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 October 29, 1994.
FEDERATED DEPARTMENT STORES, INC.
1440 Broadway
New York, New York 10018
Telephone: (212) 840-1440
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.
126,616,649 shares of the registrant's Common Stock, $.01 par value, were
outstanding as of November 26, 1994.
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PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Operations
(Unaudited)
(thousands, except per share figures)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<s > <C> <C> <C> <C>
Net Sales, including leased
department sales........... $1,926,811 $1,789,315 $5,176,542 $4,881,862
Cost of sales................ 1,185,926 1,081,727 3,169,401 2,937,184
Selling, general and
administrative expenses..... 611,563 604,581 1,688,442 1,700,380
Unusual item................. - - 27,005 -
Operating Income............. 129,322 103,007 291,694 244,298
Interest expense............. (61,897) (52,708) (177,578) (161,159)
Interest income.............. 10,911 12,716 32,555 37,626
Income Before Income Taxes
and Extraordinary Item...... 78,336 63,015 146,671 120,765
Federal, state and local
income tax expense.......... (33,993) (42,733) (66,334) (69,930)
Income Before Extraordinary
Item........................ 44,343 20,282 80,337 50,835
Extraordinary item........... - - - (3,545)
Net Income................... $ 44,343 $ 20,282 $ 80,337 $ 47,290
Earnings per Share:
Income before extraordinary
item...................... $ .35 $ .16 $ .63 $ .40
Extraordinary item.......... - - - (.03)
Net Income................ $ .35 $ .16 $ .63 $ .37
Average Number of Shares
Outstanding................. 126,600 126,311 126,545 126,278
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
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FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets
(Unaudited)
(thousands)
<CAPTION
October 29, January 29, October 30,
1994 1994 1993
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash.............................. $ 125,924 $ 222,428 $ 336,974
Accounts receivable............... 1,986,023 1,758,935 1,537,982
Merchandise inventories........... 1,730,602 1,180,844 1,534,687
Supplies and prepaid expenses..... 52,121 46,660 52,383
Deferred income tax assets........ 83,182 88,754 81,109
Total Current Assets........... 3,977,852 3,297,621 3,543,135
Property and Equipment - net........ 2,663,954 2,576,884 2,473,659
Reorganization Value in Excess of
Amounts Allocable to Identifiable
Assets - net....................... 323,648 337,720 342,410
Notes Receivable.................... 408,141 408,818 406,581
Other Assets........................ 795,710 798,384 365,422
Total Assets................... $8,169,305 $7,419,427 $7,131,207
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt................... $ 441,621 $ 10,099 $ 97,878
Accounts payable and accrued
liabilities...................... 1,512,227 1,209,744 1,403,458
Income taxes...................... 95,968 110,209 47,375
Total Current Liabilities...... 2,049,816 1,330,052 1,548,711
Long-Term Debt...................... 2,723,777 2,786,724 2,459,043
Deferred Income Taxes............... 802,346 804,181 771,820
Other Liabilities................... 228,845 220,226 220,323
Shareholders' Equity................ 2,364,521 2,278,244 2,131,310
Total Liabilities and
Shareholders' Equity.......... $8,169,305 $7,419,427 $7,131,207
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
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FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<CAPTION>
39 Weeks Ended 39 Weeks Ended
October 29, 1994 October 30, 1993
<S> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 80,337 $ 47,290
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 169,701 154,298
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets...................... 14,072 14,072
Amortization of financing costs........... 8,052 7,618
Amortization of original issue discount... 13,352 12,598
Amortization of unearned restricted stock. 1,554 2,392
Loss on early extinguishment of debt...... - 3,545
Changes in assets and liabilities, net of
effects of acquisition of company:
(Increase) Decrease in accounts
receivable............................ (175,861) 5,852
Increase in merchandise inventories..... (514,834) (385,753)
Increase in supplies and prepaid
expenses.............................. (3,878) (12,315)
Decrease in other assets not separately
identified............................ 12,556 4,010
Increase in accounts payable and accrued
liabilities not separately identified.. 266,906 281,002
Increase (Decrease) in current income
taxes.................................. (7,338) 3,156
Increase in deferred income taxes....... 3,737 30,201
Increase (Decrease) in other
liabilities............................ 4,856 (1,194)
Net cash provided (used) by operating
activities.......................... (126,788) 166,772
Cash flows from investing activities:
Purchase of property and equipment.......... (202,683) (150,721)
Disposition of property and equipment....... 1,748 833
Decrease in notes receivable................ - 14,873
Acquisition of company, net of cash
acquired.................................. (75,846) -
Net cash used by investing activities. (276,781) (135,015)
Cash flows from financing activities:
Debt issued................................. 331,007 87,021
Financing costs............................. (6,587) (393)
Debt repaid................................. (22,450) (374,210)
Increase in outstanding checks.............. 709 19,167
Acquisition of treasury stock............... (334) (174)
Issuance of common stock.................... 4,720 6,822
Net cash provided (used) by financing
activities.......................... 307,065 (261,767)
</TABLE>
(Continued)
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<TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<CAPTION>
39 Weeks Ended 39 Weeks Ended
October 29, 1994 October 30, 1993
<S> <C> <C>
Net decrease in cash........................ (96,504) (230,010)
Cash at beginning of period................. 222,428 566,984
Cash at end of period....................... $ 125,924 $ 336,974
Supplemental cash flow information:
Interest paid.............................. $ 144,081 $ 136,113
Interest received.......................... 33,470 38,170
Income taxes paid (net of refunds received) 69,124 36,109
Schedule of noncash investing and financing
activities:
Capital lease obligations for new store
fixtures................................ 6,666 2,973
Property and equipment transferred to
other assets............................ 6,645 3,155
Debt assumed in acquisition of company... 40,000 -
The accompanying notes are an integral part of these unaudited Consolidated
Financial Statements.
