The holders of our secured debt will have a prior claim on our assets that
secure the holders' secured debt. As a result, the holders of our secured debt
will be paid before you receive any amounts due under the terms of the
registered notes and the guarantees of the registered notes, but only to the
extent of the value of the assets securing their debt. In addition, if we or
one of the guarantors are involved in any dissolution, liquidation or
reorganization, you may not be able to recover any interest or principal you
are due under the registered notes.
If we or a guarantor become insolvent, the guarantee of the registered notes
could be held by a court to be unenforceable. If the guarantees were held to be
unenforceable, you would have a claim against the equity of the guarantor but
would be paid only after all of the direct obligations of the guarantor had
been satisfied.
The registered notes will be effectively subordinated to all the liabilities
of our subsidiaries that are not acting as guarantors of the registered notes.
As of December 1, 2001, our non-guarantor subsidiaries had approximately $1.2
billion of liabilities, which are off-balance sheet and are represented by a
credit card accounts receivable securitization facility.
We will use a portion of our cash flow from operations to make payments,
consisting primarily of interest and principal, on our debt. This will reduce
the funds available for our operations and capital expenditures. Also, the
overall amount of debt we have outstanding and the restrictive covenants
contained in the terms of that debt may make us vulnerable to economic
downturns and competitive pressures, and may hinder our ability to accomplish
our strategic objectives.
11
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
registration rights agreement into which we entered when we issued the
outstanding 9 7/8% notes. We will not receive any cash proceeds from this
exchange offer. In exchange for outstanding 9 7/8% notes that you tender
pursuant to this exchange offer, you will receive registered notes in like
principal amount. The outstanding 9 7/8% notes that are surrendered in exchange
for the registered notes will be retired and canceled by us upon receipt and
cannot be reissued. The issuance of the registered notes under this exchange
offer will not result in any increase in our outstanding debt.
We did not receive any cash proceeds in the transaction where we issued the
outstanding 9 7/8% notes. In that transaction we exchanged $141,557,000 in
outstanding 9 7/8% notes and $147,371,524 in cash for $130,274,000 of our 7%
notes and for $152,867,000 of our 71/4% notes, each due in 2004. We retired and
canceled all of the 7% notes and 7 1/4% notes that were tendered in exchange
for the outstanding 9 7/8% notes.
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERERD STOCK DIVIDENDS
The ratio of earnings to combined fixed charges and preferred stock
dividends is computed by dividing earnings by the sum of fixed charges and
preferred stock dividend requirements. For these purposes, earnings consist
primarily of income (loss) before income taxes and extraordinary items adjusted
for fixed charges. Combined fixed charges and preferred stock dividends consist
primarily of interest (whether expensed or capitalized), the portion of rental
expense representative of the interest factor in these rentals and preferred
stock dividends.
The following sets forth our consolidated ratio of earnings to combined
fixed charges and preferred dividends for the periods shows:
For the 39 Weeks
Ended, For the 52 Weeks Ended,
---------------- -----------------------------------------------------------
November 3, February 3, January 29, January 30, January 31, February 1,
2001 2001 2000 1999 1998 1997
---------------- ----------- ----------- ----------- ----------- -----------
Ratio of Earnings to
Fixed Charges and
Preferred Stock
Dividends......... N/A* 1.5x 2.4x 1.4x 2.3x 1.9x
- --------
*The earnings for the period ended November 3, 2001 are deficient $116,805 to
cover fixed charges.
12
THIS EXCHANGE OFFER
Purpose and Effect of this Exchange Offer
The registered notes to be issued in the exchange offer will be exchanged
for our outstanding 9 7/8% notes due 2011 that we issued on October 4, 2001. On
that date, we exchanged $141,557,000 of outstanding 9 7/8% notes and
$147,371,524 in cash for $130,274,000 of our 7% notes and $152,867,000 of our
7 1/4% notes, each due 2004. We made this exchange only with holders of the
2004 notes whom we believed were qualified institutional buyers within the
meaning of Rule 144A under the Securities Act. We exchanged the outstanding
9 7/8% notes without compliance with the registration requirements of the
Securities Act in reliance upon an exemption from those registration
requirements. As part of the exchange transaction we entered into a
registration rights agreement pursuant to which we agreed to:
. file with the SEC by January 3, 2002, a registration statement under the
Securities Act with respect to the issuance of the registered notes in
an exchange offer; and
. use our commercially reasonable efforts to cause that registration
statement to become effective under the Securities Act on or before
April 3, 2002.
We agreed to issue and exchange the registered notes for all outstanding
9 7/8% notes validly tendered and not validly withdrawn prior to the expiration
of this exchange offer. A copy of the registration rights agreement has been
filed as an exhibit to the registration statement of which this prospectus is a
part.
For purposes of this exchange offer, the term "holder" means any person in
whose name outstanding 9 7/8% notes are registered on the trustee's books or
any other person who has obtained a properly completed bond power from the
registered holder, or any person whose outstanding 9 7/8% notes are held of
record by The Depository Trust Company, which we refer to as the "Depositary"
or "DTC," who desires to deliver the outstanding 9 7/8% notes by book-entry
transfer at DTC. The terms "exchange agent" and "trustee" refer to Bank One
Trust Company, National Association.
Terms of this Exchange Offer
Subject to the terms and conditions of this exchange, we will issue $1,000
principal amount of registered notes in exchange for each $1,000 principal
amount of outstanding 9 7/8% notes properly surrendered pursuant to this
exchange offer and not validly withdrawn prior to the expiration date.
Outstanding 9 7/8% notes may be surrendered only in integral multiples of
$1,000. The form and terms of the registered notes are the same as the form and
terms of the outstanding 9 7/8% notes except that:
. the registered notes will be registered under the Securities Act and
will not bear legends restricting the transfer of the registered notes;
and
. holders of the registered notes will not be entitled to any of the
registration rights of holders of outstanding 9 7/8% notes under the
registration rights agreement.
The registered notes will evidence the same indebtedness as the outstanding
9 7/8% notes, which they replace, and will be issued under, and be entitled to
the benefits of, the same indenture under which the outstanding 9 7/8% notes
were issued. As a result, both series of notes will be treated as a single
class of debt securities under the indenture.
As of the date of this prospectus, $141,557,000 million in aggregate
principal amount of the outstanding 9 7/8% notes is outstanding. All of the
outstanding 9 7/8% notes are registered in the name of Cede & Co., as nominee
for DTC. Solely for reasons of administration, we have fixed the close of
business on January 4, 2002 as the record date for this exchange offer for
purposes of determining the persons to whom this prospectus and the
accompanying letter of transmittal will be mailed initially. There will be no
fixed record date for determining holders of the outstanding 9 7/8% notes
entitled to participate in this exchange offer.
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In connection with this exchange offer, the laws of the State of New York,
which govern the indenture and the notes, do not give you any appraisal or
dissenters' rights nor any other right to seek monetary damages in court. We
intend to conduct this exchange offer in accordance with the provisions of the
registration rights agreement and the applicable requirements of the Securities
Exchange Act and the related SEC rules and regulations.
For all relevant purposes, we will be regarded as having accepted properly
surrendered outstanding 9 7/8% notes if and when we give oral or written notice
of our acceptance to the exchange agent. The exchange agent will act as agent
for the surrendering holders of outstanding 9 7/8% notes for the purposes of
receiving the registered notes from us.
If you surrender outstanding 9 7/8% notes in this exchange offer, you will
not be required to pay brokerage commissions or fees. In addition, subject to
the instructions in the letter of transmittal, you will not have to pay
transfer taxes for the exchange of outstanding 9 7/8% notes. We will pay all
charges and expenses, other than certain applicable taxes described under
"--Other Fees and Expenses."
Conditions to this Exchange Offer; Waivers
Notwithstanding any other term of this exchange offer, or any extension of
this exchange offer, we do not have to accept for exchange, or exchange
registered notes for, any outstanding 9 7/8% notes, and we may terminate this
exchange offer before acceptance of the outstanding 9 7/8% notes, if:
. any statute, rule or regulation has been enacted, or any action has been
taken by any court or governmental authority that, in our judgment,
seeks to or would prohibit, restrict or otherwise render the
consummation of this exchange offer illegal;
. any change, or any development that would cause a change, in our
business or financial affairs has occurred that, in our judgment, might
materially impair our ability to proceed with this exchange offer or
that would materially impair the contemplated benefits to us of this
exchange offer; or
. a change occurs in the current interpretations by the staff of the SEC
that, in our judgment, might materially impair our ability to proceed
with this exchange offer.
If we, in our sole discretion, determine that any of the above conditions is
not satisfied, we may:
. refuse to accept any outstanding 9 7/8% notes and return all surrendered
outstanding 9 7/8% notes to the surrendering holders;
. extend this exchange offer and retain all outstanding 9 7/8% notes
surrendered prior to the expiration date, subject to the holders' right
to withdraw the surrender of their outstanding 9 7/8% notes; or
. waive any unsatisfied conditions regarding this exchange offer and
accept all properly surrendered outstanding 9 7/8% notes that have not
been withdrawn. If this waiver constitutes a material change to this
exchange offer, we will promptly disclose the waiver by means of a
prospectus supplement or post-effective amendment to the registration
statement that includes this prospectus that will be distributed to the
holders. We will also extend this exchange offer for a period of five to
ten business days, depending upon the significance of the waiver and the
manner of disclosure to the holders, if this exchange offer would
otherwise expire during the five-to-ten business-day period.
