<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
JANUARY 28, 1995
COMMISSION FILE NUMBER
1-13536
FEDERATED DEPARTMENT STORES, INC.
151 WEST 34TH STREET
NEW YORK, NY 10001
(212) 695-4400
AND
7 WEST SEVENTH STREET
CINCINNATI, OHIO 45202
(513) 579-7000
INCORPORATED IN DELAWARE I.R.S. NO. 13-3324058
------------------------
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
Series C Warrants New York Stock Exchange
Series D Warrants 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 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
contained in a definitive proxy statement incorporated by reference in Part III
of this Form 10-K.
There were 182,708,184 shares of the Company's Common Stock outstanding as
of March 31, 1995, excluding shares held in the treasury of the Company or by
subsidiaries of the Company. The aggregate market value of the shares of such
Common Stock, excluding shares held in the treasury of the Company or by
subsidiaries of the Company, based upon the last sale price as reported on the
New York Stock Exchange Composite Tape on March 30, 1995, was approximately
$4,133,800,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to Registrant's Annual
Meeting of Shareholders, to be held on May 19, 1995 (the "Proxy Statement"), are
incorporated by reference in Part III hereof.
<PAGE> 2
EXPLANATORY NOTE
Prior to December 19, 1994, each of Federated Department Stores, Inc.
("Federated") and R.H. Macy & Co., Inc. ("Macy's") was subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith filed various reports
and other information with the Securities and Exchange Commission (the
"Commission") under Commission file numbers 1-163 and 33-6192, respectively. On
December 19, 1994, Federated acquired Macy's in a reverse acquisition structured
as a merger (the "Merger") of Federated with and into Macy's, with Macy's as the
surviving corporation in the Merger (the "Company"), changing its name to
"Federated Department Stores, Inc." Because the substance of the Merger
constituted an acquisition of Macy's by Federated, the Company, which is subject
to the information requirements of the Exchange Act and in accordance therewith
files various reports and other information with the Commission under Commission
file number 1-13536, prepares such reports and other information as if Federated
had been the surviving corporation in the Merger.
<PAGE> 3
Unless the context otherwise requires, (i) references herein to the
"Company" are, for all periods prior to December 19, 1994 (the "Merger Date"),
references to Federated and its subsidiaries and their respective predecessors,
and, for all periods following the Merger, references to the surviving
corporation in the Merger and its subsidiaries, and (ii) references to "1994",
"1993", and "1992" are references to the Company's fiscal years ended January
28, 1995, January 29, 1994 and January 30, 1993, respectively.
ITEM 1. BUSINESS
General. The Company is one of the leading operators of full-line
department stores in the United States, with 355 department stores in 35 states
as of January 28, 1995. The Company's department 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
Company's department stores are located at urban or suburban sites, principally
in densely populated areas across the United States. The Company also operates
more than 135 specialty and clearance stores under the names "Aeropostale,"
"Charter Club" and "MCO," and a mail order catalog business under the name
"Bloomingdale's By Mail."
The Company operates, and is in the process of integrating, the businesses
operated separately by Federated, Macy's and their respective subsidiaries prior
to the Merger. Subsequent to the Merger, among other things, the Company has (i)
realigned operating management; (ii) discontinued the operations of the 12-store
I. Magnin specialty chain; (iii) commenced the consolidation of the Abraham &
Straus/Jordan Marsh division with the Macy's East division; (iv) commenced the
consolidation of the Lazarus division with the Rich's division; and (v)
commenced the consolidation of certain purchasing, support and other operations.
The following table sets forth certain information with respect to each of
the Company's retail operating divisions as of January 28, 1995:
<TABLE>
<CAPTION>
GROSS
NUMBER OF 1994 SQUARE
STORES SALES FEET(A)
--------- ------------ -----------
(MILLIONS) (THOUSANDS)
<S> <C> <C> <C>
Abraham & Straus/Jordan Marsh......................... 34 $ 1,441.1 8,999
Bloomingdale's........................................ 16 1,297.5(b) 4,439
The Bon Marche........................................ 40 873.0 4,892
Burdines.............................................. 46 1,258.5 7,648
Lazarus............................................... 51 1,130.3 10,212
Rich's/Goldsmith's.................................... 25 999.7 4,991
Stern's............................................... 22 707.4 3,946
--- ----------- -----------
Subtotal......................................... 234 7,707.5 45,127
--- ----------- -----------
Macy's East........................................... 64 327.5(c) 17,162
Macy's West/Bullock's................................. 57 255.1(c) 11,845
--- ----------- -----------
Total Department Stores.......................... 355 8,290.1 74,134
--- ----------- -----------
Macy's Specialty...................................... 122 17.8(c) 420
MCO................................................... 14 8.0(c) 704
--- ----------- -----------
Total............................................ 491 $ 8,315.9 75,258
========== =========== ===========
1
<PAGE> 4
<FN>
- - ---------------
(a) Reflects total square footage of store locations, including office, storage,
service and other support space that is not dedicated to direct merchandise
sales, but excluding warehouses and distribution terminals not located at
store sites.
(b) Includes $105.3 million of sales of the Company's Bloomingdale's By Mail
subsidiary.
(c) Represents sales subsequent to the Merger Date. Sales of divisions acquired
pursuant to the Merger for the fiscal year ended January 28, 1995 were as
follows:
</TABLE>
<TABLE>
<S> <C>
Macy's East...................... $3,447.7
Macy's West...................... 2,334.8
Macy's Specialty................. 128.4
MCO.............................. 83.1
--------
Total....................... $5,994.0
========
</TABLE>
In general, each of the Company's retail operating divisions is a separate
subsidiary of the Company. However, (i) following its consolidation with the
Abraham & Straus/Jordan Marsh division, the Macy's East division will comprise
three separate subsidiaries of the Company, (ii) the Macy's West division
comprises two separate subsidiaries of the Company, and (iii) following the
consolidation of the Rich's and Lazarus divisions, the consolidated
Rich's/Lazarus division will comprise three separate subsidiaries of the
Company.
The Company provides electronic data processing and other support functions
to its retail operating divisions on an integrated, Company-wide basis. FACS
Group, Inc. ("FACS"), the Company's financial and credit services subsidiary,
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 retail operating divisions that were divisions of
Federated prior to the Merger. GE Capital Consumer Card Co. ("GE Credit"), which
in 1991 purchased all of the consumer credit card accounts originated by the
retail operating divisions of Macy's, continues to provide credit services to
the retail operating divisions that were divisions of Macy's prior to the
Merger. The Company and GE Credit are currently engaged in negotiations with
respect to possible modifications to the contractual arrangements previously
entered into between Macy's and GE Credit with respect to such services. The
Company's data processing subsidiary, Federated Systems Group, Inc. ("FSG"),
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 provides
services for all divisions in such areas as store design and construction, real
estate, insurance, supply purchasing, merchandise accounts payable and
logistics, 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.
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 and merchandising
strategies to the particular character and customer base of the Company's
various department store franchises. Macy's Product Development, which was a
division of Macy's prior to the Merger, is in the process of being integrated
with Federated Merchandising, and will then be responsible for the private label
development for all of the Company's retail operating divisions, other than
Bloomingdale's and Stern's.
2
<PAGE> 5
The Company and its predecessors have been operating department stores
since 1830. Federated was organized as a Delaware corporation in 1929. On
February 4, 1992, Allied Stores Corporation ("Allied") was merged into
Federated. On May 26, 1994, Federated acquired Joseph Horne Co., Inc.
("Horne's") pursuant to a subsidiary merger. On December 19, 1994, Federated
acquired Macy's pursuant to the Merger.
Both Allied and Federated 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 Federated could
not be supported by operations and, on January 15, 1990, Federated, Allied and
substantially all of their respective subsidiaries (collectively, the
"Federated/Allied Companies") commenced proceedings under chapter 11 of the
United States Bankruptcy Code to reorganize and restructure their acquisition
debt and other liabilities. The Federated/Allied Companies emerged from
bankruptcy pursuant to a plan of reorganization (the "Federated POR") on
February 4, 1992. As a result of the Federated POR, Campeau ceased to have any
direct or indirect equity interest in the Company.
Macy's was organized as a Delaware corporation in 1985 to effect the
acquisition of the former R.H. Macy & Co., Inc. in a leveraged buyout.
Thereafter, in 1988, Macy's acquired the I. Magnin and
Bullock's/Bullock's-Wilshire divisions of Federated. An economic downturn,
competitive industry conditions and other factors subsequently produced a
liquidity crisis for Macy's. As a result, in January, 1992, Macy's and
substantially all of its subsidiaries (the "Macy's Debtors") commenced
proceedings under chapter 11 of the United States Bankruptcy Code to reorganize
and restructure their acquisition debt and other liabilities.
The Merger was effected pursuant to a plan of reorganization for the Macy's
Debtors (the "Macy's POR") proposed jointly by Federated and the Macy's Debtors.
In addition to the Merger, the Macy's POR provided for (i) the cancellation of
all existing capital stock and other equity interests in Macy's without payment
of any consideration therefor, (ii) the cancellation of certain indebtedness and
the discharge of related claims against the Macy's Debtors in exchange for cash,
new indebtedness of the Company and new equity interests in the Company, (iii)
the discharge of other prepetition claims against the Macy's Debtors, (iv) the
settlement of certain contingent claims and releases of certain claims of the
Macy's Debtors and other persons or entities, and (v) the assumption, assumption
and assignment, or rejection of each executory contract and unexpired lease to
which any Macy's Debtor was a party.
For additional information regarding the respective reorganization
proceedings of the Federated/Allied Companies and the Macy's Debtors, see Item 3
"Legal Proceedings."
The Company's executive offices are located at 151 W. 34th Street, New
York, New York 10001, telephone number: (212) 695-4400 and at 7 West Seventh
Street, Cincinnati, Ohio 45202, telephone number: (513) 579-7000.
Employees. As of January 28, 1995, the Company had approximately 111,700
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 10% of the Company's employees as of January 28, 1995 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.
3
<PAGE> 6
Purchasing. The Company purchases merchandise from many suppliers, no one
of which accounted for more than 5% of the Company's net purchases during 1994.
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,
off-price and discount stores, new and established forms of home shopping
(including mail order catalogs, television and computer services) and
manufacturers' outlets.
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........ 55 Chairman of the Board and Chief Executive Officer;
Director
James M. Zimmerman....... 51 President and Chief Operating Officer; Director
Ronald W. Tysoe.......... 42 Vice Chairman of the Board and Chief Financial
Officer; Director
Thomas G. Cody........... 53 Executive Vice President - Legal and Human Resources
Dennis J. Broderick...... 46 Senior Vice President, General Counsel and Secretary
John E. Brown............ 55 Senior Vice President and Controller
Karen M. Hoguet.......... 38 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"), the former indirect parent of Federated, 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.
4
<PAGE> 7
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 corporate office space in New
York and Cincinnati and other facilities at which centralized operational
support functions are conducted. As of January 28, 1995, the Company operated
355 department stores, of which 181 stores were entirely or mostly owned and 174
stores were entirely or mostly leased. The Company's interests in approximately
20% of its owned stores and approximately 6% of its leased stores are subject to
security interests in favor of certain third-party creditors. (See Note 10 to
the Consolidated Financial Statements.) Pursuant to 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 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 last two fiscal years
were as follows:
<TABLE>
<CAPTION>
JANUARY 28, 1995 JANUARY 29, 1994
------------------------- -------------------------
NUMBER OF GROSS NUMBER OF GROSS
OPERATING DIVISION STORES SQUARE FEET STORES SQUARE FEET
- - --------------------------------------------- --------- ----------- --------- -----------
(thousands) (thousands)
<S> <C> <C> <C> <C>
Abraham & Straus/Jordan Marsh................ 34 8,999 35 9,327
Bloomingdale's............................... 16 4,439 16 4,372
The Bon Marche............................... 40 4,892 39 4,697
Burdines..................................... 46 7,648 43 7,321
Lazarus...................................... 51 10,212 40 7,807
Rich's/Goldsmith's........................... 25 4,991 25 4,925
Stern's...................................... 22 3,946 21 3,879
Macy's East.................................. 64 17,162 N/A N/A
Macy's West.................................. 57 11,845 N/A N/A
MCO.......................................... 14 704 N/A N/A
Macy's Specialty............................. 122 420 N/A N/A
--- ------ --- ------
491 75,258 219 42,328
=== ====== === ======
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Federated POR was confirmed by the United States Bankruptcy Court for
the Southern District of Ohio, Western Division (the "Ohio Bankruptcy Court"),
in Consolidated Case No. 1-90-00130 on January 10, 1992. Notwithstanding the
confirmation and effectiveness of the Federated POR, the Ohio 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 Federated POR; and to resolve other matters that may
arise in connection with or relate to the Federated POR.
5
<PAGE> 8
Pursuant to the Federated POR, and based on the Company's estimate of the
amount of such claims that ultimately will be allowed by the Ohio Bankruptcy
Court, the Company provided for the payment of all remaining bankruptcy claims.
During 1994, the Company reduced selling, general and administrative expenses by
$23.8 million to reflect the favorable settlement of disputed bankruptcy claims.
The Company believes that it has adequately provided for the resolution of all
bankruptcy claims and other matters related to the Federated POR remaining at
January 28, 1995.
The Macy's POR was confirmed by the United States Bankruptcy Court for the
Southern District of New York (the "New York Bankruptcy Court") in Case No. 92 B
10477 (BRL) on December 8, 1994. Notwithstanding the confirmation and
effectiveness of the Macy's POR, the New York Bankruptcy Court continues to have
jurisdiction to, among other things, resolve disputed prepetition claims against
the Macy's Debtors; resolve matters related to the assumption, assumption and
assignment, or rejection of executory contracts pursuant to the Macy's POR; and
to resolve other matters that may arise in connection with or relate to the
Macy's POR. Except as described below, provision was made under the Macy's POR
in respect of all prepetition liabilities of the Macy's Debtors.
Certain claims or portions thereof (collectively, the "Cash Payment
Claims") against the Macy's Debtors which, to the extent allowed by the New York
Bankruptcy Court, will be paid in cash pursuant to the Macy's POR are currently
disputed by the Company. The aggregate amount of disputed Cash Payment Claims
ultimately allowed by the New York Bankruptcy Court may be more or less than the
estimated allowed amount thereof. As of March 30, 1995, the aggregate face
amount of disputed Cash Payment Claims was approximately $846.9 million, while
the estimated allowed amount thereof was approximately $355.7 million. Although
there can be no assurance with respect thereto, the Company believes that the
actual allowed amount of disputed Cash Payment Claims will not be materially
greater than the estimated allowed amount thereof.
In connection with the Federated POR 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 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 Ohio Bankruptcy Court and resolved in favor of the
Federated/Allied Companies; however, the IRS pursued appeals on both issues to
the United States District Court for the Southern District of Ohio, which
affirmed the decision of the Ohio Bankruptcy Court on August 2, 1994. On
September 30, 1994, the IRS filed a notice of appeal to the United States Court
of Appeals for the Sixth Circuit with respect to the issue relating to "break up
fees" only, where such appeal is currently pending. Although there can be no
assurance with respect thereto, the Company does not expect that the ultimate
resolution of this issue will have a material adverse effect on the Company's
financial position or results of operations.
The Company is also a party to certain disputes with the IRS relating to
certain deductions claimed by and certain loss carryforwards utilized by
Federated and its predecessors which the IRS seeks to disallow. Although there
can be no assurance with respect thereto, the Company does not expect that the
ultimate resolution of such disputes will have a material adverse effect on the
Company's financial position or results of operations.
6
<PAGE> 9
The Company and its subsidiaries are also involved in various proceedings
that are incidental to the normal course of their business. The Company does not
expect that any of such proceedings will have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders of the Company was held on November 29,
1994 for the purpose of considering and voting upon (i) the approval and
adoption of an Agreement and Plan of Merger between Federated and Macy's and
(ii) the approval of a new equity incentive plan for the Company (the "1995
Equity Plan").
The number of votes cast for or against each such matter is set forth
below:
<TABLE>
<CAPTION>
WITHHELD/
FOR AGAINST ABSTENTIONS
------------- ------------- ------------
<S> <C> <C> <C>
Agreement and Plan of Merger..................... 92,777,521 1,427,862 154,406
1995 Equity Plan................................. 71,436,132 21,875,464 1,048,193
</TABLE>
7
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER 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 1994 and 1993 the high and low sales prices per share of Common
Stock as reported on the NYSE Composite Tape:
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
LOW HIGH LOW HIGH
------- ------- ------- -------
<S> <C> <C> <C> <C>
1st Quarter............................. 20.750 25.250 17.375 22.750
2nd Quarter............................. 19.000 22.750 19.000 25.000
3rd Quarter............................. 18.750 23.625 18.000 23.500
4th Quarter............................. 17.875 20.875 19.250 23.125
</TABLE>
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.
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the Consolidated Financial Statements and the notes thereto and the other
information contained elsewhere in this report. References to "1994", "1993",
"1992", "1991", and "1990" are references to the Company's fiscal years ended
January 28, 1995, January 29, 1994, January 30, 1993, February 1, 1992 and
February 2, 1991, respectively.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2,
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Statement of Operations Data (a): |
Net sales, including leased |
department sales................... $ 8,315,877 $7,229,406 $7,079,941 | $ 6,932,323 $ 7,141,983
----------- ---------- ---------- | ----------- -----------
Cost of sales........................ 5,131,363 4,373,941 4,229,396 | 4,202,223 4,394,976
Selling, general and administrative |
expenses........................... 2,549,122 2,323,546 2,420,684 | 2,463,128 2,611,834
Business integration and |
consolidation expenses............. 85,867 -- -- | -- --
----------- ---------- ---------- | ----------- -----------
Operating income..................... 549,525 531,919 429,861 | 266,972 135,173
Interest expense (b)................. (262,115) (213,544) (258,211) | (504,257) (639,527)
Interest income...................... 43,874 49,405 60,357 | 67,260 83,585
----------- ---------- ---------- | ----------- -----------
Income (loss) before reorganization |
items, income taxes, extraordinary |
items and cumulative effect of |
change in accounting principle..... 331,284 367,780 232,007 | (170,025) (420,769)
Reorganization items (c)............. -- -- -- | (1,679,936) (127,032)
Federal, state and local income tax |
(expense) benefit.................. (143,668) (170,987) (99,299) | 613,989 276,355
Extraordinary items (d).............. -- (3,545) (19,699) | 2,165,515 --
Cumulative effect of change in |
accounting principle (e)........... -- -- -- | (93,151) --
----------- ---------- ---------- | ----------- -----------
Net income (loss).................... $ 187,616 $ 193,248 $ 113,009 | $ 836,392 $ (271,446)
=========== ========== ========== | =========== ===========
Earnings per Share of Common Stock (f): |
Income before extraordinary items.... $ 1.41 $ 1.56 $ 1.19 | $ -- $ --
Net income........................... 1.41 1.53 1.01 | -- --
Average number of shares outstanding |
(f).................................. 132,862 126,293 111,350 | -- --
Depreciation and amortization.......... $ 285,861 $ 229,781 $ 230,124 | $ 260,884 $ 278,227
Capital expenditures................... $ 397,664 $ 312,960 $ 207,931 | $ 201,631 $ 93,143
Balance Sheet Data (at year end) (a):
Cash................................. $ 206,490 $ 222,428 $ 566,984 $ 1,002,482 | $ 453,560
Working capital...................... 2,478,376 1,967,569 2,227,336 1,923,812 | 1,957,037
Total assets......................... 12,379,712 7,419,427 7,019,770 7,501,145 | 9,150,056
Short-term debt...................... 463,042 10,099 12,944 771,605 | 309,268
Liabilities subject to settlement |
under reorganization proceedings... -- -- -- -- | 6,475,129
Long-term debt (including preferred |
shares)............................ 4,529,220 2,786,724 2,809,757 3,176,687 | 1,361,778
Shareholders' equity (deficit)....... 3,639,610 2,278,244 2,074,980 1,454,132 | (1,398,528)
9
<PAGE> 12
<FN>
- - ---------------
(a) 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 and therefore are
separated by a black line.
(b) Excludes interest on unsecured prepetition indebtedness of $301,576,000 and
$290,979,000, respectively, for 1991 and 1990.
(c) Reflects the net expense incurred in connection with the chapter 11
reorganization of the Federated/Allied Companies.
(d) The extraordinary items for 1993 and 1992 are described in Note 4 to the
Consolidated Financial Statements. The extraordinary item for 1991 was a
gain resulting from the discharge of prepetition claims pursuant to the
Federated POR.
(e) Reflects the cumulative effect of the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits other than Pensions," as of February
1, 1992.
(f) Per share and share data are not presented for periods during which there
were no publicly held shares of common stock of the Company.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company acquired Horne's and Macy's on May 26, 1994 and December 19,
1994, respectively. Under the purchase method of accounting, the assets,
liabilities and results of operations associated with such acquired businesses
have been included in the Company's financial position and results of operations
since the respective dates on which such businesses were acquired. Accordingly,
the financial position and results of operations of the Company as of the end of
and for 1994 are not directly comparable to the financial position and results
of operations of the Company as of the end of and for prior fiscal years, and
are not necessarily indicative of the financial position or results of
operations that may be reported by the Company as of future dates or for future
periods. The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto contained elsewhere in
this report.
RESULTS OF OPERATIONS
Comparison of the 52 Weeks Ended January 28, 1995 and January 29, 1994. Net
sales for 1994 were $8,315.9 million, compared to $7,229.4 million for 1993, an
increase of 15.0%. During 1994, the Company added 142 department stores and more
than 135 specialty and clearance stores and closed six department stores. Of the
142 department stores added, 121 were added as a result of the acquisition of
Macy's, and 10 were added as a result of the acquisition of Horne's. All of the
specialty and clearance stores were added through the Macy's acquisition. On a
comparable store basis, net sales increased 3.1%.
Cost of sales was 61.7% of net sales for 1994, compared to 60.5% for 1993.
The increase reflects the impact of higher levels of markdowns taken to offer
more value to customers consistent with the competitive environment and to keep
in-store inventories fresh and fashion-current. Cost of sales includes a credit
of $11.3 million in 1994, compared to a charge of $2.8 million in 1993,
resulting from the valuation of merchandise inventory on the last-in, first-out
basis.
Selling, general and administrative expenses were 30.7% of net sales for
1994, compared to 32.1% for 1993. The decrease reflects the continued emphasis
on controlling expenses, enhanced efficiencies and productivity resulting from
the Company's ongoing investments in retail technology, and increased revenue
10
<PAGE> 13
from credit operations resulting from higher accounts receivable balances in
1994. In addition, operating expenses were reduced by $23.8 million in 1994 and
$24.0 million in 1993 as a result of adjustments for the favorable settlement of
disputed bankruptcy claims.
Business integration and consolidation expenses for 1994 consisted of $27.0
million associated with the integration of 10 former Horne's stores into the
Company, $45.8 million associated with the integration of Macy's into the
Company and $13.1 million of severance charges related to the consolidation of
the Company's Rich's/Goldsmith's and Lazarus divisions announced on January 20,
1995. The Company presently expects to incur approximately $225.0 million of
additional business integration and consolidation expenses in the 53 weeks ended
February 3, 1996 as a result of the Macy's acquisition and the consolidation of
the Rich's/Goldsmith's and Lazarus divisions.
Net interest expense was $218.2 million for 1994, compared to $164.1
million for 1993. The higher interest expense in 1994 is principally due to the
higher levels of borrowings incurred in connection with the acquisition of
Macy's, including the issuance of a $340.0 million promissory note on December
31, 1993 to fund the Company's initial investment in Macy's. Cash interest
payments, net of interest received, were $166.8 million for 1994 compared to
$136.6 million for 1993.
Income tax expense was $143.7 million for 1994. This amount differs from
the amount computed by applying the federal income tax statutory rate of 35.0%
to income before income taxes and extraordinary items principally because of
state and local income taxes and permanent differences arising from the
amortization of intangible assets.
Management believes that the turnaround of existing deferred tax
liabilities and tax planning strategies will generate sufficient taxable income
in future periods such that it is more likely than not that the gross deferred
tax assets, net of the valuation allowance, at the end of 1994 will be realized.
Management evaluates the realizability of deferred tax assets quarterly.
Extraordinary items of $3.5 million in 1993 relate to the after-tax
expenses associated with debt prepayments.
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 reflected 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 reflected 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 included 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 was primarily due to reduced
costs from streamlining of operations at the divisions. In addition, operating
expenses were reduced by $24.0 million in 1993 as a result of an adjustment for
the
11
<PAGE> 14
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
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.
Extraordinary items of $3.5 million in 1993 and $19.7 million in 1992
relate to the after-tax expenses associated with debt prepayments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand, cash from
operations and certain credit facilities that are available to it.
Net cash provided by operating activities in 1994 was $161.5 million, a
reduction of $249.0 from the net cash provided by operating activities in 1993
of $410.5 million. The primary factors which contributed to this decrease were
higher accounts receivable balances in 1994 generated by increases in
proprietary credit sales and a Company policy change to lower its minimum
monthly payment requirement, increased income tax payments and seasonal
decreases in Macy's accounts payable and accrued liabilities (as partially
offset by seasonal decreases in Macy's merchandise inventories) during the
period between December 19, 1994 and January 28, 1995. The increase in accounts
receivable balances was partially funded by increased short-term borrowings
associated with the receivables.
The Company is a party to a bank credit facility providing for up to $800.0
million of term borrowings and up to $2,000.0 million of revolving credit
borrowings (including a $500.0 million letter of credit subfacility). The
Company also has in effect a facility to finance its customer accounts
receivable which provides for, among other things, the issuance from time to
time of up to $375.0 million of receivables backed commercial paper. As of
January 28, 1995, the Company had $800.0 million of term borrowings, $900.0
million of long-term revolving credit borrowings, $25.0 million of seasonal
working capital revolving credit borrowings, $56.1 million of standby letters of
credit and $108.6 million of trade letters of credit outstanding under its bank
credit facility and $274.9 million of commercial paper borrowings outstanding
under its receivables backed commercial paper facility.
Net cash provided by financing activities was $776.1 million in 1994.
During 1994, the Company incurred debt totaling $2,526.9 million and repaid debt
in the amount of $1,594.1 million. Debt incurred consisted of $1,725.0 million
of borrowings under the Company's bank credit facility, the issuance of $450.0
million of 10% Senior Notes due 2001, $274.9 million of borrowings under the
Company's receivables-backed commercial paper program and the sale of $77.0
million of receivables-backed certificates. The major components of debt repaid
were $953.5 million of notes assumed in the acquisition of Macy's, a $340.0
million promissory note and $289.2 million of Series A Secured Notes.
Net cash used in investing activities was $953.5 million in 1994 compared
to $405.1 million in 1993. In 1994, $575.4 million of cash was invested in
connection with acquisitions of Macy's and Horne's and $386.8
12
<PAGE> 15
million was invested in property and equipment. The total purchase prices,
including noncash items, for the acquisitions of Macy's and Horne's were
$3,815.9 million and $116.0 million, respectively.
The Company's budgeted capital expenditures are approximately $2,800.0
million for the 1995 to 1998 period, with approximately 68% being budgeted for
existing stores, 21% being budgeted for new stores and 11% being budgeted for
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.
Management believes the department store business will continue to
consolidate. Accordingly, the Company intends from time to time to consider the
possible acquisition of department store assets and companies.
Management 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. 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.
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 Income for the 52 weeks ended January 28, 1995, January
29, 1994 and January 30, 1993.................................................... F-4
Consolidated Balance Sheets at January 28, 1995 and January 29, 1994............... F-5
Consolidated Statements of Cash Flows for the 52 weeks ended January 28, 1995,
January 29, 1994 and January 30, 1993............................................ 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" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Proxy Statement, and in Item 1A "Executive Officers of the
Registrant", and incorporated herein by reference.
13
<PAGE> 16
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" 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" and under "Certain Relationships
and Related Transactions" 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:
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.
2. FINANCIAL STATEMENT SCHEDULES:
All 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 NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated Exhibit 2.1 to the Registration
as of August 16, 1994, between Macy's Statement on Form S-4 (Registration
and the Company No. 33-85480) filed on October 21,
1994 ("S-4 Registration Statement")
2.2 Second Amended Joint Plan of Exhibit 2.2 to S-4 Registration
Reorganization of Macy's and Certain Statement
of Its Subsidiaries
2.2.1 Modifications to the Second Amended Exhibit 2.1.1 to the Current Report
Joint Plan of Reorganization of on Form 8-K (File No. 1-13536), filed
Macy's and Certain of Its on January 3, 1995 ("1995 Form 8-K")
Subsidiaries
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
2.3 Findings of Fact, Conclusions of Law Exhibit 2.1.2 of 1995 Form 8-K
and Order Confirming Second Amended
Joint Plan of Reorganization of
Macy's and Certain of Its
Subsidiaries, as Modified
3.1 Certificate of Incorporation
3.1.1 Certificate of Designations of Series
A Junior Participating Preferred
Stock
3.2 By-Laws
4.1 Certificate of Incorporation See Exhibit 3.1
4.2 By-Laws See Exhibit 3.2
4.3 Rights Agreement
4.4 Indenture, dated as of December 15, Exhibit 4.1 to the Registration
1994, between the Company and The Statement on Form S-3 (Registration
First National Bank of Boston, as No. 33-88328) filed on January 9,
Trustee 1995 ("S-3 Registration Statement")
4.4.1 Third Supplemental Indenture, dated
as of January 23, 1995, between the
Company and The First National Bank
of Boston, as Trustee
4.5 Senior Convertible Discount Note Exhibit 10.8 to the Company's Annual
Indenture, dated as of April 8, 1993, Report on Form 10-K (File No. 1-163)
between the Company and The First for the fiscal year ended January 30,
National Bank of Boston, as Trustee 1993 ("1992 Form 10-K")
4.5.1 Supplemental Indenture to Senior
Convertible Discount Note Indenture
dated as of December 19, 1994
4.6 Series C Warrant Agreement
4.7 Series D Warrant Agreement
10.1 Series A Warrant Agreement Exhibit 10.6 to the Registration
Statement on Form 10 (File No.
1-10951), filed November 27, 1991, as
amended ("Form 10")
10.1.1 Amendment No. 1, dated as of November Exhibit 10.1.1 to the Company's
3, 1993, to the Series A Warrant Annual Report on Form 10-K (File No.
Agreement 1-163) for the fiscal year ended
January 29, 1994 ("1993 Form 10-K")
10.2 Series B Warrant Agreement Exhibit 10.7 to Form 10
10.3 Credit Agreement, dated as of
December 19, 1994, among the Company,
Citibank, N.A., Chemical Bank,
Citicorp Securities, Inc., Chemical
Securities, Inc. and the initial
lenders named therein
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.4 Senior Convertible Discount Note Exhibit 10.5 to Form 10
Agreement
10.4.1 Supplemental Agreement to Senior
Convertible Discount Note Agreement
dated as of December 19, 1994
10.5 Loan Agreement, dated as of December Exhibit 10.12 to Allied's Annual
30, 1987 (the "Prudential Loan Report on Form 10-K (File No. 1-970)
Agreement"), among Prudential, Allied for the fiscal year ended January 2,
Stores Corporation ("Allied"), and 1988
certain subsidiaries of Allied named
therein
10.5.1 Amendment No. 1, dated as of December Exhibit 10.9.1 to Form 10
29, 1988, to the Prudential Loan
Agreement
10.5.2 Amendment No. 2, dated as of November Exhibit 10.9.2 to Form 10
17, 1989, to the Prudential Loan
Agreement
10.5.3 Amendment No. 3, dated as of February Exhibit 10.9.3 to Form 10
5, 1992, to the Prudential Loan
Agreement
10.6 Loan Agreement, dated as of May 26, Exhibit 10.47 to S-4 Registration
1994, among Lazarus PA (formerly Statement
Joseph Horne Co., Inc.), the banks
listed thereon, and PNC Bank, Ohio,
National Association, as Agent
("PNC")
10.7 Guaranty Agreement, dated as of May Exhibit 10.48 to S-4 Registration
26, 1994, made by the Company in Statement
favor of the banks listed on the
Lazarus PA Mortgage Term Loan and PNC
("Guaranty Agreement")
10.7.1 Amendment No. 1 to Guaranty Agreement
dated as of February 28, 1995
10.8 Amended and Restated Pooling and Exhibit 4.10 to Prime's Current
Servicing Agreement, dated as of Report on Form 8-K (File No. 0-2118),
December 15, 1992 (the "Pooling and dated March 29, 1993
Servicing Agreement"), among the
Company, Prime Receivables
Corporation ("Prime") and Chemical
Bank, as Trustee
10.8.1 First Amendment, dated as of December Exhibit 10.10.1 to 1993 Form 10-K
1, 1993, to the Pooling and Servicing
Agreement
10.8.2 Second Amendment, dated as of Exhibit 10.10.2 to 1993 Form 10-K
February 28, 1994, to the Pooling and
Servicing Agreement
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.8.3 Third Amendment, dated as of May 31,
1994, to the Pooling and Servicing
Agreement
10.9 Assumption Agreement under the Exhibit 10.10.3 to 1993 Form 10-K
Pooling and Servicing Agreement,
dated as of September 15, 1993
10.10 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 (File No. 0-
Servicing Agreement 2118), filed January 22, 1993, as
amended ("Prime's Form 8-A")
10.11 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
10.12 Series 1992-3 Supplement, dated as of Exhibit 4.8 to Prime's Current Report
January 5, 1993, to the Pooling and on Form 8-K (File No. 0-2118), dated
Servicing Agreement January 29, 1993
10.13 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
10.13.1 First Amendment, dated as of June 23, Exhibit 10.14.1 to 1993 Form 10-K
1993, to the Receivables Purchase
Agreement
10.13.2 Second Amendment, dated as of Exhibit 10.14.2 to 1993 Form 10-K
December 1, 1993, to the Receivables
Purchase Agreement
10.13.3 Third Amendment, dated as of February Exhibit 10.14.3 to 1993 Form 10-K
28, 1994, to the Receivables Purchase
Agreement
10.13.4 Fourth Amendment, dated as of May 31,
1994, to the Receivables Purchase
Agreement
10.13.5 First Supplement, dated as of Exhibit 10.14.4 to 1993 Form 10-K
September 15, 1993, to the
Receivables Purchase Agreement
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.14 Depositary Agreement, dated as of Exhibit 10.15 to 1992 Form 10-K
December 31, 1992, among Deerfield
Funding Corporation ("Deerfield"),
the Company, and Chemical Bank, as
Depositary
10.15 Liquidity Agreement, dated as of Exhibit 10.16 to 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
10.16 Pledge and Security Agreement, dated Exhibit 10.17 to 1992 Form 10-K
as of December 31, 1992, among
Deerfield, the Company, Chemical
Bank, as Depositary and Collateral
Agent, and the Liquidity Agent
10.17 Commercial Paper Dealer Agreement, Exhibit 10.18 to 1992 Form 10-K
dated as of December 31, 1992, among
Deerfield, the Company, and Goldman
Sachs Money Markets, L.P.
10.18 Commercial Paper Dealer Agreement, Exhibit 10.19 to 1992 Form 10-K
dated as of December 31, 1992, among
Deerfield, the Company, and Shearson
Lehman Brothers, Inc.
10.19 Tax Sharing Agreement Exhibit 10.10 to Form 10
10.20 Ralphs Tax Indemnification Agreement Exhibit 10.1 to From 10
10.21 Account Purchase Agreement dated as Exhibit 19.2 to Macy's Quarterly
of May 10, 1991 by and among Monogram Report on Form 10-Q for the fiscal
Bank, USA, Macy's, Macy Credit quarter ended May 4, 1991 (File No.
Corporation ("Macy Credit"), Macy 33-6192), as amended under cover of
Funding, Macy's California, Inc. Form 8, dated October 3, 1991
("MCAL"), Macy's Northeast, Inc. ("Macy's May 1991 Form 10-Q")*
("MNE"), Macy's South, Inc.,
Bullock's Inc., I. Magnin, Inc.,
Master Servicer, and Macy Specialty
Stores, Inc.
10.22 Commercial Accounts Agreement dated Exhibit 19.3 to Macy's May 1991 Form
as of May 10, 1991 ("Commercial 10-Q*
Accounts Agreement") by and among
General Electric Capital Corporation
("GECC"), Macy's, Macy Credit, Macy
Funding, MCAL, MNE, Macy's South,
Inc., Bullock's Inc., I. Magnin,
Inc., Master Servicer, and Macy
Specialty Stores, Inc.
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.23 Credit Card Program Agreement dated Exhibit 19.4 to Macy's May 1991 Form
as of May 10, 1991 ("Credit Card 10-Q
Program Agreement") by and among
Monogram Bank, USA ("Monogram"),
Macy's, MCAL, MNE, Macy's South,
Inc., Bullock's, Inc., I. Magnin,
Inc., and Macy Specialty Stores, Inc.
10.24 Amendment, dated January 27, 1992, to Exhibit 19.6 to Macy's Quarterly
Credit Card Program Agreement and Report on Form 10-Q (File No.
Commercial Accounts Agreement between 33-6192) for the fiscal quarter ended
Monogram and GECC and Macy's and February 1, 1992
certain subsidiaries
10.25 Letter, dated January 27, 1992 Exhibit 19.2 to Macy's Quarterly
("Waiver Letter"), from Monogram Report on Form 10-Q (File No.
accepted and agreed to by Macy's and 33-6192) for the fiscal quarter ended
certain of its subsidiaries and, as October 31, 1992 ("Macy's October
to Sections 4 and 12 of the Waiver 1992 Form 10-Q")
Letter, by GECC
10.26 Stipulation among Monogram, GECC, Exhibit 19.3 to Macy's October 1992
Macy's and Certain of Its Form 10-Q
Subsidiaries, the Official Unsecured
Bondholders' Committee, and the
Official Unsecured Creditors'
Committee and related Order of the
Bankruptcy Court, dated November 24,
1992
10.27 First Secured Term Loan Agreement, Exhibit 19.5 to Macy's May 1991 Form
dated as of May 10, 1991, by and 10-Q*
between MCAL, Macy's South, Inc., and
Bullock's, Inc. and GECC (the "First
Secured Term Loan Agreement")
10.28 First Amendment to First Secured Term Exhibit 10.61 to Macy's Annual Report
Loan Agreement and First Amendment to on Form 10-K (File No. 33-6192) for
Note, each dated as of October 15, the fiscal year ended August 3, 1991
1991 ("Macy's 1991 Form 10-K")
10.29 Transfer Agreement, dated as of May Exhibit 19.4 to Macy Credit's
10, 1991, by and among Macy Credit, Quarterly Report on Form 10-Q for the
MCAL, MNE, Macy's South, Inc., fiscal quarter ended May 4, 1992
Bullock's, Inc., and I. Magnin, Inc.
