<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
JANUARY 29, 1994 1-10951
FEDERATED DEPARTMENT STORES, INC.
7 WEST SEVENTH STREET
CINCINNATI, OHIO 45202
TELEPHONE: (513) 579-7000
INCORPORATED IN DELAWARE I.R.S. NO. 31-0513863
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred
Stock New York Stock Exchange
Senior Convertible Discount Notes Due February 15, 2004 New York Stock Exchange
</TABLE>
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
There were 126,527,235 shares of the Company's Common Stock outstanding as
of April 1, 1994. The aggregate market value of the shares of such Common Stock
held by nonaffiliates of the Company, based upon the last sale price as reported
on the New York Stock Exchange Composite Tape on March 31, 1994, was
approximately $2,778,700,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to Registrant's Annual
Meeting of Shareholders to be held on May 20, 1994 (the "Proxy Statement"), are
incorporated by reference in Part III hereof.
<PAGE> 2
UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) REFERENCES HEREIN TO THE
"COMPANY" INCLUDE FEDERATED DEPARTMENT STORES, INC. AND ITS SUBSIDIARIES AND
(II) REFERENCES TO "1993," "1992" AND "1991" ARE REFERENCES TO THE COMPANY'S
FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992,
RESPECTIVELY.
ITEM 1. BUSINESS
GENERAL. The Company is one of the leading operators of full-line
department stores in the United States, with 219 stores in 26 states as of
January 29, 1994. The Company's stores sell a wide range of merchandise,
including men's, women's and children's apparel and accessories, cosmetics, home
furnishings and other consumer goods, and are diversified by size of store,
merchandising character, and character of community served. The stores are
located at urban or suburban sites, principally in densely populated areas in
the eastern, midwestern, northeastern, northwestern and southeastern regions of
the United States.
The Company conducts its business through the following seven retail
operating divisions: Abraham & Straus/Jordan Marsh, Bloomingdale's, The Bon
Marche, Burdines, Lazarus, Rich's/Goldsmith's and Stern's. The following table
sets forth certain information with respect to the Company's retail operating
divisions:
<TABLE>
<CAPTION>
PRINCIPAL GROSS
YEAR GEOGRAPHIC NUMBER OF 1993 SQUARE
FOUNDED REGION STORES SALES FEET(A)
----------- ---------------- ---------- --------- -----------
(MILLIONS) (THOUSANDS)
<S> <C> <C> <C> <C> <C>
Abraham & Straus/Jordan Marsh.... 1851 Northeast 35 $1,395.3 9,327
Bloomingdale's................... 1872 East 16 1,216.0(b) 4,372
The Bon Marche................... 1890 Northwest 39 826.9 4,697
Burdines......................... 1898 Florida 43 1,222.7 7,321
Lazarus.......................... 1830 Midwest 40 964.9 7,807
Rich's/Goldsmith's............... 1867 Southeast 25 928.6 4,925
Stern's.......................... 1867 Northeast 21 675.0 3,879
--- -------- --------
219 $7,229.4 42,328
=== ======== =======
<FN>
- ---------------
(a) Includes total square footage of store locations, including office, storage,
service and other support space that is not dedicated to direct merchandise
sales, but excludes warehouses and distribution terminals not located at
store sites.
(b) Includes $98.9 million of sales of the Company's Bloomingdale's By Mail
subsidiary.
</TABLE>
Each of the Company's retail operating divisions is a separate subsidiary of the
Company, except that the Abraham & Straus/Jordan Marsh division comprises two
separate subsidiaries of the Company.
The Company provides credit, electronic data processing and other support
functions to its retail operating divisions on an integrated, Company-wide
basis. The Company's financial and credit services subsidiary (FACS Group, Inc.
("FACS")), which is based near Cincinnati, Ohio, establishes and monitors credit
policies on a Company-wide basis, and provides proprietary credit services
(including statement processing and mailing, credit authorizations, new account
development and processing, customer service and collections) to each of the
Company's retail operating divisions. The Company's data processing division
(Federated Systems Group ("FSG")), which is based near Atlanta, Georgia,
provides operational electronic data processing and management information
services to each of the Company's retail operating divisions. In addition, a
specialized staff maintained in the Company's corporate offices in Cincinnati,
provides services for all divisions in such areas as store design and
construction, real estate, insurance, supply purchasing and transportation, as
well as various other corporate office functions. FACS, FSG, a specialized
service subsidiary and certain departments in the Company's corporate offices
offer their services to unrelated third parties as well. In the second quarter
of 1993, the Company centralized in Cincinnati all accounting and merchandise
accounts payable functions for its retail operating divisions, and restructured
the management organization of its distribution functions in the Northeast.
Federated Merchandising, a division of the Company based in New York City,
coordinates the team buying process which enables the Company to centrally
develop and execute consistent Company-wide merchandise strategies while
retaining the ability to tailor merchandise assortments
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and merchandising strategies to the particular character and customer base of
the Company's various department store franchises. In addition, Federated
Merchandising is responsible for private label development for all of the
Company's retail operating divisions other than Bloomingdale's (which has its
own private label program).
The Company and its predecessors have been operating department stores
since 1830. The Company was organized as a Delaware corporation in 1929. On
February 4, 1992, Allied Stores Corporation ("Allied") was merged into the
Company. Both Allied and the Company were among the leading independent
retailers in the United States prior to being acquired by Campeau Corporation
("Campeau") in 1986 and 1988, respectively, in highly leveraged transactions.
During the course of 1989, it became apparent that the indebtedness of Allied
and the Company could not be supported by operations and, on January 15, 1990,
the Company, Allied, and substantially all of their respective subsidiaries
(collectively, the "Federated/Allied Companies") commenced proceedings under
chapter 11 of the United States Bankruptcy Code (the "Reorganization
Proceedings") to reorganize and restructure their acquisition debt and other
liabilities.
The Federated/Allied Companies emerged from bankruptcy pursuant to a plan
of reorganization (the "POR") on February 4, 1992 (the "POR Effective Date").
Pursuant to the POR, among other transactions, (i) the liabilities of the
Federated/Allied Companies were reduced by a net amount of approximately
$5,000.0 million; (ii) the Company distributed to prepetition creditors or
reinstated approximately $3,900.0 million aggregate principal amount of debt
securities and other debt, approximately $398.8 million in cash and
approximately 79.2 million shares of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company; (iii) Allied was merged into the Company; and
(iv) a new Board of Directors of the Company was elected. As a result of the
POR, Campeau (now known as Camdev Corporation) no longer has any direct or
indirect equity interest in the Company. For additional information regarding
the Reorganization Proceedings, see Item 3 "Legal Proceedings."
The Company's executive offices are located at 7 West Seventh Street,
Cincinnati, Ohio 45202, and its telephone number is (513) 579-7000.
EMPLOYEES. As of January 29, 1994, the Company had approximately 67,300
regular full-time and part-time employees. Because of the seasonal nature of the
retail business, the number of employees rises to a peak in the Christmas
season. Approximately 11% of the Company's employees as of January 29, 1994 were
represented by unions. Management considers its relations with employees to be
satisfactory.
SEASONALITY. The department store business is seasonal in nature with a
high proportion of sales and operating income generated in the months of
November and December. Working capital requirements fluctuate during the year,
increasing somewhat in mid-Summer in anticipation of the Fall merchandising
season and increasing substantially prior to the Christmas season when the
Company must carry significantly higher inventory levels.
PURCHASING. The Company purchases merchandise from many suppliers, no one
of which accounted for more than 5% of the Company's net purchases during 1993.
The Company has no long-term purchase commitments or arrangements with any of
its suppliers, and believes that it is not dependent on any one supplier. The
Company considers its relations with its suppliers to be satisfactory.
COMPETITION. The retailing industry, in general, and the department store
business, in particular, are intensely competitive. Generally, the Company's
stores are in competition not only with other department stores in the
geographic areas in which they operate but also with numerous other types of
retail outlets, including specialty stores, general merchandise stores and
off-price and discount stores.
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ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Allen I. Questrom 54 Chairman of the Board and Chief Executive Officer;
Director
James M. Zimmerman 50 President and Chief Operating Officer; Director
Ronald W. Tysoe 41 Vice Chairman of the Board and Chief Financial
Officer; Director
Thomas G. Cody 52 Executive Vice President - Legal and Human Resources
Dennis J. Broderick 45 Senior Vice President, General Counsel and Secretary
John E. Brown 54 Senior Vice President and Controller
Karen M. Hoguet 37 Senior Vice President - Planning and Treasurer
</TABLE>
Allen I. Questrom has been Chairman of the Board and Chief Executive
Officer of the Company since February 1990; prior thereto, he was President and
Chief Executive Officer of the Neiman-Marcus division of the Neiman-Marcus
Group, Inc. from September 1988 to February 1990.
James M. Zimmerman has been President and Chief Operating Officer of the
Company since May 1988.
Ronald W. Tysoe has been Vice Chairman and Chief Financial Officer of the
Company since April 1990; prior thereto, he was President and Treasurer of
Federated Stores, Inc. ("FSI"), formerly Campeau's United States holding company
for the Company and Allied, from 1987 to 1992, Chief Financial Officer of FSI
from April 1990 to February 1992, and President of Campeau from April 1989 to
January 1990.
Thomas G. Cody has been Executive Vice President - Legal and Human
Resources of the Company since May 1988.
Dennis J. Broderick has been Secretary of the Company since July 1993 and
Senior Vice President and General Counsel of the Company since January 1990;
prior thereto, he served as Vice President and General Counsel of Allied and
General Counsel of the Company since May 1988 and Vice President of the Company
since February 1988.
John E. Brown has been Senior Vice President of the Company since September
1988 and Controller of the Company since January 1992.
Karen M. Hoguet has been Senior Vice President - Planning of the Company
since April 1991 and Treasurer of the Company since January 1992; prior thereto,
she served as Vice President of the Company and Allied since December 1988.
ITEM 2. PROPERTIES.
The properties of the Company consist primarily of stores and related
retail facilities, including warehouses and distribution centers. The Company
also owns or leases other properties, including its corporate headquarters and
other facilities at which centralized operational support functions are
conducted. As of January 29, 1994, the Company operated 219 stores, of which 102
stores were entirely or mostly owned and 117 stores were entirely or mostly
leased. See Item 1 "Business--General." In connection with various shopping
center agreements, the Company is obligated to operate certain stores within the
centers for periods of up to 20 years. Some of these agreements require that the
stores be operated under a particular name. See Note 8 to the Consolidated
Financial Statements. Substantially all of the Company's owned and leased real
estate is subject to security interests in favor of certain creditors of the
Company. See Note 11 to the Consolidated Financial Statements.
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The number of stores, and total gross square feet (in thousands) of store
space, operated by the Company as of the end of each of the Company's last two
fiscal years were as follows:
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
------------------------- -------------------------
NUMBER OF GROSS NUMBER OF GROSS
OPERATING DIVISION STORES SQUARE FEET STORES SQUARE FEET
------------------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Abraham & Straus/Jordan Marsh................ 35 9,327 35 9,395
Bloomingdale's............................... 16 4,372 15 4,145
The Bon Marche............................... 39 4,697 39 4,656
Burdines..................................... 43 7,321 43 7,053
Lazarus...................................... 40 7,807 39 7,504
Rich's/Goldsmith's........................... 25 4,925 24 4,679
Stern's...................................... 21 3,879 22 3,887
--- ------ --- ------
219 42,328 217 41,319
=== ====== === ======
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
The POR was confirmed by the United States Bankruptcy Court for the
Southern District of Ohio, Western Division (the "Bankruptcy Court"), in
Consolidated Case No. 1-90-00130 on January 10, 1992 and became effective on the
POR Effective Date. Notwithstanding the confirmation and effectiveness of the
POR, the Bankruptcy Court continues to have jurisdiction to, among other things,
resolve disputed prepetition claims against the Federated/Allied Companies;
resolve matters related to the assumption, assumption and assignment, or
rejection of executory contracts pursuant to the POR; and to resolve other
matters that may arise in connection with or relate to the POR. Except as
described below, provision was made under the POR in respect of all prepetition
liabilities of the Federated/Allied Companies.
Pursuant to the POR, and based on the Company's estimate as of the POR
Effective Date of the amount of such claims that ultimately will be allowed by
the Bankruptcy Court, the Company provided for the payment of all remaining
bankruptcy claims. During 1993, the Company reduced accrued liabilities and
selling, general and administrative expenses by $24.0 million to reflect the
favorable settlement of disputed bankruptcy claims. Management believes that the
Company has adequately provided for the resolution of all bankruptcy claims and
other matters related to the POR remaining at January 29, 1994. (See Note 20 to
Consolidated Financial Statements.)
In connection with the Reorganization Proceedings and the reorganization
proceedings of 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 and the deductibility of approximately $176.3 million of
so-called "break-up fees." These issues 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, where such appeal is currently pending. Management
does not expect that the resolution of these issues will have a material adverse
effect on the Company's financial position, although there can be no assurance
with respect thereto.
The Company and its subsidiaries are also involved in various proceedings
that are 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
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "FD." The following table sets forth for each fiscal
quarter during 1993 the high and low sales prices per share of Common Stock as
reported on the NYSE Composite Tape:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1st Quarter............................. $22.750 $17.375
2nd Quarter............................. 25.000 19.000
3rd Quarter............................. 23.500 18.000
4th Quarter............................. 23.125 19.250
</TABLE>
Approximately 75% of all shares of Common Stock issued pursuant to the POR
were initially subject to substantial restrictions on disposition. All such
restrictions on transfer were terminated between November 17, 1992 and April 5,
1993.
The Company has not paid any dividends on its Common Stock during its two
most recent fiscal years, and does not anticipate paying any dividends on the
Common Stock in the foreseeable future. In addition, the covenants in certain
debt instruments to which the Company is a party restrict the ability of the
Company to pay dividends.
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<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA.
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2, FEBRUARY 3,
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Statements of Operations
Data: |
Net sales, including leased |
department sales................. $7,229,406 $7,079,941 | $6,932,323 $ 7,141,983 $ 7,577,586
---------- ---------- | ---------- ----------- -----------
Cost of sales...................... 4,373,941 4,229,396 | 4,202,223 4,394,976 4,649,656
Selling, general and |
administrative expenses.......... 2,323,546 2,420,684 | 2,463,128 2,611,834 2,678,482
---------- ---------- | ---------- ----------- -----------
Operating income................... 531,919 429,861 | 266,972 135,173 249,448
Interest expense (a)............... (213,544) (258,211) | (504,257) (639,527) (914,557)
Interest income.................... 49,405 60,357 | 67,260 83,585 107,892
Unusual items...................... -- -- | -- -- (1,067,817)(b)
---------- ---------- | ---------- ----------- -----------
Income (loss) before reorganization |
items, income taxes, |
extraordinary |
items and cumulative effect of |
change in accounting principle... 367,780 232,007 | (170,025) (420,769) (1,625,034)
Reorganization items............... -- -- | (1,679,936) (127,032) (142,110)
Federal, state and local income tax |
(expense) benefit................ (170,987) (99,299) | 613,989 276,355 (6,783)
Extraordinary items................ (3,545) (19,699) | 2,165,515 -- --
Cumulative effect of change in |
accounting principle............. -- -- | (93,151) -- --
---------- ---------- | ---------- ----------- -----------
Net income (loss) (c).............. $ 193,248 $ 113,009 | $ 836,392 $ (271,446) $(1,773,927)
========== ========== | ========== =========== ===========
Earnings per Share of Common Stock (d): |
Income before extraordinary |
items............................ $ 1.56 $ 1.19 | $ -- $ -- $ --
Net income......................... 1.53 1.01 | -- -- --
Average number of shares |
outstanding (d)...................... 126,293 111,350 | -- -- --
Depreciation and amortization.......... $ 229,781 $ 230,124 | $ 260,884 $ 278,227 $ 317,575
Capital expenditures................... $ 312,960 $ 207,931 | $ 201,631 $ 93,143 $ 177,792
Balance Sheet Data (at year end) (e):
Cash............................... $ 222,428 $ 566,984 $1,002,482 | $ 453,560 $ 446,195
Working capital.................... 1,967,569 2,227,336 1,923,812 | 1,957,037 2,653,693
Total assets....................... 7,419,427 7,019,770 7,501,145 | 9,150,056 9,592,231
Short-term debt.................... 10,099 12,944 771,605 | 309,268 176,216
Liabilities subject to settlement |
under reorganization |
proceedings...................... -- -- -- | 6,475,129 6,729,168
Long-term debt (including |
preferred shares)................ 2,786,724 2,809,757 3,176,687 | 1,361,778 1,561,778
Shareholders' equity (deficit)..... 2,278,244 2,074,980 1,454,132 | (1,398,528) (1,127,082)
<FN>
- ---------------
(a) Excludes interest on unsecured prepetition indebtedness of $301,576,000,
$290,979,000 and $11,300,000, respectively, for 1991, 1990 and 1989. See
Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(b) Consists primarily of a write-down of the excess of cost over the value of
assets acquired.
(c) See Notes 3, 4, 5 and 13 to the Consolidated Financial Statements.
(d) Per share and share data are not presented for the Company for periods prior
to the POR Effective Date as they are not meaningful because there were no
publicly held shares of common stock of the Company
</TABLE>
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following its acquisition by Campeau. See Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(e) Balance Sheet Data at February 1, 1992 reflects the adoption of fresh-start
reporting in accordance with AICPA Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code."
As a result of the Company's emergence from bankruptcy and its adoption of
fresh-start reporting as of February 1, 1992, the Company's Consolidated Balance
Sheets at and after February 1, 1992 and its Consolidated Statements of
Operations for periods after February 1, 1992 are not comparable to the
Consolidated Financial Statements for prior periods included elsewhere herein.
See the Notes to the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The Company's results of operations and financial condition reflect the
combination of the Federated/Allied Companies in the historical financial
information presented, as well as the consummation of the POR and the
transactions contemplated thereby. Accordingly, the results of operations of the
Company for periods after February 1, 1992 are generally not comparable to
periods prior to February 1, 1992 due to the Reorganization Proceedings and the
effects of the POR and the transactions contemplated thereby.
RESULTS OF OPERATIONS
COMPARISON OF THE 52 WEEKS ENDED JANUARY 29, 1994 AND JANUARY 30, 1993. Net
sales for 1993 were $7,229.4 million, compared to $7,079.9 million for 1992, an
increase of 2.1%. On a comparable store basis, net sales increased 1.9%. The
sales performance reflects the continuing effects of key merchandising
strategies put into effect in 1991, such as team buying and improved inventory
management, as well as improvements in net sales for home-related merchandise,
partially offset by softer apparel sales and the effects of the sluggish economy
in the Northeast. Additionally, net sales for 1992 were positively affected by
strong overall general merchandise sales, a post-hurricane sales surge in South
Florida and the positive impact of a one-time program to clear old inventory
undertaken at the end of 1991.
Cost of sales was 60.5% of net sales for 1993, compared to 59.7% for 1992.
The increase reflects the impact of higher levels of markdowns taken to keep
in-store inventories fresh and fashion-current. In addition, cost of sales for
the first quarter of 1992 benefited from the one-time strategy to clear old
inventory marked down at the end of fiscal 1991. Cost of sales includes charges
of $2.8 million in 1993 compared to $8.5 million in 1992 resulting from the
valuation of merchandise inventory on the last-in, first-out basis.
Selling, general, and administrative expenses were 32.1% of net sales for
1993, compared to 34.2% for 1992. The decrease is primarily due to reduced costs
from streamlining and consolidation of operations at the divisions. In addition,
operating expenses were reduced by $24.0 million in 1993 as a result of an
adjustment to accrued liabilities for the favorable settlement of disputed
bankruptcy claims. Excluding this adjustment, selling, general and
administrative expenses would have been 32.5% of net sales for 1993.
Net interest expense was $164.1 million for 1993, compared to $197.9
million for 1992. Net interest expense for 1993 was positively impacted by the
prepayment of long-term debt. Cash interest payments, net of interest received,
were $136.6 million for 1993, compared to $136.3 million for 1992.
Income tax expense was $171.0 million, excluding extraordinary items, 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 items principally because of state and local income taxes, a
one-time charge of $14.2 million for the impact of the tax rate increase on
deferred taxes and permanent differences arising from the amortization of
reorganization value in excess of amounts allocable to identifiable assets.
Management believes that the turnaround of existing deferred tax
liabilities will generate sufficient taxable income in future periods such that
it is more likely than not that the net deferred tax assets at the end of 1993
will be realized. Management intends to evaluate the realizability of deferred
tax assets quarterly.
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Extraordinary items of $3.5 million in 1993 and $19.7 million in 1992
relate to the after-tax expenses associated with debt prepayments.
COMPARISON OF THE 52 WEEKS ENDED JANUARY 30, 1993 AND FEBRUARY 1,
1992. Net sales for 1992 were $7,079.9 million, compared to $6,932.3 million
for 1991, an increase of 2.1%. During 1991, the Company closed 25 stores. On a
comparable store basis, net sales increased 5.2%. Management believes that
merchandising strategies put in place in the prior two years, including the team
buying process, which enables the Company to centrally direct and coordinate
divisional merchandise assortments, and effective inventory management,
contributed significantly to the Company's improved 1992 sales performance.
Cost of sales was 59.7% of net sales for 1992, compared to 60.6% for 1991.
The decrease was due primarily to improved margins resulting from merchandising
strategies designed to improve inventory turnover rate and the freshness of
merchandise inventories, and sales of old inventory marked down at the end of
1991. Additionally, cost of sales included charges of $8.5 million in 1992,
compared to $23.2 million in 1991 resulting from the valuation of merchandise
inventory on the last-in, first-out basis.
Selling, general and administrative expenses were 34.2% of net sales for
1992, compared to 35.5% for 1991. The decrease was due primarily to reduced
costs from streamlining and consolidation of operations at the divisions and
lower amortization of reorganization value in excess of amounts allocable to
identifiable assets in 1992 compared to amortization of excess of cost over net
assets acquired in 1991.
Net interest expense was $197.9 million for 1992, compared to $437.0
million for 1991. In addition to the impact of the POR, net interest expense for
1992 was positively impacted by the prepayment or redemption of a total of
$950.0 million of long-term debt on May 29, 1992. As a result of the chapter 11
filing, the Company did not accrue $301.6 million of interest on unsecured
prepetition debt obligations in 1991. Cash interest payments, net of interest
received, were $136.3 million for 1992 compared to $122.6 million for 1991,
which included the payment of the final $43.0 million of interest on prepetition
indebtedness required under the terms of a previous debtor-in-possession working
capital financing facility.
Reorganization items in 1991 represented expenses incurred as a result of
the chapter 11 filings by the Federated/Allied Companies and subsequent
reorganization efforts, including, among other things, the closing of 25 stores,
the consolidation of certain operations and the adjustments to record the fair
value of assets and liabilities at February 1, 1992. See Note 4 to the
Consolidated Financial Statements.
Income tax expense was $99.3 million, excluding extraordinary items, for
1992. This amount differs from the amount computed by applying the federal
income tax statutory rate of 34.0% to income before extraordinary items
principally because of permanent differences arising from the amortization of
reorganization value in excess of amounts allocable to identifiable assets and
state and local income taxes.
The extraordinary items in 1992, $19.7 million after taxes, primarily
resulted from non-cash write-offs of accrued financing costs associated with
debt prepayments. The extraordinary item in 1991 represented the gain on debt
discharge resulting from the consummation of the POR. Because the debt was
discharged as a result of a chapter 11 case, no income tax expense was recorded.
See Note 3 to the Consolidated Financial Statements.
In connection with the consummation of the POR, the Company changed its
method of accounting for postretirement benefits other than pensions from
principally a cash basis to the accrual basis in accordance with Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The amount of additional liability
recorded at fresh start represented the incremental amount over the remaining
liability for then current retirees previously recorded in connection with the
acquisition of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand, cash from
operations and certain facilities that are available to it.
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Although net income increased $80.2 million to $193.2 million in 1993, net
cash provided by operating activities decreased $31.1 million to $410.5 million.
The decrease in net cash provided by operating activities resulted primarily
from increased accounts receivable due to higher proprietary credit sales and
lower minimum monthly payment requirements, partially offset by increases in
income tax liabilities.
Net cash used by the Company for all financing activities was $349.9
million in 1993. On March 8, 1993, the Company defeased the entire $355.0
million outstanding principal amount of its 10% Series B Secured Notes due
February 15, 2000 by irrevocably depositing with the trustee therefor an amount
sufficient to prepay the notes. The prepayment was funded from cash on hand.
The Company is a party to a three-year, $380.0 million revolving credit
facility entered into with a syndicate of banks in 1992. From time to time, the
Company has caused letters of credit to be issued thereunder in the ordinary
course of the Company's business. However, the Company has not made any
borrowings under this facility since it was established.
In 1992, the Company also established a facility to finance its
receivables. Among other things, the receivables financing facility provides for
the issuance from time to time of up to $375.0 million of receivables-backed
commercial paper. As of January 29, 1994 and January 30, 1993, there were no
commercial paper borrowings outstanding under this facility.
In connection with the Company's prepayment of its Series B Secured Notes,
certain provisions of the Company's debt instruments were modified to allow the
Company to increase its planned capital expenditures by approximately $460.0
million to approximately $1,210.0 million over the 1993 to 1995 period. Most of
this increase is being invested in or budgeted for new store construction or
acquisition, store expansions and further investments in technology. Management
presently anticipates funding such expenditures from operations. However,
depending upon conditions in the capital and other financial markets and other
factors, the Company may from time to time consider the issuance of debt or
other securities, the proceeds of which could be used to refinance existing debt
or for capital projects or other corporate purposes.
Net cash used in investing activities was $405.1 million in 1993, compared
to $188.1 million in 1992. This increase resulted principally from two factors:
a $111.0 million increase in capital expenditures partially attributable to the
opening of three new stores and the reopening of a hurricane-damaged store in
1993 and a $109.3 million cash payment for the purchase of an investment in a
bankruptcy claim discussed below.
Management believes the department store segment will continue to
consolidate. Accordingly, the Company intends from time to time to consider the
possible acquisition of department store assets and companies.
On December 31, 1993, the Company acquired 50% of a claim held by The
Prudential Insurance Company of America ("Prudential") in the chapter 11
reorganization of R. H. Macy & Co., Inc. ("Macy") for $109.3 million in cash and
a promissory note due December 31, 1996 in the principal amount of $340.0
million. The rate of interest on the promissory note is 3-month LIBOR plus
1.75%, increasing to 2% beginning January 1995.
The claim arises out of Prudential's secured loan to Macy in the principal
amount of $832.5 million. The Prudential-Macy loan bears interest at the rate of
12% (none of which has been paid since Macy's chapter 11 filing in January 1992)
and is secured by mortgages on 70 of Macy's 110 department store properties.
Although the Company is not accruing interest on its investment in the
Prudential bankruptcy claim, management believes that the investment is
adequately collateralized and that the carrying value is not in excess of its
fair market value.
The Company acquired one-half of the Prudential claim with the ultimate
objective of working toward a business combination involving Macy. There can be
no assurance that the Company will be successful in achieving that objective or,
if so, as to the timing and terms thereof.
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
9
<PAGE> 11
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 involving Macy, at levels determined to be prudent
and not to effect any transaction which would be dilutive to existing
stockholders on a long-term basis.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is set forth in the Company's
Consolidated Financial Statements and supplementary data contained in this
report and is incorporated herein by this reference. Specific financial
statements and supplementary data can be found at the pages listed in the
following index.
<TABLE>
<CAPTION>
PAGE
INDEX NUMBER
----- ------
<S> <C>
Management's Report............................................................... F-2
Independent Auditors' Report...................................................... F-3
Consolidated Statements of Operations for the 52 weeks ended January 29, 1994,
January 30, 1993 and February 1, 1992........................................... F-4
Consolidated Balance Sheets at January 29, 1994 and January 30, 1993.............. F-5
Consolidated Statements of Cash Flows for the 52 weeks ended January 29, 1994,
January 30, 1993 and February 1, 1992........................................... F-6
Notes to Consolidated Financial Statements........................................ F-7
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by this item is set forth under "Item 1 -- Election
of Directors" in the Proxy Statement and incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is set forth under "Executive
Compensation" and "Compensation Committee Report on Executive Compensation" in
the Proxy Statement and incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by this item is set forth under "Stock Ownership --
Certain Beneficial Owners" in the Proxy Statement and incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this item is set forth under "Compensation
Committee Interlocks and Insider Participation" in the Proxy Statement and
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS:
10
<PAGE> 12
The list of financial statements required by this item is set forth in Item
8 "Consolidated Financial Statements and Supplementary Data" and is incorporated
herein by reference.
<TABLE>
<CAPTION>
(2) FINANCIAL STATEMENT SCHEDULES:
LOCATION IN
THIS REPORT
-----------
<S> <C> <C>
Schedule II -- Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other than S-2
Related Parties..................................
Schedule V -- Property, Plant and Equipment.................... S-3
Schedule VI -- Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment.... S-4
Schedule VIII -- Valuation and Qualifying Accounts................ S-5
Schedule IX -- Short-Term Borrowings............................ S-6
Schedule X -- Supplementary Income Statement Information....... S-7
</TABLE>
All other schedules are omitted because they are inapplicable, not
required, or the information is included elsewhere in the Consolidated Financial
Statements or the notes thereto.
(3) EXHIBITS:
The following exhibits are filed herewith or incorporated by reference as
indicated below.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
----------- ----------- -------------------------------------
<C> <S> <C>
3.1 Certificate of Incorporation of the Exhibit 3.1 to the Company's
Company (Annex A to the Agreement and Registration Statement on Form 10,
Plan of Merger, dated as of February filed November 27, 1991, as amended
4, 1992, by and between the Company (the "Form 10")
and Allied)
3.1.1 Certificate of Designation of Series Exhibit 3.1.1 to the Form 10
A Junior Participating Preferred
Stock of the Company
3.2 By-Laws of the Company Exhibit 3.2 to the Form 10
4.1 Certificate of Incorporation of the See Exhibit 3.1
Company
4.2 By-Laws of the Company See Exhibit 3.2
4.3 Rights Agreement between the Company Exhibit 4.3 to the Form 10
and the Rights Agent thereunder
4.4 Specimen Stock Certificate Exhibit 4.4 to the Company's
Registration Statement on Form S-1
(Registration No. 33-46902), filed
April 1, 1992, as amended
10.1 Series A Warrant Agreement Exhibit 10.6 to the Form 10
10.1.1 Amendment No. 1, dated as of November --
3, 1993, to the Series A Warrant
Agreement
10.2 Series B Warrant Agreement Exhibit 10.7 to the Form 10
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
----------- ----------- -------------------------------------
<C> <S> <C>
10.3 Credit Agreement, dated as of May 20, Exhibit 10.3 to the Company's Annual
1992 (the "Working Capital Facilities Report on Form 10-K, filed April 23,
Agreement"), among the Company, the 1993 (the "1992 Form 10-K")
lenders named therein and Citibank,
N.A., as Agent and Mellon Bank, N.A.,
Societe Generale, New York Branch and
Chemical Bank, as Co-Agents
(Composite Copy including Amendment
No. 1 thereto)
10.3.1 Amendment No. 2, dated as of July 15, Exhibit 10.3.1 to the 1992 Form 10-K
1992, to the Working Capital
Facilities Agreement
10.3.2 Amendment No. 3, dated as of October Exhibit 10.3.2 to the 1992 Form 10-K
29, 1992, to the Working Capital
Facilities Agreement
10.3.3 Amendment No. 4, dated as of February Exhibit 10.3.3 to the 1992 Form 10-K
28, 1993, to the Working Capital
Facilities Agreement
10.3.4 Amendment No. 5, dated as of January --
6, 1994, to the Working Capital
Facilities Agreement
10.4 Series A Secured Note Agreement Exhibit 10.2 to the Form 10
10.4.1 Amendment No. 1, dated as of May 29, Exhibit 10.4.1 to the 1992 Form 10-K
1992, to the Series A Secured Note
Agreement
10.4.2 Amendment No. 2, dated as of July 24, Exhibit 10.4.2 to the 1992 Form 10-K
1992, to the Series A Secured Note
Agreement
10.4.3 Amendment No. 3, dated as of October Exhibit 10.4.3 to the 1992 Form 10-K
29, 1992, to the Series A Secured
Note Agreement
10.4.4 Amendment No. 4, dated as of February Exhibit 10.4.4 to the 1992 Form 10-K
28, 1993, to the Series A Secured
Note Agreement
10.4.5 Amendment No. 5, dated as of January --
6, 1994, to the Series A Secured Note
Agreement
10.5 Shared Collateral Pledge Agreements Exhibit 4.7 to the Form 10
10.6 Shared Collateral Trust Agreement Exhibit 4.8 to the Form 10
10.7 Senior Convertible Discount Note Exhibit 10.5 to the Form 10
Agreement
10.8 Senior Convertible Discount Note Exhibit 10.8 to the 1992 Form 10-K
Indenture, dated as of April 8, 1993,
between the Company and The First
National Bank of Boston, as Trustee
10.8.1 Form of Senior Convertible Discount Exhibit 10.8.1 to the 1992 Form 10-K
Note
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
----------- ----------- -------------------------------------
<C> <S> <C>
10.9 Loan Agreement, dated as of December Exhibit 10.12 to Allied's Annual
30, 1987 (the "Prudential Loan Report on Form 10-K for the fiscal
Agreement"), among The Prudential year ended January 2, 1988
Insurance Company of America
("Prudential"), Allied and certain
subsidiaries of Allied named therein
10.9.1 Amendment No. 1, dated as of December Exhibit 10.9.1 to the Form 10
29, 1988, to the Prudential Loan
Agreement
10.9.2 Amendment No. 2, dated as of November Exhibit 10.9.2 to the Form 10
17, 1989, to the Prudential Loan
Agreement
10.9.3 Amendment No. 3, dated as of February Exhibit 10.9.3 to the Form 10
5, 1992, to the Prudential Loan
Agreement
10.10 Amended and Restated Pooling and Exhibit 4.10 to Prime Receivables
Servicing Agreement, dated as of Corporation's ("Prime") Form 8-K
December 15, 1992 (the "Pooling and Current Report, dated March 29, 1993
Servicing Agreement"), among the ("Prime's Form 8-K")
Company, Prime and Chemical Bank, as
Trustee
10.10.1 First Amendment, dated as of December --
1, 1993, to the Pooling and Servicing
Agreement
10.10.2 Second Amendment, dated as of --
February 28, 1994, to the Pooling and
Servicing Agreement
10.10.3 Assumption Agreement under the --
Pooling and Servicing Agreement dated
as of September 15, 1993
10.11 Series 1992-1 Supplement, dated as of Exhibit 4.6 to Prime's Registration
December 15, 1992, to the Pooling and Statement on Form 8-A, filed January
Servicing Agreement 22, 1993, as amended ("Prime's Form
8-A")
10.12 Series 1992-2 Supplement, dated as of Exhibit 4.7 to Prime's Form 8-A
December 15, 1992, to the Pooling and
Servicing Agreement
10.13 Series 1992-3 Supplement, dated as of Exhibit 4.8 to Prime's Form 8-K
January 5, 1993, to the Pooling and Current Report, dated January 29,
Servicing Agreement 1993
10.14 Receivables Purchase Agreement, dated Exhibit 10.2 to Prime's Form 8-A
as of December 15, 1992 (the
"Receivables Purchase Agreement"),
among Abraham & Straus, Inc.,
Bloomingdale's, Inc., Burdines, Inc.,
Jordan Marsh Stores Corporation,
Lazarus, Inc., Rich's Department
Stores, Inc., Stern's Department
Stores, Inc., The Bon, Inc. and Prime
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
----------- ----------- -------------------------------------
<C> <S> <C>
10.14.1 First Amendment, dated as of June 23, --
1993, to the Receivables Purchase
Agreement
10.14.2 Second Amendment, dated as of --
December 1, 1993, to the Receivables
Purchase Agreement
10.14.3 Third Amendment, dated as of February --
28, 1994, to the Receivables Purchase
Agreement
10.14.4 First Supplement, dated as of --
September 15, 1993, to the
Receivables Purchase Agreement
10.15 Depositary Agreement, dated as of Exhibit 10.15 to the 1992 Form 10-K
December 31, 1992, among Deerfield
Funding Corporation ("Deerfield"),
the Company and Chemical Bank, as
Depositary
10.16 Liquidity Agreement, dated as of Exhibit 10.16 to the 1992 Form 10-K
December 31, 1992, among Deerfield,
the Company, the financial
institutions named therein and Credit
Suisse, New York Branch, as Liquidity
Agent
10.17 Pledge and Security Agreement, dated Exhibit 10.17 to the 1992 Form 10-K
as of December 31, 1992, among
Deerfield, the Company, Chemical
Bank, as Depositary and Collateral
Agent and the Liquidity Agent
10.18 Commercial Paper Dealer Agreement, Exhibit 10.18 to the 1992 Form 10-K
dated as of December 31, 1992, among
Deerfield, the Company and Goldman
Sachs Money Markets, L.P.
10.19 Commercial Paper Dealer Agreement, Exhibit 10.19 to the 1992 Form 10-K
dated as of December 31, 1992, among
Deerfield, the Company and Shearson
Lehman Brothers, Inc.
10.20 Purchase Agreement, dated as of --
December 31, 1993, among Prudential,
Federated Noteholding Corporation
("FNC") and the Company
10.20.1 Promissory Note, dated as of December --
31, 1993, by FNC to Prudential
10.20.2 Pledge and Security Agreement, dated --
as of December 31, 1993, between FNC
and Prudential
10.20.3 Guarantee Agreement, dated as of --
December 31, 1993, between the
Company and Prudential
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
----------- ----------- -------------------------------------
<C> <S> <C>
10.20.4 Intercreditor Agreement, dated as of --
December 31, 1993, among FNC, the
Company and Prudential
10.20.5 Form of Put Note, dated as of --
December 31, 1993, by FNC to
Prudential
10.21 Tax Sharing Agreement Exhibit 10.10 to the Form 10
10.22 Ralphs Tax Indemnification Agreement Exhibit 10.1 to the Form 10
10.23 1992 Executive Equity Incentive Plan, Exhibit A to the Company's Proxy
as Amended* Statement, filed April 23, 1993
10.24 1992 Incentive Bonus Plan* Exhibit 10.12 to the Form 10
10.25 Form of Severance Agreement* Exhibit 10.13 to the Form 10
10.26 Form of Indemnification Agreement* Exhibit 10.14 to the Form 10
10.27 Master Severance Plan for Key Exhibit 10.1.5 to the Company's
Employees* Annual Report on Form 10-K for the
fiscal year ended February 3, 1990
(the "1989 Form 10-K")
10.28 Performance Bonus Plan for Key Exhibit 10.1.6 to the 1989 Form 10-K
Employees*
10.29 Senior Executive Medical Plan* Exhibit 10.1.7 to the 1989 Form 10-K
10.30 Employment Agreement, dated as of Exhibit 10.1.8 to the 1989 Form 10-K
February 2, 1990, between Allen I.
Questrom and the Company*
10.31 Form of Employment Agreement for --
Executives and Key Employees*
10.32 Supplementary Executive Retirement --
Plan, as Amended*
10.33 Comprehensive Settlement Agreement Exhibit 10.15 to the Form 10
10.34 Executive Deferred Compensation Plan Exhibit 4.1 to the Company's
(adopted October 29, 1993)* Registration Statement on Form S-8
(Registration No. 33-50831), filed
October 29, 1993
10.35 Retirement Income and Thrift Exhibit 4.1 to the Company's
Incentive Plan (as amended and Registration Statement on Form S-8
restated effective as of January 1, (Registration No. 33-59107), filed
1987 and containing all amendments January 14, 1994
through December 31, 1993)*
11.1 Exhibit of Primary and Fully Diluted See Page E-1
Earnings per Share
21 Subsidiaries of the Company --
23 Consent of KPMG Peat Marwick --
24 Powers of Attorney --
<FN>
(b) Reports on Form 8-K. None.
- ---------------
*Constitutes a compensatory plan or arrangement
</TABLE>
15
<PAGE> 17
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FEDERATED DEPARTMENT STORES, INC.
By /s/ DENNIS J. BRODERICK
--------------------------------
DENNIS J. BRODERICK
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Date: April 19, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON APRIL 19, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board and Chief Executive
- --------------------------------------------- Officer (principal executive officer) and
ALLEN I. QUESTROM Director
* Vice Chairman and Chief Financial Officer
- --------------------------------------------- (principal financial officer) and Director
RONALD W. TYSOE
* Senior Vice President and Controller
- --------------------------------------------- (principal accounting officer)
JOHN E. BROWN
*
- --------------------------------------------- Director
ROBERT A. CHARPIE
*
- --------------------------------------------- Director
LYLE EVERINGHAM
*
- --------------------------------------------- Director
MEYER FELDBERG
*
- --------------------------------------------- Director
GEORGE V. GRUNE
*
- --------------------------------------------- Director
REGINALD H. JONES
*
- --------------------------------------------- Director
JOHN K. MCKINLEY
*
- --------------------------------------------- Director
G. WILLIAM MILLER
*
- --------------------------------------------- Director
JOSEPH NEUBAUER
*
- --------------------------------------------- Director
KARL M. VON DER HEYDEN
*
- --------------------------------------------- Director
MARNA C. WHITTINGTON
*
- --------------------------------------------- Director
JAMES M. ZIMMERMAN
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and directors and filed herewith.
By /s/ DENNIS J. BRODERICK
------------------------------
DENNIS J. BRODERICK
ATTORNEY-IN-FACT
16
<PAGE> 18
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Report................................................ F-2
Independent Auditors' Report....................................... F-3
Consolidated Statements of Operations for the 52 weeks ended
January 29, 1994, January 30, 1993 and February 1, 1992.......... F-4
Consolidated Balance Sheets at January 29, 1994 and January 30,
1993............................................................. F-5
Consolidated Statements of Cash Flows for the 52 weeks ended
January 29, 1994, January 30, 1993 and February 1, 1992.......... F-6
Notes to Consolidated Financial Statements......................... F-7
</TABLE>
F-1
<PAGE> 19
MANAGEMENT'S REPORT
To the Shareholders of
Federated Department Stores, Inc.:
The integrity and consistency of the financial statements and financial
statement schedules of Federated Department Stores, Inc., which were prepared in
accordance with generally accepted accounting principles, are the responsibility
of management and properly include some amounts that are based upon estimates
and judgments.
The Company maintains a system of internal accounting controls, which is
supported by a program of internal audits with appropriate management follow-up
action, to provide reasonable assurance, at appropriate cost, that the Company's
assets are protected and transactions are properly recorded. Additionally, the
integrity of the financial accounting system is based on careful selection and
training of qualified personnel, organizational arrangements which provide for
appropriate division of responsibilities and communication of established
written policies and procedures.
The financial statements of the Company have been audited by KPMG Peat
Marwick, independent certified public accountants. Their report expresses their
opinion as to the fair presentation, in all material respects, of the financial
statements and is based upon their independent audit conducted in accordance
with generally accepted auditing standards.
The Audit Review Committee, composed solely of outside directors, meets
periodically with the independent certified public accountants, the internal
auditors and representatives of management to discuss auditing and financial
reporting matters. In addition, the independent certified public accountants and
the Company's internal auditors meet periodically with the Audit Review
Committee without management representatives present and have free access to the
Audit Review Committee at any time. The Audit Review Committee is responsible
for recommending to the Board of Directors the engagement of the independent
certified public accountants, which is subject to shareholder approval, and the
general oversight review of management's discharge of its responsibilities with
respect to the matters referred to above.