Consequences to Holders of Outstanding 9 7/8% Notes Not Tendering in this
Exchange Offer
Participation in this exchange offer is voluntary. You are urged to consult
your legal, financial and tax advisors in making your decisions on what action
to take.
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Outstanding 9 7/8% notes that are not exchanged will remain "restricted
securities" within the meaning of Rule 144(a)(3) of the Securities Act.
Accordingly, they may not be offered, sold, pledged or otherwise transferred
except:
. to a person who the seller reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the
Securities Act purchasing for its own account or for the account of a
qualified institutional buyer in a transaction meeting the requirements
of Rule 144A;
. in an offshore transaction complying with Rule 904 of Regulation S under
the Securities Act;
. pursuant to an exemption from registration under the Securities Act
provided by Rule 144, if available; or
. pursuant to an effective registration statement under the Securities Act.
Expiration Date, Extensions, Amendments
The "expiration date" is 5:00 p.m., New York City time on February 19, 2002
unless we extend this exchange offer, in which case the expiration date is the
latest date and time to which we extend this exchange offer.
In order to extend this exchange offer, we will:
. notify the exchange agent of any extension by oral or written notice; and
. issue a press release or other public announcement that would include
disclosure of the approximate number of outstanding 9 7/8% notes
deposited and that would be issued prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration
date.
We reserve the right:
. to delay accepting any outstanding 9 7/8% notes;
. to extend this exchange offer;
. to terminate or amend this exchange offer, and not accept for exchange
any outstanding 9 7/8% notes not previously accepted for exchange, upon
the occurrence of any of the events set forth in "--Conditions of this
Exchange Offer" by giving oral or written notice to the exchange agent;
or
. to waive any conditions or otherwise amend this exchange offer in any
respect, by giving oral or written notice to the exchange agent.
Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public announcement
or post-effective amendment to the registration statement.
If this exchange offer is amended in a manner determined by us to constitute
a material change, we will promptly disclose that amendment by means of a
prospectus supplement or post-effective amendment that will be distributed to
the holders. We will also extend this exchange offer for a period of five to
ten business days, depending upon the significance of the amendment and the
manner of disclosure to the holders, if this exchange offer would otherwise
expire during the five to ten business day period.
We will have no obligation to publish, advertise or otherwise communicate
any public announcement of any delay, extension, amendment (other than
amendments constituting a material change to this exchange offer) or
termination that we may choose to make, other than by making a timely release
to an appropriate news agency.
15
Effect of Surrendering Outstanding 9 7/8% Notes
By surrendering outstanding 9 7/8% notes pursuant to this exchange offer,
you will be representing to us that, among other things:
. you have full power and authority to surrender, sell, assign and
transfer the outstanding 9 7/8% notes surrendered;
. we will acquire good title to the outstanding 9 7/8% notes being
surrendered, free and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional sale agreements or
other obligations relating to their sale or transfer, and not subject to
any adverse claim when the outstanding 9 7/8% notes are accepted by us;
. you are acquiring the registered notes in the ordinary course of your
business and for investment purposes;
. you are not engaged in, and do not intend to engage in, the distribution
of the registered notes;
. you have no arrangement or understanding with any person to participate
in the distribution of the registered notes;
. you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in this exchange offer
for the purpose of distributing the registered notes, you must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale of the registered
notes, and you understand that you cannot rely on the SEC's position
with respect to exchange offers, as expressed by its staff through
no-action letters;
. you understand that a secondary resale transaction described above and
any resales of registered notes obtained by you in exchange for
outstanding 9 7/8% notes acquired by you directly from us should be
covered by an effective registration statement containing the
information required by Item 507 or Item 508 of the SEC's Regulation S-K;
. you are not an "affiliate," as defined in Rule 405 under the Securities
Act, of Saks; and
. we may rely upon these representations for purposes of this exchange
offer.
In addition, if you are a broker-dealer and you will receive registered
notes for your own account in exchange for outstanding 9 7/8% notes that were
acquired as a result of market-making activities or other trading activities,
you must acknowledge in the letter of transmittal that you will deliver a
prospectus in connection with any resale of your registered notes. See "Plan of
Distribution."
Interest on the Registered Notes
The registered notes will accrue interest on the same terms as the
outstanding 9 7/8% notes at the rate of 9 7/8% per year from October 4, 2001,
payable semi-annually in arrears on April 1 and October 1 of each year,
commencing April 1, 2002. Outstanding 9 7/8% notes accepted for exchange will
not receive accrued interest thereon at the time of exchange. However, each
registered note will bear interest from the most recent date to which interest
has been paid on the outstanding 9 7/8% notes, or if no interest has been paid
on the outstanding 9 7/8% notes or the registered notes, from October 4, 2001.
Resale of the Registered Notes
We believe that you will be allowed to resell the registered notes to the
public without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act,
if you can make the representations set forth above under "--Effect of
Surrendering Outstanding 9 7/8% Notes." However, if you intend to participate
in a distribution of the registered notes, you must comply with the
registration requirements of the Securities Act and deliver a prospectus in
connection with resales, unless an
16
exemption from registration is otherwise available. In addition, you will be
subject to additional restrictions if you are an "affiliate" of Saks as defined
under Rule 405 of the Securities Act. You will be required to represent to us
in the letter of transmittal accompanying this prospectus that you meet these
conditions exempting you from the registration requirements.
Our belief that you will be allowed to resell the registered notes without
registration is based on SEC interpretations expressed in some of its no-action
letters to other issuers in exchange offers like ours. However, we have not
asked the SEC to consider this particular exchange offer in the context of a
no-action letter. Therefore, you cannot be certain that the SEC's
interpretations applicable to other exchange offers will apply to this exchange
offer.
A broker-dealer that purchased outstanding 9 7/8% notes for market-making or
other trading activities must acknowledge that it will deliver a prospectus in
order to resell any registered notes it receives for its own account in this
exchange offer. The Letter of Transmittal accompanying this prospectus states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit it is an "underwriter" within the meaning of the
Securities Act. This prospectus may be used by a broker-dealer to resell any of
its registered notes where such registered notes were acquired by the
broker-dealer as a result of market-making or other trading activities. We have
agreed in the registration rights agreement to send this prospectus to any
broker-dealer that requests copies in the letter of transmittal for a period of
up to one year after the expiration date of this exchange offer. See "Plan of
Distribution" for more information regarding broker-dealers.
Acceptance of Outstanding 9 7/8% Notes for Exchange; Delivery of Registered
Notes
On the settlement date, registered notes to be issued in exchange for
outstanding 9 7/8% notes in this exchange offer, if consummated, will be
delivered in book-entry form.
We will be deemed to have accepted validly tendered outstanding 9 7/8% notes
that have not been validly withdrawn as provided in this prospectus when, and
if, we have given oral or written notice thereof to the exchange agent. Subject
to the terms and conditions of this exchange offer, delivery of registered
notes will be made by the exchange agent on the settlement date upon receipt of
such notice. The exchange agent will act as agent for tendering holders of the
outstanding 9 7/8% notes for the purpose of receiving outstanding 9 7/8% notes
and transmitting registered notes as of the settlement date with respect to the
outstanding 9 7/8% notes. If any tendered outstanding 9 7/8% notes are not
accepted for any reason set forth in the terms and conditions of this exchange
offer, those unaccepted outstanding 9 7/8% notes will be returned without
expense to the tendering holder as promptly as practicable after the expiration
or termination of this exchange offer.
Procedures for Tendering
A holder of outstanding 9 7/8% notes who wishes to accept this exchange
offer, and whose outstanding 9 7/8% notes are held by a custodial entity such
as a bank, broker, dealer, trust company or other nominee, must instruct the
custodial entity to tender and consent with respect to that holder's
outstanding 9 7/8% notes on the holder's behalf pursuant to the procedures of
the custodial entity.
To tender in this exchange offer, a holder of outstanding 9 7/8% notes must
either:
(i) complete, sign and date the letter of transmittal (or a facsimile
thereof) in accordance with its instructions, including guaranteeing the
signature(s) to the letter of transmittal, if required, and mail or
otherwise deliver such letter of transmittal or such facsimile, together
with the certificates representing the outstanding 9 7/8% notes
specified therein, to the exchange agent at the address set forth in the
letter of transmittal for receipt on or prior to the expiration date; or
(ii) comply with the ATOP procedures for book-entry transfer described below
on or prior to the expiration date.
17
The method of delivery of outstanding 9 7/8% notes, the letter of
transmittal, and all other required documents to the exchange agent is at the
election and risk of the holder. Instead of delivery by mail, holders should
use an overnight or hand delivery service, properly insured. In all cases,
sufficient time should be allowed to assure delivery to and receipt by the
exchange agent on or before the expiration date. Do not send the letter of
transmittal or any outstanding 9 7/8% notes to anyone other than the exchange
agent.
All registered notes will be delivered only in book-entry form through DTC.