10.30 Letter Agreement, dated September 25, Exhibit 10.63 to Macy's 1991 Form
1991, among Monogram, Macy's, MCAL, 10-K
MNE, Macy's South Inc., Bullock's
Inc., I. Magnin, Inc., and Macy
Specialty Stores, Inc.
10.31 1995 Executive Equity Incentive Exhibit 10.65 to S-4 Registration
Plan** Statement
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.32 1992 Incentive Bonus Plan** Exhibit 10.12 to Form 10
10.33 Form of Severance Agreement**
10.34 Form of Indemnification Agreement** Exhibit 10.14 to Form 10
10.35 Master Severance Plan for Key Exhibit 10.1.5 to the Company's
Employees** Annual Report on Form 10-K (File No.
33-6192) for the fiscal year ended
February 3, 1990 ("1989 Form 10-K")
10.36 Performance Bonus Plan for Key Exhibit 10.1.6 to 1989 Form 10-K
Employees**
10.37 Senior Executive Medical Plan** Exhibit 10.1.7 to 1989 Form 10-K
10.38 Employment Agreement, dated as of Exhibit 10.59 to S-4 Registration
June 24, 1994, between Allen I. Statement
Questrom and the Company**
10.39 Amended and Restated Employment Exhibit 10.82 to S-4 Registration
Agreement, dated as of February 5, Statement
1994 (as signed July 8, 1994) and
letter agreements dated August 16,
1994, August 20, 1994 and September
19, 1994, between Myron E. Ullman III
and the Company**
10.39.1 Letter agreement dated December 6,
1994 between Myron E. Ullman III and
the Company relating to Amended and
Restated Employment Agreement dated
as of February 5, 1994**
10.39.2 Termination agreement, dated December
7, 1994, as modified by letter dated
January 24, 1995, between Myron E.
Ullman III and the Company**
10.40 Form of Employment Agreement for Exhibit 10.31 to 1993 Form 10-K
Executives and Key Employees**
10.41 Supplementary Executive Retirement Exhibit 10.32 to 1993 Form 10-K
Plan, as Amended**
10.42 Executive Deferred Compensation Plan Exhibit 4.1 to Registration Statement
(adopted October 29, 1993)** on Form S-8 (Registration No.
33-50831), filed October 29, 1993
10.43 First Amendment to the Executive Exhibit 10.2 to the Company's
Deferred Compensation Plan** Quarterly Report on Form 10-Q (File
No. 33-6192) for the fiscal quarter
ended October 29, 1994 ("October 1994
Form 10-Q")
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- - --------------- ------------------------------------- -------------------------------------
<C> <S> <C>
10.44 Retirement Income and Thrift Exhibit 4.1 to the Registration
Incentive Plan (as amended and Statement on Form S-8 (Registration
restated effective as of January 1, No. 33-59107), filed January 14, 1994
1987 and containing all amendments
through December 31, 1993)**
10.45 Amendment to Retirement Income and Exhibit 3.1 to October 1994 Form 10-Q
Thrift Incentive Plan**
11 Exhibit of Primary and Fully Diluted
Earnings Per Share
21 Subsidiaries
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney
<FN>
- - ---------------
* Confidential portions of this Exhibit were omitted and filed separately with
the SEC pursuant to Rule 24b-2 under the Exchange Act.
** Constitutes a compensatory plan or arrangement
</TABLE>
21
<PAGE> 24
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
---------------------------------
Date: April 20, 1995 Dennis J. Broderick
Senior Vice President, General
Counsel and Secretary
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 20, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- - ---------------------------------------- ---------------------------------------------------
<S> <C>
* Chairman of the Board and Chief Executive Officer
- - ---------------------------------------- (principal executive officer) and Director
Allen I. Questrom
* 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
Earl G. Graves
*
- - ---------------------------------------- Director
George V. Grune
*
- - ---------------------------------------- Director
Gertrude G. Michelson
*
- - ---------------------------------------- Director
G. William Miller
*
- - ---------------------------------------- Director
Joseph Neubauer
*
- - ---------------------------------------- Director
Laurence A. Tisch
*
- - ---------------------------------------- Director
Myron E. Ullman, III
*
- - ---------------------------------------- Director
Paul W. Van Orden
*
- - ---------------------------------------- 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
22
<PAGE> 25
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Report................................................ F-2
Independent Auditors' Report....................................... F-3
Consolidated Statements of Income for the 52 weeks ended January
28, 1995, January 29, 1994 and January 30, 1993.................. F-4
Consolidated Balance Sheets at January 28, 1995 and January 29,
1994............................................................. F-5
Consolidated Statements of Cash Flows for the 52 weeks ended
January 28, 1995, January 29, 1994 and January 30, 1993.......... F-6
Notes to Consolidated Financial Statements......................... F-7
</TABLE>
F-1
<PAGE> 26
MANAGEMENT'S REPORT
To the Shareholders of
Federated Department Stores, Inc.:
The integrity and consistency of the consolidated financial statements of
Federated Department Stores, Inc., and subsidiaries 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 consolidated financial statements of the Company have been audited by
KPMG Peat Marwick LLP, 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> 27
INDEPENDENT AUDITORS' 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 28, 1995
and January 29, 1994, and the related consolidated statements of income and cash
flows for each of the fifty-two week periods ended January 28, 1995, January 29,
1994 and January 30, 1993. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these consolidated financial statements 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 28, 1995 and January 29,
1994, and the results of their operations and their cash flows for each of the
fifty-two week periods ended January 28, 1995, January 29, 1994 and January 30,
1993, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
February 28, 1995
F-3
<PAGE> 28
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS, EXCEPT PER SHARE DATA)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales, including leased department sales..... $8,315,877 $7,229,406 $7,079,941
------------ ------------ ------------
Cost of sales.................................... 5,131,363 4,373,941 4,229,396
Selling, general and administrative expenses..... 2,549,122 2,323,546 2,420,684
Business integration and consolidation
expenses....................................... 85,867 -- --
------------ ------------ ------------
Operating Income................................. 549,525 531,919 429,861
Interest expense................................. (262,115) (213,544) (258,211)
Interest income.................................. 43,874 49,405 60,357
------------ ------------ ------------
Income Before Income Taxes and Extraordinary
Items.......................................... 331,284 367,780 232,007
Federal, state and local income tax expense...... (143,668) (170,987) (99,299)
------------ ------------ ------------
Income Before Extraordinary Items................ 187,616 196,793 132,708
Extraordinary items.............................. -- (3,545) (19,699)
------------ ------------ ------------
Net Income....................................... $ 187,616 $ 193,248 $ 113,009
============ ============ ============
Earnings per Share:
Income before extraordinary items.............. $ 1.41 $ 1.56 $ 1.19
Extraordinary items............................ -- (.03) (.18)
------------ ------------ ------------
Net Income............................. $ 1.41 $ 1.53 $ 1.01
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 29
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash.......................................................... $ 206,490 $ 222,428
Accounts receivable........................................... 2,265,651 1,758,935
Merchandise inventories....................................... 2,380,621 1,180,844
Supplies and prepaid expenses................................. 99,559 46,660
Deferred income tax assets.................................... 238,127 88,754
------------ ------------
Total Current Assets.................................. 5,190,448 3,297,621
Property and Equipment -- net................................... 5,349,912 2,576,884
Intangible Assets -- net........................................ 1,006,547 337,720
Notes Receivable................................................ 408,134 408,818
Other Assets.................................................... 424,671 798,384
------------ ------------
Total Assets.......................................... $12,379,712 $7,419,427
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt............................................... $ 463,042 $ 10,099
Accounts payable and accrued liabilities...................... 2,183,711 1,209,744
Income taxes.................................................. 65,319 110,209
------------ ------------
Total Current Liabilities............................. 2,712,072 1,330,052
Long-Term Debt.................................................. 4,529,220 2,786,724
Deferred Income Taxes........................................... 993,451 804,181
Other Liabilities............................................... 505,359 220,226
Shareholders' Equity............................................ 3,639,610 2,278,244
------------ ------------
Total Liabilities and Shareholders' Equity............ $12,379,712 $7,419,427
============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 30
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 187,616 $ 193,248 $ 113,009
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment.......... 260,485 207,914 205,554
Amortization of intangible assets................................ 22,662 18,762 18,762
Amortization of financing costs.................................. 11,468 10,163 20,995
Amortization of original issue discount.......................... 29,435 16,846 15,593
Amortization of unearned restricted stock........................ 2,714 3,105 5,808
Loss on early extinguishment of debt............................. -- 3,545 19,699
Changes in assets and liabilities, net of effects of acquisition
of companies:
Increase in accounts receivable................................ (310,934) (215,101) (28,456)
(Increase) decrease in merchandise inventories................. 28,620 (31,910) 18,412
(Increase) decrease in supplies and prepaid expenses........... 2,450 (6,592) 2,547
(Increase) decrease in other assets not separately
identified................................................... 2,697 20,229 (20,179)
Increase (decrease) in accounts payable and accrued liabilities
not separately identified.................................... (124,662) 70,679 2,898
Increase in current income taxes............................... 61,149 65,990 24,520
Increase (decrease) in deferred income taxes................... (12,057) 54,917 27,225
Increase (decrease) in other liabilities not separately
identified................................................... (184) (1,291) 15,169
--------------- --------------- ---------------
Net cash provided by operating activities.................. 161,459 410,504 441,556
--------------- --------------- ---------------
Cash flows from investing activities:
Acquisition of companies net of cash acquired........................ (575,408) (109,325) --
Purchase of property and equipment................................... (386,847) (309,536) (198,505)
Disposition of property and equipment................................ 8,723 1,097 10,431
Decrease in notes receivable......................................... -- 12,636 --
--------------- --------------- ---------------
Net cash used by investing activities...................... (953,532) (405,128) (188,074)
--------------- --------------- ---------------
Cash flows from financing activities:
Debt issued.......................................................... 2,526,861 -- 979,141
Financing costs...................................................... (66,602) (633) (26,518)
Debt repaid.......................................................... (1,594,136) (391,986) (2,133,014)
Increase (decrease) in outstanding checks............................ (95,010) 35,776 (10,620)
Acquisition of treasury stock........................................ (354) (179) --
Issuance of common stock............................................. 5,376 7,090 502,031
--------------- --------------- ---------------
Net cash provided (used) by financing activities........... 776,135 (349,932) (688,980)
--------------- --------------- ---------------
Net decrease in cash................................................... (15,938) (344,556) (435,498)
Cash beginning of period............................................... 222,428 566,984 1,002,482
--------------- --------------- ---------------
Cash end of period..................................................... $ 206,490 $ 222,428 $ 566,984
=============== =============== ===============
Supplemental cash flow information:
Interest paid........................................................ $ 211,457 $ 186,658 $ 197,138
Interest received.................................................... 44,675 50,019 60,869
Income taxes paid (net of refunds received).......................... 93,647 49,588 47,554
Schedule of noncash investing and financing activities:
Capital lease obligations for new store fixtures................... 10,817 3,424 9,426
Property and equipment transferred to other assets................. 6,645 5,316 13,395
Common stock issued for the Executive Deferred Compensation Plan... 2,070 686 --
Debt and merger related liabilities issued, reinstated or assumed
in acquisition of companies...................................... 1,414,969 340,000 --
Equity issued to third parties in acquisition of company........... 1,166,014 -- --
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 31
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 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
income is 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.
Intangible assets are amortized on a straight-line basis over their
estimated lives (see Note 8). The carrying value of intangible assets is
periodically reviewed by the Company and impairments are recognized when the
expected future operating cash flows derived from such intangible assets is less
than their carrying value.
Financing costs are amortized over the life of the related debt.
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under the asset and liability method prescribed in SFAS No. 109, deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and net
operating loss and tax credit carryforwards. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred income tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-7
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The Company has adopted the provisions of 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.
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 employee compensation plans would be less than 3.0%. Fully diluted
earnings per share include the effect of the potential issuance of shares for
employee compensation plans as well as for the Senior Convertible Discount Notes
and, unless disclosed, any such dilution would be less than 3.0%.
2. ACQUISITION OF COMPANIES
On December 31, 1993, Federated Noteholding Corporation ("FNC"), a wholly
owned subsidiary of the Company, paid $109.3 million in cash and issued a
promissory note (the "Promissory Note") in the principal amount of $340.0
million to The Prudential Insurance Company of America ("Prudential"), in
exchange for 50% of a claim (the "Prudential Claim") held by Prudential in the
Chapter 11 reorganization of R. H. Macy & Co., Inc. ("Macy's") and an option to
acquire the remaining 50% of the Prudential Claim (the "Prudential Option").
This investment was included in other assets in the Company's Consolidated
Balance Sheet at January 29, 1994.
On December 19, 1994, the Company completed its acquisition of Macy's
pursuant to a Plan of Reorganization (the "Macy's POR") of Macy's and
substantially all of its subsidiaries (collectively, the "Macy's Debtors").
Pursuant to the Macy's POR, Macy's merged with the Company, which became
responsible for making distributions of cash and debt and equity securities to
the holders of allowed claims against the Macy's Debtors pursuant to the Macy's
POR. In connection with the acquisition, FNC exercised the Prudential Option,
whereby it acquired the remainder of the Prudential Claim in exchange for $469.6
million in cash , and repaid the full amount of indebtedness under the
Promissory Note. The total purchase price of the acquisition, net of amounts
issued or paid to wholly owned subsidiaries of the Company (including FNC), was
approximately $3,815.9 million and consisted of the following:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Cash payments, including exercise of the Prudential
Option and transaction costs...................... $ 830.4
Assumption of merger-related liabilities............ 192.5
Issuance, reinstatement or assumption of debt....... 1,182.4
Issuance of 55.6 million shares of common stock..... 1,047.6
Issuance of warrants to purchase 18.0 million shares
of common stock................................... 118.4
Cost of the initial investment in the Prudential
Claim, net of a $4.7 million cash distribution.... 444.6
----------
$3,815.9
==========
</TABLE>
The Macy's acquisition was accounted for under the purchase method and,
accordingly, the results of operations of Macy's have been included in the
Company's results of operations since the date of acquisition
F-8
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
and the purchase price has been allocated to Macy's assets and liabilities based
on their estimated fair values at the date of acquisition. Based upon
management's initial estimates, the excess of cost over net assets acquired is
approximately $308.5 million (see Note 8).
The following unaudited pro forma condensed statements of operations give
effect to the Macy's acquisition and related financing transactions as if such
transactions had occurred at the beginning of the periods presented.
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 28, JANUARY 29,
1995 1994
------------ ------------
(MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net sales........................................ $ 13,947.1 $ 13,445.7
Income (loss) before extraordinary items......... 81.7 (7.2)
Net income....................................... 71.1 174.6*
Earnings per share............................... $ .39 $ .96*
<FN>
* Includes a favorable cumulative effect adjustment of $185.3 million, or $1.02
per share, for the adoption of SFAS No. 109 by Macy's.
</TABLE>
The foregoing unaudited pro forma condensed statements of operations give
effect to, among other pro forma adjustments, the following:
<TABLE>
<S> <C>
(i) Interest expense on debt incurred to finance the acquisition, the reversal of Macy's
historical interest expense and the reversal of the Company's historical interest
expense on certain indebtedness redeemed in connection with the acquisition;
(ii) Amortization of deferred debt expense related to debt incurred to finance the
acquisition;
(iii) Amortization, over 20 years, of the excess of cost over net assets acquired, and
amortization, over 40 years, of tradenames acquired;
(iv) Depreciation and amortization adjustments related to fair market value of assets
acquired; and
(v) Adjustments to income tax expense related to the above.
</TABLE>
The foregoing unaudited pro forma information is provided for illustrative
purposes only and does not purport to be indicative of results that actually
would have been achieved had the Macy"s acquisition been consummated on the
first day of the period presented or of future results.
On May 26, 1994, the Company purchased Joseph Horne Co., Inc. ("Horne's"),
a department store retailer operating ten stores in Pittsburgh and Erie,
Pennsylvania for approximately $116.0 million, including the assumption of $40.0
million of mortgage debt and transaction costs. The acquisition was accounted
for under the purchase method of accounting and the purchase price approximated
the estimated fair value of the assets and liabilities acquired. Results of
operations for the stores acquired are included in the Consolidated Financial
Statements from the date of acquisition. Pro forma financial results have not
been presented for this acquisition since it did not significantly affect the
results of operations of the Company.
F-9
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
3. BUSINESS INTEGRATION AND CONSOLIDATION EXPENSES
Business integration and consolidation expenses represent the costs
associated with the integration of the Horne's and Macy's businesses with the
Company's other businesses and the consolidation of the operations of certain of
the Company's retail operating divisions.
The Company recorded a $45.8 million charge in the 52 weeks ended January
28, 1995 for the integration of Macy's into the Company, including the
consolidation of the Macy's East division with the Company's Abraham &
Straus/Jordan Marsh division and the consolidation of central merchandising
divisions. The major components of the charge include $13.0 million in severance
expenses for Abraham & Straus/Jordan Marsh employees, $12.3 million in penalties
associated with terminating certain merchandise purchasing agreements and $14.1
million of losses incurred on stores closed and property writedowns related to
stores sold as a result of the Macy's acquisition.
The Company recorded a $27.0 million charge in the 52 weeks ended January
28, 1995 for the integration of the ten Horne's department stores and related
facilities and merchandising and operating functions into the Company. The $27.0
million charge includes $12.1 million for the costs of operating the Horne's
central office during a transitional period and the incremental costs associated
with converting the Horne's stores to Lazarus stores (including advertising,
credit card issuance and promotion, data processing conversion and other name
change expenses). The remainder of the charge relates to inventory valuation
adjustments of Horne's merchandise in lines which the Company, subsequent to the
acquisition, eliminated or replaced with Lazarus merchandise lines.
Finally, as a result of the consolidation of the Company's
Rich's/Goldsmith's and Lazarus divisions, which was announced on January 20,
1995, a $13.1 million charge was recorded for severance related to the
elimination of duplicative positions.
4. 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 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.
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-10
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
5. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
----------- ------------
(MILLIONS)
<S> <C> <C>
Due from customers......................................... $ 2,087.9 $1,702.2
Less allowance for doubtful accounts....................... 44.9 36.9
----------- ------------
2,043.0 1,665.3
Other receivables.......................................... 222.7 93.6
----------- ------------
Net receivables............................................ $ 2,265.7 $1,758.9
========== ===========
</TABLE>
Sales through the Company's credit plans were $3,916.9 million, $3,743.1
million and $3,575.2 million for the 52 weeks ended January 28, 1995, January
29, 1994 and January 30, 1993, respectively. The credit plans relating to
operations of the Company that were previously conducted through divisions of
Macy's are owned by a third party.
Finance charge income amounted to $320.3 million, $243.6 million and $225.1
million for the 52 weeks ended January 28, 1995, January 29, 1994 and January
30, 1993, respectively.
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
----------- ----------- -----------
(MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year................... $ 36.9 $ 45.3 $ 59.2
Charged to costs and expenses................ 66.5 50.3 52.0
Net uncollectible balances written off....... (58.5) (58.7) (65.9)
----------- ----------- -----------
Balance, end of year......................... $ 44.9 $ 36.9 $ 45.3
========== ========== ==========
</TABLE>
6. INVENTORIES
Merchandise inventories were $2,380.6 million at January 28, 1995, compared
to $1,180.8 million at January 29, 1994. At January 28, 1995, the cost of
inventories using the LIFO method approximated the cost of such inventories
using the first-in, first-out method. Inventories were $11.3 million lower at
January 29, 1994 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 a pre-tax credit of $11.3 million for the 52 weeks ended January 28,
1995 and a pre-tax charge of $2.8 million for the 52 weeks ended January 29,
1994.
F-11
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
7. PROPERTIES AND LEASES
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
----------- ------------
(MILLIONS)
<S> <C> <C>
Land....................................................... $ 888.6 $ 446.0
Buildings on owned land.................................... 2,162.2 899.8
Buildings on leased land and leasehold improvements........ 1,055.7 549.4
Store fixtures and equipment............................... 1,765.9 996.4
Property not used in operations............................ 6.5 6.6
Leased properties under capitalized leases................. 62.6 49.0
----------- ------------
5,941.5 2,947.2
Less accumulated depreciation and amortization............. 591.6 370.3
----------- ------------
$ 5,349.9 $2,576.9
========== ===========
</TABLE>
Buildings on leased land and leasehold improvements includes approximately
$176.4 million at January 28, 1995 and $160.8 million at January 29, 1994 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.
Minimum rental commitments (excluding executory costs) at January 28, 1995,
for noncancellable leases are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES TOTAL
----------- ----------- -----------
(MILLIONS)
<S> <C> <C> <C>
Fiscal year:
1995........................................... $ 11.2 $ 158.2 $ 169.4
1996........................................... 11.0 151.2 162.2
1997........................................... 10.9 132.8 143.7
1998........................................... 10.6 114.4 125.0
1999........................................... 10.0 105.7 115.7
After 1999..................................... 94.9 1,000.8 1,095.7
----------- ----------- -----------
Total minimum lease payments..................... 148.6 $ 1,663.1 $ 1,811.7
========== ==========
Less amount representing interest................ 77.1
-----------
Present value of net minimum capital lease
payments....................................... $ 71.5
==========
</TABLE>
F-12
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Capitalized leases are included in the Consolidated Balance Sheets as
property and equipment while the related obligation is included in short-term
($4.0 million) and long-term ($67.5 million) debt. Amortization of assets
subject to capitalized leases is included in depreciation and amortization
expense. Total minimum lease payments shown above have not been reduced by
minimum sublease rentals of approximately $8.9 million on capital leases and
$17.2 million on operating leases.
Rental expense consists of:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Real estate (excluding executory
costs)
Capital leases --
Contingent rentals.............. $ 3.3 $ 3.4 $ 3.5
Operating leases --
Minimum rentals................. 78.9 68.5 63.6
Contingent rentals.............. 10.4 8.7 8.5
------- ------- -------
92.6 80.6 75.6
------- ------- -------
Less income from subleases --
Capital leases.................. 0.6 0.8 0.8
Operating leases................ 0.9 1.2 6.1
------- ------- -------
1.5 2.0 6.9
------- ------- -------
$ 91.1 $ 78.6 $ 68.7
=============== =============== ===============
Personal property --
Operating leases................... $ 37.4 $ 38.1 $ 36.4
=============== =============== ===============
</TABLE>
8. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994
---------------- -----------------
(MILLIONS)
<S> <C> <C>
Reorganization value in excess of amount
allocable to identifiable assets............... $ 300.2 $ 375.2
Excess of cost over net assets acquired --
Macy's......................................... 308.5 --
Tradenames -- Macy's............................. 458.0 --
---------------- -----------------
1,066.7 375.2
Less accumulated amortization.................... 60.2 37.5
---------------- -----------------
Intangible assets -- net......................... $1,006.5 $ 337.7
=============== ================
</TABLE>
Intangible assets are being amortized on a straight-line basis over 20
years, except for tradenames which are being amortized over 40 years. During the
52 weeks ended January 28, 1995, the Company recorded $75.0 million of tax
benefits as a reduction of reorganization value in excess of amounts allocable
to identifiable assets (see Note 12).
F-13
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
9. NOTES RECEIVABLE
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
----------- ------------
(MILLIONS)
<S> <C> <C>
9 1/2% note relating to the sale of certain divisions in
1988 and maturing in two equal installments on May 3,
1997 and May 3, 1998..................................... $ 400.0 $ 400.0
Other...................................................... 8.1 8.8
----------- ------------
$ 408.1 $ 408.8
========== ===========
</TABLE>
The $400.0 million note, which is supported by a letter of credit, was
transferred to a grantor trust which borrowed $352.0 million under a note
monetization facility and transferred such proceeds to the Company (see Note
10).
10. FINANCING
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
----------- ------------
(MILLIONS)
<S> <C> <C>
Short-term debt:
Bank credit facility..................................... $ 25.0 $ --
Receivables backed commercial paper...................... 274.9 --
Current portion of long-term debt........................ 163.1 10.1
----------- ------------
Total short-term debt............................ $ 463.0 $ 10.1
========== ===========
Long-term debt:
Bank credit facility..................................... $ 1,700.0 $ --
Receivables backed certificates.......................... 1,056.8 979.5
Senior notes............................................. 450.0 --
Mortgages................................................ 415.1 345.1
Senior convertible discount notes........................ 306.6 289.0
Tax notes................................................ 177.4 32.0
Note monetization facility............................... 352.0 352.0
Promissory note.......................................... -- 340.0
Series A secured notes................................... -- 289.2
Subsidiary trade obligations............................. -- 101.5
Capitalized leases....................................... 67.5 53.8
Other.................................................... 3.8 4.6
----------- ------------
Total long-term debt............................. $ 4,529.2 $2,786.7
========== ===========
</TABLE>
F-14
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Interest and financing costs were as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Interest on debt.......................... $244.9 $197.5 $232.0
Amortization of financing costs........... 11.5 10.2 21.0
Interest on capitalized leases............ 6.2 6.0 5.3
------- ------- -------
Subtotal............................. 262.6 213.7 258.3
Less:
Interest capitalized on construction...... (0.5) (0.2) (0.1)
Interest income........................... (43.9) (49.4) (60.3)
------- ------- -------
$218.2 $164.1 $197.9
=============== =============== ===============
</TABLE>
Future maturities of long-term debt, other than capitalized leases and
including unamortized original issue discount of $2.0 million, are shown below:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Fiscal year:
1996........................................... $ 155.3
1997........................................... 903.7
1998........................................... 467.9
1999........................................... 913.9
2000........................................... 973.2
After 2000..................................... 1,049.7
</TABLE>
On December 19, 1994, the Company entered into a $2,800.0 million bank
credit facility (the "Bank Credit Facility") providing for up to $800.0 million
of term borrowings and up to $2,000.0 million of revolving credit loans.
Utilizing the Bank Credit Facility and cash on hand, the Company paid off its
previous working capital facility, which was scheduled to expire on April 3,
1995, exercised its option to acquire the remainder of the Prudential Claim for
$469.6 million, repaid all indebtedness under a $340.0 million promissory note
and the $280.7 million Series A secured notes and made certain cash payments in
connection with the acquisition of Macy's.
In connection with the acquisition of Macy's, the Company issued $953.5
million of notes. On January 27, 1995, the Company issued $450.0 million of 10%
Senior Notes due 2001 and utilized the proceeds thereof, together with
borrowings under the Bank Credit Facility and the proceeds from the sale of
$77.0 million of receivables backed certificates, to prepay the $953.5 million
of notes in their entirety.
The following summarizes certain provisions of the Company's long-term
debt:
BANK CREDIT FACILITY
The Bank Credit Facility consists of a $2,000.0 million revolving credit
facility (the "Revolving Loan Facility") and an $800.0 million term loan
facility (the "Term Loan Facility").
F-15
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The Revolving Loan Facility provides for revolving credit loans ("Revolving
Loans" and, together with the loans under the Term Loan Facility, the "Loans")
of up to $2,000.0 million, of which an aggregate of $1,100.0 million is
available for seasonal working capital purposes (including a letter of credit
subfacility). For 30 consecutive calendar days during the period from December 1
to March 1, commencing December 1, 1995, total borrowings plus the aggregate
stated amounts of stand-by letters of credit under the Revolving Loan Facility
may not exceed $1,000.0 million ($1,100 million in the case of the period from
December 1, 1995 to March 1, 1996). The Company's ability to effect borrowings
under the Revolving Loan Facility is not subject to any borrowing base
requirements or limitations. The Revolving Loan Facility matures on March 31,
2000, with the Revolving Loans then outstanding to be repaid in full on such
date.
The Term Loan Facility matures on January 29, 2000 and does not require any
amortization of principal prior to May 4, 1996. Commencing on May 4, 1996, the
Company is required to make quarterly amortization payments totaling, on an
annual basis: $100.0 million in the first year thereafter; $150.0 million in the
second year thereafter; $200.0 million in the third year thereafter; and $350.0
million in the fourth year thereafter. The Company is permitted by the terms of
the Credit Agreement to make voluntary prepayments of amounts outstanding under
the Term Loan Facility at any time without penalty or premium. Until such time
as the Company has obtained an investment grade rating with respect to its
long-term senior unsecured debt, repayments of certain amounts outstanding under
the Term Loan Facility are required upon the occurrence of certain events.
Loans under the Bank Credit Facility (other than "competitive bid loans,"
if any) bear interest at a rate equal to, at the Company's option, (i) the
administrative agent's Base Rate (as defined in the bank credit agreement) in
effect from time to time or (ii) the administrative agent's Eurodollar rate
(adjusted for reserves) plus 1.0% subject to adjustment based on the Company's
long-term debt rating and interest coverage ratio. The Company is able to borrow
up to $1,000.0 million under the Revolving Loan Facility in competitive bid
loans at either fixed rates or Eurodollar-based rates as bid by the lenders in
the Revolving Loan Facility. The Company pays a commitment fee of 0.25% per
annum, subject to adjustment, on the unused portion of the Revolving Loan
Facility.
The Company has purchased interest rate caps covering an aggregate notional
amount of $1,400.0 million for a period of three years from December 15, 1994.
Pursuant to such caps, the Eurodollar rate with reference to which interest on
$500.0 million of the Company's variable rate indebtedness is determined is
effectively limited to a maximum rate of 8% per annum throughout such three-year
period and the Eurodollar rate with reference to which interest on $900.0
million of the Company's variable rate indebtedness is determined is effectively
limited to a maximum rate of 7% per annum in the first year of such three-year
period, 8% per annum in the second year of such three-year period and 9% per
annum thereafter.
RECEIVABLES BACKED CERTIFICATES
On December 15, 1992, Prime issued $981.0 million ($979.1 million
discounted amount) of asset-backed certificates in four separate classes to
finance its purchases of revolving consumer credit card receivables generated by
the Company's department store operations (other than operations previously
conducted by divisions of Macy's). The four classes of certificates 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
F-16
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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. On January 20,
1995 Prime entered into an agreement pursuant to which it effectively sold an
additional $77.0 million of asset-backed certificates to a third party, with
such certificates bearing interest at the purchaser's commercial paper rate plus
0.9% and maturing as to $38.5 million in 1998 and $38.5 million in 2000. The
certificates represent undivided interests in the assets of a master trust
originated by Prime.
RECEIVABLES BACKED COMMERCIAL PAPER
On January 5, 1993, an indirect wholly owned special purpose financing
subsidiary of the Company entered into a liquidity facility with a syndicate of
banks providing for the issuance of up to $375.0 million of receivables backed
commercial paper. Borrowings under the liquidity facility are secured by an
interest in the master trust originated by Prime and are subject to interest
rate caps effectively limiting the rate of interest thereon to 10% per annum. As
of January 28, 1995 there was $274.9 million of such commercial paper
outstanding and at January 29, 1994 there was no such commercial paper
outstanding.
SENIOR NOTES
The Senior Notes were issued by the Company on January 27, 1995. The Senior
Notes are unsecured obligations of the Company which mature on February 15, 2001
and bear interest at 10% per annum from January 27, 1995, payable semiannually
on February 15 and August 15, of each year, commencing on August 15, 1995. The
Senior Notes are not redeemable at the option of the Company prior to maturity
and are not subject to a sinking fund.
MORTGAGES
Certain of the Company's real estate subsidiaries are parties to a mortgage
loan facility providing for secured borrowings. 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. As of January 28, 1995
and January 29, 1994, there was $345.1 million outstanding under the mortgage
loan facility. In addition, in connection with the acquisitions of Horne's and
Macy's in 1994, the Company assumed mortgage debt of $40.0 million and $32.6
million, respectively.
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 9.72% per annum from
February 15, 1995, payable semiannually on February 15 and August 15 of each
year, commencing August 15, 1995. Prior to February 15, 1995, the Convertible
Notes accreted original issue discount at the rate of 6.0% per annum.
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 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,
F-17
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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.
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.
TAX NOTES
The Tax Notes represent agreements with taxing authorities with respect to
claims to be paid over varying periods of time up to six years, with unpaid
balances bearing interest at rates ranging from 8.0% to 9.35% per annum.
NOTE MONETIZATION FACILITY
On May 3, 1988, the Company sold certain divisions for consideration which
included a $400.0 million promissory note. The Company subsequently transferred
the note to a grantor trust of which it is the beneficiary. The trust borrowed
$352.0 million under a note monetization facility, using the note as collateral,
and distributed the proceeds of such borrowing to the Company. The borrowing
under the note monetization facility matures in two equal installments on May 3,
1997 and 1998, and bears interest at a variable interest rate based on LIBOR,
subject to certain adjustments. An interest rate swap agreement was entered into
for the 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 or the interest rate swap
agreement, and the lender's recourse thereunder is limited to the trust's assets
and the Company's interest in the trust.
SUBSIDIARY TRADE OBLIGATIONS
As of January 28, 1995, the subsidiary trade obligations, relating to the
Company's reorganization proceedings, were included in short-term debt on the
Consolidated Balance Sheet. Such obligations were thereafter paid in full on
February 6, 1995.
F-18
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
----------- -----------
(MILLIONS)
<S> <C> <C>
Merchandise and expense accounts payable........ $ 1,299.2 $ 833.4
Business integration and consolidation
expenses...................................... 57.8 --
Merger related liabilities...................... 173.1 --
Taxes other than income taxes................... 123.3 52.5
Accrued wages and vacation...................... 81.2 50.3
Accrued interest................................ 29.3 25.3
Other........................................... 419.8 248.2
----------- -----------
$ 2,183.7 $ 1,209.7
========== ==========
</TABLE>
Included in the liability for business integration and consolidation
expenses at January 28, 1995 is $26.1 million of accrued severance related to
approximately 750 employees of the Abraham & Straus/Jordan Marsh,
Rich's/Goldsmith's and Lazarus divisions (see Note 3).
12. TAXES
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Income from operations.............. $143.7 $171.0 $ 99.3
Extraordinary items................. -- (2.3) (12.7)
------- ------- -------
Total income taxes.................. $143.7 $168.7 $ 86.6
=============== =============== ===============
</TABLE>
F-19
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Income tax expense attributable to income from operations is as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
--------------------------- --------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- ------ ------- -------- ------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal............... $ 82.0 $ 31.4 $113.4 $127.9 $ 10.4 $138.3 $64.4 $ 14.2 $ 78.6
State and local....... 21.2 9.1 30.3 33.6 (0.9) 32.7 16.1 4.6 20.7
------- -------- ------ ------- -------- ------ ------- -------- ------
$103.2 $ 40.5 $143.7 $161.5 $ 9.5 $171.0 $80.5 $ 18.8 $ 99.3
======== ========= ====== ======== ========= ====== ======== ========= ======
</TABLE>
The income tax expense attributable to income 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 28, 1995 and January 29,
1994 and 34% for the 52 weeks ended January 30, 1993 to income before income
taxes and extraordinary items. The reasons for this difference and their tax
effects are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Expected tax.............................. $115.9 $128.7 $ 78.9
State and local income taxes, net of
federal income tax expense.............. 19.7 21.2 13.7
Permanent difference arising from
amortization of intangible assets....... 7.9 6.6 6.4
Effect of federal tax rate change on
deferred income taxes................... -- 14.2 --
Other..................................... 0.2 0.3 0.3
------- ------- -------
$143.7 $171.0 $ 99.3
=============== =============== ===============
</TABLE>
F-20
<PAGE> 45
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 28, JANUARY 29,
1995 1994
----------- -----------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards............... $ 378.3 $ --
Accrued liabilities accounted for on a cash
basis for tax purposes................... 174.6 130.1
Postretirement benefits other than
pensions................................. 180.8 78.4
Capital lease debt......................... 28.6 22.7
Allowance for doubtful accounts............ 18.1 14.8
Alternative minimum tax credit
carryforwards............................ 37.3 21.0
Other...................................... 77.7 46.6
----------- -----------
Total gross deferred tax assets....... 895.4 313.6
Less valuation allowance.............. (114.7) --
----------- -----------
Net deferred tax assets............... 780.7 313.6
----------- -----------
Deferred tax liabilities:
Excess of book basis over tax basis of
property and equipment................... (1,119.2) (605.9)
Prepaid pension expense.................... (76.7) (95.2)
Deferred gain from sale of divisions....... (81.6) (82.2)
Merchandise inventories.................... (98.6) (68.1)
Effects of reorganization transactions..... (136.4) (167.8)
Other...................................... (23.5) (9.8)
----------- -----------
Total gross deferred tax
liabilities......................... (1,536.0) (1,029.0)
----------- -----------
Net deferred tax liability............ $ (755.3) $ (715.4)
========== ==========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities and tax planning strategies in
making this assessment. Because tax law limits the use of Macy's net operating
loss carryforwards ("Macy's NOL's") to subsequent taxable income of the acquired
enterprise in a consolidated tax return for the combined enterprise, management
has recorded a valuation allowance of $114.7 million to reflect the estimated
amount of deferred tax assets related to such Macy's NOL's which may not be
realized. Subsequent adjustments, if any, to this valuation allowance related to
Macy's NOL's will be recorded as reductions of excess of cost over value of net
assets acquired.
As of January 28, 1995, the Company estimated that the Macy's NOL's were
approximately $950.0 million which are available to offset future taxable income
through 2009. The Company also had alternative minimum tax credit carryforwards
of $37.3 million which are available to reduce future regular income taxes, if
any, over an indefinite period.
F-21
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
In connection with the joint plan of reorganization of Federated Stores,
Inc. ("FSI"), the former parent of the Company and certain of its subsidiaries,
the FSI consolidated tax group (which, with respect to periods prior to February
4, 1992, included the Company and such subsidiaries) triggered certain gains
(the "Gains") estimated at approximately $1,800.0 million. 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 Gains will have a material adverse effect on the Company's financial
position or results of operations. Further, the realization of any unrecorded
tax benefits related to the NOLs generated prior to February 4, 1992 will be
recorded as reductions of reorganization value in excess of amounts allocable to
identifiable assets. During the year ended January 28, 1995, the Company
recorded $75.0 million of tax benefits related to such NOLs and reduced
reorganization value in excess of amounts allocable to identifiable assets
accordingly.
