SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal quarter ended July 30, 1994.
FEDERATED DEPARTMENT STORES, INC.
7 West Seventh Street
Cincinnati, Ohio 45202
Telephone: (513) 579-7000
Delaware 1-10951 31-0513863
(State of incorporation) (Commission File No.) (I.R.S. Employer
Identification
Number)
Registrant has filed all reports required to be filed by Section 12, 13
or 15(d) of the Act, including subsequent to the distribution of
securities under its plan of reorganization, during the preceding 12
months and has been subject to such filing requirements for the past 90
days.
126,592,151 shares of registrant's Common Stock, $.01 par value, were
outstanding as of August 27, 1994.
<PAGE>
<TABLE>
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Operations
(Unaudited)
(thousands, except per share figures)
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Sales, including leased
department sales............. $1,596,100 $1,502,288 $3,249,731 $3,092,547
Cost of sales................. 975,339 903,739 1,983,475 1,855,457
Selling, general and
administrative expenses...... 534,791 540,189 1,076,879 1,095,799
Operating Income.............. 85,970 58,360 189,377 141,291
Interest expense.............. (59,318) (52,363) (115,681) (108,451)
Interest income............... 10,620 12,094 21,644 24,910
Unusual item.................. (27,005) - (27,005) -
Income Before Income Taxes and
Extraordinary Item........... 10,267 18,091 68,335 57,750
Federal, state and local
income tax expense........... (6,495) (9,238) (32,341) (27,197)
Income Before Extraordinary
Item......................... 3,772 8,853 35,994 30,553
Extraordinary item............ - - - (3,545)
Net Income.................... $ 3,772 $ 8,853 $ 35,994 $ 27,008
Earnings per Share:
Income before extraordinary
item....................... $ .03 $ .07 $ .28 $ .24
Extraordinary item.......... - - - (.03)
Net Income................ $ .03 $ .07 $ .28 $ .21
Average Number of Shares
Outstanding.................. 126,578 126,309 126,517 126,260
</TABLE>
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
<PAGE>
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets
(Unaudited)
(thousands)
<CAPTION>
July 30, January 29, July 31,
1994 1994 1993
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash................................. $ 98,135 $ 222,428 $ 362,082
Accounts receivable.................. 1,791,774 1,758,935 1,364,691
Merchandise inventories.............. 1,341,496 1,180,844 1,209,815
Supplies and prepaid expenses........ 60,188 46,660 51,681
Deferred income tax assets........... 86,123 88,754 85,150
Total Current Assets.............. 3,377,716 3,297,621 3,073,419
Property and Equipment - net........... 2,623,798 2,576,884 2,450,234
Reorganization Value in Excess of
Amounts Allocable to Identifiable
Assets - net.......................... 328,339 337,720 347,101
Notes Receivable....................... 407,949 408,818 421,021
Other Assets........................... 792,354 798,384 374,051
Total Assets...................... $7,530,156 $7,419,427 $6,665,826
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt...................... $ 220,602 $ 10,099 $ 11,364
Accounts payable and accrued
liabilities......................... 1,178,641 1,209,744 1,083,234
Income taxes......................... 68,892 110,209 31,228
Total Current Liabilities......... 1,468,135 1,330,052 1,125,826
Long-Term Debt......................... 2,715,395 2,786,724 2,453,929
Deferred Income Taxes.................. 801,308 804,181 753,338
Other Liabilities...................... 226,492 220,226 222,569
Shareholders' Equity................... 2,318,826 2,278,244 2,110,164
Total Liabilities and Shareholders'
Equity........................... $7,530,156 $7,419,427 $6,665,826
</TABLE>
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
<PAGE>
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 30, 1994 July 31, 1993
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $ 35,994 $ 27,008
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 110,922 101,750
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets....................... 9,381 9,381
Amortization of financing costs............ 5,097 5,078
Amortization of original issue discount.... 8,857 8,358
Amortization of unearned restricted stock.. 972 1,663
Loss on early extinguishment of debt....... - 3,545
Changes in assets and liabilities net of
effects of acquisition of company:
Decrease in accounts receivable.......... 18,388 179,143
Increase in merchandise inventories...... (125,728) (60,881)
Increase in supplies and prepaid
expenses................................ (11,945) (11,613)
(Increase) Decrease in other assets not
separately identified................... 13,006 (2,968)
Decrease in accounts payable and accrued
liabilities not separately identified... (33,103) (13,976)
Decrease in current income taxes......... (34,414) (12,991)
Increase (Decrease) in deferred income
taxes................................... (242) 7,678
Increase in other liabilities............ 2,816 1,052
Net cash provided by operating
activities............................ 1 242,227
Cash flows from investing activities:
Purchase of property and equipment........... (106,839) (74,985)
Disposition of property and equipment........ 1,442 25
Acquisition of company, net of cash acquired. (75,846) -
Net cash used by investing
activities........................... (181,243) (74,960)
Cash flows from financing activities:
Debt issued.................................. 109,950 -
Financing costs.............................. (2,258) (373)
Debt repaid.................................. (21,178) (372,230)
Decrease in outstanding checks............... (33,181) (6,079)
Acquisition of treasury stock................ (331) (175)
Issuance of common stock..................... 3,947 6,688
Net cash provided (used) by financing
activities............................ 56,949 (372,169)
</TABLE>
(Continued)
<PAGE>
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 30, 1994 July 31, 1993
<S> <C> <C>
Net decrease in cash.......................... (124,293) (204,902)
Cash at beginning of period................... 222,428 566,984
Cash at end of period......................... $ 98,135 $ 362,082
Supplemental cash flow information:
Interest paid................................ $ 102,283 $ 102,894
Interest received............................ 22,529 23,982
Income taxes paid (net of refunds received).. 66,257 32,068
Schedule of noncash investing and financing
activities:
Capital lease obligations for new store
fixtures................................. 1,545 626
Property and equipment transferred to other
assets................................... 4,922 1,853
Debt assumed in acquisition of company..... 40,000 -
</TABLE>
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
A description of the Company's significant accounting policies is
included in the Company's January 29, 1994 Annual Report on Form
10-K (the "1993 10-K"). The accompanying Consolidated Financial
Statements should be read in conjunction with the Consolidated
Financial Statements in the 1993 10-K.
Because of the seasonal nature of the general merchandising
business, the results of operations for the 13 and 26 weeks ended
July 30, 1994 and July 31, 1993 (which do not include the Christmas
season) are not indicative of such results for the fiscal year.
The Consolidated Financial Statements for the 13 and 26 weeks ended
July 30, 1994 and July 31, 1993, in the opinion of management,
include all adjustments (consisting only of normal recurring
adjustments) considered necessary to present fairly, in all
material respects, the consolidated financial position and results
of operations of the Company and its subsidiaries.
2. Acquisition of Company
On May 26, 1994, the Company purchased Joseph Horne Co., Inc.
("Horne's"), a department store retailer operating ten stores in
Pittsburgh and Erie, Pennsylvania for approximately $116.0 million
including the assumption of $40.0 million of mortgage debt and
transaction costs. The acquisition is being accounted for under
the purchase method of accounting and the purchase price
approximates the estimated fair value of the assets and liabilities
acquired. Results of operations for the stores acquired are
included in the consolidated financial statements from the date of
acquisition.
3. Unusual Item
The unusual item during the 13 weeks ended July 30, 1994 represents
a one-time charge for the integration of the facilities, and the
merchandising and operating functions, of the ten Horne's
department stores into the Lazarus department store division.
4. Extraordinary Item
The extraodinary item during the 26 weeks ended July 31, 1993
represents costs of $3.5 million, net of income tax benefit of $2.3
million, associated with the prepayment of the entire $355.0
million outstanding principal amount of the Company's Series B
Secured Notes.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Comparison of the 13 Weeks Ended July 30, 1994 and July 31, 1993
For purposes of the following discussion, all references to "second
quarter of 1994" and "second quarter of 1993" are to the Company's 13-
week fiscal periods ended July 30, 1994 and July 31, 1993, respectively.
Net sales for the second quarter of 1994 were $1,596.1 million
compared to $1,502.3 million for the second quarter of 1993, an
increase of 6.2%. Net sales for the second quarter of 1994 reflect
the acquisition of the ten stores of Joseph Horne Co., Inc. of
Pittsburgh ("Horne's") on May 26, 1994. On a comparable store
basis, net sales increased 2.2%.
Cost of sales was 61.1% as a percent of net sales for the second
quarter of 1994 compared to 60.1% for the second quarter of 1993.
The increase reflects additional markdowns taken to offer increased
value to the customer and to keep inventory assortments fresh and
fashion current. Cost of sales includes charges of $0.6 million
for the second quarter of 1994 compared to $3.7 million in the
second quarter of 1993 resulting from the valuation of merchandise
inventory on the last-in, first-out basis.
Selling, general and administrative expenses were 33.5% as a
percent of net sales for the second quarter of 1994 compared to
36.0% for the second quarter of 1993. The decrease is primarily
due to continued emphasis on controlling expenses, enhanced
efficiencies and productivity that are the result of the Company's
ongoing investments in retail technology, and increased revenue
from credit operations resulting from higher accounts receivable
balances this year.
Net interest expense was $48.7 million for the second quarter of
1994 compared to $40.3 million for the second quarter of 1993.
Interest expense for the second quarter of 1994 reflects a full
period accrual on the $340.0 million promissory note issued on
December 31, 1993 in connection with the purchase of 50% of the
claim held by The Prudential Insurance Company of America (the
"Prudential Claim") in the chapter 11 reorganization of R.H. Macy &
Co., Inc. ("Macy"). Cash interest payments, net of interest
received, were $45.7 million for the second quarter of 1994
compared to $41.7 million for the second quarter of 1993.
The unusual item of $27.0 million, before income taxes, represents
a one-time charge associated with the integration of the ten
Horne's stores into the Lazarus department store division.
Income tax expense was $6.5 million for the second quarter of 1994.
This amount differs from the amount computed by applying the
federal income tax statutory rate of 35.0% to income before income
taxes principally because of state and local income taxes and
permanent differences arising from amortization of reorganization
value in excess of amounts allocable to identifiable assets.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Comparison of the 26 Weeks Ended July 30, 1994 and July 31, 1993
For purposes of the following discussion, all references to "1994"
and "1993" are to the Company's 26-week fiscal periods ended July
30, 1994 and July 31, 1993, respectively.
Net sales for 1994 were $3,249.7 million compared to $3,092.5
million for 1993, an increase of 5.1%. On a comparable store
basis, net sales increased 2.2%.
Cost of sales was 61.0% as a percent of net sales for 1994 compared to
60.0% for 1993. The increase reflects additional markdowns taken to
offer increased value to the customer and to keep inventory assortments
fresh and fashion current. Cost of sales includes charges of $5.8
million in 1994 compared to $7.6 million in 1993 resulting from the
valuation of merchandise inventory on the last-in, first-out basis.
Selling, general and administrative expenses were 33.2% as a
percent of net sales for 1994 compared to 35.4% for 1993. The
decrease is primarily due to continued emphasis on controlling
expenses, enhanced efficiencies and productivity that are the
result of the Company's ongoing investments in retail technology,
as well as increased revenue from credit operations resulting from
higher accounts receivable balances this year.
Net interest expense was $94.0 million for 1994 compared to $83.5
million for 1993. Interest expense for 1994 reflects a full period
accrual on the $340.0 million promissory note issued on December
31, 1993 in connection with the purchase of 50% of the Prudential
Claim in the chapter 11 reorganization of Macy. Interest expense
for 1993 reflects a partial period accrual for the $355.0 million
of Series B Secured Notes which were prepaid on March 8, 1993.
Cash interest payments, net of interest received, were $79.8
million for 1994 compared to $78.9 million for 1993.
Income tax expense was $32.3 million for 1994. This amount differs from
the amount computed by applying the federal income tax statutory rate of
35.0% to income before income taxes and extraordinary item principally
because of state and local income taxes and permanent differences arising
from the amortization of reorganization value in excess of amounts
allocable to identifiable assets.
The extraordinary item for 1993, $3.5 million after taxes, represents
the costs associated with the prepayment of debt.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations,
cash on hand and certain credit facilities that are available to it.
Net cash provided by operating activities in 1994 decreased $242.2 million
from 1993. Two primary factors contributed to this decrease, including
higher accounts receivable balances this year generated by increases in
proprietary credit sales and a Company policy change to lower the minimum
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
monthly payment requirements; and, increases in inventories to
enhance merchandise offerings for accelerated sales growth. The
increase in accounts receivable balances was partially funded by
increased short-term borrowings associated with the receivables.
Net cash provided by the Company for all financing activities was
$56.9 million for 1994, and net cash used in investing activities
was $181.2 million. During the first half of 1994, the Company
opened three new stores, reopened a hurricane-damaged store and
closed one store. On May 26, 1994, the Company purchased Joseph
Horne Co., Inc., a department store retailer operating ten stores
in Pittsburgh and Erie, Pennsylvania for approximately $116.0
million including the assumption of $40.0 million of mortgage debt
and transaction costs. The acquisition is being accounted for
under the purchase method of accounting. The Company plans to open
six new stores in the second half of the year.
On July 29, 1994, the Company and Macy filed a Joint Plan of
Reorganization for Macy and Certain of Its Subsidiaries (as
subsequently amended, the "Macy's POR") in the United States
Bankruptcy Court for the Southern District of New York (the "New
York Bankruptcy Court"). As contemplated by the Macy's POR, the
Company and Macy entered into an Agreement and Plan of Merger,
dated as of August 16, 1994 (the "Merger Agreement"), providing for
the merger of the Company and Macy (the "Merger") into a single
department store operation.
The Macy's POR provides for distributions to Macy's creditors
totaling approximately $4.1 billion in assumed value of cash, debt,
common stock and warrants in the new merged company, which will
retain the name "Federated Department Stores, Inc."
The Macy's POR and the Merger Agreement are filed herewith as
Exhibits 99.1 and 10.1, respectively, and are incorporated herein
by this reference. Additional information concerning the Macy's
POR and the proposed Merger is contained in a Current Report on
Form 8-K filed by the Company with the Securities and Exchange
Commission on September 1, 1994; however, such information is
subject to change without notice and should not be relied upon as
being accurate as of any date after September 1, 1994. The
effectiveness of the Macy's POR and the obligations of the Company
and Macy to consummate the Merger are subject to various approvals
and to the satisfaction or waiver of various conditions. There can
be no assurance that such approvals will be obtained, that such
conditions will be satisfied, that the Macy's POR will become
effective, or that the Merger will be consummated.
Management believes the department store segment will continue to
consolidate. Accordingly, the Company intends from time to time to
consider additional acquisitions of department store assets and
companies.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Management of the Company believes that, with respect to its
current operations, cash on hand and funds from operations,
together with its credit facilities, will be sufficient to cover
its reasonably foreseeable working capital, capital expenditure and
debt service requirements. Any business combination transaction
involving the Company and Macy would require the establishment of a
revised capital structure for the combined company. Other
acquisition transactions, if any, are expected to be financed
through a combination of cash on hand and from operations and the
possible issuance from time to time of long-term debt or other
securities. Management's objective is to maintain the Company's
debt to equity ratio following any transaction, including any
transaction involving Macy, at levels determined to be prudent and
not to effect any transaction which would adversely affect the long
term value of an investment in the Company.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Litigation with Internal Revenue Service. As previously
reported in the Company's Annual Report on Form 10-K for the
fiscal year ended January 29, 1994, in connection with the
chapter 11 proceedings (the "Reorganization Proceedings") of
the Company, Allied Stores Corporation and substantially all
of their subsidiaries (the "Federated/Allied Companies") filed
in the United States Bankruptcy Court for the Southern
District of Ohio, Western Division (the "Bankruptcy Court") on
January 15, 1990 and the reorganization proceedings of
Federated Stores, Inc., the former indirect parent of the
Company ("FSI"), the Internal Revenue Service (the "IRS")
audited the tax returns of FSI and the Federated/Allied
Companies for tax years 1984 through 1989 and asserted certain
claims against the Federated/Allied Companies and other
members of the FSI consolidated tax group. The issues raised
by the IRS audit were resolved by agreement with the IRS in
the Reorganization Proceedings except for two issues involving
the use by the Federated/Allied Companies of an aggregate of
$27.0 million of net operating and capital loss carryforwards
of an acquired company (the "NOL Issue") and the deductibility
of approximately $176.3 million of so-called "break-up fees"
(the "Break-Up Fee Issue"). The NOL Issue and the Break-Up
Fee Issue were litigated before the Bankruptcy Court and
resolved in favor of the Federated/Allied Companies; however,
on January 21, 1992, the IRS filed a notice of appeal of the
Bankruptcy Court's determination of these issues to the United
States District Court for the Southern District of Ohio (the
"District Court"). On August 2, 1994, the District Court
affirmed the decisions of the Bankruptcy Court with respect to
both the NOL Issue and the Break-Up Fee Issue. The IRS has
until October 3, 1994 to appeal the decision of the District
Court. While there can be no assurance with respect thereto,
management does not expect that, in the event of such an
appeal, the ultimate resolution of the NOL Issue and/or the
Break-Up Fee Issue would have a material adverse effect on the
Company's financial position.