Accordingly, if you anticipate tendering other than through DTC we urge you to
contact promptly a bank, broker or other intermediary that has the capability
to hold securities custodially through DTC to arrange for receipt of any
registered notes to be delivered to you pursuant to this exchange offer and to
obtain the information necessary to provide the required DTC participant with
account information for the letter of transmittal.
Book-Entry Delivery Procedures for Tendering Outstanding 9 7/8% Notes Held
with DTC
If you wish to tender outstanding 9 7/8% notes held on your behalf by a
nominee with DTC, you must:
(i) inform your nominee of your interest in tendering your outstanding 9
7/8% notes pursuant to this exchange offer; and
(ii) instruct your nominee to tender all outstanding 9 7/8% notes you wish to
be tendered in this exchange offer into the exchange agent's account at
DTC on or prior to the expiration date. Any financial institution that
is a participant in DTC, including Euroclear and Clearstream, must
tender outstanding 9 7/8% notes by effecting a book-entry transfer of
the outstanding 9 7/8% notes to be tendered in this exchange offer into
the account of the exchange agent at DTC by electronically transmitting
its acceptance of this exchange offer through the ATOP procedures for
transfer. DTC will then verify the acceptance, execute a book-entry
delivery to the exchange agent's account at DTC, and send an agent's
message to the exchange agent. An "agent's message" is a message,
transmitted by DTC to and received by the exchange agent and forming
part of a book-entry confirmation, which states that DTC has received an
express acknowledgement from an organization that participates in DTC,
tendering outstanding 9 7/8% notes that the participant has received and
agrees to be bound by the terms of the letter of transmittal and that we
may enforce the agreement against the participant.
Proper Execution and Delivery of Letter of Transmittal
Signatures on a letter of transmittal or notice of withdrawal described
below, as the case may be, must be guaranteed by an eligible institution unless
the outstanding 9 7/8% notes tendered pursuant to the letter of transmittal are
tendered:
(i) by a holder who has not completed the box entitled "Special Delivery
Instructions" or "Special Issuance Instructions" on the letter of
transmittal; or
(ii) for the account of an eligible institution.
If signatures on a letter of transmittal, or notice of withdrawal, are required
to be guaranteed, that guarantee must be made by an eligible institution.
If the letter of transmittal is signed by the holder(s) of outstanding 9
7/8% notes tendered by that letter of transmittal, the signature(s) must
correspond with the name(s) as written on the face of the outstanding 9 7/8%
notes without alteration, enlargement or any change whatsoever. If any of the
outstanding 9 7/8% notes tendered are held by two or more holders, all of those
holders must sign the letter of transmittal. If any of the outstanding 9 7/8%
notes tendered are registered in different names on different outstanding 9
7/8% notes, it will be necessary to complete, sign and submit as many separate
letters of transmittal, and any accompanying documents, as there are different
registrations of certificates.
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If outstanding 9 7/8% notes that are not tendered for exchange pursuant to
this exchange offer are to be returned to a person other than the holder,
certificates for those outstanding 9 7/8% notes must be endorsed or accompanied
by an appropriate instrument of transfer, signed exactly as the name of the
registered owner appears on the certificates, with the signatures on the
certificates or instruments of transfer guaranteed by an eligible institution.
If the letter of transmittal is signed by a person other than the holder of
any outstanding 9 7/8% notes listed in the letter of transmittal, those
outstanding 9 7/8% notes must be properly endorsed or accompanied by a properly
completed bond power, signed by that holder exactly as that holder's name
appears on the outstanding 9 7/8% notes. If the letter of transmittal or any
outstanding 9 7/8% notes, bond powers or other instruments of transfer are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing, and, unless waived by
us, evidence satisfactory to us of their authority to so act must be submitted
with the letter of transmittal.
No alternative, conditional, irregular or contingent tenders will be
accepted. By executing the letter of transmittal or facsimile of the letter of
transmittal, the tendering holders of outstanding 9 7/8% notes waive any right
to receive any notice of the acceptance for exchange of their outstanding 9
7/8% notes. Tendering holders should indicate in the applicable box in the
letter of transmittal the name and address to which substitute certificates
evidencing outstanding 9 7/8% notes for amounts not tendered or not exchanged
are to be issued or sent, if different from the name and address of the person
signing the letter of transmittal. If no such instructions are given,
outstanding 9 7/8% notes not tendered or exchanged will be returned to the
tendering holder.
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance and withdrawal of tendered outstanding 9 7/8% notes
will be determined by us in our absolute discretion, which determination will
be final and binding. We reserve the absolute right to reject any and all
tendered outstanding 9 7/8% notes determined by us not to be in proper form or
not to be properly tendered or any tendered outstanding 9 7/8% notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive, in our absolute discretion, any defects,
irregularities or conditions of tender as to particular outstanding 9 7/8%
notes, whether or not waived in the case of other outstanding 9 7/8% notes. Our
interpretation of the terms and conditions of this exchange offer, including
the instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of outstanding 9 7/8% notes must be cured within such time as we shall
determine. Although we intend to notify holders of defects or irregularities
with respect to tenders of outstanding 9 7/8% notes, none of us, the exchange
agent or any other person will be under any duty to give notification or shall
incur any liability for failure to give any notification. Tenders of
outstanding 9 7/8% notes will not be deemed to have been made until any defects
or irregularities have been cured or waived by us.
Any holder whose outstanding 9 7/8% notes have been mutilated, lost, stolen
or destroyed will be responsible for obtaining replacement securities or for
arranging for indemnification with the trustee of the outstanding 9 7/8% notes.
Holders may contact the exchange agent for assistance with such matters.
Withdrawal of Tenders
You may withdraw tenders of outstanding 9 7/8% notes at any time prior to
the expiration date.
For a withdrawal of a tender to be effective, a written or facsimile
transmission notice of withdrawal must be received by the exchange agent prior
to the deadline described above at its address set forth on page 20 of this
prospectus. The withdrawal notice must:
. specify the name of the person who tendered the outstanding 9 7/8% notes
to be withdrawn;
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. must contain a description of the outstanding 9 7/8% notes to be
withdrawn, the certificate numbers shown on the particular certificates
evidencing such outstanding 9 7/8% notes and the aggregate principal
amount represented by such outstanding 9 7/8% notes; and
. must be signed by the holder of those outstanding 9 7/8% notes in the
same manner as the original signature on the letter of transmittal,
including any required signature guarantees, or be accompanied by
evidence satisfactory to us that the person withdrawing the tender has
succeeded to the beneficial ownership of the outstanding 9 7/8% notes.
In addition, the notice of withdrawal must specify, in the case of
outstanding 9 7/8% notes tendered by delivery of certificates for such
outstanding 9 7/8% notes, the name of the registered holder, if
different from that of the tendering holder or, in the case of
outstanding 9 7/8% notes tendered by book-entry transfer, the name and
number of the account at DTC to be credited with the withdrawn
outstanding 9 7/8% notes. The signature on the notice of withdrawal must
be guaranteed by an eligible institution unless the outstanding 9 7/8%
notes have been tendered for the account of an eligible institution.
Withdrawal of tenders of outstanding 9 7/8% notes may not be rescinded, and
any outstanding 9 7/8% notes properly withdrawn will be deemed not validly
tendered for purposes of this exchange offer. Properly withdrawn outstanding 9
7/8% notes may, however, be retendered by again following one of the procedures
described in "--Procedures for Tendering" prior to the expiration date.
Exchange Agent
Bank One Trust Company, National Association, has been appointed the
exchange agent for this exchange offer. Letters of transmittal and all
correspondence in connection with this exchange offer should be sent or
delivered by each holder of outstanding 9 7/8% notes, or a beneficial owner's
commercial bank, broker, dealer, trust company or other nominee, to the
exchange agent as follows:
By Mail or Hand Delivery: Bank One Trust Company, National Association
One North State Street, 9/th/ Floor
Chicago, IL 60602
Attention: Exchanges
Facsimile Transmission: (312) 407-8853
Confirm by Telephone: (800) 524-9472
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable, out-of-pocket expenses in
connection with this exchange offer.
Other Fees and Expenses
We will bear the expenses of soliciting tenders of the outstanding 9 7/8%
notes. The principal solicitation is being made by mail. Additional
solicitations may, however, be made by facsimile transmission, telephone, email
or in person by our officers and other employees and those of our affiliates.
Tendering holders of outstanding 9 7/8% notes will not be required to pay
any fee or commission. If, however, a tendering holder handles the transaction
through its broker, dealer, commercial bank, trust company or other
institution, the holder may be required to pay brokerage fees or commissions.
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DESCRIPTION OF THE REGISTERED NOTES
In general, the form and terms of the registered notes and the outstanding 9
7/8% notes are identical in all material respects, except that the registered
notes are not subject to transfer restrictions or registration rights.
We issued the outstanding 9 7/8% notes and will issue the registered notes
under an indenture by and among Saks Incorporated, the guarantors and Bank One
Trust Company, National Association, as trustee. The terms of the registered
notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of the registered notes.
The definitions of some of the terms used in the following summary are set
forth under "--Definitions." In this summary, the word "company" means only
Saks Incorporated and not any of the guarantors or other of its subsidiaries.
General
The registered notes:
. are general unsecured obligations of the company;
. rank equally with all unsecured and unsubordinated indebtedness of the
company;
. are senior in right of payment to all subordinated indebtedness of the
company; and
. are unconditionally guaranteed by the guarantors, jointly and severally.
