<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 14, 1995
BROADWAY STORES, INC.
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Exact name of registrant as specified in its charter
DELAWARE 1-8765 94-0457907
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3880 NORTH MISSION ROAD
LOS ANGELES, CA 90031
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 213/227-2000
N/A
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(Former name or former address, if changed since last report)
The Exhibit Index is located on Page 5.
<PAGE>
ITEM 5. OTHER EVENTS
On August 17, 1995, Broadway Stores, Inc. ("Broadway") and General
Electrical Capital Corporation ("GE Capital") entered into an amendment
(the"Broadway Working Capital Amendment") to Broadway's working capital credit
facility (the "Broadway Working Capital Facility").
Pursuant to the Broadway Working Capital Amendment, the size of the
Broadway Working Capital Facility was increased to $250.0 million from $225.0
million, and the percentage of the value of "Eligible Inventory" that
constitutes the "Borrowing Base" under the Broadway Working Capital Facility was
increased to 55% from 50%. In addition, the minimum inventory balance
requirements under the Broadway Working Capital Facility were relaxed and
various financial covenants previously contained therein were eliminated. A
copy of the Broadway Working Capital Amendment is filed as Exhibit 4.1 hereto
and incorporated herein by this reference.
As a condition to GE Capital's entering into the Broadway Working
Capital Amendment, GE Capital and Federated Department Stores, Inc.
("Federated") entered into a Put Agreement (the "Put Agreement"), and a Last-Out
Participation Agreement (the "Participation Agreement"). Under the Put
Agreement, Federated will be required to purchase from GE Capital for $30.0
million a last-out participation in the Broadway Working Capital Facility upon
the earlier to occur of (i) the commitment termination date under the Broadway
Working Capital Facility (unless all of Broadway's obligations under the
Broadway Working Capital Facility are repaid or otherwise satisfied in
accordance with the terms of such facility on or prior to such date) and (ii)
the tenth banking day prior to the then-current expiration date of the letter of
credit that Federated provided to GE Capital to secure the performance of
Federated's contingent purchase obligation thereunder.
The Participation Agreement provides for a $30.0 million last-out
participation in the Broadway Working Capital Facility, under the terms of which
Federated would not be entitled to receive any payments of principal until
Broadway's obligations to GE Capital and any other members of the lender
syndicate under the Broadway Working Capital Facility are fully repaid or
otherwise satisfied. In addition, Federated's right to receive payments of
interest in respect of the last-out participation would be subordinated in
certain circumstances.
In connection with the Broadway Working Capital Amendment, GE Capital
consented to the merger described in the joint press release of Broadway and
Federated dated August 14, 1995, a copy of which is filed as Exhibit 20.1 hereto
and incorporated herein by this reference.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
See Exhibit Index on Page 5.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROADWAY STORES, INC.,
a Delaware corporation
By: /s/ JOHN C. HAECKEL
------------------------------------------
JOHN C. HAECKEL, EXECUTIVE VICE
PRESIDENT AND CHIEF FINANCIAL
OFFICER
Date: August 24, 1995
4
<PAGE>
EXHIBIT 4.1
[EXECUTION COPY 8/16/95]
TENTH AMENDMENT TO CREDIT AGREEMENT
THIS TENTH AMENDMENT (the "Tenth Amendment"), dated as of August 17, 1995,
---------------
is entered into by and among BROADWAY STORES, INC., a Delaware corporation
previously known as Carter Hawley Hale Stores, Inc. (the "Borrower"), the
--------
financial institutions parties hereto (the "Lenders") and GENERAL ELECTRIC
-------
CAPITAL CORPORATION, a New York corporation, as agent (the "Agent") for the
-----
Lenders.
R E C I T A L S
---------------
WHEREAS, the parties hereto have entered into that certain Credit Agreement
dated as of October 8, 1992 and amended by the letter agreement dated April 29,
1993, the Amended and Restated Second Amendment dated as of August 20, 1993, the
Third Amendment dated as of September 30, 1993, the Fourth Amendment dated as of
October 31, 1993, the Fifth Amendment dated as of December 10, 1993, the Sixth
Amendment dated as of February 26, 1994, the Seventh Amendment dated as of
September 13, 1994, the Eighth Amendment dated as of March 3, 1995 and the Ninth
Amendment dated as of June 28, 1995 (as so amended, the "Credit Agreement"), and
----------------
now desire to amend the Credit Agreement in certain respects;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the
-----------
Credit Agreement are used herein with the same meanings ascribed to them
therein.