Antitrust Matters Relating to the Proposed Merger. On August
19, 1994, the Federal Trade Commission (the "FTC") notified
the Company and Macy that it had granted early termination of
the waiting period applicable to the proposed Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
On August 23, 1994, the Company and Macy were advised that the
Office of the Attorney General for the State of New York intended
to commence litigation challenging the proposed Merger absent a
mutually satisfactory settlement of the matter. Discussions between
the Company, Macy and the Attorney General's office are continuing.
The Company believes that the proposed Merger does not violate any
federal or state antitrust or other law. The Company has not been
notified by the Attorneys General of any other potentially affected
states that they are investigating, or intend to investigate, the
proposed Merger.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re computation of per --
share earnings.
(10.1) Agreement and Plan of Merger --
Between R.H. Macy & Co., Inc.
("Macy") and the Company
dated as of August 16, 1994
(99.1) Amended Joint Plan of Exhibit I to the
Reorganization for Macy and Disclosure Statement
Certain of Its Subsidiaries filed as Exhibit 28.1
to the Company's
Current Report on
Form 8-K dated
September 1, 1994
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fiscal
quarter ended July 30, 1994.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
FEDERATED DEPARTMENT STORES, INC.
Date September 13, 1994 /s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President and General Counsel
/s/ John E. Brown
John E. Brown
Senior Vice President and Controller
(Principal Accounting Officer)
<TABLE>
EXHIBIT 11
FEDERATED DEPARTMENT STORES, INC.
Exhibit of Primary and Fully Diluted Earnings Per Share
(thousands, except per share figures)
13 Weeks Ended 26 Weeks Ended
July 30, 1994 July 31,1993 July 30, 1994 July 31, 1993
Shares Income Shares Income Shares Income Shares Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income and average
number of shares
outstanding.............. 126,578 $ 3,772 126,309 $ 8,853 126,517 $ 35,994 126,260 $ 27,008
Earnings per share........ $.03 $ .07 $.28 $.21
PRIMARY COMPUTATION:
Average number of common
share equivalents:
Shares to be issued to
the U.S. Treasury.... 122 163 122 163
Deferred compensation
plan................. 62 - 51 -
Stock options......... 193 335 265 260
Adjusted number of
common and common
equivalent shares
outstanding and
adjusted net
income............. 126,955 3,772 126,807 8,853 126,955 35,994 126,683 27,008
Primary earnings
per share.......... $.03 $.07 $.28 $.21
FULLY DILUTED COMPUTATION:
Additional adjustments
to a fully diluted
basis:
Stock options......... - 14 1 14
Adjusted number of
shares outstanding
and net income on a
fully diluted basis 126,955 $ 3,772 126,821 $ 8,853 126,956 $ 35,994 126,697 $ 27,008
Fully diluted earnings
per share.......... $.03 $.07 $.28 $.21
</TABLE>
APPENDIX A
-----------------------------------------------------------------
AGREEMENT AND PLAN
OF
MERGER
between
R. H. MACY & CO., INC.,
and
FEDERATED DEPARTMENT STORES, INC.
____________________
Dated as of August 16, 1994
____________________
-----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MERGER AND CONVERSION OF SHARES . . . . . . . . . . . . . . . 6
2.1 The Merger . . . . . . . . . . . . . . . . . 6
2.2 Certificate of Incorporation and By-
Laws of Surviving Corporation . . . . . . . . 6
2.3 Directors and Officers of Surviving
Corporation . . . . . . . . . . . . . . . . . 6
2.4 Closing . . . . . . . . . . . . . . . . . . . 7
2.5 Effective Time; Conditions . . . . . . . . . 7
2.6 Conversion of Federated Common Stock . . . . 7
2.7 Effect of Conversion of Federated
Common Stock. . . . . . . . . . . . . . . . . 7
2.8 Exchange of Federated Common Stock
Certificates . . . . . . . . . . . . . . . . 8
2.9 Cancellation of RHM Capital Stock . . . . . . 8
2.10 No Transfer of Shares After Effective
Time . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RHM . . . . . . . . . . . . 8
3.1 Corporate Existence and Qualification . . . . 8
3.2 Authority; Approvals; Non-
Contravention . . . . . . . . . . . . . . . . 8
3.3 SEC Reports; Financial Statements. . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FEDERATED . . . . . . . . . 10
4.1 Organization and Qualification . . . . . . . 10
4.2 Capitalization; Options or Other
Rights . . . . . . . . . . . . . . . . . . . 10
4.3 Authority; Approvals; Non-
Contravention . . . . . . . . . . . . . . . . 10
4.4 SEC Reports; Financial Statements . . . . . . 11
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . 12
5.1 Interim Operations Committee . . . . . . . . 12
5.2 Conduct of Business by RHM . . . . . . . . . 12
5.3 Conduct of Business by Federated. . . . . . . 14
(i)
<PAGE>
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Access to Information. . . . . . . . . . . . 14
6.2 Consents and Approvals. . . . . . . . . . . . 15
6.3 Notification of Certain Additional
Matters. . . . . . . . . . . . . . . . . . . 16
6.4 Bankruptcy Court Approvals. . . . . . . . . . 16
6.5 Registration Statement, Proxy Statement
and Other Securities Law Filings;
Disclosure Statement. . . . . . . . . . . . . 17
6.6 Stockholders' Meeting . . . . . . . . . . . . 18
6.7 NYSE Listing; NASDAQ Quotation . . . . . . . 18
6.8 RHM Employees and Employee Benefits . . . . . 19
6.9 Directors' and Officers'
Indemnification . . . . . . . . . . . . . . . 20
6.10 Certain Offers . . . . . . . . . . . . . . . 21
6.11 No Hire . . . . . . . . . . . . . . . . . . . 23
6.12 Injunctions . . . . . . . . . . . . . . . . . 23
6.13 Taxes . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Conditions to Obligation of Each Party . . . 24
7.2 Conditions to Obligation of Federated. . . . 25
7.3 Conditions to Obligation of RHM. . . . . . . 25
7.4 Waiver of Conditions . . . . . . . . . . . . 26
ARTICLE VIII
TERMINATION AND TERMINATION FEES . . . . . . . . . . . . . . 26
8.1 Termination . . . . . . . . . . . . . . . . . 26
8.2 Certain Effects of Termination. . . . . . . . 26
8.3 Termination Fee. . . . . . . . . . . . . . . 27
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Notices. . . . . . . . . . . . . . . . . . . 28
9.2 Expenses. . . . . . . . . . . . . . . . . . . 29
9.3 Assignment. . . . . . . . . . . . . . . . . . 29
9.4 Waivers. . . . . . . . . . . . . . . . . . . 29
9.5 Binding Effect; Benefits. . . . . . . . . . . 29
9.6 Entire Agreement. . . . . . . . . . . . . . . 29
9.7 Headings. . . . . . . . . . . . . . . . . . . 29
(ii)
<PAGE>
9.8 Retention of Bankruptcy Court
Jurisdiction; Governing Law; Waiver of
Jury Trial . . . . . . . . . . . . . . . . . 29
9.9 Public Announcements . . . . . . . . . . . . 30
9.10 Amendments; Interpretation . . . . . . . . . 30
9.11 Disclosures . . . . . . . . . . . . . . . . . 30
9.12 Counterparts . . . . . . . . . . . . . . . . 30
9.13 Specific Performance . . . . . . . . . . . . 30
9.14 Plan Termination, Etc. . . . . . . . . . . . 30
9.15 Further Assurances . . . . . . . . . . . . . 30
9.16 Severability . . . . . . . . . . . . . . . . 30
SCHEDULES
Schedule 2.6(b) - Federated Stock Option Plans
Schedule 3.2(b) - RHM Approvals
Schedule 3.2(c) - RHM Conflicts
Schedule 4.2(b) - Federated Options or Other Rights
Schedule 4.3(b) - Federated Approvals
Schedule 4.3(c) - Federated Conflicts
Schedule 5.2(b)(i) - Certain RHM Actions Requiring Notice
Schedule 5.2(b)(ii) - Certain RHM Actions Requiring
Consultation
Schedule 5.3(a) - Conduct of Business by Federated
Schedule 5.3(b)(ii) - Federated Permitted Stock Issuances
Schedule 6.8(a)(iv) - RHM Annuity and Supplemental
Retirement Payments
Schedule 6.8(a)(vi) - Certain RHM Employee and RHM
Retiree Claims
Schedule 6.8(a)(viii) -Certain RHM Employee Matters
(iii)
<PAGE>
EXHIBITS
Exhibit A - The Plan
Exhibit B - Form of Certificate of Incorporation of
Surviving Corporation
Exhibit C - Form of By-laws of Surviving Corporation
Exhibit D - Form of Certificate of Merger
Exhibit E - Form of Jones, Day, Reavis and Pogue
Opinion
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 16,
1994, by and between R. H. Macy & Co., Inc., a Delaware
corporation ("RHM"), on behalf of itself and its subsidiaries,
including the Other Debtors (as defined below), and Federated
Department Stores, Inc., a Delaware corporation ("Federated").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, RHM and certain of its subsidiaries
(collectively, the "Other Debtors") are debtors and debtors in
possession under chapter 11 of title 11 of the United States
Code, 11 U.S.C. Sec.Sec. 101, et seq. (the "Bankruptcy Code"), having
-- ---
commenced a voluntary case (No. 92 B 40477 (BRL) Jointly
Administered) (the "Reorganization Case") in the United States
Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court");
WHEREAS, a plan of reorganization for RHM and the Other
Debtors was filed jointly by RHM and Federated with the
Bankruptcy Court on July 29, 1994, a copy of which is attached as
Exhibit A hereto (as the same may be jointly amended, modified or
supplemented from time to time, the "Plan");
WHEREAS, the Plan provides that Federated and RHM will
be merged (the "Merger"), and the parties have agreed that RHM
shall be the surviving corporation in the Merger (the "Surviving
Corporation"), upon the terms and subject to the conditions set
forth herein, including, in particular, Section 6.4(b), and in
the Plan; and
WHEREAS, as a material inducement to RHM's execution
and delivery of this Agreement and its agreement herein to enter
into the Merger in the form and upon the terms and subject to the
conditions set forth herein, the parties hereto have agreed to
seek certain Bankruptcy Court approvals as provided in Section
6.4(b).
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants, agreements and
conditions herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
(a) Except as the context may otherwise require, the
terms set forth below shall have the following meanings:
"Affiliate" means any Person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person
specified. For purposes of this definition, the term "control"
(including, with correlative meaning, the terms "controlled by"
and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of the Person specified, whether
through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this agreement and all schedules,
appendices and exhibits hereto, as the same may be amended from
time to time pursuant to Section 9.10.
<PAGE>
"Antitrust Authorizations" means all consents,
approvals or authorizations of any Governmental Authority
required for consummation of the Merger and the other
transactions contemplated hereby under the HSR Act or any Federal
or state antitrust or similar law.
"Appointed Representatives of RHM" has the meaning set
forth in Section 6.4(b).
"Bankruptcy Code" has the meaning set forth in the
recitals of this Agreement.
"Bankruptcy Court" has the meaning set forth in the
recitals of this Agreement.
"Better Offer" has the meaning set forth in Section
6.10.
"Business Day" means and refers to any day (other than
a day which is a Saturday, Sunday or legal holiday in the State
of New York) on which banks are open for business in New York,
New York.
"Certificate of Merger" has the meaning set forth in
Section 2.5.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section
2.4.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Competing Offer" has the meaning set forth in Section
6.10(b).
"Competing Offer Notice" has the meaning set forth in
Section 6.10(b).
"Confidentiality Agreements" has the meaning set forth
in Section 6.1.
"Confirmation Date" means the date on which the
Confirmation Order is entered.
"Confirmation Order" means the order entered by the
Bankruptcy Court confirming the Plan.
"DGCL" means the General Corporation Law of the State
of Delaware, 8 Del. C. Sec.Sec. 1-101, et seq.
-- ---
"Disclosure Statement" means the Disclosure Statement
to be filed jointly by RHM and Federated in the Bankruptcy Court
and distributed to holders of claims against and interests in RHM
and the Other Debtors in connection with voting on the Plan, as
the same may be jointly amended, modified or supplemented from
time to time.
"Effective Date of the Plan" has the meaning given to
the term "Effective Date" in the Plan.
"Effective Time" has the meaning set forth in Section
2.5 and will have the same meaning as the term "Effective Time of
the Federated/Macy's Merger" in the Plan.
"Employee Benefits" has the meaning set forth in
Section 6.8(a)(i).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
"Federated" has the meaning set forth in the preamble
of this Agreement.
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<PAGE>
"Federated Common Stock" means the common stock of
Federated, par value $0.01 per share.
"Federated Material Adverse Effect" means a material
adverse effect on the business, financial condition or results of
operations of Federated and its Subsidiaries taken as a whole.
"Federated Objection" has the meaning set forth in
Section 6.10(c).
"Federated SEC Reports" has the meaning set forth in
Section 4.4(a).
"Federated Share Purchase Rights" means the rights
issued pursuant to the Federated Share Purchase Rights Agreement.
"Federated Share Purchase Rights Agreement" means the
Rights Agreement, dated as of February 5, 1992, between Federated
and The Bank of New York, as rights agent, as the same may be
amended from time to time.
"Federated Stock Option" has the meaning set forth in
Section 2.6(b).
"Federated Stock Option Plans" has the meaning set
forth in Section 2.6(b).
"Federated Stockholder Approval" means the adoption of
this Agreement by the stockholders of Federated entitled to vote
thereon at a meeting of such holders held for such purpose, as
required under the DGCL and Federated's Certificate of
Incorporation and By-laws.
"GAAP" has the meaning set forth in paragraph (b) of
this ARTICLE I.
"Gains Tax" has the meaning set forth in Section 6.13.
"Governmental Authority" means any court, tribunal,
arbitrator, authority, agency, commission, department, unit,
official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or
other political subdivision.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations of the Federal Trade Commission promulgated
thereunder.
"Indemnified Party" has the meaning set forth in
Section 6.9(c).
"Interim Operations Committee" has the meaning set
forth in Section 5.1(a).
"Law" means any law, statute, rule, regulation,
ordinance, order, code, arbitration award, judgment, decree or
other legal requirement of any Governmental Authority.
"Liability" means any costs or expenses (including
reasonable attorneys' fees, disbursements and related charges),
judgments, fines, levies, claims, damages, liabilities or amounts
paid or that may be required to be paid in settlement of any
claim, action, suit, proceeding or investigation.
"Lien" means any mortgage, security interest, charge,
encumbrance, lien, assessment, easement, covenant, claim, title
defect, pledge, encroachment, right of first refusal, preemptive
right or other encumbrance of any kind whatsoever.
"Management Employee" has the meaning set forth in
Section 6.11.
"Matching Offer" has the meaning set forth in Section
6.10(c).
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<PAGE>
"Match Period" has the meaning set forth in Section
6.10(c).
"Merger" has the meaning set forth in the recitals of
this Agreement.