Principal, Maturity and Interest
We will issue registered notes with a maximum aggregate principal amount of
$141,557,000. The registered notes will mature on October 1, 2011. Interest on
the registered notes will accrue at a rate of 9 7/8% per annum, and the
interest, including any additional interest, will be payable semi-annually on
each April 1 and October 1, commencing on April 1, 2002. We will make each
interest payment to the holders of record of the registered notes on the
immediately preceding March 15 and September 15. Interest on the registered
notes will accrue from the date of original issuance or, if interest has
already been paid, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
The company will not be required to make any sinking fund payments with
respect to the registered notes.
Guarantees
The guarantors will jointly and severally guarantee the company's
obligations under the registered notes and the indenture. The guarantors are
those subsidiaries of the company that also guarantee the company's obligations
under the credit facility. If a subsidiary of the company that is not already a
guarantor becomes a guarantor of the company's credit facility, that subsidiary
will become a guarantor under the registered notes and the indenture for the
registered notes. Each guarantor will irrevocably and unconditionally
guarantee, jointly and severally, the punctual payment of all of the company's
obligations under the registered notes. The obligations of each guarantor under
its guarantee will be limited as necessary to prevent the guarantee from
constituting a fraudulent conveyance under applicable law.
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Each guarantee will:
. be a general, unsecured obligation of the guarantor;
. rank equally with all unsecured and unsubordinated indebtedness of the
guarantor; and
. be senior in right of payment to all subordinated indebtedness of the
guarantor.
The guarantee of a guarantor will be released:
. in connection with any sale or transfer of all of the capital stock of
such guarantor to a third party other than an affiliate of the company;
. in connection with a sale or transfer of all or substantially all of the
assets of that guarantor, pursuant to a transaction that complies with
the indenture; or
. if the guarantor is released from its guarantee obligations under the
credit facility, and the company requests that the guarantee be released.
Covenants
Restrictions on Liens
The company will not, and will not permit any of its subsidiaries to issue,
assume or guarantee any indebtedness secured by any Lien upon any Operating
Property or Operating Asset of the company or any subsidiary, whether such
property or assets are now owned or subsequently acquired. However, this
restriction will not apply if we effectively provide that the registered notes,
together with, if we so determine, any of our other indebtedness ranking
equally with the registered notes, are secured at least ratably with the other
secured indebtedness. In any event, the foregoing restrictions will not apply
to:
(1) a purchase money Lien on property given simultaneously with or within
180 days after the later of:
. the acquisition or completion of construction or completion of
substantial reconstruction, renovation, remodeling, expansion or
improvement (each a "substantial improvement") of that property; or
. the date that property was placed in operation after the acquisition
or completion of any such construction or substantial improvement;
(2) the acquisition of property not previously owned by the company or any
subsidiary of the company subject to an existing Lien securing
indebtedness, whether or not assumed;
In each case above, the Lien may also secure indebtedness incurred for
reimbursement of funds previously expended for any construction or
substantial improvement. However, in each case any Lien must be limited to
the acquired or constructed property or substantial improvement, or the real
property on which any construction or substantial improvement occurs. If the
acquired or constructed property is a distribution center, a Lien may also
include any equipment used directly in the business conducted on that
property. In any event, the total amount of the indebtedness secured by such
Lien, together with all other indebtedness to persons other than the company
or a subsidiary of the company secured by Liens on such property, may not
exceed the lesser of the total cost of such property, including any such
construction or substantial improvement, and the fair market value thereof
immediately following the acquisition, construction or substantial
improvement thereof by us;
(3) a Lien on real property of the company or any of its subsidiaries which
is the sole security for indebtedness. If such a Lien is for a
distribution center, it may also include equipment used directly in the
business conducted on that property. In any event, for this exception to
be applicable, the Lien must be incurred within three years after the
latest of the issuance of the registered notes, the acquisition of the
real property or equipment or the completion of construction or
substantial improvement on the real property. The Lien must also be
incurred for the purpose of reimbursing the company or any of its
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subsidiaries for the cost of acquisition or the cost of improvement of
the real property or equipment. Finally, under this exception the amount
of the Lien may not exceed the lesser of the aggregate cost of the real
property, improvements and equipment and its fair market value;
(4) Liens on Operating Property of the company or any of its subsidiaries
incurred in the ordinary course of business that secure:
. nondelinquent performance of bids or contracts (other than for
borrowed money, obtaining of advances or credit or the securing of
debt);
. contingent obligations on surety and appeal bonds; or
. other nondelinquent obligations of a like nature;
(5) statutory or common law Liens relating to banker's liens, rights of
set-off or similar rights and remedies as to deposit accounts or other
funds;
(6) pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation;
(7) statutory and tax Liens for sums not yet due or delinquent or which are
being contested or appealed in good faith by appropriate proceedings;
(8) mechanics', materialmen's, warehousemen's and carriers' Liens arising in
the ordinary course of business;
(9) Liens of landlords or of mortgages of landlords on fixtures and
Operating Assets located on premises leased in the ordinary course of
business;
(10) Liens existing on the date of the indenture, or on assets of a
subsidiary existing on the date it became a subsidiary;
(11) Liens in favor of the company or any of its subsidiaries;
(12) Liens securing only the indebtedness issued under the indenture; and
(13) Liens to secure indebtedness incurred to extend, renew, refinance or
replace indebtedness secured by any Liens referred to in the foregoing
clauses (1) to (12); provided, however, that the principal amount of the
extending, renewal, refinancing or replacement indebtedness does not
exceed the principal amount of indebtedness so extended, renewed,
refinanced or replaced, plus transaction costs and fees, and that any
such Lien applies only to any part or all of the same property or assets
that were subject to the prior permitted Lien (and, in case of real
property, improvements thereon).
Restrictions on Sale and Leaseback Transactions
The indenture also prohibits the company or any of its subsidiaries from
entering into any arrangement, without equally and ratably securing the
registered notes, with any Person providing for the leasing of any Operating
Property or Operating Asset that the company or its subsidiaries have sold or
transferred to such Person with the intention of taking back a lease of such
property (a "Sale and Leaseback Transaction") unless:
(1) in the case of any sale or transfer involving proceeds in excess of $25
million, the company's Board of Directors determines the terms of such
sale or transfer to be fair and arms' length; and
(2) within 365 days after the receipt of the proceeds from a Sale and
Leaseback Transaction, the company or any subsidiary applies an amount
equal to the greater of the net proceeds of such sale or transfer or the
fair value of such Operating Property or Operating Asset at the time of
such sale or transfer to the prepayment or retirement (other than any
mandatory prepayment or retirement) of Senior Funded Debt of the company
or a subsidiary, or to the acquisition, construction, development or
improvement of Operating Assets or Operating Properties. However, the
company will not be required to use the funds from the Sale and
Leaseback Transaction in this manner if the company or the subsidiary
would be
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entitled, at the effective date of such sale or transfer, to incur
indebtedness secured by a Lien on such Operating Property or Operating
Assets, in an amount at least equal to the Attributable Debt in respect
thereof, without equally and ratably securing the registered notes
pursuant to "Restrictions on Liens" described above. These restrictions
will not apply to the following:
. any Sale and Leaseback Transaction for a term of less than three
years including renewals;
. any Sale and Leaseback Transaction with respect to Operating Property
(and, with respect to distribution centers, equipment used directly
in the operation of, or the business conducted on, such Operating
Property) if a binding commitment with respect thereto is entered
into within three years after the later of the issuance of the
registered notes under the indenture or the date such Operating
Property was acquired;
. any Sale and Leaseback Transaction with respect to Operating Assets
if a binding commitment with respect thereto is entered into within
180 days after the later of the date such property was acquired and,
if applicable, the date such property was first placed in operation;
or
. any Sale and Leaseback Transaction between the company and its
subsidiaries or between its subsidiaries if the lessor will be the
company or a subsidiary.
Exempted Debts
Without complying with the restrictions in the indenture concerning Liens
and Sale and Leaseback Transactions, the company or any of its subsidiaries may
issue, assume or guarantee indebtedness secured by Liens, or enter into Sale
and Leaseback Transactions if after such transactions the aggregate outstanding
amount of all such indebtedness secured by Liens plus Attributable Debt
resulting from such Sale and Leaseback Transactions (collectively, the
"Exempted Debts") does not exceed 15% of Consolidated Net Tangible Assets at
the time such Lien is granted or at the time such Sale and Leaseback
Transaction is entered into.
No Special Protection in the Event of a Highly Leveraged Transaction
The terms of the registered notes will not afford the holders special
protection in the event of a highly leveraged transaction.
Merger and Consolidation
The company may, without the consent of the holders of the registered notes,
consolidate with or merge with or into any other corporation, or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, provided that:
(1) the successor corporation is the company or a domestic corporation;
(2) if the successor corporation is not the company, the successor
corporation assumes the company's obligations under the indenture and
the registered notes;
(3) immediately after such transaction, no event of default has occurred and
is continuing; and
(4) the company, its subsidiaries and their Operating Property or any
Operating Assets do not become subject to a Lien that would not be
permitted under "Restrictions on Liens" or "Exempted Debts" described
above, unless the registered notes would rank equally with the
indebtedness so secured.