2. Amendments to the Credit Agreement: Upon the Effective Date (as
----------------------------------
defined herein), the Credit Agreement is hereby amended as follows:
2.1 Amendment to Article 1. Article 1 of the Credit Agreement is hereby
----------------------
amended as follows:
(a) The definition of "Borrowing Base" is amended in its entirety to read
as follows:
"Borrowing Base" shall mean, at any time, the lesser of (i) the
--------------
Commitment or (ii) up to 55% of Eligible Inventory (valued on a first-in,
first-out basis, at the lower of cost or market), less such reserves as the
Required
<PAGE>
[EXECUTION COPY 8/16/95]
Lenders may deem necessary from time to time. The Agent shall promptly
inform the Borrower of the establishment of any such other reserve
(together with a statement in reasonable detail of the reasons therefor),
but failure to do so shall not impair the effectiveness of any such reserve
for purposes of this Agreement.
(b) The definition of "Commitment Termination Date" is amended in its
entirety to read as follows:
"Commitment Termination Date" shall mean the earliest of: (i)
---------------------------
February 29, 1996, if the Federated Merger shall not have become effective
on or prior to such date; (ii) October 8, 1996, (iii) the date that the
Borrower prepays the Loan in accordance with Section 2.3(e), (iv) the date
--------------
on which any Event of Default specified in Section 9.1(g), 9.1(h) or 9.1(i)
---------------------- ------
occurs and (iv) the date that the Required Lenders elect to terminate the
Borrower's right to receive Advances or accommodations for Letters of
Credit pursuant to Section 9.2. The Borrower shall have no right to
-----------
terminate the Commitments unless simultaneously therewith all commitments
of the Receivables Lender under the Accounts Receivable Facility are
terminated.
(c) The definition of "Total Commitment Amount" is amended in its
entirety to read as follows:
"Total Commitment Amount" shall mean $250,000,000.
-----------------------
(d) The following new definitions are added to Article 1 of the
Credit Agreement in alphabetical order:
"Federated" shall mean Federated Department Stores, Inc., a
---------
Delaware corporation.
"Federated Merger" shall mean the merger of Nomo Company, Inc., a
----------------
wholly owned subsidiary of Federated, with and into the Borrower (with the
Borrower as the surviving corporation) pursuant to the terms of the
Federated Merger Agreement.
"Federated Merger Agreement" shall mean the Agreement and Plan of
--------------------------
Merger dated as of August 14, 1995 by and among the Borrower, Federated and
Nomo Company, Inc., as such agreement may be amended, modified or
supplemented from time to time.
"Federated Merger Termination Date" shall mean the date on which
---------------------------------
the Federated Merger Agreement is terminated
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<PAGE>
[EXECUTION COPY 8/16/95]
by the parties thereto or is terminated in accordance with its terms or, if
earlier, the date on which any condition precedent to the effectiveness of
the Federated Merger becomes incapable of being met prior to February 29,
1996.
2.2 Amendment to Section 5.1. The following new Section 5.1(k) shall
------------------------
be added to the end of Section 5.1 of the Credit Agreement:
(k) At any time after the Federated Merger Termination Date,
promptly upon the request of the Agent, but in any event no later than the
date (during the fiscal week following such request) on which the next
Borrowing Base Certificate is required to be delivered pursuant to Section
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5.4, a certificate of the chief executive officer or chief financial
---
officer of the Borrower setting forth in reasonable detail calculations
indicating compliance with the financial covenant contained in Section
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7.1(d)(ii) for each period requested by the Agent.
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2.3 Amendment to Section 7.1.
------------------------
(a) Sections 7.1(a), 7.1(b), 7.1(c) and 7.1(f) of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
(a) [INTENTIONALLY OMITTED].
(b) [INTENTIONALLY OMITTED].
(c) [INTENTIONALLY OMITTED].
(f) [INTENTIONALLY OMITTED].