"NASDAQ" means the National Association of Securities
Dealers Automated Quotation System -- National Market System.
"Other Debtors" has the meaning set forth in the
recitals of this Agreement.
"Permits" means all permits, licenses, certificates,
franchises and other authorizations, consents and approvals of
any Governmental Authority necessary for any Person to conduct
its business as presently conducted.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an estate,
an unincorporated organization and any Governmental Authority.
"Petition Dates" has the meaning given to such term in
the Plan.
"Plan" has the meaning set forth in the recitals of
this Agreement.
"Proxy Statement" has the meaning set forth in Section
6.5.
"Reorganization Case" has the meaning set forth in the
recitals of this Agreement.
"Representatives" means, with respect to any party, the
directors, officers and employees of such party or its
Subsidiaries and its accountants, counsel, financial advisors and
other such representatives.
"Registration Statement" has the meaning set forth in
Section 6.5.
"RHM" has the meaning set forth in the preamble of this
Agreement.
"RHM Director Designees" has the meaning set forth in
Section 2.3(a).
"RHM Employees" has the meaning set forth in Section
6.8.
"RHM LBO Effective Date" has the meaning set forth in
Section 6.9(a).
"RHM Material Adverse Effect" means a material adverse
effect on the business, financial condition or results of
operations of RHM and its Subsidiaries taken as a whole.
"RHM Objection" has the meaning set forth in Section
6.10(c).
"RHM Retirees" has the meaning set forth in Section
6.8.
"RHM SEC Reports" has the meaning set forth in Section
3.3(a).
"RHM's CEO" has the meaning set forth in Section
2.3(a).
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
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<PAGE>
"Securities Law Filings" means any and all filings and
registrations with the SEC or any other Governmental Authority
pursuant to the applicable requirements of any Federal or state
securities or "Blue Sky" laws with respect to this Agreement, the
Merger or the Surviving Corporation Common Stock or other
securities to be issued pursuant to the Merger as contemplated by
this Agreement and by the Plan, including the filings and
registrations contemplated in Section 6.5.
"Special Meeting" has the meaning set forth in Section
6.6.
"Subsidiary" means, with respect to any Person, any
corporation or other organization, whether incorporated or
unincorporated, of which more than 50% of either the equity
interests in, or the voting control of, such corporation or other
organization is, directly or indirectly, through subsidiaries or
otherwise, beneficially owned by such Person.
"Surviving Corporation" has the meaning set forth in
the recitals of this Agreement.
"Surviving Corporation Common Stock" has the meaning
set forth in Section 2.6.
"Surviving Corporation Share Purchase Rights" has the
meaning given to the term "New Combined Company Share Purchase
Rights" in the Plan.
"Surviving Corporation Share Purchase Rights Agreement"
has the meaning given to the term "New Combined Company Share
Purchase Rights Agreement" in the Plan.
"Taxes" means any federal, state, county, local or
foreign taxes, fees, levies, other assessments, withholding taxes
or other charges imposed by any Governmental Authority, and
includes any interest and penalties (civil or criminal) on or
additions to any such taxes and any expenses incurred in
connection with the determination, settlement or litigation of
any tax liability.
"Termination Date" has the meaning set forth in Section
8.1(b).
"Transaction Document" means any agreement, document,
certificate or other instrument delivered or to be delivered
pursuant to this Agreement in connection with the transactions
contemplated hereby.
(b) Except as the context may otherwise require, (i)
words of any gender include the other gender; (ii) words using
the singular or plural number also include the plural or singular
number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire
Agreement; and (iv) the term "including" means "including, but
not limited to." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business
Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them
under generally accepted accounting principles ("GAAP").
- 5 -
<PAGE>
ARTICLE II
MERGER AND CONVERSION OF SHARES
2.1 The Merger.
(a) Upon the terms and subject to the conditions of
this Agreement (including Section 6.4(b)) and the Plan, and upon
the authority granted by the Confirmation Order, at the Effective
Time, Federated shall be merged with and into RHM, whereupon
Federated's separate corporate existence shall cease, and RHM
shall be the Surviving Corporation. The name of the Surviving
Corporation shall be changed to "Federated Department Stores,
Inc." or such other name as Federated in consultation with RHM
shall designate prior to the Effective Time.
(b) Subject to Section 6.4(b), upon the Merger, RHM
will continue to be governed by the laws of the State of Delaware
and all of its rights, privileges, powers and franchises, public
or private, and all of its duties and liabilities as a
corporation organized under the DGCL will continue unaffected by
the Merger. The Merger shall have the effects set forth in the
DGCL and this Agreement.
2.2 Certificate of Incorporation and By-Laws of
Surviving Corporation.
(a) The Certificate of Incorporation of the Surviving
Corporation to be in effect from and after the Effective Time
until amended in accordance with its terms and the DGCL shall be
the Certificate of Incorporation of RHM immediately prior to the
Effective Time, as amended and restated in the form of Exhibit B
hereto, which amendment and restatement shall include a provision
changing the name of the Surviving Corporation as provided in
Section 2.1(a) and such other provisions as shall be necessary or
advisable to effectuate the matters set forth in Sections 2.3 and
6.9 and the transactions contemplated hereby.
(b) The By-Laws of the Surviving Corporation to be in
effect from and after the Effective Time until amended in
accordance with their terms and the DGCL shall be the By-Laws of
RHM immediately prior to the Effective Time, as amended and
restated in the form of Exhibit C hereto.
2.3 Directors and Officers of Surviving Corporation.
(a) The members of the initial Board of Directors of
the Surviving Corporation shall be the members of the Board of
Directors of Federated immediately prior to the Effective Time,
together with four additional persons to be designated by RHM
prior to the Effective Time (the "RHM Director Designees"). One
of the RHM Director Designees shall be the Chairman and Chief
Executive Officer of RHM ("RHM's CEO"), and the other three RHM
Director Designees shall be members of RHM's Board of Directors
whose designation by RHM shall have been approved by two of the
three members of the Interim Operations Committee, which approval
shall not be unreasonably withheld (the parties acknowledging
that the members of the Interim Operations Committee appointed by
Federated may approve as RHM Director Designees only persons who
also have been approved by the Board Organization Committee of
Federated's Board of Directors, which approval shall not be
unreasonably withheld). RHM's CEO and a second RHM Director
designated by RHM shall be in the class of directors of the
Surviving Corporation whose terms expire at the 1995 Annual
Meeting of Stockholders, which directors shall be nominated by
the Board of Directors of the Surviving Corporation, at the
expiration of such term, to serve for an additional three-year
term to expire at the 1998 Annual Meeting of Stockholders. The
remaining two RHM Director Designees, as designated by RHM, shall
be in the class of directors of the Surviving Corporation whose
terms expire at the 1996 Annual Meeting of Stockholders and the
1997 Annual Meeting of Stockholders, respectively. All of the
members of the Board of Directors of the Surviving Corporation
shall serve until their successors are duly elected or appointed
and qualified or until their earlier death, resignation or
removal in accordance with the Certificate of Incorporation and
the By-laws of the Surviving Corporation.
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<PAGE>
(b) The officers of the Surviving Corporation shall
consist of (i) the officers of Federated immediately prior to the
Effective Time and (ii) RHM's CEO, who shall be the Deputy
Chairman of the Surviving Corporation. Such persons shall
continue as officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and the By-Laws of the
Surviving Corporation.
2.4 Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at
the offices of Jones, Day, Reavis & Pogue, 599 Lexington Avenue,
New York, New York, at 10:00 a.m., local time, on the first
Business Day immediately following the date on which the last of
the conditions set forth in ARTICLE VII is satisfied or waived
(if permitted), or at such other place, time or date as RHM and
Federated may agree (the "Closing Date").
2.5 Effective Time; Conditions. As soon as
practicable following the Closing and the satisfaction or waiver
(if permitted) of the conditions specified in ARTICLE VII, and
provided that this Agreement has not been terminated or abandoned
pursuant to ARTICLE VIII, RHM and Federated shall cause a
certificate of merger, substantially in the form of Exhibit D
hereto (the "Certificate of Merger"), to be executed and filed
with the Secretary of State of the State of Delaware as provided
in the DGCL. The Merger shall become effective on the date on
which the Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware or at the time
specified as the effective time in the Certificate of Merger, and
such time is hereinafter referred to as the "Effective Time."
2.6 Conversion of Federated Common Stock; Stock
Options.
(a) Subject to Section 6.4(b), at the Effective Time,
by virtue of the Merger and without any action on the part of the
holders thereof, (i) each share of Federated Common Stock
outstanding immediately prior to the Effective Time, together
with the associated Federated Share Purchase Rights, shall be
converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share,
of the Surviving Corporation ("Surviving Corporation Common
Stock") and, subject to the approval and adoption of the
Surviving Corporation Share Purchase Rights Agreement by
Federated's Board of Directors on behalf of the Surviving
Corporation effective as of the Effective Time, one Surviving
Corporation Share Purchase Right, and (ii) each share of
Federated Common Stock held in Federated's treasury or in the
treasury of any of Federated's Subsidiaries immediately prior to
the Effective Time, together with the associated Federated Share
Purchase Rights, shall be cancelled and extinguished without
payment of any consideration therefor.
(b) At the Effective Time, each outstanding option to
purchase any shares of Federated Common Stock (a "Federated Stock
Option") issued pursuant to the option plans or arrangements of
Federated set forth on Schedule 2.6(b) hereto (collectively, the
"Federated Stock Option Plans"), whether vested or not vested,
shall be assumed by the Surviving Corporation and shall be deemed
to be an option to acquire, on the same terms as applicable under
the relevant Federated Stock Option Plan, the same number of
shares of Surviving Corporation Common Stock as the holder of
such Federated Stock Option would have been entitled to receive
had such holder exercised such option in full immediately prior
to the Effective Time and the shares of Federated Common Stock
received upon such exercise were converted into shares of
Surviving Corporation Common Stock in the Merger.
2.7 Effect of Conversion of Federated Common Stock.
Each share of Surviving Corporation Common Stock into which a
share of Federated Common Stock is converted at the Effective
Time pursuant to the Merger shall be deemed, for all corporate
purposes, (i) to have been issued by the Surviving Corporation at
the Effective Time and (ii) subject to the approval and adoption
of the Surviving Corporation Share Purchase Rights Agreement by
Federated's Board of Directors on behalf of the Surviving
Corporation effective as of the Effective Time, to be accompanied
by one Surviving Corporation Share Purchase Right. From and
after such time and prior to the surrender pursuant to Section
2.8 of any certificate theretofore representing shares of
Federated Common Stock, such certificate shall, for all corporate
purposes (including, without limitation, the right to vote and to
receive dividends), be treated as representing (x) the number of
shares of Surviving Corporation Common Stock into which such
shares of Federated Common Stock shall have been
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<PAGE>
converted in the Merger and (y) subject to the approval and
adoption of the Surviving Corporation Share Purchase Rights
Agreement by Federated's Board of Directors as aforesaid, and to
the provisions thereof, an equal number of Surviving Corporation
Share Purchase Rights.
2.8 Exchange of Federated Common Stock Certificates.
In that the shares of Federated Common Stock outstanding
immediately prior to the Effective Time shall be deemed to have
been converted in the Merger with the effects set forth in
Sections 2.6 and 2.7, holders of certificates theretofore
representing such shares will not be required to surrender such
certificates following the Merger for exchange into certificates
representing shares of Surviving Corporation Stock. Without
limiting the generality or effect of the foregoing and Section
2.7, from and after the Effective Time, the holders of
certificates theretofore representing shares of Federated Common
Stock, upon surrender of such certificates to any transfer agent
for the Surviving Corporation Common Stock designated as such by
the Surviving Corporation, will be entitled to receive in
exchange therefor certificates representing the number of shares
of Surviving Corporation Common Stock into which the shares of
Federated Common Stock theretofore represented by the surrendered
certificates shall have been converted in the Merger. If any
certificate for shares of Surviving Corporation Common Stock is
to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so
surrendered shall be properly endorsed (or accompanied by a duly
executed stock power or other appropriate instrument of transfer)
and shall otherwise be proper, and that the Person requesting
such transfer shall pay to the transfer agent any transfer or
other taxes payable by reason of the issuance of such new
certificate or payment in any name other than that of the
registered holder of the certificate surrendered or establish to
the satisfaction of the Surviving Corporation that such tax has
been paid or is not payable.
2.9 Cancellation of RHM Capital Stock. Pursuant to
the Plan, at the Effective Time, without any action on the part
of the holders thereof, each share of capital stock of RHM
outstanding or held in RHM's treasury or the treasury of any of
RHM's Subsidiaries immediately prior to the Effective Time, and
each option or other right to purchase any capital stock of RHM
in existence immediately prior to the Effective Time, shall be
canceled and extinguished without payment of any consideration
therefor.
2.10 No Transfer of Shares After Effective Time. No
transfer of shares of Federated Common Stock shall be made on the
stock transfer books of Federated at or after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RHM
RHM represents and warrants to Federated that:
3.1 Corporate Existence and Qualification. RHM is a
corporation duly organized and validly existing under the laws of
the State of Delaware and has the requisite power and authority
to own, lease and operate its assets and properties and to carry
on its business as now conducted. RHM is qualified or licensed
to do business in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the businesses
conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified (i) results from the
commencement or continuance of the Reorganization Case or (ii)
will not, when taken together with all other such failures, have
an RHM Material Adverse Effect.
3.2 Authority; Approvals; Non-Contravention.
(a) Subject to the entry and provisions of the
Confirmation Order, RHM has full corporate power and authority
and has taken all corporate action necessary to enter into this
Agreement and the Transaction Documents to which it is a party
and to consummate the transactions contemplated hereby and
thereby. Subject to the entry and provisions of the Confirmation
Order, this Agreement has been, and the Transaction Documents,
when executed and delivered pursuant to this Agreement by RHM
will be, duly and validly executed and delivered by RHM, and this
Agreement constitutes, and the Transaction Documents to be
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<PAGE>
executed and delivered by RHM will constitute valid and binding
agreements of RHM enforceable against RHM in accordance with
their respective terms.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect
to RHM in connection with the execution and delivery of this
Agreement by RHM or the performance by RHM of the transactions
contemplated hereby and by the Plan, except (i) for consents,
approvals, orders and authorizations of, and filings with, the
Bankruptcy Court, (ii) for the filing of a notification and
report form by RHM under the HSR Act and the expiration or
earlier termination of the applicable waiting period thereunder,
(iii) for Securities Law Filings required to be made by RHM, (iv)
for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware pursuant to the DGCL and of
appropriate documents with the relevant authorities of other
states in which RHM or any of its Subsidiaries is authorized to
do business, (v) for any consents, approvals, authorizations and
filings required under any environmental, health or safety Law,
(vi) for any consents, approvals, orders, authorizations,
registrations, declarations or filings, which, if not obtained or
made, would not, in the aggregate, have an RHM Material Adverse
Effect or materially and adversely affect the ability of RHM to
consummate the transactions contemplated hereby and by the Plan
and (vii) for any consents, approvals, orders, authorizations,
registrations, declarations or filings set forth in Schedule
3.2(b).
(c) Subject to the entry and provisions of the
Confirmation Order, the execution and delivery of this Agreement
and the Transaction Documents by RHM do not, and as of the
Effective Time the consummation by RHM of the transactions
contemplated hereby and thereby will not, and assuming that the
filings, registrations and declarations referred to in clauses
(i) through (vii), inclusive, of Section 3.2(b) have been made,
the waiting period referred to therein shall have expired or been
earlier terminated, the consents, approvals, orders and
authorizations referred to therein shall have been obtained and
shall remain in full force and effect, and the conditions set
forth in ARTICLE VII shall have been satisfied or waived (if
permitted), the performance by RHM of the transactions
contemplated hereby, by the Transaction Documents and by the Plan
will not, violate, conflict with or result in a breach of any
provision of, or constitute a default (or result in any event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination
or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of RHM or any of its Subsidiaries
under, any of the terms, conditions or provisions of (i) the
respective certificates of incorporation or by-laws of RHM or any
of its Subsidiaries, (ii) any judgment, decree, order or award of
any Governmental Authority applicable to RHM or any of its
Subsidiaries, or any law, rule or regulation applicable to RHM or
any of its Subsidiaries, or (iii) except as set forth on Schedule
3.2(c), any note, bond, mortgage, indenture, deed of trust,
Permit, lease, agreement or other instrument to which RHM or any
of its Subsidiaries is now a party or by which RHM or any of its
Subsidiaries or any of their respective properties or assets may
be bound or subject and to which the Surviving Corporation or any
of its Subsidiaries also will be a party or by which the
Surviving Corporation or any of its Subsidiaries or any of their
respective properties or assets may be bound or subject from and
after the Effective Time, which, in the aggregate, would have an
RHM Material Adverse Effect or materially and adversely affect
the ability of RHM to consummate the transactions contemplated
hereby or thereby.