Events of Default
The following will be Events of Default under the Indenture:
(1) default for 30 days in payment of interest on the registered notes;
(2) default in payment of the principal of or premium, if any, on the
registered notes at maturity;
(3) default in the performance of or breach of any other covenant or
warranty of the company in the indenture, that continues for 60 days
after the trustee has given us written notice as provided in the
indenture;
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(4) acceleration of any indebtedness, having an aggregate minimum principal
amount of $50 million, for money borrowed by the company or any of its
subsidiaries under the terms of the instrument under which such
indebtedness is issued or secured, if such acceleration is not
discharged within 10 days after written notice as provided in the
indenture;
(5) any guarantee ceases to be in full force and effect or is declared null
and void, or any guarantor denies that it has any further liability
under any guarantee or given notice to such effect that continues for
thirty (30) days after the Trustee has given us notice as provided in
the Indenture; and
(6) events in bankruptcy, insolvency or reorganization.
If an event of default (other than as specified in clause (6) above with
respect to the company), occurs and is continuing, either the trustee, or the
holders of at least 25% in aggregate principal amount of the outstanding
registered notes, may declare the principal of, premium, if any, and accrued
interest on all of the outstanding registered notes due and payable immediately
by a written notice to the company (and to the trustee if given by holders of
the registered notes), upon which declaration, all such amounts payable will
become and be immediately due and payable. If an Event of Default specified in
clause (6) above with respect to the company occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the outstanding
registered notes will become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holder of registered
notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in aggregate principal amount of the outstanding registered notes, by
written notice to the company and the trustee, may rescind such declaration if
the company has paid or deposited with the trustee a sum sufficient to pay:
(a) all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee, its agents and counsel;
(b) all overdue interest on the registered notes;
(c) the principal of and premium, if any, on the registered notes which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the registered notes; and
(d) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the registered notes.
In addition to the sums that we must deposit under (a)-(d) above, all events of
default must have been cured or waived. The waiver or cure of the event of
default need not apply to the non-payment of principal, premium, if any, and
interest on the registered notes that has become due solely by such declaration
of acceleration.
The holders of not less than a majority in aggregate principal amount of the
outstanding registered notes may on behalf of the holders of all registered
notes waive any past defaults under the indenture, except a default:
. in the payment of the principal of, or premium, if any, on the
registered notes;
. in the payment of interest on the registered notes; or
. in respect of a covenant or provision that under the indenture cannot be
modified or amended without the consent of the holder of each note
outstanding.
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No holder of the registered notes has any right to institute any proceeding
with respect to the indenture or any remedy thereunder, unless:
. the holders of at least 25% in aggregate principal amount of the
outstanding registered notes have made written request, and offered
reasonable indemnity, to the trustee to institute such proceeding;
. the trustee has failed to institute such proceeding within 60 days after
receipt of such notice; and
. the trustee, within such 60-day period, has not received directions
inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding registered notes.
These limitations do not apply to a suit instituted by a holder of a registered
note for the enforcement of the payment of the principal of, premium, if any,
or interest on such registered note on or after the respective due dates
expressed in such registered note.
We are required to furnish to the trustee annual and quarterly statements as
to our performance and the performance of the guarantors of our respective
obligations under the indenture and as to any default in such performance. We
are also required to notify the trustee within five business days of any event
which is, or after notice or lapse of time or both would become, an event of
default.
Defeasance or Covenant Defeasance of Indenture
Defeasance and Discharge
The terms of the registered notes provide that under specified conditions we
will be discharged from any and all obligations in respect of the registered
notes (except for obligations to register the transfer or exchange of
registered notes, to replace stolen, lost or mutilated registered notes, to
maintain paying agencies and to hold moneys for payment in trust) upon the
deposit with the trustee, in trust for the benefit of the holders of registered
notes, of money and/or U.S. government obligations that, through the payment of
interest and principal in accordance with their terms, will provide money in an
amount sufficient to pay principal (and premium, if any) and interest on, the
registered notes on the stated maturity of the payments in accordance with the
terms of the registered notes.
This discharge may only occur if, among other things, we have delivered to
the trustee an opinion of counsel to the effect that we have received from, or
there has been published by, the U.S. Internal Revenue Service a ruling, or
there has been a change in tax law, in either case, to the effect that holders
of registered notes will not recognize gain or loss for federal income tax
purposes as a result of the deposit, defeasance and discharge and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if the deposit, defeasance and discharge
were not to occur.
Defeasance of Certain Covenants
The terms of the registered notes provide us with the option of not
complying with the restrictive covenants described above. In those
circumstances, the occurrence of the events of default described above in
clauses (3) and (4) under "Events of Default" will be deemed not to be or
result in an event of default with respect to the registered notes. To exercise
this option, we will be required to deposit with the trustee money and/or U.S.
government obligations that, through the payment of interest and principal in
accordance with their terms, will provide money in an amount sufficient to pay
principal (and premium, if any) and interest on, the registered notes on the
stated maturity of the payments in accordance with the terms of the registered
notes.
We will also be required to deliver to the trustee an opinion of counsel to
the effect that the deposit and related covenant defeasance will not cause the
holders of the registered notes to recognize income, gain or loss for federal
income tax purposes and that such holders will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit and defeasance were not to occur.
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Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of the
registered notes, when either of the following occur:
(1) all the registered notes theretofore authenticated and delivered have
been delivered to the trustee for cancellation; or
(2)(a) all registered notes not theretofore delivered to the trustee for
cancellation have become due and payable and we have irrevocably
deposited or caused to be deposited with the trustee funds sufficient
to pay and discharge the registered notes not previously delivered to
the trustee for cancellation;
(b) we have paid all other sums payable under the indenture; and
(c) we have delivered to the trustee instructions to apply all deposited
funds to pay all sums due on the registered notes, and an officer's
certificate and an opinion of counsel each stating that we have
complied with all conditions under the indenture relating to its
satisfaction and discharge.
Amendments and Waivers
From time to time, we and the trustee may, without the consent of the
holders, amend the indenture or the registered notes to, among other things:
(1) cure ambiguities, defects or inconsistencies;
(2) qualify, or maintain the qualification of, the indenture under the Trust
Indenture Act; or
(3) make any change that does not materially adversely affect the legal
rights of any holder.
For the trustee to agree to such a change, we must deliver an opinion of
counsel stating that such change does not materially adversely affect the legal
rights of any holder.
We, the guarantors and the trustee may make other amendments and
modifications to the indenture or the registered notes with the consent of the
holders of a majority of the principal amount of the outstanding registered
notes. However, without the consent of the holder of each outstanding
registered note, no amendment may:
(1) reduce the principal of or change the stated maturity of any registered
note;
(2) reduce the rate of or change the time for payment of interest on the
registered notes;
(3) change the place or currency of payment of principal of (or premium) or
interest on the registered notes;
(4) modify any provisions of the indenture relating to the waiver of past
defaults or the right of the holders of registered notes to institute
suit for the enforcement of any payment on or with respect to the
registered notes;
(5) reduce the percentage as stated above of the holders of registered notes
who must consent to an amendment or waiver of compliance with the
indenture or the registered notes;
(6) waive a default in the payment of principal of or interest on the
registered notes (except a rescission of acceleration of the registered
notes by the holders as provided in the indenture and a waiver of the
payment default that resulted from such acceleration);
(7) modify the ranking or priority of the registered notes or the guarantees
in any manner adverse to the holders of the registered notes; or
(8) release any guarantor from any of its obligations under its guarantee or
the indenture otherwise than in accordance with the indenture.
27
The holders of a majority in aggregate principal amount of the registered
notes, on behalf of all holders of the registered notes, may waive our
compliance with specified restrictive provisions of the indenture. Subject to
the rights of the trustee provided in the indenture, the holders of a majority
in aggregate principal amount of the registered notes, on behalf of all holders
of the registered notes, may waive any past default under the indenture
(including any such waiver obtained in connection with a tender offer or
exchange offer for the registered notes), except a default in respect of a
provision that under the indenture cannot be modified or amended without the
consent of the holder of each registered note.
Governing Law
The indenture, the registered notes and the guarantees are governed by the
laws of the State of New York, without regard to the principles of conflicts of
law.
Definitions
"Accounts Receivable subsidiary" means Saks Credit Corporation, Saks
Transitional Credit Corporation, National Bank of the Great Lakes and any other
present or future subsidiary (including any credit card bank) of the company
that is, directly or indirectly, wholly owned by the company (except in the
case of any credit card bank, for directors' qualifying shares) and organized
for the purpose of, and is only engaged in, (i) originating, purchasing,
acquiring, financing, servicing or collecting accounts receivable obligations
of customers of the company or its subsidiaries, (ii) issuing or servicing
credit cards, engaging in other credit card operations or financing accounts
receivable obligations of customers of the company and its subsidiaries, (iii)
the sale or financing of such accounts receivable and interests therein, and
(iv) other activities incident thereto.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value (discounted at the imputed rate of
interest of such transaction determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such Sale and Leaseback Transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended). The term "net rental payments" under any lease for any period shall
mean the sum of the rental and other payments required to be paid in such
period by the lessee thereunder, not including any amounts required to be paid
by such lessee (whether or not designated as rental or additional rental) on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges.