(b) Section 7.1(d) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(d) Consolidated Minimum Inventory Balance. (i) The Borrower
--------------------------------------
will not permit the aggregate amount of all inventory of the Borrower
and its Subsidiaries (determined on the lower of a first-in, first-out
or market basis) on the last day of any Fiscal Month set forth below
to be less than the minimum amount set forth below opposite such
Fiscal Month (provided that the minimum amount set forth opposite
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January 1996 shall not include inventory-in-transit):
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<PAGE>
[EXECUTION COPY 8/16/95]
<TABLE>
<CAPTION>
Fiscal Month Minimum Amount
-------------- -----------------
<S> <C>
August 1995 -0-
September 1995 $333,000,000
October 1995 $421,000,000
November 1995 $478,000,000
December 1995 $354,000,000
January 1996 $360,000,000
February 1996 $418,900,000
March 1996 $409,700,000
April 1996 $404,700,000
May 1996 $415,700,000
June 1996 $382,100,000
July 1996 $386,100,000
August 1996 $426,600,000
September 1996 $443,700,000; and
</TABLE>
(ii) if the Federated Merger Termination Date has occurred
at any time prior to the Commitment Termination Date, the Borrower
will not permit the aggregate amount of all inventory of the Borrower
and its Subsidiaries (determined on the lower of a first-in, first-out
or market basis) at any time during each period or on any date set
forth below to be less than the minimum amount set forth below
opposite such period or date (provided that the minimum amount set
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forth opposite the period ending February 28, 1996 shall not include
inventory-in-transit) for a period of more than five consecutive days:
<TABLE>
<CAPTION>
Period Minimum Amount
------ --------------
<S> <C>
September 1, 1995 through
October 30, 1995 $333,000,000
October 31, 1995 through
November 29, 1995 $421,000,000
November 30, 1995 $478,000,000
December 1, 1995 through
January 30, 1996 $354,000,000
January 31, 1996 through
February 28, 1996 $360,000,000
February 29, 1996 $418,900,000
</TABLE>
2.4 Amendment to Section 7.13. Sections 7.13 of the Credit Agreement
-------------------------
is amended in its entirety to read as follows:
7.13 Restricted Payments. The Borrower shall not make any
-------------------
Restricted Payments; provided, however, after the consummation of the
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Federated Merger, the Borrower may
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<PAGE>
[EXECUTION COPY 8/16/95]
repurchase the Convertible Subordinated Notes to the extent such repurchase
is required to be made under the terms of the Convertible Subordinated
Notes as a result of the Federated Merger but only from the proceeds of (i)
a contribution made by Federated to the common equity of the Borrower or
(ii) intercompany loans made by Federated to the Borrower which have been
subordinated to the Obligations on terms and conditions satisfactory to the
Required Lenders.
2.5 Amendment to Section 9.1(m). Section 9.1(m) of the Credit
---------------------------
Agreement is amended in its entirety to read as follows:
(m) Any Change in Control shall occur (other than a Change in Control
resulting from the consummation of the Federated Merger).
3. Consents. The Lenders hereby consent, pursuant to Sections 7.2,
--------
7.4 and 7.6 of the Credit Agreement, to the Federated Merger. The Lenders
hereby consent, pursuant to Section 7.14 of the Credit Agreement, to any
intercompany Indebtedness to be incurred by the Borrower pursuant to, and used
for the purpose specified in, Section 7.13 of the Credit Agreement.
4. Effective Date. This Tenth Amendment shall become effective as of
--------------
the date hereof (the "Effective Date") when all of the following conditions have
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been satisfied:
(a) The Agent has received each of the following in form and
substance satisfactory to it:
(i) counterparts hereof signed by the Borrower, the Lenders
and the Agent, together with an Amended and Restated Note in the form
of Exhibit A hereto;
---------
(ii) one or more certificates, dated the Effective Date and
in form and substance satisfactory to the Agent, of the Secretary or
any Assistant Secretary of the Borrower certifying (A) as to
resolutions of the Board of Directors of the Borrower authorizing this
Tenth Amendment and the transactions contemplated hereby and thereby,
(B) that the resolutions described in clause (A) have not been amended
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and remain in full force and effect, (C) as to the incumbency and
signatures of each officer of the Borrower executing this Tenth
Amendment or any of the Loan Documents delivered in connection
therewith, (D)
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<PAGE>
[EXECUTION COPY 8/16/95]
as to the matters set forth in Section 4 of this Tenth Amendment, and
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(E) as to such other matters as shall be reasonably requested by
Agent; and
(iii) opinions, dated the Effective Date and addressed to
the Agent and each Lender, of (A) George Touras, general counsel of
the Borrower and (B) of Milbank, Tweed, Hadley & McCloy, counsel to
the Borrower.
(b) The Borrower shall have paid to the Agent for the account of
the Lenders an amendment fee in the amount of $1,125,000 in same day funds.
5. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants that, as of the date hereof and as of the Effective Date, after
giving effect to this Tenth Amendment:
(a) The execution, delivery and performance by the Borrower of
this Tenth Amendment have been duly authorized by all necessary corporate
action;
(b) Each of the Loan Documents constitutes (and, after giving
effect to the Federated Merger, will constitute) the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms;
(c) After giving effect to the Federated Merger, the Borrower
will be a wholly owned subsidiary of Federated;
(d) No Default or Event of Default has occurred or is continuing;
and
(e) The representations and warranties of the Borrower contained
in Article 4 of the Credit Agreement and any other Loan Document (other
---------
than representations and warranties which expressly speak as of a different
date) are true, correct and complete in all material respects, except that
such representations and warranties need not be true, correct and complete
to the extent that changes in the facts and conditions on which such
representations and warranties are based are required or permitted under
the Credit Agreement.
6. Limitation on Amendment. This Tenth Amendment shall be limited
-----------------------
solely to the matters expressly set forth herein and shall not (a) constitute a
waiver or amendment of any other
-6-
<PAGE>
[EXECUTION COPY 8/16/95]
term or condition of the Credit Agreement, or of any instruments or agreements
referred to therein, (b) prejudice any right or rights which the Agent or any of
the Lenders may now have or may have in the future under or in connection with
the Credit Agreement or any instruments or agreements referred to therein, or
(c) require the Agent or the Lenders to agree to a similar waiver or amendment
or grant a similar waiver or amendment for a similar transaction or on a future
occasion. Except to the extent specifically waived herein, the provisions of
the Credit Agreement shall not be amended, modified, impaired or otherwise
affected hereby, and the Credit Agreement and all of the Obligations are hereby
confirmed in full force and effect.
7. Confirmation of Obligations and Liens. In consideration for the
-------------------------------------
Lenders agreement to enter into this Tenth Amendment, the Borrower hereby (i)
confirms that as of August 15, 1995 the outstanding principal amount of the
Advances was $25,551,000.00 and the outstanding amount of Letter of Credit
Obligations was $58,494,429.96 and that such amounts are payable pursuant to the
Credit Agreement, as amended hereby, without offset, withholding, counterclaim
or deduction of any kind and (ii) confirms and agrees that all Liens granted to
the Agent or any Lender under the Collateral Documents and the other Loan
Documents are valid and fully perfected and remain in full force and effect.
8. Release of Lender Parties. The Borrower, for itself and on
-------------------------
behalf of each of its Subsidiaries and Affiliates and each of its employees,
officers and directors, and each of their respective predecessors, successors
and assigns (collectively, the "Releasors"), does hereby forever and
unconditionally (i) release, discharge and acquit the Agent and each of the
Lenders, and each of their respective parent corporations, Subsidiaries and
Affiliates, and each of their respective officers, directors, shareholders,
employees, attorneys, agents, accountants, consultants, servants and
representatives, and each their respective predecessors, successors, heirs and
assigns (collectively, the "Lender Parties"), of and from any and all claims of
every type, kind, nature, description or character, known and unknown,
whensoever arising out of any actions or omissions of the Lender Parties, or any
of them, occurring at any time up to and through the date hereof, which in any
way arise out of, are connected with or relate to the Loan Documents
(collectively, "Claims"), and (ii) agree not to bring any action in any
judicial, administrative or other proceeding against the Lender Parties, or any
of them, alleging any such Claim or otherwise arising in connection with any
such Claim, or support any shareholder of the Borrower or any
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<PAGE>
[EXECUTION COPY 8/16/95]
of the respective Releasors in any such action brought by such shareholder.
9. Miscellaneous. This Tenth Amendment is a Loan Document and,
-------------
together with the Credit Agreement and the other Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof.
The headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
10. Severability. Whenever possible, each provision of this Tenth
------------
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Tenth Amendment be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Tenth Amendment.
11. Governing Law. This Tenth Amendment shall be governed by, and
-------------
shall be construed and enforced in accordance with, the laws of the State of New
York.
12. Costs and Expenses; Indemnity.
-----------------------------
(a) The Borrower agrees to reimburse GE Capital and its affiliates as
parties to both the Credit Agreement and the Accounts Receivable Facility for
all costs and expenses incurred by GE Capital and its affiliates in connection
with the preparation, reproduction, execution and delivery of this Tenth
Amendment and all other agreements entered into in connection herewith.