3.3 SEC Reports; Financial Statements.
(a) RHM has delivered to Federated (i) its Annual
Report on Form 10-K for the fiscal year ended July 31, 1993 and
(ii) its Quarterly Reports on Form 10-Q for each of the fiscal
quarters ended October 30, 1993, January 29, 1994 and April 30,
1994, respectively, each in the form (including exhibits) filed
with the SEC (collectively, the "RHM SEC Reports"). Each RHM SEC
Report has been prepared and filed in accordance with all
applicable rules and regulations of the SEC and at the time of
its filing was in compliance with such rules and regulations in
all material respects. As of their respective dates, the RHM SEC
Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(b) Each of the audited consolidated financial
statements and unaudited consolidated interim financial
statements of RHM (and the related notes and schedules) included
in the RHM SEC Reports presents fairly, in all material respects,
the consolidated financial position of RHM and its Subsidiaries
as of the respective dates thereof and the results of operations
and cash flows for the respective periods set forth therein, in
accordance with GAAP consistently applied during the period
involved, except as otherwise noted therein and subject, in the
case of the unaudited interim financial statements, to the
omission of certain notes not ordinarily accompanying such
unaudited interim financial statements and to normal year-end
adjustments and any other adjustments described therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FEDERATED
Federated represents and warrants to RHM that:
4.1 Organization and Qualification. Federated is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite
power and authority to own, lease and operate its assets and
properties and to carry on its business as now conducted.
Federated is qualified or licensed to do business and is in good
standing in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the businesses
conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have
a Federated Material Adverse Effect.
4.2 Capitalization; Options or Other Rights.
(a) Federated has authorized capital stock consisting
of (i) 250,000,000 shares of Federated Common Stock, of which
126,584,004 shares are outstanding as of the date hereof, and
(ii) 125,000,000 shares of Preferred Stock, par value $.01 per
share, none of which is outstanding as of the date hereof. As of
the date hereof, all of the outstanding shares of Federated
Common Stock are validly issued, fully paid and non-assessable
and free from preemptive rights and, as of the Effective Time,
all of the securities of the Surviving Corporation issuable
pursuant to the Merger as contemplated by the Plan, including
securities, if any, issuable upon the exercise thereof, when
issued as contemplated hereunder and by the Plan or upon such
exercise, will be duly authorized, validly issued, fully paid and
non-assessable and not subject to any preemptive or similar
rights.
(b) Except as set forth on Schedule 4.2(b) hereto, as
of the date hereof, there are not, and as of the Effective Time,
there will not be, any outstanding rights, registration rights,
subscriptions, options, warrants, calls, puts, unsatisfied
preemptive rights or other agreements or arrangements of any kind
to purchase or otherwise receive from Federated any shares of
capital stock of Federated or any of its Subsidiaries, or any
securities convertible into or exchangeable for any such capital
stock.
4.3 Authority; Approvals; Non-Contravention.
(a) Federated has full corporate power and authority
and has taken all corporate action necessary to enter into this
Agreement and, subject to Federated Stockholder Approval, to
enter into the Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby.
This Agreement has been, and, subject to Federated Stockholder
Approval, the Transaction Documents, when executed and delivered
pursuant to this Agreement by Federated will be, duly and validly
executed and delivered by Federated, and this Agreement
constitutes, and, subject to Federated Stockholder Approval, the
Transaction Agreements to be executed and delivered by Federated
will constitute valid and binding agreements of Federated
enforceable against Federated in accordance with their respective
terms.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect
to Federated in
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connection with the execution and delivery of this Agreement by
Federated or the performance by Federated of the transactions
contemplated hereby and by the Plan, except (i) for consents,
approvals, orders and authorizations of, and filings with, the
Bankruptcy Court, (ii) for the filing of a notification and
report form by Federated under the HSR Act and the expiration or
earlier termination of the applicable waiting period thereunder,
(iii) for Securities Law Filings required to be made by
Federated, (iv) for the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware pursuant to the
DGCL and of appropriate documents with the relevant authorities
of other states in which Federated or any of its Subsidiaries is
authorized to do business, (v) for any consents, approvals,
authorizations or filings required under state or local laws
relating to the taxation of sales or transfers of property, (vi)
for any consents, approvals, authorizations and filings required
under any environmental, health or safety Law, (vii) for any
consents, approvals, orders, authorizations, registrations,
declarations or filings, which, if not obtained or made, would
not, in the aggregate, have an Federated Material Adverse Effect
or materially and adversely affect the ability of Federated to
consummate the transactions contemplated hereby and by the Plan
and (viii) for any consents, approvals, orders, authorizations,
registrations, declarations or filings set forth in Schedule
4.3(b).
(c) The execution and delivery by Federated of this
Agreement does not, and, subject to Federated Stockholder
Approval, the execution and delivery of the Transaction Documents
will not, and, assuming that the filings, registrations and
declarations referred to in clauses (i) through (viii),
inclusive, of Section 4.3(b) have been made, the waiting period
referred to therein shall have expired or been earlier
terminated, the consents, approvals, orders and authorizations
referred to therein shall have been obtained and shall remain in
full force and effect, and the conditions set forth in ARTICLE
VII shall have been satisfied or waived (if permitted), the
performance by Federated of the transactions contemplated hereby,
by the Transaction Documents and by the Plan will not, violate,
conflict with or result in a breach of any provision of, or
constitute a default (or result in any event which, with notice
or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, or result in the creation of any Lien upon any of the
properties or assets of Federated or any of its Subsidiaries
under, any of the terms, conditions or provisions of, (i) the
respective certificates of incorporation or by-laws of Federated
or any of its Subsidiaries, (ii) any judgment, decree, order or
award of any Governmental Authority applicable to Federated or
any of its Subsidiaries, or any law, rule or regulation
applicable to Federated or any of its Subsidiaries, or (iii)
except as set forth on Schedule 4.3(c), any note, bond, mortgage,
indenture, deed of trust, Permit, lease, agreement or other
instrument to which Federated or any of its Subsidiaries is now a
party or by which Federated or any of its Subsidiaries or any of
their respective properties or assets may be bound or subject,
which, in the aggregate, would have a Federated Material Adverse
Effect or materially and adversely affect the ability of
Federated to consummate the transactions contemplated hereby.
4.4 SEC Reports; Financial Statements.
(a) Federated has delivered to RHM (i) its Annual
Report on Form 10-K for the fiscal year ended January 29, 1994
and (ii) its Quarterly Report on Form 10-Q for the fiscal quarter
ended April 30, 1994, each in the form (including exhibits) filed
with the SEC (collectively, the "Federated SEC Reports"). Each
Federated SEC Report has been prepared and filed in accordance
with all applicable rules and regulations of the SEC and at the
time of its filing was in compliance with such rules and
regulations in all material respects. As of their respective
dates, the Federated SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of the audited consolidated financial
statements and unaudited consolidated interim financial
statements of Federated (and the related notes and schedules)
included in the Federated SEC Reports presents fairly, in all
material respects, the consolidated financial position of
Federated and its Subsidiaries as of the respective dates thereof
and the results of operations and cash flows for the respective
periods set forth therein, in accordance with GAAP consistently
applied during the period involved, except as otherwise noted
therein and subject, in the case of the unaudited interim
financial statements, to the omission of certain notes
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<PAGE>
not ordinarily accompanying such unaudited interim financial
statements and to normal year-end adjustments and any other
adjustments described therein.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Interim Operations Committee. Upon the execution
and delivery of this Agreement, the parties shall establish a
committee (the "Interim Operations Committee") for the purpose of
being notified of, consulting with respect to or approving, as
and to the extent provided in Section 5.2(b), certain actions by
RHM and its Subsidiaries after the date hereof and prior to the
Effective Time or earlier termination of this Agreement in
accordance with ARTICLE VIII. The members of the Interim
Operations Committee shall be Myron E. Ullman, III (or such other
natural Person as may hereafter be designated to replace Mr.
Ullman (or his successor) from time to time by RHM's Board of
Directors), Allen Questrom and James Zimmerman (or such other
natural Person as may hereafter be designated to replace Mr.
Questrom or Mr. Zimmerman (or their successors) from time to time
by Federated's Board of Directors).
5.2 Conduct of Business by RHM.
(a) Except as required by law or as contemplated by
this Agreement or the Plan, after the date hereof and prior to
the Effective Time or earlier termination of this Agreement in
accordance with ARTICLE VIII, RHM shall, and shall cause its
Subsidiaries to:
(i) conduct its business in the ordinary course
consistent with past practice, subject to any obligations as
a debtor and debtor-in-possession under the Bankruptcy Code;
(ii) use its reasonable efforts to preserve intact its
business organization and goodwill, keep available the
services of its key employees and maintain its existing
relationships with suppliers, distributors and customers,
except as a result of the rejection of executory contracts
and unexpired leases in connection with the Reorganization
Case, subject to Section 5.2(b)(iii)(L);
(iii) use its reasonable efforts to maintain in effect
its existing (or comparable replacement) property damage,
liability and other insurance; and
(iv) use its reasonable efforts to maintain in effect
its existing Permits.
(b) Without limiting the generality of Section 5.2(a),
except as required by law or as contemplated by this Agreement or
the Plan, after the date hereof and prior to the Effective Time
or earlier termination of this Agreement in accordance with
ARTICLE VIII, neither RHM nor any of its Subsidiaries shall:
(i) without providing at least two Business Days'
prior written notice thereof to the Interim Operations
Committee, which notice shall describe the actions to be
taken in reasonable detail, take (or cause to be taken) any
of the actions set forth on Schedule 5.2(b)(i);
(ii) without providing prior written notice thereof to
the Interim Operations Committee, which notice shall
describe the actions proposed to be taken in reasonable
detail, and providing the Interim Operations Committee with
a reasonable opportunity (in view of the facts and
circumstances relating to the proposed actions at such time)
to consult with RHM with respect to the advisability of such
proposed actions, take (or cause to be taken) any of the
actions set forth on Schedule 5.2(b)(ii); provided, however,
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that RHM shall not be deemed to be in breach of its
obligations under this Section 5.2(b)(ii) if it shall have
provided the notice contemplated by this Section not less
than seven days (or such shorter period as the facts and
circumstances dictate) prior to the taking of the proposed
action referred to therein and Representatives of RHM are
reasonably available to discuss the proposed actions during
such seven-day (or shorter) period; or
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<PAGE>
(iii) without receiving the prior written consent of at
least two members of the Interim Operations Committee:
(A) incur any indebtedness for borrowed money,
guaranty or endorse the obligations of any other
Person for indebtedness for borrowed money or
create any material Lien upon any of its material
assets or properties (other than any purchase
money Lien), except in the ordinary course of
business (including the issuance of letters of
credit) and except for indebtedness permitted
under the DIP Credit Agreement (as such term is
defined in the Plan);
(B) purchase or sell any assets (other than any
purchase or sale of inventory or any sale of
assets held for sale on the date hereof or no
longer used in its business) or make any capital
expenditures (including the entry into capitalized
leases), in any individual transaction or series
of related transactions involving more than $5
million that were not previously disclosed in
RHM's capital budgets for fall 1994 and spring
1995, respectively, copies of which heretofore
were delivered by RHM to Federated;
(C) enter into any single contract or series of
related contracts (other than any contract to
purchase inventory or to sell assets held for sale
on the date hereof or no longer used in its
business or relating to capital expenditures
disclosed in RHM's capital budgets for fall 1994
and spring 1995 as aforesaid) involving total
annual expenditures by RHM or any of its
Subsidiaries, or total annual payments to RHM or
its Subsidiaries, in excess of $5 million;
(D) amend or propose to amend its Certificate of
Incorporation or By-laws;
(E) split, combine, subdivide or reclassify any shares
of its capital stock, or declare, set aside or pay
any dividend or distribution on any shares of its
capital stock (other than any dividend or
distribution by any Subsidiary to RHM or any other
Subsidiary of RHM);
(F) issue, sell or grant to any Person, or acquire by
redemption or otherwise, any shares of its capital
stock, any options, warrants or other rights to
acquire any shares of its capital stock or any
securities convertible into or exchangeable for
any shares of its capital stock;
(G) merge or consolidate with or into any Person;
(H) (a) enter into, adopt, terminate or amend (other
than amendments or revisions to comply with
applicable law or any of RHM's collective
bargaining agreements) any compensation,
severance, termination, pension, retirement,
employment, severance, collective bargaining or
other employee benefit agreement, plan, program or
arrangement for the benefit or welfare of, or in
respect of, any current or former director,
officer or employee or (b) increase in any manner
the compensation or benefits of, or in respect of,
any current or former director, officer or
employee, in each case except as set forth on
Schedule 6.8(a)(viii) and except in the ordinary
course of business;
(I) consent to any agreement or arrangement limiting
its conduct of business in any material respect;
(J) change any of its accounting practices or
procedures so as to materially and adversely
affect its reported results of operations;
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(K) compromise or settle, or submit to the Bankruptcy
Court any request for the approval of any
compromise or settlement of, (i) any Unsecured
Claim (as such term is defined in the Plan) for
which the postsettlement allowed amount exceeds $5
million and for which the postsettlement allowed
amount exceeds the scheduled amount by the greater
of $500,000 and 10% of such scheduled amount and
(ii) any Administrative Claim, any real property
tax claim that constitutes an Administrative Claim
or a Priority Tax Claim (as such term is defined
in the Plan), except for any such real property
tax claim for which RHM has already made a written
settlement offer to the relevant taxing authority
or otherwise has reached an agreement in principle
with the relevant taxing authority with respect
thereto, or any Priority Claim (as such term is
defined in the Plan), in each case for which the
postsettlement allowed amount exceeds $2.5
million; provided, however, that if the Interim
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Operations Committee fails to respond to RHM's
written request for approval under this clause (K)
within ten days thereof, such failure shall
constitute its approval thereof;
(L) assume or reject any executory contract which
involves total annual expenditures by RHM or any
Other Debtor, or total annual payments to RHM or
any Other Debtor, of more than $5 million (other
than any unexpired lease to occupy space used in
its business), or assume or reject any unexpired
lease to occupy space used in its business on the
date hereof; provided, however, that if the
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Interim Operations Committee fails to respond to
RHM's written request for approval under this
clause (L) within ten days thereof, such failure
shall constitute its approval thereof; or
(M) enter into any legally binding agreement or
arrangement to do any of the foregoing.
5.3 Conduct of Business by Federated.
(a) Except as required by law, as contemplated by this
Agreement or the Plan or as set forth on Schedule 5.3(a), after
the date hereof and prior to the Effective Time or earlier
termination of this Agreement in accordance with ARTICLE VIII,
Federated shall, and shall cause its Subsidiaries to, conduct its
business in the ordinary course consistent with past practice.
(b) Without limiting the generality of Section 5.3(a),
except as required by law or as contemplated by this Agreement or
the Plan, after the date hereof and prior to the Effective Time
or earlier termination of this Agreement in accordance with
ARTICLE VIII, neither Federated nor any of its Subsidiaries
shall, without the prior written consent of RHM:
(i) split, combine, subdivide or reclassify any shares
of its capital stock, or declare, set aside or pay any
dividend or distribution on any shares of its capital stock;
or
(ii) issue, sell or grant to any Person, or acquire by
redemption or otherwise, any shares of its capital stock,
any options, warrants or other rights to acquire any shares
of its capital stock or any securities convertible into or
exchangeable for any shares of its capital stock, except as
set forth on Schedule 5.3(b)(ii) hereto.