Allen I. Questrom
Chairman and Chief Executive Officer
James M. Zimmerman
President and Chief Operating Officer
Ronald W. Tysoe
Vice Chairman and Chief Financial Officer
John E. Brown
Senior Vice President and Controller
F-2
<PAGE> 20
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Federated Department Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Federated
Department Stores, Inc. and subsidiaries (the "Company") as of January 29, 1994
and January 30, 1993, and the related consolidated statements of operations and
cash flows for each of the fifty-two week periods ended January 29, 1994,
January 30, 1993, and February 1, 1992. In connection with our audits of the
consolidated financial statements, we have also audited the accompanying
financial statement schedules. These consolidated financial statements and
financial statement schedules are the responsibility of management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Federated
Department Stores, Inc. and subsidiaries as of January 29, 1994 and January 30,
1993, and the results of their operations and their cash flows for each of the
fifty-two week periods ended January 29, 1994, January 30, 1993, and February 1,
1992, in conformity with generally accepted accounting principles. Further, in
our opinion, the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
On February 4, 1992 the Company emerged from bankruptcy. As described in
Note 1 to the consolidated financial statements, the Company accounted for the
reorganization as of February 1, 1992 and adopted "fresh-start reporting." As a
result, the consolidated statements of operations and cash flows for the
fifty-two weeks ended January 29, 1994 and January 30, 1993, which present the
consolidated results of operations and cash flows of the reorganized entity, are
not comparable to the consolidated statements of operations and cash flows for
the fifty-two week period ended February 1, 1992.
As discussed in Note 5 to the consolidated financial statements, the
Company adopted the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits other than Pensions," and changed its method of
accounting for income taxes to adopt the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," as of February 1,
1992.
KPMG PEAT MARWICK
Cincinnati, Ohio
February 28, 1994
F-3
<PAGE> 21
<TABLE>
<CAPTION>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS, EXCEPT PER SHARE DATA)
================================================================================================
52 WEEKS 52 WEEKS | 52 WEEKS
ENDED ENDED | ENDED
JANUARY 29, JANUARY 30, | FEBRUARY 1,
1994 1993 | 1992
------------ ------------ | ------------
<S> <C> <C> | <C>
Net Sales, including leased department sales..... $7,229,406 $ 7,079,941 | $ 6,932,323
---------- ----------- | -----------
Cost of sales.................................... 4,373,941 4,229,396 | 4,202,223
Selling, general and administrative expenses..... 2,323,546 2,420,684 | 2,463,128
---------- ----------- | -----------
Operating Income................................. 531,919 429,861 | 266,972
Interest expense................................. (213,544) (258,211) | (504,257)
Interest income.................................. 49,405 60,357 | 67,260
---------- ----------- | -----------
Income (Loss) Before Reorganization Items, Income |
Taxes, Extraordinary Items and Cumulative |
Effect of Change in Accounting Principle....... 367,780 232,007 | (170,025)
Reorganization items............................. -- -- | (1,679,936)
---------- ----------- | -----------
Income (Loss) Before Income Taxes, Extraordinary |
Items and Cumulative Effect of Change in |
Accounting Principle........................... 367,780 232,007 | (1,849,961)
Federal, state and local income tax (expense) |
benefit........................................ (170,987) (99,299) | 613,989
---------- ----------- | -----------
Income (Loss) Before Extraordinary Items and |
Cumulative Effect of Change in Accounting |
Principle...................................... 196,793 132,708 | (1,235,972)
Extraordinary items.............................. (3,545) (19,699) | 2,165,515
Cumulative effect of change in accounting |
principle...................................... -- -- | (93,151)
---------- ----------- | -----------
Net Income....................................... $ 193,248 $ 113,009 | $ 836,392
========== =========== | ===========
Earnings per Share: |
Income before extraordinary items.............. $ 1.56 $ 1.19 |
Extraordinary items............................ (.03) (.18) |
---------- ----------- |
Net Income............................. $ 1.53 $ 1.01 |
========== =========== |
<FN>
- ---------------
Earnings per share are not presented for periods prior to the POR Effective
Date as they are not meaningful because there were no publicly held shares of
common stock of the Company.
The accompanying notes are an integral part of these Consolidated Financial
Statements.
</TABLE>
F-4
<PAGE> 22
<TABLE>
<CAPTION>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
================================================================================================
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash.......................................................... $ 222,428 $ 566,984
Accounts receivable........................................... 1,758,935 1,543,834
Merchandise inventories....................................... 1,180,844 1,148,934
Supplies and prepaid expenses................................. 46,660 40,068
Deferred income tax assets.................................... 88,754 90,261
---------- ----------
Total Current Assets.................................. 3,297,621 3,390,081
Property and Equipment -- net................................... 2,576,884 2,478,251
Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets -- net.................................... 337,720 356,482
Notes Receivable................................................ 408,818 421,454
Other Assets.................................................... 798,384 373,502
---------- ----------
Total Assets.......................................... $7,419,427 $7,019,770
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt............................................... $ 10,099 $ 12,944
Accounts payable and accrued liabilities...................... 1,209,744 1,103,289
Income taxes.................................................. 110,209 46,512
---------- ----------
Total Current Liabilities............................. 1,330,052 1,162,745
Long-Term Debt.................................................. 2,786,724 2,809,757
Deferred Income Taxes........................................... 804,181 750,771
Other Liabilities............................................... 220,226 221,517
Shareholders' Equity............................................ 2,278,244 2,074,980
---------- ----------
Total Liabilities and Shareholders' Equity............ $7,419,427 $7,019,770
========== ==========
<FN>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
</TABLE>
F-5
<PAGE> 23
<TABLE>
<CAPTION>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
======================================================================================================================
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, JANUARY 30, | FEBRUARY 1,
1994 1993 | 1992
--------------- --------------- | ---------------
<S> <C> <C> | <C>
Cash flows from operating activities: |
Net income................................................. $ 193,248 $ 113,009 | $ 836,392
Adjustments to reconcile net income to net cash provided by |
operating activities: |
Depreciation and amortization.......................... 207,914 205,554 | 212,186
Amortization of reorganization value in excess of |
amounts allocable to identifiable assets............. 18,762 18,762 | --
Amortization of excess of cost over net assets |
acquired............................................. -- -- | 48,698
Amortization of financing costs........................ 10,163 20,995 | 7,893
Amortization of original issue discount................ 16,846 15,593 | --
Amortization of unearned restricted stock.............. 3,105 5,808 | --
Loss on early extinguishment of debt................... 3,545 19,699 | --
Cumulative effect of change in accounting for |
postretirement benefits other than pensions.......... -- -- | 93,151
Changes in assets and liabilities: |
(Increase) decrease in accounts receivable........... (215,101) (28,456) | 111,174
(Increase) decrease in merchandise inventories....... (31,910) 18,412 | 183,840
(Increase) decrease in supplies and prepaid |
expenses........................................... (6,592) 2,547 | 860
Decrease in excess of cost over net assets |
acquired........................................... -- -- | 133,000
(Increase) decrease in other assets not separately |
identified......................................... 20,229 (20,179) | 238,605
Increase in accounts payable and accrued liabilities |
not separately identified.......................... 70,679 2,898 | 154,787
Increase in current income taxes..................... 65,990 24,520 | 170,942
Increase (decrease) in deferred income taxes......... 54,917 27,225 | (524,829)
Increase (decrease) in other liabilities not |
separately identified.............................. (1,291) 15,169 | (12,692)
----------- ----------- | -----------
410,504 441,556 | 1,654,007
Changes due to reorganization activities -- net............ -- -- | (1,092,774)
----------- ----------- | -----------
Net cash provided by operating activities........ 410,504 441,556 | 561,233
----------- ----------- | -----------
Cash flows from investing activities: |
Purchase of property and equipment......................... (309,536) (198,505) | (201,631)
Disposition of property and equipment...................... 1,097 10,431 | 8,465
Decrease in notes receivable............................... 12,636 -- | 400,383
Increase in investments.................................... (109,325) -- | --
----------- ----------- | -----------
Net cash provided (used) by investing |
activities..................................... (405,128) (188,074) | 207,217
----------- ----------- | -----------
Cash flows from financing activities: |
Debt issued................................................ -- 979,141 | 684,153
Financing costs............................................ (633) (26,518) | (45,774)
Debt repaid................................................ (391,986) (2,133,014) | (502,999)
Increase (decrease) in outstanding checks.................. 35,776 (10,620) | 24,194
Acquisition of treasury stock.............................. (179) -- | --
Issuance of common stock................................... 7,090 502,031 | --
----------- ----------- | -----------
Net cash provided (used) by financing |
activities..................................... (349,932) (688,980) | 159,574
----------- ----------- | -----------
Cash flow effect of reorganization activities -- payment of |
liabilities subject to settlement.......................... -- -- | (379,102)
----------- ----------- | -----------
Net increase (decrease) in cash.............................. (344,556) (435,498) | 548,922
Cash beginning of period..................................... 566,984 1,002,482 | 453,560
----------- ----------- | -----------
Cash end of period........................................... $ 222,428 $ 566,984 | $ 1,002,482
=========== =========== | ===========
Supplemental cash flow information: |
Interest paid.............................................. $ 186,658 $ 197,138 | $ 190,207
Interest received.......................................... 50,019 60,869 | 67,601
Income taxes paid (net of refunds received)................ 49,588 47,554 | 18
Schedule of noncash investing and financing activities: |
Capital lease obligations for new store fixtures......... 3,424 9,426 | --
Property and equipment transferred to other assets....... 5,316 13,395 | 169,515
Investment purchased for promissory note................. 340,000 -- | --
Common stock issued for the Executive Deferred |
Compensation Plan...................................... 686 -- | --
<FN>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
</TABLE>
F-6
<PAGE> 24
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
1. REORGANIZATION AND EMERGENCE FROM CHAPTER 11
Federated Department Stores, Inc. (the "Company") is a retail organization
operating department stores selling a wide range of merchandise including
women's, men's and children's apparel, cosmetics, home furnishings and other
consumer goods.
On February 4, 1992 (the "POR Effective Date"), the Company emerged from
proceedings under chapter 11 ("Chapter 11") of the United States Bankruptcy Code
as the surviving corporation resulting from the Joint Plan of Reorganization
(the "POR") of its predecessor companies, Federated Department Stores, Inc.
("Federated") and Allied Stores Corporation ("Allied"), and substantially all of
their respective subsidiaries (collectively, the "Federated/Allied Companies").
The POR, which was confirmed by the United States Bankruptcy Court, Southern
District of Ohio, Western Division (the "Bankruptcy Court") on January 10, 1992,
resulted in an approximately $5,000.0 million net reduction in the total
indebtedness, liabilities subject to reorganization, and redeemable preferred
stock of the Federated/Allied Companies.
The POR provided for, among other things, the cancellation of certain
indebtedness in exchange for cash, new indebtedness, and/or new equity
securities, the discharge of other prepetition claims, the cancellation of all
prepetition ownership interests in Federated and Allied, the settlement of
certain claims and mutual releases of certain claims of the Federated/Allied
Companies and other persons or entities (including certain affiliated persons or
entities), the assumption or rejection of executory contracts and unexpired
leases to which any Federated/Allied Company was a party, and the election of a
board of directors for the Company (the "Board of Directors").
In addition to the foregoing, on the POR Effective Date and in accordance
with the POR, Allied was merged into the Company. The merger was accounted for
as a combination of entities under common control. As of February 1, 1992, in
accordance with AICPA Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), the Company
adopted "fresh-start reporting" and reflected the effects of such adoption in
the Consolidated Financial Statements for the 52 weeks then ended.
The Chapter 11 cases of the Federated/Allied Companies were commenced on
January 15, 1990 (the "Petition Date"). During the pendency of their Chapter 11
cases, the Federated/Allied Companies discontinued accruing interest on their
unsecured prepetition obligations. The net expense occurring as a result of the
Chapter 11 filings and subsequent reorganization efforts of the Federated/Allied
Companies have been segregated from ordinary operations in the Consolidated
Statements of Operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company adopted the recommended accounting for entities emerging from
Chapter 11 reorganization set forth in the SOP 90-7. Consolidated Financial
Statements as of and subsequent to February 1, 1992 are generally not comparable
to Consolidated Financial Statements prior to February 1, 1992 and are separated
by a black line.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated.
Cash includes cash and liquid investments with original maturities of three
months or less.
Installments of deferred payment accounts receivable maturing after one
year are included in current assets in accordance with industry practice. Such
accounts are accepted on customary revolving credit terms and offer the customer
the option of paying the entire balance on a 25-day basis without incurring
finance charges. Alternatively, customers may make scheduled minimum payments
and incur competitive finance
F-7
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
charges. Minimum payments vary from 4.2% to 100.0% of the account balance,
depending on the size of the balance. Profits on installment sales are included
in income when the sales are made. Finance charge revenues are included as a
reduction of selling, general and administrative expenses.
Substantially all merchandise inventories are valued by the retail method
and stated on the LIFO (last-in, first-out) basis, which is generally lower than
market.
Depreciation and amortization are provided primarily on a straight-line
basis over the shorter of estimated asset lives or related lease terms. Real
estate taxes and interest on construction in progress and land under development
are capitalized. Amounts capitalized are amortized over the estimated lives of
the related depreciable assets.
Reorganization value in excess of amounts allocable to identifiable assets
is being amortized on a straight-line basis over 20 years. Accumulated
amortization was $37.5 million and $18.8 million at January 29, 1994 and January
30, 1993, respectively. The excess of cost over net assets acquired was
amortized on a straight-line basis over 40 years.
Financing costs are amortized over the life of the related debt.
In connection with the adoption of fresh-start reporting, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"). Prior to the adoption of fresh-start reporting,
the Company accounted for income taxes under Statement of Financial Accounting
Standards No. 96 ("SFAS No. 96"). Under both SFAS No. 109 and SFAS No. 96,
deferred income taxes are provided for at the statutory rates on the difference
between financial statement basis and tax basis of assets and liabilities and,
under SFAS No. 109, are classified in the Consolidated Balance Sheets as current
or non-current consistent with the assets and liabilities which give rise to
such deferred income taxes.
Also in connection with the adoption of fresh-start reporting, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits other than Pensions" ("SFAS No. 106"),
which requires that the cost of these benefits be recognized in the financial
statements over an employee's term of service with the Company. (See Note 5.)
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" was issued in November 1992, and must be
implemented by the first quarter of 1994. The adoption of this pronouncement
will not have a material effect on results of operations or financial position.
Earnings per share are computed on the basis of daily average number of
shares outstanding during the year. Any dilution from the potential issuance of
shares under the 1992 Executive Equity Incentive Plan, as Amended (the "Equity
Plan") and the Executive Deferred Compensation Plan (the "deferred compensation
plan") would be less than 3.0%. Fully diluted earnings per share include the
effect of the potential issuance of shares for the above items as well as for
the Senior Convertible Discount Notes and, unless disclosed, any such dilution
would be less than 3.0%.
3. EXTRAORDINARY ITEMS
The extraordinary item for the 52 weeks ended January 29, 1994 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.
On May 28, 1992, the Company completed a public offering of 46.0 million
shares of Common Stock. The net proceeds from the stock offering of $502.0
million and cash on hand were applied to the prepayment or redemption of a total
of $950.0 million of long-term debt. During the 52 weeks ended January 30, 1993,
the Company recorded an extraordinary item of $13.6 million, net of income tax
benefit of $8.8 million, resulting primarily from the non-cash write-off of
accrued financing costs associated with the debt prepayments.
F-8
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
On December 15, 1992, Prime Receivables Corporation ("Prime"), an indirect
wholly owned special-purpose financing subsidiary of the Company, completed the
public offering of $981.0 million ($979.1 million discounted amount) of
asset-backed debt securities. In connection with the offerings, the Company's
former receivables financing facilities were terminated. During the 52 weeks
ended January 30, 1993, the Company recorded an extraordinary item of $6.1
million, net of income tax benefit of $3.9 million, resulting primarily from the
non-cash write-off of accrued financing costs associated with the prepayment of
the receivables facilities.
The extraordinary item for the 52 weeks ended February 1, 1992 was a gain
resulting from the discharge of prepetition claims against the Federated/Allied
Companies during Chapter 11. The value of cash and securities distributed was
$2,165.5 million less than the allowed claims.
4. REORGANIZATION ITEMS
The net expense incurred as a result of the Chapter 11 filings and
subsequent reorganization efforts has been segregated from ordinary operations
in the Consolidated Statements of Operations.
<TABLE>
<CAPTION>
52 WEEKS ENDED
FEBRUARY 1,
1992
---------------
(MILLIONS)
<S> <C>
Adjustments to fair value................... $ 1,231.4
Restructuring costs......................... 378.8
Professional fees and other expenses related
to bankruptcy............................. 110.8
Interest income............................. (41.1)
---------
$ 1,679.9
=========
</TABLE>
Adjustments to fair value reflect the net change to state assets and
liabilities at fair value. Restructuring costs include costs and expenses from
closing of facilities, consolidation of operations, and certain expenses related
to the rejection of executory contracts as well as gains or losses from the
disposition of related assets. Interest income is attributable to the
accumulation of cash and short-term investments subsequent to the Petition Date.
5. CUMULATIVE EFFECT OF ACCOUNTING CHANGES
In connection with the adoption of fresh-start reporting, the Company
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits other
than Pensions," as of February 1, 1992. The cumulative effect of the change on
retained earnings prior to the adoption of fresh-start reporting at February 1,
1992 was $93.2 million, net of income tax benefit of $59.5 million. The Company
also adopted SFAS No. 109, "Accounting for Income Taxes," as of February 1,
1992. The cumulative effect of the change to SFAS No. 109 was not material. (See
Note 13.)
6. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Due from customers............................... $ 1,702.2 $ 1,498.7
Less allowance for doubtful accounts............. 36.9 45.4
--------- ---------
1,665.3 1,453.3
Other receivables................................ 93.6 90.5
--------- ---------
Net receivables.................................. $ 1,758.9 $ 1,543.8
========= =========
</TABLE>
Sales through the Company's credit plans were $3,743.1 million, $3,575.2
million and $3,512.8 million for the 52 weeks ended January 29, 1994, January
30, 1993 and February 1, 1992, respectively.
F-9
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
Finance charge revenues amounted to $243.6 million, $225.1 million and
$225.7 million for the 52 weeks ended January 29, 1994, January 30, 1993 and
February 1, 1992, respectively.
7. INVENTORIES
Merchandise inventories were $1,180.8 million at January 29, 1994, compared
to $1,148.9 million at January 30, 1993. Inventories were $11.3 million lower at
January 29, 1994 and $8.5 million lower at January 30, 1993 than they would have
been had the retail method been applied using the first-in, first-out method.
The application of the LIFO method resulted in pre-tax charges of $2.8 million
for the 52 weeks ended January 29, 1994 and $8.5 million for the 52 weeks ended
January 30, 1993. As a result of the adoption of fresh-start reporting,
merchandise inventories were adjusted to the estimated fair market value as of
February 1, 1992, and the LIFO inventory cost, therefore, approximated the cost
of such inventory using the first-in, first-out method.
8. PROPERTIES AND LEASES
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Land............................................. $ 446.0 $ 446.5
Buildings on owned land.......................... 899.8 873.3
Buildings on leased land and leasehold
improvements................................... 549.4 509.0
Store fixtures and equipment..................... 996.4 782.9
Property not used in operations.................. 6.6 6.1
Leased properties under capital leases........... 49.0 50.0
--------- ---------
2,947.2 2,667.8
Less accumulated depreciation and amortization... 370.3 189.5
--------- ---------
$ 2,576.9 $ 2,478.3
========= =========
</TABLE>
Buildings on leased land and leasehold improvements include approximately
$160.8 million at January 29, 1994 and $161.2 million at January 30, 1993 of
intangible assets relating to favorable leases which are being amortized over
the related lease terms.
In connection with various shopping center agreements, the Company is
obligated to operate certain stores within the centers for periods of up to 20
years. Some of these agreements require that the stores be operated under a
particular name.
The Company leases a portion of the real estate and personal property used
in its operations. Most leases require the Company to pay real estate taxes,
maintenance and other executory costs; some also require additional payments
based on percentages of sales and some contain purchase options.
F-10
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
Minimum rental commitments (excluding executory costs) at January 29, 1994,
for noncancellable leases are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES TOTAL
------- --------- ---------
(MILLIONS)
<S> <C> <C> <C>
Fiscal year:
1994............................... $ 9.6 $ 80.2 $ 89.8
1995............................... 8.5 75.1 83.6
1996............................... 8.3 70.9 79.2
1997............................... 8.3 61.9 70.2
1998............................... 8.2 55.7 63.9
After 1998......................... 76.4 505.3 581.7
------ ------- --------
Total minimum lease payments......... 119.3 $ 849.1 $ 968.4
======= ========
Less amount representing interest.... 62.5
------
Present value of net minimum capital
lease payments..................... $ 56.8
======
</TABLE>
Capital leases are included in the Consolidated Balance Sheets as property
and equipment while the related obligation is included in short-term ($3.0
million) and long-term ($53.8 million) debt. Amortization of capital leases is
included in depreciation and amortization expense. Total minimum lease payments
shown above have not been reduced by minimum sublease rentals of approximately
$1.4 million on capital leases and $4.0 million on operating leases.
Rental expense consists of:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS | 52 WEEKS
ENDED ENDED | ENDED
JANUARY 29, JANUARY 30, | FEBRUARY 1,
1994 1993 | 1992
------------ ------------ | ------------
(MILLIONS) |
<S> <C> <C> | <C>
Real estate (excluding executory costs) |
Capital leases -- |
Contingent rentals.......................... $ 3.4 $ 3.5 | $ 3.0
Operating leases -- |
Minimum rentals............................. 68.5 63.6 | 61.2
Contingent rentals.......................... 8.7 8.5 | 8.9
------ ------ | ------
80.6 75.6 | 73.1
------ ------ | ------
Less income from subleases -- |
Capital leases.............................. 0.8 0.8 | 0.7
Operating leases............................ 1.2 6.1 | 9.3
------ ------ | ------
2.0 6.9 | 10.0
------ ------ | ------
$ 78.6 $ 68.7 | $ 63.1
====== ====== | ======
Personal property -- |
Operating leases............................ $ 38.1 $ 36.4 | $ 38.9
====== ====== | ======
</TABLE>
9. NOTES RECEIVABLE
On May 3, 1988, Federated sold its Bullock's/Bullocks-Wilshire, Filene's,
Foley's and I. Magnin divisions. The proceeds from the sales included $800.0
million in notes receivable. Federated obtained $704.0 million in cash by
transferring the notes to grantor trusts, which borrowed such amount under note
monetization facilities (see Note 11) and distributed the proceeds to Federated.
At the end of fiscal year 1991, Federated received $400.0 million pursuant to a
letter of credit which secured the payment of a $400.0 million promissory note
for the sale of Federated's Bullock's/Bullocks-Wilshire and I. Magnin divisions.
The remaining $400.0 million note receivable bears interest at 9 1/2% and is
supported by a letter of credit.
F-11
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
10. INVESTMENT IN SECURED CLAIM
On December 31, 1993, the Company acquired 50% of a claim held by The
Prudential Insurance Company of America ("Prudential") in the chapter 11
reorganization of R. H. Macy & Co., Inc. ("Macy") for $109.3 million in cash and
a promissory note (the "Promissory Note") due December 31, 1996 in the principal
amount of $340.0 million (see Note 11). The transaction also provided the
Company with an option to acquire the remaining 50% of Prudential's claim within
three years. The investment is included in other assets on the Company's
Consolidated Balance Sheet.
The claim arises out of Prudential's secured loan to Macy in the principal
amount of $832.5 million. The Prudential-Macy loan bears interest at the rate of
12% (none of which has been paid since Macy's chapter 11 filing in January 1992)
and is secured by mortgages on 70 of Macy's 110 department store properties.
Although the Company is not accruing interest on its investment in the
Prudential bankruptcy claim, management believes that the investment is
adequately collateralized and that the carrying value is not in excess of its
fair market value (see Note 18).
11. FINANCING
Pursuant to the POR, the Company issued the Series A Secured Notes, Series
B Secured Notes, Series C Secured Notes, Series D Secured Notes, Series E
Secured Notes, and the Senior Convertible Discount Notes (the "Convertible
Notes"). In addition, in consideration of certain distributions under the POR, a
letter of credit facility (the "LC Facility") was made available to the Company.
On May 29, 1992, the net proceeds of $502.0 million from a public offering
of 46.0 million shares of Common Stock and cash on hand were used to prepay a
total of $950.0 million of long-term debt. The indebtedness prepaid included all
of the Company's Series C, D, and E Secured Notes, approximately $170.0 million
of the Company's Series A Secured Notes and approximately $199.0 million of the
Company's Series B Secured Notes. In connection with the stock offering, the
Company entered into a three-year revolving credit loan and letter of credit
agreement (the "Working Capital Facility" described below). This Working Capital
Facility replaced the LC Facility.
On December 15, 1992, Prime completed a public offering of a total of
$981.0 million ($979.1 million discounted amount) of asset-backed debt
securities in four separate classes, as described below. The net proceeds from
the offerings have been used by Prime to finance its purchases of revolving
consumer credit card receivables generated by the Company's department store
operations and to prepay approximately $722.6 million of balances outstanding
under the receivables financing facilities which were terminated in connection
with the offerings. On January 5, 1993, another indirect wholly owned
special-purpose financing subsidiary of the Company entered into a liquidity
facility with a syndicate of banks providing support for the issuance of up to
$375.0 million of receivables-backed commercial paper.
On March 8, 1993, the Company defeased the entire $355.0 million
outstanding principal amount of its Series B Secured Notes. In addition, the
Series A Secured Notes, which were scheduled to be repaid with annual
installments beginning on February 15, 1997 and extending through February 15,
2000, were amended to be payable in full on February 15, 1997.
F-12
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
Short-term and long-term debt were as follows:
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------- ----------------
(MILLIONS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt........................ $ 10.1 $ 12.9
-------- --------
Total short-term debt................................. $ 10.1 $ 12.9
======== ========
Long-term debt:
Receivables backed certificates.......................... $ 979.5 $ 979.2
Note monetization facility............................... 352.0 352.0
Mortgage facility........................................ 345.1 346.5
Promissory note.......................................... 340.0 --
Series A secured notes................................... 289.2 302.9
Series B secured notes................................... -- 355.0
Senior convertible discount notes........................ 289.0 272.5
Subsidiary trade obligations............................. 101.5 101.5
Capital leases........................................... 53.8 54.1
Other.................................................... 36.6 46.1
-------- --------
Total long-term debt.................................. $2,786.7 $2,809.8
======== ========
</TABLE>
Future maturities of long-term debt, other than capital leases and
including unamortized original issue discount of $19.9 million, are shown below:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Fiscal year:
1995.............................................. $ 108.0
1996.............................................. 344.7
1997.............................................. 1,012.0
1998.............................................. 187.6
1999.............................................. 503.2
After 1999........................................ 597.3
</TABLE>
The following summarizes certain provisions of the Company's long-term
debt:
RECEIVABLES BACKED CERTIFICATES
The four classes of securities are: (i) $450.0 million in aggregate
principal amount of 7.05% Class A-1 Asset-Backed Certificates, Series 1992-1 due
December 15, 1997; (ii) $450.0 million in aggregate principal amount of 7.45%
Class A-2 Asset-Backed Certificates, Series 1992-2 due December 15, 1999; (iii)
$40.5 million in aggregate principal amount of 7.55% Class B-1 Asset-Backed
Certificates, Series 1992-1 due January 15, 1998; and (iv) $40.5 million in
aggregate principal amount of 7.95% Class B-2 Asset-Backed Certificates, Series
1992-2 due January 18, 2000. The certificates represent undivided interests in
the assets of a master trust originated by Prime.
RECEIVABLES-BACKED COMMERCIAL PAPER
The borrowings are secured by an interest in the master trust originated by
Prime and are subject to interest rate caps of 7% in 1994 and 10% thereafter. As
of January 29, 1994 and January 30, 1993, there were no borrowings outstanding
under the commercial paper program or the liquidity facility.
F-13
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
NOTE MONETIZATION FACILITY
On May 3, 1988, Federated sold certain divisions for consideration
consisting of two $400.0 million promissory notes. Federated subsequently
transferred the notes to grantor trusts of which it is the beneficiary. The
trusts borrowed $704.0 million under note monetization facilities, using the
notes as collateral, and distributed the proceeds of such borrowing to
Federated. At the end of fiscal year 1991, Federated received $400.0 million
pursuant to a letter of credit which secured the payment of a $400.0 million
promissory note for the sale of Federated's Bullock's/Bullocks-Wilshire and I.
Magnin divisions. Of the $400.0 million cash received, $352.0 million was
treated as in-substance defeasance of the indebtedness incurred by one of the
grantor trusts. The other trust's borrowing under the remaining note
monetization facility matures in two equal installments on May 3, 1997 and 1998,
and bears interest at fluctuating interest rates based on LIBOR, subject to
certain adjustments. An interest rate swap agreement was entered into for the
remaining note monetization facility which, in effect, converted the variable
interest rate to a fixed rate of 10.344%. The Company is not an obligor on the
borrowing under the note monetization facility, and the lender's recourse
thereunder is limited to the trust's assets and the Company's interest in the
trust.
MORTGAGE FACILITY
Certain of the Company's real estate subsidiaries are parties to a mortgage
loan facility providing for secured borrowings. Under an amendment entered into
pursuant to the POR, borrowings under the facility will mature in 2002 and bear
interest at 9.99% per annum. Borrowings under the facility are secured by liens
on certain real property.
PROMISSORY NOTE
On December 31, 1993, the Company acquired 50% of a claim held by
Prudential in the chapter 11 reorganization of Macy for $109.3 million in cash
and the Promissory Note due December 31, 1996 in the principal amount of $340.0
million. The note bears interest at 3-month LIBOR plus 1.75%, increasing to 2%
beginning January 1995. The Promissory Note is mandatorily prepayable in certain
circumstances.
THE SERIES A SECURED NOTES
The Series A Secured Notes (as amended on March 8, 1993) are secured
obligations of the Company which mature on February 15, 1997 and bear interest
at the rate per annum equal to, at the Company's option, either (i) Citibank's
Alternate Base Rate III plus 1.5% (the "Base Rate") or (ii) LIBOR plus 2.5% (the
"LIBOR Rate"). Interest at the Base Rate is payable quarterly. Interest at the
LIBOR Rate is payable at the end of each one-, two-, three-, or six-month period
(a "LIBOR Interest Period"), as selected by the Company, except that, with
respect to any LIBOR Interest Period of six months, accrued and unpaid interest
will be payable at the end of the third and sixth months of such LIBOR Interest
Period.
Under certain circumstances, the Company will be required to apply to the
repayment or redemption of the Series A Secured Notes a portion of the net
proceeds realized from (i) the sale, conveyance, or other disposition of
collateral securing the Series A Secured Notes or (ii) the sale by the Company
for its own account of shares of its capital stock.
THE SENIOR CONVERTIBLE DISCOUNT NOTES
The Convertible Notes are unsecured obligations of the Company which mature
on February 15, 2004 and bear interest at the rate of 6.0% payable semiannually
on February 15 and August 15, commencing August 15, 1995; provided, however,
that such interest rate will be reset effective as of February 15, 1995 to a
rate (not to exceed 10% per annum) equal to the sum of (i) the average rate for
hypothetical Eight-Year Treasury Notes during the 20 consecutive trading days
ending February 15, 1995 and (ii) 200 basis points, unless the per share closing
price of the Common Stock is at least equal to $32.00 or $35.00, respectively,
for
F-14
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
20 consecutive trading days in any of the first or second 12-month periods
following February 15, 1993. The Convertible Notes will not bear cash interest
prior to February 15, 1995, but will accrete from the deemed issue price as of
the POR Effective Date of $835.81 per $1,000 of stated principal amount to such
stated principal amount at the rate of 6.0% per annum compounded semiannually
during the period from February 3, 1992 to February 15, 1995.
On each of February 15, 2002 and 2003, the Company will pay an amount equal
to 33.3% of the aggregate stated principal amount of the Convertible Notes
initially outstanding, and will pay any remaining balance on February 15, 2004,
in each case together with accrued interest to the date of payment. In addition,
subject to the limitations contained in certain other debt instruments to which
the Company is a party, at any time on or after February 15, 1995, the Company
may make optional prepayments or redemptions of the Convertible Notes in whole
or part. All such prepayments will be made at 100% of the stated principal
amount so prepaid or redeemed, together with interest accrued to the date of
prepayment or redemption.
At any time at the option of a holder of Convertible Notes, such holder
will have the right to convert the principal of any such holder's Convertible
Notes that is $100,000 stated principal amount or an integral multiple of such
amount (or such lesser stated principal amount that represents all of such
holder's Convertible Notes) into fully-paid and non-assessable shares of Common
Stock at the rate of 27.86 shares of Common Stock for each $1,000 stated
principal amount of Convertible Notes, provided that such conversion rate will
be appropriately adjusted in order to prevent dilution of such conversion rights
in the event of certain changes in or events affecting the Common Stock and
certain consolidations, mergers, sales, leases, transfers, or other dispositions
to which the Company is a party. In addition, if at any time the closing per
share price of the Common Stock is $42.00 or more for 20 consecutive trading
days, or if the aggregate outstanding stated principal amount of the Convertible
Notes is $12.5 million or less, the Company may require the conversion of all
outstanding Convertible Notes into Common Stock.
As of January 29, 1994, holders of $158.0 million of the Convertible Notes
have exchanged such notes, per the agreement, for registered notes having the
same terms as the original unregistered notes.
SUBSIDIARY TRADE OBLIGATIONS
In addition to the cash distribution made on the POR Effective Date, the
holders of certain allowed general unsecured prepetition claims against certain
of the Company's subsidiaries are entitled pursuant to the POR to receive an
additional cash payment on February 4, 1995.
The obligations of the applicable subsidiaries of the Company (the
"Subsidiary Trade Obligors") to make such payments (the "Subsidiary Trade
Obligations") have been estimated by the Company at $101.5 million in the
aggregate, exclusive of interest. The Subsidiary Trade Obligations bear interest
at the rate of 6.94% per annum, payable annually on February 15, commencing on
February 15, 1993. The Subsidiary Trade Obligations are unsecured obligations of
the applicable Subsidiary Trade Obligors, guaranteed by the Company on a
subordinated basis. The terms of the POR relating to the Subsidiary Trade
Obligations include certain restrictions on, among other things, the incurrence
of indebtedness by the Subsidiary Trade Obligors and the payment of dividends by
the Subsidiary Trade Obligors or the Company.
WORKING CAPITAL FACILITY
On May 29, 1992, the Company entered into a three-year revolving credit
loan and letter of credit agreement (the "Revolving Credit Agreement") with a
syndicate of banks. The Revolving Credit Agreement, which expires on April 3,
1995, provides for direct borrowings and the issuance of letters of credit in an
aggregate amount of up to $380.0 million (the "Working Capital Facility"). The
rate of interest on the borrowings is LIBOR plus 2% (1.5% beginning May 1994)
per annum or the Base Rate (described in the Revolving Credit Agreement) plus 1%
(0.5% beginning May 1994) per annum payable quarterly in arrears. A commitment
fee of 0.5% per annum is payable quarterly in arrears on the average daily
unused portion of the
F-15
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
facility. Fees for outstanding letters of credit are 1.5% (1% beginning May
1994) per annum for outstanding trade letters of credit and 2% (1.5% beginning
May 1994) per annum for outstanding stand-by letters of credit. The Company's
obligations under the Revolving Credit Agreement are secured by the stock of
certain operating subsidiaries. The Revolving Credit Agreement contains
restrictive covenants, including limitations on capital expenditures, additional
borrowings and dividends; requires the Company to achieve certain financial
ratios; and requires an annual "clean-up" during the fourth fiscal quarter of
each year. During 1993 and 1992, there were no revolving credit borrowings under
the Working Capital Facility and, as of January 29, 1994 and January 30, 1993,
the aggregate face amount of letters of credit outstanding was $64.1 million and
$86.3 million, respectively.
Interest and financing costs were as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 | FEBRUARY 1, 1992
---------------- ---------------- | ----------------
(MILLIONS) |
<S> <C> <C> | <C>
Interest on debt......................... $197.5 $232.0 | $479.8
Amortization of financing costs.......... 10.2 21.0 | 18.3
Interest on capital leases............... 6.0 5.3 | 6.4
------ ------ | ------
Subtotal............................ 213.7 258.3 | 504.5
Less: |
Interest capitalized on construction..... (0.2) (0.1) | (0.2)
Interest income.......................... (49.4) (60.3) | (67.3)
------ ------ | ------
$164.1 $197.9 | $437.0
====== ====== | ======
</TABLE>
Up to $600.0 million of combined borrowings under the Series A Secured
Notes, the Promissory Note and the Working Capital Facility are subject to
interest rate caps of 7% in 1994. Interest expense excludes interest on
unsecured prepetition debt obligations of $301.6 million for the 52 weeks ended
February 1, 1992.
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Merchandise and expense accounts payable........ $ 833.4 $ 710.0
Restructuring and consolidation costs........... 71.5 105.9
Taxes other than income taxes................... 52.5 51.9
Accrued wages and vacations..................... 50.3 51.9
Accrued interest................................ 25.3 28.2
Other........................................... 176.7 155.4
--------- ---------
$ 1,209.7 $ 1,103.3
========= =========
</TABLE>
13. TAXES
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993
----------------- ----------------
(MILLIONS)
<S> <C> <C>
Income from operations.................... $ 171.0 $ 99.3
Extraordinary items....................... (2.3) (12.7)
------- -------
Total income taxes........................ $ 168.7 $ 86.6
======= ======
</TABLE>
F-16
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Income tax expense (benefit) attributable to income (loss) from operations
is as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 | FEBRUARY 1, 1992
----------------------------- ------------------------------ | ------------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL | CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- ------- | ------- -------- -------
(MILLIONS) |
<S> <C> <C> <C> <C> <C> <C> | <C> <C> <C>
Federal................. $127.9 $ 10.4 $138.3 $ 64.4 $ 14.2 $ 78.6 | $(25.9) $(457.5) $(483.4)
State and local......... 33.6 (0.9) 32.7 16.1 4.6 20.7 | 42.6 (173.2) (130.6)
------ ------ ------ ------ ------- ------- | ------ ------- -------
$161.5 $ 9.5 $171.0 $ 80.5 $ 18.8 $ 99.3 | $ 16.7 $(630.7) $(614.0)
====== ====== ====== ====== ======= ======= | ====== ====== =======
</TABLE>
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. The income tax expense (benefit) attributable to
income (loss) from operations reported differs from the expected tax computed by
applying the federal income tax statutory rate of 35% for the 52 weeks ended
January 29, 1994 and 34% for the 52 weeks ended January 30, 1993 and February 1,
1992 to income (loss) before income taxes, extraordinary items and cumulative
effect of change in accounting principles. The reasons for this difference and
their tax effects are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 | FEBRUARY 1, 1992
---------------- ---------------- | ----------------
(MILLIONS) |
<S> <C> <C> | <C>
Expected tax............................... $128.7 $ 78.9 | $ (629.0)
Permanent differences arising from: |
Amortization of intangible assets........ 6.6 6.4 | 16.6
Certain non-deductible reorganization |
items................................. -- -- | 13.3
Effect of federal tax rate change on |
deferred income taxes.................... 14.2 -- | --
Effect of consummation of POR.............. -- -- | 68.2
State and local income taxes, net of |
federal income tax expense (benefit)..... 21.2 13.7 | (86.2)
Other...................................... 0.3 0.3 | 3.1
------ -------- | --------
$171.0 $ 99.3 | $ (614.0)
====== ======== | =========
</TABLE>
F-17
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities accounted for on a cash
basis for tax purposes..................... $ 130.1 $ 144.2
Postretirement benefits other than pensions... 78.4 78.3
Capital lease debt............................ 22.7 23.1
Allowance for doubtful accounts............... 14.8 17.7
Alternative minimum tax credit
carryforwards.............................. 21.0 25.8
Other......................................... 46.6 32.1
--------- ---------
Total gross deferred tax assets............ 313.6 321.2
--------- ---------
Deferred tax liabilities:
Excess of book basis over tax basis of
property and equipment..................... (605.9) (593.9)
Prepaid pension expense....................... (95.2) (91.0)
Deferred gain from sale of divisions.......... (82.2) (80.1)
Merchandise inventories....................... (68.1) (76.4)
Effects of reorganization transactions........ (167.8) (130.9)
Other......................................... (9.8) (9.4)
--------- ---------
Total gross deferred tax liabilities....... (1,029.0) (981.7)
--------- ---------
Net deferred tax liability................. $ (715.4) $ (660.5)
========= =========
</TABLE>
As of January 29, 1994, the Company had alternative minimum tax credit
carryforwards of $21.0 million which are available to reduce future federal
regular income taxes, if any, over an indefinite period.
In connection with the POR and the joint plan of reorganization of
Federated Stores, Inc. ("FSI"), the former parent of Federated and Allied and
certain of its subsidiaries, the FSI consolidated tax group (which, with respect
to periods prior to the POR Effective Date, included the Federated/Allied
Companies) triggered certain gains (the "Gains") estimated at approximately
$1,800.0 million. Under applicable federal tax law, each member of the FSI
consolidated tax group would be severally liable for the entire amount of any
tax liability incurred by any other member of the group, generally, prior to the
POR Effective Date. Under an indemnification agreement entered into pursuant to
the POR, among other things, Ralphs Grocery Company ("Ralphs"), a former
subsidiary of FSI, would generally be liable to the Company for 21% of the first
$71.43 million in tax liability with respect to the Gains and the Company would
indemnify Ralphs for any tax liability above that amount. The Company believes
that net operating and capital losses ("NOLs") sufficient to offset the Gains
were available at the time the Gains were triggered and, accordingly, that the
Company will have no regular federal income tax liability in respect thereof and
that it has adequately provided for its estimated alternative minimum tax
liability. Management does not expect that the resolution of issues related to
the POR will have a material adverse effect on the Company's financial position.
Further, the realization of any unrecorded tax benefits related to the NOLs
generated prior to the POR Effective Date will be recorded as reductions of
reorganization value in excess of amounts allocable to identifiable assets.
In connection with the Chapter 11 cases, the Internal Revenue Service
("IRS") audited the tax returns of the Federated/Allied Companies and the FSI
consolidated tax group 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 Chapter 11
F-18
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
cases except for two issues involving the use by the Federated/Allied Companies
of an aggregate of $27.0 million of NOLs of an acquired company and the
deductibility of approximately $176.3 million of so-called "break-up fees".
These issues 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, where such
appeal is currently pending. Management does not expect that the resolution of
these issues will have a material adverse effect on the Company's financial
position.
14. RETIREMENT PLANS
The Company has defined benefit plans ("Pension Plans") and a defined
contribution plan ("Profit Sharing Plan") which cover substantially all
employees who work 1,000 hours or more in a year. In addition, the Company has a
defined benefit supplementary retirement plan which includes benefits, for
certain employees, in excess of qualified plan limitations. For the 52 weeks
ended January 29, 1994, net retirement expense for these plans totaled $2.7
million, and for the 52 weeks ended January 30, 1993 and the 52 weeks ended
February 1, 1992, net retirement income totaled $1.1 million and $2.0 million,
respectively.
Measurements of plan assets and obligations for the Pension Plans and the
defined benefit supplementary retirement plan are calculated as of December 31
of each year. In addition, for such plans, the discount rate used to determine
the actuarial present value of projected benefit obligations was 7.0% as of
December 31, 1993 and 8.0% as of December 31, 1992. The assumed rate of increase
in future compensation levels was 5.0% as of December 31, 1993 and 4.5% as of
December 31, 1992. The long-term rate of return on assets (Pension Plans only)
was 9.75% as of December 31, 1993 and 10.0% as of December 31, 1992.