</TABLE>
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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 39 weeks ended October 29,
1994 and October 30, 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 39 weeks ended
October 29, 1994 and October 30, 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 39 weeks ended October 29, 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 Company's Lazarus department store division.
4. Income Taxes
The passage on August 10, 1993 of the federal Omnibus Budget
Reconciliation Act of 1993 increased the federal income tax statutory
rate from 34% to 35%, retroactive to January 1, 1993. Accordingly,
income tax expense for the 13 weeks ended October 30, 1993 includes
one-time charges totaling $15.0 million for the impact of the rate
increase on deferred income taxes and for the retroactive effect of
the rate increase.
5. Extraordinary Item
The extraordinary item during the 39 weeks ended October 30, 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.
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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 October 29, 1994 and October 30, 1993
For purposes of the following discussion, all references to "third
quarter of 1994" and "third quarter of 1993" are to the Company's
13-week fiscal periods ended October 29, 1994 and October 30, 1993,
respectively.
Net sales for the third quarter of 1994 totaled $1,926.8 million,
compared to net sales of $1,789.3 million for the third quarter of
1993, an increase of 7.7%. Since October 30, 1993, the Company has
opened seven new stores, added ten stores through an acquisition,
reopened two hurricane-damaged stores and closed two stores. On a
comparable store basis, net sales increased 3.4%.
Cost of sales was 61.6% as a percent of net sales for the third quarter
of 1994 compared to 60.4% for the third quarter of 1993. The increase
reflects the impact of offering increased value to the customer and of
keeping inventory assortments fresh and fashion-current. Cost of sales
includes charges of $3.4 million for the third quarter of 1994 compared
to $4.4 million in the third quarter of 1993 resulting from the
valuation of merchandise inventory on the last-in, first-out basis.
Selling, general and administrative expenses were 31.7% as a percent of
net sales for the third quarter of 1994 compared to 33.8% for the third
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.
Net interest expense was $51.0 million for the third quarter of 1994
compared to $40.0 million for the third quarter of 1993. The higher
interest expense for the third quarter of 1994 is principally due to
the increase in long-term debt due to the issuance of a $340.0 million
promissory note 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's") as well as increased short-term borrowings.
Cash interest payments, net of interest received, were $30.9 million
for the third quarter of 1994 compared to $19.0 million for the third
quarter of 1993.
Income tax expense was $34.0 million for the third 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 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.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The passage on August 10, 1993 of the federal Omnibus Budget
Reconciliation Act of 1993 increased the federal income tax statutory
rate from 34.0% to 35.0% retroactive to January 1, 1993. Accordingly,
income tax expense of $42.7 million for the third quarter of 1993
includes one-time charges totaling $15.0 million for the impact of the
rate increase on deferred income taxes and for the retroactive effect
of the rate increase. In addition to these one-time charges, income
tax expense also differs from the amount computed by applying the
federal income tax statutory rate to income before income taxes and
extraordinary item due to the impact of state and local income taxes
and permanent differences arising from the amortization of
reorganization value in excess of amounts allocable to identifiable assets.
Comparison of the 39 Weeks Ended October 29, 1994 and October 30, 1993
For purposes of the following discussion, all references to "1994" and
"1993" are to the Company's 39-week fiscal periods ended October 29,
1994 and October 30, 1993, respectively.
Net sales for 1994 were $5,176.5 million compared to $4,881.9 million
for 1993, an increase of 6.0%. On a comparable store basis, net sales
increased 2.7%.
Cost of sales was 61.3% as a percent of net sales for 1994 compared to
60.2% for 1993. The increase reflects the impact of offering increased
value to the customer and of keeping inventory assortments fresh and
fashion-current. Cost of sales includes charges of $9.2 million in
1994 compared to $11.9 million in 1993 resulting from the valuation of
merchandise inventory on the last-in, first-out basis.
Selling, general and administrative expenses were 32.6% as a percent of
net sales for 1994 compared to 34.8% 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.
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 Company's Lazarus department store division.
Net interest expense was $145.0 million for 1994 compared to $123.5
million for 1993. Interest expense for 1994 reflects higher short-term
borrowings and 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's.
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 $110.6
million for 1994 compared to $97.9 million for 1993.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Income tax expense was $66.3 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.
Income tax expense was $69.9 million for 1993. 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 the one-time charge of $14.2 million for the
impact of the tax rate increase on deferred taxes, 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 used by operating activities in 1994 was $126.8 million, a
reduction of $293.6 million from the net cash provided by operating
activities in 1993 of $166.8 million. The primary factors which
contributed to this decrease were higher accounts receivable balances
in 1994 generated by increases in proprietary credit sales and a
Company policy change to lower its minimum monthly payment requirement,
and increased 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
$307.1 million for 1994, and net cash used in investing activities was
$276.8 million. During the 39 weeks ended October 29, 1994, the
Company opened seven new stores, reopened a hurricane-damaged store and
closed two stores. 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 two new
stores in the fourth quarter of the year, one of which will be a
replacement store.
On October 13, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "New York Bankruptcy Court")
approved the disclosure statement relating to the amended Joint Plan of
Reorganization for Macy's and certain of its subsidiaries (the "Macy's
POR"). As contemplated by the Macy's POR, the Company and Macy's
entered into an Agreement and Plan
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
of Merger, dated as of August 16, 1994 (the "Merger Agreement"),
providing for the merger of the Company and Macy's (the "Merger") into
a single department store operation. The Merger Agreement was approved
by the New York Bankruptcy Court on September 9, 1994 and by the
Company's shareholders on November 29, 1994 at a special shareholders
meeting.
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 of the new combined company, which will retain the name
"Federated Department Stores, Inc."