In connection with their respective reorganization proceedings, the
Internal Revenue Service ("IRS") audited the tax returns of the Company and
certain of its subsidiaries and the FSI consolidated tax group for tax years
1984 through 1989 and asserted certain claims against the Company and such
subsidiaries and other members of the FSI consolidated tax group. The issues
raised by the IRS audit were resolved by agreement with the IRS except for two
issues involving the use by the Company 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 for the Southern District of Ohio and resolved in favor of the Company;
however, the IRS pursued appeals on both issues to the United States District
Court for the Southern District of Ohio (the "Ohio District Court"), which
affirmed the decision of the Bankruptcy Court on August 2, 1994. On September
30, 1994, the IRS filed a notice of appeal to the United States Court of Appeals
for the Sixth Circuit with respect to the issue relating to "break-up fees"
only, where such appeal is currently pending. Although there can be no assurance
with respect thereto, management does not expect that the ultimate resolution of
this issue will have a material adverse effect on the Company's financial
position or results of operations.
13. RETIREMENT PLANS
The Company has defined benefit plans ("Pension Plans") and defined
contribution plans ("Savings Plans") which cover substantially all employees who
work 1,000 hours or more in a year. In addition, the Company has defined benefit
supplementary retirement plans which include benefits, for certain employees, in
excess of qualified plan limitations. For the 52 weeks ended January 28, 1995,
and the 52 weeks ended January 29, 1994, net retirement expense for these plans
totaled $3.0 million and $2.7 million, respectively. For the 52 weeks ended
January 30, 1993, net retirement income for these plans totaled $1.1 million. In
connection with the acquisition of Macy's, the Company added a pension plan, a
savings plan and a supplementary retirement plan. The pension plan and
supplementary retirement plan are included in the projected actuarial present
value of benefit obligations at December 31, 1994. The impact on pension income
or expense for the 52 weeks ended January 28, 1995 was not material for any Macy
retirement plan added.
Measurements of plan assets and obligations for the Pension Plans and the
defined benefit supplementary retirement plans are calculated as of December 31
of each year. In addition, for such plans, the discount rates
F-22
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
used to determine the actuarial present value of projected benefit obligations
ranged from 8.0% to 8.5% as of December 31, 1994 and was 7.0% as of December 31,
1993. The assumed rate of increase in future compensation levels ranged from
5.0% to 6.0% as of December 31, 1994 and was 5.0% as of December 31, 1993. The
long-term rate of return on assets (Pension Plans only) ranged from 9.0% to
9.75% as of December 31, 1994 and was 9.75% as of December 31, 1993.
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 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost....................... $ 19.9 $ 17.5 $ 16.8
Interest cost...................... 39.9 39.0 36.9
Actual return on assets............ 5.1 (94.1) (48.6)
Net amortization and deferrals..... (73.7) 24.9 (19.6)
Cost of special termination
benefits......................... -- 7.8 --
------- ------- -------
$ (8.8) $ (4.9) $(14.5)
=============== =============== ===============
</TABLE>
The following table sets forth the projected actuarial present value of
benefit obligations and funded status at December 31, 1994 and 1993, for the
Pension Plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(MILLIONS)
<S> <C> <C>
Accumulated benefit obligations.................. $ 888.5 $536.4
Less: Present value of net accumulated benefits
available under a Savings Plan................. 30.9 43.5
------------ ------------
Net accumulated benefit obligations, including
vested benefits of $839.7 million and $478.7
million, respectively.......................... 857.6 492.9
Projected compensation increases................. 137.6 75.7
------------ ------------
Projected benefit obligations.................... 995.2 568.6
------------ ------------
Plan assets (primarily stocks, bonds and U.S.
government securities)......................... 1,075.3 744.9
Unrecognized loss................................ 127.6 52.9
Unrecognized prior service cost.................. 1.9 8.9
------------ ------------
1,204.8 806.7
------------ ------------
Prepaid pension expense.......................... $ 209.6 $238.1
============ ============
</TABLE>
F-23
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The Company's policy is to fund the Pension Plans at or above the minimum
required by law. At December 31, 1994 and 1993, 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.
SUPPLEMENTARY RETIREMENT PLANS
Net pension expense for the supplementary retirement plans included the
following actuarially determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost............................ $ 0.8 $ 0.3 $ 0.3
Prior service cost...................... -- -- 7.9
Interest cost on projected benefit
obligations........................... 1.7 1.2 0.6
Net amortization and deferral........... 1.0 (0.3) (0.4)
------- ------- -------
$ 3.5 $ 1.2 $ 8.4
=============== =============== ===============
</TABLE>
The following table sets forth the projected actuarial present value of
unfunded benefit obligations at December 31, 1994 and 1993, for the
supplementary retirement plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Accumulated benefit obligations, including vested
benefits of $20.7 million and $14.0 million,
respectively........................................ $ 21.1 $ 14.2
Projected compensation increases...................... 19.7 3.5
----------- -----------
Projected benefit obligations......................... 40.8 17.7
Unrecognized gain..................................... 4.4 3.6
Unrecognized prior service cost....................... (7.6) (1.1)
----------- -----------
Accrued supplementary retirement obligation........... $ 37.6 $ 20.2
============ ============
</TABLE>
In December 1992, the Company reestablished a percentage of the benefits
for former employees who had retired prior to January 15, 1990. 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.
SAVINGS PLANS
The Savings Plans include a voluntary savings feature for eligible
employees. For one plan, the Company's contribution is based on the Company's
annual earnings and minimum Company contribution is
F-24
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
20% of employee's eligible savings. For the other plan, the Company's
contribution is based on a percentage of employee savings. Savings expense
amounted to $8.3 million for the 52 weeks ended January 28, 1995, $6.4 million
for the 52 weeks ended January 29, 1994, and $5.0 million for the 52 weeks ended
January 30, 1993.
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 28, 1995 and January 29, 1994, the liability
under the plan which is reflected in other liabilities is $3.9 million and $1.1
million, respectively. Expense for the 52 weeks ended January 28, 1995 and the
52 weeks ended January 29, 1994 was immaterial.
14. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In addition to pension and other supplemental benefits, certain retired
employees are currently provided with specified health care and life insurance
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. Certain employees
are either ineligible for such benefits or are subject to having such benefits
modified or terminated. The postretirement benefit obligations related to
persons previously employed by Macy's are included in the projected actuarial
present value of benefit obligations at December 31, 1994. The impact on
postretirement benefit expense for the 52 weeks ended January 28, 1995 was not
material.
Net postretirement benefit expense included the following actuarially
determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost....................... $ 0.7 $ 1.0 $ 3.5
Interest cost...................... 9.1 9.7 15.1
Net amortization and deferral...... (5.8) (5.8) --
------- ------- -------
$ 4.0 $ 4.9 $ 18.6
=============== =============== ===============
</TABLE>
F-25
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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 at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
----------- -----------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................ $ 246.6 $ 112.0
Fully eligible active plan participants......... 48.9 14.6
Other active plan participants.................. 89.6 11.4
----------- -----------
Accumulated postretirement benefit obligation... 385.1 138.0
Unrecognized net gain........................... 44.4 35.5
Unrecognized prior service cost................. 20.7 22.9
----------- -----------
Accrued postretirement benefit obligation....... $ 450.2 $ 196.4
========== ==========
</TABLE>
The discount rate used in determining the actuarial present value of
unfunded postretirement benefit obligations ranged from 8.0% to 8.5% as of
December 31, 1994 and was 7.0% as of December 31, 1993.
The future medical benefits provided by the Company for certain employees
are based on a fixed amount per year of service, and the accumulated
postretirement benefit obligation is not affected by increases in health care
costs. However, the future medical benefits provided by the Company for certain
other employees are affected by increases in health care costs. For purposes of
determining the present values of unfunded postretirement benefit obligations,
the annual growth rate in the per capita cost of various components of such
medical benefit obligations was assumed to range from 11.5% to 19.0% in the
first year, and to decrease gradually for each such component to 6.0% in the
twelfth year and to remain at that level thereafter. The foregoing growth rate
assumption has a significant effect on such determination. To illustrate,
increasing such assumed growth rates by one percentage point would increase the
present value of unfunded postretirement benefit obligations as of December 31,
1994 by $35.1 million.
15. 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.
F-26
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Stock option transactions are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994
------------------------- -------------------------
(SHARES IN THOUSANDS) SHARES GRANT PRICE SHARES GRANT PRICE
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year............ 3,038.5 $11.625-25.000 1,828.5 $11.625-18.375
Granted................................... 3,597.4 18.625-23.625 1,575.3 19.375-25.000
Canceled.................................. (218.2) 11.625-23.625 (268.2) 15.625-20.875
Exercised................................. (266.2) 11.625-20.875 (97.1) 11.625-16.875
------- -------------- ------- --------------
Outstanding, end of year.................. 6,151.5 $11.625-25.000 3,038.5 $11.625-25.000
======= ============== ======= ==============
Exercisable, end of year.................. 1,904.1 $11.625-25.000 814.1 $11.625-20.875
======= ============== ======= ==============
</TABLE>
As of January 28, 1995, 1,966,700 shares of Common Stock were available for
additional grants pursuant to the Company's former equity plan, of which 331,400
shares were available for grants in the form of restricted stock. In the year
ended January 28, 1995, 418,000 shares of Common Stock were granted in the form
of restricted stock. Effective February 15, 1995, the Company's former equity
plan was terminated and a total of 11,966,700 shares of Common Stock (including
331,400 shares available for grants as restricted stock) became available for
issuance under the Company's current equity plan.
16. 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 500.0 million shares of Common Stock, par value of $.01 per share
with 212.2 million shares of Common Stock issued and 182.6 million shares of
Common Stock outstanding at January 28, 1995. 126.3 million and 126.0 million
shares of Common Stock were issued and outstanding at January 29, 1994 and
January 30, 1993, respectively.
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.
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).
F-27
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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).
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, 5.2
million shares of Common Stock (subject to adjustment) upon the exercise of the
Series A Warrants and Series B Warrants and 18.0 million shares of Common Stock
(subject to adjustment) upon the exercise of the Series C Warrants and Series D
Warrants. The warrants have the following terms:
<TABLE>
<CAPTION>
SHARES PER EXERCISE EXPIRATION
WARRANT PRICE DATE
---------- ---------- ----------
<S> <C> <C> <C>
Series A...................... 1.047 $25.00 2/15/96
Series B...................... 1.047 35.00 2/15/00
Series C...................... 1.000 25.93 12/19/99
Series D...................... 1.000 29.92 12/19/01
</TABLE>
F-28
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Shareholders' Equity consists of the following:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994 JANUARY 30, 1993
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Preferred stock......................... $ -- $ -- $ --
Common stock:
Balance, beginning of year......... 1.3 1.3 0.8
Issuance of common stock........... 0.8 -- 0.5
---------------- ---------------- ----------------
Balance, end of year............... 2.1 1.3 1.3
---------------- ---------------- ----------------
Additional paid-in capital:
Balance, beginning of year......... 1,975.7 1,968.0 1,453.3
Issuance of common stock........... 1,617.7 7.7 514.7
Issuance of warrants............... 118.4 -- --
Cancellation of treasury stock..... (0.5) -- --
---------------- ---------------- ----------------
Balance, end of year............... 3,711.3 1,975.7 1,968.0
---------------- ---------------- ----------------
Unearned restricted stock:
Balance, beginning of year......... (4.1) (7.3) --
Cancellation (issuance) of common
stock............................ (7.1) 0.1 (13.1)
Amortization....................... 2.7 3.1 5.8
---------------- ---------------- ----------------
Balance, end of year............... (8.5) (4.1) (7.3)
---------------- ---------------- ----------------
Treasury stock:
Balance, beginning of year......... (0.9) -- --
Additions.......................... (558.7) (0.9) --
Cancellations...................... 0.5 -- --
---------------- ---------------- ----------------
Balance, end of year............... (559.1) (0.9) --
---------------- ---------------- ----------------
Accumulated equity:
Balance, beginning of year......... 306.2 113.0 --
Net income......................... 187.6 193.2 113.0
---------------- ---------------- ----------------
Balance, end of year............... 493.8 306.2 113.0
---------------- ---------------- ----------------
Total shareholders' equity.............. $3,639.6 $2,278.2 $2,075.0
=============== =============== ===============
</TABLE>
F-29
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Changes in the number of shares held in the treasury are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994
---------------- ----------------
(THOUSANDS)
<S> <C> <C>
Balance, beginning of year.......... 40.6 --
Additions:
Acquisition of Macy's.......... 29,474.2 --
Restricted stock............... 15.7 8.5
Deferred compensation plan..... 98.4 32.1
Cancellations....................... (24.2) --
---------------- -----
Balance, end of year................ 29,604.7 40.6
=============== ===============
</TABLE>
In connection with the acquisition of Macy's, 29.5 million shares were
issued to wholly owned subsidiaries of the Company and are reflected as treasury
shares in the Consolidated Financial Statements. 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.
17. 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
As of January 28, 1995, the Company's long-term investment consisted of its
ownership of approximately 6.58% of the common stock of Ralphs Grocery Company
("Ralphs"), the fair value of which was estimated as of such date based on the
terms of the pending sale thereof. As of January 29, 1994, no quoted market
prices existed for the Company's long-term investments (which then included the
Company's initial investment in the Prudential Claim) 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.
F-30
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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.
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 28, 1995 JANUARY 29, 1994
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------- ---------- --------------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
Cash and short-term investments..... $ 207.4 $ 207.4 $ 222.4 $ 222.4
Notes receivable.................... 408.1 406.1 408.8 459.7
Other assets........................ 43.0 52.4 475.2 N/A
Long-term debt...................... 4,499.7 4,518.5 2,732.9 2,843.1
Interest rate swap agreement........ -- (20.5) -- (63.3)
Interest rate cap agreements........ 24.0 19.5 6.7 --
</TABLE>
F-31
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The estimated fair values and related unrecognized loss of the Company's
interest rate swap and cap agreements are as follows:
<TABLE>
<CAPTION>
JANUARY 28, 1995 JANUARY 29, 1994
----------------------------------- -----------------------------------
NOTIONAL CARRYING FAIR UNRECOGNIZED CARRYING FAIR UNRECOGNIZED
AMOUNT RATE TERM VALUE VALUE GAIN (LOSS) VALUE VALUE GAIN (LOSS)
- - -------- ---- ----------------------- -------- ----- ------------ -------- ----- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Caps:
$ 500.0 8% 12/15/94 to 12/15/97 $ 7.3 $ 6.1 $ (2.1) $ -- $ -- $ --
$ 900.0 7% 12/15/94 to 12/15/95
8% 12/15/95 to 12/15/96
9% 12/15/96 to 12/15/97 11.9 10.3 (1.6) -- -- --
$ 375.0 10% 2/3/95 to 1/3/01 4.5 2.7 (1.8) 3.9 -- (3.9)
$ 38.5 11% 1/20/95 to 3/15/98 0.1 0.1 -- -- -- --
$ 38.5 11% 1/20/95 to 3/15/00 0.2 0.3 0.1 -- -- --
$1,000.0 7% 2/3/94 to 2/3/95 -- -- -- 2.8 -- (2.8)
Interest Rate Swap:
$ 352.0 10.344% $176.0 to 5/3/97 and
$176.0 to 5/3/98 -- (20.5) (20.5) -- (63.3) (63.3)
</TABLE>
The interest rate cap agreements in effect at January 28, 1995 are used to
hedge interest rate risk related to variable rate indebtedness under the
Company's bank credit facility and receivable backed commercial paper program.
These interest rate cap agreements are recorded at cost and are amortized on a
straight-line basis over the life of the cap. The $1,000.0 million interest rate
cap agreement in effect at January 29, 1994 related to variable rate
indebtedness of the Company which was thereafter retired.
The interest rate swap agreement described in the foregoing table relates
to a note monetization facility, which bears interest based on LIBOR, subject to
certain adjustments. The interest rate swap agreement converts this variable
rate debt (LIBOR plus 0.40%) to a fixed rate of 10.344%. The trust that is the
borrower under the note monetization facility receives fixed-rate interest on
the promissory note constituting such trust's principal asset.
The fair value of the Company's investment in Ralph's is based on the
pending sale thereof in exchange for $24.7 million in cash and $9.9 million in
debentures, for a total of $34.6 million. The investment is carried at cost of
$25.2 million and $25.9 million in the Consolidated Balance Sheets at January
28, 1995 and January 29, 1994, respectively. The Company's initial investment in
the Prudential Claim was carried at its original cost of $449.3 million in the
Consolidated Balance Sheet at January 29, 1994.
Commitments to extend credit under revolving agreements relate primarily to
the aggregate unused credit limits and unused lines of credit 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
F-32
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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.
18. QUARTERLY RESULTS (UNAUDITED)
Unaudited quarterly results for the 52 weeks ended January 28, 1995 and the
52 weeks ended January 29, 1994, 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 28, 1995:
Net sales.................................. $1,653.6 $1,596.1 $1,926.8 $3,139.4
Operating income........................... 103.4 59.0 129.3 257.8
Income before extraordinary items.......... 32.2 3.8 44.3 107.3
Net income................................. $ 32.2 $ 3.8 $ 44.3 $ 107.3
Earnings per share:
Income before extraordinary items....... $ .25 $ .03 $ .35 $ .71
Net income.............................. .25 .03 .35 .71
Fully diluted earnings per share:
Income before extraordinary items....... .25 .03 .35 .68
Net income.............................. .25 .03 .35 .68
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
</TABLE>
19. LEGAL PROCEEDINGS
A plan of reorganization (the "Federated POR") of the Company and certain
of its subsidiaries (the "Federated/Allied Companies") was confirmed by the
United States Bankruptcy Court for the Southern District of Ohio (the "Ohio
Bankruptcy Court") on January 10, 1992. Notwithstanding the confirmation and
effectiveness of the Federated POR, the Ohio 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
Federated POR, and to resolve other matters that may arise in connection with or
relate to the Federated
F-33
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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 Ohio Bankruptcy Court.
During 1994 and 1993, the Company reduced selling, general and administrative
expenses by $23.8 million and $24.0 million, respectively, 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 Federated POR remaining at January 28, 1995. (See
Note 12 for a description of legal proceedings relating to certain federal
income tax issues.)
The Macy's POR was confirmed by the United States Bankruptcy Court for the
Southern District of New York (the "New York Bankruptcy Court") on December 8,
1994. Notwithstanding the confirmation and effectiveness of the Macy's POR, the
New York Bankruptcy Court continues to have jurisdiction to, among other things,
resolve disputed prepetition claims against the Macy's Debtors, resolve matters
related to the assumption, assumption and assignment, or rejection of executory
contracts pursuant to the Macy's POR, and to resolve other matters that may
arise in connection with or relate to the Macy's POR. Except as described below,
provision was made under the Macy's POR in respect of all prepetition
liabilities of the Macy's Debtors.
Certain claims or portions thereof (collectively, the "Cash Payment
Claims") against the Macy's Debtors which, to the extent allowed by the New York
Bankruptcy Court, will be paid in cash pursuant to the Macy's POR are currently
disputed by the Company. The aggregate amount of disputed Cash Payment Claims
ultimately allowed by the New York Bankruptcy Court may be more or less than the
estimated allowed amount thereof. The aggregate face amount of disputed Cash
Payment Claims was approximately $846.9 million, while the estimated allowed
amount thereof was approximately $355.7 million. Although there can be no
assurance with respect thereto, management believes that the actual allowed
amount of disputed Cash Payment Claims will not be materially greater than the
estimated allowed amount thereof.
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 results of operations and financial position.
F-34
<PAGE> 1
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
FEDERATED DEPARTMENT STORES, INC.
FIRST. The name of the corporation is Federated Department Stores,
Inc. (the "Company").
SECOND. The address of the Company's registered office in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of the Company's registered agent at such address is
The Corporation Trust Company.
THIRD. The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. Section 1. AUTHORIZED CAPITAL STOCK. The Company is
authorized to issue two classes of capital stock, designated Common Stock and
Preferred Stock. The total number of shares of capital stock that the Company
is authorized to issue is 625,000,000 shares, consisting of 500,000,000 shares
of Common Stock, par value $0.01 per share, and 125,000,000 shares of Preferred
Stock, par value $0.01 per share.
Section 2. PREFERRED STOCK. The Preferred Stock may be issued in one
or more series. The Board of Directors of the Company (the "Board") is hereby
authorized to issue the shares of Preferred Stock in such series and to fix
from time to time before issuance the number of shares to be included in any
such series and the designation, relative powers, preferences, and rights and
qualifications, limitations, or restrictions of all shares of such series. The
authority of the Board with respect to each such series will include, without
limiting the generality of the foregoing, the determination of any or all of
the following:
(a) the number of shares of any series and the
designation to distinguish the shares of such series from the shares
of all other series;
(b) the voting powers, if any, and whether such voting
powers are full or limited in such series;
(c) the redemption provisions, if any, applicable to such
series, including the redemption price or prices to be paid;
(d) whether dividends, if any, will be cumulative or
noncumulative, the dividend rate of such series, and the dates and
preferences of dividends on such series;
<PAGE> 2
(e) the rights of such series upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets of,
the Company;
(f) the provisions, if any, pursuant to which the shares
of such series are convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any
other class or classes of stock, or any other security, of the Company
or any other corporation or other entity, and the price or prices or
the rates of exchange applicable thereto;
(g) the right, if any, to subscribe for or to purchase
any securities of the Company or any other corporation or other
entity;
(h) the provisions, if any, of a sinking fund applicable
to such series; and
(i) any other relative, participating, optional, or other
special powers, preferences, rights, qualifications, limitations, or
restrictions thereof;
all as may be determined from time to time by the Board and stated in the
resolution or resolutions providing for the issuance of such Preferred Stock
(collectively, a "Preferred Stock Designation").
Section 3. COMMON STOCK. Except as may otherwise be provided in a
Preferred Stock Designation, the holders of Common Stock will be entitled to
one vote on each matter submitted to a vote at a meeting of stockholders for
each share of Common Stock held of record by such holder as of the record date
for such meeting.
FIFTH. The Board may make, amend, and repeal the By-Laws of the
Company. Any By-Law made by the Board under the powers conferred hereby may be
amended or repealed by the Board (except as specified in any such By-Law so
made or amended) or by the stockholders in the manner provided in the By-Laws
of the Company. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, By-Laws 1, 3(a), 8, 10, 11, 12,
13, and 38 may not be amended or repealed by the stockholders, and no provision
inconsistent therewith may be adopted by the stockholders, without the
affirmative vote of the holders of at least 80% of the Voting Stock, voting
together as a single class; PROVIDED, HOWEVER, that if any such proposed
amendment or repeal or adoption of an inconsistent provision is approved by the
affirmative vote of the holders of a majority, but less than 80%, of the Voting
Stock, voting together as a single class, such proposed amendment, repeal, or
adoption of an inconsistent provision will become effective 12 months after
such approval. The Company may in its By-Laws confer powers upon the Board in
addition to the foregoing and in addition to the powers
- 2 -
<PAGE> 3
and authorities expressly conferred upon the Board by applicable law. For the
purposes of this Certificate of Incorporation, "Voting Stock" means stock of
the Company of any class or series entitled to vote generally in the election
of Directors. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Voting Stock, voting together as a single class, is required to
amend or repeal, or to adopt any provisions inconsistent with, this Article
Fifth.
SIXTH. Subject to the rights of the holders of any series of
Preferred Stock:
(a) any action required or permitted to be taken by the
stockholders of the Company must be effected at a duly called annual
or special meeting of stockholders of the Company and may not be
effected by any consent in writing of such stockholders; and
(b) special meetings of stockholders of the Company may
be called only by (i) the Chairman of the Board (the "Chairman"), (ii)
the Secretary of the Company (the "Secretary") within 10 calendar days
after receipt of the written request of a majority of the total number
of Directors that the Company would have if there were no vacancies
(the "Whole Board"), and (iii) as provided in By-Law 3.
At any annual meeting or special meeting of stockholders of the Company, only
such business will be conducted or considered as has been brought before such
meeting in the manner provided in the By-Laws of the Company. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the Voting Stock, voting
together as a single class, will be required to amend or repeal, or adopt any
provision inconsistent with, this Article Sixth; PROVIDED, HOWEVER, that if any
proposed amendment or repeal of, or adoption of provision inconsistent with,
clause (b) of the first sentence of this Article Sixth is approved by the
affirmative vote of the holders of a majority, but less than 80%, of the Voting
Stock, voting together as a single class, such proposed amendment, repeal, or
adoption of an inconsistent provision will become effective 12 months after
such approval.
SEVENTH. Section 1. NUMBER, ELECTION, AND TERMS OF DIRECTORS.
Subject to the rights, if any, of the holders of any series of Preferred Stock
to elect additional Directors under circumstances specified in a Preferred
Stock Designation, the number of the Directors of the Company will not be less
than three nor more than 16 and will be fixed from time to time in the manner
described in the By-Laws of the Company. The Directors, other than those who
may be elected by the holders of any series of Preferred Stock, will be
classified with respect to the time for which they severally hold office into
three classes, as
- 3 -
<PAGE> 4
nearly equal in number as possible, designated Class I, Class II, and Class
III. At any meeting of stockholders at which Directors are to be elected, the
number of Directors elected may not exceed the greatest number of Directors
then in office in any class of Directors. The Directors first appointed to
Class I will hold office for a term expiring at the annual meeting of
stockholders to be held in 1995; the Directors first appointed to Class II will
hold office for a term expiring at the annual meeting of stockholders to be
held in 1996; and the Directors first appointed to Class III will hold office
for a term expiring at the annual meeting of stockholders to be held in 1997,
with the members of each class to hold office until their successors are
elected and qualified. At each succeeding annual meeting of the stockholders
of the Company, the successors of the class of Directors whose terms expire at
that meeting will be elected by plurality vote of all votes cast at such
meeting to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
Subject to the rights, if any, of the holders of any series of Preferred Stock
to elect additional Directors under circumstances specified in a Preferred
Stock Designation, Directors may be elected by the stockholders only at an
annual meeting of stockholders. Election of Directors of the Company need not
be by written ballot unless requested by the Chairman or by the holders of a
majority of the Voting Stock present in person or represented by proxy at a
meeting of the stockholders at which Directors are to be elected.
Section 2. NOMINATION OF DIRECTOR CANDIDATES. Advance notice of
stockholder nominations for the election of Directors must be given in the
manner provided in the By-Laws of the Company.
Section 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal, or other cause will be filled solely by
the affirmative vote of a majority of the remaining Directors then in office,
even though less than a quorum of the Board, or by a sole remaining Director.
Any Director elected in accordance with the preceding sentence will hold office
for the remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such Director's
successor has been elected and qualified. No decrease in the number of
Directors constituting the Board may shorten the term of any incumbent
Director.
Section 4. REMOVAL. Subject to the rights, if any, of the holders of
any series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office by the
- 4 -
<PAGE> 5
stockholders only for cause and only in the manner provided in this Section 4.
At any annual meeting or special meeting of the stockholders, the notice of
which states that the removal of a Director or Directors is among the purposes
of the meeting, the affirmative vote of the holders of at least 80% of the
Voting Stock, voting together as a single class, may remove such Director or
Directors for cause.
Section 5. AMENDMENT, REPEAL, ETC. Notwithstanding anything contained
in this Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least 80% of the Voting Stock, voting together as a single
class, is required to amend or repeal, or adopt any provision inconsistent
with, this Article Seventh; PROVIDED, HOWEVER, that if any such proposed
amendment or repeal or adoption of an inconsistent provision is approved by the
affirmative vote of the holders of a majority, but less than 80%, of the Voting
Stock, voting together as a single class, such proposed amendment, repeal, or
adoption of an inconsistent provision will become effective 12 months after
such approval.
EIGHTH. Section 1. BUSINESS COMBINATIONS WITH INTERESTED
STOCKHOLDERS. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the Company will not engage in any Business
Combination with any Interested Stockholder for a period of three years
following the date that such stockholder became an Interested Stockholder,
unless (a) prior to such date the Board approved the transaction that resulted
in the stockholder becoming an Interested Stockholder, (b) upon consummation of
the transaction that resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the Voting Stock
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares Owned by (i) Persons
who are Directors and also officers of the Company and (ii) employee stock
plans maintained by the Company or any direct or indirect majority-owned
subsidiary of the Company in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (c) on or subsequent to such date
the Business Combination is approved by the Board and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66-2/3% of the Voting Stock which is not Owned by
the Interested Stockholder.
Section 2. EXCEPTIONS. The restrictions contained in Section 1 of
this Article Eighth will not apply if:
(a) a stockholder becomes an Interested Stockholder
inadvertently and (i) as soon as practicable divests sufficient shares
so that such stockholder ceases to be an Interested Stockholder and
(ii) would not, at any time within the three-year period immediately
prior to a Business
- 5 -
<PAGE> 6
Combination between the Company and such stockholder, have been an
Interested Stockholder but for the inadvertent acquisition; or
(b) the Business Combination is proposed prior to the
consummation or abandonment and subsequent to the earlier of the
public announcement or the notice required under this paragraph (b) of
a proposed transaction which (i) constitutes one of the transactions
described in the second sentence of this paragraph (b); (ii) is with
or by a Person who either was not an Interested Stockholder during the
previous three years or who became an Interested Stockholder with the
approval of the Board; and (iii) is approved or not opposed by a
majority of the members of the Board then in office (but not less than
one) who were Directors prior to any Person becoming an Interested
Stockholder during the previous three years or were recommended for
election or elected to succeed such Directors by a majority of such
Directors. The proposed transactions referred to in the preceding
sentence of this paragraph (b) are limited to (x) a merger or
consolidation of the Company (except for a merger in respect of which,
pursuant to Section 251(f) of the Delaware General Corporation Law as
in effect on the effective date of the plan of reorganization of R. H.
Macy & Co., Inc. and certain of its subsidiaries as confirmed by the
United States Bankruptcy Court for the Southern District of New York
in Case Nos. 92 B 40477 (BRL) (the "Macy's Plan of Reorganization")
(the "DGCL"), no vote of the stockholders of the Company is or would
have been required), (y) a sale, lease, exchange, mortgage, pledge,
transfer, or other disposition (in one transaction or a series of
transactions), whether as part of a dissolution or otherwise, of
assets of the Company or of any direct or indirect majority-owned
subsidiary of the Company (other than to any direct or indirect wholly
owned subsidiary of the Company or to the Company) having an aggregate
market value equal to 50% or more of either the aggregate market value
of all of the assets of the Company determined on a consolidated basis
or the aggregate market value of all the outstanding stock of the
Company, or (z) a proposed tender or exchange offer for 50% or more of
the outstanding Voting Stock. The Company will give at least 20
calendar days notice to all Interested Stockholders prior to the
consummation of any of the transactions described in clauses (x) or
(y) of the second sentence of this paragraph (b).
Section 3. CERTAIN DEFINITIONS. For purposes of this Article Eighth:
(a) "Affiliate" means a Person that directly, or
indirectly through one or more intermediaries, Controls, or is
Controlled By, or is Under Common Control With another Person.
- 6 -
<PAGE> 7
(b) "Associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization of which
such Person is a Director, officer, or partner or is, directly or
indirectly, the Owner of 20% or more of any class of Voting Stock,
(ii) any trust or other estate in which such Person has at least a 20%
beneficial interest or as to which such Person serves as trustee or in
a similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same residence as
such Person.
(c) "Business Combination" means:
(i) any merger or consolidation of the Company or
any direct or indirect majority-owned subsidiary of the
Company with (A) the Interested Stockholder or (B) with any
other corporation if the merger or consolidation is caused by
the Interested Stockholder and as a result of such merger or
consolidation Section 1 of this Article Eighth is not
applicable to the surviving corporation;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition (in one transaction or a series
of transactions), except proportionately as a stockholder of
the Company, to or with the Interested Stockholder, whether as
part of a dissolution or otherwise, of assets of the Company
or of any direct or indirect majority-owned subsidiary of the
Company which assets have an aggregate market value equal to
10% or more of either the aggregate market value of all the
assets of the Company determined on a consolidated basis or
the aggregate market value of all the outstanding stock of the
Company;
(iii) any transaction which results in the issuance
or transfer by the Company or by any direct or indirect
majority-owned subsidiary of the Company of any stock of the
Company or of such subsidiary to the Interested Stockholder,
except (A) pursuant to the exercise, exchange, or conversion
of securities exercisable for, exchangeable for, or
convertible into stock of the Company or any such subsidiary
which securities were outstanding prior to the time that the
Interested Stockholder became such, (B) pursuant to a dividend
or distribution paid or made, or the exercise, exchange, or
conversion of securities exercisable for, exchangeable for, or
convertible into stock of the Company or any such subsidiary
which security is distributed, pro rata to all holders of a
class or series of stock of the Company subsequent to the time
the Interested Stockholder became such, (C) pursuant to an
exchange offer by the Company to purchase stock made on the
same terms to all holders of such stock, or (D) any issuance
or transfer of stock by the Company;
- 7 -
<PAGE> 8
PROVIDED, HOWEVER, that in no case under subclauses (B), (C),
or (D) of this clause (iii) will there be an increase in the
Interested Stockholder's proportionate share of the stock of
any class or series of the Company or of the Voting Stock;
(iv) any transaction involving the Company or any
direct or indirect majority-owned subsidiary of the Company
which has the effect, directly or indirectly, of increasing
the proportionate share of the stock of any class or series,
or securities convertible into the stock of any class or
series, of the Company or of any such subsidiary which is
Owned by the Interested Stockholder, except as a result of
immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock
not caused, directly or indirectly, by the Interested
Stockholder; or
(v) any receipt by the Interested Stockholder of
the benefit, directly or indirectly (except proportionately as
a stockholder of the Company), of any loans, advances,
guarantees, pledges, or other financial benefits (other than
those expressly permitted in clauses (i)-(iv) of this
paragraph (c)) provided by or through the Company or any
direct of indirect majority-owned subsidiary of the Company.
(d) "Control," including the terms "Controlling,"
"Controlled By," and "Under Common Control With," means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract, or otherwise. A
Person who is the Owner of 20% of more of a corporation's outstanding
stock entitled to vote generally in the election of directors will be
presumed to have Control of such corporation, in the absence of proof
by a preponderance of the evidence to the contrary. Notwithstanding
the foregoing, a presumption of Control will not apply where such
Person holds such voting stock, in good faith and not for the purpose
of circumventing this Article Eighth, as an agent, bank, broker,
nominee, custodian, or trustee for one or more Owners who do not
individually or as a group have Control of such corporation.
(e) "Interested Stockholder" means any Person (other than
the Company and any direct or indirect majority-owned subsidiary of
the Company) that (i) is the Owner of 15% or more of the Voting Stock
or (ii) is an Affiliate or Associate of the Company and was the Owner
of 15% or more of the outstanding Voting Stock at any time within the
three-year period immediately prior to the date on which it is sought
to be determined whether such Person is an Interested Stockholder, and
the Affiliates and Associates of such
- 8 -
<PAGE> 9
Person; PROVIDED, HOWEVER, that the term Interested Stockholder will
not include any Person whose Ownership of shares in excess of the 15%
limitation set forth herein is the result of action taken solely by
the Company unless and until such Person thereafter acquires
additional shares of Voting Stock, except as a result of further
corporate action not caused, directly or indirectly, by such Person;
PROVIDED FURTHER, HOWEVER, that a Person will not be deemed to be an
Interested Stockholder solely by reason of such Person, and the
Affiliates and Associates of such Person, receiving, or having the
right to receive, shares of Common Stock, or securities that are
convertible into, or exercisable or exchangeable for, shares of Common
Stock, pursuant to the Macy's Plan of Reorganization unless and until
such time on or after the effective date of the Macy's Plan of
Reorganization as (A) such Person or any Affiliate or Associate of
such Person becomes the Owner of additional Voting Stock representing
1% or more of the outstanding Voting Stock otherwise than pursuant to
the Macy's Plan of Reorganization or as a result of a stock dividend,
stock split, or similar transaction effected by the Company in which
all holders of each class or series of Voting Stock are treated
equally with all other holders of such class or series of Voting Stock
or (B) any Person which Owns Voting Stock representing 1% or more of
the outstanding Voting Stock and was not an Affiliate or Associate of
such Person as of the effective date of the Macy's Plan of
Reorganization subsequently becomes an Affiliate or Associate of such
Person. For the purpose of determining whether a Person is an
Interested Stockholder, the Voting Stock deemed to be outstanding will
include stock deemed to be Owned by such Person through application of
paragraph (f) of this Section 3 but will not include any other
unissued stock of the Company that may be issuable pursuant to any
agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants, options, or other rights.
(f) "Owner" including the terms "Own," "Owned," and
"Ownership" when used with respect to any stock means a Person that
individually or with or through any of its Affiliates or Associates:
(i) beneficially owns such stock, directly or
indirectly; or
(ii) has (A) the right to acquire such stock (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement, or
understanding, or upon the exercise of conversion rights,
exchange rights, warrants, options, or other rights; PROVIDED,
HOWEVER, that a Person will not be deemed the Owner of stock
tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until
such
- 9 -
<PAGE> 10
tendered stock is accepted for purchase or exchange or (B) the
right to vote such stock pursuant to any agreement,
arrangement, or understanding; PROVIDED, HOWEVER, that a
Person will not be deemed to be the Owner of any stock because
of such Person's right to vote such stock if the agreement,
arrangement, or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting
(except voting pursuant to a revocable proxy or consent as
described in subclause (B) of clause (ii) of this paragraph
(f)), or disposing of such stock with any other Person that
beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, such stock.
(g) "Person" means any individual, corporation,
partnership, unincorporated association, or other entity.
Section 4. POWERS OF THE BOARD. For purposes of this Article Eighth,
a majority of the Whole Board will have the power to make all determinations
pursuant to this Article Eighth, including with respect to (a) whether a Person
is an Interested Stockholder, (b) the number of shares of Voting Stock owned by
a Person, (c) whether a Person is an Affiliate or Associate of another Person,
and (d) the aggregate fair market value of assets and stock of the Company.