(b) The Borrower agrees that its obligation to indemnify each
Indemnified Person under the terms of Article 10 of the Credit Agreement shall
include an obligation to indemnify and hold each such Indemnified Person
harmless from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys',
experts' and witness fees and disbursements and other costs of investigations or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by such Indemnified Person in connection with or
arising out of this Tenth Amendment or any other Loan Document or the Federated
Merger Agreement or any other agreement entered into in connection with the
Tenth Amendment or in any way related to the Federated Merger.
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<PAGE>
[EXECUTION COPY 8/16/95]
13. Counterparts. This Tenth Amendment may be executed in any number
------------
of counterparts which, when taken together, shall be deemed to constitute one
and the same instrument.
WITNESS the due execution hereof as of the date first above written.
BROADWAY STORES, INC., as the Borrower
By: /s/ Ralph DeMarco
_________________________________
Title: Vice President - Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and
as the Lender
By: _____________________________
Title:
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<PAGE>
EXHIBIT A TO TENTH AMENDMENT
FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE
--------------------------------------------------
$250,000,000 August 17, 1995
FOR VALUE RECEIVED, the undersigned, BROADWAY STORES, INC., a Delaware
corporation (previously known as Carter Hawley Hale Stores, Inc.) having an
office at 3880 N. Mission Road, Los Angeles, California 90031 (the "Borrower"),
--------
hereby promises to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION (the
"Lender"), or its registered assigns, in lawful money of the United States of
------
America and in immediately available funds, the principal amount of TWO HUNDRED
FIFTY MILLION DOLLARS ($250,000,000), or, if less, the aggregate unpaid
principal amount of all Advances made by the Lender pursuant to that certain
Credit Agreement, dated as of October 8, 1992 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the
"Credit Agreement"), among the Borrower, certain commercial lending institutions
-----------------
(including the Lender) as are, or may from time to time become, parties thereto,
and General Electric Capital Corporation, as Agent, together with interest on
the unpaid principal amount of this Note outstanding from time to time from the
date of the first advance made or deemed to have been made hereunder, as
hereinafter provided.
This Note is issued pursuant to the Credit Agreement, is one of the
Notes referred to therein, and is entitled to the benefit and security of the
Loan Documents provided for therein, to which reference is hereby made for a
statement of all of the terms and conditions under which the Advances evidenced
hereby are made. All capitalized terms, unless otherwise defined herein, shall
have the meanings ascribed to them in the Credit Agreement.
The principal amount of the indebtedness from time to time evidenced
hereby shall be payable in the manner specified in the Credit Agreement and, if
not sooner paid in full, on October 8, 1996.
The outstanding principal amount of indebtedness evidenced hereby
shall bear interest, payable monthly in arrears on the tenth day of each month
for the immediately preceding calendar month, as set forth in the Credit
Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in immediately available funds to the account
designated by the Agent pursuant to the Credit Agreement.
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<PAGE>
If any payment or prepayment on this Note becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
Upon and after the occurrence of an Event of Default, this Note may,
as provided in the Credit Agreement, and without demand, notice or legal process
of any kind, be declared, and upon such declaration immediately shall become,
due and payable.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
This Note is given in renewal of and rearrangement and substitution,
but not in payment, for the "Note" referred to in the Credit Agreement (the
"Prior Note"), it being acknowledged and agreed that the indebtedness evidenced
-----------
by the Prior Note constitutes the same indebtedness evidenced by this Note and
that this Note in no way is intended to constitute a novation of such Prior Note
or the outstanding principal amount thereof.
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<PAGE>
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York.
BROADWAY STORES, INC.
By /s/ Ralph DeMarco
___________________________________
Title: Vice President - Treasurer
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<PAGE>
EXHIBIT 20.1
Broadway Stores, Inc.
The Broadway Emporium Weinstocks
Contacts:
Carol Sanger
513/579-7764
Bill Ihle
213/227-3884
FOR IMMEDIATE RELEASE
BROADWAY AGREES TO MERGER WITH FEDERATED
CINCINNATI, OH, and LOS ANGELES, CA, August 14, 1995--Federated Department
Stores, Inc. and Broadway Stores, Inc. jointly announced today that the boards
of directors of both companies have approved a definitive agreement providing
for a stock-for-stock merger under which Broadway Stores will become a
subsidiary of Federated. The merger is expected to take place by mid-to-late
October.
Los Angeles-based Broadway Stores, Inc. is a leading retailer in the
western U.S., with annual sales of more than $2 billion. Broadway currently
operates 83 department stores under the names of The Broadway, Emporium and
Weinstocks; 71 of the stores operate in California, with the remainder in
Arizona, Colorado, Nevada and New Mexico.