"Consolidated Net Tangible Assets" means the total amount of assets (less
accumulated depreciation and valuation reserves and other reserves and items
deductible from gross book value of specific asset accounts under GAAP) that
under GAAP are included on a balance sheet of the company and its subsidiaries
after deducting therefrom all goodwill, trade names, trademarks, patents,
favorable lease rights, unamortized debt discount and expense and other like
intangibles (other than leasehold costs and investments in so-called safe
harbor leases), which in each such case would be so included on such balance
sheet, net of accumulated amortization.
"Credit Facility" means the Second Amended and Restated Credit Agreement
dated as of August 26, 1999 by and among the company, Bank of America, N.A., as
Agent, and other financial institutions, as in effect on the Issue Date, and as
such agreement may be amended, renewed, extended, substituted, refinanced,
replaced, supplemented or otherwise modified from time to time, and includes
related registered notes, guarantees and other agreements executed in
connection therewith.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "--Events of Default"
above.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Foreign subsidiary" means a subsidiary of the company not organized or
existing under the laws of the United States, any state thereof, the District
of Columbia or any territory thereof.
"Funded Debt" means Indebtedness that matures more than one year from the
date of the computation thereof, or that is extendable or renewable at the sole
option of the obligor so that it may become payable more than one year from
such date; provided, however, that Funded Debt shall not include (i)
obligations created pursuant to leases, or (ii) any Indebtedness for the
payment or redemption of which money in the necessary amount shall have been
deposited in trust either at or before the maturity date thereof.
"GAAP" means generally accepted accounting principles in effect in the
United States which are applicable as of the Issue Date and that are
consistently applied for all applicable periods.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation. A guarantee shall include, without limitation, any
agreement to maintain or preserve any other Person's financial condition or to
cause any other Person to achieve certain levels of operating results.
"Guarantor" means (i) each of the company's Subsidiaries that are guarantors
or obligors in respect of the Credit Facility on the Issue Date and (ii) each
other subsidiary of the company that is required to execute a supplemental
indenture and become a Guarantor subsequent to the Issue Date pursuant to the
indenture.
"Indebtedness" of any Person means indebtedness for borrowed money and
indebtedness under purchase money Liens or conditional sales or similar title
retention agreements, in each case where such indebtedness has been created,
incurred, or assumed by such Person to the extent such indebtedness would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, guarantees by such Person of such indebtedness, and
indebtedness for borrowed money secured by any Lien, pledge or other lien or
encumbrance upon property owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness.
"Issue Date" means the original issue date of the registered notes under the
indenture.
"Lien" means any security interest, pledge, lien or other encumbrance.
"Operating Assets" means all merchandise, inventories, furniture and
equipment (including all transportation and warehousing equipment, store racks
and showcases but excluding office equipment and data processing equipment)
owned by the company or a subsidiary.
"Operating Property" means all real property and improvements thereon owned
by the company or any of its subsidiaries and constituting, without limitation,
any store, warehouse, service center or distribution center wherever located;
provided, however, that such term shall not include any store, warehouse,
service center or distribution center which the company's Board of Directors
declares by resolution not to be of material importance to the business of the
company and its subsidiaries. Operating Property is treated as having been
"acquired" on the day the Operating Property is placed in operation by the
company or any of its subsidiaries after the latest of (a) its acquisition from
a third party, including any of the company's subsidiaries, (b) completion of
its original construction or (c) completion of its substantial reconstruction,
renovation, remodeling, expansion or improvement (whether or not constituting
an Operating Property prior to such reconstruction, renovation, remodeling,
expansion or improvement).
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Securities Act" mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
"Senior Funded Debt" means all Funded Debt of the company or any Person
(except Funded Debt, the payment of which is subordinated to the payment of the
registered notes).
"Subsidiary" means any corporation or other business entity of which at
least a majority of the outstanding stock or membership or other interest, as
the case may be, having voting power under ordinary circumstances to elect a
majority of the board of directors, managers or other governing body of said
corporation or business entity or otherwise direct the business and affairs of
such corporation or business entity is at the time owned or controlled by the
company, or by the company and one or more of its subsidiaries, or by any one
or more of the company's subsidiaries; provided, that, unless otherwise
expressly stated, subsidiary shall not include any Accounts Receivable
subsidiary or any Foreign subsidiary.
Book-Entry, Delivery and Form
Registered notes will be issued in registered, global form in minimum
denominations of $1,000 and integral multiples of $1,000 in excess of $1,000.
Registered notes will be issued at the closing of this exchange offer only
pursuant to valid tenders of outstanding 9 7/8% notes. The registered notes
initially will be represented by one or more notes in registered, global form
without interest coupons (collectively, the "Global Notes"). The Global Notes
will be deposited upon issuance with the trustee as custodian for DTC in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
notes in certificated form except in the limited circumstances described below.
See "--Exchange of Global Notes for Certificated Notes" below. Transfers of
beneficial interests in the Global Notes will be subject to the applicable
rules and procedures of DTC and its direct or indirect participants (including,
if applicable, those of Euroclear and Clearstream), which may change from time
to time.
Depository Procedures
The following description of the operations of DTC is provided solely as a
matter of convenience. These operations and procedures are solely within the
control of the respective settlement systems and are subject to changes by
them. We take no responsibility for these operations and procedures and urge
you to contact the DTC or its participants directly to discuss these matters.
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through Participants or the
Indirect Participants. The ownership of interests in, and transfers of
ownership interests in, each security held by or on behalf of DTC are recorded
on the records of the Participants and the Indirect Participants.
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DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of the
Participants designated by holders of outstanding 9 7/8 notes who
exchange their outstanding 9 7/8 notes in this exchange offer with
portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and
the transfer of ownership of these interests will be effected only
through, records maintained by DTC (with respect to the Participants) or
by the Participants and the Indirect Participants (with respect to other
owners of beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes
that are not Participants may hold their interests indirectly though
organizations (including Euroclear and Clearstream) which are Participants in
DTC. All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants, the ability of a person
having beneficial interests in a Global Note to pledge such interests to
persons that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have registered notes registered in their name, will not receive physical
delivery of registered notes in certificated form and will not be considered
the registered owners or "holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest (including additional
interest) and premium, if any, on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, we and the trustee will
treat the persons in whose names the registered notes, including the Global
Notes, are registered as the owners of the registered notes for the purpose of
receiving payments and all other purposes. Consequently, neither we, the
trustee nor any agent of us or the trustee has or will have any responsibility
or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising
or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in
the Global Notes; or
(2) any other matter relating to the actions or practices of DTC or any of
its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment in
respect of securities such as the registered notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of registered notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the trustee or
us. Neither we nor the trustee will be liable for any delay by DTC or any of
its Participants in identifying the beneficial owners of the registered notes,
and we and the trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
31
DTC has advised us that it will take any action permitted to be taken by a
holder of registered notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the registered
notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the registered notes,
DTC reserves the right to exchange the Global Notes for legended registered
notes in certificated form, and to distribute such registered notes to its
Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither we nor the trustee nor any of
our respective agents will have any responsibility for the performance by DTC
or its Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive registered notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes, and we fail to appoint a successor
depositary, or (b) has ceased to be a clearing agency registered under
the Exchange Act;
(2) at our option, we notify the trustee in writing that we elect to cause
the issuance of the Certificated Notes; or
(3) there has occurred and is continuing an Event of Default with respect to
the registered notes and the Registrar has received a written request
from DTC to issue new notes in registered certificated form.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
Same Day Settlement and Payment
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and liquidated damages,
if any) by wire transfer of immediately available funds to the accounts
specified by the Global Note holder. We will make all payments of principal,
interest and premium and liquidated damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the holders thereof or, if no account is specified, by
mailing a check to that holder's registered address. The registered notes
represented by the Global Notes are expected to trade in DTC's Same Day Funds
Settlement System, and any permitted secondary market trading activity in the
registered notes will, therefore, be required by DTC to be settled in
immediately available funds. We expect that secondary trading in any
Certificated Notes will also be settled in immediately available funds.
Registered Exchange Offer; Registration Rights
In connection with our issuance of the outstanding 9 7/8% notes, we entered
into a registration rights agreement pursuant to which we agreed, for the
benefit of the holders of the outstanding 9 7/8% notes, at our cost to use our
best efforts to:
(1) by January 3, 2002, file a registration statement of which this
prospectus is a part relating to a registered offer to exchange the
outstanding 9 7/8% notes for registered notes having terms identical in
all material respects to the outstanding 9 7/8% notes (except that the
registered notes would not contain transfer restrictions);
32
(2) cause the registration statement to be declared effective by April 3,
2002; and
(3) complete the exchange offer by May 3, 2002.
Promptly after the registration statement was declared effective, we
commenced this offer to exchange the registered notes for the outstanding
9 7/8% notes. We agreed to keep the exchange offer open for not less than 20
business days and not more than 30 business days (or longer if required by
applicable law) after the date on which this prospectus was mailed to the
holders of the outstanding 9 7/8% notes. Interest on each registered note will
accrue from the last interest payment date on which interest was paid on the
outstanding 9 7/8% notes surrendered in exchange therefore or, if no interest
has been paid on such outstanding 9 7/8% note, from the date of its original
issue. The registered notes will vote together with the outstanding 9 7/8%
notes on all matters on which holders of outstanding 9 7/8% notes or registered
notes are entitled to vote.