Section 5. INTERPRETATIONS. Each of the provisions of this Article
Eighth which is also a part of Section 203 of the DGCL will be interpreted in a
manner consistent with the judicial interpretations that have been, or may in
the future be, rendered with respect to Section 203 of the DGCL.
Section 6. AMENDMENT, REPEAL, ETC. Notwithstanding anything contained
in this Certificate of Incorporation to the contrary, the affirmative vote of
at least a majority of the Voting Stock, voting together as a single class, is
required to amend or repeal, or adopt any provision inconsistent with, this
Article Eighth. An amendment or repeal, or adoption of any provision
inconsistent with, this Article Eighth adopted pursuant to this Section 6 shall
not be effective until 12 months after the adoption of such amendment, repeal,
or adoption of an inconsistent provision, and will not apply to any Business
Combination between the Company and any Person who became an Interested
Stockholder on or prior to such amendment, repeal, or adoption of an
inconsistent provision.
NINTH. To the full extent permitted by the Delaware General
Corporation Law or any other applicable law currently or hereafter in effect,
no Director of the Company will be
- 10 -
<PAGE> 11
personally liable to the Company or its stockholders for or with respect to any
acts or omissions in the performance of his or her duties as a Director of the
Company. Any repeal or modification of this Article Ninth will not adversely
affect any right or protection of a Director of the Company existing prior to
such repeal or modification.
TENTH. Each person who is or was or had agreed to become a Director
or officer of the Company, and each such person who is or was serving or who
had agreed to serve at the request of the Board or an officer of the Company as
an employee or agent of the Company or as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
entity, whether for profit or not for profit (including the heirs, executors,
administrators, or estate of such person), will be indemnified by the Company
to the full extent permitted by the Delaware General Corporation Law or any
other applicable law as currently or hereafter in effect. Persons in respect
of whom indemnity obligations were deemed to have been assumed by Federated
Department Stores, Inc. (a predecessor to the Company) pursuant to Article
V.E.3 of the plan of reorganization of Federated Department Stores, Inc.,
Allied Stores Corporation, and certain of their subsidiaries as confirmed by
the United States Bankruptcy Court for the Southern District of Ohio, Western
Division, in Consolidated Case No. 1-90-00130 (the "Federated Plan of
Reorganization") and Section 365 of title 11 of the United States Code as in
effect on the effective date of the Federated Plan of Reorganization (the
"Bankruptcy Code") or in respect of whom indemnity obligations arose thereafter
or may arise in the future by reason of such person's service as a director,
officer, or employee of the Company, will be deemed to have served at the
request of the predecessors of the Company to the extent that they served as
directors, officers, or employees of Federated Stores, Inc. ("FSI") or any of
its affiliates (as defined in Section 101(2) of the Bankruptcy Code) prior to
the effective date of the Federated Plan of Reorganization; PROVIDED, HOWEVER,
that the indemnity provided for in this Article Tenth will not apply to any
person who continued to serve as a director of Ralphs Grocery Company
("Ralphs") as of or following the effective date of the Federated Plan of
Reorganization notwithstanding the immediately preceding sentence of this
Article Tenth to the extent that the action, suit, or proceeding in respect of
which a claim for indemnification is made relates to or arises out of such
person's service as a director, officer, or employee of Ralphs at any time
after the effective date of the Federated Plan of Reorganization. The right of
indemnification provided in this Article Tenth (a) will not be exclusive of any
other rights to which any person seeking indemnification may otherwise be
entitled, including without limitation pursuant to the Agreement and Plan of
Merger, dated as of August 16, 1994, by and between R. H. Macy & Co., Inc. and
Federated Department Stores, Inc. (the "Merger Agreement") or any contract
approved by a majority of the Whole Board (whether or not the Directors
approving such contract are or are to be parties to such contract
- 11 -
<PAGE> 12
or similar contracts), and (b) will be applicable to matters otherwise within
its scope (with each reference in the first sentence of this Article Tenth to
the "Company" being deemed for purposes of this sentence to include all
predecessors of the Company) whether or not such matters arose or arise before
or after the adoption of this Article Tenth except to the extent that the
obligation of the Company or its predecessors to provide such indemnification
would otherwise have terminated as expressly provided in Article V.D.1 of the
Macy's Plan of Reorganization or Article V.E.3 of the Federated Plan of
Reorganization. Without limiting the generality or the effect of the
foregoing, the Company may adopt By-Laws, or enter into one or more agreements
with any person, which provide for indemnification greater or different than
that provided in this Article Tenth or the DGCL. Any amendment or repeal of,
or adoption of any provision inconsistent with, this Article Tenth will not
adversely affect any right or protection existing hereunder, or arising out of
facts occurring, prior to such amendment, repeal, or adoption and no such
amendment, repeal, or adoption, will affect the legality, validity, or
enforceability of any contract entered into or right granted prior to the
effective date of such amendment, repeal, or adoption.
ELEVENTH. The Company will not issue nonvoting capital stock to the
extent prohibited by Section 1123 of the Bankruptcy Code; PROVIDED, HOWEVER,
that this Article Eleventh (a) will have no further force and effect beyond
that required under Section 1123 of the Bankruptcy Code, (b) will have such
force and effect, if any, only for so long as such Section is in effect and
applicable to the Company, and (c) in all events may be amended or eliminated
in accordance with applicable law as from time to time in effect.
- 12 -
<PAGE> 1
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
FEDERATED DEPARTMENT STORES, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Federated Department Stores, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (formerly
known as R. H. Macy & Co., Inc. and hereinafter called the "Company"), DOES
HEREBY CERTIFY:
That, pursuant to authority vested in the Board of Directors of the
Company by its Certificate of Incorporation, and pursuant to the provisions of
Section 151 of the General Corporation Law, the Board of Directors of the
Company has adopted the following resolution providing for the issuance of a
series of Preferred Stock:
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Company (hereinafter called the "Board of Directors" or the
"Board") by the Certificate of Incorporation of the Company, a series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Company be, and it hereby is, created, and that the designation and amount
thereof and the powers, designations, preferences, and relative, participating,
optional, and other special rights of the shares of such series, and the
qualifications, limitations, or restrictions thereof are as follows:
I. Designation and Amount
----------------------
The shares of such series will be designated as Series A Junior
Participating Preferred Stock (the "Series A Preferred") and the number of
shares constituting the Series A Preferred is 5,000,000. Such number of shares
may be increased or decreased by resolution of the Board; PROVIDED, HOWEVER,
that no decrease will reduce the number of shares of Series A Preferred to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights,
or warrants or upon the conversion
<PAGE> 2
of any outstanding securities issued by the Company convertible into Series A
Preferred.
II. Dividends and Distributions.
---------------------------
(a) Subject to the rights of the holders of any shares of
any series of Preferred Stock ranking prior to the Series A Preferred with
respect to dividends, the holders of shares of Series A Preferred, in
preference to the holders of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company, and of any other junior stock, will be
entitled to receive, when, as, and if declared by the Board out of funds
legally available for the purpose, quarterly dividends payable in cash on such
dates as are from time to time established for the payment of quarterly cash
dividends on the Common Stock (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred (the "First Quarterly Dividend Payment Date"), in an amount
per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or
(ii) subject to the provision for adjustment hereinafter set forth, one hundred
times the aggregate per share amount of all cash dividends, and one hundred
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
First Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred. In the event that the Company at
any time (i) declares a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivides the outstanding shares of
Common Stock, (iii) combines the outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such case
and regardless of whether any shares of Series A Preferred are then issued or
outstanding, the amount to which holders of shares of Series A Preferred would
otherwise be entitled immediately prior to such event under clause (ii) of the
preceding sentence will be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Company will declare a dividend or distribution
on the Series A Preferred as provided in the immediately preceding paragraph
immediately after it declares a dividend or distribution on the Common Stock
(other than a
2
<PAGE> 3
dividend payable in shares of Common Stock); PROVIDED, HOWEVER, that, in the
event no dividend or distribution has been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred will nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(c) Dividends will accrue on outstanding shares of Series
A Preferred from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless (i) the date of issue of such shares is prior to
the record date for the First Quarterly Dividend Payment Date, in which case
dividends on such shares will accrue from the date of the first issuance of a
share of Series A Preferred or (ii) the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Preferred entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends will accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends will cumulate from the applicable Quarterly
Dividend Payment Date but will not bear interest. Dividends paid on the shares
of Series A Preferred in an amount less than the total amount of such dividends
at the time accrued and payable on such shares will be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
may fix a record date for the determination of holders of shares of Series A
Preferred entitled to receive payment of a dividend or distribution declared
thereon, which record date will be not more than 60 calendar days prior to the
date fixed for the payment thereof.
III. Voting Rights
-------------
The holders of shares of Series A Preferred will have the following
voting rights:
(a) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred will entitle the holder
thereof to one hundred votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company at any time (i)
declares a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (ii) subdivides the outstanding shares of
Common Stock, (iii) combines the outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues any shares of its
capital stock in a reclassification of the outstanding shares of
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case and regardless of
whether any shares of Series A Preferred are then issued or
outstanding, the number of votes per share to which holders of shares
of Series A
3
<PAGE> 4
Preferred would otherwise be entitled immediately prior to such event
will be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(b) Except as otherwise provided herein, in any other
Preferred Stock Designation creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series A
Preferred and the holders of shares of Common Stock and any other
capital stock of the Company having general voting rights will vote
together as one class on all matters submitted to a vote of
stockholders of the Company.
(c) Except as set forth herein, or as otherwise provided
by law, holders of Series A Preferred will have no voting rights.
IV. Certain Restrictions
--------------------
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred outstanding have been paid in full,
the Company will not:
(i) Declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution, or winding up) to
the Series A Preferred;
(ii) Declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution, or
winding up) with the Series A Preferred, except dividends paid
ratably on the Series A Preferred and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) Redeem, purchase, or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to
the Series A Preferred; PROVIDED, HOWEVER, that the Company may
at any time redeem, purchase, or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the
Company ranking junior (either as to dividends or upon
dissolution, liquidation, or winding up) to the Series A
Preferred; or
4
<PAGE> 5
(iv) Redeem, purchase, or otherwise acquire for
consideration any shares of Series A Preferred, or any shares of
stock ranking on a parity with the Series A Preferred, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board) to all holders of such
shares upon such terms as the Board, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, may determine
in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Company will not permit any majority-owned
subsidiary of the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could, under paragraph
(a) of this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
V. Reacquired Shares
-----------------
Any shares of Series A Preferred purchased or otherwise acquired by
the Company in any manner whatsoever will be retired and canceled promptly
after the acquisition thereof. All such shares will upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation
of the Company, or in any other Preferred Stock Designation creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
VI. Liquidation, Dissolution, or Winding Up
---------------------------------------
Upon any liquidation, dissolution, or winding up of the Company, no
distribution will be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution, or winding up) to the
Series A Preferred unless, prior thereto, the holders of shares of Series A
Preferred have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment; PROVIDED, HOWEVER, that the holders of shares of Series A
Preferred will be entitled to receive an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to one hundred times
the aggregate amount to be distributed per share to holders of shares of Common
Stock or (b) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution, or winding up) with the Series A
Preferred, except distributions made ratably on the Series A Preferred and all
such parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution, or winding up.
In the event the Company at any time (i) declares a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock,
5
<PAGE> 6
(ii) subdivides the outstanding shares of Common Stock, (iii) combines the
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues any shares of its capital stock in a reclassification of the outstanding
shares of Common Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such case and regardless of whether any shares of
Series A Preferred are then issued or outstanding, the aggregate amount to
which each holder of shares of Series A Preferred would otherwise be entitled
immediately prior to such event under the proviso in clause (a) of the
preceding sentence will be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
VII. Consolidation, Merger, Etc.
---------------------------
In the event that the Company enters into any consolidation, merger,
combination, or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash, and/or any other
property, then, in each such case, each share of Series A Preferred will at the
same time be similarly exchanged for or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to one
hundred times the aggregate amount of stock, securities, cash, and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company at any
time (a) declares a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (b) subdivides the outstanding shares of Common
Stock, (c) combines the outstanding shares of Common Stock in a smaller number
of shares, or (d) issues any shares of its capital stock in a reclassification
of the outstanding shares of Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and regardless of
whether any shares of Series A Preferred are then issued or outstanding, the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred will be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
VIII. Redemption
----------
The shares of Series A Preferred are not redeemable.
6
<PAGE> 7
IX. Rank
----
The Series A Preferred rank, with respect to the payment of dividends
and the distribution of assets, junior to all other series of the Company's
Preferred stock.
X. Amendment
---------
Notwithstanding anything contained in the Certificate of Incorporation
of the Company to the contrary and in addition to any other vote required by
applicable law, the Certificate of Incorporation of the Company may not be
amended in any manner that would materially alter or change the powers,
preferences, or special rights of the Series A Preferred so as to affect them
adversely without the affirmative vote of the holders of at least 80% of the
outstanding shares of Series A Preferred, voting together as a single series.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its Vice Chairman and attested by its Secretary this
19th day of December, 1994.
/s/ Ronald W. Tysoe
---------------------------------------
Ronald W. Tysoe
Vice Chairman
Attest:
/s/ Dennis J. Broderick
- - ----------------------------------
Dennis J. Broderick
Secretary
7
<PAGE> 1
===============================================================================
FEDERATED DEPARTMENT STORES, INC.
BY-LAWS
As Adopted and in
Effect on December 19, 1994
Amended as of April 20, 1995
===============================================================================
<PAGE> 2
FEDERATED DEPARTMENT STORES, INC.
BY-LAWS
TABLE OF CONTENTS
-----------------
Page
----
STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Time and Place of Meetings . . . . . . . . . . . . . . . . 1
2. Annual Meeting 1
3. Special Meetings . . . . . . . . . . . . . . . . . . . . . 1
4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . 1
5. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 2
7. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . 2
8. Order of Business . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9. Function . . . . . . . . . . . . . . . . . . . . . . . . . . 4
10. Number, Election, and Terms . . . . . . . . . . . . . . . . . 4
11. Vacancies and Newly Created Directorships . . . . . . . . . . 4
12. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
13. Nominations of Directors; Election . . . . . . . . . . . . . . 5
14. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . 6
15. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . 6
16. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . 6
17. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
18. Participation in Meetings by Telephone Conference . . . . . . 7
19. Committees . . . . . . . . . . . . . . . . . . . . . . . . . 7
20. Compensation . . . . . . . . . . . . . . . . . . . . . . . . 8
21. Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
22. Generally . . . . . . . . . . . . . . . . . . . . . . . . . 9
23. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 9
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
24. Generally . . . . . . . . . . . . . . . . . . . . . . . . . 9
25. Compensation . . . . . . . . . . . . . . . . . . . . . . 9
26. Succession . . . . . . . . . . . . . . . . . . . . . . . 10
27. Authority and Duties . . . . . . . . . . . . . . . . . . 10
STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
28. Certificates . . . . . . . . . . . . . . . . . . . . . . . 10
29. Classes of Stock . . . . . . . . . . . . . . . . . . . . . 10
30. Lost, Stolen, or Destroyed Certificates . . . . . . . . . . 10
31. Record Dates . . . . . . . . . . . . . . . . . . . . . . . 11
i
<PAGE> 3
Page
----
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
32. Damages and Expenses . . . . . . . . . . . . . . . . . . . 11
33. Insurance, Contracts, and Funding . . . . . . . . . . . . . 18
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
34. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 18
35. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
36. Reliance Upon Books, Reports, and Records . . . . . . . . . 18
37. Time Periods . . . . . . . . . . . . . . . . . . . . . . . 18
38. Amendments . . . . . . . . . . . . . . . . . . . . . . . . 18
39. Certain Defined Terms . . . . . . . . . . . . . . . . . . . 19
ii
<PAGE> 4
STOCKHOLDERS' MEETINGS
1. TIME AND PLACE OF MEETINGS. All meetings of the stockholders
for the election of Directors or for any other purpose will be held at such
time and place, within or without the State of Delaware, as may be designated
by the Board or, in the absence of a designation by the Board, the Chairman,
the President, or the Secretary, and stated in the notice of meeting. The
Board may postpone and reschedule any previously scheduled annual or special
meeting of the stockholders.
2. ANNUAL MEETING. An annual meeting of the stockholders will be
held at such date and time as may be designated from time to time by the Board,
at which meeting the stockholders will elect by a plurality vote the Directors
to succeed those whose terms expire at such meeting and will transact such
other business as may properly be brought before the meeting in accordance with
By-Law 8.
3. SPECIAL MEETINGS. (a) Special meetings of the stockholders
may be called only by (i) the Chairman, (ii) the Secretary within 10 calendar
days after receipt of the written request of a majority of the Whole Board, and
(iii) as provided in By-Law 3(b). Any such request by a majority of the Whole
Board must be sent to the Chairman and the Secretary and must state the purpose
or purposes of the proposed meeting. Special meetings of holders of the
outstanding Preferred Stock, if any, may be called in the manner and for the
purposes provided in the applicable Preferred Stock Designation.
(b) Upon the receipt by the Company of a written request executed
by the holders of not less than 15% of the outstanding Voting Stock (a "Meeting
Request"), the Board will (i) call a special meeting of the stockholders for
the purposes specified in the Meeting Request and (ii) fix a record date for
the determination of stockholders entitled to notice of and to vote at such
meeting, which record date will not be later than 60 calendar days after the
date of receipt by the Company of the Meeting Notice; PROVIDED, HOWEVER, that
no separate special meeting of stockholders requested pursuant to a Meeting
Request will be required to be convened if (A) the Board calls an annual or
special meeting of stockholders to be held not later than 90 calendar days
after receipt of such Meeting Request and (B) the purposes of such annual or
special meeting include (among any other matters properly brought before the
meeting) the purposes specified in such Meeting Request. Notwithstanding any
provision of the Certificate of Incorporation or these By-Laws to the contrary,
this By-Law 3(b) may not be amended or repealed by the Board, and no provision
inconsistent therewith may be adopted by the Board, without the affirmative
vote of the holders of at least a majority of the Common Stock present or
represented by proxy and entitled to vote at any annual or special meeting of
stockholders at which such vote is to be taken.
4. NOTICE OF MEETINGS. Written notice of every meeting of the
stockholders, stating the place, date, and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
will be given not less than 10 nor more than 60 calendar days before the date
of the meeting to each
1
<PAGE> 5
stockholder of record entitled to vote at such meeting, except as otherwise
provided herein or by law. When a meeting is adjourned to another place, date,
or time, written notice need not be given of the adjourned meeting if the
place, date, and time thereof are announced at the meeting at which the
adjournment is taken; PROVIDED, HOWEVER, that if the adjournment is for more
than 30 calendar days, or if after the adjournment a new record date is fixed
for the adjourned meeting, written notice of the place, date, and time of the
adjourned meeting must be given in conformity herewith. At any adjourned
meeting, any business may be transacted which properly could have been
transacted at the original meeting.
5. INSPECTORS. The Board may appoint one or more inspectors of
election to act as judges of the voting and to determine those entitled to vote
at any meeting of the stockholders, or any adjournment thereof, in advance of
such meeting. The Board may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the presiding officer of
the meeting may appoint one or more substitute inspectors.
6. QUORUM. Except as otherwise provided by law or in a Preferred
Stock Designation, the holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, will constitute a quorum at all meetings of the stockholders for the
transaction of business thereat. If, however, such quorum is not present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, will have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present or represented.
7. VOTING. Except as otherwise provided by law, by the
Certificate of Incorporation, or in a Preferred Stock Designation, each
stockholder will be entitled at every meeting of the stockholders to one vote
for each share of stock having voting power standing in the name of such
stockholder on the books of the Company on the record date for the meeting and
such votes may be cast either in person or by written proxy. Every proxy must
be duly executed and filed with the Secretary. A stockholder may revoke any
proxy that is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary. The vote upon any question
brought before a meeting of the stockholders may be by voice vote, unless
otherwise required by the Certificate of Incorporation or these By-Laws or
unless the Chairman or the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
such meeting otherwise determine. Every vote taken by written ballot will be
counted by the inspectors of election. When a quorum is present at any
meeting, the affirmative vote of the holders of a majority of the stock present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter and which has actually been voted will be the act of the
stockholders, except in the election of Directors or as otherwise
2
<PAGE> 6
provided in these By-Laws, the Certificate of Incorporation, a Preferred Stock
Designation, or by law.
8. ORDER OF BUSINESS. (a) The Chairman, or such other officer of
the Company designated by a majority of the Whole Board, will call meetings of
the stockholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding officer
of the meeting of the stockholders will also determine the order of business
and have the authority in his or her sole discretion to regulate the conduct of
any such meeting, including without limitation by imposing restrictions on the
persons (other than stockholders of the Company or their duly appointed
proxies) who may attend any such stockholders' meeting, by ascertaining whether
any stockholder or his proxy may be excluded from any meeting of the
stockholders based upon any determination by the presiding officer, in his sole
discretion, that any such person has unduly disrupted or is likely to disrupt
the proceedings thereat, and by determining the circumstances in which any
person may make a statement or ask questions at any meeting of the
stockholders.
(b) At an annual meeting of the stockholders, only such business
will be conducted or considered as is properly brought before the meeting. To
be properly brought before an annual meeting, business must be (i) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board in accordance with By-Law 4, (ii) otherwise properly brought
before the meeting by the presiding officer or by or at the direction of a
majority of the Whole Board, or (iii) otherwise properly requested to be
brought before the meeting by a stockholder of the Company in accordance with
By-Law 8(c).
(c) For business to be properly requested by a stockholder to be
brought before an annual meeting, the stockholder must (i) be a stockholder of
the Company of record at the time of the giving of the notice for such annual
meeting provided for in these By-Laws, (ii) be entitled to vote at such
meeting, and (iii) have given timely notice thereof in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
calendar days prior to the annual meeting; PROVIDED, HOWEVER, that in the event
public announcement of the date of the annual meeting is not made at least 75
calendar days prior to the date of the annual meeting, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th calendar day following the day on which public
announcement is first made of the date of the annual meeting. A stockholder's
notice to the Secretary must set forth as to each matter the stockholder
proposes to bring before the annual meeting (A) a description in reasonable
detail of the business desired to brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (B) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made, (C) the class and number of shares of the Company that are owned
beneficially and of record by the stockholder proposing such business and by
the beneficial owner, if any, on whose behalf the proposal is made, and
3
<PAGE> 7
(D) any material interest of such stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made in such
business. Notwithstanding the foregoing provisions of this By-Law 8(c), a
stockholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this By-Law 8(c). For purposes of this
By-Law 8(c) and By-Law 13, "public announcement" means disclosure in a press
release reported by the Dow Jones News Service, Associated Press, or comparable
national news service or in a document publicly filed by the Company with the
Securities and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the
Securities Exchange Act of 1934, as amended, or furnished to stockholders.
Nothing in this By-Law 8(c) will be deemed to affect any rights of stockholders
to request inclusion of proposals in the Company's proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
(d) At a special meeting of stockholders, only such business may
be conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in
the notice of the meeting (or any supplement thereto) given by or at the
direction of the Chairman or a majority of the Whole Board in accordance with
By-Law 4 or (ii) otherwise properly brought before the meeting by the presiding
officer or by or at the direction of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought
before any annual or special meeting of the stockholders is properly brought
before such meeting in accordance with this By-Law 8 will be made by the
presiding officer of such meeting. If the presiding officer determines that
any business is not properly brought before such meeting, he or she will so
declare to the meeting and any such business will not be conducted or
considered.
DIRECTORS
9. FUNCTION. The business and affairs of the Company will be
managed under the direction of its Board.
10. NUMBER, ELECTION, AND TERMS. Subject to the rights, if any,
of any series of Preferred Stock to elect additional Directors under
circumstances specified in a Preferred Stock Designation and to the minimum and
maximum number of authorized Directors provided in the Certificate of
Incorporation, the authorized number of Directors may be determined from time
to time only (i) by a vote of a majority of the Whole Board or (ii) by the
affirmative vote of the holders of at least 80% of the Voting Stock, voting
together as a single class. The Directors, other than those who may be elected
by the holders of any series of the Preferred Stock, will be classified with
respect to the time for which they severally hold office in accordance with the
Certificate of Incorporation.
11. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a
4
<PAGE> 8
Preferred Stock Designation, newly created directorships resulting from any
increase in the number of Directors and any vacancies on the Board resulting
from death, resignation, disqualification, removal, or other cause will be
filled solely by the affirmative vote of a majority of the remaining Directors
then in office, even though less than a quorum of the Board, or by a sole
remaining Director. Any Director elected in accordance with the preceding
sentence will hold office for the remainder of the full term of the class of
Directors in which the new directorship was created or the vacancy occurred and
until such Director's successor is elected and qualified. No decrease in the
number of Directors constituting the Board will shorten the term of an
incumbent Director.
12. REMOVAL. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office by the stockholders only for cause and only in the manner provided in
the Certificate of Incorporation and, if applicable, any amendment to this
By-Law 12.
13. NOMINATIONS OF DIRECTORS; ELECTION. (a) Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, only persons who are nominated in accordance with the following
procedures will be eligible for election at a meeting of stockholders as
Directors of the Company.
(b) Nominations of persons for election as Directors of the
Company may be made only at an annual meeting of stockholders (i) by or at the
direction of the Board or (ii) by any stockholder who is a stockholder of
record at the time of giving of notice provided for in this By-Law 13, who is
entitled to vote for the election of Directors at such meeting, and who
complies with the procedures set forth in this By-Law 13. All nominations by
stockholders must be made pursuant to timely notice in proper written form to
the Secretary.
(c) To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not less
than 60 calendar days prior to the annual meeting of stockholders; PROVIDED,
HOWEVER, that in the event that public announcement of the date of the annual
meeting is not made at least 75 calendar days prior to the date of the annual
meeting, notice by the stockholder to be timely must be so received not later
than the close of business on the 10th calendar day following the day on which
public announcement is first made of the date of the annual meeting. To be in
proper written form, such stockholder's notice must set forth or include (i)
the name and address, as they appear on the Company's books, of the stockholder
giving the notice and of the beneficial owner, if any, on whose behalf the
nomination is made; (ii) a representation that the stockholder giving the
notice is a holder of record of stock of the Company entitled to vote at such
annual meeting and intends to appear in person or by proxy at the annual
meeting to nominate the person or persons specified in the notice; (iii) the
class and number of shares of stock of the Company owned beneficially and of
record by the stockholder giving the notice and by the beneficial owner, if
any, on whose behalf the
5
<PAGE> 9
nomination is made; (iv) a description of all arrangements or understandings
between or among any of (A) the stockholder giving the notice, (B) the
beneficial owner on whose behalf the notice is given, (C) each nominee, and (D)
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder giving the
notice; (v) such other information regarding each nominee proposed by the
stockholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (vi) the signed consent of each nominee to serve as a director of
the Company if so elected. At the request of the Board, any person nominated
by the Board for election as a Director must furnish to the Secretary that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. The presiding officer of any annual meeting
will, if the facts warrant, determine that a nomination was not made in
accordance with the procedures prescribed by this By-Law 13, and if he or she
should so determine, he or she will so declare to the meeting and the defective
nomination will be disregarded. Notwithstanding the foregoing provisions of
this By-Law 13, a stockholder must also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this By-Law 13.
14. RESIGNATION. Any Director may resign at any time by giving
written notice of his resignation to the Chairman or the Secretary. Any
resignation will be effective upon actual receipt by any such person or, if
later, as of the date and time specified in such written notice.
15. REGULAR MEETINGS. Regular meetings of the Board may be held
immediately after the annual meeting of the stockholders and at such other time
and place either within or without the State of Delaware as may from time to
time be determined by the Board. Notice of regular meetings of the Board need
not be given.
16. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman or the President on one day's notice to each Director by whom
such notice is not waived, given either personally or by mail, telephone,
telegram, telex, facsimile, or similar medium of communication, and will be
called by the Chairman or the President in, like manner and on like notice on
the written request of five or more Directors. Special meetings of the Board
may be held at such time and place either within or without the State of
Delaware as is determined by the Board or specified in the notice of any such
meeting.
17. QUORUM. At all meetings of the Board, a majority of the total
number of Directors then in office will constitute a quorum for the transaction
of business. Except for the designation of committees as hereinafter provided
and except for actions required by these By-Laws or the Certificate of
Incorporation to be taken by a majority of the Whole Board, the act of a
majority of the Directors present at any meeting at which there is a quorum
will be the act of the Board. If a quorum is not present at any meeting of
6
<PAGE> 10
the Board, the Directors present thereat may adjourn the meeting from time to
time to another place, time, or date, without notice other than announcement at
the meeting, until a quorum is present.
18. PARTICIPATION IN MEETINGS BY TELEPHONE CONFERENCE. Members of
the Board or any committee designated by the Board may participate in a meeting
of the Board or any such committee, as the case may be, by means of telephone
conference or similar means by which all persons participating in the meeting
can hear each other, and such participation in a meeting will constitute
presence in person at the meeting.
19. COMMITTEES. (a) The Board, by resolution passed by a majority
of the Whole Board, will designate an executive and finance committee (the
"Executive and Finance Committee") of not less than five members of the Board,
one of whom will be the Chairman. The Executive and Finance Committee will
have and may exercise the powers of the Board, except the power to amend these
By-Laws or the Certificate of Incorporation (except, to the extent authorized
by a resolution of the Whole Board, to fix the designation, preferences, and
other terms of any series of Preferred Stock), adopt an agreement of merger or
consolidation, authorize the issuance of stock, declare a dividend, or
recommend to the stockholders the sale, lease, or exchange of all or
substantially all of the Company's property and assets, a dissolution of the
Company, or a revocation of a dissolution, and except as otherwise provided by
law.
(b) The Board, by resolution passed by a majority of the Whole
Board, may designate one or more additional committees, each such committee to
consist of one or more Directors and each to have such lawfully delegable
powers and duties as the Board may confer.
(c) The Executive and Finance Committee and each other committee
of the Board will serve at the pleasure of the Board or as may be specified in
any resolution from time to time adopted by the Board. The Board may designate
one or more Directors as alternate members of any such committee, who may
replace any absent or disqualified member at any meeting of such committee. In
lieu of such action by the Board, in the absence or disqualification of any
member of a committee of the Board, the members thereof present at any such
meeting of such committee and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the Board to act
at the meeting in the place of any such absent or disqualified member.
(d) Except as otherwise provided in these By-Laws or by law, any
committee of the Board, to the extent provided in Paragraph (a) of this By-Law
or, if applicable, in the resolution of the Board, will have and may exercise
all the powers and authority of the Board in the direction of the management of
the business and affairs of the Company. Any such committee designated by the
Board will have such name as may be determined from time to time by resolution
adopted by the Board. Unless otherwise prescribed by the Board, a majority of
the members of any committee of the Board will constitute a quorum for the
transaction of business, and the act of a majority of the members present at a
meeting at which
7
<PAGE> 11
there is a quorum will be the act of such committee. Each committee of the
Board may prescribe its own rules for calling and holding meetings and its
method of procedure, subject to any rules prescribed by the Board, and will
keep a written record of all actions taken by it.
(e) A majority of the members of the Executive and Finance
Committee, and all of the members of any committee the primary responsibilities
of which include (i) reviewing the professional services to be provided by the
Company's independent auditors and the independence of such firm from the
Company's management, reviewing financial statements with management or
independent auditors, and/or reviewing internal accounting controls, (ii)
reviewing and approving salaries and other compensation, whether cash or
non-cash, and benefits of the Company's executive officers, or (iii)
recommending candidates to the Board for nomination for election to the Board,
will be Non-Employee Directors. For purposes of these By-Laws, "Non-Employee
Director" means any Director who is not a full-time employee of the Company or
any subsidiary of the Company and who, as of the Effective Time of the
Federated/Allied Combination Transactions (as defined in the Federated Plan of
Reorganization), was not then, and for the preceding two years had not been, a
full-time employee of Federated Department Stores, Inc. (a predecessor to the
Company, "Federated"), any subsidiary of Federated, any predecessor of
Federated, any subsidiary of any predecessor of Federated, Federated Stores,
Inc. ("FSI"), Ralphs Grocery Company ("Ralphs"), any other subsidiary of FSI,
Campeau Corporation ("Campeau"), or any other affiliate (as that term is
defined in Section 101(2) of the Bankruptcy Code) of Campeau Corporation;
PROVIDED, HOWEVER, that any Director who is elected to the Board by the
Company's stockholders and who is not at the time of such election a full-time
employee of the Company or any subsidiary of the Company, but who would not
otherwise be a Non-Employee Director because he or she had been such an
employee during such two-year period, will be deemed to be a Non-Employee
Director for all purposes, other than membership on any committee of the Board
described in clause (iii) of the immediately preceding sentence, effective as
of the time of such election. Notwithstanding any provision of the Certificate
of Incorporation or these By-Laws to the contrary, this By-Law 19(e) may not be
amended or repealed by the Board, and no provision inconsistent therewith may
be adopted by the Board, without the affirmative vote of the holders of at
least a majority of the Common Stock present or represented by proxy and
entitled to vote at any annual or special meeting of stockholders at which such
vote is to be taken.
(f) Without limiting the effect of By-Law 19(e), a majority of the
members of the Executive and Finance Committee and each other directorate
committee that the Board may from time to time establish (including without
limitation the Public Policy Committee), and all of the members of each of the
other committees referred to in the first sentence of By-Law 19(e), will be
Independent Directors unless and to the extent that a majority of the
Independent Directors then serving as members of the Board determines in a
specific instance that it would be in the best interests of the Company and its
stockholders that this By-Law 19(f) not operate to preclude the services of one
or more individuals on one or more such committees. For purposes of this
By-Law 19(f), the term "Independent Director" means any Director who, as of any
particular time at which this definition is applied thereto, (i) is not (and
has not been within the preceding 60 months) an employee of the Company or any
of its subsidiaries that is or was a subsidiary of the Company at the time such
Director was an employee thereof; (ii) is not (and has not been within the
preceding 60 months) an executive officer, partner or principal in or of any
corporation or other entity that is or was a paid adviser, consultant or
provider of professional services to, or a substantial supplier of, the Company
or any of its subsidiaries at the time such Director was an executive officer,
partner or principal in or of such corporation or entity; (iii) is not a party
to any contract pursuant to which such Director provides personal services
(other than as a director) to the Company or any of its subsidiaries; (iv) is
not employed by an organization that received (within the preceding 60 months)
eleemosynary grants or endowments from the Company or any of its subsidiaries
in excess of $250,000 in any fiscal year of the Company; (v) is not a parent,
child, sibling, aunt, uncle, niece, nephew or first cousin of any Director or
executive officer of the Company; (vi) is not a party to any agreement binding
him or her to vote, as a stockholder of the Company, in accordance with the
recommendations of the Board; and (vii) is not a director of any corporation or
other entity (other than the Company) of which the Company's Chairman or Chief
Executive Officer is also a director; PROVIDED, HOWEVER, that, as used in this
By-Law 19(f), the term "Company" will not include R. H. Macy & Co., Inc.
("Macy's") prior to its merger with Federated Department Stores, Inc. on
December 19, 1994 and the term "subsidiary" will not include any subsidiary of
Macy's prior to such merger.
20. COMPENSATION. The Board may establish the compensation for,
and reimbursement of the expenses of, Directors for membership on the Board and
on committees of the Board, attendance at meetings of the Board or committees
of the Board, and for other services by Directors to the Company or any of its
majority-owned subsidiaries.
21. RULES. The Board may adopt rules and regulations for the
conduct of meetings and the oversight of the management of the affairs of the
Company.
8
<PAGE> 12
NOTICES
22. GENERALLY. Except as otherwise provided by law, these
By-Laws, or the Certificate of Incorporation, whenever by law or under the
provisions of the Certificate of Incorporation or these By-Laws notice is
required to be given to any Director or stockholder, it will not be construed
to require personal notice, but such notice may be given in writing, by mail,
addressed to such Director or stockholder, at the address of such Director or
stockholder as it appears on the records of the Company, with postage thereon
prepaid, and such notice will be deemed to be given at the time when the same
is deposited in the United States mail. Notice to Directors may also be given
by telephone, telegram, telex, facsimile, or similar medium of communication or
as otherwise may be permitted by these By-Laws.
23. WAIVERS. Whenever any notice is required to be given by law
or under the provisions of the Certificate of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, will be deemed equivalent to such notice. Attendance of a person at a
meeting will constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
OFFICERS
24. GENERALLY. The officers of the Company will be elected by the
Board and will consist of a Chairman (who, unless the Board specifies
otherwise, will also be the Chief Executive Officer), a President, a Deputy
Chairman, a Secretary, and a Treasurer. The Board of Directors may also choose
any or all of the following: one or more Vice Chairmen, one or more Assistants
to the Chairman, one or more Vice Presidents (who may be given particular
designations with respect to authority, function, or seniority), and such other
officers as the Board may from time to time determine. Notwithstanding the
foregoing, by specific action the Board may authorize the Chairman to appoint
any person to any office other than Chairman, President, Secretary, or
Treasurer. Any number of offices may be held by the same person. Any of the
offices may be left vacant from time to time as the Board may determine. In
the case of the absence or disability of any officer of the Company or for any
other reason deemed sufficient by a majority of the Board, the Board may
delegate the absent or disabled officer's powers or duties to any other officer
or to any Director.
25. COMPENSATION. The compensation of all officers and agents of
the Company who are also Directors of the Company will be fixed by the Board or
by a committee of the Board. The Board may fix, or delegate the power to fix,
the compensation of other officers and agents of the Company to an officer of
the Company.
9
<PAGE> 13
26. SUCCESSION. The officers of the Company will hold office
until their successors are elected and qualified. Any officer may be removed
at any time by the affirmative vote of a majority of the Whole Board. Any
vacancy occurring in any office of the Company may be filled by the Board or by
the Chairman as provided in By-Law 24.
27. AUTHORITY AND DUTIES. Each of the officers of the Company
will have such authority and will perform such duties as are customarily
incident to their respective offices or as may be specified from time to time
by the Board.