Additional information concerning the Macy's POR and the proposed
Merger is contained in a Proxy Statement/Prospectus, dated October 21,
1994, filed with the Securities and Exchange Commission as part of a
Registration Statement S-4 (Registration No. 33-85480) and mailed to
the Company's shareholders in connection with the November 29, 1994
special shareholders meeting; however, such information is subject to
change without notice and should not be relied upon as being accurate
as of any date after October 21, 1994. The effectiveness of the Macy's
POR and the obligations of the Company and Macy's to consummate the
Merger are subject to various approvals and to the satisfaction or
waiver of various conditions. Although the Company presently expects
the Macy's POR to become effective and the Merger to be consummated in
December 1994, there can be no assurance with respect thereto.
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.
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. The effectiveness of the Macy's POR and the consummation
of the Merger will result in 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
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
The information regarding legal proceedings in the Company's
Quarterly Report on Form 10-Q for the period ended July 30, 1994
covers events known to the Company and occurring prior to
September 7, 1994. The following is a general description of
certain developments in the legal proceedings known to the Company
subsequent to that date and prior to December 9, 1994.
Resolution of Litigation with Internal Revenue Service. 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. The IRS pursued appeals on both issues and, on August
2, 1994, the United States District Court for the Southern
District of Ohio (the "Ohio District Court") affirmed the
decisions of the Bankruptcy Court with respect to both the NOL
Issue and the Break-Up Fee Issue. On September 30, 1994, the IRS
filed a notice of appeal from the decision of the Ohio District
Court. Management does not expect that the resolution of the
these issues will have a material adverse effect on the Company's
financial position or results of operations, although there can be
no assurance with respect thereto.
Merger with R.H. Macy & Co., Inc.
On October 13, 1994, the New York Bankruptcy Court entered an
order (the "Order") establishing procedures for the solicitation
approving the Macy's POR, scheduling a hearing on confirmation of
the Macy's POR for December 8, 1994 and approving notice
procedures relating thereto and approving, with minor technical
amendments, the disclosure statement pursuant to section 1125 of
the Bankruptcy Code for the Macy's POR (the "Disclosure
Statement"). On October 21, 1994 the Company and Macy's filed a
Disclosure Statement which reflected the amendments required by
the New York Bankruptcy Court in the Order. On December 8, 1994
the New York Bankruptcy Court entered an order confirming the
Macy's POR.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
PART II -- OTHER INFORMATION (continued)
Antitrust Matters. On August 19, 1994, the Federal Trade
Commission (the "FTC") notified the Company and Macy's that it had
granted early termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. The Company and Macy's were also advised by the Office
of the Attorney General for the State of New York (the "New York
Attorney General") that it was investigating the competitive
effects of the Merger. On September 19, 1994, however, the
Company and the New York Attorney General entered into an
agreement in principle (the "Agreement in Principle") resolving
that investigation. On the terms and subject to the conditions set
forth in the Agreement in Principle, the Company and the New York
Attorney General agreed that: (i) the New York Attorney General
would not challenge the Merger; and (ii) the surviving corporation
following the Merger would (a) offer for sale and sell six
department stores located in the New York City metropolitan area,
(b) conduct new and small vendor fairs in New York City for a
period of five years, (c) continue to maintain an executive office
and conduct its existing buying operations in New York City for a
period of five years, and (d) engage in continued discussions with
the New York Attorney General to attempt to resolve issues
relating to the use of rights under reciprocal easement agreements
relating to properties located in the State of New York. The
Company and Macy's have not been identified by the Attorneys
General of any other potentially affected states that they are
investigating or intend to investigate, the Merger.
Other Proceedings. The Company and it subsidiaries are also
involved in various legal proceedings incidental to the normal
course of their business. Management does not expect that any of
such proceedings will have a material adverse effect on the
Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
(a) A special meeting of the Company's shareholders was held on
November 29, 1994.
(b) The shareholders voted on the following items at the meeting:
(i) The shareholders approved the Merger Agreement. The
votes for approval were 92,777,521, the votes against
approval were 1,427,862, the votes abstained were
154,406 and there were no broker non-votes.
(ii) The shareholders approved the Company's 1995 Executive
Equity Incentive Plan. The votes for approval were
71,436,132, the votes against approval were 21,875,464,
the votes abstained were 1,048,193 and there were no
broker non-votes.
<PAGE>
FEDERATED DEPARTMENT STORES, INC.
PART II -- OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of Amended and Restated --
Severance Agreement
10.2 First Amendment to the --
Executive Deferred Compensation
Plan (adopted October 29, 1993)
10.3 Amendment to the Company's --
Retirement Income and Thrift
Incentive Plan (as amended and
restated effective as of
January 31, 1987 and containing
all amendments through December 31,
1993)
10.4 1995 Executive Equity Incentive Plan Annex D to
the Proxy
Statement/
Prospectus
included in
Macy's
Registra-
tion
Statement
on Form S-4
(Registra-
tion
No. 33-85480)
11 Statement re computation of per --
share earnings
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed by the Company on
September 1, 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 December 13, 1994 /s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President, General Counsel
and Secretary
/s/ John E. Brown
John E. Brown
Senior Vice President and Controller
(Principal Accounting Officer)
AMENDED AND RESTATED SEVERANCE AGREEMENT
This AMENDED AND RESTATED SEVERANCE AGREEMENT, dated as of
November 1, 1994 (this "Agreement"), is made and entered by and
between FEDERATED DEPARTMENT STORES, INC., a Delaware corporation
(the "Company"), and _______________ (the "Executive").