ARTICLE VI
COVENANTS
6.1 Access to Information. Subject to any
confidentiality agreements between the parties or to which the
parties may be subject in connection with the Reorganization Case
(the "Confidentiality Agreements"), from and after the date
hereof and until the Effective Time, each party shall afford the
other party and its Representatives, upon reasonable notice and
during normal business hours, full access to the facilities,
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properties, books, contracts, commitments, records, managerial
employees, counsel and auditors of such party and its
Subsidiaries, and shall make available to the other party (i) a
copy of each report, schedule and other document filed or
received by it or its Subsidiaries pursuant to the requirements
of Federal or state securities laws or filed with the SEC or any
Governmental Authority in connection with this Agreement, the
Plan or the transactions contemplated hereby or thereby and (ii)
any other information concerning the business, property and
personnel of such party and its Subsidiaries as the other party
may reasonably request; provided that no investigation pursuant
--------
to this Section 6.1 shall affect any representation, warranty or
covenant contained in this Agreement or any condition to the
obligations of the parties hereto. Notwithstanding the
foregoing, neither party shall be required to disclose or
otherwise provide access to the other party and its
Representatives to any information which would, or could
reasonably be expected to, harm the business or prospects of the
disclosing party and its Subsidiaries, and any such information
disclosed by a party shall not be used by the other party to the
disclosing party's detriment.
6.2 Consents and Approvals.
(a) Each of Federated and RHM shall cooperate with and
assist each other and promptly (i) prepare and file all necessary
documentation, (ii) effect all necessary applications, notices,
petitions and filings and execute all agreements and documents,
and (iii) use its reasonable efforts to obtain all necessary
licenses, franchises, permits, consents, approvals and authoriza-
tions of all Governmental Authorities and all other parties
necessary to consummate the Merger and the other transactions
contemplated hereby or required by the terms of any note, bond,
mortgage, indenture, deed of trust, Permit, concession, contract,
lease or other material instrument to which it or any of its
respective Subsidiaries is a party or by which it is bound and to
otherwise satisfy its conditions to its obligations to close as
set forth in Article VII. In the case of Antitrust
Authorizations, Federated's reasonable efforts shall be deemed to
include divesting or otherwise holding separate, or taking such
other action (or otherwise agreeing to do any thereof) with
respect to its, any of its Subsidiaries' or any of the Surviving
Corporation's assets and properties necessary to obtain such
Antitrust Authorizations (in addition to any dispositions
contemplated by that certain written presentation dated July 1,
1994 furnished by Federated to RHM's Board of Directors), except
to the extent that such actions (other than dispositions referred
to in such written presentation) would, in the aggregate, have a
material adverse affect on the business, financial condition or
results of operations of the Surviving Corporation and its
Subsidiaries taken as a whole.
(b) Without limiting the generality of Section 6.2(a)
but subject to the limitations therein, not later than 15 days
after the date the Plan is filed with the Bankruptcy Court (or
such later date as the parties may mutually agree in writing),
each of Federated and RHM shall file or cause to be filed with
the Federal Trade Commission ("FTC") and the United States
Department of Justice ("DOJ") any notifications required to be
filed under the HSR Act with respect to the transactions
contemplated hereby. Each party shall consult with the other as
to the appropriate time of filing such notifications and shall
use its reasonable efforts to make such filings at the agreed
upon time, to respond promptly to any requests for additional
information made by either of such agencies.
(c) Federated shall pay all notice, application and
filing fees associated with obtaining any Antitrust
Authorizations.
(d) With respect to the matters referred to in
Sections 6.2(a) and (b), RHM shall have the right to review and
approve in advance all characterizations of the information
relating to RHM; Federated shall have the right to review and
approve in advance all characterizations of the information
relating to Federated; and each of RHM and Federated shall have
the right to review and approve in advance all characterizations
of the information relating to the transactions contemplated by
this Agreement, in each case which appear in any filing made in
connection with the transactions contemplated hereby, and in each
case including, but not limited to, characterizations with
respect to such party's business, assets, properties, condition
(financial or other), projections, litigation or results of
operations, or relating to the transactions contemplated by this
Agreement; provided, however, that any such approval shall not be
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unreasonably withheld or delayed by Federated or RHM, as the case
may be. The parties agree that they shall keep each other fully
informed about any developments relating to obtaining all
necessary licenses, franchises, permits, consents, approvals and
authorizations of all third
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parties and Governmental Authorities in connection herewith and
shall supply each other with copies of all correspondence or
other written communications received by them from any such
authorities or third parties. In addition, each party shall be
entitled to participate in any and all substantive discussions
with the FTC and DOJ with respect to any notification or filing
by either party under the HSR Act, and in any and all substantive
discussions with any other Governmental Authorities in connection
with the matters referred to in this Section 6.2.
6.3 Notification of Certain Additional Matters. From
the date hereof until the Effective Time, each party shall give
the other party prompt notice of (i) any actual notice of, or
communication with respect to, the occurrence of a default (other
than any default relating to the commencement or continuation of
the Reorganization Case) or event which, with notice or lapse of
time or both, would become a default, under any note, bond,
mortgage, indenture, deed of trust, Permit, concession, contract,
lease or other material instrument, which, in the aggregate,
would, in the case of RHM, have an RHM Material Adverse Effect
and, in the case of Federated, have a Federated Material Adverse
Effect, (ii) any written notice from any third party alleging
that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement
and (iii) any material adverse change or development in the
business or financial condition of such party.
6.4 Bankruptcy Court Approvals.
(a) Each of Federated and RHM shall use its reasonable
efforts and shall assist and cooperate with each other to (i)
obtain the approval by the Bankruptcy Court of (A) the motion
referred to in Section 6.4(b), (B) the matters referred to in
Section 8.1(c) and (C) the Disclosure Statement, (ii) obtain the
Confirmation Order and (iii) obtain from the Bankruptcy Court
such other relief as may be necessary or appropriate in
connection with this Agreement, the Plan and the consummation of
the transactions contemplated hereby and thereby. RHM and
Federated shall consult with and seek the advice of one another
regarding joint pleadings or positions either of them might take
with the Bankruptcy Court in connection with the approval of the
Disclosure Statement and Plan and consummation of the trans-
actions contemplated by the Plan. Except as either RHM or
Federated may in good faith determine is otherwise required as a
result of fiduciary duties owed to its respective constituencies
or, in the case of RHM, as a result of its duties and obligations
under the Bankruptcy Code, neither RHM nor Federated shall file
any pleading or take other action in the Bankruptcy Court
(including in respect of the exclusivity periods under Section
1121 of the Bankruptcy Code, the Disclosure Statement, the
solicitation of acceptances or rejections of the Plan and the
confirmation of the Plan) with respect to this Agreement or the
Plan or the consummation of the transactions contemplated hereby
or thereby as the other, in the reasonable exercise of its
judgment, shall not approve.
(b) Without limiting the generality of Section 6.4(a),
no later than August 31, 1994, the parties jointly shall file a
motion in the Bankruptcy Court, in form and substance
satisfactory to the parties, seeking an order appointing the
members of Federated's Board of Directors, Federated's principal
executive officer, Federated's principal financial officer and
Federated's principal accounting officer to replace and be
substituted for the members of RHM's Board of Directors, RHM's
principal executive officer, RHM's principal financial officer
and RHM's principal accounting officer, respectively (such
Federated personnel in such capacities being referred to as, the
"Appointed Representatives of RHM"), solely for all purposes and
in all respects relating to the Registration Statement, including
the execution and filing thereof, the information contained
therein and the taking of any other action necessary or advisable
in connection therewith and with the offering and sale of
securities pursuant thereto, to the effect (i) that the Appointed
Representatives of RHM shall be responsible therefor as if and to
the extent that they held their respective appointed positions
with RHM at all times and for all purposes and (ii) that the
persons holding such positions with RHM (other than the RHM
Director Designees) shall not have any personal responsibility
therefor. In the event that (A) the Bankruptcy Court order
referred to in the immediately preceding sentence is not entered
by October 15, 1994, (B) such order is entered but is
subsequently vacated or modified in any material respect, (C) the
SEC does not accept the filing of the Registration Statement
executed by the Appointed Representatives of RHM, (D) the SEC in
its written comments on or other communications with respect to
the Registration Statement challenges or questions the validity
of the appointment of the Appointed Representatives of RHM for
the purposes set forth in the
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immediately preceding sentence (including clauses (i) and (ii)
thereof), which challenge or question is not resolved to the
reasonable satisfaction of RHM within ten Business Days after it
is made, or the SEC requires the inclusion of a statement in the
Registration Statement questioning the validity of such
appointment for such purposes, or the SEC requires that the
members of RHM's Board of Directors (other than the RHM Director
Designees) and RHM's principal executive officer, RHM's principal
financial officer and RHM's principal accounting officer be named
in the Registration Statement as such, or (E) the opinion
delivered in the form of Exhibit E hereto rendered by Federated's
independent counsel, Jones, Day, Reavis & Pogue, to RHM's Board
of Directors with respect to the foregoing and to the effect that
RHM's directors (other than the RHM Director Designees) and
officers holding the same positions with RHM as those Appointed
Representatives of RHM who execute the Registration Statement
should not be deemed to be directors, controlling persons or
officers signing the Registration Statement for purposes of
certain potential liabilities under the Federal securities laws,
shall have been withdrawn or modified in any material respect,
then the parties promptly shall modify this Agreement, the Plan
and the Disclosure Statement (and take all such other actions as
shall be necessary or appropriate in connection therewith) to the
extent necessary, in each case, to change the form of the Merger
to provide that RHM shall be merged with Federated (in which
case, Federated shall be the surviving corporation) or, at
Federated's option, (x) to provide that RHM shall be merged with
a wholly-owned subsidiary of Federated or (y) to provide that
Federated shall acquire the capital stock of RHM, and that, in
any case, holders of claims against and interests in RHM and the
Other Debtors shall receive shares of Federated Common Stock and
other securities of Federated (as opposed to securities of RHM)
pursuant to any such merger or acquisition, without any further
action of the respective Boards of Directors of RHM and Federated
or of Federated's stockholders except as required by law.
6.5 Registration Statement, Proxy Statement and Other
Securities Law Filings; Disclosure Statement.
(a) Each of RHM and Federated shall cooperate with and
assist each other in preparing and filing with the SEC as soon as
practicable after the date hereof (i) a registration statement of
RHM on Form S-4 under the Securities Act (together with any
amendment or supplement thereto, the "Registration Statement") to
register the shares of Surviving Corporation Common Stock to be
issued in connection with the Merger and (ii) a proxy statement
and related proxy materials (collectively, and, together with any
amendments or supplements thereto, the "Proxy Statement") of
Federated under the Exchange Act to be used in soliciting proxies
of Federated's stockholders with respect to this Agreement and
the Merger. Subject to the fiduciary duties of Federated's Board
of Directors, the Proxy Statement shall contain a recommendation
of the Board of Directors of Federated that stockholders of
Federated vote to adopt this Agreement (and Federated shall
solicit such vote) and shall specify that a vote to adopt this
Agreement shall also constitute a vote to approve the matters
referred to in Section 6.4(b), including, but not limited to,
approval of any change to the form of the Merger as provided
therein. Each party shall use its reasonable efforts to have the
Registration Statement declared effective, and to have the Proxy
Statement cleared, by the SEC, and to cause a final prospectus
for the shares of Surviving Corporation Common Stock and a
definitive Proxy Statement to be mailed to the stockholders of
Federated as soon as practicable thereafter. Each party
represents and warrants to the other party that the information
supplied in writing by such party specifically for inclusion in
(i) the Registration Statement, when declared effective by the
SEC and at the Effective Time, (ii) the Proxy Statement, at the
time first mailed, the time of the Special Meeting and at the
Effective Time, and (iii) any other Securities Law Filings in
connection with the transactions contemplated hereby and by the
Plan, including any amendments or supplements thereto, at the
respective times such filings are made, will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading (other than any "forward-looking
statement" contained in any of the foregoing, which, at all
relevant times, will comply in all material respects with Rule
175 under the Securities Act). Each of RHM and Federated shall
promptly notify the other if at any time before the Closing Date
it becomes aware that the Registration Statement, Proxy Statement
or any other Securities Law Filing contains any untrue statement
of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were
made, not misleading. In such event, the parties shall cooperate
with and assist each other in preparing a supplement or amendment
to the applicable Securities Law Filing correcting
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such misstatement or omission, and shall cause the same to be
filed with the SEC and any other applicable Governmental
Authority and distributed to the stockholders of Federated, as
applicable. Each party shall notify the other party promptly of
the receipt of any comments from the SEC or its staff, and of any
request by the SEC or its staff for amendments or supplements to
any Securities Law Filing contemplated by this Section 6.5, and
shall supply the other party with copies of all correspondence
between them or any of their Representatives and the SEC and its
staff, promptly after receipt thereof. Any draft or final
Registration Statement, preliminary or final prospectus,
preliminary or definitive Proxy Statement and any other
Securities Law Filing contemplated by this Section 6.5, and any
amendments or supplements thereto, shall be filed only with the
mutual consent of the parties, which consent shall not be
unreasonably withheld or delayed. Federated shall pay (i) the
registration fee and all printing costs and expenses relating to
the registration of the shares of Surviving Corporation Common
Stock to be issued in connection with the Merger, (ii) all fees,
costs and expenses of the preparation, filing and clearance of
the Proxy Statement, including Federated's attorneys' and
advisors' fees and all other costs and expenses relating to the
solicitation of proxies and the Special Meeting, and (iii) all
fees, costs and expenses of any other Securities Law Filings made
by Federated.
(b) Each of Federated and RHM shall from time to time
furnish to the other all such information required to be
disclosed in the Disclosure Statement. The Disclosure Statement
shall contain a recommendation of the Board of Directors of RHM
that holders of claims against or interests in RHM or the Other
Debtors entitled to vote on the Plan vote to accept the Plan,
subject to RHM's right to withdraw such recommendation upon its
acceptance of a Competing Offer that is a Better Offer, terminate
this Agreement and withdraw the Plan and Disclosure Statement as
contemplated by Section 6.10(c). Each of Federated and RHM shall
promptly notify the other if at any time before the Effective
Date of the Plan it becomes aware that the Disclosure Statement
contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. In
such event, the parties shall prepare a supplement or amendment
to the Disclosure Statement which corrects such misstatement or
omission and shall cause the same to be filed with the Bankruptcy
Court and distributed to holders of claims against and interests
in RHM and the Other Debtors entitled to vote on the Plan. The
information supplied by RHM or Federated specifically for
inclusion in the Disclosure Statement, at the date such
information is supplied or included and at the time of mailing
and the vote on the Plan, will not, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading (other than any "forward-looking statement"
contained therein, which, at all relevant times, will comply in
all material respects with Rule 175 under the Securities Act).
All costs and expenses of printing and mailing the Disclosure
Statement and all other costs and expenses relating to the
solicitation of votes in respect of the Plan shall be borne half
by Federated and half by RHM.
6.6 Stockholders' Meeting. As soon as practicable
after the date hereof, Federated shall set a record date and,
upon clearance by the SEC of the Proxy Statement as referred to
in Section 6.5, forward a notice (together with the Proxy
Statement) of a special meeting of stockholders for the purpose
of voting on this Agreement and upon any other matters necessary
or desirable for the consummation of the transactions
contemplated by this Agreement and the Plan (the "Special
Meeting"). The date of the Special Meeting shall be as soon as
practicable following the clearance by the SEC of the Proxy
Statement.
6.7 NYSE Listing; NASDAQ Quotation. The parties shall
cooperate with and assist each other in causing authorization for
listing on the NYSE upon official notice of issuance or listing
for quotation through NASDAQ of the shares of Surviving
Corporation Common Stock (and associated Surviving Corporation
Share Purchase Rights, if issuable as contemplated by Section
2.7) issuable pursuant to the Merger or the Plan or upon the
exercise of any securities of the Surviving Corporation issuable
pursuant to the Plan, including the warrants contemplated by the
Plan. Federated shall pay the NYSE listing application fee or
NASDAQ listing application fee, as the case may be, and all costs
and expenses related thereto.