STOCK
28. CERTIFICATES. Certificates representing shares of stock of
the Company will be in such form as is determined by the Board, subject to
applicable legal requirements. Subject to Section 2.7 of the Merger Agreement,
each such certificate will be numbered and its issuance recorded in the books
of the Company, and such certificate will exhibit the holder's name and the
number of shares and will be signed by, or in the name of, the Company by the
Chairman and the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer, and will also be signed by, or bear the facsimile
signature of, a duly authorized officer or agent of any properly designated
transfer agent of the Company. Any or all of the signatures and the seal of
the Company, if any, upon such certificates may be facsimiles, engraved, or
printed. Such certificates may be issued and delivered notwithstanding that
the person whose facsimile signature appears thereon may have ceased to be such
officer at the time the certificates are issued and delivered.
29. CLASSES OF STOCK. The designations, preferences, and relative
participating, optional, or other special rights of the various classes of
stock or series thereof, and the qualifications, limitations, or restrictions
thereof, will be set forth in full or summarized on the face or back of the
certificates which the Company issues to represent its stock or, in lieu
thereof, such certificates will set forth the office of the Company from which
the holders of certificates may obtain a copy of such information.
30. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Secretary may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Company alleged to have
been lost, stolen, or destroyed, upon the making of an affidavit of that fact,
satisfactory to the Secretary, by the person claiming the certificate of stock
to be lost, stolen, or destroyed. As a condition precedent to the issuance of
a new certificate or certificates, the Secretary may require the owners of such
lost, stolen, or destroyed certificate or certificates to give the Company a
bond in such sum and with such surety or sureties as the Secretary may direct
as indemnity against any claims that may be made against the Company with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of the new certificate.
10
<PAGE> 14
31. RECORD DATES. (a) In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which will not be
more than 60 nor less than 10 calendar days before the date of such meeting.
If no record date is fixed by the Board, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders will
be at the close of business on the calendar day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the
calendar day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of the stockholders will apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
(b) In order that the Company may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion, or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date will not be
more than 60 calendar days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose will be at
the close of business on the calendar day on which the Board adopts the
resolution relating thereto.
(c) The Company will be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes, and
will not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the Company has
notice thereof, except as expressly provided by applicable law.
INDEMNIFICATION
32. DAMAGES AND EXPENSES. (a) Without limiting the generality or
effect of Article Ninth of the Certificate of Incorporation or Section 6.9 of
the Merger Agreement, the Company will to the fullest extent permitted by
applicable law as then in effect indemnify any person (an "Indemnitee") who is
or was involved in any manner (including without limitation as a party or a
witness) or is threatened to be made so involved in any threatened, pending, or
completed investigation, claim, action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (including without limitation any
action, suit, or proceeding by or in the right of the Company to procure a
judgment in its favor) (a "Proceeding") by reason of the fact that such person
is or was or had agreed to become a Director, officer, employee, or agent of
the Company, or is or was serving at the request of the Board or an officer of
the Company as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other entity, whether for profit or not
for profit (including the heirs, executors, administrators, or estate of such
person), or anything done or not by such person in any such capacity, against
all expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually
11
<PAGE> 15
and reasonably incurred by such person in connection with such Proceeding.
Such indemnification will be a contract right and will include the right to
receive payment in advance of any expenses incurred by an Indemnitee in
connection with such Proceeding, consistent with the provisions of applicable
law as then in effect. No change in applicable law or amendment or repeal of
any provision of the Certificate of Incorporation or By-Laws will adversely
affect any right or protection existing hereunder, or arising out of facts
occurring, prior to such change, amendment, or repeal.
(b) The right of indemnification provided in this By-Law 32 will
not be exclusive of any other rights to which any person seeking
indemnification may otherwise be entitled, and will be applicable to
Proceedings commenced or continuing after the adoption of this By-Law 32,
whether arising from acts or omissions occurring before or after such adoption.
(c) In furtherance, but not in limitation of the foregoing
provisions, the following procedures, presumptions, and remedies will apply
with respect to advancement of expenses and the right to indemnification under
this By-Law 32:
(i) All reasonable expenses incurred by or on behalf of
an Indemnitee in connection with any Proceeding will be advanced to
the Indemnitee by the Company within 30 calendar days after the
receipt by the Company of a statement or statements from the
Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such
statement or statements will describe in reasonable detail the
expenses incurred by the Indemnitee and, if and to the extent required
by law at the time of such advance, will include or be accompanied by
an undertaking by or on behalf of the Indemnitee to repay such amounts
advanced as to which it may ultimately be determined that the
Indemnitee is not entitled. If such an undertaking is required by law
at the time of an advance, no security will be required for such
undertaking and such undertaking will be accepted without reference to
the recipient's financial ability to make repayment.
(ii) To obtain indemnification under this By-Law 32, the
Indemnitee will submit to the Secretary a written request, including
such documentation supporting the claim as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to
what extent the Indemnitee is entitled to indemnification (the
"Supporting Documentation"). The determination of the Indemnitee's
entitlement to indemnification will be made not less than 60 calendar
days after receipt by the Company of the written request for
indemnification together with the Supporting Documentation. The
Secretary will promptly upon receipt of such a request for
indemnification advise the Board in writing that the Indemnitee has
requested indemnification. The Indemnitee's entitlement to
indemnification under this By-Law 32 will be determined in one of the
following ways: (A) by a majority vote of the Disinterested Directors
(as hereinafter defined), if they constitute a quorum of the Board,
or, in the
12
<PAGE> 16
case of an Indemnitee that is not a present or former officer of the
Company, by any committee of the Board or committee of officers or
agents of the Company designated for such purpose by a majority of the
Whole Board; (B) by a written opinion of Independent Counsel if (1) a
Change of Control has occurred and the Indemnitee so requests or (2)
in the case of an Indemnitee that is a present or former officer of
the Company, a quorum of the Board consisting of Disinterested
Directors is not obtainable or, even if obtainable, a majority of such
Disinterested Directors so directs; (C) by the stockholders (but only
if a majority of the Disinterested Directors, if they constitute a
quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders for their determination); or (D)
as provided in subparagraph (iii) below. In the event the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to clause (B) above, a majority of the
Disinterested Directors will select the Independent Counsel, but only
an Independent Counsel to which the Indemnitee does not reasonably
object;PROVIDED, HOWEVER, that if a Change of Control has occurred,
the Indemnitee will select such Independent Counsel, but only an
Independent Counsel to which the Board does not reasonably object.
(iii) Except as otherwise expressly provided in this By-Law
32, the Indemnitee will be presumed to be entitled to indemnification
under this By-Law 32 upon submission of a request for indemnification
together with the Supporting Documentation in accordance with
subparagraph (c)(ii) above, and thereafter the Company will have the
burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under
subparagraph (c)(ii) to determine entitlement to indemnification has
not been appointed or has not made a determination within 60 calendar
days after receipt by the Company of the request thereof or together
with the Supporting Documentation, the Indemnitee will be deemed to be
entitled to indemnification and the Indemnitee will be entitled to
such indemnification unless (A) the Indemnitee misrepresented or
failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such
indemnification is prohibited by law. The termination of any
Proceeding described in paragraph (a) of this By-Law 32, or of any
claim, issue, or matter therein, by judgment, order, settlement, or
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, will
not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not
act in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal Proceeding, that the Indemnitee had
reasonable cause to believe that his conduct was unlawful.
(iv) (A) In the event that a determination is made
pursuant to subparagraph (c)(ii) that the Indemnitee is not entitled
to indemnification under this By-Law 32, (1) the Indemnitee will be
entitled to seek an adjudication of his or
13
<PAGE> 17
her entitlement to such indemnification either, at the Indemnitee's
sole option, in (x) an appropriate court of the State of Delaware or
any other court of competent jurisdiction or (y) an arbitration to be
conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association; (2) any such judicial proceeding or
arbitration will be DE NOVO and the Indemnitee will not be prejudiced
by reason of such adverse determination; and (3) in any such judicial
proceeding or arbitration the Company will have the burden of proving
that the Indemnitee is not entitled to indemnification under this
By-Law 32.
(B) If a determination is made or deemed to have been
made, pursuant to subparagraph (c)(ii) or (iii) of this By-Law 32,
that the Indemnitee is entitled to indemnification, the Company will
be obligated to pay the amounts constituting such indemnification
within five business days after such determination has been made or
deemed to have been made and will be conclusively bound by such
determination unless (1) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or
in the Supporting Documentation or (2) such indemnification is
prohibited by law. In the event that advancement of expenses is not
timely made pursuant to subparagraph (c)(i) of this By-Law 32 or
payment of indemnification is not made within five business days after
a determination of entitlement to indemnification has been made or
deemed to have been made pursuant to subparagraph (c)(ii) or (iii) of
this By-Law 32, the Indemnitee will be entitled to seek judicial
enforcement of the Company's obligation to pay to the Indemnitee such
advancement of expenses or indemnification. Notwithstanding the
foregoing, the Company may bring an action, in an appropriate court in
the State of Delaware or any other court of competent jurisdiction,
contesting the right of the Indemnitee to receive indemnification
hereunder due to the occurrence of any event described in subclause
(1) or (2) of this clause (B) (a "Disqualifying Event"); PROVIDED,
HOWEVER, that in any such action the Company will have the burden of
proving the occurrence of such Disqualifying Event.
(C) The Company will be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to the
provisions of this subparagraph (c)(iv) that the procedures and
presumptions of this By-Law 32 are not valid, binding, and enforceable
and will stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this By-Law 32.
(D) In the event that the Indemnitee, pursuant to the
provisions of this subparagraph (c)(iv), seeks a judicial adjudication
of, or an award in arbitration to enforce, his rights under, or to
recover damages for breach of, this By-Law 32, the Indemnitee will be
entitled to recover from the Company, and will be indemnified by the
Company against, any expenses actually and reasonably incurred by the
Indemnitee if the Indemnitee prevails in such judicial adjudication or
arbitration. If it is determined in such judicial
14
<PAGE> 18
adjudication or arbitration that the Indemnitee is entitled to receive
part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by the Indemnitee in connection with
such judicial adjudication or arbitration will be prorated
accordingly.
(v) For purposes of this paragraph (c):
(A) "Change in Control" means the occurrence of any of
the following events (other than the Federated/Macy Merger (as that
term is defined in the Macy's Plan of Reorganization) or any other
event provided for in the Macy's Plan of Reorganization):
(1) The Company is merged, consolidated, or
reorganized into or with another corporation or other legal
entity, and as a result of such merger, consolidation, or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation
or entity immediately after such transaction are held in the
aggregate by the holders of the Voting Stock immediately prior
to such transaction;
(2) The Company sells or otherwise transfers all
or substantially all of its assets to another corporation or
other legal entity and, as a result of such sale or transfer,
less than a majority of the combined voting power of the then-
outstanding securities of such other corporation or entity
immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock immediately prior to
such sale or transfer;
(3) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report or
item therein), each as promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing
30% or more of the combined voting power of the Voting Stock;
(4) The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule
14A (or any successor schedule, form, or report or item
therein) that a change in control of the Company has occurred
or will occur in the future pursuant to any then-existing
contract or transaction; or
(5) If, during any period of two consecutive
years or such longer period, if any, commencing immediately
prior to a meeting of the stockholders at which Directors are
elected and concluding immediately after the next
15
<PAGE> 19
succeeding meeting of stockholders at which Directors are
elected, individuals who at the beginning of any such period
constitute the Directors cease for any reason to constitute at
least a majority thereof; PROVIDED, HOWEVER, that for purposes
of this clause (5) each Director who is first elected, or
first nominated for election by the Company's stockholders, by
a vote of at least two-thirds of the Directors (or a committee
of the Board) then still in office who were Directors at the
beginning of any such period will be deemed to have been a
Director at the beginning of such period.
Notwithstanding the foregoing provisions of clauses (3) or (4) of this
paragraph (c)(v)(A), unless otherwise determined in a specific case by
majority vote of the Board, a "Change in Control" will not be deemed
to have occurred for purposes of such clauses (3) or (4) solely
because (x) the Company, (y) an entity in which the Company, directly
or indirectly, beneficially owns 50% or more of the voting securities
(a "Subsidiary"), or (z) any employee stock ownership plan or any
other employee benefit plan of the Company or any Subsidiary either
files or becomes obligated to file a report or a proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule
14A (or any successor schedule, form, or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of
Voting Stock, whether in excess of 30% or otherwise, or because the
Company reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership.
(B) "Disinterested Director" means a Director of the
Company who is not or was not a party to the Proceeding in respect of
which indemnification is sought by the Indemnitee.
(C) "Independent Counsel" means a law firm or a member of
a law firm that neither presently is, nor in the past five years has
been, retained to represent (1) the Company or the Indemnitee in any
matter material to either such party or (2) any other party to the
Proceeding giving rise to a claim for indemnification under this
By-Law 32. Notwithstanding the foregoing, the term "Independent
Counsel" will not include any person who, under the applicable
standards of professional conduct then prevailing under the law of the
State of Delaware, would be precluded from representing either the
Company or the Indemnitee in an action to determine the Indemnitee's
rights under this By-Law 32.
(d) Notwithstanding anything contained in these By-Laws to the
contrary, and without limiting the generality or effect of Section 6.9 of the
Merger Agreement, the Company will indemnify any person serving (i) on or after
January 15, 1990 as a director, officer, or employee of Federated or any
predecessor of Federated, including Federated Department Stores, Inc. ("Old
Federated") and Allied Stores Corporation ("Allied"), or any of their
respective majority-owned subsidiaries or (ii) as a director, officer, or
employee of another corporation, partnership, joint venture, trust,
16
<PAGE> 20
or other entity, including without limitation Campeau, Campeau Properties, Inc.
("Campeau Properties"), Federated Holdings, Inc. ("Holdings"), Federated
Holdings II, Inc. ("Holdings II"), Federated Holdings III, Inc. ("Holdings
III"), FSI, Gold Circle, Inc. ("Gold Circle"), Ralphs, and their affiliates (as
defined in Section 101(2) of the Bankruptcy Code) as of the effective date of
the Plan of Reorganization other than Old Federated, Allied, and their
respective subsidiaries (collectively, the "FSI Companies"), to the extent that
such person, by reason of such person's past or future service in such a
capacity, is, or but for the merger of Federated and the Company or the merger
of Old Federated and Allied would be, entitled to indemnification by Federated,
Old Federated, Allied, or any of their respective subsidiaries (collectively,
the "Predecessor Companies") under, and to the extent provided in, the
applicable certificates of incorporation, by-laws, or similar constituent
documents of any of the Predecessor Companies, under any written agreement to
which any of the Predecessor Companies is or was a party, or under any
applicable statute; PROVIDED, HOWEVER, that no person who (A) (1) as of the
Effective Date of the Federated Plan of Reorganization (as therein defined) or
prior thereto was a director, officer, or employee of any FSI Company other
than Gold Circle and (2) as of the Effective Date of the Federated Plan of
Reorganization (as therein defined), had not ceased to be a director, officer,
or employee of any FSI Company other than FSI, Gold Circle, or Ralphs or had
not ceased to be an officer or employee of Ralphs or (B) is or becomes a
director, officer, or employee of Holdings, Holdings II, Holdings III, Campeau,
or Campeau Properties or an officer or employee of Ralphs following the
Effective Date of the Federated Plan of Reorganization (as therein defined)
will be entitled to indemnification pursuant to this By-Law 32. Any person who
is entitled to indemnification pursuant to the immediately preceding sentence
or in respect of whom indemnity obligations arise in the future by reason of
his or her service as director, officer, or employee of the Company will be
deemed to have served at the request of Federated, Old Federated and Allied to
the extent that he or she served as a director, officer, or employee of any
subsidiary of Old Federated or Allied or any FSI Company prior to the effective
date of the Plan of Reorganization; PROVIDED, HOWEVER, that such indemnity will
not apply to any person who continued to serve as a director of Ralphs as of or
following the Effective Date of the Federated Plan of Reorganization (as
therein defined) to the extent that any Proceeding relates to or arises out of
such person's service as a director, officer, or employee of Ralphs at any time
after the Effective Date of the Federated Plan of Reorganization (as therein
defined).
(e) If any provision or provisions of this By-Law 32 are held to
be invalid, illegal, or unenforceable for any reason whatsoever: (i) the
validity, legality, and enforceability of the remaining provisions of this
By-Law 32 (including without limitation all portions of any paragraph of this
By-Law 32 containing any such provision held to be invalid, illegal, or
unenforceable, that are not themselves invalid, illegal, or unenforceable) will
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible, the provisions of this By-Law 32 (including without limitation all
portions of any paragraph of this By-Law 32
17
<PAGE> 21
containing any such provision held to be invalid, illegal, or unenforceable,
that are not themselves invalid, illegal, or unenforceable) will be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal, or unenforceable.
33. INSURANCE, CONTRACTS, AND FUNDING. Without limiting the
generality or effect of Section 6.9 of the Merger Agreement, the Company may
purchase and maintain insurance to protect itself and any Indemnitee against
any expenses, judgments, fines, and amounts paid in settlement or incurred by
any Indemnitee in connection with any Proceeding referred to in By-Law 32 or
otherwise, to the fullest extent permitted by applicable law as then in effect.
Without limiting the generality or effect of Section 6.9 of the Merger
Agreement, the Company may enter into contracts with any person entitled to
indemnification under By-Law 32 or otherwise, and may create a trust fund,
grant a security interest, or use other means (including without limitation a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect indemnification as provided in By-Law 32.
GENERAL
34. FISCAL YEAR. The fiscal year of the Company will end on the
Saturday closest to January 31st of each year or such other date as may be
fixed from time to time by the Board.
35. SEAL. The Board may adopt a corporate seal and use the same
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise.
36. RELIANCE UPON BOOKS, REPORTS, AND RECORDS. Each Director,
each member of a committee designated by the Board, and each officer of the
Company will, in the performance of his or her duties, be fully protected in
relying in good faith upon the records of the Company and upon such
information, opinions, reports, or statements presented to the Company by any
of the Company's officers or employees, or committees of the Board, or by any
other person or entity as to matters the Director, committee member, or officer
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Company.
37. TIME PERIODS. In applying any provision of these By-Laws that
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days will be used unless otherwise specified, the
day of the doing of the act will be excluded, and the day of the event will be
included.
38. AMENDMENTS. Except as otherwise provided by law or by the
Certificate of Incorporation or these By-Laws, these By-Laws or any of them may
be amended in any respect or repealed at any time, either (i) at any meeting of
stockholders, provided that any amendment or supplement proposed to be acted
upon at any such meeting has been described or referred to in the notice of
such
18
<PAGE> 22
meeting, or (ii) at any meeting of the Board, provided that no amendment
adopted by the Board may vary or conflict with any amendment adopted by the
stockholders.
39. CERTAIN DEFINED TERMS. Terms used herein with initial capital
letters that are not otherwise defined are used herein as defined in the
Certificate of Incorporation.
19
<PAGE> 1
================================================================================
RIGHTS AGREEMENT,
Dated as of December 19, 1994
By and Between
Federated Department Stores, Inc.
and
The Bank of New York,
as Rights Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Transfer, Split Up, Combination, and Exchange
of Right Certificates; Mutilated, Destroyed,
Lost, or Stolen Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. Cancellation and Destruction of Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. Company Covenants Concerning Securities and
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. Adjustment of Purchase Price, Number and Kind
of Securities, or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . 14
12. Certificate of Adjusted Purchase Price or
Number of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Consolidation, Merger, or Sale or Transfer of
Assets or Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14. Fractional Rights and Fractional Securities . . . . . . . . . . . . . . . . . . . . 27
15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17. Right Certificate Holder Not Deemed a
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19. Merger or Consolidation or Change of Name
of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
22. Issuance of New Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 35
23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
25. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
26. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
27. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
28. Successors; Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
29. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
(ii)
<PAGE> 4
RIGHTS AGREEMENT
----------------
This RIGHTS AGREEMENT, dated as of December 19, 1994 (this
"Agreement"), is made and entered into by and between Federated Department
Stores, Inc., a Delaware corporation (the "Company"), and The Bank of New York,
a New York banking corporation (the "Rights Agent").
RECITALS
--------
A. A plan of reorganization of R.H. Macy & Co. (a predecessor to
the Company, "Macy") and certain of its subsidiaries (as amended, the "Plan of
Reorganization") proposed by Federated Department Stores, Inc. (a predecessor
to the Company, "Old Federated") and Macy was confirmed by the United States
Bankruptcy Court for the Southern District of New York on December 8, 1994.
B. Pursuant to the Plan of Reorganization and the related
Agreement and Plan of Merger (the "Merger Agreement") between Old Federated and
Macy, Old Federated was merged with Macy (the "Merger").
C. The Plan of Reorganization provides for the execution and
delivery of this Agreement by the Company, and this Agreement has been approved
and adopted by the Board of Directors of Old Federated, on behalf of the
Company, effective as of the effective time of the Merger.
D. The Plan of Reorganization, the Merger Agreement, and this
Agreement contemplate that each Common Share (as hereinafter defined) issued
pursuant to the Plan of Reorganization or the Merger Agreement will be
accompanied by one right (a "Right"), each Right initially representing the
right to purchase one one-hundredth of a Preferred Share (as hereinafter
defined), on the terms and subject to the conditions herein set forth.
E. This Agreement further contemplates the issuance of one Right
with respect to each Common Share issued or delivered by the Company (whether
originally issued or delivered from the Company's treasury) after the date
hereof but prior to the earlier of the Distribution Date (as hereinafter
defined) and the Expiration Date (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
<PAGE> 5
(a) "ACQUIRING PERSON" means any Person (other than the Company or
any Subsidiary of the Company or any employee benefit or stock ownership plan
of the Company or of any Subsidiary of the Company or any entity holding Common
Shares for or pursuant to the terms of any such plan) who or which, together
with all Affiliates and Associates of such Person, is the Beneficial Owner of
20% or more of the then-outstanding Common Shares; PROVIDED, HOWEVER, that a
Person will not be deemed to have become an Acquiring Person solely as a result
of a reduction in the number of Common Shares outstanding unless and until (i)
such time as such Person or any Affiliate or Associate of such Person
thereafter becomes the Beneficial Owner of any additional Common Shares, other
than as a result of a stock dividend, stock split, or similar transaction
effected by the Company in which all holders of Common Shares are treated
equally, or (ii) any other Person who is the Beneficial Owner of any Common
Shares thereafter becomes an Affiliate or Associate of such Person; PROVIDED,
FURTHER, HOWEVER, that a Person will not be deemed to have become an Acquiring
Person solely by reason of such Person, and the Affiliates and Associates of
such Person, receiving, or having the right to receive, Common Shares or
securities that are convertible into, or exercisable or exchangeable for,
Common Shares pursuant to the Plan of Reorganization unless and until such time
on or after the Effective Date (as such term is defined in the Plan of
Reorganization) as (A) such Person or any Affiliate or Associate of such Person
becomes the Beneficial Owner of additional Common Shares representing 1% or
more of the then-outstanding Common Shares other than pursuant to the Plan of
Reorganization or as a result of a stock dividend, stock split, or similar
transaction effected by the Company in which all holders of Common Shares are
treated equally or (B) any other Person who is the Beneficial Owner of Common
Shares representing 1% or more of the then-outstanding Common Shares becomes an
Affiliate or Associate of such Person.
(b) "AFFILIATE" and "ASSOCIATE" will have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(c) A Person will be deemed the "BENEFICIAL OWNER" of, and to
"BENEFICIALLY OWN," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to the Plan of Reorganization or any
agreement, arrangement, or understanding (whether or not in writing),
or upon the exercise of conversion rights, exchange rights, warrants,
options, or other rights (in each case, other than upon exercise or
exchange of the
-2-
<PAGE> 6
Rights); PROVIDED, HOWEVER, that a Person will not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or
dispose of, including pursuant to any agreement, arrangement, or
understanding (whether or not in writing); or
(iii) of which any other Person is the Beneficial Owner, if
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement, or understanding (whether or not in writing)
with such other Person (or any of such other Person's Affiliates or
Associates) with respect to acquiring, holding, voting, or disposing
of any securities of the Company;
PROVIDED, HOWEVER, that a Person will not be deemed the Beneficial Owner of, or
to beneficially own, any security (A) if such Person has the right to vote such
security pursuant to an agreement, arrangement, or understanding (whether or
not in writing) which (1) arises solely from a revocable proxy given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange
Act and (2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report), or (B) if such beneficial ownership
arises solely as a result of such Person's status as a "clearing agency", as
defined in Section 3(a)(23) of the Exchange Act; PROVIDED, FURTHER, HOWEVER,
that nothing in this paragraph (c) will cause a Person engaged in business as
an underwriter of securities to be the Beneficial Owner of, or to beneficially
own, any securities acquired through such Person's participation in good faith
in an underwriting syndicate until the expiration of 40 calendar days after the
date of such acquisition, or such later date as the Board of Directors of the
Company may determine in any specific case.
(d) "BUSINESS DAY" means any day other than a Saturday, Sunday, or
a day on which banking institutions in the State of New York (or such other
state in which the principal office of the Rights Agent is located) are
authorized or obligated by law or executive order to close.
(e) "CLOSE OF BUSINESS" on any given date means 5:00 P.M., Eastern
Time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day
it means 5:00 P.M., Eastern time, on the next succeeding Business Day.
-3-
<PAGE> 7
(f) "COMMON SHARES" when used with reference to the Company means
the shares of Common Stock, par value $.01 per share, of the Company; PROVIDED,
HOWEVER, that, if the Company is the continuing or surviving corporation in a
transaction described in Section 11(a)(ii) or Section 13(a)(ii), "Common
Shares" when used with reference to the Company means the capital stock or
equity security with the greatest aggregate voting power of the Company.
"Common Shares" when used with reference to any corporation or other legal
entity other than the Company, including an Issuer, means the capital stock or
equity security with the greatest aggregate voting power of such corporation or
other legal entity.
(g) "COMPANY" means Federated Department Stores, Inc., a Delaware
corporation and the successor by merger of Old Federated and Macy.
(h) "DISTRIBUTION DATE" means the earliest of: (i) the Close of
Business on the tenth Business Day (or, unless the Distribution Date has
previously occurred, such later date as may be specified by the Board of
Directors of the Company) after the Share Acquisition Date, (ii) the Close of
Business on the tenth Business Day (or, unless the Distribution Date has
previously occurred, such later date as may be specified by the Board of
Directors of the Company) after the date of the commencement of a tender or
exchange offer by any Person (other than the Company or any Subsidiary of the
Company or any employee benefit or stock ownership plan of the Company or of
any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan), if upon the consummation thereof such
Person would be the Beneficial Owner of 20% or more of the outstanding Common
Shares, and (iii) the Close of Business on the tenth Business Day after the
first date of public announcement by the Company (by press release, filing made
with the Securities and Exchange Commission, or otherwise) of the first
occurrence of a Triggering Event.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(j) "EXPIRATION DATE" means the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the time at which the Rights are
redeemed as provided in Section 23, and (iii) the time at which all exercisable
Rights are exchanged as provided in Section 27.
(k) "FINAL EXPIRATION DATE" means the tenth anniversary of the
date hereof.
(l) "FLIP-IN EVENT" means any event described in clauses (A), (B),
or (C) of Section 11(a)(ii).
-4-
<PAGE> 8
(m) "FLIP-OVER EVENT" means any event described in clauses (i),
(ii), or (iii) of Section 13(a).
(n) "ISSUER" has the meaning set forth in Section 13(b).
(o) "NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotation System.
(p) "PERSON" means any individual, firm, corporation, or other
legal entity, and includes any successor (by merger or otherwise) of such
entity.
(q) "PREFERRED SHARES" means shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the rights and preferences set forth in the form of Certificates of Designation
of Series A Junior Participating Preferred Stock attached to this Agreement as
Exhibit A.
(r) "PURCHASE PRICE" means initially $62.50 per one one-hundredth
of a Preferred Share, subject to adjustment from time to time as provided in
this Agreement.
(s) "REDEMPTION PRICE" means $0.03 per Right, subject to
adjustment by resolution of the Board of Directors of the Company to reflect
any stock split, stock dividend, or similar transaction occurring after the
date hereof.
(t) "RIGHT" has the meaning set forth in the Recitals to this
Agreement.
(u) "RIGHT CERTIFICATES" means certificates evidencing the Rights,
in substantially the form of Exhibit B attached hereto.
(v) "RIGHTS AGENT" means The Bank of New York, a New York banking
corporation, unless and until a successor Rights Agent has become such pursuant
to the terms of this Agreement, and thereafter, "Rights Agent" means such
successor Rights Agent.
(w) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(x) "SHARE ACQUISITION DATE" means the first date of public
announcement by the Company (by press release, filing made with the Securities
and Exchange Commission, or otherwise) that an Acquiring Person has become
such.
(y) "SUBSIDIARY" when used with reference to any Person means any
corporation or other legal entity of which a majority of the voting power of
the voting equity securities or equity interests is owned, directly or
indirectly, by such
-5-
<PAGE> 9
Person; PROVIDED, HOWEVER, that for purposes of Section 13(b), "Subsidiary"
when used with reference to any Person means any corporation or other legal
entity of which at least 20% of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such
Person.
(z) "TRADING DAY" means any day on which the principal national
securities exchange on which the Common Shares are listed or admitted to
trading is open for the transaction of business or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, a
Business Day.
(aa) "TRIGGERING EVENT" means any Flip-in Event or Flip-over Event.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3, will also be, prior to the Distribution
Date, the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment and
hereby certifies that it complies with the requirements of the New York Stock
Exchange governing transfer agents and registrars. The Company may from time
to time act as Co-Rights Agent or appoint such Co-Rights Agents as it may deem
necessary or desirable. Any actions which may be taken by the Rights Agent
pursuant to the terms of this Agreement may be taken by any such Co-Rights
Agent. To the extent that any Co-Rights Agent takes any action pursuant to
this Agreement, such Co-Rights Agent will be entitled to all of the rights and
protections of, and subject to all of the applicable duties and obligations
imposed upon, the Rights Agent pursuant to the terms of this Agreement.
3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution Date,
(i) the Rights will be evidenced by the certificates representing Common Shares
registered in the names of the record holders thereof (which certificates
representing Common Shares will also be deemed to be Right Certificates), (ii)
the Rights will be transferable only in connection with the transfer of the
underlying Common Shares, and (iii) the surrender for transfer of any
certificates evidencing Common Shares in respect of which Rights have been
issued will also constitute the transfer of the Rights associated with the
Common Shares evidenced by such certificates.
(b) Rights will be issued by the Company in respect of all Common
Shares (other than Common Shares issued upon the exercise or exchange of any
Right) issued or delivered by the Company (whether originally issued or
delivered from the Company's treasury) after the date hereof but prior to the
-6-
<PAGE> 10
earlier of the Distribution Date and the Expiration Date. Certificates
evidencing such Common Shares will have stamped on, impressed on, printed on,
written on, or otherwise affixed to them the following legend or such similar
legend as the Company may deem appropriate and as is not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or transaction reporting system on
which the Common Shares may from time to time be listed or quoted, or to
conform to usage:
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Federated
Department Stores, Inc. and The Bank of New York, a New York banking
corporation (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Federated Department Stores, Inc. The
Rights are not exercisable prior to the occurrence of certain events
specified in the Rights Agreement. Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may
expire, may be amended, or may be evidenced by separate certificates
and no longer be evidenced by this Certificate. Federated Department
Stores, Inc. will mail to the holder of this Certificate a copy of the
Rights Agreement without charge promptly after receipt of a written
request therefor. Under certain circumstances as set forth in the
Rights Agreement, Rights beneficially owned by an Acquiring Person or
any Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement) may become null and void.
(c) As promptly as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send), by first-class, insured, postage prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right Certificate
evidencing one Right for each Common Share so held, subject to adjustment. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
form of election to purchase, the form of assignment, and the form of election
to purchase without the payment of cash to be printed on the reverse thereof)
will be substantially in the form set forth as Exhibit B hereto with
-7-
<PAGE> 11
such changes, marks of identification or designation, and such legends,
summaries, or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
transaction reporting system on which the Rights may from time to time be
listed or quoted, or to conform to usage. Subject to the provisions of Section
22, the Right Certificates, whenever issued, on their face will entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as are set forth therein at the Purchase Price set forth therein, but the
Purchase Price, the number and kind of securities issuable upon exercise of
each Right, and the number of Rights outstanding will be subject to adjustment
as provided herein.
5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates
will be executed on behalf of the Company by its Chairman of the Board, any
Vice Chairman, its President, or any Vice President, either manually or by
facsimile signature, and will have affixed thereto the Company's seal or a
facsimile thereof which will be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates will be manually countersigned by the Rights Agent and will not be
valid for any purpose unless so countersigned. In case any officer of the
Company who signed any of the Right Certificates ceases to be such officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, is a proper officer of
the Company to sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such person was not such officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at the principal office of the Rights Agent designated for
such purpose and at such other offices as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or any transaction reporting system on
which the Rights may from time to time be listed or quoted, books for
registration and transfer of the Right Certificates issued hereunder. Such
books will show the names and addresses of the respective holders of the Right
Certificates, the number of Rights
-8-
<PAGE> 12
evidenced on its face by each of the Right Certificates, and the date of each
of the Right Certificates.
6. TRANSFER, SPLIT UP, COMBINATION, AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST, OR STOLEN RIGHT CERTIFICATES. (a)
Subject to the provisions of Sections 7(d) and 14, at any time after the Close
of Business on the Distribution Date and prior to the Expiration Date, any
Right Certificate or Right Certificates representing exercisable Rights may be
transferred, split up, combined, or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of one one-hundredths of a Preferred Share (or other securities, as the case
may be) as the Right Certificate or Right Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine, or exchange any
such Right Certificate must make such request in writing delivered to the
Rights Agent and must surrender the Right Certificate or Right Certificates to
be transferred, split up, combined, or exchanged at the principal office of the
Rights Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, subject to the provisions of Sections 7(d) and 14, the
Company will prepare, execute, and deliver to the Rights Agent, and the Rights
Agent will countersign and deliver, a Right Certificate or Right Certificates,
as the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination, or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction, or mutilation
of a Right Certificate, and, in case of loss, theft, or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will prepare, execute, and deliver a new Right
Certificate of like tenor to the Rights Agent and the Rights Agent will
countersign and deliver such new Right Certificate to the registered holder in
lieu of the Right Certificate so lost, stolen, destroyed, or mutilated.
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date and prior to the Expiration Date, upon
surrender of the Right Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office or
offices of the
-9-
<PAGE> 13
Rights Agent designated for such purpose, together with payment in cash, in
lawful money of the United States of America by certified check or bank draft
payable to the order of the Company, equal to the sum of (i) the exercise price
for the total number of securities as to which such surrendered Rights are
exercised and (ii) an amount equal to any applicable transfer tax required to
be paid by the holder of such Right Certificate in accordance with the
provisions of Section 9(c). In lieu of the cash payment referred to in the
immediately preceding sentence, following the occurrence of a Triggering Event,
the registered holder of a Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part upon
surrender of the Right Certificate as described above together with an election
to exercise such Rights without payment of cash on the reverse side thereof
duly completed. With respect to any Rights as to which such an election to
exercise Rights without the payment of cash is made, the holder will receive a
number of Common Shares or other securities having a value equal to the
difference between (i) the value of the Common Shares or other securities that
would have been issuable upon payment of the cash amount as described above and
(ii) the amount of such cash payment. For purposes of this Section 7(a), the
value of any security will be the current per share market price thereof (or of
the security as to which such security is deemed for purposes of this Agreement
to be an equivalent), determined pursuant to the applicable provisions of
Section 11(d), on the date of the first occurrence of a Triggering Event.
(b) Upon receipt of a Right Certificate representing exercisable
Rights with the form of election to purchase duly executed, accompanied by
either payment as described above or a duly completed election to exercise
without payment of cash, the Rights Agent will promptly (i) requisition from
any transfer agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) certificates representing the number of one
one-hundredths of a Preferred Share to be purchased (and the Company hereby
irrevocably authorizes and directs its transfer agent to comply with all such
requests), or, if the Company elects to deposit Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one one-
hundredths of a Preferred Share as are to be purchased (and the Company hereby
irrevocably authorizes and directs such depositary agent to comply with all
such requests), (ii) after receipt of such certificates (or depositary
receipts, as the case may be), cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, (iii) when appropriate,
requisition from the Company or any transfer agent therefor (or make available,
if the Rights Agent is the transfer
-10-
<PAGE> 14
agent) certificates representing the number of equivalent common shares to be
issued in lieu of the issuance of Common Shares in accordance with the
provisions of Section 11(a)(iii), (iv) when appropriate, after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names
as may be designated by such holder, (v) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with the provisions of Section 14 or in lieu of the
issuance of Common Shares in accordance with the provisions of Section
11(a)(iii), (vi) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate, and (vii) when
appropriate, deliver any due bill or other instrument provided to the Rights
Agent by the Company for delivery to the registered holder of such Right
Certificate as provided by Section 11(l).
(c) In case the registered holder of any Right Certificate
exercises less than all the Rights evidenced thereby, the Company will prepare,
execute, and deliver a new Right Certificate evidencing Rights equivalent to
the Rights remaining unexercised and the Rights Agent will countersign and
deliver such new Right Certificate to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14.
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company will be obligated to undertake any
action with respect to any purported transfer, split up, combination, or
exchange of any Right Certificate pursuant to Section 6 or exercise of a Right
Certificate as set forth in this Section 7 unless the registered holder of such
Right Certificate has (i) completed and signed the certificate following the
form of assignment or the form of election to purchase, as applicable, set
forth on the reverse side of the Right Certificate surrendered for such
transfer, split up, combination, exchange, or exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company has
reasonably requested.
8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination, or exchange will, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, will be canceled by it,
and no Right Certificates will be issued in lieu thereof except as expressly
permitted by this Agreement. The Company will deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent will so
-11-
<PAGE> 15
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will
deliver all canceled Right Certificates to the Company, or will, at the written
request of the Company, destroy such canceled Right Certificates, and in such
case will deliver a certificate of destruction thereof to the Company.
9. COMPANY COVENANTS CONCERNING SECURITIES AND RIGHTS. The
Company covenants and agrees that:
(a) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other
securities) issuable upon the exercise of the Rights may be listed on
a national securities exchange, it will endeavor to cause, from and
after such time as the Rights become exercisable, all securities
reserved for issuance upon the exercise of Rights to be listed on such
exchange upon official notice of issuance upon such exercise.