RECITALS
A. The Executive is a senior executive or key employee of
the Company or one or more of its Subsidiaries and has made and
is expected to continue to make significant contributions to the
profitability, growth, and financial strength of the Company and
its Subsidiaries, taken as a whole;
B. The Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control
(as hereinafter defined) exists;
C. The Company desires to assure itself of both present
and future continuity of management and desires to establish
certain minimum severance benefits for certain of its senior
executive officers and other key employees, including the
Executive, applicable in the event of a Change in Control;
D. The Company desires to ensure that its senior
executives and other key employees are not practically disabled
from discharging their duties in respect of a proposed or actual
transaction involving a Change in Control; and
E. The Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of
the Company.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. Certain Defined Terms: In addition to terms defined
elsewhere herein, the following terms have the following meanings
when used herein with initial capital letters:
(a) "Change in Control" means the occurrence during the
Term of any of the following events (other than, for purposes of
clauses (i), (ii), and (iv) below, the Federated/Macy's Merger
(as that term is defined in the Amended Joint Plan of
Reorganization of R.H. Macy & Co., Inc. and the Company (the
"Plan")) or any other event provided for in the Federated/Macy's
Merger Agreement (as that term is defined in the Plan) or the
Plan):
(i) The Company is merged, consolidated, or
reorganized into or with another corporation or other legal
entity, and as a result of or immediately following such
merger, consolidation, or reorganization less than a
majority of the combined voting power of the then-
outstanding securities of such other corporation or entity
immediately after such transaction are held in the aggregate
by the holders of the then-outstanding securities entitled
to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such
transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or
other legal entity and, as a result of or immediately
following such sale or transfer, less than a majority of the
combined voting power of the then-outstanding securities of
such other corporation or entity immediately after such sale
or transfer is held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such sale
or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report
or item therein), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 30% or more the of the
combined voting power of the Voting Stock of the Company;
(iv) The Company files a report or proxy
statement with the Securities and Exchange Commission
pursuant to the Exchange Act disclosing in response to Form
8-K or Schedule 14A (or any successor schedule, form, or
report or item therein) that a change in control of the
Company has occurred or will occur in the future pursuant to
any then-existing contract or transaction; or
(v) If, during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the directors of the Company cease for any reason
to constitute at least a majority thereof; provided,
however, that for purposes of this clause (v) the following
persons will in all events be deemed to be directors of the
Company as of the beginning of the relevant two-year period:
each director who is (A) a director of the Company
immediately after the Federated/Macy's Merger (as that term
is defined in the Plan) or (B) first elected, or first
nominated for election by the Company's stockholders, by a
vote of at least two-thirds of the directors of the Company
(or a committee thereof) then still in office who were
directors of the Company at the beginning of the relevant
two-year period (including any person deemed to be a
director pursuant to the immediately preceding clause (A)).
Notwithstanding the foregoing provisions of Section 1(a)(iii) or
1(a)(iv), unless otherwise determined in a specific case by
majority vote of the Board of Directors of the Company (the
"Board"), a "Change in Control" will not be deemed to have
occurred for purposes of Section 1(a)(iii) or 1(a)(iv) solely
because (1) the Company, (2) an entity in which the Company,
directly or indirectly, beneficially owns 50% or more of the
voting securities (a "Subsidiary"), or (3) any employee stock
ownership plan or any other employee benefit plan of the Company
or any Subsidiary either files or becomes obligated to file a
report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K, or Schedule 14A (or any successor
schedule, form, or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock,
whether in excess of 30% or otherwise, or because the Company
reports that a change in control of the Company has occurred or
will occur in the future by reason of such beneficial ownership;
(b) "Cause" means that, prior to any termination pursuant
to Section 3(b), the Executive shall have committed:
(i) an intentional act of fraud, embezzlement, or
theft in connection with the Executive's duties or in the
course of the Executive's employment with the Company (if
applicable) or any Subsidiary;
(ii) intentional wrongful damage to property of
the Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional engagement in any Competing
Business;
and any such act shall have been materially harmful to the
Company and its Subsidiaries, taken as a whole. For purposes of
this Agreement, no act or failure to act on the part of the
Executive will be deemed "intentional" if it was due primarily to
an error in judgment or negligence, but will be deemed
"intentional" only if done or omitted to be done by the Executive
not in good faith and without reasonable belief that the
Executive's act or omission was in the best interest of the
Company and its Subsidiaries, taken as a whole. Notwithstanding
the foregoing, the Executive will not be deemed to have been
terminated for "Cause" hereunder unless and until there has been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the Board
then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good
faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the
right of the Executive or the Executive's beneficiaries to
contest the validity or propriety of any such determination;
(c) "Competing Business" means any investment by the
Executive of $100,000 or more in, or the rendering by the
Executive of any personal services to, any business enterprise
engaged in the general merchandise department store business
which (i) at the time of determination is substantially similar
to the whole or a substantial part of the business conducted by
the Company or any of its divisions or Subsidiaries or other
affiliates, (ii) at the time of determination is operating a
store or stores which, during its or their fiscal year preceding
the determination, had aggregate net sales, including sales in
leased and licensed departments, in excess of $10,000,000, if
such store or any of such stores is or are located in a city or
within a radius of 25 miles from outer limits of a city where the
Company, or any of its divisions of Subsidiaries or other
affiliates, is operating a store or stores which, during its or
their fiscal year preceding the determination, had aggregate net
sales, including sales in leased and licensed departments, in
excess of $10,000,000, and (iii) had aggregate net sales at all
its locations, including sales in leased and licensed departments
and sales by its divisions and Subsidiaries and other affiliates,
during its fiscal year preceding that in which the Executive made
such an investment therein, or first rendered personal services
thereto, in excess or $100,000,000;
(d) "Employee Benefits" means the perquisites, benefits,
and service credit for benefits as provided under any and all
employee retirement income and welfare benefit policies, plans,
programs, or arrangements in which the Executive is entitled to