PENSION PLANS
Net pension income for the Company's Pension Plans included the following
actuarially determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 | FEBRUARY 1, 1992
---------------- ---------------- | ----------------
(MILLIONS) |
<S> <C> <C> | <C>
Service cost............................. $ 17.5 $ 16.8 | $ 16.7
Interest cost............................ 39.0 36.9 | 37.4
Actual return on assets.................. (94.1) (48.6) | (138.6)
Net amortization and deferrals........... 24.9 (19.6) | 74.5
Cost of special termination benefits..... 7.8 -- | --
------ ------ | ------
$ (4.9) $(14.5) | $(10.0)
====== ====== | ======
</TABLE>
F-19
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The following table sets forth the projected actuarial present value of
benefit obligations and funded status at December 31, 1993 and 1992, for the
Pension Plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
(MILLIONS)
<S> <C> <C>
Accumulated benefit obligations............. $ 536.4 $ 486.4
Less: Present value of net accumulated
benefits available under the Profit
Sharing Plan.............................. 43.5 48.7
-------- --------
Net accumulated benefit obligations,
including vested benefits of $478.7
million and $422.2 million,
respectively.............................. 492.9 437.7
Projected compensation increases............ 75.7 60.0
-------- --------
Projected benefit obligations............... 568.6 497.7
-------- --------
Plan assets (primarily stocks, bonds and
U.S. government securities)............... 744.9 706.8
Unrecognized loss........................... 52.9 24.1
Unrecognized prior service cost............. 8.9 --
-------- --------
806.7 730.9
-------- --------
Prepaid pension expense..................... $ 238.1 $ 233.2
======== ========
</TABLE>
The Company's policy is to fund the Pension Plans at or above the minimum
required by law. At December 31, 1993 and 1992, the Company had met the full
funding limitation. Plan assets are held by independent trustees.
In connection with a salary reduction program at one division, the Company
provided, in 1993, $7.8 million of special termination benefits to eligible
employees who elected to retire within a specified time period.
One of the Company's Pension Plans was amended effective January 1, 1993 to
reflect then current salary levels. This amendment resulted in an increase of
$9.9 million in the accumulated benefit obligation, which is being recognized
over an amortization period of 10.1 years.
SUPPLEMENTARY RETIREMENT PLAN
Net pension expense for the supplementary retirement plan included the
following actuarially determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED | 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 | FEBRUARY 1, 1992
---------------- ---------------- | ----------------
(MILLIONS) |
<S> <C> <C> | <C>
Service cost............................. $ 0.3 $ 0.3 | $ 1.0
Prior service cost....................... -- 7.9 | --
Interest cost on projected benefit |
obligations............................ 1.2 0.6 | 2.0
Net amortization and deferral............ (0.3) (0.4) | 0.9
------ ------ | ------
$ 1.2 $ 8.4 | $ 3.9
====== ====== | ======
</TABLE>
F-20
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
The following table sets forth the projected actuarial present value of
unfunded benefit obligations at December 31, 1993 and 1992, for the
supplementary retirement plan:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
(MILLIONS)
<S> <C> <C>
Accumulated benefit obligations, including
vested benefits of $14.0 million and $12.0
million, respectively..................... $ 14.2 $ 12.4
Projected compensation increases............ 3.5 3.2
-------- --------
Projected benefit obligations............... 17.7 15.6
Unrecognized gain........................... 3.6 4.1
Unrecognized prior service cost............. (1.1) --
-------- --------
Accrued supplementary retirement
obligation................................ $ 20.2 $ 19.7
======== ========
</TABLE>
In December 1992, the Company reestablished a percentage of the benefits
for former employees who had retired prior to the Petition Date. This action
increased the accumulated benefit obligation by $7.9 million at December 31,
1992, which was expensed as prior service cost in the 52 weeks ended January 30,
1993.
PROFIT SHARING PLAN
The Profit Sharing Plan includes a voluntary savings feature for eligible
employees. The Company's contribution is based on the Company's annual earnings.
The minimum Company contribution is 20% of employee's eligible savings. Profit
sharing expense amounted to $6.4 million for the 52 weeks ended January 29,
1994, $5.0 million for the 52 weeks ended January 30, 1993, and $4.1 million for
the 52 weeks ended February 1, 1992. The Profit Sharing Plan had net assets at
December 31, 1993, aggregating $635.3 million held in independent trusts.
DEFERRED COMPENSATION PLAN
During 1993, the Company implemented a deferred compensation plan wherein
eligible executives may elect to defer a portion of their compensation each year
as either stock or cash credits. The Company transfers shares to a trust to
cover the number it estimates will be needed for distribution of stock credits
currently outstanding. At January 29, 1994, the liability under the plan which
is reflected in other liabilities is $1.1 million. Expense for the 52 weeks
ended January 29, 1994 was immaterial.
15. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In addition to providing pension and other supplemental benefits, certain
retired employees are currently provided with specified health care, life
insurance, and certain other benefits. Eligibility requirements for such
benefits vary by division and subsidiary, but generally state that benefits are
available to employees who retire after a certain age with specified years of
service. The Company has the right to modify or terminate these benefits for
employees who retire after the Petition Date. Health care and life insurance
benefits are provided to both retired and active employees through medical
benefit trusts and insurance companies. Based on a change in the retiree health
care coverage, employees hired on January 1, 1994 or later will not be eligible
for retiree health care benefits.
F-21
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
===============================================================================
Net postretirement benefit expense included the following actuarially
determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993
---------------- ----------------
(MILLIONS)
<S> <C> <C>
Service cost....................... $ 1.0 $ 3.5
Interest cost...................... 9.7 15.1
Net amortization and deferral...... (5.8) --
------ ------
$ 4.9 $ 18.6
====== ======
</TABLE>
The measurement of the postretirement benefit obligations is calculated as
of December 31. The following table sets forth the projected actuarial present
value of unfunded postretirement benefit obligations for the plans at December
31, 1993 and 1992:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
----------- -----------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................ $ 112.0 $ 148.7
Fully eligible active plan participants......... 14.6 26.0
Other active plan participants.................. 11.4 26.6
--------- ---------
Accumulated postretirement benefit obligation... 138.0 201.3
Unrecognized net gain........................... 35.5 --
Unrecognized prior service cost................. 22.9 --
--------- ---------
Accrued postretirement benefit obligation....... $ 196.4 $ 201.3
========= =========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% as of December 31, 1993 and 8.0% as
of December 31, 1992. As of January 1, 1993, the Company revised certain
assumptions and estimates related to the cost of certain other benefits. The
resulting unrecognized gain is being recognized over an amortization period of
12.8 years.
On January 1, 1993, all but two subsidiaries changed the retiree health
care benefits and the remaining two subsidiaries adopted the changes on July 1,
1993. As a result of these changes, the future benefits provided by the Company
for employees who retire after the Petition Date and were hired prior to January
1, 1994, is based on a fixed amount per year of service, and the accumulated
postretirement benefit obligation is not affected by increases in health care
costs. The effect of adopting the benefit changes is reflected as a $24.7
million reduction of the accumulated postretirement benefit obligation and is
being recognized over an amortization period of 11.4 years.
16. EQUITY PLAN
The Company has implemented an equity plan intended to provide an equity
interest in the Company to key management personnel and thereby provide
additional incentives for such persons to devote themselves to the maximum
extent practicable to the businesses of the Company and its subsidiaries. The
Equity Plan is administered by the Compensation Committee of the Board of
Directors (the "Compensation Committee"). The Compensation Committee is
authorized to grant options, stock appreciation rights and restricted stock to
officers and key employees of the Company and its subsidiaries. The Equity Plan
also provides for the award of options to non-employee directors. A maximum of
9.6 million shares of Common Stock may be issued pursuant to the Equity Plan,
not more than 1.45 million of which may be awarded in the form of restricted
stock.
F-22
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Stock option transactions are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993
--------------------------- ---------------------------
(SHARES IN THOUSANDS) SHARES GRANT PRICE SHARES GRANT PRICE
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year.......... 1,828.5 $ 11.625-18.375 -- $ --
Granted................................. 1,575.3 19.375-25.000 1,948.7 11.625-18.375
Cancelled............................... (268.2) 15.625-20.875 (120.2) 13.375-16.875
Exercised............................... (97.1) 11.625-16.875 -- --
------- ---------------- ------- ----------------
Outstanding, end of year................ 3,038.5 $ 11.625-25.000 1,828.5 $ 11.625-18.375
======= ================ ======= ================
Exercisable, end of year................ 814.1 $ 11.625-20.875 -- $ --
======= ================ ======= ================
</TABLE>
As of January 29, 1994, 5,695,500 shares of Common Stock are available for
additional grants pursuant to the Equity Plan, of which not more than 681,100
may be awarded in the form of restricted stock.
17. SHAREHOLDERS' EQUITY
The authorized shares of the Company consist of 125.0 million shares of
preferred stock ("Preferred Stock"), par value of $.01 per share with no shares
issued and 250.0 million shares of Common Stock, par value of $.01 per share
with 126.3 million and 126.0 million shares of Common Stock issued and
outstanding at January 29, 1994 and January 30, 1993, respectively.
In addition to shares issued under the Equity Plan and the deferred
compensation plan, 0.2 million shares were issued in 1993 to certain prepetition
creditors upon realization of a $5.0 million insurance recovery.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Subject to
preferential rights that may be applicable to any Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. However, it
is not presently anticipated that dividends will be paid on Common Stock in the
foreseeable future and certain of the debt instruments to which the Company is a
party restrict the payment of dividends. All of the outstanding shares of Common
Stock issued pursuant to the POR are fully paid and nonassessable.
PREFERRED SHARE PURCHASE RIGHTS
Each share of Common Stock is accompanied by one right (a "Right") issued
pursuant to the Share Purchase Rights Agreement between the Company and The Bank
of New York, as Rights Agent. Each Right entitles the registered holder thereof
to purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Series A Preferred
Shares"), of the Company at a price (the "Purchase Price") of $62.50 per one
one-hundredth of a Series A Preferred Share (subject to adjustment).
In general, the Rights will not become exercisable or transferable apart
from the shares of Common Stock with which they were issued unless a person or
group of affiliated or associated persons becomes the beneficial owner of, or
commences a tender offer that would result in beneficial ownership of, 20% or
more of the outstanding shares of Common Stock (any such person or group of
persons being referred to as an "Acquiring Person"). Thereafter, under certain
circumstances, each Right (other than any Rights that are or were beneficially
owned by an Acquiring Person, which Rights will be void) could become
exercisable to purchase at the Purchase Price a number of shares of Common Stock
having a market value equal to two times the Purchase Price. The Rights will
expire on February 4, 2002, unless earlier redeemed by the Company at a
redemption price of $.03 per Right (subject to adjustment).
F-23
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
FUTURE STOCK ISSUANCES
The Company is authorized to issue 8.6 million shares of Common Stock
(subject to adjustment) upon the conversion of the Convertible Notes and 5.2
million shares of Common Stock (subject to adjustment) upon the exercise of the
Series A Warrants and Series B Warrants. The Series A Warrants were issued under
the Series A Warrant Agreement between the Company and The Bank of New York, as
Warrant Agent (the "Series A Warrant Agreement"). The Series B Warrants were
issued under the Series B Warrant Agreement between the Company and The First
Boston Corporation, as the initial holder of the Series B Warrants (the "Series
B Warrant Agreement"). Each warrant, when exercised, will entitle the holder
thereof to acquire 1.047 shares of Common Stock at an exercise price of (i)
$25.00 per warrant, in the case of the Series A Warrants, or (ii) $35.00 per
warrant, in the case of the Series B Warrants.
The Series A Warrants are transferable. The Series B Warrants are not
transferable prior to February 4, 1995. There are 4.2 million shares of Common
Stock subject to the Series A Warrants and 1.0 million shares of Common Stock
subject to the Series B Warrants, in each case subject to adjustment in certain
events to prevent dilution of the rights conferred thereby as set forth in the
applicable Warrant Agreement. The Series A Warrants expire February 15, 1996 and
the Series B Warrants expire February 15, 2000.
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 FEBRUARY 1, 1992
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Preferred stock......................... $ -- $ -- $ --
-------- -------- --------
Common stock:
Balance, beginning of year......... 1.3 0.8 --
Issuance of common stock........... -- 0.5 0.8
-------- -------- --------
Balance, end of year............... 1.3 1.3 0.8
-------- -------- --------
Additional paid-in capital:
Balance, beginning of year......... 1,968.0 1,453.3 915.3
Issuance of common stock........... 7.7 514.7 2,015.4
Eliminate deficit in accumulated
earnings......................... -- -- (1,477.4)
-------- -------- --------
Balance, end of year............... 1,975.7 1,968.0 1,453.3
-------- -------- --------
Unearned restricted stock:
Balance, beginning of year......... (7.3) -- --
Cancellation (issuance) of common
stock............................ 0.1 (13.1) --
Amortization....................... 3.1 5.8 --
-------- -------- --------
Balance, end of year............... (4.1) (7.3) --
-------- -------- --------
Treasury stock:
Balance, beginning of year......... -- -- --
Additions.......................... (0.9) -- --
-------- -------- --------
Balance, end of year............... (0.9) -- --
-------- -------- --------
Accumulated equity (deficit):
Balance, beginning of year......... 113.0 -- (2,313.8)
Net income......................... 193.2 113.0 836.4
Eliminate deficit in accumulated
earnings......................... -- -- 1,477.4
Balance, end of year............... 306.2 113.0 --
-------- -------- --------
Total shareholders' equity.............. $2,278.2 $2,075.0 $1,454.1
======== ======== ========
</TABLE>
F-24
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Changes in the number of shares held in the treasury for the 52 weeks ended
January 29, 1994, are as follows:
<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C>
Balance, beginning of year.............. --
Additions:
Restricted stock................... 8.5
Deferred compensation plan......... 32.1
-----
Balance, end of year.................... 40.6
=====
</TABLE>
Additions to treasury stock for restricted stock represent shares accepted
in lieu of cash to cover employee tax liability upon lapse of restrictions.
Under the deferred compensation plan, shares are maintained in a trust to cover
the number estimated to be needed for distribution of stock credits currently
outstanding.
18. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS
The carrying amount approximates fair value because of the short maturity
of these instruments.
ACCOUNTS RECEIVABLE
The carrying amount approximates fair value because of the short average
maturity of the instruments, and bad debt expense can be reasonably estimated
and has been reserved for against the receivable balance.
NOTES RECEIVABLE
The fair value of notes receivable is estimated using discounted cash flow
analysis, based on estimated market discount rates.
OTHER ASSETS
No quoted market prices exist for the Company's long-term investments and,
therefore, a reasonable estimate of fair value could not be made without
incurring excessive costs. Additional information pertinent to the value of the
investments is provided below.
LONG-TERM DEBT
The fair values of the Company's long-term debt are estimated based on the
quoted market prices for publicly traded debt or by using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
INTEREST RATE SWAP AGREEMENT
The fair value of the interest rate swap agreement is obtained from dealer
quotes. The value represents the estimated amount the Company would pay to
terminate the agreement at the reporting date, taking into account current
interest rates and the current creditworthiness of the swap counterparties. The
interest rate swap agreement pertains to the note monetization facility and
although currently in a net payable position, management intends to hold the
agreement to its maturity date or until conditions are favorable to refinance
the note monetization facility.
F-25
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
INTEREST RATE CAP AGREEMENTS
The fair values of the interest rate cap agreements are estimated based on
current settlement prices of comparable contracts obtained from dealer quotes.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------- ---------- --------------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
Cash and short-term investments..... $ 222.4 $ 222.4 $ 567.0 $ 567.0
Notes receivable.................... 408.8 459.7 419.7 428.6
Other assets........................ 475.2 N/A 25.9 N/A
Long-term debt...................... 2,732.9 2,843.1 2,755.7 2,770.7
Interest rate swap agreement........ -- (63.3) -- (65.0)
Interest rate cap agreements........ 6.7 -- 10.1 6.2
</TABLE>
It is not practicable to estimate the fair market value of the Company's
investment in the secured claim against Macy as a result of the uncertainty
related to the outcome of Macy's chapter 11 reorganization proceedings. The
secured claim in Macy is carried at its original cost of $449.3 million in the
Consolidated Balance Sheet at January 29, 1994. (See Note 10.)
Further, it is not practicable to estimate the fair value of the Company's
investment in Ralphs (approximately 6.58% of the issued common stock) due to
lack of a quoted market price. The investment is carried at its original cost of
$25.9 million in the Consolidated Balance Sheet at January 29, 1994 and January
30, 1993. Revenues and net loss reported by Ralphs were $2,843.8 million and
$76.1 million, respectively, for the year ended January 30, 1993 and revenues
and net income were $1,874.2 million and $23.8 million, respectively, for the 36
weeks ended October 10, 1993. At October 10, 1993, Ralphs reported total assets
of $1,363.9 million and shareholders' deficit of $109.5 million.
Commitments to extend credit under revolving agreements relate primarily to
the aggregate unused credit limits for the Company's credit plans. These
commitments generally can be terminated at the option of the Company. It is
unlikely the total commitment amount will represent future cash requirements.
The Company evaluates each customer's creditworthiness on a case-by-case basis.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in what
it believes to be high credit quality financial instruments. Credit risk with
respect to trade receivables is concentrated in the geographic regions in which
the Company operates stores. Such concentrations, however, are considered to be
limited due to the Company's large number of customers and their dispersion
across many regions.
F-26
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
19. QUARTERLY RESULTS (UNAUDITED)
Unaudited quarterly results for the 52 weeks ended January 29, 1994 and the
52 weeks ended January 30, 1993, were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
52 Weeks Ended January 29, 1994:
Net sales.................................. $1,590.3 $1,502.3 $1,789.3 $2,347.5
Operating income........................... 82.9 58.4 103.0 287.6
Income before extraordinary items.......... 21.7 8.8 20.3 146.0
Net income................................. $ 18.1 $ 8.8 $ 20.3 $ 146.0
Earnings per share:
Income before extraordinary items....... $ .17 $ .07 $ .16 $ 1.16
Net income.............................. .14 .07 .16 1.16
Fully diluted earnings per share:
Income before extraordinary items....... .17 .07 .16 1.10
Net income.............................. .14 .07 .16 1.10
52 Weeks Ended January 30, 1993:
Net sales.................................. $1,571.7 $1,457.2 $1,789.0 $2,262.0
Operating income........................... 80.2 27.3 99.5 222.9
Income (loss) before extraordinary items... 11.8 (15.8) 31.6 105.1
Net income (loss).......................... $ 11.8 $ (29.4) $ 31.6 $ 99.0
Earnings per share:
Income (loss) before extraordinary
items................................. $ .15 $ (.14) $ .25 $ .83
Net income (loss)....................... .15 (.26) .25 .78
Fully diluted earnings per share:
Income (loss) before extraordinary
items................................. .15 (.14) .25 .80
Net income (loss)....................... .15 (.26) .25 .75
</TABLE>
20. LEGAL PROCEEDINGS
Notwithstanding the confirmation and effectiveness of the POR, the
Bankruptcy Court continues to have jurisdiction to, among other things, resolve
disputed prepetition claims against the Federated/Allied Companies, resolve
matters related to the assumption, assumption and assignment, or rejection of
executory contracts pursuant to the POR, and to resolve other matters that may
arise in connection with or relate to the POR. The Company, upon emergence from
Chapter 11, provided for the payment of all remaining bankruptcy claims based
upon management's estimate of the amount of such claims that would ultimately be
allowed by the Bankruptcy Court. During 1993, the Company reduced accrued
liabilities and selling, general and administrative expenses by $24.0 million to
reflect the favorable settlement of disputed bankruptcy claims. Management
believes that the Company has adequately provided for the resolution of all
bankruptcy claims and other matters related to the POR remaining at January 29,
1994.
The Company and its 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.
F-27
<PAGE> 45
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
----
<S> <C> <C>
Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters
and Employees Other than Related Parties.............................. S-2
Schedule V -- Property, Plant and Equipment......................................... S-3
Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property,
Plant and Equipment.................................................. S-4
Schedule VIII -- Valuation and Qualifying Accounts..................................... S-5
Schedule IX -- Short-Term Borrowings................................................. S-6
Schedule X -- Supplementary Income Statement Information............................ S-7
</TABLE>
All other schedules are omitted because they are inapplicable, not required
or the information is included elsewhere in the Consolidated Financial
Statements or the notes thereto.
S-1
<PAGE> 46
<TABLE>
<CAPTION>
SCHEDULE II
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS AND
EMPLOYEES OTHER THAN RELATED PARTIES
=================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
BALANCE AT
DEDUCTIONS END OF PERIOD
--------------------- ---------------------
(1) (2) (1) (2)
BALANCE AT AMOUNTS
BEGINNING OF AMOUNTS WRITTEN NOT
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED OFF CURRENT CURRENT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James E. Gray................. $500,000 $ -- $ -- $ -- $ -- $500,000
Gordon R. Cooke............... 200,000 -- 200,000 -- -- --
Rudolph V. Javosky............ 125,000 -- 25,000 -- 25,000 75,000
Carl Tooker................... 150,000 -- 150,000 -- -- --
</TABLE>
In July 1988, Federated made a loan in the amount of $500,000 to Mr. James
E. Gray, President of Burdines, in connection with his relocation from Los
Angeles, California to Miami, Florida. The note is interest free as long as he
is an employee of the Company and is due the earlier of June 30, 1995 or
termination.
In August 1988, Federated made a loan in the amount of $200,000 to Mr.
Gordon R. Cooke, Chief Executive Officer of Bloomingdale's By Mail Ltd., in
connection with his relocation to New York. The loan bore interest at a rate of
8% per annum and was due in installments from August 19, 1994 through August 19,
1998. His employment with the Company ended in November 1993 and the balance of
the loan was paid at that time.
In July 1988, Federated made a loan in the amount of $225,000 to Mr.
Rudolph V. Javosky, Senior Vice President of the Company, in connection with his
relocation from New York to Cincinnati, Ohio. The loan is interest free as long
as there is no default and is due in installments from August 1, 1989 through
August 1, 1997.
In September 1990, Federated made a loan in the amount of $150,000 to Mr.
Carl Tooker, Chairman of Rich's, in connection with his relocation from
Massachusetts to Georgia. The loan bore interest at a rate of 10% per annum and
was due in installments from April 1, 1993 through April 1, 1995. His employment
with the Company ended in June 1993 and the balance of the loan was paid at that
time.
S-2
<PAGE> 47
<TABLE>
<CAPTION>
SCHEDULE V
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
(THOUSANDS)
============================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
OTHER
BALANCE AT CHANGES--
BEGINNING ADDITIONS ADD BALANCE AT
OF AT (DEDUCT) END OF
CLASSIFICATION PERIOD COST RETIREMENTS DESCRIBE PERIOD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(NOTE A)
52 Weeks Ended January 29, 1994:
Land........................... $ 446,481 $ 3,818 $ 426 $ (3,898) $ 445,975
Buildings, substantially all on
owned land.................. 873,276 34,422 1,685 (6,166) 899,847
Buildings on leased land, im-
provements to leased
properties and leaseholds... 508,951 38,169 1,245 3,571 549,446
Store fixtures and equipment... 782,888 233,000 18,897 (636) 996,355
Property not used in
operations.................. 6,074 -- -- 534 6,608
Capital leases................. 50,049 3,551 4,604 -- 48,996
---------- ---------- ---------- ----------- ----------
$2,667,719 $ 312,960 $ 26,857 $ (6,595) $2,947,227
========== ========== ========== =========== ==========
52 Weeks Ended January 30, 1993:
Land........................... $ 455,044 $ 503 $ -- $ (9,066) $ 446,481
Buildings, substantially all on
owned land.................. 850,162 18,374 569 5,309 873,276
Buildings on leased land, im-
provements to leased
properties and leaseholds... 512,821 11,693 6,445 (9,118) 508,951
Store fixtures and equipment... 634,825 167,798 18,619 (1,116) 782,888
Property not used in
operations.................. 5,935 137 -- 2 6,074
Capital leases................. 40,913 9,426 290 -- 50,049
---------- ---------- ---------- ----------- ----------
$2,499,700 $ 207,931 $ 25,923 $ (13,989) $2,667,719
========== ========== ========== =========== ==========
52 Weeks Ended February 1, 1992:
Land........................... $ 494,960 $ -- $ -- $ (39,916) $ 455,044
Buildings, substantially all on
owned land.................. 1,130,052 11,985 1,820 (290,055) 850,162
Buildings on leased land, im-
provements to leased
properties and leaseholds... 696,796 27,359 3,478 (207,856) 512,821
Store fixtures and equipment... 966,171 162,287 42,679 (450,954) 634,825
Property not used in
operations.................. 6,969 -- -- (1,034) 5,935
Capital leases................. 75,516 -- 11,877 (22,726) 40,913
---------- ---------- ---------- ----------- ----------
$3,370,464 $ 201,631 $ 59,854 $(1,012,541) $2,499,700
========== ========== ========== =========== ==========
<FN>
- ---------------
NOTES:
(A) Includes transfers to others assets of $6,595,000, $13,989,000 and
$242,758,000 in the years ended January 29, 1994, January 30, 1993 and
February 1, 1992, respectively, and transfers between classifications.
For the year ended February 1, 1992, also includes $769,783,000 for
adjustment to fair value as of February 1, 1992.
(B) Depreciation and amortization are provided primarily on a straight-line
basis for book purposes over the shorter of estimated asset lives or
lease terms. The more important rates are as follows:
</TABLE>
<TABLE>
<S> <C>
Buildings and building equipment............... 2% to 5%
Leaseholds..................................... Over term of lease
Store fixtures and equipment................... 6 2/3% to 33 1/3%
</TABLE>
S-3
<PAGE> 48
<TABLE>
<CAPTION>
SCHEDULE VI
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(THOUSANDS)
==========================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
OTHER
ADDITIONS CHANGES --
BALANCE AT CHARGED TO ADD BALANCE AT
BEGINNING COSTS AND (DEDUCT) END OF
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS DESCRIBE PERIOD
- -----------------------------------------------------------------------------------------------------------
(NOTE A)
52 Weeks Ended January 29, 1994:
Buildings, substantially all on
owned land.................. $ 39,639 $ 41,726 $ 1,684 $ (514) $ 79,167
Buildings on leased land, im-
provements to leased
properties and leaseholds... 34,755 34,809 777 (759) 68,028
Store fixtures and equipment... 109,128 125,102 18,943 (6) 215,281
Property not used in
operations.................. 361 379 -- -- 740
Capital leases................. 5,585 5,898 4,356 -- 7,127
--------- --------- --------- --------- ---------
$ 189,468 $ 207,914 $ 25,760 $ (1,279) $ 370,343
========= ========= ========= ========= =========
52 Weeks Ended January 30, 1993:
Buildings, substantially all on
owned land.................. $ -- $ 39,970 $ 228 $ (103) $ 39,639
Buildings on leased land, im-
provements to leased
properties and leaseholds... -- 36,118 1,191 (172) 34,755
Store fixtures and equipment... -- 123,230 13,783 (319) 109,128
Property not used in
operations.................. -- 361 -- -- 361
Capital leases................. -- 5,875 290 -- 5,585
--------- --------- --------- --------- ---------
$ -- $ 205,554 $ 15,492 $ (594) $ 189,468
========= ========= ========= ========= =========
52 Weeks Ended February 1,
1992:..........................
Buildings, substantially all on
owned land.................. $ 137,253 $ 43,357 $ 1,880 $(178,730) $ --
Buildings on leased land, im-
provements to leased
properties and leaseholds... 125,066 39,357 3,126 (161,297) --
Store fixtures and equipment... 337,217 122,687 42,245 (417,659) --
Property not used in
operations.................. 630 351 -- (981) --
Capital leases................. 20,431 6,434 4,138 (22,727) --
--------- --------- --------- --------- ---------
$ 620,597 $ 212,186 $ 51,389 $(781,394) $ --
========= ========= ========= ========= =========
<FN>
- ---------------
NOTE:
(A) Includes transfers to other assets of $1,279,000, $594,000 and
$73,244,000 in the years ended January 29, 1994, January 30, 1993 and
February 1, 1992, respectively, and transfers between classifications.
For the year ended February 1, 1992, also includes $708,150,000 for the
write-off of accumulated depreciation as of February 1, 1992.
</TABLE>
S-4
<PAGE> 49
<TABLE>
<CAPTION>
SCHEDULE VIII
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS)
===============================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------
ADDITIONS
-------------------------
(2)
(1) CHARGED TO DEDUCTIONS
BALANCE AT CHARGED TO OTHER FROM BALANCE AT
BEGINNING COSTS AND ACCOUNTS-- RESERVES-- END
CLASSIFICATION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
- ---------------------------------------------------------------------------------------------------------------
(NOTE A)
<S> <C> <C> <C> <C> <C>
Accounts receivable -- allowance for
doubtful accounts (applied as a
reduction of assets):
Years Ended:
January 29, 1994.............. $ 45,346 $ 50,251 $ -- $ 58,707 $ 36,890
======== ======== ======== ======== ========
January 30, 1993.............. $ 59,193 $ 52,025 $ -- $ 65,872 $ 45,346
======== ======== ======== ======== ========
February 1, 1992.............. $ 39,087 $ 87,237 $ -- $ 67,131 $ 59,193
======== ======== ======== ======== ========
<FN>
- ---------------
NOTE:
(A) Excess of uncollectible balances written off over recoveries of
accounts previously written off.
</TABLE>
S-5
<PAGE> 50
<TABLE>
<CAPTION>
SCHEDULE IX
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE IX -- SHORT-TERM BORROWINGS
(THOUSANDS, EXCEPT INTEREST RATE DATA)
=================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT OUT- AMOUNT OUT- AVERAGE
BALANCE AVERAGE STANDING STANDING INTEREST
CATEGORY OF AGGREGATE AT END INTEREST DURING DURING RATE DURING
SHORT-TERM BORROWINGS OF PERIOD RATE THE PERIOD THE PERIOD THE PERIOD
- -----------------------------------------------------------------------------------------------------------------
(NOTE A) (NOTE B)
<S> <C> <C> <C> <C> <C> <C>
Year Ended January 29, 1994:
Commercial Paper.............. $ -- --% $ 119,906 $ 26,963 8.85%
Year Ended January 30, 1993:
Accounts Receivable Facility
(C)......................... $ -- --% $ 715,433 $ 522,367 5.48%
Accounts Receivable Facility
(D)......................... -- -- 478,064 207,387 6.39
Year Ended February 1, 1992:
Accounts Receivable Facility
(C)......................... $ 684,153 4.31% $ 684,153 $ 324,166 8.70%
Accounts Receivable Facility
(D)......................... 458,269 4.54 520,452 427,060 7.54
<FN>
- ---------------
NOTE:
(A) Average amount outstanding during the period is computed by dividing
the total of daily outstanding principal balances by the number of days
in the fiscal year.
(B) Average interest rate for the year is computed by dividing the actual
short-term interest expense by the average short-term debt outstanding.
Short-term interest expense includes loan fees of $1,505,000 for the
year ended January 29, 1994, $8,538,000 and $5,101,000 for the year
ended January 30, 1993 for the Accounts Receivable Facility of
Federated Credit Corporation and Allied Stores Credit Corporation,
respectively, and $9,092,000 and $6,253,000 for the year ended February
1, 1992 for the Accounts Receivable Facility of Federated Credit
Corporation and Allied Stores Credit Corporation, respectively.
(C) Accounts Receivable Facility of Federated Credit Corporation.
(D) Accounts Receivable Facility of Allied Stores Credit Corporation.
</TABLE>
S-6
<PAGE> 51
<TABLE>
<CAPTION>
SCHEDULE X
FEDERATED DEPARTMENT STORES, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(THOUSANDS)
========================================================================================
- ----------------------------------------------------------------------------------------
COLUMN A COLUMN B
- ----------------------------------------------------------------------------------------
CHARGED TO COSTS AND EXPENSES
--------------------------------------------
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 29, JANUARY 30, FEBRUARY 1,
ITEM 1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising costs.................. $ 298,832 $ 296,339 $ 299,085
============ ============ ============
<FN>
- ---------------
NOTE:
All other information has been omitted since the amounts do not exceed 1%
of the total sales reported in the related statement of income.
</TABLE>
S-7
<PAGE> 1
Exhibit 10.1.1
FEDERATED
DEPARTMENT STORES, INC. 7 West Seventh Street*Cincinnati, Ohio 45202
November 3, 1993
To: The Bank of New York
101 Barclay Street 12W
New York, NY 10286
Attn: John I. Sivertsen
RE: Letter Agreement
----------------
Ladies and Gentlemen:
Please refer to the Series A Warrant Agreement dated as of February 5, 1992
(the "Series A Warrant Agreement") between Federated Department Stores, Inc.
("Federated") and The Bank of New York as Warrant Agent (the "Warrant
Agent"). Capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Series A Warrant Agreement.
Background
----------
On the terms and subject to the conditions of the Plan, Federated issued
4,000,000 warrants, each warrant initially representing the right to
purchase one share of Common Stock at the initial price of $25.00 per share
(the "Warrant Price"). Upon the issuance of Common Stock pursuant to an IPO
by Federated on May 20, 1992, the Warrant Price was adjusted pursuant to
Section 4.1(g) of the Series A Warrant Agreement to $23.88 per share and the
number of Warrant Shares thereafter purchasable upon the exercise of each
Warrant was adjusted pursuant to Section 4.1(d) to 1.047 shares.
Thereafter, at exercise, a holder would pay the adjusted Warrant Price for
each Warrant Share they were to receive upon exercise of their Warrants.
Due to an oversight, the calculation in Section 3.1(a)(ii) of the Series A
Warrant Agreement does not reflect the fact that the Warrant Price is a per
Warrant Share price and not a per Warrant price.
Amendment
---------
By this Letter Agreement, pursuant to the authority contained in Section
12(a) of the Series A Warrant Agreement to amend such agreement to cure any
ambiguity or correct any provision which is inconsistent with any other
provisions in the agreement, Federated and the Warrant Agent hereby agree as
follows:
<PAGE> 2
Section 3.1(a)(ii) will now read in its entirety:
"(ii) cash, or a certified bank check payable to the order of the
Company in an amount equal to the product of (A) the number of
Warrant Shares purchasable upon the exercise of the number of
Warrants designated in the Form of Exercise Notice multiplied
by (B) the Warrant Price."
Please indicate your consent and agreement to this requested amendment by
executing a copy of this letter in the space provided below and returning it
to Federated.
Sincerely,
FEDERATED DEPARTMENT STORES,INC.
By: /s/ Karen M. Hoguet
-------------------
Karen M. Hoguet
Senior Vice President-Planning and Treasurer
Agreed to this 5 day of
-----
November, 1993:
THE BANK OF NEW YORK
By: /s/ Thomas C. Griffo
----------------------------
Thomas C. Griffo
Title: Vice President
-------------------------
SPS:ckh
warramen.sps
10Kexhib.10.1.1
<PAGE> 1
Exhibit 10.3.4
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
January 6, 1994
To: Credit Agreement Lenders
RE: Request for Amendment and Waiver
--------------------------------
Please refer to the Credit Agreement dated as of May 20, 1992 (as heretofore
amended, waived or otherwise modified, the "Credit Agreement") among Federated
Department Stores, Inc. ("Federated"), the Lenders parties thereto, Citibank,
N.A., as Agent, and Mellon Bank, N.A., Societe Generale, New York Branch, and
Chemical Bank, as co-agents. Capitalized terms used in this letter and not
otherwise defined have the meanings assigned such terms in the Credit
Agreement.
Background
- ----------
During the fall of 1993, Federated implemented an Executive Deferred
Compensation Plan (the "EDCP") pursuant to which an eligible participant may
elect to defer his or her compensation, and may further elect to receive such
deferred compensation in cash or Federated stock. Heretofore, when a
participant elected to defer compensation in stock, Federated issued Treasury
shares for up to the amount of compensation so deferred (the "Share Credits")
and contributed such shares to a Grantor (Rabbi) Trust that Federated has
established for the express purpose of holding shares representing deferred
compensation. Federated, however, would like to be able to also purchase
Federated shares in the open market for contribution to the Trust. It is
estimated that annually less than approximately $10 million Share Credits will
be created in lieu of cash compensation that would otherwise be payable and
that the number of shares held by the Trust will equal the number of Share
Credits of all participants in the EDCP. By contributing the shares to the
Trust, Federated will avoid the necessity of having to expense each quarter the
accrued stock appreciation on the Stock Credits.
Amendment Request
- -----------------
Section 7.3(a) RESTRICTED PAYMENTS does not allow Federated to make certain
Restricted Payments, including purchases of shares of stock of Federated.
Payments under the Equity Plan, however, are specifically excluded from this
restriction. In light of the implementation of the EDCP, Federated hereby
requests that you amend this Section 7.3(a), titled "Restricted Payments", as
indicated in the attached Amendment Letter.
<PAGE> 2
Credit Agreement Lenders
January 6, 1994
Page Two
Waiver Request
- --------------
In addition, please note that Federated's recent acquisition of a portion of
the claim of The Prudential Insurance Company of America's ("Prudential") claim
in the R.H. Macy & Co. bankruptcy case was accomplished through a newly formed
special purpose subsidiary, Federated Noteholding Corporation ("FNC"). Because
FNC's agreements with Prudential and its corporate charter do not permit FNC to
conduct any business or incur any obligation other than those relating to the
acquisition and holding of the claim, FNC cannot issue a guaranty of
Federated's obligations under the Credit Agreement as is technically required
by Section 6.14 of the Credit Agreement. Although we do not consider this to
be substantively harmful or detrimental in any way to the Lenders, we would
like to obtain your waiver of the Section 6.14 guaranty requirement as it
relates to FNC, as indicated in the attached Amendment Letter.
Additional Information
- ----------------------
During 1989 and 1990 Federated centralized all of its credit processing
operations into FACS (Financial and Credit Services), a division of Federated.
Besides doing all the credit processing for Federated, FACS is now also
marketing its services to non-affiliated parties. To aid FACS in its marketing
efforts, it has been determined that it will be beneficial to subsidiarize FACS
at this time. We estimate that we will capitalize FACS at approximately $2.0
million.
Federated is also researching into the possibility of shifting its FDS National
Bank ("the Bank") subsidiary to be under the new FACS subsidiary. As FACS and
the Bank have so many of their operations inter-related, it is felt that this
transfer makes sense. This transfer will have no economic impact on the
operations of Federated, FACS or the Bank. If it is determined that there are
no regulatory or other impediments to such a transfer, we may have to increase
the capitalization of FACS.
This subsidiarization of FACS is specifically allowed in the Credit Agreement.
We plan to effect this transaction on January 28, 1994. At that time Federated
will execute a Pledge Amendment and Subsidiary Guaranty Amendment as required
in the Credit Agreement.
To enable Federated to purchase shares beginning with its 1994 fiscal year, we
would appreciate your consent to the attached amendment letter by January 21,
1994. Thank you for your continued support.
Sincerely,
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Susan P. Storer
---------------------------------
Susan P. Storer
Operating Vice President
and Assistant Treasurer
facwaiv1.sps
10kexhib.1034.doc
<PAGE> 3
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
January 6, 1994
CITIBANK, N.A., as Agent
399 Park Avenue
New York, NY 10043
Attention: Paul Trefry
RE: Amendment No. 5 to the Credit Agreement
---------------------------------------
Gentlemen:
Reference is made to that certain Credit Agreement, dated as
of May 20, 1992, among Federated Department Stores, Inc., as Borrower,
Citibank, N.A. as Agent, and Mellon Bank, N.A., Societe Generale, New York
Branch, and Chemical Bank, as Co-Agents and the Lenders parties thereto, as
amended to the date hereof (the "Credit Agreement"). Capitalized terms used
herein that are not defined herein shall have the meaning assigned to such
terms in the Credit Agreement.
1. AMENDMENT. The parties hereto hereby agree to amend and
restate Section 7.3(a) of the Credit Agreement so that is will read in full
as follows:
"The Borrower shall not and shall not permit any Subsidiary to
make or suffer to exist any Restricted Payment other
than (i) dividends paid to the Borrower or any
wholly-owned Subsidiary of the Borrower by any
wholly-owned Subsidiary of the Borrower, (ii) payments
under the Equity Plan, (iii) payments to purchase its
shares of common stock in the open market for
contribution to a Grantor (Rabbi) Trust established for
the express purpose of holding shares representing
deferred compensation received pursuant to the
Borrower's Executive Deferred Compensation Plan adopted
on October 29, 1993, and (iv) payments in respect of
the redemption of outstanding share purchase rights
under the Share Purchase Rights Agreement at not more
than the redemption price set forth therein on the
Closing Date. Notwithstanding the foregoing, so long
as no Default or Event of Default has occurred or is
continuing, the Borrower may make Restricted Payments
at any time that (i) either S&P has rated the Rated
Debt "BBB" or higher or Moody's has rated the Rated
Debt "Baa2" or higher, (ii) the Fixed Charge Coverage
Ratio (calculated after giving effect to such proposed
Restricted Payment and any Debt prepayments permitted
pursuant to the last sentence of Section 7.3(b)
for the four fiscal quarters ending immediately prior to the
fiscal quarter in which such Restricted Payment is declared or
made equals or exceeds 1.5:1.0, and (iii) the Series A Notes
and the Series B Notes have been refinanced in full on terms
reasonably acceptable to the Majority Lenders; PROVIDED that
in no event shall the aggregate amount of such Restricted
Payments (when aggregated with any repayment of Debt permitted
pursuant to the last sentence of Section 7.3(b)) exceed 20% of
the undistributed Net Income of the Borrower for such four
preceding fiscal quarters."
<PAGE> 4
2. WAIVER. The Lenders hereby waive the requirement set forth in
Section 6.14(b) of the Credit Agreement that Federated Noteholding
Corporation ("FNC"), a wholly owned subsidiary of the Borrower, become a
party to the Subsidiaries Guaranty as a result of the capital contribution
FNC received from the Borrower on or about December 31, 1993.
3. COSTS. The Borrower agrees to pay on demand all costs and
expenses of the Agent and the Lenders in connection with the preparation,
execution and delivery of this amendment, including the reasonable fees and
out-of-pocket expenses for counsel for the Agent and the Lenders with
respect hereto.
4. MISCELLANEOUS. Except as specifically provided herein, the
Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed. Notwithstanding anything in this amendment and
waiver to the contrary, no waiver of any default under or breach of any
provision of the Credit Agreement shall be deemed to be a waiver of any
other subsequent similar or different default under or breach of such or any
other provision of the Credit Agreement or of any election of remedies
available in connection with any of the foregoing.
This amendment and waiver may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
amendment.
If the terms of this amendment and waiver are acceptable to
you, please return an executed copy of this amendment via facsimile to Mr.
Paul Trefry at Citibank, N.A., fax number (212) 793-3053.
Very truly yours,
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Susan P. Storer
--------------------------------
Susan P. Storer
Operating Vice President
and Assistant Treasurer
Accepted and Agreed to on
this _____ day of January, 1994
Name of Bank:______________________________
By:______________________________
Name:
Title:
waiv-wg2.sps
10kexhib.1034b.doc
<PAGE> 1
Exhibit 10.4.5
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
January 6, 1994
To: Series A Note Lenders
RE: Request for Amendment and Consent
---------------------------------
Please refer to the Series A Note Agreement dated as of February 5, 1992 (as
heretofore amended, waived or otherwise modified, the "Series A Note
Agreement") among Federated Department Stores, Inc. ("Federated"), the Lenders
parties thereto, Citibank, N.A., as Series A Agent, and The Sumitomo Bank,
Limited, New York Branch, as Series A Co-Agent. Capitalized terms used herein
and not otherwise defined have the meanings assigned such terms in the Series A
Note Agreement.