"There are few deals too good to pass up because of what they can mean to a
company strategically over the longer term," Allen Questrom, Federated's
chairman and chief executive officer, said in making today's announcement.
"Because this merger will enable us to broaden our base of store operations in
this important area of the country, we think this is one of those deals for
Federated."
While the company has not yet finalized its plans, Federated anticipates
retaining and operating a significant number of the stores acquired in the
merger with Broadway, and divesting the remainder over the next year or so. Most
of the retained stores will be converted to Macy's/Bullock's or, in the case of
a few of the acquired stores, to Bloomingdale's, marking that prestigious
chain's first entry into California.
An operational conversion of the retained Broadway stores into
Macy's/Bullock's or Bloomingdale's is expected to be initiated early in 1996; in
the interim, Broadway, Emporium and Weinstocks stores will continue operating as
they are now until after the first of the year.
Federated said it is too early in the process to provide any additional
information
(more)
<PAGE>
-2-
on specific store sale, retention or conversion plans; those decisions and
subsequent announcements will not be forthcoming until after the merger is
completed this fall.
"We expect that most of Broadway's stores that we retain will be converted
to Macy's/Bullock's after the merger, and a few will become Bloomingdale's,"
Questrom said. "We are delighted at the opportunity to acquire these fine
stores, because it represents a singularly unique opportunity to significantly
expand Federated's presence on the West Coast, and to enhance the company's
competitive position for the benefit of consumers in those communities."
In the merger, each of Broadway's approximately 46.9 million outstanding
shares of common stock will be converted into 0.27 shares of Federated common
stock; accordingly, Federated will issue approximately 12.7 million shares of
new Federated common stock in the merger transaction.
In connection with the merger, Federated also agreed to acquire Broadway's
existing mortgage loan of approximately $422 million from Prudential Insurance
Company of America, in exchange for additional Federated common stock to be
valued at $200.0 million at the time of acquisition, plus approximately $222
million of new indebtedness.
In addition, as a result of the transaction, Broadway's working capital
lender has undertaken to liberalize the financial covenants on that facility,
and to increase the size of the facility.
"With Federated as an industry partner, we expect that we will be able to
reassure our trade resources and our people immediately and dramatically, and we
expect an immediate return to a normal trade situation," said David L. Dworkin,
president and chief executive officer of Broadway.
Zell/Chilmark L.P., which presently owns approximately 54 percent of
Broadway's outstanding common stock, has agreed to vote those shares in favor of
the merger and has granted Federated an option to buy those shares at the merger
exchange ratio. A meeting of Broadway shareholders for the purpose of voting on
the merger is expected to take place in October.
In addition to customary conditions, the merger is conditioned on both
parties' receipt of certain bank consents and waivers.
"Broadway always has had an amazing collection of assets. With this
transaction, the prospect for superior utilization of those assets has
increased," said Sam Zell, general
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<PAGE>
-3-
partner of Zell/Chilmark. "This deal is good for The Broadway, its employees and
vendors. Shareholders will have a continuing interest in a well managed retail
company, with lots of growth potential and benefits of enhanced economies of
scale."
James M. Zimmerman, Federated's president and chief operating officer,
noted that in recent years, Federated has "acquired a tremendous amount of
experience in merging divisional operations and converting store nameplates.
Because of this, we believe we will be able to effect a smooth transition of
Broadway Stores into Federated, and to effectively convert these stores into
Macy's/Bullock's or Bloomingdale's with a minimum of disruption to our existing
business."
Zimmerman said Federated currently expects to invest approximately $525
million in capital for conversions and major remodels of stores acquired and
retained from the Broadway merger over the period from 1996-1999. Sales
generated by retained stores are expected to add approximately $1.4 billion
annually to Federated's annual sales totals in their first full year, which
would be beginning in Fiscal 1997. These numbers are subject to change as plans
are finalized.
As a result of the merger, Federated will take one-time charges against
earnings in the current and possibly the next fiscal year; the actual amount of
these charges cannot yet be determined.
Federated, with corporate offices in Cincinnati and New York, is one of the
nation's leading retailers, with annual sales before the merger of more than $14
billion. Federated currently operates 354 department stores and more than 100
specialty and clearance stores in 35 states under the names of Bloomingdale's,
The Bon Marche, Bullock's, Burdines, Goldsmith's, Jordan Marsh, Lazarus, Macy's,
Rich's and Stern's, as well as Aeropostale, Charter Club and Macy's Close Out.
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