Under existing interpretations of the staff of the SEC, after the registered
notes are issued, they will generally be freely tradable without further
compliance with the registration and prospectus delivery requirements of the
Securities Act. However, any participant in this exchange offer who is our
affiliate or who intends to participate in this exchange offer for the purpose
of distributing the registered notes:
(1) will not be able to rely on the interpretations of the SEC staff;
(2) will not be entitled to participate in the exchange offer; and
(3) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the
outstanding 9 7/8% notes unless such sale or transfer is made pursuant
to an exemption from such requirements.
Each holder of outstanding 9 7/8% notes who wishes to exchange outstanding
9 7/8% notes for registered notes pursuant to this exchange offer will be
required to represent that:
(4) it is not our affiliate;
(5) the registered notes to be received by it will be acquired in the
ordinary course of its business; and
(6) at the time of the exchange offer, it has no arrangement with any person
to participate in the distribution (within the meaning of the Securities
Act) of the registered notes.
In addition, in connection with any resales of registered notes, any
broker-dealer that acquired outstanding 9 7/8% notes for its own account as a
result of market-making or other trading activities, who we refer to as
exchanging broker-dealers, must deliver a prospectus meeting the requirements
of the Securities Act. Based on positions the SEC has taken in similar exchange
offers, we believe that exchanging broker-dealers may fulfill their prospectus
delivery requirements with respect to the registered notes by delivering this
prospectus. Under the registration rights agreement, we are required to allow
exchanging broker-dealers and other persons, if any, subject to similar
prospectus delivery requirements, to use this prospectus in connection with the
resale of registered notes.
If:
(1) changes in law or the applicable interpretations of the SEC staff do not
permit us to complete this exchange offer;
(2) for any other reason, this exchange offer is not completed by April 3,
2002; or
(3) any holder of outstanding 9 7/8% notes notifies us that it is not
eligible to participate in this exchange offer,
we will, at our cost:
(a) as promptly as practicable, but not later than 30 days after so required
or requested pursuant to the registration rights agreement, file with
the SEC a shelf registration statement covering resales of the
outstanding 9 7/8% notes; provided that, to the extent that we have
already filed with the SEC a shelf registration statement covering
resales of the outstanding 9 7/8% notes, we may instead use that
registration statement;
33
(b) use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act as promptly as practicable;
and
(c) use our best efforts to keep the shelf registration statement effective
until the earlier of two years after its effective date or such time as
all outstanding 9 7/8% notes eligible to be sold thereunder have been
sold.
We will provide to each relevant holder copies of the prospectus which is a
part of the shelf registration statement, notify each such holder when the
shelf registration statement has been filed and when it has become effective
and take certain other actions as are required to permit unrestricted resales
of the relevant notes. A holder that sells outstanding 9 7/8% notes pursuant to
the shelf registration statement generally will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus
to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such
holder (including certain indemnification obligations). In addition, a holder
of outstanding 9 7/8% notes will be required to deliver information to be used
in connection with the shelf registration statement in order to have such
holder's outstanding 9 7/8% notes included in the shelf registration statement
and to benefit from the provisions set forth in the following paragraph.
If:
(1) by April 3, 2002, the registration statement of which this prospectus is
a part has not been declared effective;
(2) by May 3, 2002, neither the exchange offer has been completed nor the
shelf registration statement has been declared effective; or
(3) after either the registration statement of which this prospectus is a
part or the shelf registration statement has been declared effective,
such registration statement ceases to be effective or usable (subject to
certain exceptions) in connection with resales of registered notes or
outstanding 9 7/8% notes, as applicable, in accordance with and during
the periods specified in the registration rights agreement (each such
event referred to in clauses (1) through (3), a "Registration Default"),
then additional interest will accrue on the principal amount of the outstanding
9 7/8% notes and the registered notes (in addition to the stated interest on
the outstanding 9 7/8% notes and the registered notes) from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured. Additional interest
will accrue at a rate of 0.25% per year during the 90-day period immediately
following the occurrence of any such Registration Default and shall increase by
0.25% per year at the end of each subsequent 90-day period until all such
Registration Defaults have been cured, but in no event will such rate exceed
0.50%.
The above description of the registration rights agreement is a summary
only, does not purport to be complete and is qualified in its entirety by
reference to all provisions of the registration rights agreement, which we have
filed as an exhibit to the registration statement of which this prospectus is a
part.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
United States Tax Consequences
The following is a general discussion of certain United States federal
income tax consequences associated with the exchange offer and the ownership
and disposition of the registered notes offered herein. Except where noted, it
deals only with those holders who hold the outstanding 9 7/8% notes and
registered notes as capital assets and does not deal with special situations,
such as those of brokers, dealers in securities or currencies, financial
institutions, tax-exempt entities, insurance companies, persons liable for
alternative minimum tax, U.S. persons whose "functional currency" is not the
U.S. dollar, persons holding outstanding 9 7/8% notes or registered notes, as
the case may be, as part of a hedging, integrated, conversion or constructive
sale transaction or a straddle, and traders in securities that elect to use a
mark-to-market method of accounting for their securities holdings. The
following summary does not address specific state or local or non United States
tax consequences or United States federal tax consequences (e.g., estate or
gift tax) other than those pertaining to the income tax.
Furthermore, this discussion is based on provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations of the foregoing,
all as in effect as of the date hereof and all of which are subject to change,
possibly with retroactive effect. This discussion does not address tax
consequences of the purchase, ownership, or disposition of the registered notes
to holders of registered notes other than those holders who acquired their
registered notes pursuant to the exchange offer. If a partnership holds the
outstanding 9 7/8% notes or registered notes, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. Partners of partnerships that hold outstanding 9 7/8% notes or
will receive registered notes pursuant to the exchange offer should consult
their own tax advisors.
As used herein, the term "U.S. Holder" means a holder of outstanding 9 7/8%
notes or registered notes, as the case may be, that is, for United States
federal income tax purposes, (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or under the law of
the United States or of any political subdivision thereof, (iii) any estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if (a) a United States court is able
to exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust or (b) the trust was in existence on August 20, 1996,
was treated as a United States person prior to that date, and elected to
continue to be treated as a United States person. For purposes of this
discussion, the term "non-U.S. Holder" means a holder of outstanding 9 7/8%
notes or registered notes that, for United States federal income tax purposes,
is (i) a nonresident alien, (ii) a corporation, partnership, estate or trust
that is not a U.S. Holder or (iii) any other person that is not subject to
United States federal income taxation in respect of the notes.
Each U.S. Holder and non-U.S. Holder should consult its tax advisor
regarding the particular tax consequences to such holder of the exchange offer,
the ownership and disposition of the registered notes, as well as any tax
consequences that may arise under the laws of any other relevant foreign,
state, local, or other taxing jurisdiction.
U.S. Holders
Exchange Offer
Under general principles of tax law, the "significant modification" of a
debt instrument creates a deemed exchange (upon which gain or loss may be
recognized) if the modified debt instrument differs materially either in kind
or in extent from the original debt instrument. Under applicable Treasury
Regulations, the modification of a debt instrument is a significant
modification that will create a deemed exchange if, based on all the facts and
circumstances and taking into account certain modifications of the debt
instrument collectively, the legal rights or obligations that are altered and
the degree to which they are altered are "economically significant." In
addition, a significant modification that will create a deemed exchange occurs
if one of the bright line tests set forth in Treasury Regulations Section
1.1001-3(e) is met.
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The exchange of outstanding 9 7/8% notes for registered notes pursuant to
the exchange offer should not constitute an exchange for federal income tax
purposes as the registered notes do not differ materially in kind or extent
from the outstanding 9 7/8% notes and consequently, a significant modification
of a debt instrument pursuant to Treasury Regulations Section 1.1001-3 has not
occurred. Accordingly, a U.S. Holder who exchanges outstanding 9 7/8% notes for
the registered notes pursuant to the exchange offer will not recognize taxable
gain or loss upon the receipt of the registered notes in exchange for the
outstanding 9 7/8% notes in the exchange offer and will continue to include
original issue discount ("OID") in gross income as it accrues in the registered
note, in advance of the receipt of cash attributable to that income, if the
outstanding 9 7/8% note was issued with OID. In addition, the holding period
for a registered note received in the exchange offer will include the holding
period of the outstanding 9 7/8% note surrendered in exchange therefor and the
adjusted tax basis of a registered note immediately after the exchange will be
the same as the adjusted tax basis of the outstanding 9 7/8% note surrendered
in exchange therefor.
Each U.S. Holder should consult its tax advisor regarding the particular tax
consequences to such U.S. Holder in the exchange transaction.
Consequences to Non-Tendering U.S. Holders
A Non-Tendering U.S. Holder will not realize any gain or loss for failing to
tender an outstanding 9 7/8% note for a registered note.
Payment of Interest
Stated interest payable on the registered notes generally will be included
in the gross income of a U.S. Holder as ordinary interest income at the time
accrued or received, in accordance with such U.S. Holder's method of accounting
for United States federal income tax purposes.