(b) It will take all such action as may be necessary to
ensure that all Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) delivered
upon exercise of Rights, at the time of delivery of the certificates
for such securities, will be (subject to payment of the Purchase
Price) duly and validly authorized and issued, fully paid, and
nonassessable securities.
(c) It will pay when due and payable any and all federal
and state transfer taxes and charges that may be payable in respect of
the issuance or delivery of the Right Certificates and of any
certificates representing securities issued upon the exercise of
Rights; PROVIDED, HOWEVER, that the Company will not be required to pay
any transfer tax or charge which may be payable in respect of any
transfer or delivery of Right Certificates to a person other than, or
the issuance or delivery of certificates or depositary receipts
representing securities issued upon the exercise of Rights in a name
other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise, or to issue or deliver any
certificates or depositary receipts representing securities issued
upon the exercise of any Rights until any such tax or charge has been
paid (any such tax or charge being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established
to the Company's reasonable satisfaction that no such tax is due.
(d) It will use its best efforts (i) to file on an
appropriate form, as soon as practicable following the
-12-
<PAGE> 16
later of the first occurrence of a Triggering Event or the
Distribution Date, a registration statement under the Securities Act
with respect to the securities issuable upon exercise of the Rights,
(ii) to cause such registration statement to become effective as soon
as practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such
securities and (B) the Expiration Date. The Company will also take
such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection
with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time after the date set forth in clause (i)
of the first sentence of this Section 9(d), the exercisability of the
Rights in order to prepare and file such registration statement and to
permit it to become effective. Upon any such suspension, the Company
will issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
In addition, if the Company determines that a registration statement
should be filed under the Securities Act or any state securities laws
following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights in each relevant jurisdiction until
such time as a registration statement has been declared effective and,
upon any such suspension, the Company will issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding anything in this
Agreement to the contrary, the Rights will not be exercisable in any
jurisdiction if the requisite registration or qualification in such
jurisdiction has not been effected or the exercise of the Rights is
not permitted under applicable law.
(e) Notwithstanding anything in this Agreement to
contrary, after the Distribution Date it will not, except as permitted
by Section 23 or Section 26, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably
foreseeable that such action will eliminate or otherwise diminish the
benefits intended to be afforded by the Rights.
(f) In the event that the Company is obligated to issue
other securities of the Company and/or pay cash pursuant to Sections
11, 13, or 14, it will make all arrangements necessary so that such
other securities
-13-
<PAGE> 17
and/or cash are available for distribution by the Rights Agent, if and
when appropriate.
10. RECORD DATE. Each Person in whose name any certificate
representing Preferred Shares (or Common Shares and/or other securities, as the
case may be) is issued upon the exercise of Rights will for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate will be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Shares
(or Common Shares and/or other securities, as the case may be) transfer books
of the Company are closed, such Person will be deemed to have become the record
holder of such securities on, and such certificate will be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate will not be entitled to any rights of a stockholder of the Company
with respect to securities for which the Rights will be exercisable, including
without limitation the right to vote, to receive dividends or other
distributions, or to exercise any preemptive rights, and will not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SECURITIES,
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities
issuable upon exercise of each Right, and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company at any time
after the date of this Agreement (A) declares a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivides the
outstanding Preferred Shares, (C) combines the outstanding Preferred
Shares into a smaller number of Preferred Shares, or (D) issues any
shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), the Purchase Price in effect at the time of
the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification, and/or the number
and/or kind of shares of capital stock issuable on such date upon
exercise of a Right, will be proportionately adjusted so that the
holder of any Right exercised after such time is entitled to receive
upon
-14-
<PAGE> 18
payment of the Purchase Price then in effect the aggregate number and
kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, the holder
of such Right would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) or
Section 13, the adjustment provided for in this Section 11(a)(i) will
be in addition to, and will be made prior to, any adjustment required
pursuant to Section 11(a)(ii) or Section 13.
(ii) Subject to the provisions of Section 27, in the event
that:
(A) any Person, at any time on or after the date
of this Agreement, becomes an Acquiring Person (other
than pursuant to any transaction set forth in Section
13(a)); or
(B) any Acquiring Person or any Affiliate or
Associate of any Acquiring Person, at any time on or
after the date of this Agreement at which, for any
reason, the adjustments provided for in this Section
11(a)(ii) have not been theretofore effected and are not
then continuing in effect pursuant to Section
11(a)(ii)(A), directly or indirectly, (1) merges into the
Company or otherwise combines with the Company and the
Company is the continuing or surviving corporation of
such merger or combination (other than in a transaction
subject to Section 13), (2) merges or otherwise combines
with any Subsidiary of the Company, (3) in one or more
transactions (other than in connection with the exercise
or exchange of Rights or the exercise or conversion of
securities exercisable for or convertible into shares of
any class of capital stock of the Company or any of its
Subsidiaries) transfers any assets to the Company or any
of its Subsidiaries in exchange (in whole or in part) for
shares of any class of capital stock of the Company or
any of its Subsidiaries or for securities exercisable for
or convertible into
-15-
<PAGE> 19
shares of any class of capital stock of the Company or
any of its Subsidiaries, or otherwise obtains from the
Company or any of its Subsidiaries, with or without
consideration, any additional shares of any class of
capital stock of the Company or any of its Subsidiaries
or securities exercisable for or convertible into shares
of any class of capital stock of the Company or any of
its Subsidiaries (other than as part of a pro rata
distribution to all holders of such shares of any class
of capital stock of the Company, or any of its
Subsidiaries), (4) sells, purchases, leases, exchanges,
mortgages, pledges, transfers, or otherwise disposes (in
one or more transactions), to, from, with, or of, as the
case may be, the Company or any of its Subsidiaries
(other than in a transaction subject to Section 13),
assets, including securities, on terms and conditions
less favorable to the Company than the Company would be
able to obtain in arm's-length negotiation with an
unaffiliated third party, (5) receives any compensation
from the Company or any of its Subsidiaries other than
compensation as a director or for full-time employment as
a regular employee, in either case, at rates in
accordance with the Company's (or its Subsidiaries') past
practices, or (6) receives the benefit, directly or
indirectly (except proportionately as a stockholder), of
any loans, advances, guarantees, pledges, or other
financial assistance or any tax credits or other tax
advantage provided by the Company or any of its
Subsidiaries; or
(C) during such time as there is an Acquiring
Person and at any time on or after the date of this
Agreement at which, for any reason, the adjustments
provided for in this Section 11(a)(ii) have not been
theretofore effected and are not then continuing in
effect pursuant to Section 11(a)(ii)(A), there is any
reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries, or any other transaction or series of
transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person), other than a transaction
subject to Section 13, which has the effect, directly or
indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any
class of equity securities or of securities exercisable
for or convertible into equity securities of the Company
or any of its Subsidiaries of which an Acquiring Person,
or any Affiliate or Associate of any Acquiring Person, is
the Beneficial Owner;
-16-
<PAGE> 20
then, and in each such case, proper provision will be made so that
each holder of a Right, except as provided below, will thereafter has
a right to receive, upon exercise thereof in accordance with the terms
of this Agreement at an exercise price per Right equal to the product
of the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event, in
lieu of Preferred Shares, such number of Common Shares as equals the
result obtained by (x) multiplying the then-current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the first occurrence of a
Triggering Event, and dividing that product by (y) 50% of the current
per share market price of the Common Shares (determined pursuant to
Section 11(d)) on the date of the first occurrence of a Triggering
Event. Notwithstanding anything in this Agreement to the contrary,
from and after the later of the Distribution Date and the first
occurrence of a Flip-in Event, (1) any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any
Affiliate or Associate of any Acquiring Person) will be void and any
holder of such Rights will thereafter have no right to exercise such
Rights under any provision of this Agreement, (2) no Right Certificate
will be issued pursuant to this Agreement that represents Rights
beneficially owned by any Acquiring Person or any Affiliate or
Associate thereof, (3) no Right Certificate will be issued at any time
upon the transfer of any Rights to any Acquiring Person or any
Affiliate or Associate thereof or to any nominee of any Acquiring
Person or Affiliate or Associate thereof, and (4) any Right
Certificate delivered to the Rights Agent for transfer to any
Acquiring Person or any Affiliate or Associate thereof will be
canceled.
(iii) Upon the occurrence of a Flip-in Event, if there are
not sufficient Common Shares authorized but unissued or issued but not
outstanding to permit the issuance of all the Common Shares issuable
in accordance with Section 11(a)(ii) upon the exercise of a Right, the
Board of Directors of the Company will use its best efforts promptly
to authorize and, subject to the provisions of Section 9(d), make
available for issuance additional Common Shares or other equity
securities of the Company having equivalent voting rights and an
equivalent value (as determined in good faith by the Board of
Directors of the Company) to the Common Shares (for purposes of this
Section 11(a)(iii), "equivalent common shares"). In the event that
equivalent common shares are so authorized, upon the exercise of a
Right in accordance with the provisions of Section 7, the
-17-
<PAGE> 21
registered holder will be entitled to receive (A) Common Shares, to
the extent any are available, and (B) a number of equivalent common
shares, which the Board of Directors of the Company has determined in
good faith to have a value equivalent to the excess of (x) the
aggregate current per share market value of all the Common Shares
issuable in accordance with Section 11(a)(ii) upon the exercise of a
Right (the "Exercise Value") over (y) the aggregate current per share
market value of any Common Shares available for issuance upon the
exercise of such Right; PROVIDED, HOWEVER, that if at any time after
90 calendar days after the first occurrence of a Flip-in Event, there
are not sufficient Common Shares and/or equivalent common shares
available for issuance upon the exercise of a Right, then the Company
will be obligated to deliver, upon the surrender of such Right and
without requiring payment of the Purchase Price, Common Shares (to the
extent available), equivalent common shares (to the extent available)
and then cash (to the extent permitted by applicable law and any
agreements or instruments to which the Company is a party in effect
immediately prior to the first occurrence of any Flip-in Event), which
securities and cash have an aggregate value equal to the excess of (1)
the Exercise Value over (2) the product of the then-current Purchase
Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to the first
occurrence of a Triggering Event. To the extent that any legal or
contractual restrictions prevent the Company from paying the full
amount of cash payable in accordance with the foregoing sentence, the
Company will pay to holders of the Rights as to which such payments
are being made all amounts which are not then restricted on a pro rata
basis and will continue to make payments on a pro rata basis as funds
become available until the full amount due to each such Rights holder
has been paid.
(b) In the event that the Company fixes a record date for the
issuance of rights, options, or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or securities having
equivalent rights, privileges, and preferences as the Preferred Shares (for
purposes of this Section 11(b), "equivalent preferred shares")) or securities
convertible into Preferred Shares or equivalent preferred shares at a price per
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security convertible into Preferred Shares or equivalent preferred
shares) less than the current per share market price of the Preferred Shares
(determined pursuant to Section 11(d)) on such record date, the Purchase Price
to be in effect after
-18-
<PAGE> 22
such record date will be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which is
the number of Preferred Shares outstanding on such record date plus the number
of Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price and the
denominator of which is the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or equivalent
preferred shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case
such subscription price may be paid in a consideration part or all of which is
in a form other than cash, the value of such consideration will be as
determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the Company will not be
deemed outstanding for the purpose of any such computation. Such adjustment
will be made successively whenever such a record date is fixed, and in the
event that such rights, options, or warrants are not so issued, the Purchase
Price will be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In the event that the Company fixes a record date for the
making of a distribution to all holders of Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular periodic cash dividend), assets, stock
(other than a dividend payable in Preferred Shares), or subscription rights,
options, or warrants (excluding those referred to in Section 11(b)), the
Purchase Price to be in effect after such record date will be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which is the current per share market price of
the Preferred Shares (as determined pursuant to Section 11(d)) on such record
date or, if earlier, the date on which Preferred Shares begin to trade on an
ex-dividend or when-issued basis for such distribution, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination will be described in a statement filed with the Rights
Agent) of the portion of the evidences of indebtedness, cash, assets, or stock
so to be distributed or of such subscription rights, options or warrants
applicable to one Preferred Share, and the denominator of which is such current
per share market price of the Preferred Shares. Such adjustments will be made
successively whenever such a record date is fixed; and in the
-19-
<PAGE> 23
event that such distribution is not so made, the Purchase Price will again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of Common Shares on any date will be deemed to
be the average of the daily closing prices per share of such Common Shares for
the 30 consecutive Trading Days immediately prior to such date;PROVIDED,
HOWEVER, that in the event that the current per share market price of the
Common Shares is determined during a period following the announcement by the
issuer of such Common Shares of (A) a dividend or distribution on such Common
Shares payable in such Common Shares or securities convertible into such Common
Shares (other than the Rights) or (B) any subdivision, combination, or
reclassification of such Common Shares, and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination, or reclassification, then,
and in each such case, the current per share market price will be appropriately
adjusted to take into account ex-dividend trading or to reflect the current per
share market price per Common Share equivalent. The closing price for each day
will be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or admitted
to trading or, if the Common Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use, or, if on any
such date the Common Shares are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares selected by the Board of
Directors of the Company. If the Common Shares are not publicly held or not so
listed or traded, or are not the subject of available bid and asked quotes,
"current per share market price" will mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred
-20-
<PAGE> 24
Shares will be determined in the same manner as set forth above for
Common Shares in Section 11(d)(i), other than the last sentence
thereof. If the current per share market price of the Preferred
Shares cannot be determined in the manner provided above, the "current
per share market price" of the Preferred Shares will be conclusively
deemed to be an amount equal to the current per share market price of
the Common Shares multiplied by one hundred (as such number may be
appropriately adjusted to reflect events such as stock splits, stock
dividends, recapitalizations, or similar transactions relating to the
Common Shares occurring after the date of this Agreement). If neither
the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, or the subject of available bid and asked quotes,
"current per share market price" of the Preferred Shares will mean the
fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a
statement filed with the Rights Agent. For all purposes of this
Agreement, the current per share market price of one one-hundredth of
a Preferred Share will be equal to the current per share market price
of one Preferred Share divided by one hundred.
(e) Except as set forth below, no adjustment in the Purchase Price
will be required unless such adjustment would require an increase or decrease
of at least 1% in such price; PROVIDED, HOWEVER, that any adjustments which by
reason of this Section 11(e) are not required to be made will be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 will be made to the nearest cent or to the nearest one
one-millionth of a Preferred Share or one ten-thousandth of a Common Share or
other security, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 will be made no later
than the earlier of (i) three years from the date of the transaction which
requires such adjustment and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a), the holder of any Right thereafter exercised becomes entitled to receive
any securities of the Company other than Preferred Shares, thereafter the
number of such other securities so receivable upon exercise of any Right will
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Shares contained in this Section 11, and the provisions of Sections 7, 9, 10,
and 13 with respect to the Preferred Shares will apply on like terms to any
such other securities.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price
-21-
<PAGE> 25
hereunder will evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a Preferred Share issuable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.
(h) Unless the Company has exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and Section 11(c) with respect to a
distribution of subscription rights, options, or warrants applicable to
Preferred Shares, each Right outstanding immediately prior to the making of
such adjustment will thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-hundredths of a Preferred Share
issuable upon exercise of a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect, on or after the date of any adjustment
of the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights will be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights will become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company will make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, will be at least 10 calendar
days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company will, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to the provisions of Section 14, the
additional Rights to which such holders are entitled as a result of such
adjustment, or, at the option of the Company, will cause to be distributed to
such holders of record in
-22-
<PAGE> 26
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
are entitled after such adjustment. Right Certificates so to be distributed
will be issued, executed, and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
will be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Without respect to any adjustment or change in the Purchase
Price or the number or kind of securities issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue
to express the Purchase Price and the number and kind of securities which were
expressed in the initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares or below the then par value, if any, of any other
securities of the Company issuable upon exercise of the Rights, the Company
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Shares or such other securities, as the case may
be, at such adjusted Purchase Price.
(l) In any case in which this Section 11 otherwise requires that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Preferred Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Preferred Shares or
other securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company delivers to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional Preferred Shares or other securities upon the occurrence of the
event requiring such adjustment.
(m) Notwithstanding anything in this Agreement to the contrary,
the Company will be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the
Company determines to be advisable in order that any (i) consolidation or
subdivision of the Preferred
-23-
<PAGE> 27
Shares, (ii) issuance wholly for cash of Preferred Shares at less than the
current per share market price therefor, (iii) issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (iv) stock dividends, or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Shares is not taxable to such
stockholders.
(n) Notwithstanding anything in this Agreement to the contrary, in
the event that the Company at any time after the date of this Agreement and
prior to the Distribution Date (i) declares a dividend on the outstanding
Common Shares payable in Common Shares, (ii) subdivides the outstanding Common
Shares, (iii) combines the outstanding Common Shares into a smaller number of
shares, or (iv) issues any shares of its capital stock in a reclassification of
the outstanding Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each
Common Share then outstanding, or issued, or delivered thereafter but prior to
the Distribution Date, will be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
equals the result obtained by multiplying the number of Rights associated with
each Common Share immediately prior to such event by a fraction the numerator
of which is the total number of Common Shares outstanding immediately prior to
the occurrence of the event and the denominator of which is the total number of
Common Shares outstanding immediately following the occurrence of such event.
The adjustments provided for in this Section 11(n) will be made successively
whenever such a dividend is paid or such a subdivision, combination or
reclassification is effected.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SECURITIES. Whenever an adjustment is made as provided in Section 11 or
Section 13, the Company will promptly (a) prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Preferred Shares and the Common Shares a copy of such certificate, and (c) if
such adjustment is made after the Distribution Date, mail a brief summary of
such adjustment to each holder of a Right Certificate in accordance with
Section 25.
13. CONSOLIDATION, MERGER, OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. (a) In the event that:
(i) following the Share Acquisition Date, the Company
consolidates with, or merges with or into, any other Person and the
Company is not the continuing or
-24-
<PAGE> 28
surviving corporation of such consolidation or merger; or
(ii) following the Share Acquisition Date, any Person
consolidates with the Company, or merges with or into the Company, and
the Company is the continuing or surviving corporation of such merger
or consolidation and, in connection with such merger or consolidation,
all or part of the Common Shares is changed into or exchanged for
stock or other securities of any other Person or cash or any other
property; or
(iii) following the Share Acquisition Date, the Company,
directly or indirectly, sells or otherwise transfers (or one or more
of its Subsidiaries sells or otherwise transfers), in one or more
transactions, assets or earning power (including without limitation
securities creating any obligation on the part of the Company and/or
any of its Subsidiaries) representing in the aggregate more than 50%
of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons;
then, and in each such case, proper provision will be made so that (A) each
holder of a Right thereafter has the right to receive, upon the exercise
thereof in accordance with the terms of this Agreement at an exercise price per
Right equal to the product of the then-current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Triggering Event,
such number of validly authorized and issued, fully paid, nonassessable, and
freely tradeable Common Shares of the Issuer, free and clear of any liens,
encumbrances, and other adverse claims and not subject to any rights of call or
first refusal, as equals the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is exercisable immediately prior to the first
occurrence of a Triggering Event and dividing that product by (y) 50% of the
current per share market price of the Common Shares of the Issuer (determined
pursuant to Section 11(d)), on the date of consummation of such Flip-over
Event; (B) the Issuer will thereafter be liable for, and will assume, by virtue
of the consummation of such Flip-over Event, all the obligations and duties of
the Company pursuant to this Agreement; (C) the term "Company" will thereafter
be deemed to refer to the Issuer; and (D) the Issuer will take such steps
(including without limitation the reservation of a sufficient number of its
Common Shares to permit the exercise of all outstanding Rights) in connection
with such consummation as may be necessary to assure that the provisions hereof
are thereafter applicable, as nearly as reasonably may be possible, in relation
to its Common Shares thereafter deliverable upon the exercise of the Rights.
-25-
<PAGE> 29
(b) For purposes of this Section 13, "Issuer" means (i) in the
case of any Flip-over Event described in Sections 13(a)(i) or (ii) above, the
Person that is the continuing, surviving, resulting, or acquiring Person
(including the Company as the continuing or surviving corporation of a
transaction described in Section 13(a)(ii) above), and (ii) in the case of any
Flip-over Event described in Section 13(a)(iii) above, the Person that is the
party receiving the greatest portion of the assets or earning power (including
without limitation securities creating any obligation on the part of the
Company and/or any of its Subsidiaries) transferred pursuant to such
transaction or transactions; PROVIDED, HOWEVER, that, in any such case, (A) if
(1) no class of equity security of such Person is, at the time of such merger,
consolidation, or transaction and has been continuously over the preceding
12-month period, registered pursuant to Section 12 of the Exchange Act, and (2)
such Person is a Subsidiary, directly or indirectly, of another Person, a class
of equity security of which is and has been so registered, the term "Issuer"
means such other Person; and (B) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, a class of equity security of two or
more of which are and have been so registered, the term "Issuer" means
whichever of such Persons is the issuer of the equity security having the
greatest aggregate market value. Notwithstanding the foregoing, if the Issuer
in any of the Flip-over Events listed above is not a corporation or other legal
entity having outstanding equity securities, then, and in each such case, (x)
if the Issuer is directly or indirectly wholly owned by a corporation or other
legal entity having outstanding equity securities, then all references to
Common Shares of the Issuer will be deemed to be references to the Common
Shares of the corporation or other legal entity having outstanding equity
securities which ultimately controls the Issuer, and (y) if there is no such
corporation or other legal entity having outstanding equity securities, (I)
proper provision will be made so that the Issuer creates or otherwise makes
available for purposes of the exercise of the Rights in accordance with the
terms of this Agreement, a kind or kinds of security or securities having a
fair market value at least equal to the economic value of the Common Shares
which each holder of a Right would have been entitled to receive if the Issuer
had been a corporation or other legal entity having outstanding equity
securities; and (II) all other provisions of this Agreement will apply to the
issuer of such securities as if such securities were Common Shares.
(c) The Company will not consummate any Flip-over Event, unless
the Issuer has a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 13(b) above) which have not been issued
or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior to
-26-
<PAGE> 30
such consummation the Company and the Issuer have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
subsections (a) and (b) of this Section 13 and further providing that as
promptly as practicable after the consummation of any Flip-over Event, the
Issuer will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities issuable
upon exercise of the Rights on an appropriate form, and use its best
efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date;
(ii) take all such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights;
and
(iii) deliver to holders of the Rights historical financial
statements for the Issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under
the Exchange Act.
(d) The provisions of this Section 13 will similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Flip-over Event occurs at any time after the occurrence of a Flip-in
Event, except for Rights that have become void pursuant to Section 11(a)(ii),
the Rights which have not theretofore been exercised will thereafter become
exercisable in the manner described in Section 13(a).
14. FRACTIONAL RIGHTS AND FRACTIONAL SECURITIES. (a) The Company
will not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, the Company will pay as promptly as practicable to the registered
holders of the Right Certificates with regard to which such fractional Rights
otherwise would be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right is the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights otherwise would have been issuable. The closing price for
any day is the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to
-27-
<PAGE> 31
securities listed or admitted to trading on the New York Stock Exchange or, if
the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the- counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board of Directors of
the Company will be used.
(b) The Company will not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts pursuant to an appropriate agreement between
the Company and a depositary selected by it, provided that such agreement
provides that the holders of such depositary receipts have all the rights,
privileges, and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one
one-hundredth of a Preferred Share, the Company may pay to any Person to whom
or which such fractional Preferred Shares would otherwise be issuable an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For purposes of this Section 14(b), the current market value of one
Preferred Share is the closing price of the Preferred Shares (as determined in
the same manner as set forth for Common Shares in the second sentence of
Section 11(d)(i)) for the Trading Day immediately prior to the date of such
exercise; PROVIDED, HOWEVER, that if the closing price of the Preferred Shares
cannot be so determined, the closing price of the Preferred Shares for such
Trading Day will be conclusively deemed to be an amount equal to the closing
price of the Common Shares (determined pursuant to the second sentence of
Section 11(d)(i)) for such Trading Day multiplied by one hundred (as such
number may be appropriately adjusted to reflect events such as stock splits,
stock dividends, recapitalizations, or similar
-28-
<PAGE> 32
transactions relating to the Common Shares occurring after the date of this
Agreement); provided further, however, that if neither the Common Shares nor
the Preferred Shares are publicly held or listed or admitted to trading on any
national securities exchange, or the subject of available bid and asked quotes,
the current market value of one Preferred Share will be determined in good
faith by the Board of Directors of the Company.
(c) Following the occurrence of a Triggering Event, the Company
will not be required to issue fractions of Common Shares or other securities
issuable upon exercise or exchange of the Rights or to distribute certificates
which evidence any such fractional securities. In lieu of issuing any such
fractional securities, the Company may pay to any Person to whom or which such
fractional securities would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of one such security. For
purposes of this Section 14(c), the current market value of one Common Share or
other security issuable upon the exercise or exchange of Rights is the closing
price thereof (as determined in the same manner as set forth for Common Shares
in the second sentence of Section 11(d)(i)) for the Trading Day immediately
prior to the date of such exercise or exchange; PROVIDED, HOWEVER, that if
neither the Common Shares nor any such other securities are publicly held or
listed or admitted to trading on any national securities exchange, or the
subject of available bid and asked quotes, the current market value of one
Common Share or such other security will be determined in good faith by the
Board of Directors of the Company.
15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the holder of any Common Shares), may in his own
behalf and for his own benefit enforce, and may institute and maintain any
suit, action, or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Right
Certificate, Common Share certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under this Agreement,
-29-
<PAGE> 33
and injunctive relief against actual or threatened violations of the
obligations of any Person subject to this Agreement.
16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights are
transferable only in connection with the transfer of the Common Shares;
(b) After the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer;
(c) The Company and the Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Share certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent will be
affected by any notice to the contrary;
(d) Such holder expressly waives any right to receive any
fractional Rights and any fractional securities upon exercise or
exchange of a Right, except as otherwise provided in Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent will have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree, or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory, or administrative agency or commission, or
any statute, rule, regulation, or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; PROVIDED, HOWEVER, that the
Company will use its best efforts to have any such order, decree, or
ruling lifted or otherwise overturned as soon as possible.
17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Right Certificate will be entitled
-30-
<PAGE> 34
to vote, receive dividends, or be deemed for any purpose the holder of the
Preferred Shares or any other securities of the Company which may at any time
be issuable upon the exercise of the Rights represented thereby, nor will
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of Directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in Section 24), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate have been exercised in accordance
with the provisions of this Agreement or exchanged pursuant to the provisions
of Section 27.
18. CONCERNING THE RIGHTS AGENT. (a) The Company will pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will also indemnify the Rights Agent for, and to hold
it harmless against, any loss, liability, suit, action, proceeding, or expense,
incurred without negligence, bad faith, or willful misconduct on the part of
the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
(b) The Rights Agent will be protected and will incur no liability
for or in respect of any action taken, suffered, or omitted by it in connection
with its administration of this Agreement in reliance upon any Right
Certificate or certificate evidencing Preferred Shares or other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
Person or Persons.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under
-31-
<PAGE> 35
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21. In case at the time such successor Rights Agent succeeds to the
agency created by this Agreement, any of the Right Certificates have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates have not been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates will have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent changes and
at such time any of the Right Certificates have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any
of the Right Certificates have not been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates will have the full force
provided in the Right Certificates and in this Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, will be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel
will be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate
signed by any one of the Chairman of the Board, the President, or any
Vice President of the Company and delivered to the Rights Agent, and
such certificate will be full authorization to the Rights Agent for
any action taken or suffered in
-32-
<PAGE> 36
good faith by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent will be liable hereunder only for
its own negligence, bad faith, or willful misconduct.
(d) The Rights Agent will not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements
and recitals are and will be deemed to have been made by the Company
only.
(e) The Rights Agent will not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor will it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Right Certificate; nor will it
be responsible for any adjustment required under the provisions of
Sections 11 or 13 (including any adjustment which results in Rights
becoming void) or responsible for the manner, method, or amount of any
such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise
of Rights evidenced by Right Certificates after actual notice of any
such adjustment); nor will it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation
of any shares of stock or other securities to be issued pursuant to
this Agreement or any Right Certificate or as to whether any shares of
stock or other securities will, when issued, be validly authorized and
issued, fully paid, and nonassessable.
(f) The Company will perform, execute, acknowledge, and
deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances
as may reasonably be required by the Rights Agent for the carrying out
or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the President, or
any Vice President of the Company, and to apply to such officers for
advice or instructions in connection with its
-33-
<PAGE> 37
duties, and it will not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director,
officer, or employee of the Rights Agent may buy, sell, or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein will preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent will not be answerable or accountable for any act, default,
neglect, or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect, or
misconduct, provided reasonable care was exercised in the selection
and continued employment thereof. The Rights Agent will not be under
any duty or responsibility to ensure compliance with any applicable
federal or state securities laws in connection with the issuance,
transfer, or exchange of Right Certificates.
(j) If, with respect to any Right Certificate surrendered
to the Rights Agent for exercise, transfer, split up, combination, or
exchange, the certificate attached to the form of assignment or form
of election to purchase, as the case may be, has either not been
completed or indicates an affirmative response to clause 1 or 2
thereof, the Rights Agent will not take any further action with
respect to such requested exercise, transfer, split up, combination,
or exchange without first consulting with the Company.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 calendar days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 calendar days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. If the Rights Agent
resigns or is
-34-
<PAGE> 38
removed or otherwise becomes incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of 30 calendar days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who will, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
will be a corporation organized and doing business under the laws of the United
States or of the States of Ohio or New York (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties, and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent will
deliver and transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company will file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the
Preferred Shares and the Common Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, will not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price per share and the number or kind of securities
issuable upon exercise of the Rights made in accordance with the provisions of
this Agreement. In addition, in connection with the issuance or sale by the
Company of Common Shares following the Distribution Date and prior to the
Expiration Date, the Company (a) will, with respect to Common Shares so issued
or sold pursuant to the exercise or conversion of securities
-35-
<PAGE> 39
issued prior to the Distribution Date which are exercisable for, or convertible
into Common Shares, and (b) may, in any other case, if deemed necessary,
appropriate or desirable by the Board of Directors of the Company, issue Right
Certificates representing an equivalent number of Rights as would have been
issued in respect of such Common Shares if they had been issued or sold prior
to the Distribution Date, as appropriately adjusted as provided herein as if
they had been so issued or sold; PROVIDED, HOWEVER, that (i) no such Right
Certificate will be issued if, and to the extent that, in its good faith
judgment the Board of Directors of the Company determines that the issuance of
such Right Certificate could have a material adverse tax consequence to the
Company or to the Person to whom or which such Right Certificate otherwise
would be issued and (ii) no such Right Certificate will be issued if, and to
the extent that, appropriate adjustment otherwise has been made in lieu of the
issuance thereof.
23. REDEMPTION. (a) Prior to the Expiration Date, the Board of
Directors of the Company may, at its option, redeem all but not less than all
of the then-outstanding Rights at the Redemption Price at any time prior to the
Close of Business on the later of (i) the Distribution Date and (ii) the Share
Acquisition Date.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights will be to receive the
Redemption Price, without interest thereon. Promptly after the action of its
Board of Directors ordering the redemption of the Rights, the Company will
publicly announce such action, and within 10 calendar days thereafter, the
Company will give notice of such redemption to the holders of the
then-outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the Company; PROVIDED,
HOWEVER, that the failure to give, or any defect in, any such notice will not
affect the validity of the redemption of the Rights. Any notice which is
mailed in the manner herein provided will be deemed given, whether or not the
holder receives the notice. The notice of redemption mailed to the holders of
Rights will state the method by which the payment of the Redemption Price will
be made. The Company may, at its option, pay the Redemption Price in cash,
Common Shares (based upon the current per share market price of the Common
Shares (determined pursuant to Section 11(d)) at the time of redemption), or
any other form of consideration deemed appropriate by the Board of Directors of
the Company (based upon the fair market value of such other consideration,
determined by the Board of Directors of the Company in good faith) or any
combination thereof. If legal or contractual
-36-
<PAGE> 40
restrictions prevent the Company from paying the Redemption Price (in the form
of consideration deemed appropriate by the Board of Directors) at the time of
redemption, the Company will pay the Redemption Price, without interest,
promptly after such time as the Company ceases to be so prevented from paying
the Redemption Price.
(c) At any time following the Share Acquisition Date, the Board of
Directors of the Company may relinquish the right to redeem the Rights under
this Section 23 by duly adopting a resolution to that effect. Immediately upon
adoption of such resolution, the rights of the Board of Directors of the
Company to redeem the Rights will terminate without further action and without
any notice. Promptly after adoption of such a resolution, the Company will
publicly announce such action; PROVIDED, HOWEVER, that the failure to give, or
any defect in, any such notice will not affect the validity of the action of
the Board of Directors of the Company.
24. NOTICE OF CERTAIN EVENTS. (a) In case, after the
Distribution Date, the Company proposes (i) to pay any dividend payable in
stock of any class to the holders of Preferred Shares or to make any other
distribution to the holders of Preferred Shares (other than a regular periodic
cash dividend), (ii) to offer to the holders of Preferred Shares rights,
options, or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights, or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of assets or
earning power (including without limitation securities creating any obligation
on the part of the Company and/or any of its Subsidiaries) representing more
than 50% of the assets and earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person or Persons, (v) to effect the
liquidation, dissolution, or winding up of the Company, or (vi) to declare or
pay any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or reclassification of the Common Shares then, in each
such case, the Company will give to each holder of a Right Certificate, in
accordance with Section 25, a notice of such proposed action, which specifies
the record date for the purposes of such stock dividend, distribution, or
offering of rights, options, or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to
-37-
<PAGE> 41
be fixed, and such notice will be so given, in the case of any action covered
by clause (i) or (ii) above, at least 10 calendar days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
and, in the case of any such other action, at least 10 calendar days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, whichever
is the earlier.
(b) In case any Triggering Event occurs, then, in any such case,
the Company will as soon as practicable thereafter give to the Rights Agent and
each holder of a Right Certificate, in accordance with Section 25, a notice of
the occurrence of such event, which specifies the event and the consequences of
the event to holders of Rights.
25. NOTICES. (a) Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company will be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attention: General Counsel
(b) Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent will be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: William Skinner
(c) Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
(or, if prior the Distribution Date, to the holder of any certificate
evidencing Common Shares) will be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the last sentence of this
-38-
<PAGE> 42
Section 26, if the Company so directs, the Company and the Rights Agent will
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares upon action of the Board of
Directors of the Company. From and after the Distribution Date and subject to
the last sentence of this Section 26, if the Company so directs, the Company
and the Rights Agent will supplement or amend this Agreement without the
approval of any holders of Right Certificates upon action of the Board of
Directors of the Company in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder, (iv) to change the Redemption Price to another amount
not less than $0.01 per Right, or (v) to supplement or amend the provisions
hereunder in any manner which the Company may deem desirable, including without
limitation the addition of other events requiring adjustment to the Rights
under Sections 11 or 13 or procedures relating to the redemption of the Rights,
which supplement or amendment will not, in the good faith determination of the
Board of Directors of the Company, adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person). Without limiting the generality or
effect of the foregoing, this Agreement may be supplemented or amended to
provide for such voting powers for the Rights and such procedures for the
exercise thereof, if any, as the Board of Directors of the Company may
determine to be appropriate. Upon the delivery of a certificate from an
officer of the Company which states that the proposed supplement or amendment
is in compliance with the terms of this Section 26, the Rights Agent will
execute such supplement or amendment; PROVIDED, HOWEVER, that the failure or
refusal of the Rights Agent to execute such supplement or amendment will not
affect the validity of any supplement or amendment adopted by the Company, any
of which will be effective in accordance with the terms thereof.
Notwithstanding anything in this Agreement to the contrary, no supplement or
amendment will be made which decreases the stated Redemption Price to an amount
less than $0.01 per Right or the period of time remaining until the Final
Expiration Date or which modifies a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable.
27. EXCHANGE. (a) The Board of Directors of the Company may, at
its option, at any time after the later of the Distribution Date and the first
occurrence of a Triggering Event, exchange all or part of the then-outstanding
and exercisable Rights (which will not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii)) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend, or similar transaction
-39-
<PAGE> 43
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors will not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding
Common Shares for or pursuant to the terms of any such plan), who or which,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the then-outstanding Common Shares.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 27(a), and
without any further action and without any notice, the right to exercise such
Rights will terminate and the only right with respect to such Rights thereafter
of the holder of such Rights will be to receive that number of Common Shares
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. Promptly after the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 27(a), the
Company will publicly announce such action, and within 10 calendar days
thereafter will give notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent; PROVIDED, HOWEVER, that the failure to give, or any defect in,
such notice will not affect the validity of such exchange. Any notice which is
mailed in the manner herein provided will be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common Shares for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange will be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii)) held by each holder of Rights.
(c) In any exchange pursuant to this Section 27, the Company, at
its option, may substitute for any Common Share exchangeable for a Right, (i)
equivalent common shares (as such term is used in Section 11(a)(iii)), (ii)
cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value which the
Board of Directors of the Company determines in good faith to be equal to the
current market value of one Common Share (determined pursuant to Section 11(d))
on the Trading Day immediately preceding the date of exchange pursuant to this
Section 27.
28. SUCCESSORS; CERTAIN COVENANTS. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Rights
Agent will be binding on and inure to
-40-
<PAGE> 44
the benefit of their respective successors and assigns hereunder.
29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement will be
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy, or
claim under this Agreement. This Agreement will be for the sole and exclusive
benefit of the Company, the Rights Agent, and the registered holders of the
Right Certificates (or prior to the Distribution Date, the Common Shares).
30. SEVERABILITY. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, or unenforceable, the remainder of the
terms, provisions, covenants, and restrictions of this Agreement will remain in
full force and effect and will in no way be affected, impaired, or invalidated.
31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder will be deemed to be a contract made under the internal
substantive laws of the State of Delaware and for all purposes will be governed
by and construed in accordance with the internal substantive laws of such State
applicable to contracts to be made and performed entirely within such State.
32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to
be an original, and all such counterparts will together constitute but one and
the same instrument.