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6.8 RHM Employees and Employee Benefits.
(a) Notwithstanding anything to the contrary contained
herein, from and after the Effective Time, the Surviving
Corporation shall have sole discretion over the hiring,
promotion, retention, firing and other terms and conditions of
the employment of employees of the Surviving Corporation, subject
to the following provisions of this Section 6.8 for the express
benefit of individuals who are employees of RHM or of any of its
Subsidiaries immediately prior to the Effective Time ("RHM
Employees") and individuals who ceased to be employees of RHM or
of any of its Subsidiaries at any time prior to the Effective
Time ("RHM Retirees"), which are in addition to and not in lieu
of any other benefits to be provided to RHM Employees pursuant to
the Plan, and subject to any collective bargaining agreements
that may be binding on the Surviving Corporation or its
Subsidiaries and except as required by law:
(i) for a period of one year after the Effective Time,
the Surviving Corporation shall, or shall cause its
Subsidiaries or Affiliates to, provide RHM Employees who are
employees thereof with compensation and employee benefit
plans, programs, arrangements and other perquisites (in-
cluding, but not limited to, "employee benefit plans" within
the meaning of section 3(3) of ERISA) ("Employee Benefits")
that are, in the aggregate, substantially comparable to the
compensation and Employee Benefits provided to such
individuals by RHM or its Subsidiaries or Affiliates immedi-
ately prior to the Effective Time; provided, however, that
-------- -------
nothing to the contrary contained herein, the Surviving
Corporation shall not be required to modify the benefit
formulas under any RHM pension plan in a manner that
increases the aggregate expenses thereof as of the date
hereof in order to comply with the requirements of the "Tax
Reform Act of 1986," except as set forth in Annex A to
Schedule 6.8(a)(iv) hereto, which Annex A is reflective of
RHM's Spring 1994 business plan heretofore provided by RHM
to Federated. After the expiration of such one-year period,
the Surviving Corporation shall, or shall cause its
Subsidiaries or Affiliates to, provide RHM Employees who are
employees thereof with compensation and Employee Benefits
that are substantially comparable to the compensation and
Employee Benefits provided to similarly situated employees
of the Surviving Corporation or its Subsidiaries and
Affiliates who are not RHM Employees; provided, however,
-------- -------
that for so long as the Surviving Corporation or its
Affiliates shall continue the RHM pension plans (qualified
and non-qualified), as to be amended in accordance with
Annex A to Schedule 6.8(a)(iv), in determining substantially
comparable benefits under this clause (i), pension benefits
shall be excluded;
(ii) with respect to Employee Benefits provided by RHM
to RHM Retirees which may be terminated or reduced by the
Surviving Corporation after the Effective Time under
applicable law as in effect at the time of any proposed
termination or reduction ("Modifiable Retiree Benefits"),
for a period of one year after the Effective Time, the
Surviving Corporation shall, or shall cause its Subsidiaries
or Affiliates to, provide RHM Retirees with Employee
Benefits that are, with respect to each such benefit,
program, arrangement and perquisite, no less favorable than
such benefit, program, arrangement and perquisite provided
to such RHM Retirees immediately prior to (A) the Effective
Time, in the case of RHM Retirees who retired prior to the
Effective Time but on or after the Petition Dates, and (B)
the Petition Dates, in the case of RHM Retirees who retired
prior to the Petition Dates. With respect to Modifiable
Retiree Benefits, after the expiration of such one-year
period, the Surviving Corporation, to the extent it changes
or terminates the Modifiable Retiree Benefits, shall not,
and shall cause its Subsidiaries or Affiliates not to,
reduce the aggregate Employee Benefits provided to RHM
Retirees if, after giving effect to such reduction, such
Employee Benefits, in the aggregate, would not be at least
substantially comparable to the Employee Benefits provided
to similarly situated retirees of the Surviving Corporation
or its Subsidiaries and Affiliates who are not RHM Retirees;
(iii) with respect to Employee Benefits provided to RHM
Retirees that cannot be terminated or reduced by the
Surviving Corporation after the Effective Time under
applicable law, from and after the Effective Time, the
Surviving Corporation shall, or shall cause its Subsidiaries
or Affiliates to, provide RHM Retirees with Employee
Benefits that are, with respect to each benefit, program,
arrangement and perquisite, no less favorable than the
Employee Benefits provided to such RHM Retirees immediately
prior to (A) the Effective Time, in the case of RHM Retirees
who retired prior
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to the Effective Time but on or after the Petition Dates,
and (B) the Petition Dates, in the case of RHM Retirees who
retired prior to the Petition Dates;
(iv) from and after the Effective Time, the Surviving
Corporation shall, or shall cause its Subsidiaries or
Affiliates to, continue to make all annuity or annuity-type
payments, and pay all supplemental retirement obligations,
in each case as described by character and amount on
Schedule 6.8(a)(iv), to the same extent as RHM and the Other
Debtors are required to make or pay immediately prior to the
Effective Time to RHM Retirees, or which otherwise are
outstanding, subject to the terms and conditions of such
annuity or annuity-type obligations, or supplemental
retirement obligations, as the case may be, and shall, or
shall cause its Subsidiaries or Affiliates to, promptly
after the Effective Time, pay to such RHM Retirees entitled
thereto all annuity or annuity-type payments or supplemental
retirement obligations, in each case as described by
character and amount on Schedule 6.8(a)(iv), relating to
services rendered prior to the Effective Time;
(v) in addition to any other obligations the Surviving
Corporation may have to any RHM Retiree pursuant to this
Section 6.8, for a period of two years after the Effective
Time, the Surviving Corporation shall not merge or
consolidate the R. H. Macy & Co., Inc. Pension Plan with any
other plan, nor at any time shall the Surviving Corporation
amend, terminate or otherwise modify such pension plan in
any respect that would materially and adversely affect the
participants' benefits thereunder, except to the extent
necessary to satisfy applicable requirements of ERISA and
the Code;
(vi) the Surviving Corporation shall, or shall cause
its Subsidiaries or Affiliates to, promptly after the
Effective Time, pay or otherwise continue to pay, subject to
the terms thereof, all valid, unpaid claims of RHM Employees
or RHM Retirees described by character and amount on
Schedule 6.8(a)(vi), the obligations for which arose prior
to the Petition Dates, for wages, deferred cash
compensation, vacation, severance, expense reimbursement,
employee discounts, benefit and similar claims; provided,
--------
however, that the foregoing shall not include claims the
-------
subject of or relating to pending or threatened litigation,
including any administrative proceeding;
(vii) the Surviving Corporation shall, or shall cause
its Subsidiaries or Affiliates to, credit or cause to be
credited with respect to all Employee Benefits any service
rendered to RHM and RHM's Subsidiaries and Affiliates by RHM
Employees for purposes of eligibility, vesting, benefit
accrual and other determinations of benefits, to the same
extent as if such service had been rendered to Federated and
Federated's Subsidiaries and Affiliates; provided, however,
-------- -------
nothing in this clause (vii) shall require the Surviving
Corporation to increase the amount of any Employee Benefit
treated as having been accrued or as being payable in
respect of any period prior to the Effective Time as having
so accrued or being so payable at a rate greater than that
at which such Employee Benefit would have accrued or become
payable by RHM or its Subsidiaries in respect of such
service in such period, or to provide duplicate benefits to
any RHM Employee for the same period of service; and
(viii) the Surviving Corporation shall enter into such
agreements or other arrangements at RHM's request necessary
or advisable to implement the agreements and matters
referred to in Schedule 6.8(a)(viii) hereto, upon the terms
and subject to the conditions set forth therein.
(b) Entry of the Bankruptcy Court approvals
contemplated by Section 8.1(c) shall not be deemed or construed
as Bankruptcy Court approval of any modification of "retiree
benefits" as such term is defined in section 1114(a) of the
Bankruptcy Code.
6.9 Directors' and Officers' Indemnification.
(a) The Certificate of Incorporation and By-Laws of
the Surviving Corporation shall not be amended, repealed or
otherwise modified in any manner that would adversely affect the
indemnification rights thereunder of individuals who as of or
after July 15, 1986 (the "RHM LBO Effective Date") were
directors, officers, employees or agents of RHM.
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<PAGE>
(b) The Surviving Corporation shall (i) maintain in
effect for at least six years from the Effective Time the current
policies of directors' and officers' liability insurance
maintained by RHM (or procure such insurance substantially
comparable in scope and coverage to such current policies)
covering directors and officers of RHM serving as of or after the
RHM LBO Effective Date with respect to claims arising from
occurrences prior to the Effective Time to the extent that the
cost thereof does not exceed 250% of RHM's most recent annual
premiums therefor; provided, however, in the event such cost
-------- -------
would exceed 250% of RHM's most recent annual premiums therefor,
the Surviving Corporation shall obtain such coverage of the
nature described in this clause (i) as may be obtained through
the expenditure of 250% of RHM's most recent annual premiums
therefor; and (ii) without limiting its obligation under clause
(i) above, maintain in effect for at least three years from the
Effective Time, policies of directors' and officers' liability
insurance covering the individuals who are directors and/or
officers of the Surviving Corporation at any time during such
period, which policies shall, at all times, contain terms and
conditions which are at least equal to the directors' and
officers' liability insurance policy provided by Federated to its
directors and officers immediately prior to the date of this
Agreement.
(c) From and after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted by law,
indemnify and hold harmless each director, officer, employee or
agent of RHM or any of its Subsidiaries or Affiliates who served
as such as of or after the RHM LBO Effective Date (each an
"Indemnified Party" and collectively, the "Indemnified Parties"),
against any Liabilities in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring prior to the
Effective Time in connection with such person's serving as an
officer, director, employee or agent of RHM or any of its
Subsidiaries or Affiliates, or arising out of, based upon or
otherwise in connection with the transactions contemplated by
this Agreement. An Indemnified Party shall not be entitled to
indemnification pursuant to this Agreement or any other agreement
with the Surviving Corporation for the cost or amount of any
Liability for which he has received reimbursement or an
indemnification payment from some other source or for which, for
any reason, he suffers no Liability. The foregoing indemnity
shall not apply with respect to any conduct of an Indemnified
Party which is determined by a final and unappealable court order
to have constituted intentional misconduct and from which the
Indemnified Party derived an improper personal benefit. This
indemnification shall include indemnity for the Indemnified
Party's own negligence, whether sole or concurrent. In the event
of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the
Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the Indemnified Party, which counsel shall
be reasonably satisfactory to the Surviving Corporation, promptly
after statements therefor are received, and (ii) the Surviving
Corporation shall cooperate in the defense of any such matter;
provided, however, that the Surviving Corporation shall not be
-------- -------
liable for any settlement effected without its prior written
consent, which shall not be unreasonably withheld. The
Indemnified Parties as a group may retain only one law firm with
respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict of interest on any
significant issue exists between the positions of any two or more
Indemnified Parties.
(d) In the event the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any Person, then and in each case, proper provision shall be
made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this
Section 6.9.
6.10 Certain Offers.
(a) From and after the date hereof and until the
Confirmation Date, RHM and the Other Debtors shall not solicit,
initiate or encourage inquiries or proposals concerning the
potential sale of all or substantially all of the business,
assets, properties or securities (by merger or otherwise) of RHM
and the Other Debtors. Notwithstanding the foregoing, RHM may
furnish information concerning its business, assets, properties
or securities to any other Person, in response to an unsolicited
request therefor, or participate in negotiations concerning the
potential sale of all or substantially all of the same to any
other Person, if counsel to RHM advises RHM's Board of Directors
that such action is required for RHM's directors to satisfy their
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<PAGE>
fiduciary duties to RHM and its constituencies under applicable
law, including the Bankruptcy Code. RHM shall provide to
Federated a written description of the material terms of each
written inquiry or written proposal concerning the potential
purchase of all or substantially all of RHM's business, assets,
properties or securities (by merger or otherwise) that comes to
the attention of RHM's senior management and, subject to any
confidentiality agreement, copies thereof. Each such written
description shall be provided by RHM to Federated promptly (but
not later than three Business Days) after receipt by RHM's senior
management of the written inquiry or written proposal described
therein.
(b) If (i) RHM receives a written bona fide proposal
---- ----
or offer with respect to the potential purchase of all or
substantially all of RHM's business, assets, properties or
securities (by merger or otherwise) (a "Competing Offer"), (ii)
such offer constitutes a Better Offer and (iii) RHM's Board of
Directors determines, based on the advice of its counsel, that
the fiduciary obligations of the directors require that RHM
accept the Competing Offer and terminate this Agreement, then RHM
shall deliver to Federated, not less than ten (10) days prior to
accepting the Competing Offer or otherwise entering into any
agreement or understanding with respect thereto, a written notice
(a "Competing Offer Notice") (together with copies of all written
materials received by RHM or its Representatives in connection
therewith) setting forth (i) the identity of the Person making
the Competing Offer and (ii) a description of the material terms
and conditions of the Competing Offer, including the value
ascribed to any noncash consideration to be provided thereunder.
(c) If, during the period of ten (10) days after
delivery to Federated of a Competing Offer Notice (the "Match
Period"), Federated submits to RHM an offer that, taken as a
whole, constitutes a Better Offer in respect of the Competing
Offer which is the subject of the Competing Offer Notice (a
"Matching Offer"), then RHM shall reject such Competing Offer and
Federated and RHM promptly shall modify this Agreement, the Plan
and the Disclosure Statement to the extent, in each case,
necessary or appropriate to reflect the terms and conditions of
the Matching Offer. If Federated disagrees in good faith with
RHM's determination that a Competing Offer constitutes a Better
Offer, Federated may, within the Match Period, file a motion in
the Bankruptcy Court seeking a determination with respect thereto
(a "Federated Objection"). If Federated files a Federated
Objection, but the Bankruptcy Court determines that the Competing
Offer qualifies as a Better Offer, the Match Period with respect
to such Competing Offer will be deemed to commence anew on the
date of such determination. If Federated submits a Matching
Offer and RHM's Board of Directors determines in good faith,
after receiving advice from RHM's independent financial advisors,
that such Matching Offer does not constitute a Better Offer in
respect of the applicable Competing Offer, RHM shall, within ten
days after receipt by RHM of such Matching Offer, file a motion
in the Bankruptcy Court seeking a determination with respect
thereto (a "RHM Objection"). If (i) Federated fails to submit a
Matching Offer or file a Federated Objection within the Match
Period or (ii) RHM timely files an RHM Objection and the
Bankruptcy Court determines that Federated's purported Matching
Offer does not constitute a Better Offer in respect of the
applicable Competing Offer, then RHM may, within five days after
the expiration of the Match Period or, if applicable, the
Bankruptcy Court's determination, terminate this Agreement,
withdraw the Plan and Disclosure Statement, as applicable, and
proceed to consummate the Competing Offer.
(d) For purposes of this Agreement, the term "Better
Offer" means a bona fide written offer presented to RHM, which:
---- ----
(i) with respect to a Competing Offer or a Matching
Offer, is accompanied by reasonable evidence of the
offeror's financial capacity to consummate the transactions
contemplated thereby;
(ii) with respect to a Competing Offer, provides for
aggregate distributions to the holders of claims against or
interests in RHM and the Other Debtors of a value which
exceeds the value of the aggregate Plan distributions by at
least $100 million and, with respect to a Matching Offer,
provides for substantially comparable economic benefits,
taken as a whole, to the holders of claims against or
interests in RHM and the Other Debtors as under the
applicable Competing Offer; and
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<PAGE>
(iii) with respect to a Competing Offer or a Matching
Offer, is otherwise on terms and conditions that, taken as a
whole, are at least as favorable to the holders of claims
against and interests in RHM and the Other Debtors as those
contained in the Plan, taken as a whole.