participate, including without limitation any stock option, stock
purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare
benefit, deferred compensation, incentive compensation, group or
other life, health, medical/hospital, or other insurance (whether
funded by actual insurance or self-insured by the Company),
disability, salary continuation, expense reimbursement, and other
employee benefit policies, plans, programs, or arrangements that
may now exist or any equivalent successor policies, plans,
programs, or arrangements that may be adopted hereinafter by the
Company or any Subsidiary, providing perquisites, benefits, and
service credit for benefits at least as great in the aggregate as
are payable thereunder prior to a Change in Control;
(e) "Severance Benefit" means an amount equal to (i) the
product of (A) two and (B) the sum of (1) the Executive's
annualized base salary rate as of the date of the first event
constituting a Change in Control or, if higher, the Executive's
highest base salary received for any year in the three full
calendar years immediately preceding the first event constituting
a Change in Control and (2) the Executive's targeted annual bonus
as of the date of the first event constituting a Change in
Control or, if higher, the Executive's highest annual bonus
received for any year in the three full calendar years
immediately preceding the first event constituting a Change of
Control, minus (ii) the amount of all cash payments actually
received or to be received by the Executive following the
Termination Date which became due by virtue of the Executive's
termination of employment and are therefore in the nature of
severance payments under any other employment, retention,
severance, or similar agreement with the Company or any
Subsidiary to which the Executive is a party or any severance pay
plan of the Company or any Subsidiary in which the Executive is a
participant;
(f) "Severance Period" means the period of time commencing
on the date of the first occurrence of a Change in Control and
continuing until the earliest of (i) the expiration of three
years after the first occurrence of a Change in Control, (ii) the
Executive's death, and (iii) the Executive's attainment of age
65;
(g) "Term" means the period commencing as of the date
hereof and expiring as of the later of (i) the close of business
on the fourth anniversary of the date hereof and (ii) the
expiration of the Severance Period; provided, however, that if,
prior to a Change in Control, the Executive ceases for any reason
to be an employee of the Company or any Subsidiary, thereupon
without further action the Term will be deemed to have expired
and this Agreement will immediately terminate and be of no
further effect, whether or not cause exists. For purposes of
this Section 1(g), the Executive will not be deemed to have
ceased to be an employee of the Company or any Subsidiary by
reason of the transfer of the Executive's employment between the
Company and any Subsidiary, or among any Subsidiaries; and
(h) "Termination Date" means (i) the date on which the
Executive's employment is terminated by the Company or any
Subsidiary or (ii) the date on which the Executive terminates his
or her employment pursuant to Section 3(b).
2. Operation of Agreement: This Agreement will be
effective and binding immediately upon its execution, but,
notwithstanding anything in this Agreement to the contrary, will
not be operative unless and until a Change in Control occurs,
whereupon without further action this Agreement will become
immediately operative.
3. Termination Following a Change in Control: (a) In the
event of the occurrence of a Change in Control, the Executive's
employment may be terminated by the Company during the Severance
Period without the Executive becoming entitled to the benefits
provided by Section 4 only upon the occurrence of one or more of
the following events:
(i) The Executive's death;
(ii) The Executive becoming permanently disabled
within the meaning of, and beginning actually to receive
disability benefits pursuant to, the long-term disability
plan of the Company or any Subsidiary in effect for, or
applicable to, the Executive immediately prior to the Change
in Control; or
(iii) Cause.
If the Executive's employment is terminated by the Company during
the Severance Period, other than pursuant to Section 3(a)(i),
3(a)(ii), or 3(a)(iii), the Executive will be entitled to the
benefits provided by Section 4.
(b) On or after the commencement of the Severance Period,
if one or more of the following events (regardless of whether any
other reason, other than Cause as hereinabove provided, for
termination exists or has occurred, including without limitation
the Executive's acceptance and/or commencement of other
employment) occurs, the Executive may terminate the Executive's
employment with the Company and any Subsidiary and become
entitled to the benefits provided by Section 4:
(i) The failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in Control, or
the removal of the Executive as a director of the Company
(or any successor thereto) if the Executive had been a
director of the Company immediately prior to the Change in
Control;
(ii) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities, or duties attached to the position with
the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, a reduction in
the aggregate amount of the Executive's combined base pay
and incentive pay receivable from the Company and its
Subsidiaries, taken as a whole, or the termination or denial
of the Executive's rights to Employee Benefits or a
reduction in the scope or value thereof, except for any such
termination or denial, or reduction in the scope or value,
of any Employee Benefits applicable generally to all
recipients of or participants in such Employee Benefits;
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the
parties hereto provided it has been made in good faith and
in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and
convincing evidence) that a change in circumstances has
occurred following a Change in Control, including without
limitation a change in the scope of the business or other
activities for which the Executive was responsible
immediately prior to the Change in Control, which has
rendered the Executive substantially unable to carry out,
has substantially hindered the Executive's performance of,
or has caused the Executive to suffer a substantial
reduction in, any of the authorities, powers, functions,
responsibilities, or duties attached to the position held by
the Executive immediately prior to the Change in Control,
which situation is not remedied within 10 calendar days
after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation, or reorganization of the Company or transfer
of all or substantially all of its business and/or assets,
unless the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer, or otherwise) to
which all or substantially all of the Company's business
and/or assets have been transferred (directly or by
operation of law) shall have assumed all duties and
obligations of the Company under this Agreement pursuant to
Section 10(a);
(v) The Company relocates its principal executive
offices, or requires the Executive to have the Executive's
principal location of work changed, to any location which is
in excess of 25 miles from the location thereof immediately
prior to the Change in Control, or requires the Executive to
travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties
hereunder at least 20% more (in terms of aggregate days in
any calendar year or in any calendar quarter when annualized
for purposes of comparison to any prior year) than was
required of the Executive in any of the three full calendar
years immediately prior to the Change in Control without, in
either case, the Executive's prior written consent; and/or
(vi) Without limiting the generality or effect
of the foregoing, any material breach of this Agreement by
the Company or any successor thereto.