33. DESCRIPTIVE HEADINGS, ETC. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and will
not control or affect the meaning or construction of any of the provisions
hereof. Unless otherwise expressly provided, references herein to Articles,
Sections, and Exhibits are to Articles, Sections, and Exhibits of or to this
Agreement.
-41-
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
[SEAL]
Attest: FEDERATED DEPARTMENT STORES, INC.
/s/ John R. Sims By: /s/ Dennis J. Broderick
- - --------------------------------- ----------------------------
John R. Sims Dennis J. Broderick
Assistant Secretary Senior Vice President
[SEAL]
Attest: THE BANK OF NEW YORK
/s/ Daniel M. Egan By: /s/ John I. Siverrsen
- - --------------------------------- ----------------------------
Name: Daniel M. Egan Name: John I. Siverrsen
Title: Assistant Treasurer Title: Vice President
-42-
<PAGE> 1
- - -------------------------------------------------------------------------------
CONFORMED COPY
Federated Department Stores, Inc.
and
The First National Bank of Boston,
Trustee
Third Supplemental Trust Indenture
Dated as of January 23, 1995
Supplementing that certain
Indenture
Dated as of December 15, 1994
Authorizing the Issuance and Delivery of
Senior Securities
consisting of $450,000,000 aggregate principal amount of
10% Senior Notes due February 15, 2001
- - -------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Recitals ................................................................................................. 1
[Form of Face of Security] ............................................................................... 2
[Form of Reverse of Security] ............................................................................ 3
[Form of Trustee's Certificate of
Authentication for Senior Notes]
ARTICLE I. ISSUANCE OF SENIOR NOTES. ..................................................................... 7
Section 1.1. Issuance of Senior Notes; Principal Amount;
Maturity ...................................................................... 7
Section 1.2. Interest on the Senior Notes; Payment of
Interest ...................................................................... 7
ARTICLE II. CERTAIN DEFINITIONS. ......................................................................... 8
Section 2.1. Certain Definitions. .............................................................. 8
ARTICLE III. CERTAIN COVENANTS. .......................................................................... 20
Section 3.1. Indebtedness. ..................................................................... 20
Section 3.2. Liens. ............................................................................ 20
Section 3.3. Restricted Payments. .............................................................. 21
Section 3.4. Change of Control. ................................................................ 22
Section 3.5. Payment Restrictions Affecting Restricted
Subsidiaries .................................................................. 23
Section 3.6. Issuance of Subsidiary Preferred Stock. ........................................... 23
Section 3.7. Asset Sales. ...................................................................... 24
Section 3.8. Transactions with Affiliates. ..................................................... 25
Section 3.9. Sale and Leaseback Transactions. .................................................. 26
Section 3.10. Merger and Certain Other Transactions. ........................................... 26
Section 3.11. Permitting Unrestricted Subsidiaries to Become
Restricted SUBSIDIARIES. ...................................................... 26
Section 3.12. Payment Office. .................................................................. 27
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT. ................................................................ 27
Section 4.1. Additional Events of Default. ..................................................... 27
ARTICLE V. DEFEASANCE. ................................................................................... 28
Section 5.1. Applicability of Article V of the Indenture. ...................................... 28
ARTICLE VI. MISCELLANEOUS. ............................................................................... 29
Section 6.1. Reference to and Effect on the Indenture. ......................................... 29
Section 6.2. Waiver of Certain Covenants. ...................................................... 29
Section 6.3. Supplemental Indenture May be Executed In
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Counterparts 29
Section 6.4. Effect of Headings 30
</TABLE>
ii
<PAGE> 4
THIRD SUPPLEMENTAL INDENTURE, dated as of January 23,
1995, between Federated Department Stores, Inc., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), and
The First National Bank of Boston, a national banking association, organized
and existing under the laws of the United States of America, as Trustee
(the "Trustee"), supplementing that certain Indenture, dated as of December
15, 1994, between the Company and the Trustee (the "Indenture").
RECITALS
A. The Company has duly authorized the execution and
delivery of the Indenture to provide for the issuance from time to time of
its unsecured debentures, notes, or other evidences of indebtedness (the
"Securities"), to be issued in one or more series as provided for in the
Indenture.
B. The Indenture provides that the Securities of
each series shall be in substantially the form set forth in the
Indenture, or in such other form as may be established by or pursuant to a
Board Resolution or in one or more indentures supplemental thereto, in each
case with such appropriate insertions, omissions, substitutions, and other
variations as are required or permitted by the Indenture, and may have such
letters, numbers, or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of
any securities exchange or as may, consistently herewith, be determined to be
required by the officers executing such Securities, as evidenced by their
execution thereof.
C. The Company and the Trustee have agreed that the
Company shall issue and deliver, and the Trustee shall authenticate,
Securities denominated "10% Senior Notes due February 15, 2001" (the "Senior
Notes") pursuant to the terms of this Supplemental Indenture and substantially
in the form set forth below, in each case with such appropriate insertions,
omissions, substitutions, and other variations as are required or permitted by
the Indenture and this Supplemental Indenture, and with such letters,
numbers, or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
<PAGE> 5
2
[Form of Face of Security]
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be transferred to, or registered, or
exchanged for Securities registered in the name of, any Person other than the
Depositary or a nominee thereof, and no such transfer may be registered,
except in the limited circumstances described in the Indenture. Every
Security authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, this Security shall be a Global Security subject
to the foregoing, except in such limited circumstances.
FEDERATED DEPARTMENT STORES, INC.
10% Senior Note due February 15, 2001
No. R- ________ $________
Federated Department Stores, Inc., a corporation duly
organized and existing under the laws of the State of Delaware
(hereinafter called the "Company", which term includes any successor Person
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of
$450,000,000 on February 15, 2001, and to pay interest thereon from January
27, 1995 or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semiannually on February 15 and August 15 of
each year, commencing on August 15, 1995, at the rate of 10% per annum, until
the principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
shall, as provided in said Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the February 1 or August 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall
be given to Holders of Securities of this series not less than 10 calendar
days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
<PAGE> 6
3
Payment of the principal of and any such interest on this
Security shall be made at the office or agency of the Company maintained
for the purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; PROVIDED, HOWEVER, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security Register.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET FORTH
ON THE REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH IN THIS PLACE.
This Security shall not be valid or become obligatory for any
purpose until the certificate of authentication herein has been signed
manually by the Trustee under said Indenture.
IN WITNESS WHEREOF, this instrument has been duly executed in
accordance with the Indenture.
FEDERATED DEPARTMENT STORES, INC.
Date Issued:__________ By:______________________________
Attest:
By:___________________
[Form of Reverse of Security]
FEDERATED DEPARTMENT STORES, INC.
This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities") issued and to be issued in
one or more series under an Indenture, dated as of December 15, 1994 (herein
called the "Indenture"), between the Company and The First National Bank of
Boston, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, and immunities thereunder
of the Company, the Trustee, and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and
delivered. This
<PAGE> 7
4
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $450,000,000.
Upon the occurrence of a Change of Control prior to such
time as the Company shall have reached Investment Grade Status or,
thereafter, upon the occurrence of a Designated Event with respect to the
Company and a Rating Decline in connection therewith, the Company is required
to offer to purchase the Securities at a purchase price equal to 101% of the
principal amount thereof, together in the case of any such purchase with
accrued and unpaid interest to the Purchase Date, but interest installments
with a Stated Maturity on or prior to such Purchase Date shall be payable to
the Holders of such Securities of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of the repurchase of this Security in part
only, a new Security or Securities of this series and of like tenor for the
portion hereof not so repurchased shall be issued in the name of the Holder
hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of this Security or (b) certain restrictive
covenants and Events of Default with respect to this Security, in each case
upon compliance with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of
this series shall occur and be continuing, the principal of the Securities
of this series may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Securities at the time Outstanding of each series to be affected.
The Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right
<PAGE> 8
5
to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of
a continuing Event of Default with respect to the Securities of this series,
the Holders of not less than 25% in principal amount of the Securities of
this series at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall
not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent
with such request and shall have failed to institute such proceeding for 60
calendar days after receipt of such notice, request, and offer of indemnity.
The foregoing shall apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or any premium
or interest hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
any premium and interest on this Security at the times, place, and rate, and
in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registerable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of and any premium and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, shall be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable
for a like aggregate principal amount of Securities of this series and of
like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
<PAGE> 9
6
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee, and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security shall be
overdue, and neither the Company, the Trustee, nor any such agent shall be
affected by notice to the contrary.
Unless this Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Company or its agent for registration of transfer, exchange or
payment, and any Security issued upon registration of transfer of, or in
exchange for, or in lieu of, this Security is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.
All terms used in this Security that are defined in the
Indenture shall have the respective meanings assigned to them in the
Indenture.
D. The Trustee's certificate of authentication shall be
in substantially the following form:
[Form of Trustee's Certificate of
Authentication for Senior Notes]
Trustee's Certificate of Authentication
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The First National Bank of
Boston, as Trustee
By:___________________________
Authorized Officer
E. All acts and things necessary to make the Senior
Notes, when the Senior Notes have been executed by the Company and
authenticated by the Trustee and delivered as provided in the Indenture
and this Supplemental Indenture, the valid, binding, and legal obligations
of the Company and to constitute these presents a valid indenture and
agreement according to its terms, have been done and performed, and the
execution and delivery by the Company of the Indenture and this Supplemental
Indenture and
<PAGE> 10
7
the issue hereunder of the Senior Notes have in all respects been duly
authorized; and the Company, in the exercise of legal right and power in it
vested, is executing and delivering the Indenture and this Supplemental
Indenture and proposes to make, execute, issue, and deliver the Senior Notes.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the
Senior Notes are authenticated, issued, and delivered, and in consideration
of the premises and of the purchase and acceptance of the Senior Notes by
the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of the respective Holders from time to time of the Senior Notes, as
follows:
ARTICLE I. ISSUANCE OF SENIOR NOTES.
SECTION 1.1. ISSUANCE OF SENIOR NOTES; PRINCIPAL AMOUNT;
MATURITY.
(a) On January 27, 1995, the Company shall issue and
deliver to the Trustee, and the Trustee shall authenticate, Senior Notes
substantially in the form set forth above, in each case with such appropriate
insertions, omissions, substitutions, and other variations as are required or
permitted by the Indenture and this Supplemental Indenture, and with such
letters, numbers, or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Senior Notes, as evidenced by their execution of such
Senior Notes.
(b) The Senior Notes shall be issued in the aggregate
principal amount of $450,000,000, and shall mature on February 15, 2001.
SECTION 1.2. INTEREST ON THE SENIOR NOTES; PAYMENT OF
INTEREST.
(a) The Senior Notes shall bear interest at the rate of
10% per annum from January 27, 1995, except in the case of Senior Notes
delivered pursuant to Sections 2.05 or 2.07 of the Indenture, which shall bear
interest from the last Interest Payment Date through which interest has been
paid.
(b) The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in such
Indenture, be paid to the Person in whose name a Senior Note (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be the February 1 or
August 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid
<PAGE> 11
8
or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name
the Senior Note (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders
of Securities of this series not less than 10 calendar days prior to such
Special Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which
the Securities of this series may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
(c) Payment of the principal of (and premium, if any)
and any such interest on the Senior Notes shall be made at the office or
agency of the Company maintained for the purpose in New York, New York, in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; PROVIDED,
HOWEVER, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
appears in the Security Register.
ARTICLE II. CERTAIN DEFINITIONS.
SECTION 2.1. CERTAIN DEFINITIONS.
The terms defined in this Section 2.1 (except as herein
otherwise expressly provided or unless the context of this Supplemental
Indenture otherwise requires) for all purposes of this Supplemental Indenture
and of any indenture supplemental hereto have the respective meanings
specified in this Section 2.1. All accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP. All other
terms used in this Supplemental Indenture that are defined in the Indenture or
the Trust Indenture Act, either directly or by reference therein (except as
herein otherwise expressly provided or unless the context of this Supplemental
Indenture otherwise requires), have the respective meanings assigned to such
terms in the Indenture or the Trust Indenture Act, as the case may be, as in
force at the date of this Supplemental Indenture as originally executed.
"Bank Facilities" means the Credit Agreement, dated as
of December 19, 1994, among the Company, certain financial institutions,
Citibank, N.A., as administrative agent, and Chemical Bank, as agent, as the
same may be amended, supplemented, or otherwise modified from time to time.
"Cash Equivalent" means: (a) obligations unconditionally
guaranteed as to principal and interest by the United States of America or
by any agency or authority controlled or supervised by and acting as an
instrumentality of the United
<PAGE> 12
9
States of America; (b) obligations (including, but not limited to, demand or
time deposits, bankers' acceptances and certificates of deposit) issued by a
depository institution or trust company or a wholly owned Subsidiary or
branch office of any depository institution or trust company, provided that
(i) such depository institution or trust company has, at the time of the
Company's or any Restricted Subsidiary's investment therein or contractual
commitment providing for such investment, capital, surplus or undivided
profits (as of the date of such institution's most recently published
financial statements) in excess of $100.0 million and (ii) the commercial
paper of such depository institution or trust company, at the time of the
Company's or any Restricted Subsidiary's investment therein or contractual
commitment providing for such investment, is rated at least A1 by S&P or
P-1 by Moody's; and (c) debt obligations (including, but not limited to,
commercial paper and medium term notes) issued or unconditionally
guaranteed as to principal and interest by any corporation, state or
municipal government or agency or instrumentality thereof, or foreign
sovereignty, if the commercial paper of such corporation, state or
municipal government or foreign sovereignty, at the time of the Company's
or any Restricted Subsidiary's investment therein or contractual commitment
providing for such investment, is rated at least A1 by S&P or P-1 by
Moody's; (d) repurchase obligations with a term of not more than 7 days for
underlying securities of the type described above entered into with a
depository institution or trust company meeting the qualifications described
in clause (b) above; and (e) Investments in money market or mutual funds that
invest predominantly in Cash Equivalents of the type described in clauses (a),
(b), (c) and (d) above; PROVIDED, HOWEVER, that, in the case of clauses (a)
through (c) above, each such investment has a maturity of one year or less from
the date of acquisition thereof.
"Change of Control" means the occurrence of any of the
following events: (a) any "Person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of all classes of
stock of the Company entitled to vote generally in the election of directors
("Voting Stock") of the Company; (b) the Company consolidates with, or merges
with or into, another Person or sells, assigns, conveys, transfers, leases,
or otherwise disposes of all or substantially all of its assets to any
person, or another Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is converted into or exchanged for cash,
securities, or other property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is converted into or exchanged for
(1) Voting Stock (other than redeemable Voting Stock) of the surviving or
transferee corporation, (2) cash, securities, and other property in an amount
that could be paid by the Company as a Restricted Payment,
<PAGE> 13
10
or (3) a combination thereof, and (ii) immediately after such transaction (A)
no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than
50% of the total Voting Stock of the Company and (B) the holders of equity
securities of the Company immediately prior to such transaction hold,
immediately following such transaction, a majority of the total Voting
Stock of the Person surviving such transaction, (c) during any consecutive
two-year period, individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in office;
or (d) the dissolution or liquidation of the Company.
"Consolidated Net Worth" of the Company means the
stockholders' equity of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that adjustments
following the date of this Supplemental Indenture to the accounting books and
records of the Company, in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise,
resulting from the acquisition of control of the Company by another Person
shall not be given effect.
"Debt Rating" means the actual rating assigned to the Notes
by Moody's or S&P. The Company shall use its best efforts to cause both
Moody's and S&P to make a rating of the Senior Notes publicly available, but
in the event that either Moody's or S&P does not make a rating of the Senior
Notes publicly available, the Company shall select any other nationally
recognized securities rating agency ( a "Recognized Rating Agency") to make
such a rating. In such event, the terms "Moody's" and "S&P," as the case
may be, mean, for purposes of this definition, such other Recognized Rating
Agency.
"Designated Event" shall be deemed to have occurred at
such time as (a) a Change of Control occurs or (b) a Designated Restricted
Payment Event occurs.
"Designated Restricted Payment Event" means the (i)
declaration or payment of any dividend on, or the making of any
distribution on account of, the Company's capital stock or (ii) purchase,
redemption, or acquisition or retirement for value of any capital stock
(including any option, warrant, or right to purchase capital stock) of the
Company owned beneficially by a Person other than a wholly owned Subsidiary
of the Company, by the Company or any Subsidiary of the Company, directly or
indirectly, if, after giving effect to any such action set forth
<PAGE> 14
11
in clause (i) or (ii), the Consolidated Net Worth of the Company as at the
end of the last fiscal quarter for which consolidated financial statements
are available is less than $2,750.0 million.
"Effective Date" means December 19, 1994.
"Existing Indebtedness" means all indebtedness under or
evidenced by: (a) the Senior Notes; (b) the outstanding principal amount of
notes issued pursuant to the Loan Agreement, dated as of December 30, 1987,
by and among Allied Stores General Real Estate Company and certain of its
Subsidiaries and The Prudential Insurance Company of America; (c) the
outstanding principal amount of notes issued pursuant to the Mortgage Note
Agreement, dated as of the Effective Date, between Macy's Primary Real Estate,
Inc. and Federated Noteholding Corporation; (d) the outstanding principal
amount of notes issued pursuant to the Loan Agreement, dated as of May 26,
1994, by and among Joseph Horne Co., Inc., PNC Bank, Ohio, National
Association, as agent, and the financial institutions listed on the
signature pages thereof; (e) the Capital Lease Obligations of the Company
and the Restricted Subsidiaries existing on the date hereof; (f) the
outstanding principal amount of uncertificated obligations of the Company
owed to the Internal Revenue Service and other taxing authorities; (g) the
existing secured mortgage debt assumed pursuant to the Plan; (h) the Note
Override Agreement dated as of December 19, 1994, by Kings Plaza Shopping
Center of Avenue U, Inc., as Issuer, and The John Hancock Mutual Life
Insurance Company, as Noteholder and the Promissory Note, dated as of
December 19, 1994, by Macy's Kings Plaza Real Estate, Inc., as Issuer, and The
John Hancock Mutual Life Insurance Company, as Noteholder; and (i) the other
secured Indebtedness of the Company or secured or unsecured Indebtedness of the
Restricted Subsidiaries existing on the date hereof.
"Full Rating Category" means (i) with respect to S&P, any of
the following categories: BB, B, CCC, CC, and C, and (ii) with respect to
Moody's, any of the following categories: Ba, B, Caa, Ca, and C. In
determining whether the rating of the Notes has decreased by the equivalent of
one Full Rating Category, gradation within Full Rating Categories (+ and -
for S&P; 1, 2, and 3 for Moody's) shall be taken into account (e.g., with
respect to S&P, a decline in rating from BB+ to BB-, or from BB to B+, shall
constitute a decrease of less than one Full Rating Category).
"Interest Coverage Ratio" means the ratio of (a) the sum of
(i) net income (other than net income of any Restricted Subsidiary during a
period in which such Restricted Subsidiary is prohibited from paying dividends
pursuant to any provision referred to in clause (ii), (iii), or (iv) of
Section 3.5 hereof, (ii) net interest expense, (iii) cash dividends with
respect to redeemable preferred stock (to the extent deducted from net income
and not included in net interest expense in accordance with GAAP), (iv) income
tax expense, (v) depreciation expense,
<PAGE> 15
12
(vi) amortization expense, and (vii) the net amount, which may be less than
zero, of extraordinary and unusual losses minus extraordinary and unusual
gains of the Company and its Subsidiaries on a consolidated basis, to (b)
net interest expense, plus cash dividends with respect to redeemable
preferred stock (to the extent deducted from net income and not included in
net interest expense in accordance with GAAP), of the Company and its
Subsidiaries on a consolidated basis, all as determined in accordance with
GAAP (or, in respect of the net income of any Restricted Subsidiary for
purposes of the parenthetical in clause (a)(i) above, the normal accounting
practices of such Restricted Subsidiary as in effect from time to time) for
the four most recently completed fiscal quarters of the Company.
"Investment" means, with respect to any Person, any
direct or indirect loan or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition by such Person of any capital stock, bonds,
notes, debentures, or other securities or evidences of Indebtedness issued by
any other Person. The amount of any Investment shall be the original cost
thereof, plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, write-ups, write-downs, or write-offs with
respect to such Investment.
"Investment Grade" means a rating of at least BBB- (or the
equivalent) or higher by S&P and Baa3 (or the equivalent) or higher by
Moody's.
"Investment Grade Status" exists as of a date and
thereafter if at such date the Debt Rating by both Moody's and S&P is
Investment Grade.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory
or other), security interest, or preference, priority, or other security
agreement or preferential arrangement of any kind or nature whatsoever
intended to assure payment of any Indebtedness or other obligation, including
without limitation any conditional sale, deferred purchase price, or other
title retention agreement, the interest of a lessor under a Capital Lease
Obligation, any financing lease having substantially the same economic effect
as any of the foregoing, and the filing, under the Uniform Commercial Code or
comparable law of any jurisdiction, of any financing statement naming the owner
of the asset to which such Lien relates as debtor.
"Moody's" means Moody's Investors Service, or any successor
to the rating agency business thereof.
"Notice" means, with respect to an Offer to Purchase, a
written notice stating:
<PAGE> 16
13
(a) the Section of this Supplemental Indenture pursuant
to which such Offer to Purchase is being made;
(b) the applicable Purchase Amount (including, if less
than all the Senior Notes, the calculation thereof pursuant to the
Section hereof requiring such Offer to Purchase);
(c) the applicable Purchase Date;
(d) the purchase price to be paid by the Company for
each $1,000 principal amount at maturity of Senior Notes accepted for
payment (as specified in this Supplemental Indenture);
(e) that the Holder of any Senior Note may tender for
purchase by the Company all or any portion of such Senior Note equal
to $1,000 principal amount or any integral multiple thereof;
(f) the place or places where Senior Notes are to be
surrendered for tender pursuant to such Offer to Purchase;
(g) any Senior Note not tendered or tendered but not
purchased by the Company pursuant to such Offer to Purchase shall
continue to accrue interest as set forth in such Senior Note and this
Supplemental Indenture;
(h) that on the Purchase Date the purchase price shall
become due and payable upon each Senior Note (or portion thereof)
selected for purchase pursuant to such Offer to Purchase and that
interest thereon shall cease to accrue on and after the Purchase
Date;
(i) that each Holder electing to tender a Senior Note
pursuant to such Offer to Purchase shall be required to surrender
such Senior Note at the place or places specified in the Notice prior
to the close of business on the fifth Business Day prior to the
Purchase Date (such Senior Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company
and the Trustee duly executed by, the Holder thereof or its attorney
duly authorized in writing);
(j) that (a) if Senior Notes (or portions thereof) in
an aggregate principal amount less than or equal to the Purchase
Amount are duly tendered and not withdrawn pursuant to such Offer to
Purchase, the Company shall purchase all such Senior Notes and (b) if
Senior Notes in an aggregate principal amount in excess of the
Purchase Amount are duly tendered and not withdrawn pursuant to such
Offer to Purchase, (i) the Company shall purchase Senior Notes
having an aggregate principal amount equal to the Purchase Amount
and (ii) the particular Senior Notes (or portions thereof)
<PAGE> 17
14
to be purchased shall be selected by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for
purchase of portions (equal to $1,000 or an integral multiple of
$1,000) of the principal amount of Senior Notes of a denomination
larger than $1,000;
(k) that, in the case of any Holder whose Senior Note
is purchased only in part, the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Senior
Note without service charge, a new Senior Note or Senior Notes, of
any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the
unpurchased portion of the Senior Note so tendered; and
(l) any other information required by applicable law to
be included therein.
"Offer to Purchase" means an offer to purchase Senior Notes
pursuant to and in accordance with a Notice, in the aggregate Purchase
Amount, on the Purchase Date, and at the purchase price specified in such
Notice (as determined pursuant to this Supplemental Indenture). Any Offer
to Purchase shall remain open from the time of mailing of the Notice until
the Purchase Date, and shall be governed by and effected in accordance with,
and the Company and the Trustee shall perform their respective obligations
specified in, the Notice for such Offer to Purchase.
"Permitted Indebtedness" means: (a) Existing Indebtedness;
(b) Indebtedness under the Bank Facilities in an aggregate principal
amount at any one time not to exceed $2,800.0 million, less (i) principal
payments actually made by the Company on any term loan facility under such
Bank Facilities (other than principal payments made in connection with or
pursuant to a refinancing of the Bank Facilities in compliance with clause
(l) below) and (ii) any amounts by which any revolving credit facility
commitments under the Bank Facilities are permanently reduced (other than
permanent reductions made in connection with or pursuant to a refinancing of
the Bank Facilities in compliance with clause (l) below) except that under no
circumstances shall the total allowable indebtedness under this clause (b) be
less than $1,250.0 million (subject to increase from and after the date hereof
at a rate, compounded annually, equal to 3% per annum) if incurred for the
purpose of providing the Company and its Subsidiaries with working capital
including bankers' acceptances, letters of credit, and similar assurances of
payment whether as part of the Bank Facilities or otherwise; (c) Indebtedness
existing as of the date hereof of any Subsidiary of the Company engaged
primarily in the business of owning or leasing real property; (d) Indebtedness
incurred for the purpose of financing store construction and remodeling or
other capital expenditures; (e) unsecured Indebtedness among the Company and
its Subsidiaries; (f) Indebtedness in respect of the deferred
<PAGE> 18
15
purchase price of property or arising under any conditional sale or other
title retention agreement; (g) Indebtedness of a Person acquired by the
Company or a Subsidiary of the Company at the time of such acquisition; (h)
to the extent deemed to be "Indebtedness," obligations under swap agreements,
cap agreements, collar agreements, insurance arrangements, or any other
agreement or arrangement, in each case designed to provide protection
against fluctuations in interest rates, the cost of currency or the cost
of goods (other than inventory); (i) other Indebtedness in outstanding
amounts not to exceed $750.0 million in the aggregate incurred by the Company
and the Restricted Subsidiaries at any particular time; (j) the
uncertificated obligations of certain Subsidiaries of the Company owed to
certain former holders of prepetition unsecured claims against such
Subsidiaries or their predecessors due February 4, 1995; (k) the
indebtedness represented by the convertible notes issued and outstanding
pursuant to the Senior Convertible Discount Note Agreement, dated as of
February 5, 1992, among the Company, the holders of such Convertible Notes
listed on the signature pages thereto, Citibank, N.A., as Convertible Note
Agent, and The Sumitomo Bank, Limited, New York Branch, as Convertible Note
Co-Agent, and the Indenture, dated as of April 8, 1993, between the
Company and The First National Bank of Boston, as trustee; and (l)
Indebtedness incurred in connection with any extension, renewal, refinancing,
replacement, or refunding (including successive extensions, renewals,
refinancings, replacements, or refundings), in whole or in part, of any
Indebtedness of the Company or the Restricted Subsidiaries; PROVIDED,
HOWEVER, that: (i) the principal amount of the Indebtedness so incurred does
not exceed the sum of the principal amount of the Indebtedness so extended,
renewed, refinanced, replaced, or refunded, plus all interest accrued thereon
and all related fees and expenses (including any payments made in connection
with procuring any required lender or similar consents) and (ii) in the case
of the extension, renewal, refinancing, replacement, or refunding of the
Indebtedness referred to in clause (k) above, the Indebtedness so incurred
is pari passu with or subordinate to the Senior Notes.
"Permitted Investments" means: (a) Cash Equivalents; (b)
Investments in another Person, if as a result of such Investment (i) such
other Person becomes a Restricted Subsidiary of the Company or (ii) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted Subsidiary of
the Company; (c) Investments in the Company or any Restricted Subsidiary of
the Company; (d) Investments represented by accounts receivable created or
acquired in the ordinary course of business, extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices, or
liabilities to the Company or any Restricted Subsidiary represented by
customer credit card obligations; (e) commissions and advances to employees of
the Company and its Subsidiaries in the ordinary course of business; (f)
investments representing notes, securities or other instruments or obligations
acquired in
<PAGE> 19
16
connection with the sale of assets; (g) Investments in the form of the sale
(on a "true-sale" non-recourse basis) of receivables transferred from the
Company or any Restricted Subsidiary, or transfers of cash, to an Unrestricted
Subsidiary as a capital contribution or in exchange for Indebtedness of such
Unrestricted Subsidiary or cash; (h) Permitted Joint Venture Investments; (i)
Investments representing capital stock or obligations issued to the Company
or any Restricted Subsidiary in settlement of claims against any other Person
by reason of a composition or readjustment of debt or a reorganization of
any debtor of the Company or such Restricted Subsidiary; (j) loans or
advances to vendors in connection with in-store merchandising to be repaid
either on a lump-sum basis or over a period of time by the delivery of
merchandise; (k) loans or advances to sublessees in an aggregate amount
not to exceed $5 million at any time outstanding; (l) construction
advances to developers; (m) Investments in swap agreements, cap
agreements, collar agreements, insurance arrangements or any other
agreement or arrangement, in each case designed to provide protection
against fluctuations in interest rates, the cost of currency or the cost of
goods (other than inventory); and (n) other Investments not to exceed $200.0
million in the aggregate.
"Permitted Joint Venture Investments" means Investments in
joint ventures or other risk-sharing arrangements (which may include
investments in partnerships or corporations) the purpose of which is to
engage in the same or similar lines of business as the operating business
of the Company or a Restricted Subsidiary or in businesses consistent with the
fundamental nature of the operating business of the Company or a Restricted
Subsidiary or necessary or desirable to facilitate the opening business of
the Company or a Restricted Subsidiary and is a business or operation that
the Company or a Restricted Subsidiary could engage in directly under the
terms hereof and that constitute "Investments" solely due to the fact that
Persons other than the Company or a Restricted Subsidiary have an interest
in such business or operation; PROVIDED, HOWEVER, that the business of
such joint venture, partnership, or corporation is, by the terms of the
applicable joint venture agreement, partnership agreement, or corporate
charter, prohibited from the making of Investments other than Permitted
Investments to the extent the Company could make such Investments directly in
accordance with the terms hereof.
"Permitted Liens" means: (a) Liens (other than Liens on
inventory) securing Indebtedness referred to in any of clauses (a) through
(d), clauses (f) through (j) and clause (l) of the definition of "Permitted
Indebtedness"; (b) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with liability insurance,
workers' compensation, unemployment insurance, old-age pensions, and other
social security benefits other than in respect of employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, as amended; (c)
Liens securing performance, surety, and appeal
<PAGE> 20
17
bonds and other obligations of like nature incurred in the ordinary course of
business; (d) Liens on goods and documents securing trade letters of credit;
(e) Liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's, and vendor's Liens, incurred in the ordinary course of business
and securing obligations which are not yet due or which are being contested
in good faith by appropriate proceedings; (f) Liens securing the payment of
taxes, assessments, and governmental charges or levies, either (i) not
delinquent or (ii) being contested in good faith by appropriate legal or
administrative proceedings and as to which adequate reserves shall have been
established on the books of the relevant Person in conformity with GAAP;
(g) zoning restrictions, easements, rights of way, reciprocal easement
agreements, operating agreements, covenants, conditions, or restrictions on
the use of any parcel of property that are routinely granted in real estate
transactions or do not interfere in any material respect with the ordinary
conduct of the business of the Company and its Subsidiaries or the value of
such property for the purpose of such business; (h) Liens on property existing
at the time such property is acquired; (i) purchase money Liens upon or in
any property acquired or held in the ordinary course of business to secure
Indebtedness incurred solely for the purpose of financing the acquisition of
such property; (j) Liens on the assets of any Subsidiary of the Company at the
time such Subsidiary is acquired; (k) Liens with respect to obligations in
outstanding amounts not to exceed $100.0 million at any particular time and
that (i) are not incurred in connection with the borrowing of money or
obtaining advances or credit (other than trade credit in the ordinary course of
business) and (ii) do not in the aggregate interfere in any material respect
with the ordinary conduct of the business of the Company and its
Subsidiaries; and (l) without limiting the ability of the Company or any
Restricted Subsidiary to create, incur, assume, or suffer to exist any Lien
otherwise permitted under any of the foregoing clauses, any extension,
renewal, or replacement, in whole or in part, of any Lien described in the
foregoing clauses; PROVIDED, HOWEVER, that any such extension, renewal, or
replacement Lien is limited to the property or assets covered by the Lien
extended, renewed, or replaced or substitute property or assets, the value of
which is determined by the Board of Directors of the Company to be not
materially greater than the value of the property or assets for which the
substitute property or assets are substituted.
"Plan" means the Amended Joint Plan of Reorganization of R.H.
Macy & Co., Inc. and Certain of its Subsidiaries.
"Purchase Amount" means the aggregate outstanding principal
amount of the Senior Notes required to be offered to be purchased by the
Company pursuant to an Offer to Purchase.
"Purchase Date" means, with respect to any Offer to Purchase,
a date specified by the Company in such Offer to Purchase not less than 30
calendar days or more than 60 calendar
<PAGE> 21
18
days after the date of the mailing of the Notice of such Offer to Purchase (or
such other time period as is necessary for the Offer to Purchase to remain
open for a sufficient period of time to comply with applicable securities
laws).
"Rating Decline" means the occurrence of the following on,
or within 90 calendar days after, the date of public disclosure of the
occurrence of a Designated Event (which period shall be extended, for a period
not to exceed 90 calendar days, so long as the Debt Rating is under publicly
announced consideration for possible downgrading by both Moody's and S&P):
(i) in the event the Senior Notes are rated Investment Grade by Moody's or
S&P on the earlier of the date immediately preceding the date of the public
disclosure of (w) the occurrence of a Designated Event or (x) (if
applicable) the intention of the Company to effect a Designated Event, the
Debt Rating by both Moody's and S&P shall be below Investment Grade; or (ii)
in the event the Senior Notes are rated below Investment Grade by both Moody's
and S&P on the earlier of the date immediately preceding the date of the
public disclosure of (y) the occurrence of a Designated Event or (z) (if
applicable) the intention of the Company to effect a Designated Event, the
Debt Rating by each of Moody's and S&P shall be decreased by at least one
Full Rating Category. In the event that either Moody's or S&P does not
make a rating of the Senior Notes publicly available, and the Company
selects a Recognized Rating Agency to make such a rating, (i) the terms
"Moody's" or "S&P," as the case may be, shall mean such other Recognized
Rating Agency; (ii) the term "Full Rating Category" shall mean, with respect
to such Recognized Rating Agency, the equivalent of any such category of S&P
or Moody's used by such Recognized Rating Agency; and (iii) the term
"Investment Grade" shall mean, with respect to such Recognized Rating Agency,
the equivalent of a rating of at least BBB- in the case of S&P and at least
Baa3 in the case of Moody's, used by such Recognized Rating Agency.
"Restricted Subsidiary" means any direct or indirect
subsidiary (as that term is defined in Regulation S-X promulgated by the
Securities and Exchange Commission) other than an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc., or any successor to the rating agency business thereof.
"Sale and Leaseback Transaction" means, with respect to any
Person, an arrangement with any bank, insurance company or other lender or
investor or to which such lender or investor is a party, providing for the
leasing pursuant to a Capital Lease by such Person or any Subsidiary of such
Person of any property or asset of such Person or such Subsidiary which has
been or is being sold or transferred by such Person or such Subsidiary to
such lender or investor or to any Person to whom funds have been
<PAGE> 22
19
or are to be advanced by such lender or investor on the security of such
property or asset.
"Senior Indebtedness" means any Indebtedness of the Company or
its Subsidiaries other than Subordinated Indebtedness.
"Significant Subsidiary" means any Subsidiary which accounts
for 10.0% or more of the total consolidated assets of the Company and its
Subsidiaries as of any date of determination or 10.0% or more of the total
consolidated revenues of the Company and its Subsidiaries for the most
recently concluded fiscal quarter.
"Subordinated Indebtedness" means any Indebtedness of the
Company which is expressly subordinated in right of payment to the Senior
Notes.
"Unrestricted Subsidiary" means (a) FDS National Bank, FACS
Group, Inc., Federated Credit Holdings Corporation, Prime Credit Card Master
Trust (to the extent that it is deemed to be a Subsidiary), Prime Receivables
Corporation, Seven Hills Funding Corporation, Ridge Capital Trust II (to the
extent that it is deemed to be a Subsidiary), Macy Financial, Inc., R.H.
Macy Overseas Finance, N.V., Macy Credit Corp., and Macy's Data and Credit
Services Corp., (b) any Subsidiary of the Company the primary business of
which consists of, and is restricted by the charter, partnership agreement,
or similar organizational document of such Subsidiary to, financing operations
on behalf of the Company and its Subsidiaries, and/or purchasing accounts
receivable or direct or indirect interests therein, and/or making loans
secured by accounts receivable or direct or indirect interests therein (and
business related to the foregoing), or which is otherwise primarily engaged
in, and restricted by its charter, partnership agreement, or similar
organizational document to, the business of a finance company (and business
related thereto), which, in accordance with the provisions of this
Supplemental Indenture, has been designated by Board Resolution as an
Unrestricted Subsidiary, in each case unless and until any of the Subsidiaries
of the Company referred to in the foregoing clauses (a) and (b) is, in
accordance with the provisions of this Supplemental Indenture, designated by a
Board Resolution as a Restricted Subsidiary, and (c) any Subsidiary of the
Company of which, in the case of a corporation, more than 50% of the issued and
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation has or
might have voting power upon the occurrence of any contingency), or, in the
case of any partnership or other legal entity, more than 50% of the ordinary
equity capital interests, is at the time directly or indirectly owned or
controlled by one or more Unrestricted Subsidiaries and the primary business
of which consists of, and is restricted by the charter, partnership
agreement or similar organizational document of such Subsidiary
<PAGE> 23
20
to, financing operations on behalf of the Company and its Subsidiaries,
and/or purchasing accounts receivable or direct or indirect interests therein,
and/or making loans secured by accounts receivable or direct or indirect
interests therein (and business related to the foregoing), or which is
otherwise primarily engaged in, and restricted by its charter, partnership
agreement or similar organizational document to, the business of a finance
company (and business related thereto).
ARTICLE III. CERTAIN COVENANTS.