Sale, Exchange and Retirement of Registered notes
Upon the sale, exchange (subsequent to this exchange offer), retirement at
maturity, or other taxable disposition of the registered notes, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized by such holder (less an amount equal to any accrued and
unpaid interest not previously included in income, which will be treated as
ordinary interest income) and such holder's adjusted tax basis in the
registered notes. A U.S. Holder's adjusted tax basis in a registered note will
be the same as the adjusted tax basis of the outstanding 9 7/8% note
surrendered in exchange therefor, subject to subsequent adjustments. The
deductibility of capital losses is subject to limitations.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to accrual of OID
and certain payments of principal and interest paid on the registered notes and
to the proceeds of the sale of registered notes made by U.S. Holders other than
certain exempt recipients (such as corporations). A backup withholding tax will
apply to such payments if the U.S. Holder fails to provide a taxpayer
identification number on a Form W-9, furnishes an incorrect taxpayer
identification number, fails to certify foreign or other exempt status from
backup withholding or receives notification from the Internal Revenue Service
that the holder is subject to backup withholding as a result of a failure to
report all interest or dividends.
Backup withholding is not an additional tax. Any amounts withheld from a
payment to a U.S. Holder under the backup withholding rules will be allowed as
a credit against the holder's United States federal income tax liability and
may entitle the holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Non-U.S. Holders
Subject to the discussion of backup withholding and information reporting
below, the interest income and gains that a non-U.S. Holder derives in respect
of the registered notes generally will be exempt from U.S. federal income
taxes, including withholding tax.
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Payments of interest or principal in respect of the registered notes by us
or our paying agent to a holder that is a non-U.S. Holder will not be subject
to withholding of United States federal income tax, provided that, in the case
of payments of interest (including OID):
(a) the income is effectively connected with the conduct by such non-U.S.
Holder of a trade or business carried on in the United States and the
non-U.S. Holder complies with applicable identification requirements
(described below under "Backup Withholding and Information Reporting");
or
(b) the non-U.S. Holder and/or each securities clearing organization, bank,
or other financial institution that holds the registered notes on behalf
of such non-U.S. Holder in the ordinary course of its trade or business,
in the chain between the non-U.S. Holder and the paying agent, complies
with applicable identification requirements (described below under
"Backup Withholding and Information Reporting") to establish that the
holder is a non-U.S. Holder and in addition, that the following
requirements of the "portfolio interest" exception under the Code are
satisfied:
. the non-U.S. Holder does not actually or constructively own 10% or
more of our voting stock;
. the non-U.S. Holder is not a controlled foreign corporation with
respect to us;
. the non-U.S. Holder is not a bank whose receipt of interest on the
registered notes is described in Section 881(c)(3)(A) of the Code; and
. such interest is not contingent interest described in Section
871(h)(4) of the Code.
Any gain that a non-U.S. Holder realizes on a sale or exchange of the
registered notes generally will be exempt from U.S. federal income tax,
including withholding tax, unless:
(a) such gain is effectively connected with the conduct of a trade or
business in the United States (or if a tax treaty applies, such gain is
attributable to a permanent establishment of the non-U.S. Holder);
(b) in the case of a non-U.S. Holder that is an individual, such non-U.S.
Holder is present in the United States for 183 days or more during the
taxable year in which such sale, exchange, or other disposition occurs;
or
(c) in the case of gain representing accrued interest, the requirements of
the portfolio interest exception are not satisfied.
In the case of a non-U.S. Holder which is subject to United States federal
income taxation on a net basis in respect of the registered notes, such holder
will generally be taxed under the same rules that govern the taxation of a U.S.
Holder. In addition, if such holder is a foreign corporation, it may be subject
to an additional branch profits tax.
Backup Withholding and Information Reporting
Payment of the proceeds of a sale of a registered note or payment of
interest (including OID) will be subject to information reporting requirements
and backup withholding tax unless the beneficial owner certifies its non-U.S.
status under penalties of perjury or otherwise establishes an exemption (absent
actual knowledge by the paying agent that the holder is actually a U.S.
Holder). Recently promulgated Treasury Regulations provide certain presumptions
under which a non-U.S. Holder will be subject to backup withholding and
information reporting unless such holder certifies as to its non-U.S. status or
otherwise establishes an exemption. In addition, the recent Treasury
Regulations change certain procedural requirements related to establishing a
holder's non-U.S. status. Non-U.S. Holders should consult with their own tax
advisors regarding the above issues.
Any amounts withheld from a payment to a non-U.S. Holder under the backup
withholding rules will be allowed as a credit against the holder's United
States federal income tax liability and may entitle the holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
37
Applicable identification requirements generally will be satisfied if there
is delivered to a securities clearing organization either directly, or
indirectly, by the appropriate filing of a Form W-8IMY:
(a) IRS Form W-8BEN signed under penalties of perjury by the non-U.S.
Holder, stating that such holder of the registered notes is not a U.S.
person and providing such non-U.S. Holder's name and address;
(b) with respect to non-U.S. Holders of the registered notes residing in a
country that has a tax treaty with the United States who seek an
exemption or reduced tax rate (depending on the treaty terms), Form
W-8BEN. If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the non-U.S. Holder qualifies under
the portfolio interest rules set forth in the Code and files a W-8BEN; or
(c) with respect to interest income effectively connected with the conduct
by such non-U.S. Holder of a trade or business carried on in the United
States, Form W-8ECI;
provided that in any such case:
. the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the U.S. withholding agent, otherwise
required to withhold tax; and
. none of the entities receiving the form has actual knowledge or
reason to know that the holder is a U.S. Holder.
Certain U.S. Federal Income Tax Documentation Requirements
A non-U.S. beneficial owner of the registered notes holding them through a
paying agent will be subject to U.S. withholding tax that generally applies to
payments of interest (including OID) on registered debt issued by U.S. Persons
as well as interest (including original issue discount) which is due as a
result of the exchange transaction, unless (i) each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes one
of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8BEN). Beneficial owners of the
registered notes that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by qualifying under the portfolio interest rules set forth
in the Code and by filing a Form W-8BEN (Certificate of Foreign Status of
Beneficial Owner for United States Withholding), or otherwise satisfying
certain documentary evidence requirements for establishing that it is a
non-U.S. person. If the information shown on Form W-8BEN changes, the
withholding agent or payer must be notified within 30 days of the change in
circumstances and a new Form W-8BEN must be filed.
Exemption for non-U.S. Persons with effectively connected income (Form
W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's
Claim for Exemption from Withholding on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
Exemption or reduced rate of non-U.S. Persons resident in treaty countries
(Form W-8BEN). Alternatively, non-U.S. Persons that are registered notes owners
residing in a country that has a tax treaty with the United States can obtain
an exemption or reduced tax rate (depending on the treaty terms) by filing Form
W-8BEN, or otherwise satisfying certain documentary evidence requirements. If
the treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer qualifies under the portfolio interest rules set
forth in the Code and files Form W-8BEN, or otherwise satisfies certain
documentary evidence requirements.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
38
U.S. Federal Income Tax Reporting Procedure. The holders of registered notes
file by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Forms W-8BEN and W-8ECI are effective for three calendar
years unless a change in circumstances makes any information in the form
incorrect.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or under the law of
the United States or of any political subdivision thereof, (iii) any estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if (a) a United States court is able
to exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust or (b) the trust was in existence on August 20, 1996,
was treated as a United States person prior to that date, and elected to
continue to be treated as a United States person.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to non-U.S. Holders of the registered notes.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the registered notes.
39
PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer and we are bearing
the expenses of the exchange.
Each broker-dealer that receives registered notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of registered notes received in
exchange for outstanding 9 7/8% notes where such outstanding 9 7/8% notes were
acquired as a result of market-making activities or other trading activities.
We have agreed that, for a period of one year after the expiration date, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
forty days after the effectiveness of this registration statement all dealers
effecting transactions in the registered notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of registered notes by
broker-dealers. Registered notes received by broker-dealers for their own
account pursuant to this exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the registered notes or a combination of
these methods of resale, at market prices prevailing at the time of resale, at
prices related to the prevailing market prices or negotiated prices. Any resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any
broker-dealer and/or the purchasers of any registered notes. Any broker-dealer
that resells registered notes that were received by it for its own account
pursuant to this exchange offer and any broker or dealer that participates in a
distribution of registered notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit of any resale of registered
notes and any commissions or concessions received by any of these persons may
be deemed to be underwriting compensation under the Securities Act. The letter
of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of one year after the expiration date, we shall promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests these documents in the letter of
transmittal. We have agreed to pay all expenses incident to this exchange offer
(including the expenses of one counsel for the holders of the outstanding 9
7/8% notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the outstanding 9 7/8% notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the registered notes offered hereby will be passed upon for
Saks by Charles J. Hansen, Senior Vice President and Deputy General Counsel of
Saks Incorporated. A copy of this legal opinion was filed as an exhibit to the
registration statement containing this prospectus.
EXPERTS
The consolidated financial statements incorporated in the Registration
Statement by reference to the annual report on Form 10-K for the three years
ended February 3, 2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
40
$141,557,000
Saks Incorporated
Offer to Exchange $141,557,000
9 7/8% Notes Due 2011 registered under the
Securities Act of 1933
for $141,557,000 aggregate principal amount of its outstanding unregistered
9 7/8% Notes due 2011
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PROSPECTUS
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January 18, 2002