(c) A termination by the Company pursuant to Section 3(a)
or by the Executive pursuant to Section 3(b) will not affect any
rights which the Executive may have pursuant to any other
agreement, policy, plan, program, or arrangement of the Company
or any Subsidiary providing Employee Benefits (except as provided
in Section 4(a)), which rights will be governed by the terms
thereof.
4. Severance Compensation: (a) If, following the
occurrence of a Change in Control, the Company terminates the
Executive's employment during the Severance Period other than
pursuant to Section 3(a), or if the Executive terminates the
Executive's employment pursuant to Section 3(b), the Company will
pay to the Executive the Severance Benefit in immediately
available funds, in United States dollars, within five business
days after the Termination Date. In addition, for a period of
two years following the Termination Date, the Company will
arrange to provide the Executive Employee Benefits that are
welfare benefits (but not stock option, stock purchase, stock
appreciation, or similar compensatory benefits) substantially
similar to those which the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if
greater, immediately prior to the reduction, termination, or
denial described in Section 3(b)(ii)), except that the level of
any such Employee Benefits to be provided to the Executive may be
reduced in the event of a corresponding reduction applicable to
generally all recipients of or participants in such Employee
Benefits, and an additional period of two years will be
considered service with the Company and its Subsidiaries for the
purpose of determining service credits and benefits due and
payable to the Executive under the Company's retirement income,
supplemental executive retirement, and other benefit plans of the
Company applicable to the Executive, the Executive's dependents,
or the Executive's beneficiaries immediately prior to the
Termination Date. If and to the extent that any benefit
described in the immediately preceding sentence is not or cannot
be paid or provided under any policy, plan, program, or
arrangement of the Company or any Subsidiary, as the case may be,
then the Company will itself pay or provide for the payment of
such Employee Benefits to the Executive, and, if applicable, the
Executive's dependents and beneficiaries. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits
otherwise receivable by the Executive pursuant to this Section
4(a) will be reduced to the extent comparable welfare benefits
are actually received by the Executive from another employer
during the Severance Period following the Executive's Termination
Date.
(b) There will be no right of set-off or counterclaim in
respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement,
except as expressly provided in the last sentence of Section
4(a).
(c) Without limiting the rights of the Executive at law or
in equity, if the Company fails to make any payment or provide
any benefit required to be made or provided hereunder on a timely
basis, the Company will pay interest on the amount or value
thereof at an annualized rate of interest equal to 1.25 times the
so-called composite "prime rate" as quoted from time to time
during the relevant period in the Midwest Edition of The Wall
Street Journal. Such interest will be payable as it accrues on
demand. Any change in such prime rate will be effective on and
as of the date of such change.
(d) Notwithstanding anything to the contrary contained in
this Agreement or in the 1992 Incentive Bonus Plan of the Company
(the "Bonus Plan"), if, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during
the Severance Period other than pursuant to Section 3(a), or if
the Executive terminates the Executive's employment pursuant to
Section 3(b), the Executive will be entitled to an additional
payment in the amount of the Executive's Long-Term Incentive
Awards (as defined in the Bonus Plan), in lieu of any other Long-
Term Incentive Award under the Bonus Plan, (a) calculated as if
the Executive's Operating Unit (as defined in the Bonus Plan) and
the Executive (if applicable) had achieved 100% of its or his
Performance Goals (as defined in the Bonus Plan) and (b) prorated
on the basis of the ratio of the number of months of the
Executive's participation during the Performance Period (as
defined in the Bonus Plan) to which the Long-Term Incentive Award
relates to the aggregate number of months in such Performance
Period.
(e) Notwithstanding anything to the contrary contained in
this Agreement, the parties' respective rights and obligations
under this Section 4 and under Section 7 will survive any
termination or expiration of this Agreement following a Change in
Control or the termination of the Executive's employment
following a Change in Control for any reason whatsoever.
(f) Notwithstanding anything to the contrary contained in
this Agreement, in the 1992 Executive Equity Incentive Plan, as
Amended, or any similar or successor plan (an "Equity Plan"), or
in any agreement evidencing a grant made pursuant to any Equity
Plan, immediately upon the occurrence of a Change in Control, (i)
any rights theretofore granted to the Executive to purchase stock
in the Company upon the exercise of an option, and any
corresponding appreciation rights, will become exercisable in
full and (ii) any risks of forfeiture and prohibitions or
restrictions on transfer pertaining to any restricted shares
theretofore granted to the Executive will lapse.
5. No Mitigation Obligation: The Company hereby
acknowledges that it will be difficult and may be impossible (a)
for the Executive to find reasonably comparable employment
following the Termination Date and (b) to measure the amount of
damages which the Executive may suffer as a result of termination
of employment hereunder. Accordingly, the payment of the
severance compensation to the Executive in accordance with the
terms of this Agreement is hereby acknowledged by the Company to
be reasonable and will be liquidated damages, and the Executive
will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or
otherwise, nor will any profits, income, earnings, or other
benefits from any source whatsoever create any mitigation,
offset, reduction, or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in
the last sentence of Section 4(a).