I. Amendment Request
-----------------
Background
- ----------
During the fall of 1993, Federated implemented an Executive Deferred
Compensation Plan (the "EDCP") pursuant to which an eligible participant may
elect to defer his or her compensation, and may further elect to receive such
deferred compensation in cash or Federated stock. Heretofore, when a
participant elected to defer compensation in stock, Federated issued Treasury
shares for up to the amount of compensation so deferred (the "Share Credits")
and contributed such shares to a Grantor (Rabbi) Trust that Federated has
established for the express purpose of holding shares representing deferred
compensation. Federated, however, would like to be able to also purchase
Federated shares in the open market for contribution to the Trust. It is
estimated that annually less than approximately $10 million Share Credits will
be created in lieu of cash compensation that would otherwise be payable and
that the number of shares held by the Trust will equal the number of Share
Credits of all participants in the EDCP. By contributing the shares to the
Trust, Federated will avoid the necessity of having to expense each quarter the
accrued stock appreciation on the Stock Credits.
Request
- -------
Section 6.3(a) RESTRICTED PAYMENTS does not allow Federated to make certain
Restricted Junior Payments, including purchases of shares of stock of
Federated. Payments under the Equity Plan, however, are specifically excluded
from this restriction. In light of the implementation of the EDCP, Federated
hereby requests that you amend such Section 6.3(a), titled "Restricted
Payments", as indicated in the attached Amendment Letter.
<PAGE> 2
Series A Note Lenders
January 6, 1994
Page Two
II. Consent Request
---------------
Background
- ----------
The Lazarus store in the Kettering Shopping Center near Dayton, Ohio (the
"Store") has been earmarked for sale for quite some time. It was on the "Asset
Sale List" provided to the Series A Agent in December, 1991. To date, our
efforts to find a buyer for this Store have been unsuccessful. Federated,
however, has succeeded in negotiating an attractive deal with the Center's
Developer whereby the Developer would give Lazarus $2.8 million in exchange for
Lazarus' commitment to (i) use the $2.8 million for remodeling and stocking the
Store after downsizing it to approximately 82,000 square feet (the size of an
average soft-lines-only store), (ii) lease the remaining 50,000 square feet to
the Developer free of rent, (iii) sign a ten-year operating covenant and pay
the Developer percentage rent based on sales in the Store above certain levels,
and (iv) transfer title to the entire Store to the Developer in the event
Lazarus ceases to operate the Store. Additionally, the Developer has requested
that the Lenders acknowledge the lease of 50,000 square feet to the Developer
and execute a mutually satisfactory non-disturbance agreement.
Request
- -------
The Lenders have a mortgage on the Store. The transaction outlined above has
the potential of increasing the value of the Store as collateral to the Lenders
and of Federated's business. Therefore, Federated hereby requests that you
waive any and all restrictions that may be contained in the Series A Note
Agreement and other Loan Documents restricting Federated's ability to enter
into and execute the transaction outlined above.
To enable Federated to purchase shares beginning with Federated's 1994 fiscal
year and to consummate the transaction outlined above with respect to the
Lazarus Kettering Store by the end of the current fiscal year, we would
appreciate hearing from you by January 21, 1994. Thank you for your continued
support.
Sincerely,
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Susan P. Storer
---------------------------------
Susan P. Storer
Operating Vice President
and Assistant Treasurer
facwaiv2.sps
10kexhib.1045.doc
<PAGE> 3
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
January 6, 1994
CITIBANK, N.A., as Agent
399 Park Avenue
New York, NY 10043
Attention: Paul Trefry
RE: Amendment No. 5 to the Credit Agreement
---------------------------------------
Gentlemen:
Reference is made to that certain Credit Agreement, dated as
of May 20, 1992, among Federated Department Stores, Inc., as Borrower,
Citibank, N.A. as Agent, and Mellon Bank, N.A., Societe Generale, New York
Branch, and Chemical Bank, as Co-Agents and the Lenders parties thereto, as
amended to the date hereof (the "Credit Agreement"). Capitalized terms used
herein that are not defined herein shall have the meaning assigned to such
terms in the Credit Agreement.
1. AMENDMENT. The parties hereto hereby agree to amend and
restate Section 7.3(a) of the Credit Agreement so that is will read in full
as follows:
"The Borrower shall not and shall not permit any Subsidiary to
make or suffer to exist any Restricted Payment other than (i)
dividends paid to the Borrower or any wholly-owned Subsidiary
of the Borrower by any wholly-owned Subsidiary of the
Borrower, (ii) payments under the Equity Plan, (iii) payments
to purchase its shares of common stock in the open market for
contribution to a Grantor (Rabbi) Trust established for the
express purpose of holding shares representing deferred
compensation received pursuant to the Borrower's Executive
Deferred Compensation Plan adopted on October 29, 1993, and
(iv) payments in respect of the redemption of outstanding
share purchase rights under the Share Purchase Rights
Agreement at not more than the redemption price set forth
therein on the Closing Date. Notwithstanding the foregoing,
so long as no Default or Event of Default has occurred or is
continuing, the Borrower may make Restricted Payments at any
time that (i) either S&P has rated the Rated Debt "BBB" or
higher or Moody's has rated the Rated Debt "Baa2" or higher,
(ii) the Fixed Charge Coverage Ratio (calculated after giving
effect to such proposed Restricted Payment and any Debt
prepayments permitted pursuant to the last sentence of
Section 7.3(b) for the four fiscal quarters ending immediately
prior to the fiscal quarter in which such Restricted Payment
is declared or made equals or exceeds 1.5:1.0, and (iii) the
Series A Notes and the Series B Notes have been refinanced in
full on terms reasonably acceptable to the Majority Lenders;
PROVIDED that in no event shall the aggregate amount of such
Restricted Payments (when aggregated with any repayment of
Debt permitted pursuant to the last sentence of Section
7.3(b)) exceed 20% of the undistributed Net Income of the
Borrower for such four preceding fiscal quarters."
<PAGE> 4
2. WAIVER. The Lenders hereby waive the requirement set forth in
Section 6.14(b) of the Credit Agreement that Federated Noteholding
Corporation ("FNC"), a wholly owned subsidiary of the Borrower, become a
party to the Subsidiaries Guaranty as a result of the capital contribution
FNC received from the Borrower on or about December 31, 1993.
3. COSTS. The Borrower agrees to pay on demand all costs and
expenses of the Agent and the Lenders in connection with the preparation,
execution and delivery of this amendment, including the reasonable fees and
out-of-pocket expenses for counsel for the Agent and the Lenders with
respect hereto.
4. MISCELLANEOUS. Except as specifically provided herein, the
Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed. Notwithstanding anything in this amendment and
waiver to the contrary, no waiver of any default under or breach of any
provision of the Credit Agreement shall be deemed to be a waiver of any
other subsequent similar or different default under or breach of such or any
other provision of the Credit Agreement or of any election of remedies
available in connection with any of the foregoing.
This amendment and waiver may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
amendment.
If the terms of this amendment and waiver are acceptable to
you, please return an executed copy of this amendment via facsimile to Mr.
Paul Trefry at Citibank, N.A., fax number (212) 793-3053.
Very truly yours,
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Susan P. Storer
------------------------------
Susan P. Storer
Operating Vice President
and Assistant Treasurer
Accepted and Agreed to on
this _____ day of January, 1994
Name of Bank:______________________________
By:______________________________
Name:
Title:
waiv-wg2.sps
10kexhib.1045.doc
<PAGE> 1
Exhibit 10.10.1
FIRST AMENDMENT
TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
This First Amendment to the Amended and Restated Pooling and Servicing
Agreement dated as of December 15, 1992 is among PRIME RECEIVABLES CORPORATION
(the "Transferor"), a national banking corporation and CHEMICAL BANK, as
Trustee (in such capacity, the "Trustee").
W I T N E S S E T H
WHEREAS, the Transferor, the Servicer and the Trustee entered into an
Amended and Restated Pooling and Servicing Agreement as of December 15, 1992
(the "Pooling and Servicing Agreement");
WHEREAS, the Transferor, the Servicer and the Trustee wish to amend
Schedule 2 of the Pooling and Servicing Agreement;
WHEREAS, Section 13.01 of the Pooling and Servicing Agreement permits
the amendment of Schedules subject to certain conditions;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto hereby agree as follows:
1. Schedule 2 as attached to the Pooling and Servicing Agreement is
hereby deleted in its entirety and Schedule 2 attached hereto is substituted
therefor.
2. Attached hereto is an Opinion of Counsel stating that the
amendment to the Pooling and Servicing Agreement affected by this Second
Amendment does not adversely affect in any material respect the interests of
the Certificateholders.
3. The Pooling and Servicing Agreement, as amended by this Second
Amendment shall continue in full force and effect among the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
PRIME RECEIVABLES CORPORATION
By /s/ Susan R. Robinson
----------------------------
Title President
-------------------------
FDS NATIONAL BANK
By /s/ Susan P. Storer
----------------------------
Title CFO & Treasurer
-------------------------
CHEMICAL BANK
By
----------------------------
Title
-------------------------
10kexhib.10101.doc
<PAGE> 3
Schedule II
List of Lock-box Accounts
-------------------------
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35245-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
<PAGE> 4
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
<PAGE> 5
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
(513) 579-7560
December 17, 1993
Prime Receivables Corporation
4705 Duke Drive
Mason, Ohio 45220
Re: Prime Receivables, Inc. Amended and Restated Pooling & Servicing
Agreement dated as of December 15, 1992 (the "Agreement")
---------------------------------------------------------
Ladies and Gentlemen:
As General Counsel of Federated Department Stores, Inc., a
Delaware corporation, the ultimate parent of Prime Receivables Corporation, a
Delaware corporation ("Prime"), I have acted as counsel to Prime in connection
with the Second Amendment to the Agreement and the substitution of Schedule 2
of the Agreement.
I have examined such documents, records and matters of law as I
have deemed necessary for purposes of this opinion. Based thereon, I am of the
opinion that:
The First Amendment to the Agreement and the deletion of the
current Schedule 2 to the Agreement and substitution therefor with an amended
Schedule 2 do not, in accordance with Section 13.01 of the Agreement, adversely
affect in any material respect the interest of any of the Investor
Certificateholders, as such term is defined in the Agreement.
Very truly yours,
/s/ Dennis J. Broderick
Dennis J. Broderick
dkm550.doc
<PAGE> 1
Exhibit 10.10.2
SECOND AMENDMENT
TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
This Second Amendment to the Amended and Restated Pooling and Servicing
Agreement dated as of December 15, 1992 is among PRIME RECEIVABLES CORPORATION
(the "Transferor"), a national banking corporation and CHEMICAL BANK, as
Trustee (in such capacity, the "Trustee").
W I T N E S S E T H
-------------------
WHEREAS, the Transferor, the Servicer and the Trustee entered into an
Amended and Restated Pooling and Servicing Agreement as of December 15, 1992
(the "Pooling and Servicing Agreement");
WHEREAS, the Transferor, the Servicer and the Trustee wish to amend
Schedule 2 of the Pooling and Servicing Agreement;
WHEREAS, Section 13.01 of the Pooling and Servicing Agreement permits
the amendment of Schedules subject to certain conditions;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto hereby agree as follows:
1. Schedule 2 as attached to the Pooling and Servicing Agreement is
hereby deleted in its entirety and Schedule 2 attached hereto is substituted
therefor.
2. Attached hereto is an Opinion of Counsel stating that the
amendment to the Pooling and Servicing Agreement affected by this Second
Amendment does not adversely affect in any material respect the interests of
the Certificateholders.
3. The Pooling and Servicing Agreement, as amended by this Second
Amendment, shall continue in full force and effect among the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
PRIME RECEIVABLES CORPORATION
By /s/ Susan R. Robinson
--------------------------
Title President
------------------------
FDS NATIONAL BANK
By /s/ Susan P. Storer
--------------------------
Title CFO & Treasurer
------------------------
CHEMICAL BANK
By
--------------------------
Title
------------------------
2-Pool.WP
10kexhib.10102.doc
<PAGE> 3
SCHEDULE II
List of Lock-box Accounts
-------------------------
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Maas 480-366-723
Dept. 4504
Cincinnati, OH
45274-4504
Jordan Marsh 480-381-1425
Dept. 4501
Cincinnati, OH
45274-4501
Abraham & Straus 481-442-598
Dept. 4505
Cincinnati, OH
45274-4505
Bloomingdale's 481-442-556
Dept. 4508
Cincinnati, OH
45274-4508
Rich's 481-442-606
Dept. 4506
Cincinnati, OH
45274-4506
Goldsmith's 481-442-614
Dept. 4507
Cincinnati, OH
45274-4507
PNC Bank The Bon Marche 426-002-7019
201 East Fifth Street Dept. 4503
Cincinnati, OH Cincinnati, OH
45201-1198 45274-4503
Stern's 419-000-2709
Dept. 4502
Cincinnati, OH
45274-4503
Lazarus 411-017-5133
Dept. 4504
Cincinnati, Ohio
45274-4504
<PAGE> 4
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35245-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square P.O. Box 0064
Plaza Cincinnati, OH
Cincinnati, OH 45263 45274-0064
<PAGE> 5
FEDERATED 7 West Seventh Street, Cincinnati, Ohio 45202
DEPARTMENT STORES, INC.
(513) 579-7560
February 28, 1994
Prime Receivables Corporation
4705 Duke Drive
Mason, Ohio 45220
Re: Prime Receivables, Inc. Amended and Restated Pooling &
Servicing Agreement dated as of December 15, 1992 (the
"Agreement")
------------------------------------------------------
Ladies and Gentlemen:
As General Counsel of Federated Department Stores, Inc., a
Delaware corporation, the ultimate parent of Prime Receivables Corporation, a
Delaware corporation ("Prime"), I have acted as counsel to Prime in connection
with the Second Amendment to the Agreement and the substitution of Schedule 2
of the Agreement.
I have examined such documents, records and matters of law as I
have deemed necessary for purposes of this opinion. Based thereon, I am of the
opinion that:
The Second Amendment to the Agreement and the deletion of the
current Schedule 2 to the Agreement and substitution therefor with an amended
Schedule 2 do not, in accordance with Section 13.01 of the Agreement, adversely
affect in any material respect the interest of any of the Investor
Certificateholders, as such term is defined in the Agreement.
Very truly yours,
/s/ Dennis J. Broderick
Dennis J. Broderick
dkm550.doc
<PAGE> 1
Exhibit 10.10.3
ASSUMPTION AGREEMENT
This ASSUMPTION AGREEMENT, dated as of September 15, 1993 (this
"Agreement"), is among PRIME RECEIVABLES CORPORATION (the "Transferor"), a
Delaware corporation, FEDERATED DEPARTMENT STORES, INC. ("Federated"), a
Delaware corporation, CHEMICAL BANK, as Trustee (in such capacity, the
"Trustee"), a New York banking corporation, and FDS NATIONAL BANK (the "Bank"),
a national banking association.
W I T N E S S E T H
-------------------
WHEREAS, the Transferor, Federated and the Trustee entered into
and Amended and Restated Pooling and Servicing Agreement dated as of December
15, 1992 (the "Pooling and Servicing Agreement", under the terms of which
Federated agreed, among other things, to act as Servicer of certain receivables
transferred from the Transferor to the Trustee pursuant to such agreement;
WHEREAS, Section 3.01 of the Pooling and Servicing Agreement
contemplates that an Affiliate of Federated may succeed Federated as Servicer
provided certain conditions are met; and
WHEREAS, the Bank is an Affiliate of Federated that desires to
become Servicer under the Pooling and Servicing Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINED TERMS. Capitalized terms used herein and
not otherwise defined have the meanings assigned such terms in the Pooling and
Servicing Agreement.
ARTICLE II
TRANSFER AND ASSUMPTION OF OBLIGATIONS AS SERVICER
Section 2.01. TRANSFER AND ASSUMPTION OF OBLIGATIONS. Federated
hereby assigns and transfers to the Bank, and the Bank hereby unconditionally
assumes and agrees to perform, every covenant and obligation of the Servicer
under the Pooling and Servicing Agreement. The Bank shall, upon the
effectiveness of
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10kexhib.10103.doc
<PAGE> 2
this Agreement, be designated for all purposes and in all respects the Servicer
under the Pooling and Servicing Agreement.
Section 2.02. AFFIRMATION OF OBLIGATIONS. Notwithstanding the
transfer and assignment of its obligations as Servicer, Federated hereby
affirms and acknowledges that it remains jointly and severally liable with the
Bank for amounts payable to the Trustee pursuant to Section 11.05 of the
Pooling and Servicing Agreement.
Section 2.03. REVERSION TO FEDERATED. Notwithstanding the
transfer and assumption effected by this Agreement, if at any time, for any
reason, the bank is unwilling or unable to perform its duties and fulfill its
obligations as Servicer under the Pooling and Servicing Agreement, then the
duties, obligations and designation as Servicer under the Pooling and Servicing
Agreement shall automatically revert to Federated, with no further action,
approval, consent or waiver required by any party.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
Section 3.01. CONDITIONS PRECEDENT. This Agreement shall not
become effective under the following conditions precedent are met:
(a) the Trustee shall have received an opinion of counsel that
the execution, delivery and performance of this Agreement
by the parties hereto shall not cause the Trust to be
characterized for Federal income tax purposes as an
association taxable as a corporation or otherwise have any
material adverse impact on the Federal income taxation of
any outstanding Series of Investor Certificates or any
Certificate Owner; and
(b) the Trustee shall have received written confirmation from
each Rating Agency to the effect that the then current
rating of any Series or class of any Series will not be
reduced or withdrawn as a result of this Agreement.
Section 3.02. BINDING EFFECT. This Agreement shall become
effective (i) upon the fulfillment of each of the conditions to effectiveness
identified in Section 3.01 hereof and (ii) when it shall have been executed by
each party hereto, and from such date shall be binding upon and inure to the
benefit of each party hereto and their respective successors and assigns.
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10kexhib.10103.doc
<PAGE> 3
ARTICLE IV
MISCELLANEOUS
Section 4.01. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 4.02. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement.
Section 4.03. HEADINGS. The headings in this Agreement are
solely for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
Section 4.04. ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding of the parties hereto concerning the matters set forth
herein and supersedes all prior arrangements, communications and discussions,
whether oral or written, between the parties concerning such matters.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective offices thereunto duly authorized, as of the
date first above written.
PRIME RECEIVABLES CORPORATION
By /s/Susan R. Robinson
---------------------------
Title President
------------------------
FEDERATED DEPARTMENT STORES, INC.
By /s/Karen M. Hoguet
---------------------------
Title
------------------------
CHEMICAL BANK
By
---------------------------
Title
------------------------
FDS NATIONAL BANK
By /s/Susan P. Storer
---------------------------
Title CFO & Treasurer
------------------------
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292200-091-041
10kexhib.10103.doc
<PAGE> 4
COUNTERPART SIGNATURE PAGE
ARTICLE IV
MISCELLANEOUS
Section 4.01. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 4.02. EXECUTION IN COUNTERPARTS. This Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same Agreement.
Section 4.03. HEADINGS. The headings in this Agreement are
solely for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
Section 4.04. ENTIRE AGREEMENT. This Agreement sets forth
the entire understanding of the parties hereto concerning the matters set forth
herein and supersedes all prior arrangements, communications and discussions,
whether oral or written, between the parties concerning such matters.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective offices thereunto duly authorized,
as of the date first above written.
PRIME RECEIVABLES CORPORATION
By /s/Susan R. Robinson
--------------------------
Title President
-----------------------
FEDERATED DEPARTMENT STORES, INC.
By /s/Karen M. Hoguet
--------------------------
Title
-----------------------
CHEMICAL BANK
By /s/signature illegible
--------------------------
Title Vice President
-----------------------
FDS NATIONAL BANK
By /s/Susan P. Storer
--------------------------
Title CFO & Treasurer
-----------------------
CHMAIN Doc: 20155.2 29
292200-091-041
10kexhib.10103.doc
<PAGE> 1
Exhibit 10.14.1
FIRST AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This First Amendment To Receivables Purchase Agreement dated as of
June _____, 1993 (this "First Amendment"), is among THE ORIGINATORS listed on
the signature page hereof (collectively, the "Originators") and PRIME
RECEIVABLES CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992 (the "Purchase Agreement")
pursuant to which the Purchaser purchased Receivables (as defined in the
Purchase Agreement) from the Originators on the terms and conditions set forth
in the Purchase Agreement;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to revise Schedule IV attached to the Purchase Agreement;
WHEREAS, Section 8.01 of the Purchase Agreement permits the
Originators and the Purchaser to amend the Purchase Agreement subject to
certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Schedule IV attached to the Purchase Agreement is hereby
deleted in its entirety and Schedule IV attached hereto is substituted
therefor.
2. Attached hereto as Exhibit A is a certificate by an officer of
Federated Department Stores, Inc., as Servicer, stating that the amendment to
the Purchase Agreement affected by this First Amendment does not adversely
affect in any material respect the interests of any of the Investor
Certificateholders (as defined in the Purchase Agreement), which certificate is
required to be delivered to the Trustee (as defined in the Purchase Agreement)
pursuant to Section 8.01 of the Purchase Agreement.
3. The Purchase Agreement, as amended by this First Amendment,
shall continue in full force and effect among the parties thereto.
3117.ptc 1
10kexhib.10141.doc
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE ORIGINATORS:
ABRAHAM & STRAUS, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
BLOOMINGDALE'S, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
BURDINES, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
JORDAN MARSH STORES CORPORATION
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
LAZARUS, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
THE BON, INC.
By: /s/ Karen M. Hoguet
------------------------
Title:
---------------------
3117.ptc 2
<PAGE> 3
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
By: /s/ Susan R. Robinson
--------------------------
Title: President
-----------------------
June 23, 1993
3117.ptc 3
<PAGE> 4
Schedule IV
List of Lock-box Accounts
-------------------------
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, OH
45040-8079
Central Trust Company The Bon Marche 426-002-701
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, OH
45201-1198 45040-8080
Stern's 426-002-981
P.O. Box 8081
Mason, OH
45040-8081
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35245-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
3117.ptc
<PAGE> 5
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square P.O. Box 0064
Plaza Cincinnati, OH
Cincinnati, OH 45263 45274-0064
First Florida Bank Burdines 271-242-6035
P.O. Box 32165 Tampa, FL
Tampa, FL 33631 33651-9150
3117.ptc
<PAGE> 6
EXHIBIT A
FEDERATED DEPARTMENT STORES, INC.
OFFICER'S CERTIFICATE
---------------------
Pursuant to Section 8.01(a) of the Receivables Purchase Agreement
dated as of December 15, 1992 among the Originators listed therein and Prime
Receivables Corporation, Federated Department Stores, Inc., as Servicer,
certifies that the amendment dated as of June _23_, 1993 to Schedule IV of
Receivables Purchase Agreement does not adversely affect in any material
respect the interests of any of the Investor Certificateholders.
Karen Hoguet
---------------------------------
Federated Department Stores, Inc.
as Servicer
June 23 , 1993 Name: Karen Hoguet
---- ----------------------------
Title: Senior Vice President -
Planning and Treasurer
--------------------------
3117.ptc
<PAGE> 1
Exhibit 10.14.2
SECOND AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Second Amendment to Receivables Purchase Agreement dated as of
December ____, 1993 (this "Second Amendment"), is among THE ORIGINATORS listed
on the signature page hereof (collectively, the "originators") and PRIME
RECEIVABLES CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992 (the "Purchase Agreement")
pursuant to which the Purchaser purchased Receivables (as defined in the
Purchase Agreement) from the Originators on the terms and conditions set forth
in the Purchase Agreement;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to revise Schedule IV attached to the Purchase Agreement;
WHEREAS, Section 8.01 of the Purchase Agreement permits the
Originators and the Purchaser to amend the Purchase Agreement subject to
certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Schedule IV attached to the Purchase Agreement is hereby
deleted in its entirety and Schedule IV attached hereto is substituted
therefor.
2. Attached hereto as Exhibit A is a certificate by an officer of
FDS National Bank, as Servicer, stating that the amendment to the Purchase
Agreement affected by this First Amendment does not adversely affect in any
material respect the interests of any of the Investor Certificateholders (as
defined in the Purchase Agreement), which certificate is required to be
delivered to the Trustee (as defined in the Purchase Agreement) pursuant to
Section 8.01 of the Purchase Agreement.
3. The Purchase Agreement, as amended by this Second Amendment,
shall continue in full force and effect among the parties hereto.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE ORIGINATORS:
ABRAHAM & STRAUS, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
BLOOMINGDALE'S, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
BURDINES, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
JORDAN MARSH STORES CORPORATION
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
LAZARUS, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title:
------------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
THE BON, INC.
By: /s/ Karen M. Hoguet
---------------------------
Title: Treasurer
------------------------
2
<PAGE> 3
Date: 12/1/93 FDS NATIONAL BANK
------------
By: /s/ Susan P. Storer
-------------------------
Title: CFO
----------------------
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 12/1/93 By: /s/ Susan R. Robinson
------------ -------------------------
Title: President
----------------------
3
2nd-Amen.
10kexhib.10142.doc
<PAGE> 4
Schedule IV
List of Lock-box Accounts
-------------------------
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, OH
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East Fifth Street P.O. Box 8080
Cincinnati, OH Mason, OH
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, OH
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35245-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
<PAGE> 5
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square P.O. Box 0064
Plaza Cincinnati, OH
Cincinnati, OH 45263 45274-0064
<PAGE> 6
EXHIBIT A
FEDERATED DEPARTMENT STORES, INC.
OFFICER'S CERTIFICATE
---------------------
Pursuant to Section 8.01(a) of the Receivables Purchase Agreement
dated as of December 15, 1992 among the Originators listed therein and Prime
Receivables Corporation, FDS National Bank, as Servicer, certifies that the
amendment dated as of December ____, 1993 to Schedule IV of Receivables
Purchase Agreement does not adversely affect in any material respect the
interests of any of the Investor Certificateholders.
/s/ Susan P. Storer
------------------------------------
FDS National Bank
As Servicer
Date: 12/1/93 Name: Susan P. Storer
--------------- ------------------------------
Title: CFO
------------------------------
<PAGE> 1
Exhibit 10.14.3
THIRD AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Third Amendment to Receivables Purchase Agreement dated as of
February _28_, 1994 (this "Second Amendment"), is among THE ORIGINATORS listed
on the signature page hereof (collectively, the "originators") and PRIME
RECEIVABLES CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992 (the "Purchase Agreement")
pursuant to which the Purchaser purchased Receivables (as defined in the
Purchase Agreement) from the Originators on the terms and conditions set forth
in the Purchase Agreement;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to revise Schedule IV attached to the Purchase Agreement;
WHEREAS, Section 8.01 of the Purchase Agreement permits the
Originators and the Purchaser to amend the Purchase Agreement subject to
certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Schedule IV attached to the Purchase Agreement is hereby
deleted in its entirety and Schedule IV attached hereto is substituted
therefor.
2. Attached hereto as Exhibit A is a certificate by an officer of
FDS National Bank, as Servicer, stating that the amendment to the Purchase
Agreement affected by this Third Amendment does not adversely affect in any
material respect the interests of any of the Investor Certificateholders (as
defined in the Purchase Agreement), which certificate is required to be
delivered to the Trustee (as defined in the Purchase Agreement) pursuant to
Section 8.01 of the Purchase Agreement.
3. The Purchase Agreement, as amended by this Third Amendment,
shall continue in full force and effect among the parties hereto.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE ORIGINATORS:
ABRAHAM & STRAUS, INC.
[C]
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
BLOOMINGDALE'S, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
BURDINES, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
JORDAN MARSH STORES CORPORATION
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
LAZARUS, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
THE BON, INC.
By: /s/ Karen M. Hoguet
-----------------------------
Title:
--------------------------
2
<PAGE> 3
Date: 2/28/94 FDS NATIONAL BANK
-------------
By: /s/ Susan P. Storer
-----------------------------
Title: CFO & Treasurer
--------------------------
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 2/28/94 By: /s/ Susan R. Robinson
------------- ----------------------------
Title: President
-------------------------
3
3rd-Amen.
10kexhib.10143.doc
<PAGE> 4
Schedule IV
LIST OF LOCK-BOX ACCOUNTS
-------------------------
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35245-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
<PAGE> 5
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
<PAGE> 6
EXHIBIT A
FEDERATED DEPARTMENT STORES, INC.
OFFICER'S CERTIFICATE
---------------------
Pursuant to Section 8.01(a) of the Receivables Purchase Agreement
dated as of December 15, 1992 among the Originators listed therein and Prime
Receivables Corporation, FDS National Bank, as Servicer, certifies that the
amendment dated as of February ____, 1994 to Schedule IV of Receivables
Purchase Agreement does not adversely affect in any material respect the
interests of any of the Investor Certificateholders.
___________________________________
FDS National Bank
As Servicer
Date: 2/28/94 /s/ Susan P. Storer
-------------- -----------------------------------
Name: Susan P. Storer
Title: CFO
<PAGE> 1
Exhibit 10.14.4
FIRST SUPPLEMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This FIRST SUPPLEMENT TO RECEIVABLES PURCHASE AGREEMENT, dated
as of September 15, 1993 (this "Supplement"), is among PRIME RECEIVABLES
CORPORATION, a Delaware corporation (the "Purchaser") and FDS NATIONAL BANK, a
national banking association (the "Bank").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, certain wholly owned operating subsidiaries
(collectively, the "Originators") of Federated Department Stores, Inc.
("Federated") and the Purchaser, a wholly owned special purpose subsidiary of
Federated, entered into a Receivables Purchase Agreement dated as of December
15, 1992, (as heretofore amended, waiver or otherwise modified, the "Purchase
Agreement"), pursuant to which the Purchaser has agreed to purchase Receivables
(as defined in the Purchase Agreement) from the Originators on the terms and
subject to the conditions set forth in such agreement;
WHEREAS, Section 2.06 of the Purchase Agreement contemplates
that a direct wholly owned subsidiary of Federated may become an additional
Originator provided certain conditions are met;
WHEREAS, the Bank is a direct wholly owned subsidiary of
Federated that has acquired the Accounts (as defined in the Purchase Agreement)
of each of the Originators; and
WHEREAS, the Bank desires to become an Additional Originator
under the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined have the meanings assigned such terms in the Purchase
Agreement.
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<PAGE> 2
ARTICLE II
ADDITION OF BANK AS AN ORIGINATOR
SECTION 2.01. SALE OF RECEIVABLES. The Bank agrees to sell
Receivables to the Purchaser and the Purchaser agrees to buy Receivables from
the Bank, on the terms and subject to the conditions set forth in the Purchase
Agreement.
SECTION 2.02. REPRESENTATIONS AND WARRANTIES OF BANK. The Bank
hereby certifies to the Purchaser that, with respect to the Bank, each of the
representations and warranties contained in Sections 4.02 and 4.03 of the
Purchase Agreement is true and correct.
SECTION 2.03. COVENANTS OF THE BANK. The Bank hereby agrees to
comply with each of the covenants set forth in Article V of the Purchase
Agreement.
SECTION 2.04. DESIGNATION AS ORIGINATOR. The Purchaser and the
Bank hereby agree that, pursuant to Section 2.06 of the Purchase Agreement,
upon the effectiveness of this Supplement, the Bank shall in all respects be
designated, and have all of the rights and obligations of, an Originator under
the Purchase Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.01. CONDITIONS PRECEDENT. This Supplement shall not
become effective under the following conditions precedent are met:
(a) the Bank shall have delivered to the Purchaser the
items identified in Section 3.01(c) of the Purchase
Agreement; and
(b) the Purchaser shall have received notice from each
Rating Agency that the inclusion of the Bank as an
Additional Originator pursuant to Section 2.06 of
the Purchase Agreement will not result in a
reduction or withdrawal of its then existing rating
of any Class of Investor Certificates issued and
outstanding on the date of such notice.
SECTION 3.02. BINDING EFFECT. This Supplement shall become effective
(i) upon the fulfillment of each of the conditions to effectiveness identified
in Section 3.01 hereof and (ii) when it shall have been executed by each party
hereto, and from such date shall be binding upon and inure to the benefit of
each party hereto and their respective successors and assigns.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.01. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 4.02. EXECUTION IN COUNTERPARTS. This Supplement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Supplement.
SECTION 4.03. HEADINGS. The headings in this Supplement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Supplement.
SECTION 4.04. ENTIRE AGREEMENT. This Supplement sets forth the
entire understanding of the parties hereto concerning the matters set forth
herein and supersedes all prior arrangements, communications and discussions,
whether oral or written, between the parties concerning such matters.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be executed by their respective offices thereunto duly authorized, as of the
date first above written.
PRIME RECEIVABLES CORPORATION
By /s/Susan R. Robinson
---------------------------
Title President
------------------------
FDS NATIONAL BANK
By /s/Susan P. Storer
---------------------------
Title CFO/Treasurer
------------------------
I, Ellen R. Dugan, Secretary of the Bank, do hereby certify on behalf
of the Bank that S.P. Storer is the duly elected and acting CFO/Treasurer of
the Bank and that the above is her true and genuine signature.
Dated: September 17, 1993
-------------
By: /s/ Ellen R. Dugan
--------------------------
[Name] Ellen R. Dugan
Secretary
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Exhibit 10.20
================================================================================
PURCHASE AGREEMENT,
Dated as of December 31, 1993,
Among
The Prudential Insurance Company of America,
Federated Noteholding Corporation,
and
Federated Department Stores, Inc.
================================================================================
<PAGE> 2
This Purchase Agreement (this "Agreement") is made and entered
into on December 31, 1993 (the "Execution Date") by and among The Prudential
Insurance Company of America, a New Jersey mutual insurance corporation
("Seller"), Federated Noteholding Corporation, a Delaware corporation
("Buyer"), and Federated Department Stores, Inc., a Delaware corporation
("Parent").
RECITALS:
---------
A. Seller holds the promissory notes (the "Notes")
listed on Schedules I and II to the Proof of Claim (as hereafter defined) in
the aggregate principal amount of $832,503,433 as of December 31, 1991 issued
pursuant to the Term Loan Agreement, dated as of July 15, 1986, as amended (the
"Loan Agreement"), among Seller, R.H. Macy & Co., Inc. (the "Company"), and
each of the direct or indirect wholly owned subsidiaries of the Company
identified in the Proof of Claim (collectively with the Company, the "Credit
Parties").
B. On January 27, 1992 (the "Initial Petition Date"),
the Company and certain of its Affiliates commenced reorganization cases and on
January 31, 1992, certain other Affiliates of the Company (collectively,
together with the Company and its Affiliates that commenced reorganization
cases on January 27, 1992, the "Debtors") commenced reorganization cases
(collectively, the "Bankruptcy Case") under Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"). The
Debtors are continuing in the
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possession and operation of their respective businesses and properties as
debtors in possession, pursuant to Sections 1107 and 1108 of the Bankruptcy
Code.
C. Seller wishes to sell, transfer, assign, and deliver
(collectively, "Transfer") to Buyer and Buyer wishes to purchase and acquire
from Seller a fifty percent (the "Initial Percentage") undivided interest in
Seller's entire right, title, and interest in and to the Claims (as hereafter
defined) on the terms set forth in this Agreement.
D. Seller wishes to grant to Buyer and Buyer wishes to
accept from Seller the Option (as hereafter defined) on the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. PURCHASE AND SALE; OPTION
-------------------------
1.1. PURCHASE AND SALE. Pursuant to this Agreement and
the Instrument of Assignment in the form of Exhibit A (the "Instrument of
Assignment"), Seller transferred to Buyer and Buyer purchased and accepted
from Seller the Initial Percentage of the Claims. For purposes of this
Agreement and the Instrument of Assignment, "Claims" means any and all right,
title, and interest of Seller in and to: (a) all rights and claims of Seller
arising under each issue of Notes, the Loan Agreement, and the mortgages,
security agreements, title insurance policies, financing statements, and
other agreements, documents, or
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instruments made or given at any time (including without limitation after the
Execution Date) in connection with the Notes or the Loan Agreement
(collectively, the "Related Documents"), and any extension thereof or
substitution for any of the foregoing, including without limitation all (i)
principal amounts (collectively, the "Principal Amount") due under the Notes,
the Loan Agreement, the Related Documents, or any such extension thereof or
substitution therefor (collectively, the "Loan Documents") and (ii) accrued and
unpaid interest under the Loan Documents, including without limitation any
accrued and unpaid Additional Interest (as defined in the Loan Agreement),
rights to payment of yield maintenance, any interest rate kicker, or other
additional or contingent interest amounts, and any other amounts at any time
payable under the Loan Documents (excluding, however, attorneys' fees and
expenses of counsel for Seller and other costs of enforcement or administration
of Seller under the Loan Documents); (b) all collateral securing the Notes (the
"Collateral"); (c) any Distributions (as defined in the Intercreditor
Agreement); and (d) any and all causes of action or claims of Seller (whether
known or unknown) against any person or entity which in any way is based upon,
arises out of, or is related to any of the foregoing, including without
limitation all "claims" within the meaning of Section 101(5) of the Bankruptcy
Code in respect of the foregoing and any and all rights and claims evidenced by
the Proof of Claim.
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1.2. PURCHASE PRICE. The purchase price for the Initial
Percentage of the Claims (the "Purchase Price") is $449,325,000, payable as
follows:
1.2.1. INITIAL CASH PAYMENT. Simultaneously with delivery
of this Agreement, Buyer paid to Seller an initial payment in the amount
of $109,325,000 (the "Initial Cash Payment").
1.2.2. DEFERRED PAYMENT OBLIGATION. (a) Buyer will pay
to Seller the balance of $340,000,000 of the Purchase Price (the "Deferred
Payment Obligation") on December 31, 1996 (the "Deferred Payment Date"). The
Deferred Payment Obligation is evidenced by a promissory note in the form of
Exhibit B ("Buyer's Note").
(b) The unpaid balance of the Deferred Payment
Obligation will bear interest from the Execution Date to the Deferred Payment
Date as provided in Buyer's Note.
(c) The Deferred Payment Obligation will be
prepaid as provided in Buyer's Note.
(d) As security for payment of the Deferred Payment
Obligation and Buyer's other obligations under this Agreement and the Other
Buyer Documents (as hereafter defined), pursuant to the security agreement in
the form of Exhibit C (the "Security Agreement"), Buyer granted to Seller a
security interest under the Uniform Commercial Code of the State of New York.
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(e) As further security for payment of the
Deferred Payment Obligation and Buyer's other obligations under this Agreement
and the Other Buyer Documents, simultaneously with the execution and delivery
of this Agreement, Parent executed and delivered to Seller a guarantee of
Buyer's obligations under Buyer's Note and the Other Buyer Documents in the
form of Exhibit D (the "Guarantee").
1.3. OPTION TO PURCHASE ADDITIONAL INTERESTS. Seller hereby
grants to Buyer the option (the "Option") to purchase and acquire from Seller
additional interests (the "Additional Percentage") in the Claims on the
following terms and conditions:
(a) Unless the Option has terminated as provided in
Section 1.3(e), Buyer may exercise the Option at any time and from time to
time, provided that at the time of any such exercise no Default (as defined in
Buyer's Note) has occurred and is continuing, on or after the Execution Date
and prior to the Deferred Payment Date, by giving written notice to Seller of
the full or partial exercise of the Option in accordance with this Agreement
(an "Option Exercise Notice"). An Option Exercise Notice must specify (i) the
Additional Percentage of Claims to be acquired, which amount may not be less
than $25,000,000 face amount of the Claims as to any partial exercise of the
Option, and (ii) the date of such acquisition (the "Option Settlement Date"),
which date may not be (x) fewer than 14 nor more than 30 calendar days after
the date of the Option Exercise Notice, nor (y) later than the "Maturity Date"
specified in Buyer's Note or
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such earlier date on which all principal and accrued interest outstanding
under Buyer's Note shall have become due and payable.
(b) The purchase price (the "Option Exercise Price")
for the purchase and acquisition of an Additional Percentage of Claims pursuant
to the Option will be an amount equal to the Principal Amount of Notes to be
purchased upon exercise of the Option multiplied by 1.08, plus, in respect of
each $1,000,000 in Principal Amount of Notes that comprise the Additional
Percentage, (i) commencing on January 1, 1994, $5,000 for each full calendar
month (or proportionate percentage thereof for a partial calendar month)
between the Execution Date and the Option Settlement Date and (ii) commencing
on January 1, 1995, $10,000 for each full calendar month (or proportionate
percentage thereof for a partial calendar month) between January 1, 1995 and
the Option Settlement Date. Purchases of Additional Percentages of Claims must
be pro rata as to each issue of Notes, with the result that (subject to
rounding to the nearest $1,000,000 of Principal Amount) Buyer purchases upon
any exercise of the Option the same Additional Percentage of Claims relating to
each issue of Notes. Subject to Section 1.3(d), the amount of the Option
Exercise Price will be payable in full in cash in immediately available United
States funds on the Option Settlement Date. On each Option Settlement Date,
(A) Buyer will deliver to Seller (1) the Option Exercise Price by wire transfer
in immediately available United States funds to an account of Seller designated
for such purpose by Seller and (2) a certificate, dated the
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Option Settlement Date and signed by an executive officer of each of Buyer and
Parent, stating that the representations and warranties of Buyer and Parent
contained in Section 4.1 are true and correct in all material respects as if
made anew on and as of the Option Settlement Date and (B) Seller will deliver
to Buyer an instrument of assignment substantially in the form of the
Instrument of Assignment with respect to the Additional Percentage of Claims
purchased upon exercise of the Option.
(c) Notwithstanding Section 1.3(a), Buyer may not
purchase upon exercise of the Option (after giving effect to the Initial
Percentage of Claims and any subsequent purchase of any Additional Percentage)
in excess of a 66% undivided interest in the Claims unless Buyer purchases all
of Seller's remaining right, title, and interest in and to the Claims.
(d) Not fewer than five business days prior to
the Option Settlement Date, Seller will notify Buyer whether it believes, after
due inquiry, that Seller will be able to deliver to Buyer an unqualified
certificate, dated as of the Option Settlement Date, signed by an authorized
executive officer of Seller, stating that all of the representations and
warranties of Seller in Section 3.1 are true and correct in all material
respects as of the Option Settlement Date as if made anew on and as of the
Option Settlement Date (an "Option Settlement Certificate"). It will be a
condition to Buyer's obligations under Section 1.3(b) (which Buyer may waive in
its sole discretion) that Seller furnish to Buyer an unqualified Option
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<PAGE> 9
Settlement Certificate on the Option Settlement Date; if Seller is unable so
to deliver an unqualified Option Settlement Certificate, Buyer will have the
right to rescind the Option Exercise Notice and Seller will have no liability
as a result of such inability to deliver an unqualified Option Settlement
Certificate; provided, however, that the rescission of any Option Exercise
Notice pursuant to this Section 1.3(d) will not constitute a waiver by Buyer of
any rights, claims, or remedies hereunder arising from the breach by Seller of
any representation or warranty set forth in Section 3.1 on and as of the date
hereof.
(e) The Option and any Option Exercise Notice in respect
of which the Option Settlement Date has not yet occurred will terminate without
further action upon the effective date of a confirmed Plan (as defined in the
Intercreditor Agreement); provided, however, that nothing herein will limit or
otherwise affect the relative rights and liabilities of the parties in respect
of any breach of any representation, warranty, or covenant occurring prior to
the date of such termination.