Any material modification of a Competing Offer will constitute a
new offer unless (i) Federated has notified RHM in writing that
Federated will not make a Matching Offer or file a Federated
Objection, (ii) the terms of the Competing Offer, as modified,
are no less favorable to RHM in any respect than those of the
Competing Offer prior to such modification and (iii) the
Competing Offer, as modified, continues to constitute a Better
Offer. If the Competing Offer includes consideration which is
not cash, Federated shall be deemed to have matched the noncash
portion of such offer if Federated offers cash (or property with
a fair market value) equal to the fair market value of the
noncash consideration offered by the other Person.
6.11 No Hire. From and after the date hereof and until
the earlier to occur of (i) the Closing and (ii) the second
anniversary of the date of this Agreement, neither party shall,
directly or indirectly, hire, solicit or encourage to leave the
employment of the other party or any of its Affiliates, any
employee of such party or any of its Affiliates employed at the
level of Councillor/DMM or administrator or equivalent levels or
above (a "Management Employee") on the date hereof, or any
individual who becomes a Management Employee after such date;
provided, however, that if the Closing shall fail to occur
-------- -------
because a party is in material breach of this Agreement, nothing
contained herein will restrict the ability of the other party to
hire or solicit any employee of such breaching party or any of
its Affiliates.
6.12 Injunctions. Subject to Section 6.2, each of the
parties shall use its reasonable efforts and cooperate with each
other to have any injunction, decree or similar order prior to
the Effective Time which prevents or prohibits the consummation
of the transactions contemplated hereby vacated, discharged or
dismissed.
6.13 Taxes.
(a) Federated shall be responsible for any and all
excise, sales, value added, use, registration, stamp, property
transfer, gains and similar taxes, levies and charges incurred in
connection with the transactions contemplated by this Agreement
and the Plan; provided, however, that nothing contained herein
-------- -------
shall require the payment of any tax from which the transaction
is otherwise exempt under Section 1146(c) of the Bankruptcy Code.
(b) With respect to New York State Real Property
Transfer Gains Tax (the "Gains Tax"), RHM shall prepare (or cause
to be prepared) all questionnaires with respect to the Gains Tax,
if any, required to be filed with respect to any "interests in
real property" held by RHM (as defined Article 31B of the New
York State Tax Law), which questionnaires shall be in form and
substance reasonably satisfactory to Federated, and shall deliver
such questionnaires to Federated for the execution thereof.
Federated thereafter promptly shall execute and deliver the
applicable transferee form to RHM and RHM shall timely file the
questionnaires with New York State. Conversely, Federated shall
prepare (or cause to be prepared) all questionnaires with respect
to the Gains Tax, if any, required to be filed with respect to
any "interests in real property" held by Federated, which
questionnaires shall be in form and substance reasonably
satisfactory to RHM, and shall deliver such questionnaires to RHM
for the execution thereof. RHM thereafter promptly shall execute
and deliver the applicable transferee form to Federated and
Federated shall timely file the questionnaires with New York
State. On the Closing Date, Federated shall pay or otherwise
provide for the amount of tax, if any, shown due on all tentative
assessment(s) received from New York State in respect of the
transactions contemplated by this Agreement and by the Plan.
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ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Each Party. Each
party's obligation to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction or written
waiver at or prior to the Effective Time of the following
conditions:
(i) there shall not be pending any injunction, order
or decree by any foreign, United States Federal or state
court or other Governmental Authority restraining,
preventing or prohibiting the consummation of the
transactions contemplated hereby or by the Plan;
(ii) there shall not be any foreign, United States or
state Law promulgated, enacted, entered or enforced by any
Governmental Authority that restrains, prevents or prohibits
the transactions contemplated hereby or by the Plan;
(iii) all Federal, state and local consents and
approvals of any Governmental Authority required to be
obtained for the consummation of the Merger shall have been
obtained and be in effect at the Effective Time, other than
(A) any such consents and approvals which, if not obtained,
would not have a material adverse effect on the business,
financial condition or results of operations of the
Surviving Corporation or materially and adversely affect the
consummation of the transactions contemplated hereby, (B)
the approval by the Internal Revenue Service of the proposed
change to RHM's fiscal year and (C) any Antitrust
Authorizations not obtained as a result of Federated's
failure to divest, hold separate or take other action (or
its failure to agree to do any thereof) with respect to its,
its Subsidiaries' or the Surviving Corporation's assets to
the extent required by Section 6.2;
(iv) all other consents, approvals and authorizations
required to be obtained by either party as contemplated by
clause (iii) of Section 6.2(a) shall have been obtained and
be in effect at the Effective Time, other than any (A) such
consents and approvals which, if not obtained, would not
have a material adverse effect on the business, financial
condition or results of operations of the Surviving
Corporation or materially and adversely affect the
consummation of the transactions contemplated hereby; and
(B) any consents and approvals of Federated's institutional
lenders, in respect of which the sole condition to closing
is set forth in Section 7.2(v);
(v) Federated Stockholder Approval shall have been
obtained;
(vi) the Registration Statement shall have been
declared effective by the SEC, no stop order suspending its
effectiveness shall have been issued and no proceedings for
such purpose shall have been initiated or threatened by the
SEC;
(vii) the shares of Surviving Corporation Common Stock
issuable in connection with the Merger (including any such
shares required to be reserved for issuance in connection
with the Merger) shall have been authorized for listing on
the NYSE upon official notice of issuance or accepted for
quotation through NASDAQ; and
(viii) the Confirmation Order shall have been entered, at
least ten days shall have passed since the entry and it
shall not be subject to any stay, and all conditions to the
Effective Date of the Plan shall have been satisfied or duly
waived in accordance with the applicable provisions of the
Plan.
Notwithstanding the foregoing, each party's obligation
to consummate the transactions contemplated hereby shall not be
relieved by the failure of any of the foregoing conditions if
such failure is the result, direct or indirect, of a breach by
such party of its material obligations under this Agreement, the
Plan or the Confirmation Order with respect to the transactions
contemplated hereby.
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7.2 Conditions to Obligation of Federated. The
obligation of Federated to consummate the transactions
contemplated by this Agreement shall be further subject to the
satisfaction or written waiver (as provided in Section 7.4) at or
prior to the Effective Time of the following conditions:
(i) RHM shall have performed in all material respects
its covenants and agreements contained in this Agreement
required to be performed by it at or prior to the Closing;
(ii) all representations and warranties made by RHM in
this Agreement shall be true and correct in all material
respects as of the date made, and on and as of the date of
the Closing, with the same force and effect as though made
on and as of the such date, except as affected by the
transactions contemplated hereby;
(iii) Federated shall have received a certificate signed
by the Chief Executive Officer and Chief Financial Officer
of RHM dated the date of the Closing to the effect that, to
the best of each such officer's knowledge, the conditions
set forth in Sections 7.2(i) and 7.2(ii) have been
satisfied;
(iv) no material adverse change shall have occurred in
the per share price of the Federated Common Stock following
receipt of Federated Stockholder Approval;
(v) all consents and approvals of Federated's
institutional lenders to the consummation of the
transactions contemplated hereby by Federated shall have
been obtained by the later of (A) August 31, 1994 and (B)
the fourteenth day following the date hereof; provided that
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this condition shall be deemed to be waived (without any
action by the parties) in the event that Federated does not
terminate this Agreement (to the extent permitted pursuant
to Article VIII) within 5 Business Days after the later of
the dates referred to in clauses (A) and (B) above; and
(vi) since the date hereof, no RHM Material Adverse
Effect shall have occurred.
Notwithstanding the foregoing, Federated's obligation
to consummate the transactions contemplated hereby shall not be
relieved by the failure of any of the foregoing conditions if
such failure is the result, direct or indirect, of any breach by
Federated of its material obligations under this Agreement, the
Plan or the Confirmation Order with respect to the transactions
contemplated hereby.
7.3 Conditions to Obligation of RHM. The obligation
of RHM to consummate the transactions contemplated by this
Agreement shall be further subject to the satisfaction or written
waiver (as provided in Section 7.4) at or prior to the Effective
Time of the following conditions:
(i) Federated shall have performed in all material
respects its covenants and agreements contained in this
Agreement required to be performed by it at or prior to the
Closing;
(ii) all representations and warranties made by
Federated in this Agreement shall be true and correct in all
material respects as of the date made, and on and as of the
date of the Closing, with the same force and effect as
though made on and as of the Closing Date, except as
affected by the transactions contemplated hereby;
(iii) RHM shall have received a certificate signed by
the Chief Executive Officer and Chief Financial Officer of
Federated dated the date of the Closing, to the effect that,
to the best of each such officer's knowledge, the conditions
set forth in Sections 7.3(i) and 7.3(ii) have been
satisfied; and
(iv) since the date hereof, no Federated Material
Adverse Effect shall have occurred.
Notwithstanding the foregoing, RHM's obligation to
consummate the transactions contemplated hereby shall not be
relieved by the failure of any of the foregoing conditions if
such failure is the result, direct
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or indirect, of any breach by RHM of its material obligations
under this Agreement, the Plan or the Confirmation Order with
respect to the transactions contemplated hereby.
7.4 Waiver of Conditions. Any party, on its own
behalf, may waive any of its conditions to the Merger described
in this ARTICLE VII and may extend or reduce any time period
described in this ARTICLE VII without requiring action or
approval of its shareholders. To be effective, a waiver or an
extension or reduction of a time period must be in writing,
executed on behalf of such party and delivered to the other
party, except as otherwise provided in Section 7.2(v).
ARTICLE VIII
TERMINATION AND TERMINATION FEES
8.1 Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated,
subject to Section 8.2(a), as follows:
(a) by mutual written consent of the parties at any
time prior to the Effective Time;
(b) by either party on February 28, 1995 (or such
later date as may be provided in the Plan with respect to the
Effective Date of the Plan) (the "Termination Date"), in the
event that the Effective Time shall not have occurred on or
before such date for any reason;
(c) by either party on October 15, 1994 (or such later
date as the parties may mutually agree in writing), in the event
that the Bankruptcy Court has not ratified or approved RHM's
execution and delivery of this Agreement, in the form executed
and delivered by the parties, and authorized RHM to take all
actions reasonably necessary to consummate the transactions
contemplated hereby on or before such date for any reason; or
(d) at any time prior to the Effective Time, by either
party by written notice to the other party, in the event and
promptly following the time that (i) any condition to such
party's obligation to consummate the transactions contemplated
hereby is reasonably determined by such party to be incapable of
being satisfied by the Termination Date (other than any
incapacity caused by a breach by such party of any of its
material obligations hereunder); provided, however, that, in the
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event any injunction, order or decree referred to in Section
7.1(i) that was entered prior to the Termination Date continues
for 60 days without being vacated, discharged or dismissed, this
Agreement may be terminated at the close of business on or after
such 60th day (even if prior to the Termination Date); (ii) RHM
shall have accepted a Competing Offer in accordance with Section
6.10; provided, however, that RHM may so terminate this Agreement
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only during the five-day period referred to in the last sentence
of Section 6.10(c); (iii) the Board of Directors of the other
party shall have withdrawn or modified in any manner adverse to
the terminating party its approval or recommendation of this
Agreement, the Plan or the transactions contemplated hereby or
thereby; (iv) the Plan shall have been voted upon and the
requisite number and amount of holders of claims in each class of
claims provided for in the Plan entitled to vote shall have
failed to accept the Plan unless, as to those such classes that
have failed to accept the Plan, a cramdown of a plan of
reorganization is sought by the parties pursuant to Section
1129(b) of the Bankruptcy Code and the terms of distribution
therein to such classes are as provided in Exhibit A hereto; or
(v) the Bankruptcy Court shall have issued an order denying
confirmation of the Plan, the Plan is terminated in accordance
with its terms or the Confirmation Order is vacated or reversed
by a final and unappealable order of a court of competent
jurisdiction.
8.2 Certain Effects of Termination.
(a) In the event of any termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become
void and of no further force or effect (other than the payment
obligations of any party under Sections 6.2(c), 6.5, 6.7, 8.2(b),
8.3 and ARTICLE IX, which shall remain in full force and
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<PAGE>
effect) and there shall be no further liability (except for such
payment obligations under such sections and article and except
for breaches of this Agreement occurring prior to any such
termination) on the part of either party.
(b) In the event of any termination of this Agreement
(i) by either party because (x) all Federal, state and local
consents and approvals of any Governmental Authority shall not
have been obtained pursuant to Section 7.1(iii) or (y) Federated
Stockholder Approval shall not have been obtained pursuant to
Section 7.1(v); (ii) by Federated because all requisite consents
and approvals of its institutional lenders shall not have been
obtained pursuant to Section 7.2(v); or (iii) by RHM because
Federated is in material breach of this Agreement (provided RHM
is not also in material breach of this Agreement), then, in such
event, Federated shall cause Federated Noteholding Corporation
("FNC") to vote all claims held by Federated and its Affiliates
in the Reorganization Case with and in the same manner as all
claims held by The Prudential Insurance Company of America and
its Affiliates (collectively, "Prudential") are voted in the
Reorganization Case in respect of any plan of reorganization of
RHM and the Other Debtors that may be proposed from time to time
in connection with the Reorganization Case, provided that all
such claims of FNC and Prudential are treated identically
therein.
8.3 Termination Fee.
(a) If this Agreement is terminated because either
party refuses to close in breach of this Agreement, then the
breaching party shall pay to the non-breaching party (provided
that it is not also in material breach of this Agreement), within
five Business Days of the effective date of termination, a lump
sum cash fee of $80 million. The parties acknowledge that any
fee paid or payable under this Section 8.3(a) is commercially
reasonable in light of the commitments and obligations of each
party to the other hereunder and is necessary to induce the
parties to propose jointly the Plan and to consummate the
transactions contemplated hereby and thereby, and the payment of
any such fee shall be in addition to, and not in lieu of, any
other rights or remedies that the parties may have hereunder or
as provided by law.
(b) If this Agreement is terminated because RHM has
accepted a Competing Offer in accordance with Section 6.10, then
RHM shall pay to Federated, within five Business Days of the
effective date of termination of this Agreement, a lump sum cash
fee of $80 million. The parties hereby agree that any such fee
paid or payable as aforesaid is in the nature of liquidated
damages and is in lieu of any other payments or damages
hereunder, unless RHM has accepted a Competing Offer in material
breach of its obligations under Section 6.10.
(c) If this Agreement is terminated because the Plan
shall have been voted upon and the requisite number and amount of
holders of claims in each class of claims provided for in the
Plan entitled to vote shall have failed to accept the Plan and
the Plan is not otherwise confirmable under Section 1129(b) of
the Bankruptcy Code and, prior to such termination, (i) the
Bankruptcy Court shall have ratified and approved RHM's execution
and delivery of this Agreement and authorized RHM to take all
actions reasonably necessary to consummate the transactions
contemplated hereby and (ii) a Competing Offer shall have been
made by a third party which provides for economic benefits, taken
as a whole, that are at least as favorable to the holders of
claims against or interests in RHM and the Other Debtors as those
contained in the Plan, in the event that RHM shall thereafter
consummate the transactions contemplated by such Competing Offer
or another transaction with the third party that made the
Competing Offer which provides for economic benefits, taken as a
whole, that are at least as favorable to the holders of claims
against or interests in RHM and the Other Debtors as those
initially contained in the Competing Offer, RHM shall pay to
Federated, within five Business Days of such consummation, a lump
sum cash fee of $80 million; provided, however, that no such fee
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shall be paid or payable if, (i) a vote of Federated's
stockholders to adopt the Merger Agreement shall have occurred
and Federated Stockholder Approval shall not have been obtained
or (ii) at the time of the termination of this Agreement as
aforesaid, Federated shall have been in material breach of this
Agreement, including under Section 6.2(a) or (b). The parties
hereby agree that any such fee paid or payable as aforesaid is in
the nature of liquidated damages and is in lieu of any other
payments or damages hereunder.