6. Limitation on Payments and Benefits: Notwithstanding
anything to the contrary contained in this Agreement, if, after
taking into account all amounts or benefits otherwise to be paid
or payable hereunder, any amount or benefit to be paid or
provided under this Agreement would be an "Excess Parachute
Payment," within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor
provision thereto, but for the application of this sentence, then
the payments and benefits to be so paid or provided under this
Agreement will be reduced to the minimum extent necessary (but in
no event to less than zero) so that no portion of any such
payment or benefit, as so reduced, constitutes an Excess
Parachute Payment; provided, however, that the foregoing
reduction will be made only if and to the extent that such
reduction would result in an increase in the aggregate payments
and benefits to be provided, determined on an after-tax basis
(taking into account the excise tax imposed pursuant to Section
4999 of the Code, or any successor provision thereto, any tax
imposed by any comparable provision of state law, and any
applicable federal, state, and local income taxes). The
determination of whether any reduction in such payments or
benefits to be provided under this Agreement is required pursuant
to the preceding sentence will be made at the expense of the
Company, if requested by the Executive or the Company, by the
Company's independent accountants. The fact that the Executive's
right to payments or benefits may be reduced by reason of the
limitations contained in this Section 6 will not of itself limit
or otherwise affect any other rights of the Executive other than
pursuant to this Agreement. In the event that any payment or
benefit intended to be provided under this Agreement or otherwise
is required to be reduced pursuant to this Section 6, the
Executive will be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this
Section 6. The Company will provide the Executive all
information reasonably requested by the Executive to permit the
Executive to make such designation. In the event that the
Executive fails to make such designation within 10 business days
of the Termination Date, the Company may effect such reduction in
any manner it deems appropriate.
7. Legal Fees and Expenses; Security: It is the intent of
the Company that the Executive not be required to incur legal
fees and the related expenses associated with the interpretation,
enforcement, or defense of the Executive's rights under this
Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to
be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the
event that the Company or any other person takes or threatens to
take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder,
the Company irrevocably authorizes the Executive from time to
time to retain counsel of the Executive's choice, at the expense
of the Company as hereinafter provided, to advise and represent
the Executive in connection with any such interpretation,
enforcement, or defense, including without limitation the
initiation or defense of any litigation or other legal action,
whether by or against the Company or any Director, officer,
stockholder, or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive's entering into an
attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a
confidential relationship will exist between the Executive and
such counsel. Without regard to whether the Executive prevails,
in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the
Executive in connection with any of the foregoing.
8. Employment Rights; Termination Prior to Change in
Control: Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employ of the
Company or any Subsidiary prior to or following any Change in
Control. Any termination of the employment of the Executive or
the removal of the Executive from any office or position in the
Company or a Subsidiary following the commencement of any
discussion with a third person that results in a Change in
Control within 90 calendar days after such termination or removal
will be deemed to be a termination or removal of the Executive
after a Change in Control for purposes of this Agreement.
9. Withholding of Taxes: The Company may withhold from
any amounts payable under this Agreement all federal, state,
city, or other taxes that the Company is required to withhold
pursuant to any law or government regulation or ruling.
10. Successors and Binding Agreement: (a) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation, reorganization, or otherwise) to all or
substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required
to perform if no such succession had taken place, provided,
however, that upon the occurrence of the Federated/Macy's Merger
(as that term is defined in the Plan), Macy's will assume all of
the obligations of the Company hereunder by operation of law and
without any further action on the part of any party hereto and
the surviving corporation in such transaction will be the
"Company" for all purposes hereof. This Agreement will be
binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any person
acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger,
consolidation, reorganization, or otherwise (and such successor
will thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable,
or delegatable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto will, without the consent of the other, assign,
transfer, or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10(a), 10(b),
and 10(d). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder
will not be assignable, transferable, or delegatable, whether by
pledge, creation of a security interest, or otherwise, other than
by a transfer by the Executive's will or by the laws of descent
and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 10(c), the Company will have no
liability to pay any amount so attempted to be assigned,
transferred, or delegated.
(d) Executive acknowledges that the Company is exploring
the possibility of establishing a corporate services company (the
"Corporate Services Company") as a wholly owned Subsidiary of the
Company, which Corporate Services Company may become the
principal employer of Executive. In the event that the Corporate
Services Company is established and becomes the principal
employer of Executive, (i) without the consent of the Executive,
the Company may assign its rights and delegate its duties
hereunder to the Corporate Services Company, provided, however,
that no such assignment or delegation will constitute a novation
or otherwise relieve the Company of any of its obligations
hereunder, and (ii) all references to the "Company" in Sections 3
(other than Section 3.b (iv)), 4, 5, 6, 7, 8, 9, 10 (other than
Section 10 (d)), 11, 14, and 16 hereof will be deemed to be to
the Company and/or the Corporate Services Company.
11. Notices: For all purposes of this Agreement, all
communications, including without limitation notices, consents,
requests, or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly
given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five
calendar days after having been mailed by United States
registered or certified mail, return receipt requested, postage
prepaid, or one business day after having been sent for next-day
delivery by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its
principal executive office and to the Executive at the
Executive's principal residence as shown in the Company's most
current records, or to such other address as any party may have
furnished to the other in writing and in accordance herewith,
except that notices of changes of address will be effective only
upon receipt.
12. Governing Law: The validity, interpretation,
construction, and performance of this Agreement will be governed
by and construed in accordance with the substantive laws of the
State of Delaware, without giving effect to the principles of
conflict of laws of such State.
13. Validity: If any provision of this Agreement or the
application of any provision hereof to any person or circumstance
is held invalid, unenforceable, or otherwise illegal, the
remainder of this Agreement and the application of such provision
to any other person or circumstance will not be affected, and the
provision so held to be invalid, unenforceable, or otherwise
illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid, or legal.
14. Miscellaneous: No provision of this Agreement may be
waived, modified, or discharged unless such waiver, modification,
or discharge is agreed to in writing signed by the Executive and
the Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition
or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or
implied with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections
of this Agreement.
15. Counterparts: This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original
but all of which together will constitute one and the same
agreement.
16. Other Benefits: Except as provided in Section 4(d),
neither the provisions of this Agreement nor the severance
compensation, benefits, and other payments provided for hereunder
will reduce or increase any amounts otherwise payable, or in any
other way affect the Executive's rights as an employee of the
Company, whether existing now or hereafter, under any other
agreement or any benefit, incentive, retirement, stock option,
stock bonus, stock purchase, or other plan, program, or
arrangement.