II. ADDITIONAL DOCUMENTS
--------------------
2.1. ADDITIONAL DOCUMENTS. Simultaneously herewith: (a)
Buyer has delivered to Seller (i) the Initial Cash Payment by wire transfer in
immediately available United States funds to an account of Seller previously
designated by Seller, (ii) Buyer's Note, the Security Agreement, the
Intercreditor Agreement in the form of Exhibit E (the "Intercreditor
Agreement"), Uniform
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<PAGE> 10
Commercial Code financing statements delivered by Buyer pursuant to the
Security Agreement, and instruments to be filed with the Bankruptcy Court
pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure (the
"Rules") (collectively, together with any certificate or other instrument or
document delivered by Buyer concurrently herewith and together with the Put
Note (as defined in the Intercreditor Agreement), the "Other Buyer Documents"),
each duly executed by Buyer, and (iii) the opinion of Jones, Day, Reavis &
Pogue, counsel for Parent and Buyer, in the form of Exhibit F, (b) Parent has
delivered to Seller the Guarantee and the Intercreditor Agreement
(collectively, the "Other Parent Documents"), each duly executed by Parent, and
(c) Seller has delivered to Buyer and Parent the Instrument of Assignment, the
Intercreditor Agreement, and instruments to be filed with the Bankruptcy Court
pursuant to Rule 3001(e), each duly executed by Seller (collectively, together
with any certificate or other instrument or document delivered by Seller
concurrently herewith, the "Other Seller Documents").
III. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
3.1. Seller represents and warrants to Buyer and Parent as
follows:
3.1.1. POWER AND AUTHORITY; NO CONFLICT. Seller is
a mutual insurance corporation duly organized, validly existing, and in good
standing under the laws of the State of New Jersey, with all requisite
corporate power and authority to enter
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into this Agreement and the Other Seller Documents and to perform its
obligations hereunder and thereunder. This Agreement and each of the Other
Seller Documents has been duly and validly authorized, executed, and delivered
by Seller. The execution, delivery, and performance of this Agreement and each
of the Other Seller Documents by Seller does not and will not violate, breach,
or constitute a default (or an event which with or without notice and/or lapse
of time would constitute a default) under Seller's organizational documents or
by-laws or any agreement or instrument to which Seller is a party or by which
it is bound, including without limitation under the Loan Documents or any
statute, ordinance, rule, regulation, or order (collectively, any "Legal
Requirement") of any Governmental Authority (as hereafter defined) applicable
to Seller, or result in the creation of any lien, encumbrance, or security
interest (collectively, any "Lien") on or in any Claim. This Agreement and
each of the Other Seller Documents is a legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability against Seller may be limited by applicable bankruptcy,
insolvency, reorganization, and similar laws affecting creditors' rights
generally, moratoria laws from time to time in effect, and applicable equitable
principles (such exception, the "Bankruptcy Exception").
3.1.2. NO REQUIRED CONSENTS. Except with respect to
required filings under Rule 3001, no registration or filing with, notice to,
or consent or approval of, or other action by, any
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federal, state, or other governmental agency, authority, administrative or
regulatory body, arbitrator, or court or other tribunal, foreign or domestic
(any "Governmental Authority"), or of any Credit Party, is required in
connection with the execution, delivery, and performance of this Agreement or
the Other Seller Documents by Seller or the Transfer by Seller of Claims
hereunder.
3.1.3. STATUS OF NOTES. The aggregate unpaid
principal amount of the Notes as of December 31, 1991 was $832,503,433. Since
December 31, 1991, no payments of principal have been received by Seller or any
of its Affiliates in respect of the Claims and since the Initial Petition Date
no other payments have been received by Seller or any of its Affiliates in
respect of the Claims. No objection to the Claims has been filed in the
Bankruptcy Court or, to the knowledge of Seller, is threatened. None of the
Loan Documents requires Seller to extend any additional credit to any of the
Credit Parties, and no sum is due from Seller or has been demanded from Seller
by any of the Credit Parties. At the time of the issuance of the Notes, the
Loan Documents were the legal, valid, and binding obligations of the Credit
Parties that are party thereto, enforceable against the Credit Parties that are
party thereto in accordance with their respective terms, subject only to the
Bankruptcy Exception, and the Liens securing the Notes were valid and
enforceable against the Credit Parties that are party thereto and were entitled
to the priorities set forth in the Loan Documents,
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subject only to the Bankruptcy Exception. Since the issuance of the Notes,
Seller has made all necessary recordings and filings, and any required renewals
thereof, in order to perfect and maintain the priority of lien in the
Collateral existing as of the initial execution date of the Loan Documents,
subject to any superior liens arising in respect of real property taxes
assessed prior to the Initial Petition Date but not due and payable until after
the Initial Petition Date.
3.1.4. OWNERSHIP OF THE NOTES AND THE CLAIMS. Seller is the
sole legal and beneficial owner and holder of the Notes and the Claims, and has
good and marketable title thereto, free and clear of any Liens. Seller's
right, title, and interest in and to the Notes and the Claims is not subject,
directly or indirectly, to any pledge, encumbrance, assignment, transfer,
conveyance, disposition of, or termination, in whole or in part, except to
Buyer hereunder and except as created pursuant to the terms and conditions of
the Loan Documents.
3.1.5. PROOF OF CLAIM. Seller has timely filed a proof of
Claim (the "Proof of Claim") in respect of the Claims in accordance with the
procedures applicable in the Bankruptcy Case, the Bankruptcy Code, and the
Rules.
3.1.6. NO VIOLATION OF SECURITIES LAWS. Without implying any
characterization of the Notes or the Claims or any interest therein as a
"security" within the meaning of any applicable securities laws, neither Seller
nor any of its Affiliates, nor any agent or other representative of any of the
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<PAGE> 14
foregoing, has offered to sell or solicited any offer to buy the Notes or the
Claims or any portion thereof in a manner that requires registration of any
such act under any applicable securities laws.
3.1.7. NO BROKERS. Seller is not party to any agreement or
has not taken any action as a result of which Buyer or Parent would become
obligated to pay any broker, finder, or other person or entity a commission,
finder's fee, or other similar payment as a result of this Agreement or the
transactions contemplated hereby.
3.2. BUYER AND PARENT ACKNOWLEDGMENT. Each of Buyer and
Parent hereby (a) acknowledges that, based on publicly available information
and a review of the Notes, Loan Agreement, and Related Documents, it has made
its own independent investigation, analysis, and interpretation of the Claims,
the Loan Documents, the Related Documents, the Credit Parties, the Collateral,
the business, financial condition, capital structure, and results of operations
of the Debtors, and the Bankruptcy Case (the Claims, Loan Documents, Related
Documents, Credit Parties and Collateral, and such business, financial
condition, capital structure and results of operations, and the Bankruptcy
Case, being hereafter referred to as the "Reviewed Information"), and is
satisfied as to such investigation, analysis, and interpretation, and the terms
of this Agreement, the Other Seller Documents, and the Other Buyer/Parent
Documents (as hereafter defined), (b) to the maximum extent legally permitted,
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irrevocably waives any claim against Seller based on nondisclosure including,
without limitation, relating to the Reviewed Information, whether based upon
any actual or alleged common law fraud, breach of any securities, deceptive
trade practices, or other laws, or otherwise, except as set forth in clause (c)
immediately below, and (c) acknowledges that Seller has not made any
representation or warranty, whether express or implied, of any kind or
character, including without limitation any representation or warranty relating
to compliance by the Collateral with any Legal Requirements relating to the
protection of the environment, except as expressly set forth in this Agreement,
any of the Other Seller Documents, or in any other document or instrument
executed by Seller and delivered to Buyer or Parent making express reference to
this Section 3.2.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
--------------------------------------------------
4.1. REPRESENTATIONS AND WARRANTIES. Parent and Buyer jointly
and severally represent and warrant to Seller as follows:
4.1.1. POWER AND AUTHORITY; NO CONFLICT, ETC.
(a) Each of Buyer and Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
all requisite corporate power and authority to enter into and to perform its
obligations hereunder and under each of the Other Buyer Documents and the Other
Parent Documents (collectively, the "Other Buyer/Parent Documents") to which it
is a party. This Agreement and each of the Other Buyer/Parent Documents has
been duly and validly authorized,
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<PAGE> 16
executed, and delivered by each of Parent and Buyer party thereto. The
execution, delivery, and performance of this Agreement and each of the Other
Buyer/Parent Documents to which Buyer or Parent is a party do not and will
not violate, breach, or constitute a default (or an event which with or without
notice and/or lapse or time would constitute a default) under Buyer's or
Parent's organizational documents or any agreement or instrument to which
Parent or Buyer is a party or by which either of them is bound, or any Legal
Requirement applicable to Parent or Buyer. Each of this Agreement and the
Other Buyer/Parent Documents to which Buyer or Parent is a party is a legal,
valid, and binding obligation of Parent and Buyer, enforceable against each of
them in accordance with its terms, subject only to the Bankruptcy Exception.
(b) Buyer has previously furnished to Seller true
and correct copies of its Certificate of Incorporation and By-Laws.
4.1.2. NO REQUIRED CONSENTS. Except with respect to required
filings under Rule 3001, no registration or filing with, notice to, or consent
or approval of, or other action by, any Governmental Authority is required in
connection with the execution, delivery, and performance of this Agreement or
the Other Buyer/Parent Documents by Buyer and Parent or the purchase and
acceptance by Buyer of the Claims hereunder.
4.1.3. BUYER'S INVESTMENT. Without implying any
characterization of the Notes or the Claims or any interest
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therein as a "security" within the meaning of any applicable securities laws,
(a) each of Buyer and Parent is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act of 1933, as amended, and (b)
Buyer is not purchasing the Notes or the Claims with a view to, or for resale
in connection with, any distribution or public offering of all or any part
thereof or any interest therein in a manner that would violate applicable
securities laws.
4.1.4. NO BROKERS. Neither Buyer nor Parent is party to any
agreement or has taken any action as a result of which Seller would become
obligated to pay any broker, finder, or other person or entity a commission,
finder's fee, or other similar payment as a result of the consummation of this
Agreement or the transactions contemplated hereby.
4.2. SELLER ACKNOWLEDGMENT. Seller hereby acknowledges
that neither Buyer nor Parent has made any representation or warranty, whether
express or implied, of any kind or character, except as expressly set forth in
this Agreement or any of the Other Buyer/Parent Documents.
V. CERTAIN COVENANTS
5.1. INDEMNIFICATION. (a) Seller will indemnify, defend,
and hold harmless Parent and Buyer from and against any and all expenses
(including without limitation reasonable attorneys' fees and expenses), losses,
claims, damages, liabilities, and obligations (collectively, "Indemnifiable
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Losses") incurred by or threatened against either of them relating to,
resulting from, or arising out of Seller's breach of any of the
representations, warranties, covenants, or agreements of Seller set forth in
this Agreement or in any of the Other Seller Documents.
(b) Buyer and Parent, jointly and severally, will
indemnify, defend, and hold harmless Seller from and against any and all
Indemnifiable Losses incurred by or threatened against Seller relating to,
resulting from, or arising out of Buyer's or Parent's breach of any of the
representations, warranties, covenants, or agreements of Buyer or Parent set
forth in this Agreement or in any of the Other Buyer/Parent Documents.
(c) The representations and warranties of each of
the parties contained in this Agreement or in any certificate or other
instrument or document delivered simultaneously herewith will survive the
Execution Date and remain in full force and effect until the first anniversary
of the Execution Date.
(d) The liabilities of Seller under Section
5.1(a) or otherwise arising from or relating to this Agreement or the Other
Seller Documents or the transactions contemplated hereby or thereby will not
exceed the Purchase Price actually paid plus the amount of all interest
actually paid (including Additional Interest), plus the Option Exercise Price
actually paid and the Put Price (as defined in the Intercreditor Agreement)
actually paid.
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5.2. PUBLICITY. Prior to publishing any press release or
similar public announcement with respect to this Agreement, the Other Seller
Documents, the Other Buyer/Parent Documents, or the transactions contemplated
hereby or thereby, each of Seller and Parent will consult each other as to the
nature and content of such public release or announcement; provided, however,
that nothing herein will prohibit any party from publishing any press release
or similar public announcement that it determines in good faith to be required
by any law or rule of any national securities exchange on which its securities
are listed or admitted for trading.
5.3. NO TRANSFER OF ADDITIONAL PERCENTAGES. Until the
expiration or termination of the Option, Seller will not (a) subject the
Additional Percentage of the Claims to any Lien or (b) Transfer, or agree to
Transfer, any Additional Percentage of the Claims or any interest therein,
unless such Transfer is expressly subject to the Option and this Agreement and
pursuant to an instrument reasonably satisfactory to Buyer whereby the
transferee assumes Seller's obligations under the Option and this Agreement,
and such Transfer is to a transferee that is a financial or investment
institution that has assets of at least $150,000,000 (a "Permitted
Transferee").
5.4. NO DISTRIBUTIONS; ETC. As long as the Deferred Payment
Obligation is outstanding, Buyer will not (a) amend its Certificate of
Incorporation or By-Laws, (b) create or permit to exist any Lien on any of its
assets, except for Liens arising
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<PAGE> 20
hereunder or under any Other Buyer/Parent Documents and tax liens arising as a
matter of law in respect of liabilities which are not overdue or which are
being contested in good faith, (c) transfer any of its assets other than
payments or in connection with the discharge of franchise fees, taxes, and
other liabilities arising as a matter of law, (d) incur any liability for
borrowed money or any other liability ("Debt"), other than franchise tax and
other liabilities arising as a matter of law, or enter into any direct or
indirect guarantee of Debt of another person or entity, (e) declare or pay any
dividends (other than solely of shares of Buyer's capital stock) on or make any
other distributions in respect of, any shares of its capital stock, or
purchase, redeem, or acquire for value any shares of its capital stock, or (f)
engage in any activity other than (i) its ownership of Notes and Claims, (ii)
actions contemplated hereby or by the Intercreditor Agreement or the Other
Buyer/Parent Documents, and (iii) ordinary corporate actions not materially
inconsistent with the foregoing limitations.
5.5. RULE 3001(E). Seller hereby irrevocably waives all of
its rights under Rule 3001(e) to object to the Transfer pursuant to the terms
hereof of the Initial Percentage or of any Additional Percentage of the Claims
to Buyer. Seller will cooperate with Buyer with respect to required filings
under Rule 3001(e).
VI. MISCELLANEOUS
-------------
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<PAGE> 21
6.1. SUCCESSORS AND ASSIGNS. This Agreement,
including without limitation the representations, warranties, covenants, and
agreements contained herein, (a) will inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns, and (b) will be binding upon and enforceable against the parties
hereto and their respective successors and permitted assigns; provided,
however, that no party hereto may assign or delegate any of its rights or
obligations hereunder or under any instrument or agreement referred to herein
without the prior written consent of the other parties hereto (which consent
may be given or withheld in the sole discretion of such other parties).
Notwithstanding the foregoing, in connection with a Transfer of Buyer's Note,
Seller may assign any of its rights or obligations hereunder to a Permitted
Transferee pursuant to an instrument of transfer reasonably satisfactory to
Buyer whereby the Permitted Transferee assumes Seller's obligations hereunder;
provided, however, that as among the parties hereto no such assignment will
relieve Seller from its liabilities hereunder.
6.2. COSTS AND EXPENSES. Each party to this Agreement will
bear its respective costs and expenses, including without limitation attorneys'
fees and expenses, incurred in connection with: (a) the preparation, execution,
delivery, performance, and administration of this Agreement and (b) the pursuit
of any actions to enforce each party's respective rights and remedies arising
out of or related to the Claims, except to the extent
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<PAGE> 22
that such costs and expenses are reimbursable by some or all of the Debtors
pursuant to the Loan Agreement, the Bankruptcy Code, the Rules or otherwise.
6.3. AMENDMENTS; WAIVERS. (a) No amendment, modification,
or supplement of any provision of this Agreement will be effective unless it is
in writing and signed by Seller, Buyer, and Parent.
(b) No action or inaction taken or omitted pursuant
to this Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties, or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature, and no failure on the part of any party to
exercise, and no delay in exercising, any right hereunder or under any related
document will operate as a waiver thereof by such party, nor will any single or
partial exercise of any right hereunder or under any other related document
preclude any other or further exercise thereof or the exercise of any other
right.
6.4. NOTICES. (a) Subject to Section 6.4(b), all demands,
notices, requests, consents, and communications hereunder will be in writing
and will be deemed to have been duly given if personally delivered by courier
service or messenger, sent by overnight delivery service, or facsimile
transmission, to the following addresses, or such other persons, firms, or
addresses as may be furnished hereafter by notice in writing, to the following
parties:
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<PAGE> 23
(i) in the case of Parent or Buyer, to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention: The Persons Listed on Exhibit I
Fax No.: 513-579-7462
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Attention: Robert A. Profusek, Esq.,
Joanne L. Bober, Esq., and
Robert K. Smits, Esq.
Fax No.: 212-755-7306
(ii) in the case of Seller, to:
The Prudential Insurance Company
of America
751 Broad Street
Newark, NJ 07102
Attention: The Persons Listed on
Exhibit H
Fax No.: 201-824-4955
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Chaim J. Fortgang, Esq.,
Laurence D. Cherkis, Esq.,
Philip Mindlin, Esq., and
Amy R. Wolf, Esq.
Fax No.: 212-403-2000
(b) All demands, notices, requests, consents, and
communications will be deemed to have been given if addressed in the manner
described above: (i) if sent by hand, at the time of actual delivery thereof,
(ii) if sent by facsimile transmission, upon receipt of confirmation of such
facsimile transmission, (iii) if sent by overnight delivery service, one
business day
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<PAGE> 24
after deposit thereof with such delivery service; PROVIDED, HOWEVER, that
notwithstanding the foregoing, all such demands, requests, consents, notices,
and communications given under Section 1.3 will be deemed to have been given
only if (A) in the case of Seller, the receipt thereof is acknowledged in
writing signed by one of the persons listed on Exhibit H, at the address of
Seller set forth above, or, if after good faith efforts to obtain such
acknowledgment Buyer or Parent is unable so to do, by notice given in the
manner hereinabove contemplated to Seller's counsel, Wachtell, Lipton, Rosen &
Katz, at the address set forth above, attention: Chaim J. Fortgang, Esq.,
Laurence D. Cherkis, Esq., Philip Mindlin, Esq., and Amy R. Wolf, Esq.,
PROVIDED FURTHER, HOWEVER, that if after good faith efforts to obtain such
acknowledgment from such counsel, Buyer or Parent is unable so to do, such
demands, requests, consents, notices and communications will be deemed to have
been given if hand delivered to each of the nine aforesaid persons, without
acknowledgment of such receipt, or (B) in the case of Buyer or Parent, the
receipt thereof is acknowledged in writing signed by one of the persons listed
on Exhibit I, at the address of Buyer and Parent set forth above, or, if after
good faith efforts to obtain such acknowledgment Seller is unable so to do, by
notice given in the manner here above contemplated to Parent's and Buyer's
counsel, Jones, Day, Reavis & Pogue, at the address specified above, attention:
Robert A. Profusek, Esq., Robert K. Smits, Esq., and Joanne L. Bober, Esq.,
provided further,
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<PAGE> 25
HOWEVER, that if after good faith efforts to obtain such acknowledgment from
such counsel, Seller is unable so to do, such demands, requests, consents,
notices and communications will be deemed to have been given if hand delivered
to each of the eight aforesaid persons, without acknowledgment of such
receipt. Each party may change its address or designate other persons or
entities to receive notices to it by giving written notice thereof to the other
parties in the manner provided above.
6.5. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the other parties hereto would be irreparably damaged if any
of the provisions of this Agreement relating to the Option were not performed
in accordance with their specific terms or were otherwise breached.
Accordingly, in the event of a breach or default of this Agreement in respect
of the Option, each of the parties agrees that the other parties will be
entitled to an injunction or injunctions to prevent breaches of those
provisions of this Agreement relating to the Option and to enforce specifically
the Option and the terms and conditions relating thereto in any action
instituted in any court of the United States, or any State thereof having
personal and subject matter jurisdiction, in addition to any other remedy to
which such party may be entitled at law or in equity (subject to the terms of
this Agreement as to any such other remedy).
6.6. COUNTERPARTS AND EXECUTION. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and will become effective
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<PAGE> 26
when one or more such counterparts have been signed by each of the parties and
delivered to the other parties.
6.7. INTEGRATION. This Agreement, together with any Exhibits
hereto and any documents delivered simultaneously herewith, constitute the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements, understandings, or
representations pertaining to the subject matter hereof, whether oral or
written. There are no representations, warranties, covenants or other
agreements among the parties in connection with the subject matter hereof
except as expressly set forth herein or therein.
6.8. SEVERABILITY. If any term or provision of this
Agreement is held by any court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms and provisions of this Agreement
will remain in full force and effect and will in no way be affected, impaired,
or invalidated by such invalidity or unenforceability of such term or
provision.
6.9. CAPTIONS. The Article and Section captions in this
Agreement are for convenience of reference only and will not affect in any way
the meaning or interpretation of this Agreement. Such captions will not be
deemed to be part of this Agreement and in no way define, limit, extend, or
describe the meaning or intent of any provisions hereof.
6.10. GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the internal laws of the
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<PAGE> 27
State of New York, without regard to the principles of conflict of laws
thereof.
6.11. INTERPRETATION. Unless the context otherwise
requires, (i) all references to Sections, Articles, or Exhibits are to
Sections, Articles, or Exhibits of or to this Agreement, (ii) each term defined
in this Agreement has the meaning assigned to it, (iii) words in the singular
include the plural and VICE VERSA, (iv) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in accordance with
generally accepted accounting principles, (v) "or" is disjunctive but not
necessarily exclusive, (vi) the term "Affiliate" has the meaning given to that
term in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of 1934,
as amended, (vii) all references to "business days" will be to any day other
than a weekend day or a day which is a national holiday in the United States or
a state holiday in New York State, and (viii) references to "$" or dollar
amounts will be to lawful currency of the United States of America.
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<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first written above.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:/s/ Russell A. Rahbany
-----------------------------------
Name: Russell A. Rahbany
----------------------------------
Title: Vice President
------------------------------------
FEDERATED DEPARTMENT STORES, INC.
By:/s/ Ronald W. Tysoe
-----------------------------
Name: Ronald W. Tysoe
---------------------------
Title: Vice-Chairman and Chief
Financial Officer
--------------------------
FEDERATED NOTEHOLDING CORPORATION
By:/s/ Ronald W. Tysoe
----------------------------
Name: Ronald W. Tysoe
--------------------------
Title: President
-------------------------
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10kexhib.1020.doc 27
<PAGE> 1
Exhibit 10.20.1
PROMISSORY NOTE
$340,000,000
New York, N.Y.
December 31, 1993
FOR VALUE RECEIVED, the undersigned, Federated Noteholding
Corporation, a Delaware corporation ("Maker"), promises to pay to the order of
The Prudential Insurance Company of America, a New Jersey mutual insurance
corporation (together with any subsequent permitted holder of this Note,
"Holder"), at its offices located at 751 Broad Street, Newark, N.J. 07102, or
at such other address as Holder may from time to time designate in writing, the
principal sum of $340,000,000, together with interest thereon from the date
hereof on the unpaid principal balance at the rate and as herein provided.
Unless otherwise specified by Holder in writing, all payments on this Note will
be made in lawful money of the United States of America and in immediately
available funds, by wire transfer of funds to Morgan Guaranty, New York, N.Y.,
Account No. 050-54-493, ABA # 021-000-238, for credit to "Prudential Insurance
- -- Mortgage Loan Account."
The principal amount of this Note and all accrued and unpaid
interest thereon will become due and be paid at 12:00 noon, Eastern Standard
Time, on December 31, 1996 or any earlier date on which such principal and
interest becomes due under the terms of this Note (any such date, the "Maturity
Date").
All capitalized terms used in this Note and not otherwise
defined have the meanings given in the Purchase Agreement dated December 31,
1993 (the "Purchase Agreement") among Maker, Holder and Federated Department
Stores, Inc., a Delaware corporation and the parent company of Maker
("Parent").
The principal amount from time to time outstanding hereunder
will bear interest at a rate per annum (the "Interest Rate") (i) from January
1, 1994 through December 31, 1994, equal to the LIBOR Rate (as hereafter
defined) plus 1.75% and (ii) from January 1, 1995 through the Maturity Date,
equal to the LIBOR Rate plus 2.00%. Interest on the unpaid balance of the Note
will be computed on the actual number of days elapsed, and a year of 360 days.
For purposes of this Note, (i) "LIBOR Rate" means, with
respect to any Interest Period (as hereafter defined), the rate for deposits in
U.S. dollars for a period equal to such Interest Period that appears on the
display designated as "Page 3750" on the Telerate Service (or such other page
as may replace Page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks) at 11:00 a.m. (London time) two
business days (i.e., days on which business in the London interbank market is
conducted)
<PAGE> 2
before the first day of such Interest Period, and (ii) "Interest Period" means
a period of three months, with the first such Interest Period commencing on the
date of this Note and each succeeding Interest Period commencing on the last
day of the preceding Interest Period; it being understood that whenever the
last day of any Interest Period would otherwise occur on a day other than a
business day, the last day of such Interest Period will be extended to occur on
the next succeeding business day, PROVIDED, that if such extension would cause
the last day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period will occur on the next preceding
business day, and whenever the first day of any Interest Period occurs on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period, such Interest Period will end on the last
business day of such calendar month.
Interest on the outstanding principal amount of this Note will
be payable quarterly in arrears on the last day of each Interest Period and on
the Maturity Date.
At any time and from time to time, Maker may prepay this Note
in whole or in part, without penalty or premium, provided that unless such
prepayment consists of cash or cash equivalent proceeds of or distributions in
respect of the Claims acquired by Maker from Holder pursuant to the Purchase
Agreement, such prepayment will be in an amount not less than the sum of
$25,000,000 and integral multiples of $1,000,000 and, in such case, Maker will
give Holder at least two business days' prior notice of the intended
prepayment.
Maker agrees to cause this Note to be immediately mandatorily
prepaid with all cash and cash equivalents included in any Distribution (as
defined in the Intercreditor Agreement), or earned upon the investment or
collection of Distributions that do not consist of cash or cash equivalents.
Maker agrees to use reasonable efforts to cause all such cash and cash
equivalents to be paid directly to Holder for application to amounts
outstanding hereunder in the order hereinafter specified.
Maker further agrees that on or before the date (the
"Mandatory Paydown Date") that is the later of (1) the date sixty days after
the date an order is entered confirming a plan of reorganization in the
Bankruptcy Case that is not a plan that was (a) proposed by Maker or Parent and
(b) pursuant to which Maker or Parent has acquired all or substantially all of
the assets of or equity interests in the Debtors, and (2) the date 30 days
after the effective date of such plan, Maker will cause this Note to be
mandatorily prepaid such that the principal amount outstanding hereunder after
giving effect to such prepayment will be less than or equal to the aggregate
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<PAGE> 3
value of the "Qualifying Securities" distributed to Maker under such plan. As
used herein, the term "Qualifying Securities" means promissory notes or other
debt securities distributed in respect of the Claims acquired by Maker under
the Purchase Agreement and secured by liens having the same priority as the
liens held by Holder on the collateral securing the Claims as of the date
hereof, senior to any lien thereon not encumbering such collateral on the date
hereof, on the entire pool of collateral securing the Claims held by Holder at
the Initial Petition Date, less any collateral sold or otherwise disposed of by
Debtors (other than in connection with the plan, unless (in the case of any
sale in connection with a plan) the sale is for cash only and all such cash is
distributed in respect of the Claims) during the Bankruptcy Case. Holder will
deliver to Maker its written determination as to whether any debt securities
distributed to Maker under a plan constitute Qualifying Securities and, if so,
the value thereof for purposes of the prepayment required hereunder on or
before the date an order is entered confirming the plan. If, within 30
calendar days after the delivery of such determination, Maker determines in
good faith, after due inquiry, that such determination is inaccurate, Maker may
give notice to Holder within such 30 calendar day period: (i) setting forth
Maker's determination of whether the debt securities are Qualifying Securities
and, if so, their correct value and (ii) specifying in reasonable detail
Maker's bases for its disagreement with Holder's determinations. Failure by
Maker to provide such notice within such 30 calendar day period will constitute
Maker's acceptance of Holder's determinations.
If Holder and Maker are unable to resolve any disagreement
between them regarding such determinations within ten calendar days after the
date of delivery of notice of such disagreement (the date of such delivery,
"Dispute Date"), the dispute will be referred for determination to one of the
nationally recognized investment banking firms (the "Investment Banker") listed
on Exhibit B to the Intercreditor Agreement, which firm will be selected as
promptly as practicable pursuant to the following procedure. On the Dispute
Date, Maker will deliver to Holder a list (the "Maker's List") of five
investment banking firms selected from Exhibit B accompanied by a certificate
to the effect that none of such firms has directly or indirectly received
advisory fees in excess of $1,000,000 in the aggregate from Parent or any
affiliate of Parent within the past 12 calendar months prior to the Dispute
Date; within three calendar days of delivery of the Maker's List Holder will
select from the Maker's List the investment banking firm that will serve as
Investment Banker and will provide Maker with a certificate to the effect that
such firm has not directly or indirectly received advisory fees in excess of
$1,000,000 in the aggregate from Holder or any affiliate of Holder within the
-3-
<PAGE> 4
past 12 calendar months prior to the Dispute Date; and within one business day
of Holder's selection of the Investment Banker, the dispute between Maker and
Holder will be referred to the Investment Banker. In connection with this
determination, the fees and expenses of the Investment Banker will be shared
equally by Holder and Maker.
The Investment Banker will make a determination of whether the
debt securities are Qualifying Securities and, if so, their correct value,
which determination will be: (i) made in accordance with the criteria
specified herein, (ii) furnished in writing to each of the parties as promptly
as practicable after the dispute has been referred to the Investment Banker and
(iii) conclusive and binding upon each of the parties.
The value of any issue of debt securities will be its face
amount, minus any original issue discount or plus any premium that, in the
opinion of the Investment Banker, is appropriate in light of the interest rate
and other terms of the debt; the market, if any, on which the debt will trade,
assuming an orderly market for the debt and full distribution of the debt to
investors in the debt in the ordinary course of their investment activity; the
obligor's creditworthiness; the collateral securing the obligations under the
debt; and such other factors that, in the opinion of the Investment Banker, are
appropriate to the valuation of the debt.
If the Investment Banker has not furnished its determinations
to the parties by the Mandatory Paydown Date, on the Mandatory Paydown Date the
Maker will cause this Note to be mandatorily prepaid such that the amount
outstanding hereunder after giving effect to such prepayment is the amount that
would be required to be outstanding if the debt securities referred to above
were Qualifying Securities and were properly valued at par. Within three
business days after the Investment Banker furnishes its determinations to the
parties, Maker will make any additional mandatory prepayment of this Note
required pursuant hereto to give effect to such determination or Holder will
return to Maker (if appropriate) any excess of the prepayment required pursuant
to the preceding sentence over the actual amount that would have been prepaid
on the Mandatory Paydown Date had the Investment Banker's determinations been
furnished to the parties by the Mandatory Paydown Date, in each case without
interest.
The principal sum evidenced by this Note, together with
accrued and unpaid interest, may be declared to be, or may automatically
become, immediately due and payable upon the occurrence of any of the following
events (each a "Default"):
(1) Maker fails to make any payment of principal (including
without limitation mandatory prepayments of
-4-
<PAGE> 5
principal of the Note) of or interest or other amounts due hereunder or under
any other Transaction Document when the same becomes due and payable; or
(2) A default occurs under any contract, agreement, lease,
document, or other obligation to which the Maker or Parent or any
subsidiary of Parent is a party or by which any of their respective
properties are bound (other than a Transaction Document, as
hereinafter defined), and such default (i) arises from the failure of
any such entity to make, at the final maturity thereof, after giving
effect to any applicable grace period, any payment in respect of
indebtedness of any such entity in excess of $25,000,000 aggregate
principal amount or (ii) causes indebtedness of any such entity in
excess of $25,000,000 aggregate principal amount to become due prior
to its stated maturity or prior to its regularly scheduled dates of
payment; or
(3) (i) Maker or Parent or any subsidiary of Parent will (a)
generally not pay its debts as such debts become due, or will admit in
writing its inability to pay its debts generally, or (b) make a
general assignment for the benefit of creditors, (ii) any proceeding
will be instituted by or against any such entity seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver,
trustee, custodian, or other similar official for it or for any
substantial part of its property and, in the case of any such
proceedings instituted against any such entity (but not instituted by
it), either such proceedings will remain undismissed or unstayed for a
period of 45 calendar days or any of the actions sought in such
proceedings will occur, or (iii) any such entity will take any
corporate action to authorize any of the actions set forth above in
this paragraph (3); or
(4) Either of Maker or Parent is dissolved; or
(5) Any representation or warranty made or deemed made by
Maker or Parent in this Note, the Purchase Agreement, the Put Note (as
defined in the Intercreditor Agreement), the Intercreditor Agreement
dated the date hereof among Holder, Maker and Parent, the Pledge and
Security Agreement dated the date hereof between Maker and Holder, the
Guarantee Agreement dated the date hereof between Parent and Holder or
any note, agreement or other document delivered in connection with any
thereof or pursuant to any thereof (the foregoing instruments
-5-
<PAGE> 6
collectively, whether now existing or hereafter delivered, the "Transaction
Documents") is false in any material respect when made or deemed made; or
(6) Maker or Parent defaults in any material respect in the
full and timely performance of any of its obligations under any of the
Transaction Documents, provided that Holder has given Maker and Parent
at least 15 calendar days' notice of the occurrence or existence of
such default and, unless such obligation is under the Guarantee, such
obligation is not immaterial or insignificant in nature; or
(7) A judgment or judgments in an aggregate amount in excess
of $10,000,000, to the extent not covered by insurance, will be
rendered against Maker or Parent or any subsidiary of Parent and
within 60 days after entry thereof such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after the
expiration of any such stay, such judgment is not discharged; or
(8) Maker or Parent challenges in writing the legality,
validity, enforceability or binding effect of any of the Transaction
Documents, or consents to or acquiesces in such challenge by any other
person or entity, or any court of competent jurisdiction determines
that any of the Transaction Documents is illegal, invalid,
unenforceable or not binding;
then, and in every such event, (i) if such Default is not a Default specified
in subclause (ii) or (iii) of clause (3) above, Holder may, by notice in
writing to Maker, immediately declare this Note to be, and it will thereupon
become, due and immediately payable without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived, and if such
Default is a Default specified in subclause (ii) or (iii) of clause (3) above,
this Note will automatically become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived and (ii) Holder will have such other rights to enforce
all or any of the obligations of the Maker or Parent under this Note and the
other Transaction Documents as are given hereunder or thereunder or by law.
All payments and prepayments of amounts due hereunder will be
applied as follows:
(1) FIRST, to payment of reimbursement of all costs and
expenses of Holder to be paid or reimbursed by Maker and not
theretofore paid or reimbursed;
-6-
<PAGE> 7
(2) SECOND, to the payment of all interest theretofore
accrued and unpaid hereunder;
(3) THIRD, to the payment in full of the entire principal
amount outstanding hereunder; and
(4) FOURTH, to the payment of all other amounts due to
Holder under any Transaction Document.
If Maker fails to make any payment of principal, accrued and
unpaid interest or any other amount due hereunder or under any Transaction
Document on any due date therefor, whether at stated maturity, by required
prepayment, by acceleration, or otherwise, the unpaid amount (including, to the
extent enforceable at law, any unpaid amount of interest) will bear interest at
the Default Rate until paid. For purposes of this Note, the "Default Rate"
will be a rate per annum equal to the sum of the LIBOR Rate in effect from time
to time plus 4.0%. Maker will also pay to Holder, in addition to the amount
due, all reasonable costs and expenses incurred by Holder in collecting or
enforcing, or attempting to collect or enforce this Note, including without
limitation court costs and reasonable attorneys' fees and expenses (including
reasonable attorneys' fees and expenses on any appeal by either Maker or Holder
and in any bankruptcy proceeding).
With respect to the amounts due pursuant to this Note, Maker
waives the following:
(1) All rights of exemption of property from levy or sale
under execution or other process for the collection of debts under the
Constitution or laws of the United States or any State thereof;
(2) Demand, presentment, protest, notice of dishonor, notice
of nonpayment, suit against any party, diligence in collection of this
Note, and all other requirements necessary to enforce this Note; and
(3) Any further receipt by or acknowledgment of any
collateral now or hereafter deposited as security for the indebtedness
evidenced by this Note.
In no event will any amount deemed to constitute interest due
or payable hereunder (including interest calculated at the Default Rate) exceed
the maximum rate of interest permitted by applicable law (the "Maximum
Amount"), and in the event such payment is inadvertently paid by Maker or
inadvertently received by Holder, then such sum will be credited as a payment
of principal or other amounts (other than interest) outstanding hereunder, and
if in excess of the outstanding amount of principal or other amounts
outstanding hereunder, will be immediately returned to Maker upon such
determination.
-7-
<PAGE> 8
It is the express intent hereof that Maker not pay and Holder not receive,
directly or indirectly, interest in excess of the Maximum Amount.
Holder will not by any act, delay, omission, or otherwise be
deemed to have modified, amended, waived, extended, discharged, or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge, or termination of any kind will be valid unless in
writing and signed by Holder. All rights and remedies of Holder under the
terms of this Note and applicable statutes or rules of law will be cumulative,
and may be exercised successively or concurrently. Maker agrees that there are
no defenses, equities, or setoffs with respect to the obligations set forth
herein, and to the extent any such defenses, equities, or setoffs may exist,
the same are hereby expressly released, forgiven, waived, and forever
discharged. The obligations of Maker hereunder will be binding upon and
enforceable against Maker and its successors and assigns.
Wherever possible, each provision of this Note will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note is prohibited by or invalid under applicable
law, such provision will be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.
Holder may, at its option, release to Maker any collateral
given to secure the indebtedness evidenced hereby, and no such release will
impair the obligations of Maker to Holder.
This Note was negotiated in New York, and made by Holder and
accepted by Maker in the State of New York, which State the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, including without limitation matters of
construction, validity, and performance, this Note and the obligations arising
hereunder will be governed by, and construed in accordance with, the internal
laws of the State of New York and any applicable law of the United States of
America. To the fullest extent permitted by law, Maker hereby unconditionally
and irrevocably waives any claim to assert that the laws of any other
jurisdiction governs this Note, and this Note will be governed by and construed
in accordance with the laws of the State of New York pursuant to Section
5-1401 of the New York General Obligations Law.
Any legal suit, action, or proceeding against Holder or Maker
arising out of or relating to this Note will be instituted in any federal or
state court in New York, New York, pursuant to Section 5-1402 of the New York
General Obligations
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<PAGE> 9
Law, and Maker waives any objection which it may now or hereafter have to the
laying of venue of any such suit, action, or proceeding, and Maker hereby
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding. Maker does hereby designate and appoint Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022, Attention:
Robert A. Profusek, Esq., as its authorized agent to accept and acknowledge on
its behalf service of any and all process which may be served in any such suit,
action or proceeding in any federal or state court in New York, New York, and
agrees that service of process upon said agent at said address (or at such
other office in New York, New York as may be designated by such agent in
accordance with the terms hereof) with a copy to Maker at the following
address: 7 West Seventh Street, Cincinnati, OH 45202, Attention: Mr. Ronald
W. Tysoe, will be deemed in every respect effective service of process upon
Maker in any such suit, action, or proceeding in the State of New York. Maker
(i) will give prompt notice to Holder of any changed address of its authorized
agent hereunder, (ii) may at any time and from time to time designate a
substitute authorized agent with an office in New York, New York (which office
will be designated as the address for service of process), and (iii) will
promptly designate such a substitute if its authorized agent ceases to have an
office in New York, New York or is dissolved without leaving a successor.
MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT LIMITATION
ANY TORT ACTION, BROUGHT WITH RESPECT TO THIS NOTE. HOLDER MAY FILE A COPY OF
THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF MAKER'S KNOWING, VOLUNTARY,
AND BARGAINED-FOR AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY,
AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER WILL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Maker may not assign or delegate this Note or any of its
rights or obligations hereunder without the prior consent of Holder (which
consent may be given or withheld in the sole discretion of Holder). Holder may
assign or delegate this Note or any of its rights or obligations hereunder to
an assignee that is a financial or investment institution that has assets of at
least $150 million without prior consent of or notice to Maker or Parent.
This Note is secured by, and entitled to the benefits of, a
Pledge and Security Agreement between Maker and Holder dated concurrently
herewith. Parent has guaranteed all of the obligations of Maker under this
Note and the other Transaction Documents (as defined in the Intercreditor
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Agreement) under a Guarantee Agreement between Parent and Holder dated
concurrently herewith. Parent, Maker and Holder have entered into an
Intercreditor Agreement dated concurrently herewith and this Note is entitled
to the benefits thereof.
IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed on its behalf as of the day and year first above written.
FEDERATED NOTEHOLDING CORPORATION
By: /s/ Ronald W. Tysoe
------------------------------
Name: Ronald W. Tysoe
Title: President
Note2.wpf
10kexhib.10201.doc
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<PAGE> 1
Exhibit 10.20.2
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated as of
December 31, 1993, by and between Federated Noteholding Corporation, a Delaware
corporation (the "Company"), and The Prudential Insurance Company of America, a
New Jersey mutual insurance company (the "Secured Party").
RECITALS:
A. Company and Secured Party have entered into a Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), which
provides for the sale to Company of certain Claims (as such term is defined in
the Purchase Agreement).
B. A portion of the purchase price for the Claims purchased
pursuant to the Purchase Agreement on the date hereof consists of a deferred
payment obligation, evidenced by a promissory note in the principal amount of
$340,000,000 (the "Note"). The Purchase Agreement, a related Intercreditor
Agreement, and other of the "Transaction Documents" (as defined in the Note)
create additional payment and performance obligations of Company to Secured
Party.
C. As a condition to entering into the Purchase Agreement,
Secured Party has required that Company enter into, and Company has agreed to
enter into, this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Company, and in
order to induce Secured Party to enter into the Purchase Agreement and the
other Transaction Documents, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms
which are defined in the Purchase Agreement and used herein are used as so
defined. The following terms which are defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General
Intangibles, Instruments, Inventory, Proceeds and Securities. The following
additional terms will have the following meanings:
"CODE" means the Uniform Commercial Code as from time to time
in effect in the State of New York.
"COLLATERAL" will have the meaning assigned to it in Section 2
of this Security Agreement.
<PAGE> 2
"CONTRACTS" means all contracts, agreements, instruments and
indentures in any form, and portions thereof, to which the Company is a party
or under which the Company has any right, title or interest or to which the
Company or any property of the Company is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (a) all rights of the Company to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Company
to damages arising out of, or for, breach or default in respect thereof and (c)
all rights of the Company to perform and to exercise all remedies thereunder.
"EVENT OF DEFAULT" means a "Default" as defined in the Note.
"INTELLECTUAL PROPERTY" means (a) all intellectual and similar
property of the Company of every kind and nature now owned or hereafter
acquired by the Company, including, without limitation, inventions, designs,
patents, copyrights, licenses and license agreements (whether the Company is
the licensor or the licensee under such agreements), trademarks, trade names
and other business names, logos, trade secrets, confidential or proprietary
technical and business information, know-how, show-how or other data or
information, software and databases and all embodiments or fixations thereof
and related documentation, registrations, applications and franchises, and all
additions, improvements and accessions to, and books and records describing or
used in connection with, any of the foregoing and (b) all renewals thereof.