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<PAGE>
(d) Any obligation of RHM to pay to Federated a cash
fee pursuant to Section 8.3(a), (b) or (c) shall be treated as an
allowed administrative expense under Section 507(A)(1) of the
Bankruptcy Code. Without limiting the generality of the
foregoing, no amount paid or payable hereunder shall affect in
any manner any claim that Federated or any of its Affiliates has
against RHM or any of the Other Debtors that is reflected in any
proof of claim timely filed with the Bankruptcy Court.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and other communications
required or permitted hereunder shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt)
by delivery in person (including by courier), by cable, telegram
or telex, by registered or certified mail (postage prepaid,
return receipt requested), by overnight courier or by facsimile
to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to RHM, to:
R. H. Macy & Co., Inc.
151 West 34th Street
New York, New York 10001
Attn: Herbert M. Hellman, Esq.
Tel: 212-494-4454
Fax: 212-494-1968
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Harvey R. Miller, Esq.
Tel: 212-310-8000
Fax: 212-310-8007
(b) If to Federated, to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attn: Chief Financial Officer
and General Counsel
Tel: 513-579-7000
Fax: 513-579-7462
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Robert A. Profusek, Esq.
Tel: 212-326-3800
Fax: 212-755-7306
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<PAGE>
9.2 Expenses. Except as provided in Sections 6.2(c),
6.5 and 6.7 with respect to Federated, and except as otherwise
expressly provided in this Agreement, each party shall bear its
own costs and expenses relating to the preparation, negotiation,
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, whether or not such
transactions are consummated.
9.3 Assignment. Neither this Agreement (including the
documents and instruments referred to herein), nor any of the
rights, interests or obligations hereunder, shall be assigned by
any of the parties hereto, including by operation of law, without
the prior written consent of the other party. Notwithstanding
the foregoing, no consent shall be necessary for Federated to
assign this Agreement to any of its Affiliates; provided that
--------
such an assignment shall not release Federated from any of its
obligations under this Agreement.
9.4 Waivers. No action taken pursuant to this
Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by such party
taking such action of compliance by any other party with any
representation, warranty, covenant or agreement contained herein.
The waiver by or on behalf of any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
9.5 Binding Effect; Benefits. This Agreement shall
inure to the benefit of the parties hereto and shall be binding
upon the parties hereto and their respective successors and
permitted assigns. Except as otherwise set forth herein,
including in Sections 6.8 (and all related Schedules referred to
therein), 6.9 and the matters set forth in Section 6.13, nothing
in this Agreement, expressed or implied, is intended to confer on
any Person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
9.6 Entire Agreement. This Agreement and the Plan
constitute the entire agreement between the parties hereto with
respect to the subject matter hereof (other than the
Confidentiality Agreements) and supersede all prior agreements,
representations, warranties, statements, promises and
understandings, whether written or oral, with respect to such
subject matter.
9.7 Headings. The section and other headings
contained in this Agreement are for reference purposes only and
shall not be deemed to be a part of this Agreement or to affect
the meaning or interpretation of this Agreement.
9.8 Retention of Bankruptcy Court Jurisdiction;
Governing Law; Waiver of Jury Trial. Without limiting the
generality or effect of ARTICLE XI of the Plan and subject to the
proviso of the immediately succeeding sentence, the Bankruptcy
Court shall retain jurisdiction of the proceedings referred to in
the Plan, including for purposes of determining any and all
controversies and disputes arising under or in connection with,
or for purposes of interpreting the provisions of, this Agreement
and the Transaction Documents and the transactions contemplated
hereby and thereby. Without limiting the generality of the
foregoing, such jurisdiction shall include any determination as
to the fulfillment or non-fulfillment of any condition to
consummation of the transactions contemplated hereby set forth in
ARTICLE VII and any such determination shall be final and binding
on the parties and not subject to any appeal, the right to which
is hereby waived by the parties; provided, however, that nothing
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contained herein shall limit the rights of the parties to appeal
any determination of the Bankruptcy Court relating to the amount
of any monetary damages, fees, costs and expenses awarded with
respect to any such determination as aforesaid. In addition, any
determination by the Bankruptcy Court with respect to a Federated
Objection or a Macy Objection as contemplated by Section 6.10
shall be final and binding on the parties and not subject to any
appeal, the right to which is hereby waived by the parties.
Except as the laws of the State of Delaware are by
their terms applicable, this Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without giving effect to the principles of conflict of laws
thereof.
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<PAGE>
ANY AND ALL RIGHT TO TRIAL BY JURY IS HEREBY WAIVED AND
THERE SHALL BE NO RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
9.9 Public Announcements. Prior to the Closing,
Federated, on the one hand, and RHM, on the other hand, shall
cooperate in connection with all actions to publicize, advertise,
announce, or disclose to any governmental authority or other
third person the execution or terms of this Agreement or the
transactions contemplated hereby.
9.10 Amendments; Interpretation. This Agreement may
not be modified or changed except by an instrument or instruments
in writing signed by Federated and RHM. This Agreement may be
amended in writing at any time prior to the Effective Time by
mutual consent of the parties, without any action or approval by
shareholders of such parties; provided that any such amendment
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shall not be materially inconsistent with the terms and
conditions contained in this Agreement and the Plan.
9.11 Disclosures. Any disclosure by either party
hereto pursuant to any specific provision of this Agreement shall
be deemed a disclosure for all other purposes of this Agreement.
9.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which, when executed, shall
be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
9.13 Specific Performance. The parties hereto
recognize that any breach of the terms of this Agreement may give
rise to irreparable harm for which money damages would not be an
adequate remedy and, agree that, in addition to other remedies,
the non-breaching party shall be entitled to enforce the terms of
this Agreement by a decree of specific performance without the
necessity of proving the inadequacy of a remedy of money damages.
9.14 Plan Termination, Etc. If, prior to the Effective
Date of the Plan, the Plan is terminated in accordance with its
terms or if the Confirmation Order is vacated or reversed by a
final unappealable order of a court of competent jurisdiction,
this Agreement shall become void, and there shall be no further
liability on the part of any party hereto or their respective
officers and directors to any other party hereunder; provided
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that this Section 9.14 shall not be deemed to prejudice the
rights of the parties hereto with respect to the other party's
payment obligations under Sections 6.2(c), 6.5, 6.7, 8.3 and this
ARTICLE IX, respectively, and with respect to any breach of the
other party occurring prior to such termination.
9.15 Further Assurances. Each party shall execute such
documents and other papers and perform such further acts as may
be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby. Each party
shall use its reasonable efforts to fulfill or obtain the
fulfillment of the conditions to the Closing, including, but not
limited to, the execution and delivery of any documents or other
papers, the execution and delivery of which are conditions
precedent to the Closing.
9.16 Severability. If any term, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, such provision
shall thereupon become ineffective, but only to the most limited
extent possible and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
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<PAGE>
IN WITNESS WHEREOF, RHM and Federated have caused this
Agreement to be signed by their respective duly authorized
officers as of the date first written above.
R. H. MACY & CO., INC.
By:___________________________
Name:
Title:
FEDERATED DEPARTMENT STORES,
INC.
By:___________________________
Name:
Title:
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SCHEDULE 6.8(a)(viii)
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CERTAIN RHM EMPLOYEE MATTERS
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(a) With respect to the so-called "Type A" and "Type
B" Executive Agreements (a list of which, by name, title and base
salary, has been provided by RHM to Federated as of the date of
this Agreement) between RHM and RHM executives, in the event that
any executive party thereto is not offered a new contract by
Federated within 45 days after the execution and delivery of this
Agreement, which contract shall provide for a term of at least
three years, shall provide for a restriction on relocation of
place of work outside a 25-mile radius of current workplace, and
shall provide for substantially the same title (determined with
reference to the "title equivalency chart" attached hereto as
Annex A), functions and level of responsibilities, benefits and
perquisites, and the same compensation and, as to individuals who
report to Operating Division Principals (as such term is defined
in Annex A), reporting relationship (as to position and as to the
person to whom they reported immediately prior to the Effective
Time) with the Surviving Corporation, such executive shall have
the right, exercisable from and after the Effective Time and
until the six-month anniversary thereof, to terminate his or her
employment upon at least 30 days' prior written notice to the
Surviving Corporation. In the event of any such termination by
any such executive or if any such executive's employment is
terminated by the Surviving Corporation other than for "cause"
(as defined in the applicable Type A or Type B Executive
Agreement), the Surviving Corporation shall pay to such executive
at termination his or her Base Salary and bonus, and the
executive shall be entitled to receive his or her benefits and
perquisites, as provided in his or her agreement for "Termination
By The Company For Any Other Reason", subject to the following:
(i) The 3-year Executive Agreement shall be deemed to
have recommenced as of the termination date;
(ii) The Bonus Amount, payable upon termination, shall
be equal to three (3) times the product of (x) twenty five
(25%) percent and (y) the Executive's annual Base Salary at
the time of termination;
(iii) The benefits and perquisites shall be, in the
aggregate, substantially comparable to the benefits and
perquisites payable immediately prior to the termination
date, and shall be payable, without modification, for the 3-
year period from and after the termination date; and
(iv) The Executive shall not be subject to any
noncompetition obligation.
(b) With respect to the so-called "Type-B" Executive
Agreements to which RHM is a party, prior to the Effective Time
RHM may, and after the Effective Time the Surviving Corporation
shall, amend such agreements or take other action so as to ensure
that an executive party thereto may not be required to relocate
his/her place of work to a geographic area outside of a 25-mile
radius of the geographic area of his/her current place of work in
order to maintain his/her rights thereunder.
(c) The parties agree that RHM may enter into such
severance, termination or retention agreements or arrangements
("Program Agreements") with any RHM "Corporate Office" employee,
including those with current employment agreements, as RHM in its
discretion shall deem appropriate and as otherwise previously
contemplated (which Program Agreements shall include provisions,
with respect to each such RHM Corporate Office employee covered
by "Type A" and "Type B" Executive Agreements, no less favorable
than those described in clauses (i), (ii), (iii) and (iv) of
paragraph (a) above); provided that the total cumulative amount
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of all payments under Program Agreements, together with all
severance or retention payments contemplated by this Schedule to
all Corporate Office employees shall not exceed $32 million in
cash
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SCHEDULE 6.8(a)(viii)
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distributions and healthcare benefit accruals; provided further,
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that such amount shall exclude any retention payments
contemplated by this Schedule for the period after February 28,
1995 which are required due to the mutual extension of the
Effective Time beyond February 28, 1995, and any payments as may
be due to the Chairman/CEO and President/COO pursuant to their
respective employment agreements. Any rights of an RHM Corporate
Office employee under a Program Agreement entered into with RHM
under this paragraph (c) shall be independent of any rights such
employee otherwise may have under any other paragraph of this
Schedule.
(d) From and after the date hereof until the Effective
Time or earlier termination of this Agreement in accordance with
ARTICLE VIII, RHM shall be entitled to enter into appropriate
employment agreements of up to one year and retention agreements
with, and provide severance in accordance with the "Special
Severance Policy Guidelines" attached as Annex B hereto (or in
accordance with any one-year employment agreement that may have
been entered into, if greater) to, RHM Corporate Office Employees
whose employment is not covered by a Type A or Type B Executive
Agreement or any Program Agreement.
(e) RHM, in its sole discretion, may pay bonuses to
certain key executives commensurate with their individual
contributions during fiscal 1994 and fiscal 1995 for the portion
thereof up until the Effective Date of the Plan, whether in the
form of a cash payment or forgiveness of indebtedness, not to
exceed $9 million in the aggregate (inclusive of any related tax
gross-ups or similar payments). Nothing contained in the
foregoing sentence shall be construed to prevent or prohibit RHM
from paying regular bonuses to its executives in accordance with
the terms of any plan of RHM as in effect on the date hereof with
respect to fiscal 1994 and fiscal 1995 for the portion thereof up
until the Effective Date of the Plan.
(f) With respect to any RHM Employee whose employment
is not covered by a Type A or Type B Executive Agreement or by a
Program Agreement and whose employment is terminated in
connection with the Merger or is otherwise offered a position
with the Surviving Corporation that is not substantially
comparable to such employee's position with RHM immediately prior
to the Effective Time (or requires relocation of his/her place of
work to a geographic area outside of a 25-mile radius of the
geographic area of his/her current place of work), which position
is not accepted by such employee, the Surviving Corporation shall
pay to such RHM Employee the severance set forth in Annex B.
(g) Without modifying the specific benefits provided
or to be provided to any RHM Employee pursuant to this Schedule,
for purposes of any employment agreement between RHM and any of
its employees in effect on the date of this Agreement, including
any employment agreement with RHM's Chairman/CEO and
President/COO, the parties acknowledge and agree that the Merger
constitutes a "Change in Control."
(h) RHM shall amend the employment agreement of RHM's
President/COO to provide that, notwithstanding anything to the
contrary contained therein, in the event of any termination of
his employment for any reason (or for no reason) by the
President/COO or the Surviving Corporation at the time of or
after the Merger or, at such earlier time as RHM, in its sole
discretion, may determine, RHM shall (i) make a lump sum payment
to its President/COO of $14 million in cash, less the aggregate
amount of salary and bonus payments (other than the $2.0 million
"signing bonus"), if any, paid since the commencement of his
employment on July 1, 1994, and less any applicable withholding
taxes (other than any withholding taxes on the signing bonus),
(ii) continue his participation, on the same basis as other
executive Board members, in RHM's or the Surviving Corporation's
senior executive medical program for a period of 12 months
following such termination of employment or, if earlier, until
such date as he commences other full-time employment, and (iii)
be deemed to have irrevocably waived the non-competition
provisions of his agreement, which shall terminate and thereafter
- 2 -
<PAGE>
SCHEDULE 6.8(a)(viii)
---------------------
be of no force and effect. In the event that the Merger
Agreement is terminated for any reason prior to the Merger, such
amendment shall be null and void and of no force and effect.
(i) RHM shall amend the employment agreement of RHM's
Chairman/CEO to provide that, notwithstanding anything to the
contrary contained therein, at the Effective Time, RHM's
Chairman/CEO shall (x) be entitled to receive, in lieu of stock
options (or any other equity rights) or any cash payment in lieu
of such stock options (or any other equity rights) as provided in
such agreement, a lump sum cash performance bonus payment of $8.4
million, (y) have the right to terminate his employment for any
reason or for no reason at any time from and after the Effective
Time until the first anniversary thereof (and the parties agree
that any such termination shall constitute a termination for
"Good Reason" after a "Change in Control" under such employment
agreement) and thereupon be entitled to receive the compensation
and benefits payable as provided in his employment agreement in
such event, and (z) not be subject to the non-competition
provisions of such agreement, which shall terminate and
thereafter be of no force and effect. In the event that the
Merger Agreement is terminated for any reason prior to the
Merger, such amendment shall be null and void and of no force and
effect. Such employment agreement shall also be amended to
reflect that Mr. Ullman's minimum annual incentive bonus for
fiscal 1995 and subsequent fiscal years shall be $625,000.
(j) RHM may effect changes in its qualified and non-
qualified pension plans as contemplated in Annex A to Schedule
6.8(a)(iv).
- 3 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000034945
<NAME> FEDERATED DEPARTMENT STORES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> MAY-01-1994
<PERIOD-END> JUL-30-1994
<CASH> 98,135
<SECURITIES> 0
<RECEIVABLES> 1,791,774
<ALLOWANCES> 0
<INVENTORY> 1,341,496
<CURRENT-ASSETS> 3,377,716<F1>
<PP&E> 2,623,798
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,530,156<F2>
<CURRENT-LIABILITIES> 1,468,135
<BONDS> 2,715,395
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,530,156<F3>
<SALES> 1,596,100
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 975,339
<OTHER-EXPENSES> 561,796
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,318
<INCOME-PRETAX> 10,267<F4>
<INCOME-TAX> 6,495
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,772
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
<F1>Includes the following:
Supplies and prepaid expenses = 60,188
Deferred income tax assets = 86,123
<F2>Includes the following:
Reorganization value in excess of amounts
allocable to identifiable assets = 328,339
Notes receivable = 407,949
Other assets = 792,354
<F3>Includes the following:
Deferred income taxes = 801,308
Other liabilities = 226,492
Shareholders' equity = 2,318,826
<F4>Includes the following:
Interest income = 10,620
</FN>
</TABLE>