17. Prior Agreement: This Agreement amends and restates
the Agreement, dated as of February 4, 1992 (the "Prior
Agreement"), between the Company and the Executive, which Prior
Agreement will, without further action, be superseded as of the
date hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed and delivered as of the date first above
written.
FEDERATED DEPARTMENT STORES, INC.
By:
Name: Dennis J. Broderick
Title: Senior Vice President
FIRST AMENDMENT
TO EXECUTIVE DEFERRED COMPENSATION PLAN
OF
FEDERATED DEPARTMENT STORES, INC.
1. Effective August 26, 1994, Section 6.1(d) of the Plan
is hereby amended by adding the following sentence as the
penultimate sentence thereof:
"The foregoing notwithstanding, a merger of Federated
Department Stores, Inc. with R.H. Macy & Co., Inc. pursuant to
the Joint Plan of Reorganization of R.H. Macy & Co., Inc. and
certain of its subsidiaries for which Federated Department
Stores, Inc. and R.H. Macy & Co., Inc. are joint plan proponents,
filed with the United States Bankruptcy Court for the Southern
District of New York on July 29, 1994, as the same may be amended
or modified, shall not be deemed a "designated change of control"
of the Company for the purposes of this Plan."
AMENDMENT TO
FEDERATED DEPARTMENT STORES, INC.
RETIREMENT INCOME AND THRIFT INCENTIVE PLAN
The Federated Department Stores, Inc. Retirement Income and
Thrift Incentive Plan (the "Plan") is hereby amended in the
following respect:
Section 6.11 of the Plan is amended in its entirety,
effective as of November 1, 1994, to read as follows:
6.11 Voting of Federated Common Shares Held in
Investment Fund.
6.11.1 Effective November 1, 1994, any
common shares of Federted which are held in the
Investment Fund described in Section 6B below as Fund D
("Fund D") shall be voted, on any matter on whcih such
common shares have a vote, in the manner directed by
the Participants pursuant to this Section 6.11.
6.11.2 Specifically, each Participant who
has any portion of his Account invested in Fund D as of
the latest Valuation Date which occurs on or before the
record date used by Federated to determine the
Federated Common shares eligible to vote on any matter
may direct the Plan as to how a number of the Federated
Common shares held in Fund D as of such record date are
to be voted on such matter. The number of shares
subject to the Participant's direction shall be equal
to the product produced by multiplying the total number
of Federated common shares held in Fund D as of such
record date by a fraction. Such fraction shall have a
numerator equal to the value of the portion of hte
Participant's Accounts which are invested in Fund D
determined as of the latest Valuation Date which occurs
on or before such record date and a denominator equal
to the total value of Fund D as of such Valuation Date.
If a Participant fails to instruct the Plan on how to
vote on any matter the number of Federated common
shares held in Fund D he is entitled to direct, such
shares will not be voted on such matter.
6.11.3 Before any annual or special
meeting of Federated shareholders on or after November
1, 1994, the Committee or a Committee representative
will send each Participant who is entitled to direct
the vote of any Federated common shares held in Fund D
on a matter being voted on at such meeting a form
allowing the Participant to instruct the Plan as to how
to vote such shares on such matter.
IN WITNESS WHEREOF, Federated Department Stores, Inc., the
sponsor of the Plan, has caused its name to be subscribed to this
Plan amendment this 25th day of October, 1994.
FEDERATED DEPARTMENT STORES, INC.
By /s/ John R. Sims
Title Vice President
Date October 25, 1994
<TABLE>
EXHIBIT 11
FEDERATED DEPARTMENT STORES, INC.
Exhibit of Primary and Fully Diluted Earnings Per Share
(thousands, except per share figures)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 29, 1994 October 30, 1993 October 29, 1994 October 30, 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.. 126,600 $44,343 126,311 $20,282 126,545 $80,337 126,278 $47,290
Earnings per share............. $.35 $.16 $.63 $.37
PRIMARY COMPUTATION:
Average number of common
share equivalents:
Shares to be issued to
the U.S. Treasury......... 122 163 122 163
Deferred compensation plan. 85 - 62 -
Stock options.............. 217 175 249 229
Adjusted number of common
and common equivalent
shares outstanding and
adjusted net income..... 127,024 44,343 126,649 20,282 126,978 80,337 126,670 47,290
Primary earnings per
share................... $.35 $.16 $.63 $.37
FULLY DILUTED COMPUTATION:
Additional adjustments to a
fully diluted basis:
Convertible notes.......... 8,564 2,651 - - - - - -
Stock options.............. - - - 5
Adjusted number of
shares outstanding and
net income on a fully
diluted basis........... 135,588 $46,994 126,649 $20,282 126,978 $80,337 126,675 $47,290
Fully diluted earnings
per share............... $.35 $.16 $.63 $.37
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> AUG-31-1994
<PERIOD-END> OCT-29-1994
<CASH> 125,924
<SECURITIES> 0
<RECEIVABLES> 1,986,023
<ALLOWANCES> 0
<INVENTORY> 1,730,602
<CURRENT-ASSETS> 3,977,852<F1>
<PP&E> 2,663,954
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,169,305<F2>
<CURRENT-LIABILITIES> 2,049,816
<BONDS> 2,723,777
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,169,305<F3>
<SALES> 1,926,811
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,185,926
<OTHER-EXPENSES> 611,563
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,897
<INCOME-PRETAX> 78,336<F4>
<INCOME-TAX> 33,993
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,343
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
<FN>
<F1>Supplies and prepaid expenses 52,121
Deferred income tax assets 83,182
<F2>Reorganization value in excess of amounts
allocable to identifiable assets 323,648
Notes receivable 408,141
Other assets 795,710
<F3>Deferred income taxes 802,346
Other liabilities 228,845
Shareholders' equity 2,364,521
<F4>Interest Income 10,911
</FN>
</TABLE>