"OBLIGATIONS" means the following, whenever arising or
incurred:
(i) all principal of, interest on and other amounts due
under the Note;
(ii) the "Put Price" (as defined in the Intercreditor
Agreement), including without limitation all principal of, interest on
and other amounts due under the "Put Note" (as defined in the
Intercreditor Agreement) and, if positive, the "Put Note Settlement
Amount" (as defined in the Intercreditor Agreement);
(iii) the Option Exercise Price due pursuant to the
Purchase Agreement, if the Option is exercised; and
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<PAGE> 3
(iv) payment of all other amounts, and performance of all
other obligations and liabilities to Seller, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of or in
connection with the Transaction Documents, whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise.
The Obligations will include interest accruing after the maturity of the
relevant obligation and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to Buyer, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding.
"SECURITY AGREEMENT" means this Pledge and Security Agreement.
2. GRANT OF SECURITY INTEREST; SECURITY INTEREST
UNCONDITIONAL.
(a) As collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by required
prepayment, by acceleration or otherwise) of the Obligations, the Company
hereby pledges, assigns, charges, mortgages, delivers and transfers to Secured
Party, and grants to the Secured Party a continuing security interest in, all
property now owned or at any time hereafter acquired by the Company or in which
the Company now has or at any time in the future may acquire any right, title
or interest (collectively, the "COLLATERAL"), including without limitation all
right, title and interest of the Company in and to:
(i) the Claims;
(ii) all Distributions (as defined in the
Intercreditor Agreement);
(iii) all Accounts;
(iv) all Chattel Paper;
(v) all Contracts;
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
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<PAGE> 4
(ix) all Instruments;
(x) all Intellectual Property;
(xi) all Inventory;
(xii) all Securities; and
(xiii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
(b) The rights and security interest of Secured Party
hereunder, and obligations of the Company hereunder are absolute and
unconditional irrespective of the value, genuineness, validity, regularity, or
enforceability of the Note, the Put Note, the Purchase Agreement, the
Intercreditor Agreement or any other Transaction Document or any other
agreement or instrument referred to herein or therein, or any substitution,
release, or exchange of any other guarantee of or security for any of the
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense, it being the intent of
this Section 2(b) that the obligations of the Company hereunder will be
absolute and unconditional under any and all circumstances. Without limiting
the generality or effect of the foregoing, it is agreed that the occurrence of
any one or more of the following will not alter or impair the rights and
security interest of Secured Party hereunder, which will remain absolute and
unconditional as described above:
(i) any acceleration, deacceleration, extension, renewal,
settlement, compromise, waiver, defense, counterclaim or release in
respect of any obligation of the Company under any Transaction
Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Transaction Document;
(iii) any release, non-perfection or invalidity of any
direct or indirect security for or guarantee of any obligation of the
Company under any Transaction Document;
(iv) any change in the existence, structure or ownership
of the Company, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Company or its assets or any
resulting release or discharge of any obligation of the Company
contained in any Transaction Document;
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<PAGE> 5
(v) the existence of any claim, set-off or other rights
which the Company may have at any time against Secured Party, or any
other corporation or person, whether in connection with the
transactions contemplated by the Transaction Documents or with any
unrelated transactions, PROVIDED that nothing herein will prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Company or any person of any Transaction Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by the Company of any amount payable by the Company under the
Transaction Documents;
(vii) any action or inaction by Secured Party under or in
respect of any Transaction Document; or
(viii) any other act or omission to act or delay of any kind
by the Company, Secured Party, or any other corporation or person or
any other circumstances whatsoever which might, but for the provisions
of this subsection, constitute a legal or equitable discharge of the
Company's obligations hereunder or impair the rights and security
interest granted Secured Party hereunder.
The Company hereby expressly waives diligence, presentment, demand of payment,
protest, and all notices whatsoever, and any requirement that Secured Party
exhaust any right, power, or remedy or proceed against the Company under the
Note or any other agreement or instrument, or against any other person or
entity in connection with, any of the Obligations and any right to require
marwilling.
3. RIGHTS OF SECURED PARTY; LIMITATIONS ON SECURED PARTY'S
OBLIGATIONS.
(a) COMPANY REMAINS LIABLE UNDER ACCOUNTS AND CONTRACTS.
Anything herein to the contrary notwithstanding, the Company will remain liable
under each of the Accounts and Contracts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with the terms of any agreement giving rise to each such Account
and in accordance with and pursuant to the terms and provisions of each such
Contract. Secured Party will not have any obligation or liability under any
Account or Claim included in the Collateral (or any agreement giving rise
thereto) or under any Contract by reason of or arising out of this Security
Agreement or the receipt by Secured Party of any payment relating to such
Account, Claim or Contract pursuant hereto, nor will Secured Party be obligated
in any manner to perform any of the
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<PAGE> 6
obligations of the Company under or pursuant to any such Account or Claim (or
any agreement giving rise thereto) or under or pursuant to any Contract, to
make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any such Account or Claim (or any agreement giving rise thereto) or
under any Contract, to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) NOTICE TO ACCOUNT DEBTORS, THE COMPANY ON CLAIMS AND
INSTRUMENTS AND CONTRACTING PARTIES. The Company will notify account debtors
on the Accounts, all obligors on the Claims and Instruments and parties to the
Contracts that the Accounts, Claims, Distributions, Instruments, Contracts and
other items of Collateral have been assigned to the Secured Party and that
payments and distributions in respect thereof should be made directly to the
Secured Party and will use reasonable efforts to cause all such persons to make
such payments and distributions directly to the Secured Party. The Secured
Party may in its own name or in the name of others communicate with account
debtors on the Accounts, all obligors on the Claims, Instruments and other
Collateral and parties to the Contracts to verify with them to its satisfaction
the existence, amount and terms of any Accounts, Claims, Instruments, Contracts
or other Collateral.
(c) COLLECTIONS ON COLLATERAL. The Secured Party hereby
authorizes the Company to collect the Claims on the terms and subject to the
limitations set forth in the Intercreditor Agreement, provided, that the
Secured Party may curtail or terminate said authority at any time upon the
occurrence and during the continuance of an Event of Default. Any payments or
distributions in respect of Accounts, Claims or Instruments or other Collateral
collected or received by the Company will be forthwith delivered by the Company
in the exact form received, duly indorsed by the Company to the Secured Party
if required, and, until so turned over, will be held by the Company in trust
for the Secured Party, segregated from other funds of the Company. Each
deposit of any such Proceeds will be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the
deposit. All Collateral while held by the Secured Party (or by the Company in
trust for the Secured Party) will continue to be collateral security for all of
the Obligations and will not constitute payment thereof until applied as
hereinafter provided. Promptly upon receipt thereof, the Secured Party will
apply all Collateral constituting cash or cash equivalents on account of the
Obligations in the order
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<PAGE> 7
specified in the Note prior to the occurrence of an Event of Default and
thereafter in such order as the Secured Party may elect. Any balance remaining
after the Obligations will have been paid in full and this Agreement has been
terminated in accordance with its terms will be paid and delivered over to the
Company or to whomsoever may be lawfully entitled to receive the same.
4. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants that:
(a) TITLE; NO OTHER LIENS. Except for the Lien granted to
the Secured Party pursuant to this Security Agreement and the other
Transaction Documents, Liens imposed by or through any action of the
Secured Party prior to, on, or after the date hereof, and tax Liens
arising as a matter of law in respect of liabilities which are not
overdue or which are being contested in good faith, the Company owns
each item of the Collateral free and clear of any and all Liens or
claims of others. No security agreement, financing statement or other
public notice with respect to all or any part of the Collateral is on
file or of record in any public office that would serve to grant the
Person who filed such security agreement, financing statement or other
public notice a perfected security interest in or lien on such
Collateral, except such as may have been filed in favor of the Secured
Party, pursuant to this Security Agreement and the other Transaction
Documents.
(b) PERFECTED FIRST PRIORITY LIENS. The Liens granted
pursuant to this Security Agreement constitute perfected first
priority Liens on the Collateral in favor of the Secured Party, which
are enforceable as such against all creditors of and purchasers from
the Company.
(c) CHIEF EXECUTIVE OFFICE. The Company's chief executive
office and chief place of business is located at 7 West Seventh
Street, Cincinnati, OH 45202.
5. COVENANTS. The Company covenants and agrees with the
Secured Party that, from and after the date of this Security Agreement until
the Obligations are paid and performed in full:
(a) FURTHER DOCUMENTATION; FURTHER DELIVERIES. At any time
and from time to time, upon the written request of the Secured Party,
and at the sole expense of the Company (except that the Comany will
not pay or reimburse Secured Party for Secured Party's own legal
expenses in connection with this Section 5(a) unless an
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<PAGE> 8
Event of Default shall have occurred and be continuing), the Company
will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Secured Party may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction with respect to the Liens created hereby
and the delivery to the Secured Party of all such proxies, powers of
attorney and other instruments as the Secured Party may reasonably
request for the purpose of enabling it to exercise all rights and
powers which it is entitled to exercise pursuant hereto. The Company
also hereby authorizes the Secured Party to file any such financing or
continuation statement without the signature of the Company to the
extent permitted by applicable law. A carbon, photographic or other
reproduction of this Security Agreement will be sufficient as a
financing statement for filing in any jurisdiction.
Without limiting the generality of the foregoing, the
Company will take all such steps as are necessary to assure that all
items of Collateral (including without limitation Proceeds) are
delivered directly to the Secured Party. If any Collateral will be or
become evidenced by any Chattel Paper, Contract, Document, General
Intangible, Instrument or Security or other written document
(including without limitation any note, stock, bond, debenture,
warrant, right or other instrument or security) not theretofore
delivered to the Secured Party, such Chattel Paper, Contract,
Document, General Intangible, Instrument or Security or other document
will be immediately delivered to the Secured Party, duly endorsed in a
manner satisfactory to the Secured Party if endorsement is required by
the Secured Party, to be held as Collateral pursuant to this
Agreement. If the Company will become entitled to receive or will
receive any stock certificate, option or rights, whether in addition
to, in substitution of, as a conversion of, as a distribution on, or
in exchange for, any Collateral, or otherwise in respect thereof, the
Company will duly endorse same to Secured Party, if required, and
deliver to Secured Party an undated stock power covering such
certificate duly executed in blank by the Company and with, if Secured
Party so requests, signature guaranteed, to be held by Secured Party,
subject to the terms hereof, as additional collateral security for the
Obligations. In the event any item of Collateral (including without
limitation any item of Collateral received as a Distribution,
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<PAGE> 9
or upon a substitution, exchange, conversion or other disposition of,
or otherwise as Proceeds or products of, a Claim or any other item of
Collateral) is of a nature such that other or additional security
instruments are necessary or appropriate to create or perfect the
Liens and security interests of the Secured Party therein, the Company
will promptly execute and deliver or cause to be executed and
delivered all such mortgages, security agreements, pledges,
instruments of assignment or conveyance or other instruments, and
take all further action, as is necessary or appropriate in order to
create, perfect and record first-priority perfected Liens and
security interests in favor of the Secured Party on all of the
Collateral so acquired, whatever the nature of such Collateral and
wherever it is acquired.
(b) INDEMNIFICATION. The Company agrees to pay, and to save
the Secured Party harmless from, any and all liabilities, costs and
expenses (including, without limitation, reasonable legal fees,
charges and expenses) (i) with respect to, or resulting from any delay
in paying, any and all excise, sales or other taxes, other than income
taxes, if any, imposed on Secured Party or any of its affiliates,
which may be payable or determined to be payable with respect to any
of the Collateral or (ii) with respect to, or resulting from, any
delay in complying with any requirement of law applicable to any of
the Collateral. In any suit, proceeding or action brought by the
Secured Party in accordance with the terms hereof under any Account,
Claim, Instrument or Contract for any sum owing thereunder, or to
enforce any provisions of any Account, Claim, Instrument or Contract,
the Company will save, indemnify and keep harmless the Secured Party
from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, whether
arising out of a breach by the Company of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any
time owing to or in favor of such account debtor or obligor or its
successors from the Company or otherwise.
(c) MAINTENANCE OF RECORDS. The Company will keep and
maintain at its own cost and expense records of the Collateral in
accordance with reasonable and prudent business practices. The
Company will mark its books and records pertaining to the Collateral
to evidence this Security Agreement and the security interests granted
hereby. For the Secured Party's further security, the Secured Party
will have a
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<PAGE> 10
security interest in all of the Company's books and records, and the
Company will turn over any such books and records to the Secured
Party or to its representatives during any examination conducted
pursuant hereto.
(d) RIGHT OF INSPECTION. The Secured Party will at any
reasonable time or times during normal business hours have access to
all the books, correspondence and records of the Company, and the
Secured Party and its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and the Company
agrees to render to the Secured Party, at the Company's cost and
expense, such clerical and other assistance as may be reasonably
requested with regard thereto. The Secured Party and its
representatives will at any reasonable time or times during normal
business hours also have the right to enter into and upon any premises
where any of the Collateral is located (or, in the case of any such
premises not owned or leased by the Company or any of its affiliates,
the Company will use its reasonable efforts to grant to the Secured
Party such right) for the purpose of inspecting the same, or otherwise
protecting the Secured Party's interests therein.
(e) COMPLIANCE WITH LAWS, ETC. The Company will comply in
all material respects with all requirements of law applicable to the
Collateral or any part thereof or to the operation of the Company's
business except where failure to so comply would not have a Material
Adverse Effect (as defined in the Guarantee, but substituting a
reference to the Company and its subsidiaries (if any) for the
reference to Guarantor and its subsidiaries in such definition).
(f) LIMITATION ON LIENS ON COLLATERAL. The Company will not
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien or
claim on or to the Collateral, other than the Liens created hereby and
other than as permitted pursuant to Section 5.4 of the Purchase
Agreement, and will defend the right, title and interest of the
Secured Party in and to any of the Collateral against the claims and
demands of all Persons whomsoever.
(g) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Company
will not sell, assign, transfer, lease, exchange or otherwise dispose
of any of the Collateral or any interest or participation therein, or
attempt, offer or contract to do so, except that the Company may take
such action in the Bankruptcy Case with respect to
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<PAGE> 11
the Claims (but not Distributions) as is permitted by the Intercreditor
Agreement.
(h) LIMITATIONS ON MODIFICATIONS, WAIVERS, EXTENSIONS OF
AGREEMENTS GIVING RISE TO ACCOUNTS. The Company will not (i) amend,
modify, terminate or waive any provision of any agreement in any
manner which could reasonably be expected to materially adversely
affect the value of the Collateral, (ii) fail to exercise promptly and
diligently each and every material right which it may have under each
agreement (other than any right of termination), except in a manner
consistent with the Intercreditor Agreement or (iii) fail to deliver
to the Secured Party a copy of each material demand, notice or
document received by it relating in any way to any material item of
Collateral or which affects the interests of the Secured Party
hereunder.
(i) LIMITATIONS ON DISCOUNTS, COMPROMISES, EXTENSIONS OF
ACCOUNTS. The Company will not, without the prior written consent of
the Secured Party, grant any extension of the time of payment of any
obligations included in the Collateral, compromise, compound or settle
the same for less than the full amount thereof, release, wholly or
partially, any person liable for the payment thereof, or allow any
credit or discount whatsoever thereon, except that the Company may
take such action in the Bankruptcy Case with respect to the Claims
(but not Distributions) as is permitted by the Intercreditor
Agreement.
(j) FURTHER IDENTIFICATION OF COLLATERAL. The Company will
furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as the Secured Party
may reasonably request, all in reasonable detail.
(k) NOTICES. The Company will advise the Secured Party
promptly, in reasonable detail, at the addresses set forth in the
Purchase Agreement, (i) of any Lien (other than Liens created hereby)
on, or claim or counterclaim asserted against, any of the Collateral
and (ii) of the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the value of the
Collateral or have a material adverse effect on the perfection or
priority of the Liens contemplated hereby relating to such Collateral,
other than events occurring in the Bankruptcy Case of which Seller
could reasonably be expected to have notice.
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(l) CHANGES IN LOCATIONS, NAME, ETC. The Company will not
(i) change the location of its chief executive office/chief place of
business from that specified hereinabove in Section 4(c) hereof or
remove its books and records from such location, or (ii) change its
name, identity or corporate structure to such an extent that any
financing statement filed by the Secured Party in connection with this
Security Agreement would become seriously misleading, unless (x) the
Company will have given the Secured Party at least 30 days' prior
written notice thereof and (y) the Company will have taken, and will
continue to take, all steps necessary to ensure that the Secured Party
has, and continues to have, a fully perfected first priority security
interest in the Collateral notwithstanding such actions.
6. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Company hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Company and in the name of
the Company or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Security Agreement, and, without limiting the generality of
the foregoing, the Company hereby gives the Secured Party the power and right,
on behalf of the Company, without notice to or assent by the Company, to do the
following, subject in each case to the terms of the Intercreditor Agreement:
(i) In the name of the Company or its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account, Claim, Instrument, General Intangible,
Security or Contract or with respect to any other Collateral and to
file any claim or to take any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by the Secured Party
for the purpose of collecting any and all such moneys due under any
Account, Claim, Instrument, General Intangible, Security or Contract
or with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral; and
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<PAGE> 13
(iii) (A) to direct any party liable for any
payment under any of the Collateral to make payment of any and all
moneys due or to become due thereunder directly to the Secured Party
or as the Secured Party will direct; (B) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of
the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any thereof and to enforce any other
right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Company with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection therewith, to give
such discharges or releases as the Secured Party may deem appropriate;
and (G) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party were the absolute owner
thereof for all purposes, and to do, at the Secured Party's option and
the Company's expense, at any time, or from time to time, all acts and
things which the Secured Party deems necessary to protect, preserve or
realize upon the Collateral and the Secured Party's thereon and to
effect the intent of this Security Agreement, all as fully and
effectively as the Company might do.
The Company hereby ratifies all that said attorneys will lawfully do or cause
to be done in accordance with the foregoing. This power of attorney is a power
coupled with an interest and is irrevocable until the expiration or termination
of this Agreement as herein provided.
(b) OTHER POWERS. The Company also authorizes the Secured
Party, at any time and from time to time, to execute, in connection with any
sale provided for herein, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) NO DUTY ON SECURED PARTY'S PART. The powers conferred on
the Secured Party hereunder are solely to protect the Secured Party's interests
in the Collateral and will not impose any duty upon the Secured Party to
exercise any such powers. Except for the duty of the Secured Party
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<PAGE> 14
described in Section 10 hereof, and the accounting by the Secured Party for
moneys actually received by it hereunder, the Secured Party will not have any
duties hereunder as to any Collateral (including, without limitation, as to
ascertaining any matters or taking any action with respect to any Collateral or
as to taking any necessary steps to preserve rights against prior parties or
any other rights pertaining to Collateral). The Secured Party will be
accountable only for amounts that it actually receives as a result of the
exercise of the powers conferred on the Secured Party hereunder, and neither it
nor any of its officers, directors, employees or agents will be responsible to
the Company for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
7. PERFORMANCE BY SECURED PARTY OF COMPANY'S OBLIGATIONS. If
the Company fails to perform or comply with any of its agreements contained
herein or elsewhere in any Transaction Document and the Secured Party, as
provided for by the terms of this Security Agreement or any other Transaction
Document, will itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable out-of-pocket expenses of
Secured party incurred in connection with such performance or compliance,
together with interest thereon at the Default Rate (as defined in the Note),
will be payable by the Company to the Secured Party on demand and will
constitute Obligations secured hereby.
8. REMEDIES. If an Event of Default will occur, the Secured
Party may exercise, in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Company or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Secured Party will have the right upon any such public sale or sales, and,
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<PAGE> 15
to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Company, which right or equity is hereby waived and
released. The Company further agrees, at the Secured Party's request, to
assemble the Collateral and make it available to the Secured Party at places
which the Secured Party will reasonably select, whether at the Company's
premises or elsewhere. The Secured Party will apply the proceeds of any such
collection recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in the order specified in
the Note prior to the occurrence of an Event of Default and thereafter in such
order as the Secured Party may elect, and only after such application and after
the payment by the Secured Party of any other amount required by any provision
of law, including, without limitation, Section 9-504(l)(c) of the Code, need
the Secured Party account for the surplus, if any, to the Company. To the
extent permitted by applicable law, the Company waives all claims, damages and
demands it may acquire against the Secured Party arising out of the exercise by
them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral will be required by law, such notice will be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company will remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Secured Party to collect such deficiency.
With respect to all Collateral consisting of Securities or
Instruments, upon the occurrence and during the continuance of an Event of
Default, (i) all shares or certificates of the Securities will be registered in
or transferred to the name of the Secured Party or its nominee, and the Secured
Party or its nominee may thereafter exercise (A) all voting, corporate and
other rights pertaining to the Securities or Instruments at any meeting of
shareholders or debtholders of each issuer thereof or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to the Securities or Instruments as if it were
the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of any stock included in such Securities
upon the merger, consolidation, reorganization, recapitalization or other
fundamental change
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<PAGE> 16
in the corporate structure of any issuer, or upon the exercise by the Company
or the Secured Party of any right, privilege or option pertaining to such
shares of stock, and in connection therewith, the right to deposit and deliver
any and all of such stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine), all without liability except to account for property actually
received by it, but the Secured Party will have no duty to the Company to
exercise any such right, privilege or option and will not be responsible for
any failure to do so or delay in so doing.
The rights of Secured Party hereunder will not be conditioned
or contingent upon the pursuit by Secured Party of any right or remedy against
any Issuer or against any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. Secured
Party will not be liable for any failure to demand, collect or realize upon all
or any part of the Collateral or for any delay in doing so, nor will Secured
Party be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Company or any other person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Secured
Party will determine to exercise its right to sell any or all of the Securities
pursuant hereto, and if in the opinion of the Secured Party it is necessary or
advisable to have the Securities, or that portion thereof to be sold,
registered under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Company will use reasonable efforts to cause each issuer
thereof (i) to execute and deliver, and cause the directors and officers of
such issuer to execute and deliver, all such instruments and documents, and do
or cause to be done all such other acts as may be, in the opinion of the
Secured Party, necessary or advisable to register the Securities, or that
portion thereof to be sold, under the provisions of the Securities Act, (ii) to
use its reasonable efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from the
date of the first public offering of the Securities, or that portion thereof to
be sold, and (iii) to make all amendments thereto and/or to the related
prospectus which, in the opinion of the Secured Party, are necessary or
advisable, all in conformity with the requirements of the Securities Act and
the rules and regulations of the Securities and Exchange Commission applicable
thereto. The Company agrees to cause each issuer to use its reasonable efforts
to comply
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<PAGE> 17
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Secured Party will designate and to make available to
its security holders, as soon as practicable, an earnings statement (which need
not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Company recognizes that Secured Party may be unable
to effect a public sale of any or all the Securities, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Company acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale will be
deemed to have been made in a commercially reasonable manner (even if the
Secured Party accepts the first offer received or offers the Collateral or any
portion thereof to only one offeree). The Secured Party will be under no
obligation to delay a sale of any of the Securities for the period of time
necessary to permit such issuer to register such securities for public sale
under the Securities Act, or under applicable state securities laws, even if
such Issuer would agree to do so.
(c) The Company further agrees to use reasonable efforts to
do or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Securities pursuant hereto valid and
binding and in compliance with any and all other applicable requirements of
law. The Company further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to Secured Party, that
the Secured Party and the Lenders have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section will be specifically enforceable against the Company in the event
of a breach and the Company hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.
10. LIMITATION ON DUTIES REGARDING PRESERVATION OF
COLLATERAL. The Secured Party's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Code or otherwise, will be to deal with it in the
same manner as the Secured Party deals with similar property for its own
account. Secured Party will not have any duties
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<PAGE> 18
hereunder as to any Collateral (including, without limitation, as to
ascertaining any matters or taking any action with respect to any Collateral or
as to taking any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral). Neither the Secured Party, nor
any of its directors, officers, employees or agents will be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or will be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Company or otherwise.
11. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
12. SEVERABILITY. If any provision of this Security
Agreement is partially or completely invalid or unenforceable in any
jurisdiction, then that provision will be ineffective in that jurisdiction to
the extent of its invalidity or unenforceability, but the invalidity or
unenforceability of that provision will not affect the validity or
enforceability or any other provision of this Security Agreement, all of which
will be construed and enforced as if that invalid or unenforceable provision
were omitted, nor will the invalidity or unenforceability of that provision in
one jurisdiction affect its validity or enforceability in any other
jurisdiction.
13. NO WAIVER. (a) No amendment, waiver, termination or
modification of, or supplement to, any provision of this Security Agreement
will be effective unless it is in writing and signed by the parties.
(b) No failure on the part of the Secured Party to exercise,
and no course of dealing with respect to, and no delay in exercising, any
right, power, or remedy hereunder will operate as a waiver thereof; nor will
any single or partial exercise by the Secured Party of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein are cumulative and
are not exclusive of any remedies provided by law.
14. CAPTIONS. The captions in this Security Agreement are
for convenience of reference only and will not affect in any way the meaning or
interpretation of this Security Agreement. Such captions will not be deemed to
be part of this Security Agreement and in no way define, limit, extend or
describe the meaning or intent of any provisions hereof.
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<PAGE> 19
15. SUCCESSORS AND ASSIGNS. This Security Agreement,
including without limitation the representations, warranties, covenants and
agreements contained herein: (a) will inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns and (b) will be binding upon and enforceable against the parties hereto
and their respective successors and permitted assigns; PROVIDED, HOWEVER, that,
the Company may not assign or delegate any of its rights or obligations
hereunder or under any instrument or agreement referred to herein without the
prior written consent of the Secured Party (which consent may be given or
withheld in the sole discretion of the Secured Party), and provided further
that the Secured Party may assign all or any part of its rights against the
Company, the Collateral, or Proceeds thereof, so long as any such assignment
shall be to an assignee that is a financial or investment institution that has
assets of at least $150 million and shall be expressly subject to this Security
Agreement and pursuant to an instrument reasonably satisfactory to the Company
whereby the assignee assumes the Secured Party's obligations under this
Security Agreement.
16. NOTICES. All notices, requests and demands hereunder
will be given in accordance with the Purchase Agreement.
17. IRREVOCABLE AUTHORIZATION AND INSTRUCTION. The Company
hereby authorizes and instructs each issuer of any Securities included in the
Collateral to comply with any instruction received by it from the Secured Party
in writing that (a) states that an Event of Default has occurred and (b) is
otherwise in accordance with the terms of this Security Agreement, without any
other or further instructions from the Company, and the Company agrees that
such issuer will be fully protected in so complying.
18. TERMINATION. This Agreement and the security interest
created hereby will terminate when all the Obligations have been indefeasibly
paid in full, at which time (i) Secured Party will execute and deliver to the
Company, or such person or persons as the Company will reasonably designate,
all Uniform Commercial Code termination statements and similar documents
prepared by the Company at its expense which the Company will reasonably
request to evidence such termination and (ii) the Secured Party will, at the
request and expense of the Company, reassign and deliver (without recourse and
without any representation or warranty) to the Company, or such person or
persons as the Company will designate, against receipt, such portion of the
Collateral as will not have been sold or otherwise applied by the Secured Party
pursuant to the terms hereof and will still be held by it hereunder, together
with appropriate instruments of reassignment and release; PROVIDED, that any
indemnity
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set forth herein will survive any such termination. The security interest
created hereby will survive any sale or other disposition of any item of
Collateral by the Company. Any execution and delivery of termination
statements or documents pursuant to this Section will be without recourse to or
representation or warranty by the Secured Party or any Lender.
19. GOVERNING LAW; INTERPRETATION. (a) This Security
Agreement will be governed by, and construed in accordance with, the internal
laws of the State of New York, without regards to the principles of conflict of
laws thereof.
(b) Unless the context otherwise requires, (i) all references
to Sections or paragraphs are to Sections or paragraphs of this Agreement, (ii)
each term defined in this Security Agreement has the meaning assigned to it,
(iii) words in the singular include the plural and VICE VERSA, (iv) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with GAAP, (v) "or" is disjunctive but not
necessarily exclusive, and (vi) all references to "business days" will be to
any day other than a weekend day or a day which is a national holiday in the
United States or a state holiday in New York State.
20. JURISDICTION; GUARANTOR'S WAIVER OF JURY TRIAL. (a) Any
legal suit, action, or proceeding against the Company or Secured Party arising
out of or relating to this Security Agreement will be instituted in any federal
or state court in New York, New York, pursuant to Section 5-1402 of the New
York General Obligations Law, and the Company waives any objection which it may
now or hereafter have to the laying of venue of any such suit, action, or
proceeding, and Guarantor hereby irrevocably submits to the jurisdiction of any
such court in any such suit, action or proceeding. The Company does hereby
designate and appoint Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New
York, New York 10022, Attention: Robert A. Profusek, Esq., as its authorized
agent to accept and acknowledge on its behalf service of any and all process
which may be served in any such suit, action or proceeding in any federal or
state court in New York, New York, and agrees that service of process upon said
agent at said address (or at such other office in New York, New York as may be
designated by such agent in accordance with the terms hereof) with a copy to
the Company at the following address: 7 West Seventh Street, Cincinnati, OH
45202, Attention: Mr. Ronald W. Tysoe, will be deemed in every respect
effective service of process upon the Company in any such suit, action, or
proceeding in the State of New York. The Company (i) will give prompt notice
to Secured Party of any changed address of its authorized agent hereunder, (ii)
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<PAGE> 21
may at any time and from time to time designate a substitute authorized agent
with an office in New York, New York (which office will be designated as the
address for service of process), and (iii) will promptly designate such a
substitute if its authorized agent ceases to have an office in New York, New
York or is dissolved without leaving a successor.
(b) THE COMPANY TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO
SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT
LIMITATION ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS
AGREEMENT. SECURED PARTY MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS
WRITTEN EVIDENCE OF THE COMPANY'S KNOWING, VOLUNTARY, AND BARGAINED-FOR
AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY, AND THAT, TO THE
FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY
WHATSOEVER BETWEEN THE COMPANY AND SECURED PARTY WILL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
21. ENFORCEMENT COSTS, ETC. The Company agrees to pay to
Secured Party, on demand, all out-of-pocket costs and expenses (including court
costs and reasonable legal expenses) incurred or expended by Secured Party in
connection with the enforcement of the Obligations and this Security Agreement,
together with interest on amounts recoverable under this Section from the time
when such amounts become due until payment, whether before or after judgment,
at the rate of interest for overdue principal set forth in the Note, PROVIDED
that if such interest exceeds the maximum amount permitted to be paid under
applicable law, then such interest will be reduced to such maximum permitted
amount. The costs and expenses the Company must pay under the preceding
sentence exclude legal expenses incurred by Seller in negotiating and
documenting the Transaction Documents.
22. PURCHASE MONEY STATUS. The Company acknowledges and
agrees that the security interest granted herein, and any lien or security
interest granted to secure the Obligations under any other mortgage, security
agreement, pledge, instrument of assignment or conveyance or other instrument,
constitutes a valid purchase money security interest for the purposes of the
Code and all other law relating to security interests in property.
23. INTEGRATION. This Security Agreement constitutes the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements, understandings,
or representations pertaining to the subject matter hereof, whether oral or
written. There are no representations, warranties, or other agreements between
the parties in connection with
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<PAGE> 22
the subject matter hereof except as expressly set forth herein.
24. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the other parties hereto would be irreparably damaged if any
of the provisions of this Security Agreement were not performed in accordance
with its specific terms or were otherwise breached. Accordingly, in the event
of a breach or default of this Security Agreement, each of the parties agrees
that the other parties will be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Security Agreement and to enforce
specifically this Security Agreement and the terms and conditions hereof in any
action instituted in any court of the United States, or any state thereof
having personal and subject matter jurisdiction, in addition to any other
remedy to which such party may be entitled at law or in equity (subject to the
terms of this Security Agreement).
25. BUSINESS DAY. Except as provided with respect to LIBOR
interest, in the event that this agreement requires any payment to be paid on a
day other than a business day, such payment is to be paid on the next following
Business Day, and interest shall continue to accrue from the original payment
date up to, but not including, the Business Day when payment is actually made,
at the rate of interest applicable at the time that such payment was originally
due and "Business Day" shall refer to any day on which banks are open for
business in New York City.
26. REFERENCE TO AGREEMENTS. Each reference herein to any
agreement or instrument shall mean such agreement or instrument as from time to
time amended, modified or supplemented in accordance with its terms, subject to
any limitations on amendment, modification or supplementation set forth in such
agreement or instrument or in the Transaction Documents.
IN WITNESS WHEREOF, the Company has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
FEDERATED NOTEHOLDING CORPORATION
By: /s/ Ronald W. Tysoe
----------------------------
Name: Ronald W. Tysoe
Title: President
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
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<PAGE> 23
By: /s/ Russell A. Rahbany
------------------------------
Name: Russell A. Rahbany
Title: Vice President
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<PAGE> 1
Exhibit 10.20.3
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (this "Agreement") dated as of December
31, 1993, by and between Federated Department Stores, Inc., a Delaware
corporation ("Guarantor"), and The Prudential Insurance Company of America, a
New Jersey mutual insurance corporation ("Seller").
RECITALS:
A. Seller, Guarantor, and Federated Noteholding Corporation,
a Delaware corporation and wholly owned subsidiary of Guarantor ("Buyer"), have
entered into a Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), which provides for the sale to Buyer of certain Claims (as such
term is defined in the Purchase Agreement). All capitalized terms used in this
Agreement and not otherwise defined will have the meanings given them in the
Purchase Agreement.
B. A portion of the purchase price for the Claims purchased
pursuant to the Purchase Agreement on the date hereof consists of a deferred
payment obligation, evidenced by a promissory note in the principal amount of
$340,000,000 (the "Note"). The Purchase Agreement, the related Intercreditor
Agreement, and other "Transaction Documents" (as defined in the Note) create
additional payment and performance obligations of Buyer to Seller.
C. As a condition to entering into the Purchase Agreement,
Seller has required that Guarantor guarantee, and Guarantor has agreed to
guarantee, all of the obligations of Buyer to Seller under the Transaction
Documents on the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Guarantor, and in
order to induce Seller to enter into the Purchase Agreement and the other
Transaction Documents to which it is a party, the parties hereto hereby agree
as follows:
Section 1. THE GUARANTEE.
1.1. THE GUARANTEE. (a) Guarantor hereby absolutely and
unconditionally guarantees to Seller and its successors and assigns the prompt
performance and payment in full when due (whether at stated maturity, by
required prepayment, by acceleration, or otherwise) of the Guaranteed
Obligations (as hereinafter defined). Guarantor hereby further agrees that if
Buyer fails to pay or perform in full when due (whether at stated maturity, by
required prepayment, by acceleration, or otherwise) any of the Guaranteed
<PAGE> 2
Obligations, Guarantor will promptly pay the same, without any demand or notice
whatsoever.
(b) The Guaranteed Obligations will include the
following, whenever arising or incurred:
(i) all principal of, interest on, and other amounts due
under the Note;
(ii) the "Put Price" (as defined in the Intercreditor
Agreement), including without limitation all principal of, interest on
and other amounts due under the "Put Note" (as defined in the
Intercreditor Agreement) and, if positive, the "Put Note Settlement
Amount" (as defined in the Intercreditor Agreement);
(iii) the Option Exercise Price due pursuant to the
Purchase Agreement, if the Option is exercised; and
(iv) payment of all other amounts, and performance of all
other obligations and liabilities to Seller, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of or in
connection with the Transaction Documents, whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise.
The Guaranteed Obligations will include interest accruing after the maturity of
the relevant obligation and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to Buyer, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding.
1.2. OBLIGATIONS UNCONDITIONAL. The obligations of Guarantor
under Section 1.01 are absolute and unconditional irrespective of the value,
genuineness, validity, regularity, or enforceability of the Note, the Put Note,
the Purchase Agreement or any other Transaction Document or any other agreement
or instrument referred to herein or therein, or any substitution, release, or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 1.02 that the obligations of Guarantor
hereunder will be absolute and unconditional under any and all circumstances.
This is a guarantee of payment and performance, and not of collectibility.
Without limiting the generality or effect of
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<PAGE> 3
the foregoing, it is agreed that the occurrence of any one or more of the
following will not alter or impair the liability of Guarantor hereunder which
will remain absolute and unconditional as described above:
(i) any acceleration, deacceleration, extension, renewal,
settlement, compromise, waiver, defense, counterclaim or release in
respect of any obligation of Buyer under any Transaction Document, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Transaction Document;
(iii) any release, non-perfection or invalidity of any
direct or indirect security for or guarantee of any obligation of
Buyer under any Transaction Document;
(iv) any change in the existence, structure or ownership
of Buyer, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting Buyer or its assets or any resulting
release or discharge of any obligation of Buyer contained in any
Transaction Document;
(v) the existence of any claim, set-off or other rights
which Guarantor may have at any time against Buyer or Seller, or any
other corporation or person, whether in connection with the
transactions contemplated by the Transaction Documents or with any
unrelated transactions,provided that nothing herein will prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating to or
against Buyer or any person of any Transaction Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by Buyer of any amount payable by Buyer under the Transaction
Documents;
(vii) any action or inaction by Seller under or in respect
of any Transaction Document; or
(viii) any other act or omission to act or delay of any kind
by Buyer, Seller, Guarantor, or any other corporation or person or any
other circumstances whatsoever which might, but for the provisions of
this Section, constitute a legal or equitable discharge of Guarantor's
obligations hereunder.
Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest, and all notices whatsoever, and any requirement that Seller exhaust
any right, power, or
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<PAGE> 4
remedy or proceed against Buyer under the Note or any other agreement or
instrument, or against any other person or entity in connection with, any of
the Guaranteed Obligations, and any right to require marshalling.
1.3. REINSTATEMENT. The obligations of Guarantor under this
Section 1 will be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of Buyer in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and Guarantor agrees that it will
indemnify Seller on demand for all reasonable costs and expenses (including
without limitation reasonable attorneys' fees and expenses) incurred by Seller
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer, or similar payment under any
bankruptcy, insolvency, or similar law.
1.4. SUBROGATION. Until the payment and satisfaction in full
of all Guaranteed Obligations, Guarantor will not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 1.01,
whether by subrogation or otherwise, against Buyer or any other guarantor of
any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.
1.5. REMEDIES. As between Guarantor and Seller, the
obligations of Buyer under the Note may be declared to be forthwith due and
payable as provided in the Note (and will be deemed to have become
automatically due and payable in the circumstances provided in the Note) for
purposes of Section 1.01 notwithstanding any stay, injunction, or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Buyer and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by Buyer) will
forthwith become due and payable by Guarantor for purposes of Section 1.01.
1.6. INSTRUMENT FOR THE PAYMENT OF MONEY. Guarantor hereby
acknowledges that the guarantee in this Section 1 constitutes an instrument for
the payment of money, and consents and agrees that Seller, at its sole option,
in the event of a dispute by Guarantor in the payment of any moneys due
hereunder, will have the right to bring motion-action under New York CPLR
Section 3213.
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<PAGE> 5
1.7. CONTINUING GUARANTEE. The guarantee in this Section 1
is a continuing guarantee, and will apply to all Guaranteed Obligations
whenever arising.
1.8. SENIOR STATUS. Guarantor agrees that its obligations
under this Agreement will constitute senior indebtedness entitled to all of the
benefits of any subordination agreement, if any, now or hereinafter in effect
to which Guarantor is a party or by which Guarantor agrees to be bound, and
agrees to take all action and execute all documents reasonably necessary to
accord its obligations under this Agreement such benefits.
Section 2. COVENANTS. Guarantor hereby covenants and agrees with
Seller that so long as this Agreement remains in effect or any amount due
Seller under any of the Transaction Documents remains unpaid, Guarantor and its
subsidiaries will:
2.1. FINANCIAL COVENANTS. Comply with the requirements of
Sections 4.1, 4.2 and 4.3 of the Series A Note Agreement dated as of February
5, 1992, among Guarantor, Citibank, N.A., as Agent, The Sumitomo Bank, Ltd., as
Co-Agent and the lenders parties thereto, as if fully set forth herein and
incorporated herein by this reference, as in effect on the date hereof and
without giving effect to any amendment, waiver, termination or modification of
or supplement to the note agreement after the date hereof (such Series A Note
Agreement, in such form, the "Note Agreement"); provided that for purposes of
application of the covenants contained in the Loan Agreement the obligations of
Guarantor under this Agreement will be considered "Senior Indebtedness" under
the Note Agreement whether or not such obligations would otherwise constitute
Senior Indebtedness.
2.2. OTHER AFFIRMATIVE COVENANTS. Comply with the
requirements of Sections 5.1 through 5.13 of the Note Agreement.
2.3. BUYER A SUBSIDIARY. Buyer shall at all times remain a
subsidiary at least 51% owned by Guarantor.
2.4. MERGERS; ETC. Not merge or consolidate with, or
transfer all or substantially all of its assets to, any person unless (a) with
respect to such merger or consolidation, either (a) Guarantor or the relevant
subsidiary is the surviving entity or (b) the surviving entity expressly
assumes the obligations of Guarantor or the relevant subsidiary (as
appropriate) hereunder by an instrument in writing reasonably satisfactory to
Seller, and (b) with respect to such transfer of assets, the transferee
expressly assumes the obligations of Guarantor or the relevant subsidiary (as
appropriate) hereunder by an instrument in writing reasonably satisfactory to
Seller, and in any such
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event (c) no Event of Default shall have occurred after giving effect thereto.
2.5. NOTICE OF DEFAULT. Guarantor shall provide Holder with
prompt notice of the occurrence or existence of a default in the timely
performance by Buyer or Guarantor of any of its obligations under any of the
Transaction Documents.
2.6. INTERPRETATION. For purposes of Sections 2.01 and 2.02
of this Agreement, references in the Note Agreement to requests, determinations
or consents by the Series A Lenders or the Series A Agent, or to delivery of
documents or notices by or to the Series A Lenders or the Series A Agent, and
all similar references to the Series A Lenders or Series A Agent, will be
construed as if the phrase Series A Lenders or Series A Agent were replaced by
a reference to Seller, and references to Borrower will be construed as
references to Guarantor.
Section 3. REPRESENTATIONS AND WARRANTIES. Capitalized terms used in
this Section 3 and not otherwise defined in this Agreement or the Purchase
Agreement have the meanings given in Section 3.09 hereof. Guarantor hereby
represents and warrants to Seller that:
3.1. FINANCIAL STATEMENTS. Guarantor has heretofore
furnished to Seller its (i) consolidated balance sheet and statements of income
and cash flows as of and for the fiscal year ended January 30, 1993, audited by
and accompanied by the opinion of KMPG Peat Marwick, independent accountants,
(ii) consolidated balance sheet as of and for the fiscal quarter ended October
30, 1993, and (iii) consolidated statements of income for the periods
commencing January 31, 1993 and August 1, 1993 and ending October 30, 1993, and
(iv) a consolidated statement of cash flows for the period commencing on
January 31, 1993, and ending October 30, 1993, certified, in the case of the
unaudited statements of operations and cash flows, by its chief financial
officer. Such financial statements present fairly in all material respects the
financial condition and results of operations and cash flows of Guarantor and
its consolidated subsidiaries as of such dates and for such periods subject in
the case of the unaudited interim financial statements to year-end adjustments.
Such balance sheets and the notes thereto disclose all material liabilities,
direct or indirect, fixed or contingent of a nature required by GAAP to be
disclosed in a balance sheet or the notes thereto, of Guarantor and its
consolidated subsidiaries as of the dates thereof. Such financial statements
were prepared in accordance with GAAP applied on a consistent basis subject, in
the case of unaudited statements of income and cash flows, to year-end
adjustments.
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3.2. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the business, results of operations, or condition, financial
or otherwise, of the Guarantor and its subsidiaries, taken as a whole, since
October 30, 1993. No Default (as defined in the Note) or event which with the
giving of notice or passage of time or both would become a Default exists on
the date hereof or will exist after giving effect to the transactions
contemplated by the Purchase Agreement.
3.3. TITLE TO PROPERTIES; POSSESSION UNDER LEASES. (a)
Guarantor and each of its subsidiaries has good and marketable title to, or
valid leasehold interests in, all its material properties and assets, except
for Liens permitted under the Note Agreement and minor defects in title that do
not interfere in any material respect with its ability to conduct its business
as currently conducted or to utilize such properties and assets for their
intended purposes. All such material properties and assets are free and clear
of Liens, other than Liens expressly permitted by the Note Agreement.
(b) Guarantor and each of its subsidiaries has complied in
all material respects with all obligations under all material leases to which
it is a party and all such leases are in full force and effect. Guarantor and
each of its subsidiaries enjoys peaceful and undisturbed possession under all
such material leases.
3.4. LITIGATIONS; COMPLIANCE WITH LAWS. (a) There are not
any actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of Guarantor,
threatened against or affecting any subsidiary or any business, property or
rights of any such person as to which there is a reasonable expectation of an
adverse determination and which, if adversely determined, could reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect.
(b) Neither the Borrower nor any of the Subsidiaries is in
violation of any law, rule or regulation, or in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default could reasonably be expected to result in a Material
Adverse Effect.
3.5. AGREEMENTS. (a) Neither Guarantor nor any of its
subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) Neither Guarantor nor any of its subsidiaries is in
default in any manner under any provision of any
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<PAGE> 8
indenture or other agreement or instrument evidencing indebtedness, or any
other material agreement or instrument to which it is a party or by which it or
any of its properties or assets are or may be bound, where such default could
result in a Material Adverse Effect.
3.6. FEDERAL RESERVE REGULATIONS. (a) Neither Guarantor nor
any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock, as defined in Regulation G of the Board of Governors
of the Federal Reserve System of the United States (the "Board").
(b) No part of the Guaranteed Obligations will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to purchase or carry margin stock or to extend credit to others
for the purpose of purchasing or carrying margin stock or to refund
indebtedness originally incurred for such purpose, or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including Regulation G.
3.7. SEC REPORTS. Guarantor has heretofore furnished to
Seller true and correct copies of all filings made by Guarantor since January
30, 1993 with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act
of 1933, as amended (the "Securities Act"), except for filings on Form S-8 and
filings made in response to the requirements of Section 16(a) of the Exchange
Act (all such filings, except as aforesaid, the "SEC Reports"). Each of the
SEC Reports, as of the date thereof, complied as to form in all material
respects with the requirements of the Exchange Act or the Securities Act, as
applicable, and none of the SEC Reports contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein, in light of the circumstances under which it was made,
not materially misleading.
3.8. SECURITY DOCUMENTS. The Liens to be created in favor of
the Secured Party under the Security Agreement will, at all times on and after
the date hereof, constitute first priority, perfected security interests in the
Collateral (as defined in the Security Agreement) as security for the Secured
Obligations (as defined in the Security Agreement), and the Collateral will not
be subject to any Liens of any other person. All filings or recordings
required in order to perfect the Liens on the Collateral created under each of
the Security Agreement are set forth in Schedule I hereto.
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<PAGE> 9
3.9. DEFINITIONS. For purposes of this Section 3, the
following terms have the following meanings:
"GAAP" will mean generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" will mean any Federal, state, local
or foreign court or government agency, authority, instrumentality or regulatory
body.
"MATERIAL ADVERSE EFFECT" will mean (a) a materially adverse
effect on the business, results of operations or condition, financial or
otherwise, of Guarantor and the Subsidiaries taken as a whole, (b) material
impairment of the ability of Guarantor or any subsidiary to perform any of its
obligations under any Transaction Document, or (c) material impairment of the
rights or benefits of Seller under any Transaction Document.
Section 4. MISCELLANEOUS.
4.1. No Waiver. (a) No amendment, waiver, termination or
modification of, or supplement to, any provision of this Agreement will be
effective unless it is in writing and signed by Seller and Guarantor.
(b) No failure on the part of Seller to exercise, and no
course of dealing with respect to, and no delay in exercising, any right,
power, or remedy hereunder will operate as a waiver thereof; nor will any
single or partial exercise by Seller of any right, power, or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
4.2. NOTICES. All demands, notices, requests, consents, and
communications to be given hereunder shall be delivered in accordance with the
procedures outlined in Section 6.4 of the Purchase Agreement.
4.3. COUNTERPARTS AND EXECUTION. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement, and will become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
parties.
4.4. INTEGRATION. This Agreement constitutes the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, understandings, or
representations pertaining to the subject matter hereof, whether oral or
written. There are no representations, warranties, or other
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<PAGE> 10
agreements between the parties in connection with the subject matter hereof
except as expressly set forth herein.
4.5. SEVERABILITY. If any provision of this Agreement is
partially or completely invalid or unenforceable in any jurisdiction, then that
provision will be ineffective in that jurisdiction to the extent of its
invalidity or unenforceability, but the invalidity or unenforceability of that
provision will not affect the validity or enforceability or any other provision
of this Agreement, all of which will be construed and enforced as if that
invalid or unenforceable provision were omitted, nor will the invalidity or
unenforceability of that provision in one jurisdiction affect its validity or
enforceability in any other jurisdiction.
4.6. CAPTIONS. The Section captions in this Agreement are
for convenience of reference only and will not affect in any way the meaning or
interpretation of this Agreement. They will not be deemed to be part of this
Agreement and in no way define, limit, extend, or describe the scope or intent
of any provisions hereof.
4.7. NO ASSIGNMENT OR DELEGATION BY GUARANTOR. Guarantor may
not assign or delegate this Agreement or any of its rights or obligations
hereunder without the prior written consent of Seller (which consent may be
given or withheld in the sole discretion of Seller). Seller may assign or
delegate this Agreement or any of its rights or obligations hereunder to any
assignee that is a financial or investment institution that has assets of at
least $150 million without prior consent of or notice to Guarantor or Buyer.
4.8. GOVERNING LAW; INTERPRETATION. (a) This Agreement will
be governed by, and construed in accordance with, the internal laws of the
State of New York, without regards to the principles of conflict of laws
thereof.
(b) Unless the context otherwise requires, (i) all references
to Sections are to Sections of this Agreement, (ii) each term defined in this
Agreement has the meaning assigned to it, (iii) words in the singular include
the plural and vice versa, (iv) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP, (v) "or"
is disjunctive but not necessarily exclusive, and (vi) all references to
"business days" will be to any day other than a weekend day or a day which is a
national holiday in the United States or a state holiday in New York State.
4.9. JURISDICTION; GUARANTOR'S WAIVER OF JURY TRIAL. (a)
Any legal suit, action, or proceeding against Seller or Guarantor arising out
of or relating to this Agreement will be instituted in any federal or state
court in New York, New York, pursuant to Section 5-1402 of the New York General
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<PAGE> 11
Obligations Law, and Guarantor waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action, or proceeding,
and Guarantor hereby irrevocably submits to the jurisdiction of any such court
in any such suit, action or proceeding. Guarantor does hereby designate and
appoint Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York
10022, Attention: Robert A. Profusek, Esq., as its authorized agent to accept
and acknowledge on its behalf service of any and all process which may be
served in any such suit, action or proceeding in any federal or state court in
New York, New York, and agrees that service of process upon said agent at said
address (or at such other office in New York, New York as may be designated by
such agent in accordance with the terms hereof) with a copy to Guarantor at the
following address: 7 West Seventh Street, Cincinnati, OH 45202, Attention:
Mr. Ronald W. Tysoe, will be deemed in every respect effective service of
process upon Guarantor in any such suit, action, or proceeding in the State of
New York. Guarantor (i) will give prompt notice to Seller of any changed
address of its authorized agent hereunder, (ii) may at any time and from time
to time designate a substitute authorized agent with an office in New York, New
York (which office will be designated as the address for service of process),
and (iii) will promptly designate such a substitute if its authorized agent
ceases to have an office in New York, New York or dies or becomes totally
disabled without leaving a successor.
(b) GUARANTOR, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO
SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT
LIMITATION ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS
AGREEMENT. SELLER MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN
EVIDENCE OF GUARANTOR'S KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT IRREVOCABLY
TO WAIVE ITS RIGHTS TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT
MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN GUARANTOR AND
SELLER WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
4.10. ENFORCEMENT COSTS, ETC. Guarantor agrees, as principal
obligor and not as a guarantor only, to pay to Seller, on demand, all costs and
expenses (including court costs and reasonable legal expenses) incurred or
expended by Seller in connection with the enforcement of the Guaranteed
Obligations or this Agreement, together with interest on amounts recoverable
under this Section from the time when such amounts become due until payment,
whether before or after judgment, at the rate of interest for overdue principal
set forth in the Note, PROVIDED that if such interest exceeds the maximum
amount permitted to be paid under applicable law, then such interest will be
reduced to such maximum permitted amount. The costs and expenses Guarantor
must pay under the
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preceding sentence exclude legal expenses incurred by Seller in negotiating and
documenting the Transaction Documents.
4.11. CONFIDENTIALITY. Unless otherwise agreed to in writing
by the Guarantor, the Seller hereby agrees to keep all Proprietary Information
(as defined below) confidential and not to disclose or reveal any Proprietary
Information to any Person other than the Seller's directors, officers,
employees, Affiliates, agents, representatives and advisors, and to actual or
potential permitted assignees and participants and potential investors in the
Seller, who in each case, are advised of the confidential nature of such
information; PROVIDED that the Seller may disclose Proprietary Information (a)
as required (in the sole judgment of the Seller) by law, rule, regulation or
judicial process, (b) to its attorneys and accountants, or (c) as requested or
required by any state, federal or foreign authority or examiner regulating
insurance companies. For purposes of this Agreement, the term "Proprietary
Information" will include all information about the Guarantor which has been
furnished by the Guarantor to the Seller, whether furnished before or after the
date hereof, and regardless of the manner in which it is furnished; PROVIDED,
HOWEVER, that Proprietary Information does not include information which (a) is
or becomes generally available to the public other than as a result of a
disclosure by the Seller not permitted by this Agreement, (b) was available to
the Seller on a nonconfidential basis prior to its disclosure to the Seller by
the Guarantor, or (c) becomes available to the Seller on a nonconfidential
basis from a Person other than the Guarantor who, to the best knowledge of the
Seller, is not bound by a confidentiality agreement with the Guarantor, or is
not otherwise prohibited from transmitting the information to the Seller.
4.12. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the other parties hereto would be irreparably damaged if any
of the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. Accordingly, in the event of a
breach or default of this Agreement, each of the parties agrees that the other
parties will be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and conditions hereof in any action instituted in any court of the
United States, or any state thereof having personal and subject matter
jurisdiction, in addition to any other remedy to which such party may be
entitled at law or in equity (subject to the terms of this Agreement).
4.13. REFERENCE TO AGREEMENTS. Each reference herein to any
agreement or instrument shall mean such agreement or instrument as from time to
time amended, modified
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or supplemented in accordance with its terms, subject to any limitations on
amendment, modification or supplementation set forth in such agreement or
instrument or in the Transaction Documents.
4.14. BUSINESS DAY. In the event that this agreement
requires any payment to be paid on a day other than a Business Day, such
payment is to be paid on the next following Business Day, and interest will
continue to accrue from the original payment date up to, but not including, the
Business Day when payment is actually made, at the rate of interest applicable
at the time that such payment was originally due, and "Business Day" will refer
to any day on which banks are open for business in New York City.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Ronald W. Tysoe
----------------------------
Name: Ronald W. Tysoe
Title: Vice-Chairman and Chief
Financial Officer
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Russell A. Rahbany
----------------------------
Name: Russell A. Rahbany
Title: Vice President
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<PAGE> 1
Exhibit 10.20.4
INTERCREDITOR AGREEMENT,
Dated December 31, 1993,
Among
The Prudential Insurance Company of America,
Federated Noteholding Corporation
and
Federated Department Stores, Inc.
<PAGE> 2
This Intercreditor Agreement (this "Intercreditor Agreement")
is entered into on December 31, 1993, by and among The Prudential Insurance
Company of America, a New Jersey mutual insurance corporation ("Seller"),
Federated Noteholding Corporation, a Delaware corporation ("Buyer"), and
Federated Department Stores, Inc., a Delaware corporation ("Parent").
RECITALS:
A. Seller holds $832,503,433 aggregate principal amount of
promissory notes (the "Notes") as of December 31, 1991 issued pursuant to the
Term Loan Agreement, dated as of July 15, 1986, as amended (the "Loan
Agreement"), among Seller, R.H. Macy & Co., Inc. (the "Company"), and each of
the direct or indirect wholly owned subsidiaries of the Company listed on Annex
I to the Loan Agreement.
B. On January 27, 1992, the Company and certain of its
Affiliates (as hereafter defined) commenced reorganization cases and on January
31, 1992, certain other Affiliates of the Company (collectively, together with
the Company and its Affiliates that commenced reorganization cases on January
27, 1992, the "Debtors") commenced reorganization cases (collectively, the
"Bankruptcy Case") under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"). The Debtors are continuing in
the possession and operation of their respective businesses and properties as
debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy
Code.
C. Seller, Buyer and Parent have entered into a Purchase
Agreement, dated as of the date hereof (the "Purchase
<PAGE> 3
Agreement"), pursuant to which Buyer purchased from Seller the Initial
Percentage of Seller's entire right, title and interest in and to the Claims
and Seller granted to Buyer the Option to acquire an Additional Percentage of
Claims, on the terms and subject to the conditions set forth in the Purchase
Agreement.
D. The Purchase Agreement contemplates that Seller, Buyer and
Parent execute and deliver this Intercreditor Agreement. Capitalized terms
used herein and not otherwise defined will have the meanings given in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto hereby agree as follows:
I. RIGHTS TO DISTRIBUTIONS ON ACCOUNT OF THE CLAIMS
0.1. ALLOCATION AND APPLICATION OF DISTRIBUTIONS. (a) Buyer
will use its reasonable efforts to cause all Distributions (as hereafter
defined) from any source whatsoever to be paid or delivered directly to Seller
until all of the Obligations (as defined in the Security Agreement) have been
paid in full and the Security Agreement has terminated in accordance with its
terms. The term "Distributions" means any payment or other distribution on
account of the Claims purchased by Buyer from Seller, including without
limitation: (i) payments made on account of the Claims under the terms of or
otherwise pursuant to the Notes or the other Loan Documents or on account of
the Collateral; (ii) adequate protection payments made pursuant to applicable
provisions of the Bankruptcy Code and authorizing
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<PAGE> 4
orders of the Bankruptcy Court; (iii) distributions required or permitted
under, or otherwise contemplated by, a confirmed plan of reorganization for any
Debtor; (iv) distributions made by any trustee appointed in any Bankruptcy Case
or any succeeding cases under chapter 7 of the Bankruptcy Code; and (v)
distributions of any proceeds from the foreclosure, sale, liquidation,
collection, exchange or other disposition of some or all of the Collateral.
(b) Seller will apply all Distributions consisting of cash or
cash equivalents to the Obligations, in the order specified in the Buyer's Note
prior to the occurrence of a Default (as defined in the Buyer's Note) and
thereafter during the continuance of such Default in such order as Seller may
elect. All Distributions that do not consist of cash or cash equivalents will
be held by Seller as Security Agreement Collateral (as hereafter defined) under
and pursuant to the terms of the Security Agreement, and dealt with as therein
provided. The term "Security Agreement Collateral" means the "Collateral", as
defined in the Security Agreement. Any Security Agreement Collateral remaining
after the Obligations have been paid in full and the Security Agreement has
terminated in accordance with its terms will be paid and delivered over to
Buyer or to whomsoever may be lawfully entitled to receive same.
0.2. RESERVED.
0.3. RETURN OF ANY DISTRIBUTIONS. 0.3.1. If Seller is
required to return any Distributions previously applied to reduce the Buyer's
Note to any of the Debtors or
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Debtors' bankruptcy estates or any creditor of Debtor pursuant to court
process, the principal amount of the Buyer's Note will be increased by the
amount of such returned Distribution, effective on the date such Distribution
is returned. No interest will be due from Buyer to Seller or from Seller to
Buyer on account of such returned Distribution for the period prior to the
return of such Distribution, the parties agreeing for purposes of this Section
1.3.1 that the interest that would have accrued on the Buyer's Note if the
Distribution had not been applied to the Buyer's Note equals the interest or
other investment return earned by Seller on the amount of such returned
Distribution from the date the amount was applied to the Buyer's Note to the
date the amount was returned.
0.3.2. If Seller is required to return any Distributions
previously applied against any Obligations other than the Buyer's Note to any
of the Debtors or Debtors' bankruptcy estates or any creditor of Debtor
pursuant to court process, Buyer will immediately repay to Seller the amount of
such returned Distribution. If such Distribution is not repaid to Seller
within three business days after Seller returns the Distribution, the amount
thereof will accrue interest at the Default Rate (as defined in the Buyer's
Note).
II. CONSULTATION WITH RESPECT TO THE
DEBTORS AND THE BANKRUPTCY CASE
1.
1.1. CONSULTATION GENERALLY. 1.1.1. Subject to the
remaining provisions of this Article II, Seller and Buyer will consult with
each other fully and in good faith in all matters relating to the Debtors or
the Bankruptcy Case.
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1.1.2. PROPOSED ACTIONS. Seller and Buyer will use their
respective reasonable efforts to reach agreement on any actions (collectively,
the "Proposed Actions") that may have a material effect on the value of the
Claims that are proposed to be taken by either party relating to the Debtors or
the Bankruptcy Case whether or not in any Court, as hereinafter defined. The
term "Court" means the Bankruptcy Court or any appellate court, other court or
adjunct thereof that exercises jurisdiction over the Bankruptcy Case or any
court, appellate court or adjunct thereof that exercises jurisdiction over any
Claims. Proposed Actions will include, without limitation, seeking relief (a)
requiring the Debtors to make adequate protection payments or other
Distributions to Buyer and Seller during the pendency of any Bankruptcy Case or
any succeeding chapter 7 cases, pursuant to applicable provisions of the
Bankruptcy Code, (b) lifting or modifying the automatic stay established
pursuant to section 362 of the Bankruptcy Code to permit Seller and Buyer to
exercise foreclosure rights with respect to the Collateral or other remedies
under the Notes, the other Loan Documents or applicable nonbankruptcy law, (c)
providing for the appointment of an examiner, trustee or other similar official
in any Bankruptcy Case, (d) establishing values for any Collateral (except for
actions taken in response to alleged satisfaction by a proposed Plan (as
hereinafter defined) of the so-called "cramdown" requirements of section
1129(b) of the Bankruptcy Code in respect of the Claims, which action will not
constitute a Proposed Action) or (e) providing for the conversion of any
Bankruptcy Case to cases under chapter 7 of the Bankruptcy Code. Seller and
Buyer will use their respective reasonable efforts to consult
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with the other at least five business days prior to taking any Proposed Actions
in a Court.
1.1.3. Regardless of whether Buyer and Seller reach agreement
with respect to any Proposed Action: (a) Buyer may not take any of the
Proposed Actions specifically enumerated in Sections 2.1.2(a) through 2.1.2(e)
without the prior written consent of Seller or any other Proposed Action
without the prior consent of Seller; PROVIDED, HOWEVER, that Buyer may take any
such Proposed Action with or without the consent of Seller and Seller will take
no action that in any manner conflicts with or may impair or impede such
Proposed Action if Seller has delivered a Put Notice (as hereafter defined) and
Buyer has paid the Put Note Liquidated Amount (as hereafter defined) in
accordance with Section 2.6 or Buyer has delivered an Option Exercise Notice to
purchase all of Seller's remaining Claims and Buyer has paid the Option
Purchase Price in accordance with the Purchase Agreement; and (b) Seller may
take any Proposed Action with or without the consent of Buyer and Buyer will
take no action that in any manner conflicts with or may impair or impede such
Proposed Action, PROVIDED, HOWEVER, that subject to Section 2.4.3 (i) Seller
may not take any action that, in Seller's reasonable judgment, will result in
diminution in the value of the Claims or have a direct material adverse effect
on the Plan Actions (as hereafter defined); and (ii) Seller may not take any
Proposed Action without the prior written consent of Buyer if Seller has
delivered a Put Notice and Buyer has paid the Put Note Liquidated Amount in
accordance with Section 2.6 or Buyer has delivered an Option Exercise Notice to
purchase all of Seller's remaining Claims and Buyer has paid the Option
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Purchase Price in accordance with the Purchase Agreement. It is understood and
agreed that Buyer, Parent or any Affiliate of Parent may take any action it
deems appropriate with respect to proofs of claim or requests for payment of
administrative expense that do not assert Claims.
1.2. PLAN ACTIONS. After prior consultation as required in
Section 2.1, each of Buyer and Seller will have the independent right to pursue
any or all of the following actions in any Court (the "Plan Actions"), without
the consent of the other:
(a) actions to support, limit, condition or
terminate the exclusivity periods established in any Bankruptcy Case
pursuant to section 1121 of the Bankruptcy Code or any order extending
such exclusivity periods;
(b) filing any objection, response, statement of
position or other paper or pleading, or appearing with respect to, any
proposed plan of reorganization for any Debtor filed by any Debtor or
any other person or entity (a "Plan"), any disclosure statement
relating thereto (a "Disclosure Statement") or the procedures by which
acceptances or rejections of any such Plan are to be solicited or
tabulated (the "Voting Procedures");
(c) filing a Plan or amending or otherwise
modifying such Plan;
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(d) filing or seeking Bankruptcy Court approval
of a Disclosure Statement or the Voting Procedures related to such
Disclosure Statement;
(e) soliciting acceptances or rejections of any
Plan;
(f) seeking Bankruptcy Court approval of an order
confirming a Plan, including without limitation filing any pleading or
other paper in support of a Plan;
(g) taking any action in connection with the
implementation of a Plan confirmed under section 1129 of the
Bankruptcy Code; or
(h) taking any other similar action that, in
Buyer's or Seller's respective reasonable judgment, directly relates
to the development, formulation, filing or obtaining Bankruptcy Court
approval or confirmation of a Plan or Disclosure Statement, and which,
in Buyer's or Seller's respective reasonable judgment, does not result
in a diminution in the value of or recovery to be obtained in
connection with the Claims.
Notwithstanding the above, if Seller has delivered a Put Notice and Buyer has
paid the Put Note Liquidated Amount in accordance with Section 2.6 or Buyer has
delivered an Option Exercise Notice to purchase all of Seller's remaining
Claims
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and Buyer has paid the Option Purchase Price in accordance with the Purchase
Agreement, Seller may not take any Plan Action without the prior written
consent of Buyer.
1.3. RIGHT TO RESPOND TO CERTAIN ACTIONS. Notwithstanding
anything to the contrary in this Article II, Buyer and Seller each will in all
events be permitted to take any action Buyer or Seller independently deems
necessary or appropriate to respond to or defend against any attempts by any
person or entity to: (a) limit Buyer's or Seller's ability to take any Plan
Action or (b) challenge any transaction provided for in any of the Transaction
Documents (as defined in the Buyer's Note) to the extent such attempts and the
response or defenses thereto relate directly to Buyer's or Seller's Claims,
respectively. Seller and Buyer will cooperate in the defense of any other
challenge to the validity, amount, nature, priority or enforceability of the
Claims, the Loan Documents, any mortgages or other Liens relating to the
Collateral or any rights and remedies arising therefrom; PROVIDED, HOWEVER,
neither Seller nor Buyer shall have an obligation to cooperate with the other
in the defense of any challenge based on the identity of, or any actions taken
or omitted after the Initial Petition Date by, the holder of the Claims.
1.4. BUYER-SUPPORTED PLAN EFFORTS. 1.4.1. Subject to
Section 2.4.3, Seller and Buyer will engage in good faith discussions in an
attempt to formulate a mutually acceptable plan. For the first 180 calendar
days after the date hereof, provided there is no continuing Default, Seller
will not: (i) initiate any discussions with any entity other than any Debtor
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concerning a Plan or (ii) have any substantive discussions or negotiations
involving any Plan, other than as may be proposed by any Debtor, without
affording Parent and Buyer a reasonable opportunity to participate therein.
1.4.2. Buyer agrees that in any Plan in the Bankruptcy Case
that (a) is proposed by Buyer or Parent and (b) provides for Buyer or Parent to
acquire all or substantially all of the assets or equity interests in the
Debtors, Buyer and Parent will cause Buyer's Note and all other Obligations (as
defined in the Security Agreement) to become secured by the entire pool of
collateral securing the Claims held by Seller at the Initial Petition Date,
less any collateral sold or otherwise disposed of by Debtors (other than in
connection with the Plan unless (in the case of a sale in connection with a
Plan) the sale is for cash only and all such cash is distributed in respect of
the Claims) during the Bankruptcy Case, pursuant to security agreements,
pledges, mortgages and related documents in substantially the form of the Loan
Documents.
1.4.3. Notwithstanding any other provision hereof, if any
Plan is not acceptable to Seller, Seller may take any action it determines to
be appropriate.
1.5. SELLER'S NOTICE OF INTENT. Notwithstanding the
foregoing, but subject to Section 2.7, Seller will not be precluded at any time
from accepting a Plan that is not a Plan supported by Buyer or Parent and for
which a disclosure statement has been approved pursuant to section 1125 of the
Bankruptcy Code, provided that it delivers to Buyer written notice
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of its intention to accept such Plan (the "Notice of Intent") by the later of:
(a) 20 calendar days prior to the deadline for submitting ballots to accept or
reject such Plan (the "Voting Deadline") and (b) five business days after
receipt by Seller of a Disclosure Statement and ballot provided by such Plan's
proponents in connection with the solicitation of acceptances of such Plan.
1.6. SELLER'S PUT.
1.6.1. EXERCISE OF SELLER'S PUT. (a) If (i) Seller
has delivered to Buyer a Notice of Intent for a Plan for which a Disclosure
Statement has been approved by the Bankruptcy Court, (ii) Buyer has not
delivered a notice to Seller within five business days after Buyer's receipt of
the Notice of Intent that Buyer also intends to accept such Plan, and (iii)
either (a) the date is after December 31, 1994 or (b) a Default has occurred
and is continuing, or (c) the Plan with respect to which such Notice of Intent
is delivered is a Plan for which a Debtor is a proponent and pursuant to the
terms of which no material merger, material investment or other material
business combination with a Third Party (as hereafter defined) is provided for,
then Seller will have the right, by delivery of written notice (the "Put
Notice") within 15 business days after Buyer's receipt of the Notice of Intent,
to require Buyer to purchase (the "Seller's Put") at the Put Price (as
hereafter defined) the balance of Seller's Claims. In the event of such
purchase, except as provided below with respect to a dispute between Seller and
Buyer regarding Plan Value (as hereafter defined), Buyer will be required to
pay to Seller a price (the "Put Price") in full in
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cash in immediately available United States funds within 30 calendar days after
delivery of the Put Notice (the "Put Settlement Date") that equals the lesser
of: (a) the amount that Buyer would be required to pay if it exercised the
Option in accordance with the Purchase Agreement on the Put Settlement Date
(irrespective of whether the Option has expired or terminated), and (b) the
present value, assuming receipt of such consideration on the Put Settlement
Date, of the consideration to be received by Seller under such Plan on account
of its Claims (the "Plan Value"). If there is an unresolved dispute between
Seller and Buyer as of the Put Settlement Date regarding the correct Plan
Value: (x) Buyer will pay to Seller on the Put Settlement Date in cash in
immediately available United States funds an amount (the "Put Note Liquidated
Amount") equal to the Principal Amount of the Notes subject to the Seller's Put
and (y) such dispute will be resolved in accordance with Sections 2.6.2 and
2.6.3. The term "Third Party" means any person or entity that is not, as of
the date hereof, a "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, 15 U.S.C. Section Section 78a-78jj, as
amended (the "Exchange Act")) of any outstanding voting equity securities of
the Company.
(b) As promptly as practicable upon delivery of the Put
Notice, but in any event no later than five business days after delivery of the
Put Notice, Buyer will execute and deliver to Seller a promissory note in the
form of Exhibit A (the "Put Note"), which will have terms (including without
limitation interest rate and mandatory prepayment provisions) substantially
similar to the Buyer's Note, except that the principal amount will be an amount
equal to the Put Price and
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the maturity date will be the Put Settlement Date, except that in the event
there is an unresolved dispute between Buyer and Seller as of the Put
Settlement Date regarding the correct Plan Value an amount equal to the Put
Note Liquidated Amount will be due and payable on the Put Settlement Date and
the balance will be due on the third business day after the Investment Banker
furnishes its determination of Plan Value to the parties in accordance with
Section 2.6.2(c).
1.6.2. DETERMINATION OF PLAN VALUE. (a) At the
same time as the delivery of the Notice of Intent, Seller will deliver to Buyer
its written determination of the Plan Value (the "Seller's Plan Value") and the
bases for its computation of the Seller's Plan Value. If, within 20 calendar
days after the delivery of the Put Notice, Parent (on behalf of itself and
Buyer) determines in good faith, after due inquiry, that Seller's Plan Value is
inaccurate, Parent may give notice to Seller within such 20 calendar day
period: (i) setting forth Parent's determination of the correct Plan Value and
(ii) specifying in reasonable detail Parent's bases for its disagreement with
Seller's determination of Plan Value. The failure by Parent to provide such
notice within such 20 calendar day period will constitute Parent's acceptance
of Seller's determination of Plan Value.
(b) If Seller and Parent (on behalf of itself and Buyer) are
unable to resolve any disagreement between them regarding Plan Value within ten
calendar days after delivery of notice of such disagreement (the "Dispute
Date"), the dispute will be referred for determination to one of the nationally
recognized investment banking firms (the
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"Investment Banker") listed on Exhibit B, which firm will be selected as
promptly as practicable pursuant to the following procedure. On the Dispute
Date, Buyer will deliver to Seller a list (the "Buyer's List") of five
investment banking firms selected from Exhibit B accompanied by a certificate
to the effect that none of such firms has directly or indirectly received
advisory fees in excess of $1,000,000 in the aggregate from Parent or any
Affiliate of Parent within the past 12 calendar months prior to the Dispute
Date; within five business days of delivery of the Buyer's List Seller will
select from the Buyer's List the investment banking firm that will serve as
Investment Banker and will provide Buyer with a certificate to the effect that
such firm has not directly or indirectly received advisory fees in excess of
$1,000,000 in the aggregate from Seller or any Affiliate of Seller within the
past 12 calendar months prior to the Dispute Date; and within one business day
of Seller's selection of the Investment Banker, the Plan Value dispute will be
referred to the Investment Banker. In connection with its determination of the
Plan Value, the fees and expenses of the Investment Banker will be shared
equally by Seller and Parent.
(c) The Investment Banker will make a determination of Plan
Value, which determination will be: (i) made in accordance with the criteria
specified in this Section 2.6.2(c), (ii) furnished in writing to each of the
parties as promptly as practicable after the dispute has been referred to the
Investment Banker and (iii) conclusive and binding upon each of the parties.
The Plan Value for any new debt or equity securities (respectively, "New Debt"
or "New Equity") or other consideration (the "Other Consideration") to be
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distributed to Seller pursuant to a Plan on account of Seller's Claims will be
determined by the Investment Banker in accordance with the following criteria:
(i) The Plan Value of any issue of New Debt will be its
face amount, minus any original issue discount or plus any premium that, in the
opinion of the Investment Banker, is appropriate in light of: the interest
rate and other terms of the New Debt; the market, if any, on which the New Debt
will trade, assuming an orderly market for the New Debt and full distribution
of the New Debt to investors in the New Debt in the ordinary course of their
investment activity; the obligor's creditworthiness; the collateral, if any,
securing the obligations under the New Debt; and such other factors that, in
the opinion of the Investment Banker, are appropriate to the valuation of the
New Debt.
(ii) As to any issue of New Equity or Other Consideration,
if there is to be an established market on any exchange registered pursuant to
Section 6(a) of the Exchange Act or the National Association of Securities
Dealers Automated Quotation System for such New Equity or Other Consideration,
or any other established market for such Other Consideration, the Plan Value of
such New Equity or Other Consideration will be at the amount that, in the
opinion of the Investment Banker, is the net realizable value of such New
Equity or Other Consideration, assuming an orderly market for such New Equity
or Other Consideration and full distribution of such New Equity or Other
Consideration to investors in such New Equity or Other Consideration in the
ordinary course of their investment activity.
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(iii) If there is no established market for any issue of
New Equity or Other Consideration, the Plan Value of such New Equity or Other
Consideration will be the amount that, in the opinion of the Investment Banker,
constitutes the amount that a holder or owner of such New Equity or Other
Consideration would receive in an arm's length, bona fide transaction between a
fully informed seller and a fully informed buyer, neither of which was under
any compulsion to enter into such transaction.
1.6.3. ADJUSTMENTS OF PAYMENTS IN RESPECT OF PUT
PRICE ONCE PLAN VALUE IS DETERMINED. Within five business days after the Put
Price is finally determined in accordance with Section 2.6.2 (the "Put Price
Settlement Date"), the difference (the "Put Note Settlement Amount") between:
(a) the Put Price and (b) the Put Note Liquidated Amount will be paid as
follows. If the Put Note Settlement Amount is positive, Buyer will pay to
Seller no later than the Put Price Settlement Date in full in cash in
immediately available United States funds the Put Note Settlement Amount, plus
accrued interest at the rate and on the terms set forth in the Put Note. If
the Put Note Settlement Amount is negative, Seller will pay to Buyer no later
than the Put Price Settlement Date in full in cash in immediately available
United States funds the Put Note Settlement Amount, plus interest at the rate
on the terms set forth in the Put Note.
1.7. PLAN VOTING. (a) Except as provided below, Seller and
Buyer will each be permitted in their sole discretion to vote their respective
Claims to accept or reject
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any Plan; PROVIDED, HOWEVER, that (i) during the continuance of any Default,
Seller will have the sole right to vote Buyer's Claims; and (ii) if the
Seller's Put has been exercised and Buyer has paid the Put Note Liquidated
Amount in accordance with Section 2.6, or the Option has been exercised to
purchase all of Seller's remaining Claims and Buyer has paid the Option
Purchase Price in accordance with the Purchase Agreement, Buyer will have the
sole right to vote Seller's Claims to accept or reject any Plan in the amount
of Seller's Claims purchased by Buyer.
(b) Notwithstanding any other provision of this Section 2.7,
neither Seller nor Buyer will cast any vote on a Plan on account of the Claims
until the third day prior to the last day established by the Bankruptcy Court
for submitting ballots to accept or reject such Plan.
III. CERTAIN COVENANTS
2.
2.1. COMPLIANCE WITH FILING REQUIREMENTS IN FORECLOSURE
PROCEEDINGS. If there is any modification of the automatic stay by a Court
under section 362 of the Bankruptcy Code or other ruling by a Court that allows
Seller and Buyer to exercise foreclosure rights against the Collateral or other
similar rights under the Loan Documents or applicable law, unless Seller has
delivered a Put Notice and Buyer has paid the Put Note Liquidated Amount in
accordance with Section 2.6 or Buyer has delivered an Option Exercise Notice to
purchase all of Seller's remaining Claims and Buyer has paid the Option
Purchase Price in accordance with the Purchase Agreement, Buyer will not
participate in any manner in (i) the process of
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exercising such foreclosure or other similar rights against any Collateral
under the Loan Documents; (ii) the operation or possession of any Collateral;
or (iii) the disposition of any Collateral, PROVIDED, HOWEVER, that with
respect to any Collateral as to which Buyer can demonstrate to Seller's
reasonable satisfaction that it has obtained all applicable governmental
consents or clearances such that it cannot be prohibited or restricted from
co-ownership of such Collateral, the foregoing restrictions will not be
applicable. Seller's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, will be to deal with it in the
same manner as Seller deals with similar property for its own account; and
PROVIDED FURTHER that any proceeds of the exercise of such foreclosure rights
will be applied as specified in the Security Agreement. Seller will not have
any duties as to any Collateral (including, without limitation, as to
ascertaining any matters or taking any action with respect to any Collateral or
as to taking any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral). Neither Seller, nor any of its
directors, officers, employees or agents will be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or will be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Buyer or otherwise. To the extent permitted by
applicable law, Buyer waives all claims, damages and demands it may acquire
against Seller arising out of the exercise by Seller of any rights with respect
to the Collateral.
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2.2. ADMINISTRATION OF NOTES AND COLLATERAL DISTRIBUTED UNDER
A PLAN. In the event that a Plan is confirmed for any Debtor that makes any
distribution of notes secured by collateral on account of the Claims, Seller
will serve as collateral agent with respect thereto and will otherwise have the
sole right to administer all of such notes and collateral and control the
enforcement of any rights or remedies available with respect thereto unless
Buyer has purchased from Seller in excess of two-thirds of Seller's Claims.
Seller will deal with such notes in the same manner as Seller deals with
similar property for its own account.
IV. MISCELLANEOUS
3.
3.1. RESERVED.
3.2. SUCCESSORS AND ASSIGNS. This Intercreditor Agreement,
including without limitation the representations, warranties, covenants and
agreements contained herein: (a) will inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns and (b) will be binding upon and enforceable against the parties hereto
and their respective successors and permitted assigns; PROVIDED, HOWEVER, that,
Buyer may not assign or delegate any of its rights or obligations hereunder or
under any instrument or agreement referred to herein without the prior written
consent of Seller (which consent may be given or withheld in the sole
discretion of Seller), and PROVIDED FURTHER that Seller may assign all or part
of its remaining Claims, the Buyer's Note and any other rights it may have
against the Debtors, Buyer or Parent so long as any such
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assignment will be to an assignee that is a financial or investment institution
that has assets of at least $150 million and will be expressly subject to the
Option and this Intercreditor Agreement and pursuant to an instrument
reasonably satisfactory to Buyer whereby the assignee assumes Seller's
Obligations under the Option and this Intercreditor Agreement.
3.3. COSTS AND EXPENSES. Each party to this Intercreditor
Agreement will bear its respective costs and expenses, including without
limitation attorneys' fees and expenses, incurred in connection with: (a) the
preparation, execution, delivery, performance and administration of this
Intercreditor Agreement and (b) the pursuit of any actions to enforce each
party's respective rights and remedies arising out of or related to the Claims,
except to the extent that such costs and expenses are reimbursable by some or
all of the Debtors pursuant to the Loan Agreement, the Bankruptcy Code, the
Rules or otherwise.
3.4. AMENDMENTS; WAIVER. (a) No amendment, waiver,
termination or modification of, or supplement to, any provision of this
Intercreditor Agreement will be effective unless it is in writing and signed by
Seller, Buyer and Parent.
(b) No failure on the part of any party to exercise, and no
course of dealing with respect to, and no delay in exercising, any right,
power, or remedy hereunder will operate as a waiver thereof; nor will any
single or partial exercise by any party of any right, power, or remedy
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hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
3.5. NOTICES. (a) Subject to Section 4.5(b), all demands,
notices, requests, consents and communications hereunder will be in writing and
will be deemed to have been duly given if personally delivered by courier
service or messenger, sent by overnight delivery service or facsimile
transmission to the following addresses, or such other persons, firms or
addresses as may be furnished hereafter by notice in writing, to the following
parties:
(i) in the case of Parent or Buyer, to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention: The Persons listed as
Exhibit I to the Purchase Agreement
Fax No.: 513-599-7462
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek, Esq.,
Joanne L. Bober, Esq.,
and Robert K. Smits, Esq.
Fax No.: 212-755-7306
(ii) in the case of Seller, to:
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102
Attention: The Persons Listed on Exhibit H
to the Purchase Agreement
Fax No.: 201-824-4955
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with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Chaim J. Fortgang, Esq.,
Laurence D. Cherkis, Esq., Philip Mindlin,
Esq. and Amy R. Wolf, Esq.
Fax No.: 212-403-2000
(b) All demands, notices, requests, consents and
communications will be deemed to have been given if addressed in the manner
described above: (i) if sent by hand, at the time of actual delivery thereof;
(ii) if sent by facsimile transmission, upon receipt of confirmation of such
facsimile transmission; (iii) if sent by overnight delivery service, one
business day after deposit thereof with such delivery service; PROVIDED,
HOWEVER, that, notwithstanding the foregoing, all such demands, requests,
consents, notices, and communications will be deemed to have been given only if
(i) in the case of Seller, the receipt thereof is acknowledged in writing
signed by one of the persons listed on Exhibit H to the Purchase Agreement, at
the address of Seller set forth above, or, if after good faith efforts to
obtain such acknowledgment Buyer or Parent is unable so to do, by notice given
in the manner hereinabove contemplated to Seller's counsel, Wachtell, Lipton,
Rosen & Katz, at the address set forth above, provided that receipt thereof is
acknowledged in writing signed by Chaim J. Fortgang, Esq., Laurence D. Cherkis,
Esq., Philip Mindlin, Esq. or Amy R. Wolf, Esq.; provided, further, however,
that if after good faith efforts to obtain such acknowledgment from such
counsel, Buyer or Parent is unable so to do, such demands, requests, consents,
notices and communications will be deemed to have been given if hand
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delivered to each of the nine aforesaid persons, without acknowledgment of such
receipt, or (ii) in the case of Buyer or Parent, the receipt thereof is
acknowledged in writing signed by one of the persons listed on Exhibit I to the
Purchase Agreement, at the address of Buyer and Parent set forth above, or, if
after good faith efforts to obtain such acknowledgment Seller is unable so to
do, by notice given in the manner hereinabove contemplated to Parent's and
Buyer's counsel, Jones, Day, Reavis & Pogue, at the address specified provided
that receipt thereof is acknowledged in writing by Robert A. Profusek, Esq.,
Joanne L. Bober, Esq., or Robert K. Smits, Esq.; provided, further, however,
that if after good faith efforts to obtain such acknowledgment from such
counsel, Seller is unable so to do, such demands, requests, consents, notices
and communications will be deemed to have been given if hand delivered to each
of the eight aforesaid persons, without acknowledgment of such receipt. Each
party may change its address or designate other persons or entities to receive
notices by giving written notice thereof to the other parties in the manner
provided above.
3.6. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the other parties hereto would be irreparably damaged if any
of the provisions of this Intercreditor Agreement were not performed in
accordance with its specific terms or were otherwise breached. Accordingly, in
the event of a breach or default of this Intercreditor Agreement, each of the
parties agrees that the other parties will be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Intercreditor
Agreement and to enforce specifically this Intercreditor Agreement and the
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terms and conditions hereof in any action instituted in any court of the United
States, or any state thereof having personal and subject matter jurisdiction,
in addition to any other remedy to which such party may be entitled at law or
in equity (subject to the terms of this Intercreditor Agreement).
3.7. COUNTERPARTS AND EXECUTION. This Intercreditor
Agreement may be executed in one or more counterparts, all of which will be
considered one and the same agreement, and will become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties.
3.8. INTEGRATION. This Intercreditor Agreement constitutes
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements, understandings,
or representations pertaining to the subject matter hereof, whether oral or
written. There are no representations, warranties, or other agreements between
the parties in connection with the subject matter hereof except as expressly
set forth herein.
3.9. SEVERABILITY. If any provision of this Intercreditor
Agreement is partially or completely invalid or unenforceable in any
jurisdiction, then that provision will be ineffective in that jurisdiction to
the extent of its invalidity or unenforceability, but the invalidity or
unenforceability of that provision will not affect the validity or
enforceability or any other provision of this Intercreditor Agreement, all of
which will be construed and
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enforced as if that invalid or unenforceable provision were omitted, nor will
the invalidity or unenforceability of that provision in one jurisdiction affect
its validity or enforceability in any other jurisdiction.
3.10. CAPTIONS. The Article and Section captions in this
Intercreditor Agreement are for convenience of reference only and will not
affect in any way the meaning or interpretation of this Intercreditor
Agreement. Such captions will not be deemed to be part of this Intercreditor
Agreement and in no way define, limit, extend or describe the meaning or intent
of any provisions hereof.
3.11. GOVERNING LAW. This Intercreditor Agreement will be
governed by, and construed in accordance with, the internal laws of the State
of New York, without regard to the principles of conflict of laws thereof.
3.12. DEFINITIONS. Capitalized terms used herein and not
otherwise defined will have the meanings given in the Purchase Agreement. Each
term defined in this Intercreditor Agreement has the meaning assigned to it
herein.
3.13. INTERPRETATION. Unless the context otherwise requires:
(a) all references to Sections, Articles or Exhibits are to Sections, Articles
or Exhibits of or to this Intercreditor Agreement, (b) words in the singular
include the plural and vice versa, (c) each accounting term not otherwise
defined in this Intercreditor Agreement has the meaning assigned to it in
accordance with generally accepted
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<PAGE> 27
accounting principles, (d) "or" is disjunctive but not necessarily exclusive,
(e) "Affiliate" has the meaning given to that term in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended, (f) all references
to "business days" will be to any day other than a weekend day or a day that is
a national holiday in the United States or a state holiday in New York State
and (g) references to "$" or dollar amounts will be to lawful currency of the
United States of America.
3.14. GUARANTEE; SECURITY. All obligations of Buyer
hereunder and under the other Transaction Documents (as defined in the Buyer's
Note) are absolutely and unconditionally guaranteed by Parent pursuant to the
Guarantee and are secured by the Claims, the Distributions, all proceeds
thereof and all other assets of Buyer pursuant to the Security Agreement.
3.15. BUSINESS DAY. In the event that this agreement
requires any payment to be paid on a day other than a Business Day, such
payment is to be paid on the next following Business Day, and interest will
continue to accrue from the original payment date up to, but not including, the
Business Day when payment is actually made, at the rate of interest applicable
at the time that such payment was originally due and "Business Day" will refer
to any day on which banks are open for business in New York City.
3.16. REFERENCE TO AGREEMENTS. Each reference herein to any
agreement or instrument will mean such agreement or instrument as from time to
time amended, modified or
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supplemented in accordance with its terms, subject to any limitations on
amendment, modification or supplementation set forth in such agreement or
instrument or in the Transaction Documents.
3.17. NOTICE OF FULL PAYMENT. Seller agrees to notify the
Debtor and the Bankruptcy Court when payments and distributions in respect of
the Claims are to be made to Buyer (or to its order) rather than to Seller.
IN WITNESS WHEREOF, the parties have caused this Intercreditor
Agreement to be duly executed as of the date first written above.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Russell A. Rahbany
---------------------------------
Name: Russell A. Rahbany
---------------------------------
Title: Vice President
---------------------------------
FEDERATED NOTEHOLDING CORPORATION
By: /s/ Ronald W. Tysoe
---------------------------------
Name: Ronald W. Tysoe
---------------------------------
Title: President
---------------------------------
FEDERATED DEPARTMENT STORES,INC.
By: /s/ Ronald W. Tysoe
---------------------------------
Name: Ronald W. Tysoe
---------------------------------
Title: Vice-Chairman and Chief
Financial Officer
---------------------------------
10kexhib.10204.doc
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Exhibit 10.20.5
FORM OF PUT NOTE
New York, N.Y.
[Date]
FOR VALUE RECEIVED, the undersigned, Federated Noteholding
Corporation, a Delaware corporation ("Maker"), promises to pay to the order of
The Prudential Insurance Company of America, a New Jersey mutual insurance
corporation (together with any subsequent permitted holder of this Note,
"Holder"), at its offices located at 751 Broad Street, Newark, N.J. 07102, or
at such other address as Holder may from time to time designate in writing, the
"Put Price" (as defined in the Intercreditor Agreement dated December 31, 1993
among Maker, Holder and Federated Department Stores, Inc. (the "Intercreditor
Agreement")), together with interest thereon from the date hereof on the unpaid
principal balance at the rate and as herein provided. Unless otherwise
specified by Holder in writing, all payments on this Note will be made in
lawful money of the United States of America and in immediately available
funds, by wire transfer of funds to Morgan Guaranty, New York, N.Y., Account
No. 050-54-493, ABA # 021-000-238, for credit to "Prudential Insurance --
Mortgage Loan Account."
The principal amount of this Note and all accrued and unpaid
interest thereon will become due and be paid at 12:00 noon, Eastern Standard
Time, on the Put Settlement Date (as defined in the Intercreditor Agreement),
except that the maturity date may be extended as set forth in Section 2.6.1.(b)
of the Intercreditor Agreement as to (and only as to) the portion of the Put
Price constituting the excess of the Put Price above the Put Note Liquidated
Amount (as defined in the Intercreditor Agreement) and the Put Note Liquidated
Amount shall in any event be due and payable on the Put Settlement Date (such
maturity date, as so extended if applicable, the "Maturity Date").
All capitalized terms used in this Note and not otherwise
defined have the meanings given in the Purchase Agreement dated December 31,
1993 (the "Purchase Agreement") among Maker, Holder and Federated Department
Stores, Inc., a Delaware corporation and the parent company of Maker
("Parent").
The principal amount from time to time outstanding hereunder
will bear interest at a rate per annum (the "Interest Rate") (i) from January
1, 1994 through December 31, 1994, equal to the LIBOR Rate (as hereafter
defined) plus 1.75% and (ii) from January 1, 1995 through the Maturity Date,
equal to the LIBOR Rate plus 2.00%. Interest on the unpaid balance of the Note
will be computed on the actual number of days elapsed, and a year of 360 days.
<PAGE> 2
For purposes of this Note, (i) "LIBOR Rate" means, with
respect to any Interest Period (as hereafter defined), the rate for deposits in
U.S. dollars for a period equal to such Interest Period that appears on the
display designated as "Page 3750" on the Telerate Service (or such other page
as may replace Page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks) at 11:00 a.m. (London time) two
business days (i.e., days on which business in the London interbank market is
conducted) before the first day of such Interest Period, and (ii) "Interest
Period" means a period of three months, with the first such Interest Period
commencing on the date of this Note and each succeeding Interest Period
commencing on the last day of the preceding Interest Period; it being
understood that whenever the last day of any Interest Period would otherwise
occur on a day other than a business day, the last day of such Interest Period
will be extended to occur on the next succeeding business day, PROVIDED, that
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period will
occur on the next preceding business day, and whenever the first day of any
Interest Period occurs on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period, such Interest
Period will end on the last business day of such calendar month.
Interest on the outstanding principal amount of this Note will
be payable quarterly in arrears on the last day of each Interest Period and on
the Maturity Date.
Holder will have such rights to enforce all or any of the
obligations of the Maker or Parent under this Note and the other Transaction
Documents as are given hereunder or thereunder or by law.
All payments of amounts due hereunder will be applied as
follows:
(1) FIRST, to payment of reimbursement of all costs and
expenses of Holder to be paid or reimbursed by Maker
and not theretofore paid or reimbursed;
(2) SECOND, to the payment of all interest theretofore
accrued and unpaid hereunder;
(3) THIRD, to the payment in full of the entire principal
amount outstanding hereunder; and
(4) FOURTH, to the payment of all other amounts due to
Holder under any Transaction Document.
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<PAGE> 3
If Maker fails to make any payment of principal, accrued and
unpaid interest or any other amount due hereunder or under any Transaction
Document on any due date therefor, whether at stated maturity, by required
prepayment, by acceleration, or otherwise, the unpaid amount (including, to the
extent enforceable at law, any unpaid amount of interest) will bear interest at
the Default Rate until paid. For purposes of this Note, the "Default Rate"
will be a rate per annum equal to the sum of the LIBOR Rate in effect from time
to time plus 4.0%. Maker will also pay to Holder, in addition to the amount
due, all reasonable costs and expenses incurred by Holder in collecting or
enforcing, or attempting to collect or enforce this Note, including without
limitation court costs and reasonable attorneys' fees and expenses (including
reasonable attorneys' fees and expenses on any appeal by either Maker or Holder
and in any bankruptcy proceeding).
With respect to the amounts due pursuant to this Note, Maker
waives the following:
(1) All rights of exemption of property from levy or sale
under execution or other process for the collection of debts under the
Constitution or laws of the United States or any State thereof;
(2) Demand, presentment, protest, notice of dishonor, notice
of nonpayment, suit against any party, diligence in collection of this
Note, and all other requirements necessary to enforce this Note; and
(3) Any further receipt by or acknowledgment of any
collateral now or hereafter deposited as security for the indebtedness
evidenced by this Note.
In no event will any amount deemed to constitute interest due
or payable hereunder (including interest calculated at the Default Rate) exceed
the maximum rate of interest permitted by applicable law (the "Maximum
Amount"), and in the event such payment is inadvertently paid by Maker or
inadvertently received by Holder, then such sum will be credited as a payment
of principal or other amounts (other than interest) outstanding hereunder, and
if in excess of the outstanding amount of principal or other amounts
outstanding hereunder, will be immediately returned to Maker upon such
determination. It is the express intent hereof that Maker not pay and Holder
not receive, directly or indirectly, interest in excess of the Maximum Amount.
Holder will not by any act, delay, omission, or otherwise be
deemed to have modified, amended, waived, extended, discharged, or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge, or
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<PAGE> 4
termination of any kind will be valid unless in writing and signed by Holder.
All rights and remedies of Holder under the terms of this Note and applicable
statutes or rules of law will be cumulative, and may be exercised successively
or concurrently. Maker agrees that there are no defenses, equities, or setoffs
with respect to the obligations set forth herein, and to the extent any such
defenses, equities, or setoffs may exist, the same are hereby expressly
released, forgiven, waived, and forever discharged. The obligations of Maker
hereunder will be binding upon and enforceable against Maker and its successors
and assigns.
Wherever possible, each provision of this Note will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note is prohibited by or invalid under applicable
law, such provision will be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.
Holder may, at its option, release to Maker any collateral
given to secure the indebtedness evidenced hereby, and no such release will
impair the obligations of Maker to Holder.
This Note was negotiated in New York, and made by Holder and
accepted by Maker in the State of New York, which State the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, including without limitation matters of
construction, validity, and performance, this Note and the obligations arising
hereunder will be governed by, and construed in accordance with, the internal
laws of the State of New York and any applicable law of the United States of
America. To the fullest extent permitted by law, Maker hereby unconditionally
and irrevocably waives any claim to assert that the laws of any other
jurisdiction governs this Note, and this Note will be governed by and construed
in accordance with the laws of the State of New York pursuant to Section
5-1401 of the New York General Obligations Law.
Any legal suit, action, or proceeding against Holder or Maker
arising out of or relating to this Note will be instituted in any federal or
state court in New York, New York, pursuant to Section 5-1402 of the New York
General Obligations Law, and Maker waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action, or proceeding,
and Maker hereby irrevocably submits to the jurisdiction of any such court in
any such suit, action or proceeding. Maker does hereby designate and appoint
Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022,
Attention: Robert A. Profusek, Esq., as its authorized agent to accept and
acknowledge on its behalf service of any
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<PAGE> 5
and all process which may be served in any such suit, action or proceeding in
any federal or state court in New York, New York, and agrees that service of
process upon said agent at said address (or at such other office in New York,
New York as may be designated by such agent in accordance with the terms
hereof) with a copy to Maker at the following address: 7 West Seventh Street,
Cincinnati, OH 45202, Attention: Mr. Ronald W. Tysoe, will be deemed in every
respect effective service of process upon Maker in any such suit, action, or
proceeding in the State of New York. Maker (i) will give prompt notice to
Holder of any changed address of its authorized agent hereunder, (ii) may at
any time and from time to time designate a substitute authorized agent with an
office in New York, New York (which office will be designated as the address
for service of process), and (iii) will promptly designate such a substitute if
its authorized agent ceases to have an office in New York, New York or is
dissolved without leaving a successor.
MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT LIMITATION
ANY TORT ACTION, BROUGHT WITH RESPECT TO THIS NOTE. HOLDER MAY FILE A COPY OF
THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF MAKER'S KNOWING, VOLUNTARY,
AND BARGAINED-FOR AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY,
AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER WILL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Maker may not assign or delegate this Note or any of its
rights or obligations hereunder without the prior consent of Holder (which
consent may be given or withheld in the sole discretion of Holder). Holder may
assign or delegate this Note or any of its rights or obligations hereunder to
an assignee that is a financial or investment institution that has assets of at
least $150 million without prior consent of or notice to Maker or Parent.
This Note is secured by, and entitled to the benefits of, a
Pledge and Security Agreement between Maker and Holder dated concurrently
herewith. Parent has guaranteed all of the obligations of Maker under this
Note and the other Transaction Documents (as defined in the Intercreditor
Agreement) under a Guarantee Agreement between Parent and Holder dated
concurrently herewith. Parent, Maker and Holder have entered into an
Intercreditor Agreement dated concurrently herewith and this Note is entitled
to the benefits thereof.
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<PAGE> 6
IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed on its behalf as of the day and year first above written.
FEDERATED NOTEHOLDING CORPORATION
By: /s/ Ronald W. Tysoe
--------------------------------
Name: Ronald W. Tysoe
--------------------------------
Title: President
--------------------------------
10kexhib.10205.doc
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<PAGE> 1
Exhibit 10.31
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made in the City of Cincinnati and State of
Ohio, as of the _____ day of _____, _____, between _____, a _____ corporation
(hereinafter called the "Employer"), and _____, of Cincinnati, Ohio
(hereinafter called the "Employee").
In consideration of the premises, it is agreed by and between
the parties hereto as follows:
ARTICLE I
EMPLOYMENT
1.1 TERM AND DUTIES. The Employer shall employ the
Employee, and the Employee shall serve the Employer, as an executive for the
period (the "Term") beginning on the date of this Agreement and ending on the
later of (a) the date set forth on Exhibit A hereto and (b) any later date to
which the Term may have been extended by agreement of the parties. During the
Term the Employee shall faithfully and in conformity with the directions of the
Board of Directors of the Employer (the "Board") or its delegate perform the
duties of his employment and shall devote to the performance of such duties his
full time and attention. During the Term the Employee shall serve in the
office or offices of the Employer to which the Board may from time to time
elect or appoint him. The Employee shall be excused from performing any
services hereunder during periods of temporary incapacity and during vacations
in accordance with the Employer's disability and vacation policies.
<PAGE> 2
1.2 COMPENSATION. In consideration of his services
during the Term, the Employer shall pay the Employee cash compensation at an
annual rate not less than the greater of his current base salary as set forth
on Exhibit A hereto or the base salary of the Employee most recently approved
by the Board or its delegate ("Base Compensation"). Employee's Base
Compensation shall be subject to such increases as may be approved by the Board
or its delegate.
1.3 PAYMENT SCHEDULE. The Base Compensation specified in
Section 1.2(a) hereof shall be payable as current salary, in installments not
less frequently than monthly, and at the same rate for any fraction of a month
unexpired at the end of the Term.
1.4 EXPENSES. During the Term the Employee shall be
allowed reasonable traveling expenses and shall be furnished office space,
assistance and accommodations suitable to the character of his position with
the Employer and adequate for the performance of his duties hereunder.
1.5 TERMINATION IN CASE OF DISABILITY. The Employee
shall not be in breach of this Agreement if he shall fail to perform his duties
hereunder because of physical or mental disability. If for a continuous period
of 12 months during the Term the Employee fails to render services to the
Employer because of the Employee's physical or mental disability, the Board or
its delegate may end the Term prior to its stated termination date. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within 10 days of a written request
therefor by either party to the other, then one designated by the then
president of the _____. The written opinion of such physician as to the matter
in dispute shall be final and binding on the parties.
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<PAGE> 3
1.6 TERMINATION OF SERVICES. If the Employer notifies
the Employee that his services will no longer be required during the Term, the
Employee shall be entitled (except as otherwise provided in Section 1.5 or
Section 1.7 hereof) to continue to receive his Base Compensation for the
remainder of the Term.
1.7 MITIGATION. If the Employee receives notice from the
Employer pursuant to Section 1.6 hereof, the Employee (subject to Section 2.4
hereof) shall be free to become actively engaged with another business and
shall use his best efforts to find other comparable employment. Upon the
payment to the Employee of compensation for employment or other services by any
unaffiliated third party, the Employee shall automatically cease to be an
employee of the Employer. The Employee shall promptly notify the Employer of
any such employment or other services and of the compensation received, to be
received or receivable from his subsequent employer or such other party
attributable to the Term. All Base Compensation otherwise payable to the
Employee by the Employer under this Agreement during the remainder of the Term
shall be reduced to the extent of his similar compensation received, to be
received or receivable from such other employment or other services.
1.8 TERMINATION FOR CAUSE. The Employer may terminate
the employment of the Employee and this Agreement and all of its obligations
hereunder, except for obligations accrued but unpaid to the effective date of
termination, for Cause upon notice given pursuant to this Section. As used in
this Agreement, the term "Cause" shall mean:
(a) an intentional act of fraud, embezzlement,
theft or any other material violation of law in connection with the Employee's
duties or in the course of his employment with the Employer;
(b) intentional wrongful damage to material
assets of the Employer;
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<PAGE> 4
(c) intentional wrongful disclosure of material
confidential information of the Employer;
(d) intentional wrongful engagement in any
competitive activity which would constitute a material breach of the duty of
loyalty; or
(e) intentional breach of any stated material
employment policy of the Employer.
No act, or failure to act, on the part of an Employee shall be
deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done, or omitted to be
done, by the Employee not in good faith and without reasonable belief that his
action or omission was in or not opposed to the best interest of the Employer.
Failure to meet performance standards or objectives of the Employer shall not
constitute Cause for purposes hereof.
1.9 ELECTION OF BENEFITS. If the Employee receives
notice from the Employer pursuant to Section 1.6 hereof, the Employee shall
have the right to elect to receive (in lieu of the payments hereunder specified
in such Section 1.6) any benefits that may be payable to him pursuant to any
severance plan of the Employer applicable to him. If no such election is made,
the amounts specified in such Section 1.6 shall be payable as specified
therein, no benefit shall be payable to the Employee under such severance plan,
and the Employee hereby expressly waives any benefits that might otherwise be
due him under such severance plan.
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<PAGE> 5
ARTICLE II
CERTAIN OBLIGATIONS OF THE EMPLOYEE
2.1 NO PARTICIPATION IN OTHER BUSINESSES. During the
Term (except as otherwise expressly provided in Section 1.7 hereof) the
Employee shall not, without the consent of the Board or its delegate, become
actively associated with or engaged in any business other than that of the
Employer or a division or affiliate of the Employer, and he shall do nothing
inconsistent with his duties to the Employer. If the Employee shall breach his
obligations under this Section, he shall promptly reimburse the Employer for
any monies paid by the Employer in connection with his relocation during the
Term or in contemplation of the signing of this Agreement, including, without
limitation, any bonus or relocation expenses paid for or incurred by the
Employer, including, without limitation, carrying costs for property purchased
from or on behalf of the Employee. Any such reimbursement shall be in addition
to any other remedy for breach of this Agreement that the Employer may be
entitled to at law or in equity.
2.2 TRADE SECRETS AND CONFIDENTIAL INFORMATION. Employee
shall not (either during the Term or thereafter) without the consent of the
Employer disclose to anyone outside of the Employer, or use in other than the
Employer's business, trade secrets or confidential information relating to the
Employer's business in any way obtained by him while employed by the Employer.
2.3 NONCOMPETITION. It is recognized by the Employee and
the Employer that Employee's duties hereunder will entail the receipt of trade
secrets and confidential information, which include not only information
concerning the Employer's current operations, procedures, suppliers and other
contacts, but also its short-range and long-range plans, and that such trade
secrets and confidential information have been developed by the Employer and
its affiliates at substantial cost and constitute valuable and unique property
of the Employer. Accordingly, the Employee acknowledges that the
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<PAGE> 6
foregoing makes it reasonably necessary for the protection of the Employer's
business interests that the Employee not compete with the Employer or any of
its affiliates during the Term and for a reasonable and limited period
thereafter. Therefore, during the Term and for a period of two years
thereafter, the Employee shall not have an investment of $100,000 or more in a
Competing Business (as hereinafter defined) and shall not render personal
services to any such Competing Business in any manner, including, without
limitation, as owner, partner, director, trustee, officer, employee, consultant
or advisor thereof. The noncompete provisions of this section shall not be
applicable to Employee if he has been notified pursuant to Section 1.6 hereof
that his services will no longer be required during the Term or if Employee has
been advised that his services will no longer be required after the expiration
of the Term.
If the Employee shall breach the covenants contained
in this Section 2.3 or in Section 2.2 hereof, the Employer shall have no
further obligation to make any payment to the Employee pursuant to this
Agreement and may recover from the Employee all such damages as it may be
entitled to at law or in equity. In addition, the Employee acknowledges that
any such breach is likely to result in immediate and irreparable harm to the
Employer for which money damages are likely to be inadequate. Accordingly, the
Employee consents to injunctive and other appropriate equitable relief upon the
institution of proceedings therefor by the Employer in order to protect the
Employer's rights hereunder. Such relief may include, without limitation, an
injunction to prevent the Employee from disclosing any trade secrets or
confidential information concerning the Employer to any Competing Business, to
prevent any Competing Business from receiving from the Employee or using any
such trade secrets or confidential information and/or to prevent any such
Competing Business from retaining or seeking to retain any other employees of
the Employer. Employer agrees, however, that it will not seek injunctive
relief for the purposes of preventing Employee from competing with
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<PAGE> 7
Employer after the expiration of the Term. The provisions of the foregoing
sentence shall not apply, however, to injunctions of the type described in the
preceding sentence.
(a) As used in this Agreement, the term "affiliate"
shall mean, with respect to a particular person, a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such person.
(b) As used in this Agreement, the term
"Competing Business" shall mean any business which:
(i) at the time of determination, is
substantially similar to the whole or a substantial part of the business
conducted by the Employer or any of its divisions or 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 the outer limits
of a city where the Employer, or any of its division's or 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 affiliates, during its fiscal year preceding that in
which the Employee made such an investment therein, or first rendered
personal services thereto, in excess of $25,000,000.
2.4 CONFLICTS OF INTEREST. The Employee shall not
engage in any activity that would violate the Conflict of Interest or
Business Ethics Statement signed from time to time by the Employee.
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<PAGE> 8
ARTICLE III
MISCELLANEOUS
3.1 ASSIGNMENT. This Agreement may be assigned by the
Employer to any of its affiliates. This Agreement shall not otherwise be
assignable by the Employer without the consent of the Employee, except that, if
the Employer shall merge or consolidate with, or transfer all or any
substantial portion of its assets, including goodwill, to another corporation
or other form of business organization, this Agreement shall (or, in the case
of any such transfer, may) be assigned to and shall bind and run to the benefit
of the successor of the Employer resulting from such merger, consolidation or
transfer. The Employee may not assign, pledge or encumber his interest in this
Agreement or any part hereof.
3.2 GOVERNING LAW. This Agreement has been executed on
behalf of the Employer by an officer of the Employer located in the City of
Cincinnati, Ohio. This Agreement and all questions arising in connection
herewith shall be governed by the internal substantive laws of the State of
Ohio. The Employer and the Employee each consent to the jurisdiction of, and
agree that any controversy between them arising out of this Agreement shall be
brought in, the United States District Court for the Southern District of Ohio,
Western Division; the Court of Common Pleas for Hamilton County, Ohio; or such
other court venued within Hamilton County, Ohio as may have subject matter
jurisdiction over the controversy.
3.3 SEVERABILITY. If any portion of this Agreement is
held to be invalid or unenforceable, such holding shall not affect any other
portion of this Agreement.
3.4 ENTIRE AGREEMENT. This Agreement comprises the
entire agreement between the parties hereto and as of the date hereof,
supersedes, cancels and annuls any and all prior agreements between the parties
hereto. This Agreement may not be
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<PAGE> 9
modified, renewed or extended orally, but only by a written instrument
referring to this Agreement and executed by the parties hereto.
3.5 GENDER AND NUMBER. Words in the masculine herein may
be interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
3.6 NOTICES. Any notice or consent required or permitted
to be given under this Agreement shall be in writing and shall be effective
when given by personal delivery or five business days after being sent by
certified U.S. mail, return receipt requested, to the Secretary of Federated
Department Stores, Inc. at its principal place of business in the City of
Cincinnati or to the Employee at his last known address as shown on the records
of the Employer.
3.7 WITHHOLDING TAXES. The Employer may withhold from
any amounts payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
3.8 WAIVER AND RELEASE. In consideration of the
Employer's entering into this Agreement, and the receipt of other good and
valuable consideration, the sufficiency of which is expressly acknowledged, the
Employee, for himself and his successors, assigns, heirs, executors and
administrators, hereby waives and releases and forever discharges the Employer
and its affiliates and their officers, directors, agents, employees,
shareholders, successors and assigns from all claims, demands, damages, actions
and causes of action whatsoever which he now has on account of any matter,
whether known or unknown to him and whether or not previously disclosed to the
Employee or the Employer, that relates to or arises out of (a) any existing or
former employment agreement (written or oral) entered into between the Employee
and the Employer or any of its affiliates (or any amendment or supplement to
any such agreement), (b) any agreement (whether entered into before or after
the filing of such
-9-
10kexhib1031.doc
(rev. 12/30/93)
<PAGE> 10
petition) providing for a payment or payments or extension of the employment
relationship triggered by a merger or sale or other disposition of the stock or
assets or restructuring of the Employer or any affiliate of the Employer, or
(c) any applicable severance plan.
IN WITNESS WHEREOF, the parties hereto have hereunto and to a
duplicate hereof set their signatures as of the day and year first above
written.
By: ____________________________
Title: Vice President
_________________________________
-10-
10kexhib1031.doc
(rev. 12/30/93)
<PAGE> 1
EXHIBIT 10.32
SUPPLEMENTARY
EXECUTIVE RETIREMENT PLAN
The Supplementary Executive Retirement Plan (the "Supplementary Plan") was
adopted by Federated Department Stores, Inc., a Delaware corporation
("Federated"), effective as of January 1, 1984, and the Excess Retirement
Benefit Plan (the "Allied Excess Plan") of Allied Stores Corporation was adopted
by Allied Stores Corporation, a Delaware corporation ("Allied"), effective as of
January 1, 1984. Payments under both said plans were suspended as of January 15,
1990, the date as of which Federated and Allied filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code. Pursuant to the Third Amended
Plan of Reorganization of Federated, Allied and certain of their subsidiaries
(the "POR"), among other things, Allied was merged into Federated. The
Supplementary Plan is hereby revised and reinstated as of the effective date of
the POR (the "Reinstated Effective Date") for executives (i) who participated as
active participants in, and who terminate employment after the Reinstated
Effective Date with a vested benefit under, the Retirement Income Plan of
Federated Department Stores, Inc., or any successor to such plan (the "Federated
Plan"), or Part A of the Retirement Benefit and Profit Sharing Investment
Program of Allied Stores Corporation, or any successor to such plan (the "Allied
Plan"), said Plans being defined benefit plans which are intended to satisfy the
requirements of Section 4.01(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) whose benefits actually payable under such Plans would
reflect one or more of the limitations described in clauses (i) and (ii) of
Section 1 of this Reinstated Supplementary Plan (such executives referred to
hereafter as "Eligible Executives"). The Supplementary Plan, as hereby revised
and reinstated, is hereafter referred to as the "Reinstated Supplementary Plan".
The Reinstated Supplementary Plan supersedes and replaces all prior provisions
of the Supplementary Plan and the Allied Excess Plan on the terms and subject to
the conditions herein set forth.
1. PURPOSE
The Reinstated Supplementary Plan shall provide for the payment of
supplementary retirement benefits to compensate an Eligible Executive or his
Beneficiary (as hereafter defined) for the amount of the reduction, if any, in
his benefits under the Federated Plan or Allied Plan on account of (1) the
applications of Sections 401(a)(17) or 415 of the Code and (ii) the exclusion
from "Compensation", as defined in Section 1.23 of the Federated Plan, of
amounts deferred under Federated's Deferred Compensation Plan ("EDCP").
2. RETIREMENT BENEFITS
2.1 BENEFIT CALCULATION. In the case of any Eligible Executive, the
benefit payable under this Reinstated Supplementary Plan shall equal the
difference, if any, between (a) and (b), where:
(a) equals the benefit payable pursuant to the Federated Plan
determined without regard to the limits of Sections 401(a)(17) or
415 of the Code or, including within the definition of
"Compensation" amounts the Eligible Executive deferred under EDCP;
and
(b) equals the benefit actually payable under the Federated Plan or
the Allied Plan.
2.2 PAYMENT OF BENEFITS. Benefits under this Reinstated Supplementary Plan
shall be in the same form as, commence at the same time, and shall continue on a
coterminous basis with the benefits paid under the Federated Plan or the Allied
Plan, as the case may be. Benefits hereunder, if any, shall be paid to the
Eligible Executive or in the event of the Eligible Executive's death, to the
surviving spouse or such other beneficiary of the Eligible Executive to whom
payments under the Federated Plan or the Allied Plan would be made following the
death of the Eligible Executive (the "Beneficiary").
<PAGE> 2
3. SOURCE OF BENEFITS
Benefits under this Supplementary Plan shall be paid exclusively from
Federated's general assets and shall be allocated to its subsidiaries as
appropriate. No Executive or Beneficiary shall have any right or claim to the
payment of a benefit hereunder which in any manner whatsoever is superior to or
different from the right or claim of a general and unsecured creditor of
Federated or such subsidiary, as the case may be.
4. COORDINATION WITH FEDERATED AND ALLIED PLANS
Federated shall take such action as may be necessary and appropriate so as
to coordinate in all respects the payment of benefits hereunder with the payment
of benefits under the Federated Plan or the Allied Plan.
5. CONSTRUCTION
Federated intends that this Reinstated Supplementary Plan be exempt, to the
maximum extent possible, from Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), under Section 4(b)(5) thereof, as an excess
benefit plan which is unfunded, and any ambiguities in construction shall be
resolved in favor of interpretations which will effectuate such intention. In
all other respects, Federated intends the Reinstated Supplementary Plan to be an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management and highly compensated employees,
within the meaning of Sections 201, 301 and 401 of ERISA, commonly called a
"top-hat" plan, and Federated reserves the right to interpret and operate the
Reinstated Supplementary Plan accordingly. Furthermore, in the construction of
this Reinstated Supplementary Plan, the masculine shall include the feminine and
the singular the plural in all cases where such meanings would be appropriate.
Finally, this Reinstated Supplementary Plan shall be governed by and construed
in accordance with the substantive laws of the State of Ohio to the extent such
laws are not preempted by ERISA.
6. ADMINISTRATION
6.1 ADMINISTRATION OF THE REINSTATED SUPPLEMENTARY PLAN. Except as
otherwise provided herein, this Reinstated Supplementary Plan shall be
administered by the Administrative Committee under the Federated Plan (the
"Committee"). Such members of the Committee shall have authority to make, amend,
interpret and enforce all appropriate rules and regulations for the
administration of this Reinstated Supplementary Plan and decide or resolve any
and all questions including interpretations of this Reinstated Supplementary
Plan, as may arise in connection with this Reinstated Supplementary Plan.
In the administration of this Reinstated Supplementary Plan, the Committee
may, from time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel who may be
counsel to or an employee of Federated or any of its subsidiaries.
The decision or action of the Committee in respect of any question arising
out of or in connection with the administration, interpretation and application
of this Supplementary Plan and the rules and regulations thereunder shall be
final and conclusive and binding upon all persons having any interest therein.
6.2 CLAIMS PROCEDURE. Each Claim for benefits under the Reinstated
Supplementary Plan shall be approved or disapproved by the Committee within 90
calendar days following the receipt of the information that the Committee
determines to be necessary to process the claim. The 90-day claims review period
may be extended an additional 90 calendar days, provided that notice of such
extension of time is given the claimant within the first 90-day period. In the
event that the Committee denies a claim for benefits in whole or in part, the
Committee shall notify the claimant in writing of such denial. If requested by
the claimant or if the Committee so elects without such request, such notice or
a subsequent notice shall also set forth, in a manner determined by the
Committee or its designee to be calculated to be understood by the claimant, (i)
the principal basis for such denial, (ii) provisions of the Reinstated
Supplementary Plan on which the denial is based, (iii) description in reasonable
detail of any additional material or information necessary to perfect the claim
with an explanation in reasonable detail of why such material or information is
necessary, and (iv) an explanation in reasonable detail of the claim review
procedures set forth in Section 6.3 hereof. If no action is
<PAGE> 3
taken by the Committee on a claim within 90 calendar days, the claim shall be
deemed to be denied for purposes of the review procedure, in which event the
claimant may request such a notice.
6.3 REVIEW PROCEDURE. A claimant may appeal a denial of his claim by
requesting a review of the decision by the Committee. An appeal must be
submitted in writing within 60 calendar days after the denial and must (i)
request a review of the claim for benefits under the Plan, (ii) set forth in
reasonable detail all of the grounds upon which the claimant's request for
review is based and any facts in support thereof, and (iii) set forth in
reasonable detail any issues or comments which the claimant deems pertinent to
the appeal. The Committee shall review each such appeal. The Committee shall act
upon each appeal within 60 calendar days after receipt thereof unless the
Committee determines that additional time is appropriate, in which case a
decision will be rendered as soon as possible but not later than 120 calendar
days after the appeal is received. The claimant shall be given an opportunity to
review pertinent documents or materials upon submission of a written request to
the Committee, provided the Committee determines in its sole discretion that the
requested documents or materials (or any portion thereof) are pertinent to the
appeal. Following the Committee's review, the Committee shall make an
independent determination of the claimant's eligibility for benefits under the
Plan. The decision of the Committee on any claim for benefits shall be final,
conclusive and binding upon all parties thereto. In the event the Committee
denies an appeal in whole or in part, it shall give written notice of the
decision to the claimant, which notice will set forth, in a manner determined by
the Committee or its designee to be calculated to be understood by the claimant,
the principal basis for such denial and provisions of the Reinstated
Supplementary Plan on which the decision was based.
7. TERMINATION, SUSPENSION, OR AMENDMENT
The Board of Directors of Federated may, in its sole discretion, terminate,
suspend, or amend this Supplementary Plan at any time or from time to time, in
whole or in part and as applied to such entities as such Board of Directors may
determine. However, no such termination, suspension, or amendment shall
adversely affect the benefits of any Eligible Executive who has theretofore
terminated employment and is entitled to a benefit under this Plan (or his
Beneficiary).
8. GENERAL CONDITIONS
8.1 PROHIBITION OF ASSIGNMENT. No interest of any person and no benefit
payable hereunder shall be assigned as security for a loan, and any such
purported assignment shall be null, void, and of no effect, nor shall any such
interest or any such benefit be subject in any manner, either voluntarily or
involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or
through any person. If any attempt is made to alienate, pledge, or charge any
such interest or any such benefit for any debt, liabilities in tort or contract,
or otherwise, of any executive, former executive, surviving spouse, or other
beneficiary contrary to the prohibitions of the preceding sentence, then the
Committee in its discretion may suspend or forfeit the interests of such person
and during the period of such suspension or, in case of forfeiture, the
Committee shall hold such interest for the benefit of, or shall make the benefit
payments to, such person who would otherwise be the Eligible Executive,
designated Beneficiary, or to some member of the Eligible Executive's, former
executive's, surviving spouse's, or Beneficiaries' family to be selected in the
discretion of the Committee.
8.2 NO ADDITIONAL RIGHTS. No Eligible Executive and no other person shall
have any legal or equitable rights or interest in this Reinstated Supplementary
Plan that are not expressly granted in this Reinstated Supplementary Plan.
Participation in this Reinstated Supplementary Plan does not give any person any
right to be retained in the service of Federated or any of its subsidiaries. The
right and power of Federated or any of its subsidiaries to dismiss or discharge
any executive is expressly reserved.
8.3 LIMITATION ON PAYMENTS. It is recognized that an Eligible Executive's
duties during the period of employment with Federated or its subsidiaries will
entail the receipt of confidential information concerning not only current
operations and procedures but also short-and long-range plans.
If the Eligible Executive during any portion of the period of two years
following his termination of employment as provided in this Reinstated
Supplementary Plan has an investment of $100,000 or more in a Competing Business
(as hereafter defined) or renders personal services to such a Competing Business
in any
<PAGE> 4
manner, including without limitation, as owner, partner, director, trustee,
officer, employee, consultant, or advisor thereof, all rights to receive any
benefits under this Reinstated Supplementary Plan shall immediately cease.
As used in this Section, a "Competing Business" shall be any business
which:
(a) at the time of determination, is substantially similar, in whole
or substantial part, to the business conducted at the end of the
period of active employment by Federated and its subsidiaries
(taken as a whole) or substantially similar to some substantial
part of said business; and
(b) at the time of determination, is operating a store or stores
which, during its or their fiscal year preceding the
determination, in the aggregate, had the aggregate net sales,
including sales in leased and licensed departments, in excess of
$10,000,000, which store or stores is located in a city or within
a radius of twenty-five (25) miles from the outer limit of a city
where Federated or any of its subsidiaries is operating a store or
stores which, during its or their fiscal year preceding the
determination, in the aggregate had aggregate net sales, including
sales in leased and licensed departments, in excess of
$10,000,000; and
(c) had aggregate consolidated net sales at all its locations,
including sales in leased and licensed departments and sales by
its divisions, subsidiaries and affiliates, during its fiscal year
preceding that in which the Eligible Executive made such
investment therein, or first rendered personal services thereto,
following his termination of service, in excess of $25,000,000.
8.4 WITHHOLDING FOR TAXES. Payments under the Reinstated Supplementary
Plan shall be subject to withholding for payroll taxes as required by law,
including state and federal income taxes and FICA taxes.
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11.1
FEDERATED DEPARTMENT STORES, INC.
EXHIBIT OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS, EXCEPT PER SHARE DATA)
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993
------------------------------ ------------------------------
SHARES INCOME SHARES INCOME
------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income and average number of shares
outstanding................................ 126,293 $193,248 111,350 $113,009
Earnings per share........................... $1.53 $1.01
PRIMARY COMPUTATION:
Average number of common share equivalents:
Shares to be issued to the U.S.
Treasury.............................. 163 204
Deferred compensation plan.............. 3 --
Stock options........................... 229 34
------- -------- ------- --------
Adjusted number of common and common
equivalent shares outstanding and
adjusted net income................ 126,688 $193,248 111,588 $113,009
Primary earnings per share............ $1.53 $1.01
FULLY DILUTED COMPUTATION:
Additional adjustments to a fully diluted
basis:
Convertible notes....................... 8,564 9,928 -- --
Stock options........................... 4 72
------- -------- ------- --------
Adjusted number of shares outstanding
and net income on a fully diluted
basis.............................. 135,256 $203,176 111,660 $113,009
======= ======== ======= ========
Fully diluted earnings per share...... $1.50 $1.01
</TABLE>
E-1
<PAGE> 1
EXHIBIT 21
FEDERATED DEPARTMENT STORES, INC.
LIST OF SUBSIDIARIES
22 East Advertising Agency, Inc.
22 East Realty Corporation
A&S Real Estate, Inc.
Abraham & Straus, Inc.
Allied Mortgage Financing Corp.
Allied Stores Credit Holdings Corporation
Allied Stores General Real Estate Company
Allied Stores International Sales Company, Inc.
Allied Stores International, Inc.
Allied Stores Marketing Corp.
Astoria Realty, Inc.
Auburndale Realty, Inc.
BFC Real Estate Company
Bloomingdale's by Mail Ltd.
Bloomingdale's Real Estate, Inc.
Bloomingdale's, Inc.
Burdine's Main Store Real Estate, Inc.
Burdine's Real Estate II, Inc.
Burdine's Real Estate, Inc.
Burdines, Inc.
Douglaston Plaza, Inc.
FACS Group, Inc.
FDS National Bank
Federated Claims Services Group, Inc.
Federated Credit Holdings Corporation
Federated Department Stores Insurance Company, Ltd.
Federated Noteholding Corporation
Federated Real Estate, Inc.
Federated Stores Realty, Inc.
Jor-Mar, Inc.
Jordan Marsh Insurance Agency, Inc.
Jordan Marsh Stores Corporation
Jordan Servicenter, Inc.
Lazarus Real Estate, Inc.
Lazarus, Inc.
Prime Receivables Corporation
<PAGE> 2
Retail Service, Inc.
Rich's Department Stores, Inc.
Rich's Main Store Real Estate, Inc.
Rich's Real Estate, Inc.
Saramaas Realty Corp.
Seven Hills Funding Corporation
Seven West Seventh, Inc.
Stern's Department Stores, Inc.
Stern's-Echelon, Inc.
Stern's-Granite Run, Inc.
Stern's-Moorestown, Inc.
The Bon, Inc.
Tukwila Warehousing Services Corporation
dkm801.rft
10kexhib.1021.doc
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Federated Department Stores, Inc.:
We consent to incorporation by reference in Registration Statement Nos.
33-45633, 33-50831 and 33-51907 on Forms S-8 of Federated Department Stores,
Inc. of our report dated February 28, 1994, relating to the consolidated
balance sheets of Federated Department Stores, Inc. and subsidiaries as of
January 29, 1994 and January 30, 1993, and the related consolidated statements
of operations and cash flows and related financial statement schedules for each
of the fifty-two week periods ended January 29, 1994, January 30, 1993 and
February 1, 1992, which report appears in the January 29, 1994 annual report on
Form 10-K of Federated Department Stores, Inc.
Our report refers to the Company's adoption of "fresh-start reporting" as of
February 1, 1992 to reflect the Company's emergence from bankruptcy and the
Company's adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits other than Pensions," and
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," as of February 1, 1992.
KPMG PEAT MARWICK
Cincinnati, Ohio
April 19, 1994
10exhib/23.doc
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Allen I. Questrom
----------------------------
Allen I. Questrom
dkm510.doc
<PAGE> 2
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Ronald W. Tysoe
-----------------------------
Ronald W. Tysoe
dkm510.doc
<PAGE> 3
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ John E. Brown
------------------------------
John E. Brown
dkm510.doc
<PAGE> 4
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Robert A. Charpie
------------------------------
Robert A. Charpie
dkm510.doc
<PAGE> 5
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Lyle Everingham
-----------------------------
Lyle Everingham
dkm510.doc
<PAGE> 6
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Meyer Feldberg
-----------------------------
Meyer Feldberg
dkm510.doc
<PAGE> 7
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ George V. Grune
-----------------------------
George V. Grune
dkm510.doc
<PAGE> 8
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Reginald H. Jones
------------------------------
Reginald H. Jones
dkm510.doc
<PAGE> 9
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ John K. McKinley
------------------------------
John K. McKinley
dkm510.doc
<PAGE> 10
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ G. William Miller
------------------------------
G. William Miller
dkm510.doc
<PAGE> 11
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Joseph Neubauer
------------------------------
Joseph Neubauer
dkm510.doc
<PAGE> 12
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Karl M. von der Heyden
------------------------------
Karl M. von der Heyden
dkm510.doc
<PAGE> 13
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ Marna C. Whittington
------------------------------
Marna C. Whittington
dkm510.doc
<PAGE> 14
POWER OF ATTORNEY
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, Boris Auerbach and Padma Tatta Cariappa, or any
of them, my true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, to do any and all acts and things in my
name and behalf in my capacities as director and/or officer of the Company and
to execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 19, 1994 /s/ James M. Zimmerman
------------------------------
James M. Zimmerman
dkm510.doc