The following covenants shall be applicable to the Company
unless and until the Company reaches Investment Grade Status. Upon reaching
Investment Grade Status, the Company shall be released from its
obligations to comply with each of the following restrictive covenants,
except for those set forth in Sections 3.2, 3.4, 3.9 (including the provisions
of the covenant set forth in Section 3.7 with respect to application of
proceeds) and 3.10. Nothing in this paragraph will, however, affect the
Company's obligations under any provision of the Indenture or, except for
Article III hereof, this Supplemental Indenture.
SECTION 3.1. INDEBTEDNESS.
The Company shall not directly or indirectly incur,
assume, guarantee, or otherwise become liable with respect to any
Indebtedness other than Permitted Indebtedness referred to in clauses (a)
through (c), clauses (e) and (f), and clauses (h) through (l) of the
definition thereof unless immediately thereafter the Interest Coverage Ratio
is 2.0 to 1.0 or greater, after giving effect, on a pro forma basis as if
incurred at the beginning of the applicable period, to the obligations of the
Company and the Restricted Subsidiaries in respect of such Indebtedness.
The Company shall not permit any Restricted Subsidiary
directly or indirectly to incur, assume, guarantee, or otherwise become liable
with respect to, any Indebtedness (A) other than Permitted Indebtedness
referred to in clauses (a) through (c), clauses (e) and (f), clauses (h)
through (j), and clause (l) of the definition thereof and (B) other than
Permitted Indebtedness referred to in clauses (d) and (g) of the definition
thereof, provided, in the case of Permitted Indebtedness incurred pursuant
to this clause (B), immediately thereafter the Interest Coverage Ratio is
2.0 to 1.0 or greater, after giving effect, on a pro forma basis as if
incurred at the beginning of the applicable period, to the obligations of the
Company and the Restricted Subsidiaries in respect of such Indebtedness.
SECTION 3.2. LIENS.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, incur, assume, or suffer to
<PAGE> 24
21
exist any Liens upon any of their respective assets, other than Permitted
Liens, unless the Senior Notes are secured by an equal and ratable Lien on
the same assets.
SECTION 3.3. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any Restricted
Subsidiary to, (a) declare or pay any dividend on, or make any other
distribution on account of, the Company's capital stock; (b) purchase, redeem,
or otherwise acquire or retire for value any capital stock (including any
option, warrant, or right to purchase capital stock) of the Company owned
beneficially by a Person other than a wholly owned Subsidiary of the Company;
(c) purchase, redeem, or otherwise acquire or retire for value the principal of
any Subordinated Indebtedness (other than the principal amount of notes
outstanding pursuant to the Loan Agreement, dated as of December 30, 1987,
by and among Allied Stores General Real Estate Company and certain of its
Subsidiaries and The Prudential Insurance Company of America, if deemed to be
subordinated by virtue of the Company's guaranty thereof) prior to the
scheduled maturity thereof other than pursuant to mandatory scheduled
redemptions or repayments; or (d) make any Investment other than Permitted
Investments (all such dividends, distributions, purchases, redemptions, or
Investments being collectively referred to as "Restricted Payments"); if, at
the time of such action, or after giving effect thereto: (i) an Event of
Default shall have occurred and is continuing; (ii) the Company could not
incur at least $1.00 of additional Indebtedness under the Interest Coverage
Ratio test in Section 3.1; or (iii) the cumulative amount of Restricted
Payments made subsequent to the Effective Date shall be greater than the sum
of: (A) 50% of the Company's cumulative consolidated net income (or a
negative amount equal to 100% of the Company's cumulative consolidated net
loss, if applicable) from January 29, 1995 through the end of the Company's
fiscal quarter next preceding the taking of such action; (B) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
of capital stock of the Company (other than redeemable capital stock),
including capital stock issued upon the conversion of convertible
Indebtedness issued on or after the Effective Date, in exchange for
outstanding Indebtedness, or from the exercise of options, warrants, or
rights to purchase capital stock of the Company to any Person other than to a
Subsidiary of the Company subsequent to the Effective Date (with the Company
being deemed, in the case of capital stock issued upon conversion or in
exchange for Indebtedness, to have received net cash proceeds equal to the
principal amount of the Indebtedness so converted or exchanged); and (C)
$250.0 million; PROVIDED, HOWEVER, that (1) the payment of any dividend within
60 calendar days after the date of declaration thereof, if such declaration
complied with the foregoing redemption, or other acquisition provisions on
the date of such declaration, (2) the purchase, redemption, or other
acquisition or retirement for value of any shares of capital stock of the
Company in exchange for, or out of the proceeds of,
<PAGE> 25
22
a substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of other shares of capital stock (other than redeemable capital
stock) of the Company, (3) the redemption or other acquisition or
retirement for value prior to any scheduled maturity of any Subordinated
Indebtedness in exchange for, or out of the proceeds of, a substantially
concurrent issue and sale of (a) capital stock (other than redeemable
capital stock) of the Company or (b) Subordinated Indebtedness of the
Company, (4) any purchase, redemption, or other acquisition or retirement
for value of any capital stock (including any option, warrant, or right to
purchase capital stock) of the Company issued to any employee or director of
the Company pursuant to any employee benefit or similar plan, and (5) any
redemption of share purchase rights issued pursuant to the Rights Agreement
dated as of December 19, 1994, by and between the Company and The Bank of New
York, as Rights Agent (as the same may be amended from time to time), or any
similar successor replacement share purchase rights plan involving an
aggregate redemption price (A) for any one such redemption of less than $10.0
million and (B) for all such redemptions of not more than $20.0 million,
shall not be deemed to constitute "Restricted Payments" and shall not be
prohibited under this Section.
SECTION 3.4. CHANGE OF CONTROL.
Following (a) a Change of Control prior to such time as
the Company shall have reached Investment Grade Status or, (b) thereafter,
a Designated Event and a Rating Decline in connection therewith, the Company
shall offer to repurchase the Senior Notes pursuant to an Offer to Purchase
at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date established for such repurchase.
Such Offer to Purchase shall be made by mailing of a Notice to the Trustee
and each Holder at the address appearing in the Security Register, by first
class mail, postage prepaid, by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company, on a date selected
by the Company, which shall be not more than 60 calendar days following the
Change in Control or the later of (i) the Designated Event and (ii) the
Rating Decline, as the case may be. On the Purchase Date, the Company shall
(i) accept for payment the Senior Notes or portions thereof tendered
pursuant to the Offer to Purchase, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Senior Notes or portions thereof
so accepted, and (iii) deliver to the Trustee the Senior Notes so accepted.
The Paying Agent shall promptly mail to the Holders of Senior Notes such
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to each Holder at the address appearing
on the Security Register new Senior Notes equal in principal amount to any
unpurchased portion of the Senior Notes surrendered. Notwithstanding the
foregoing, if the Company effects Defeasance or Covenant Defeasance of the
Senior Notes as provided in Article V of the Indenture prior to the date
Notice of a Rating Decline
<PAGE> 26
23
in connection with a Designated Event is required, the Company shall not be
obligated to give such Notice or offer to repurchase the Senior Notes as a
result of such Designated Event and Rating Decline.
Acceptance of the Offer to Purchase by a Holder shall be
irrevocable (unless otherwise provided by law). The payment of accrued
interest as part of any repurchase price on any Purchase Date shall be
subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
such Purchase Date.
If an Offer to Purchase Senior Notes is made, the Company
shall comply with all tender offer rules, including but not limited to Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent
applicable to such Offer to Purchase.
SECTION 3.5. PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist any contractual restriction on the ability of any Restricted
Subsidiary to (a) pay any dividend on, or make any other distribution on
account of, its capital stock or pay any Indebtedness owed to the Company
or a Restricted Subsidiary or (b) make loans or advances to the Company or a
Restricted Subsidiary, except for (i) restrictions existing as of the
Effective Date, (ii) restrictions in the documentation setting forth the terms
of or entered into in connection with any Permitted Indebtedness, (iii)
restrictions in the documentation setting forth the terms of or entered into
in connection with the sale of such Restricted Subsidiary to a third party,
(iv) restrictions applicable to a Person acquired by the Company or a
Subsidiary of the Company or designated as a Restricted Subsidiary, which exist
at the time of such acquisition or designation, or (v) other restrictions
arising in the ordinary course of business otherwise than in connection with
financing transactions.
SECTION 3.6. ISSUANCE OF SUBSIDIARY PREFERRED STOCK.
The Company shall not permit any Restricted Subsidiary to
issue any shares of preferred stock other than (a) preferred stock issued to
the Company or a wholly owned Subsidiary of the Company or (b) preferred
stock issued to any other Person if, after giving effect thereto on a pro
forma basis as if such preferred stock were issued at the beginning of the
applicable period, such Restricted Subsidiary could have incurred additional
Indebtedness in an amount equal to the aggregate liquidation value of such
preferred stock (assuming such Indebtedness were incurred to the Person(s) and
for the purposes to which and for which such preferred stock was issued).
<PAGE> 27
24
SECTION 3.7. ASSET SALES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, consummate any sale of assets (other than sales of
inventories, goods, fixtures, and accounts receivable in the ordinary course
of business, and sales of assets to the Company or a wholly owned Subsidiary
of the Company) unless such sale is for fair market value and, in the case of
individual sales of assets for which the consideration received (including
liabilities assumed) is more than $25.0 million at least 75% of the
consideration therefor (other than liabilities assumed) consists of either
(a) any combination of cash, cash equivalents, or promissory notes secured
by letters of credit or similar assurances of payment issued by commercial
banks of recognized standing or (b) capital asset contributions or capital
expenditures made for or on behalf of the Company or a Subsidiary by a third
party. Asset sales not subject to Section 3.8 below shall be presumed to be
for fair market value if the consideration received is less than $25.0
million and shall be conclusively presumed to have been for fair market value
if the transaction is determined by the Board of Directors to be fair, from a
financial point of view, to the Company. To the extent that the aggregate
amount of cash proceeds (net of all legal, title, and recording tax expenses,
commissions, and other fees and expenses incurred, and all federal, state,
provincial, foreign, and local taxes and reserves required to be accrued as a
liability, as a consequence of such sales of assets, and net of all payments
made on any Indebtedness which is secured by such assets in accordance with
the terms of any Liens upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such
sale or by applicable law be repaid out of the proceeds from such sales of
assets, and net of all distributions and other payments made to minority
interest holders in Subsidiaries or joint ventures as a result of such sales
of assets) from such sales of assets that shall not have been reinvested in
the business of the Company or its Subsidiaries or used to reduce Senior
Indebtedness of the Company or its Subsidiaries within 12 months of the
receipt of such proceeds (with cash equivalents being deemed to be proceeds
upon receipt of such cash equivalents and cash payments under promissory
notes secured as aforesaid being deemed to be proceeds upon receipt of such
payments) shall exceed $100.0 million ("Excess Sale Proceeds") from time to
time, the Company shall offer to repurchase pursuant to an Offer to Purchase
Senior Notes with such Excess Sale Proceeds (on a pro rata basis with any
other Senior Indebtedness of the Company or its Subsidiaries required by the
terms of such Indebtedness to be repurchased with such Excess Sale Proceeds,
based on the principal amount of such Senior Indebtedness required to be
repurchased) at 100% of principal amount, plus accrued and unpaid interest,
and to pay related costs and expenses. Such Offer to Purchase shall be made
by mailing of a Notice to the Trustee and to each Holder at the address
appearing in the Security Register, by first class mail, postage prepaid, by
the Company or, at the Company's request, by
<PAGE> 28
25
the Trustee in the name and at the expense of the Company, on a date selected
by the Company not later than 12 months from the date such Offer to Purchase
is required to be made pursuant to the immediately preceding sentence. To the
extent that the aggregate purchase price for Senior Notes or other Senior
Indebtedness tendered pursuant to such offer to repurchase is less than the
aggregate purchase price offered in such offer, an amount of Excess Sale
Proceeds equal to such shortfall shall cease to be Excess Sale Proceeds and
may thereafter be used for general corporate purposes. On the Purchase Date,
the Company shall (i) accept for payment Senior Notes or portions thereof
tendered pursuant to the Offer to Purchase in an aggregate principal amount
equal to the Purchase Amount (selected by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for
purchase of portions (equal to $1,000 or an integral multiple of $1,000)
of the principal amount of Senior Notes of a denomination larger than
$1,000), (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Senior Notes or portions thereof so accepted, and (iii)
deliver to the Trustee Senior Notes so accepted. The Paying Agent shall
promptly mail to the Holders of Senior Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Senior Note equal in principal
amount to any unpurchased portion of each Senior Note surrendered.
Election of the Offer to Purchase by a Holder shall (unless
otherwise provided by law) be irrevocable. The payment of accrued interest as
part of any repurchase price on any Purchase Date shall be subject to the right
of Holders of record on the relevant Regular Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Purchase Date.
If an Offer to Purchase Senior Notes is made, the Company
shall comply with all tender offer rules, including but not limited to Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent
applicable to such Offer to Purchase.
SECTION 3.8. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, (a) sell, lease, transfer, or otherwise dispose of any of its
properties, assets, or securities to, (b) purchase any property, assets, or
securities from, or (c) enter into any contract or agreement with or for the
benefit of an Affiliate (as defined below) of the Company or a Subsidiary of
the Company (other than the Company or a wholly-owned Subsidiary of the
Company) (an "Affiliate Transaction") other than Affiliate Transactions in the
ordinary course of business which in the aggregate do not exceed (i) $25.0
million in any one Affiliate Transaction or series of related Affiliate
Transactions unless a majority of the disinterested members of the Board of
Directors determines that such Affiliate Transaction or series of Affiliate
<PAGE> 29
26
Transactions is on terms not less favorable to the Company or such
Restricted Subsidiary than those that would apply to an arms-length
transaction with an unaffiliated party and (ii) $100.0 million in any one
Affiliate Transaction or series of related Affiliate Transactions unless the
test set forth in clause (i) has been satisfied and the Board of Directors of
the Company shall have been advised by an independent financial advisor that,
in the opinion of such advisor, such Affiliate Transaction or series of
Affiliate Transactions is fair, from a financial point of view, to the
Company or such Restricted Subsidiary. Solely for purposes of this Section
3.8, the term "Affiliate" shall have the meaning set forth in Rule 405
promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, PROVIDED, HOWEVER, that there shall be a rebuttable
presumption that any Person that holds more than 15% of the stock having
ordinary voting power of an entity is an "Affiliate" of such entity.
SECTION 3.9. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction unless: (a) the
Capital Lease Obligation incurred in connection therewith complies with Section
3.1 and (b) the net cash proceeds therefrom are applied in compliance with
Section 3.7 and to the extent required by Section 3.7. If the Company
reaches Investment Grade Status, the provisions of clause (a) above shall not
apply thereafter.
SECTION 3.10. MERGER AND CERTAIN OTHER TRANSACTIONS.
In addition to the conditions set forth in Section 11.01 of
the Indenture, the Company, in a single transaction or through a series of
related transactions, shall not consolidate with or merge with or into any
other Person, or transfer (by lease, assignment, sale, or otherwise) all or
substantially all of its properties and assets to another Person unless
immediately after and giving effect to such transaction and the incurrence
of any Indebtedness to be incurred in connection therewith the Surviving
Person could incur $1.00 of additional Indebtedness under the Interest Coverage
Ratio test.
SECTION 3.11. PERMITTING UNRESTRICTED SUBSIDIARIES TO BECOME
RESTRICTED SUBSIDIARIES.
The Company shall not permit any Unrestricted Subsidiary to
be designated as a Restricted Subsidiary unless such Subsidiary has
outstanding no Indebtedness except such Indebtedness as the Company could
permit it to become liable for immediately after becoming a Restricted
Subsidiary and such Subsidiary is otherwise in compliance with all provisions
of the Indenture and this Supplemental Indenture that apply to Restricted
Subsidiaries.
<PAGE> 30
27
SECTION 3.12. PAYMENT OFFICE.
The Company shall cause a Payment Office for the Senior Notes
to be maintained at all times in New York, New York.
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT.
SECTION 4.1. ADDITIONAL EVENTS OF DEFAULT.
In addition to the Events of Default set forth in the
Indenture, the term "Event of Default," whenever used in the Indenture or this
Supplemental Indenture with respect to the Senior Notes, means any one of the
following events (whatever the reason for such Event of Default and whether
it may be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree, or order of any court or any order, rule, or
regulation of any administrative or governmental body):
(a) the failure to redeem the Senior Notes when
required pursuant to the terms and conditions thereof or to pay
the repurchase price for Senior Notes to be repurchased in accordance
with Section 3.4 or 3.7 of this Supplemental Indenture;
(b) any nonpayment at maturity or other default is
made under any agreement or instrument relating to any other
Indebtedness of the Company or any Restricted Subsidiary (the unpaid
principal amount of which is not less than $100.0 million), and, in
any such case, such default (i) continues beyond any period of
grace provided with respect thereto and (ii) results in such
Indebtedness becoming due prior to its stated maturity or occurs at
the final maturity of such Indebtedness; PROVIDED, HOWEVER, that,
subject to the provisions of Section 9.01 and 8.08 of the
Indenture, the Trustee shall not be deemed to have knowledge of
such nonpayment or other default unless either (1) a Responsible
Officer of the Trustee has actual knowledge of nonpayment or other
default or (2) the Trustee has received written notice thereof from
the Company, from any Holder, from the holder of any such
Indebtedness or from the trustee under the agreement or instrument,
relating to such Indebtedness;
(c) the entry of one or more judgments or orders
for the payment of money against the Company or any Restricted
Subsidiary, which judgments and orders create a liability of $100.0
million or more in excess of insured amounts and have not been
stayed (by appeal or otherwise), vacated, discharged, or otherwise
satisfied within 60 calendar days of the entry of such judgments and
orders; and
(d) Events of Default of the type and subject to the
conditions set forth in clauses (vi) and (vii) of Section 8.01(a) of
the Indenture in respect of any Significant
<PAGE> 31
28
Subsidiary or, in related events, any group of Subsidiaries which, if
considered in the aggregate, would be a Significant Subsidiary of the
Company.
ARTICLE V. DEFEASANCE.
SECTION 5.1. APPLICABILITY OF ARTICLE V OF THE INDENTURE.
(a) The Senior Notes shall be subject to Defeasance and
Covenant Defeasance as provided in Article V of the Indenture; PROVIDED,
HOWEVER, that no Defeasance or Covenant Defeasance shall be effective unless
and until:
(i) there shall have been delivered to
the Trustee the opinion of a nationally recognized independent
public accounting firm certifying the sufficiency of the amount of
the moneys, U.S. Government Obligations, or a combination thereof,
placed on deposit to pay, without regard to any reinvestment, the
principal of and any premium and interest on the Senior Notes on the
Stated Maturity thereof or on any earlier date on which the Senior
Notes shall be subject to redemption;
(ii) there shall have been delivered
to the Trustee the certificate of a Responsible Officer of the
Company certifying, on behalf of the Company, to the effect that such
Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any agreement to which
the Company is a party or violate any law to which the Company is
subject; and
(iii) No Event of Default or event that
(after notice or lapse of time or both) would become an Event of
Default shall have occurred and be continuing at the time of such
deposit or, with regard to any Event of Default or any such event
specified in Sections 8.01(a)(vi) and (vii), at any time on or prior
to the 124th calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until
after such 124th calendar day).
(b) Upon the exercise of the option provided in
Section 5.01 of the Indenture to have Section 5.03 of the Indenture
applied to the Outstanding Senior Notes, in addition to the obligations from
which the Company shall be released specified in the Indenture, the Company
shall be released from its obligations under Article III hereof.
<PAGE> 32
29
ARTICLE VI. MISCELLANEOUS.
SECTION 6.1. REFERENCE TO AND EFFECT ON THE INDENTURE.
This Supplemental Indenture shall be construed as
supplemental to the Indenture and all the terms and conditions of this
Supplemental Indenture shall be deemed to be part of the terms and
conditions of the Indenture. Except as set forth herein, the Indenture
heretofore executed and delivered is hereby (i) incorporated by reference
in this Supplemental Indenture and (ii) ratified, approved and confirmed.
SECTION 6.2. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply
with any term, provision, or condition set forth in Article III hereof if
the Holders of a majority in principal amount of the Outstanding Senior
Notes shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision, or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision, or condition shall remain in full force
and effect.
SECTION 6.3. SUPPLEMENTAL INDENTURE MAY BE EXECUTED IN
COUNTERPARTS.
This instrument may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
<PAGE> 33
30
SECTION 6.4. EFFECT OF HEADINGS.
The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and year first
above written.
[Seal] FEDERATED DEPARTMENT STORES, INC.
By: /s/Dennis J. Broderick
-------------------------------
Name: Dennis J. Broderick
Title: Senior Vice President
Attest:
/s/Gwyneth G. Stewart
- - -------------------------------
Name: Gwyneth G. Stewart
Title: Assistant Secretary
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: /s/Roland S. Gustafsen
-------------------------------
Name: Roland S. Gustafsen
Title: Senior Account Manager
Attest:
/s/Kelly K. Caldwell
- - ------------------------------
Name: Kelly K. Caldwell
Title: Assistant Cashier
<PAGE> 34
31
STATE OF OHIO )
) ss.:
COUNTY OF HAMILTON )
On this 25th day of January, 1995, before me personally came
Dennis J. Broderick, to me known, who, being by me duly sworn, did depose and
say that he/she is a Senior Vice President of Federated Department Stores,
Inc., one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that
he/she signed his/her name thereto by like authority.
In Witness Whereof, I have hereunto set my hand and affixed
my official seal the day and year in this certificate first above written.
/s/Carol S. Bruser (Heitfeld)
-----------------------------
Notary Public
<PAGE> 35
32
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF NORFOLK )
On this 25th day of January 1995, before me personally came
Roland S. Gustafsen, to me known, who, being by me duly sworn, did depose and
say that he/she is a Senior Account Manager of The First National Bank of
Boston, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that
he/she signed his/her name thereto by like authority.
In Witness Whereof, I have hereunto set my hand and affixed
my official seal the day and year in this certificate first above written.
/s/B. L. May
----------------
Notary Public
<PAGE> 36
33
SCHEDULE I
PARTICULAR TERMS OF SENIOR NOTES
MATURITY: The Senior Notes will mature on February 15, 2001.
INTEREST: The interest rate per annum on the Senior Notes shall be 10%.
REDEMPTION: The Senior Notes will not be redeemable at the option of the
Company prior to maturity and are not subject to a sinking
fund.
<PAGE> 1
Exhibit 4.5.1
SUPPLEMENTAL INDENTURE TO SENIOR
CONVERTIBLE DISCOUNT NOTE INDENTURE
--------------------------------------
This Supplemental Indenture to Senior Convertible Discount
Note Indenture (this "Supplemental Indenture") dated as of December 19, 1994 is
between Federated Department Stores, Inc., a Delaware corporation and the
surviving entity of the merger of Federated Department Stores, Inc.
("Federated") into R.H. Macy & Co., Inc. ("Macy") (the "Combined Company"), and
The First National Bank of Boston, as trustee for the holders of the Senior
Convertible Discount Notes due February 15, 2004 (the "Trustee").
PRELIMINARY STATEMENTS:
- - -----------------------
A. In a merger (the "Merger") that satisfies the conditions of
Section 11.01 of the Convertible Note Indenture (as hereinafter defined),
Federated merged with and into Macy pursuant to and in the manner described in
the Disclosure Statement of R. H. Macy & Co., Inc. and Certain of Its
Subsidiaries dated, and filed with the United States Bankruptcy Court for the
Southern District of New York on, August 31, 1994.
B. Pursuant to the terms of the Merger, holders of the Common Stock
received one share of common stock of the Combined Company for each share of
Common Stock held immediately prior to the consummation of the Merger.
C. Pursuant to Section 14.05 of the Convertible Note Indenture, the
Combined Company and the Trustee are required to execute and deliver this
Supplemental Indenture, in a form satisfactory of the Trustee.
D. In consideration of the premises and to comply with Section 14.05
of the Convertible Note Indenture, the Combined Company and the Trustee hereby
agree as follows:
Section 1. DEFINED TERMS. Capitalized terms used and not otherwise
defined herein have the meanings assigned such terms in the Indenture dated as
of April 8, 1993 (as heretofore amended, waived or otherwise modified, the
"Convertible Note Indenture") between Federated and the Trustee.
Section 2. AMENDMENT TO CONVERTIBLE NOTE INDENTURE. Simultaneously
with the consummation of the Merger, each reference to the "Company" in the
Convertible Note Indenture will be deemed to refer to the "Combined Company".
Section 3. GOVERNING LAW; SEVERABILITY. This Supplemental Indenture
will be governed by, and construed in accordance with, the laws of the State of
New York without regard to the principles thereof relating to conflict of laws.
Wherever possible, each provision of this Supplemental Indenture will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Supplemental Indenture is prohibited by or invalid
under applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity,
<PAGE> 2
Page 2
without invalidating the remainder of such provision or the remaining
provisions of this Supplemental Indenture.
Section 4. RATIFICATION. The Convertible Note Indenture as hereby
supplemented is in all respects ratified and confirmed, and all of the rights
and powers created thereby or thereunder shall be and remain in full force and
effect.
Section 5. SECTION TITLES. The Section titles contained in this
Supplemental Indenture are and will be without substantive meaning or content
of any kind whatsoever and shall not effect the construction of this
Supplemental Indenture.
Section 6. SUCCESSORS AND ASSIGNS. This Supplemental Indenture shall
be binding upon the Combined Company and its successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this
Supplemental Indenture to be executed by its duly authorized officer as of the
date first above written.
FEDERATED DEPARTMENT STORES, INC.
By:/s/ Dennis J. Broderick
---------------------------------------
Name: Dennis J. Broderick
Title: Senior Vice President, Secretary
and General Counsel
THE FIRST NATIONAL BANK OF BOSTON,
AS TRUSTEE
By:/s/ Roland S. Gustafsen
---------------------------------------
Name: Roland S. Gustafsen
Title: Senior Account Manager
<PAGE> 1
SERIES C WARRANT AGREEMENT
--------------------------
This SERIES C WARRANT AGREEMENT, dated as of December 19, 1994 (this
"Agreement"), is made and entered into by and between Federated Department
Stores, Inc., a Delaware corporation (the "Company"), and The Bank of New York,
a New York banking corporation (the "Warrant Agent").
RECITALS
--------
A. A plan of reorganization of R.H. Macy & Co., Inc. (a
predecessor of the Company, "Macy") and certain of its subsidiaries (the
"Plan") proposed by Macy and Federated Department Stores, Inc. (a predecessor
of the Company, "Old Federated") was confirmed by the United States Bankruptcy
Court for the Southern District of New York on December 8, 1994;
B. Pursuant to the Plan and an Agreement and Plan of Merger,
dated as of August 16, 1994, between Old Federated and Macy, Old Federated and
Macy were merged (the "Merger"), with the Company being the surviving
corporation in the Merger.
C. The Plan provides for the execution and delivery of this
Agreement by the Company.
D. The Company desires to issue the Warrants (as defined below)
on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto hereby agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANTS.
1.1. ISSUANCE OF WARRANTS. On the terms and subject to the conditions
set forth in the Plan, the Company will issue and deliver to the holders of
Allowed Claims in Classes M-10, MOS-10, M-11, and MOS-11 (as such terms are
defined in the Plan) an aggregate of 9,999,841 warrants (the "Warrants"), each
Warrant initially representing the right to purchase one share of Common Stock,
par value $.01 per share, of the Company (the "Common Stock"). The purchase
price per Warrant Share payable upon the exercise of a Warrant (the "Warrant
Price") will initially be $25.93. The shares of Common Stock purchasable upon
exercise of the Warrants are hereinafter referred to as the "Warrant Shares."
The Warrant Price and the number and kind of Warrant Shares purchasable upon
exercise of the Warrants are subject to adjustment pursuant to the provisions
of Section 4.
1.2. FORM OF WARRANTS. Each Warrant, including without limitation any
Warrants that may be issued upon partial exercise, replacement, or transfer of
Warrants, will be evidenced by, and
<PAGE> 2
subject to the terms of, a Warrant certificate (including the Form of Exercise
Notice and Form of Assignment to be printed on the reverse thereof, a "Warrant
Certificate") in substantially the form of Exhibit A, with such changes, marks
of identification or designation, and such legends, summaries, or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto.
1.3. COUNTERSIGNATURE OF WARRANTS. The Warrant Certificates will be
executed on behalf of the Company by the manual or facsimile signature of its
Chairman, President, or any Vice President, and attested by its Secretary or
any Assistant Secretary. The Warrant Certificates will be countersigned by the
Warrant Agent, either manually or by facsimile signature, and will not be valid
for any purpose unless so countersigned. In case any officer of the Company
who has signed any of the Warrant Certificates ceases to be such officer of the
Company before countersignature by the Warrant Agent and issuance and delivery
by the Company, such Warrant Certificates, nevertheless, may be countersigned
by the Warrant Agent, and issued and delivered by the Company with the same
force and effect as though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company; and any Warrant Certificate may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, is a proper officer of the Company to
sign such Warrant Certificate, although on any other date such person was not
such an officer.
1.4 REGISTRATION OF WARRANTS. The Warrant Agent will keep or
cause to be kept, at the principal office of the Warrant Agent designated for
such purpose, books for registration and transfer of the Warrant Certificates
issued hereunder. Such books will show the names and addresses of the
respective holders of the Warrant Certificates, the number of Warrants
evidenced on its face by each of the Warrant Certificates, and the date of each
of the Warrant Certificates. The Company and the Warrant Agent will be
entitled to treat the registered holder of any Warrant Certificate (the
"Holder") as the sole owner of the Warrants represented by such Warrant
Certificate for all purposes and will not be bound to recognize any equitable
or other claim or interest in such Warrants on the part of any other person.
Neither the Company nor the Warrant Agent will be liable for any registration
of transfer of any Warrants that are registered or to be registered in the name
of a fiduciary or the nominee of a fiduciary.
2. TRANSFER AND EXCHANGE OF WARRANTS.
2.1. TRANSFER AND EXCHANGE. Any Warrant Certificate may be
transferred, split up, combined, or exchanged for another Warrant Certificate
or Warrant Certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the
2
<PAGE> 3
Warrant Certificate or Warrant Certificates surrendered then entitled such
Holder (or former Holder in the case of a transfer) to purchase. Any Holder
desiring to transfer, split up, combine, or exchange any such Warrant
Certificate will make such request in writing delivered to the Warrant Agent,
and will surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined, or exchanged, with the Form of Assignment duly
executed by the Holder thereof, at the principal office of the Warrant Agent
designated for such purpose. Thereupon or as promptly as practicable
thereafter, the Company will prepare, execute, and deliver to the Warrant
Agent, and the Warrant Agent will countersign and deliver, a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
Neither the Company nor the Warrant Agent will be required to issue or deliver
any Warrant Certificates in connection with any transfer, split up,
combination, or exchange of Warrants or Warrant Certificates unless and until
the person or persons requesting the issuance or delivery thereof has paid to
the Warrant Agent the amount of any tax or governmental charge that may be
payable in connection with such transfer, split up, combination, or exchange or
has established to the satisfaction of the Warrant Agent that any tax or
governmental charge has been paid. Holders will not be required to pay any
other charge in connection with the transfer, split up, combination, or
exchange of Warrants.
2.2. LOST, STOLEN, AND MUTILATED WARRANT CERTIFICATES. Upon receipt
by the Company and the Warrant Agent of evidence reasonably satisfactory to
them of the loss, theft, destruction, or mutilation of a Warrant Certificate,
and, in case of loss, theft, or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the Company and the
Warrant Agent of all reasonable expenses incidental thereto, and upon surrender
to the Warrant Agent and cancellation of the Warrant Certificate if mutilated,
the Company will prepare, execute, and deliver a new Warrant Certificate of
like tenor to the Warrant Agent and the Warrant Agent will countersign and
deliver such new Warrant Certificate to the Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed, or mutilated.
2.3. PAYMENT OF TAXES. The Company will pay all documentary or stamp
taxes, if any, attributable to the initial issuance of the Warrants and the
initial issuance of the Warrant Shares upon the exercise of Warrants; PROVIDED,
HOWEVER, that the Company's obligations in this regard will in all events be
conditioned upon the Holder cooperating with the Company and the Warrant Agent
in any reasonable arrangement designed to minimize or eliminate any such taxes.
Neither the Company nor the Warrant Agent will be required to pay any tax or
governmental charge that may be payable in connection with any transfer, split
up, combination, or exchange of Warrants or Warrant Certificates.
2.4. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All
Warrant Certificates surrendered for the purpose of exercise, transfer, split
up, combination, or exchange will, if surrendered
3
<PAGE> 4
to the Company, be delivered to the Warrant Agent for cancellation or in
canceled form, or, if surrendered to the Warrant Agent, will be canceled by it,
and no Warrant Certificates will be issued in lieu thereof except as expressly
permitted by this Agreement. The Company will deliver to the Warrant Agent for
cancellation and retirement, and the Warrant Agent will so cancel and retire,
any other Warrant Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Warrant Agent will deliver all canceled
Warrant Certificates to the Company, or will, at the written request of the
Company, destroy such canceled Warrant Certificates, and in such case will
deliver a certificate of destruction thereof to the Company.
3. EXERCISE OF WARRANTS.
3.1. EXERCISE OF WARRANTS. (a) Warrants may be exercised by the
Holder thereof, in whole or in part, at any time and from time to time after
the date hereof and prior to 5:00 p.m., Cincinnati, Ohio time on the fifth
anniversary of the date hereof (the "Expiration Date") by delivering to the
Warrant Agent, at its principal office designated for such purpose, the
following:
(i) the Warrant Certificate or Warrant Certificates
representing the Warrants to be exercised, with the Form of Exercise
Notice duly executed by the Holder thereof; and
(ii) cash, a certified or bank cashier's check payable to
the order of the Company, or a wire transfer to an account designated
by the Company, in each case in an amount equal to the product of (A)
the number of Warrant Shares purchasable upon the exercise of the
Warrants designated for exercise in the Form of Exercise Notice and
(B) the Warrant Price.
(b) As promptly as practicable after an exercise of Warrants in
accordance with Section 3.1(a), and in any event within 10 Business Days after
such exercise, the Warrant Agent will (i) requisition from any transfer agent
for the Common Stock (or make available, if the Warrant Agent is the transfer
agent) certificates representing the number of Warrant Shares to be purchased
(and the Company hereby irrevocably authorizes and directs its transfer agent
to comply with all such requests), (ii) after receipt of such certificates,
cause the same to be delivered to or upon the order of the Holder exercising
such Warrants, registered in such name or names as may be designated by such
Holder, (iii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of the issuance of fractional Warrant Shares in accordance
with the provisions of Section 5, and (iv) when appropriate, after receipt,
deliver such cash to or upon the order of the Holder exercising such Warrants.
(c) If the number of Warrants represented by a Warrant Certificate
are not exercised in full, the Company will prepare,
4
<PAGE> 5
execute, and deliver to the Warrant Agent a new Warrant Certificate evidencing
Warrants equivalent to such Warrants remaining unexercised and the Warrant
Agent will countersign and deliver such new Warrant Certificate to or upon the
order of the Holder exercising such Warrants, registered in such name or names
as may be designated by such Holder.
(d) The Company will take all such action as may be necessary to
ensure that all Warrant Shares delivered upon exercise of Warrants, at the time
of delivery of the certificates for such Warrant Shares, will (subject to
payment of the Warrant Price) be duly and validly authorized and issued, fully
paid, and nonassessable and, if shares of Common Stock are then listed on any
national securities exchange (as defined in the Securities Exchange Act of
1934, as amended) or qualified for quotation on the National Association of
Securities Dealers, Inc. Automated Quotation System, will be duly listed or
qualified for quotation thereon, as the case may be.
(e) In the event that the Company is obligated to pay cash in lieu
of fractional Warrant Shares pursuant to Section 5 in connection with any
exercise of Warrants, it will make all arrangements necessary so that such cash
is available for distribution by the Warrant Agent, if and when appropriate.
(f) The Company will pay all expenses, taxes, and other charges
payable in connection with the preparation, issuance, and delivery of
certificates representing Warrant Shares or Warrant Certificates representing
unexercised Warrants in connection with any exercise of Warrants in accordance
with Section 3.1(a), except that, if any such certificates representing Warrant
Shares or any such Warrant Certificates are to be registered in a name or names
other than that of the Holder at the time of any such exercise of Warrants,
funds sufficient to pay all transfer or similar taxes payable as a result of
such transfer shall be paid by the Holder at the time of such exercise or
promptly upon receipt of a written request of the Company for payment thereof.
In connection with any exercise of Warrants in accordance with Section 3.1(a),
the Warrants will be deemed to have been exercised, any certificate
representing Warrant Shares or any Warrant Certificate issued on account
thereof will be deemed to have been issued, and the person in whose name any
such certificate or Warrant Certificate is issued will be deemed for all
purposes to have become a holder of record of the Warrant Shares or Warrants,
as the case may be, represented thereby as of the date of such exercise.
3.2. CERTAIN DEFINITIONS. For purposes of this Agreement, (a) the
term "Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the state of Ohio are authorized or obligated by
law or executive order to close and (b) the term "Trading Day" means any day on
which shares of Common Stock are traded on the principal national securities
exchange on which the shares of Common Stock are
5
<PAGE> 6
listed or admitted to trading or, if shares of Common Stock are not so listed
or admitted to trading, in the over-the-counter market.
4. ADJUSTMENTS OF WARRANT PRICE AND WARRANT SHARES. The Warrant Price
and the number and kind of Warrant Shares purchasable upon exercise of the
Warrants will be subject to adjustment from time to time upon the occurrence of
certain events as provided in this Section 4.
4.1. MECHANICAL ADJUSTMENTS. The Warrant Price and the number and
kind of Warrant Shares purchasable upon exercise of a Warrant will be subject
to adjustment as follows:
(a) Subject to Section 4.1(f), if the Company (i) pays a
dividend or otherwise distributes to holders of its Common Stock, as
such, shares of its capital stock (whether Common Stock or capital
stock of any other class), (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares of Common Stock, (iii)
combines its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issues any shares of its capital
stock in a reclassification of its outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation, merger, or other business combination transaction in
which the Company is the continuing or surviving corporation), then
the number and kind of Warrant Shares purchasable upon exercise of
each Warrant immediately prior thereto will be adjusted so that the
Holder of each Warrant will be entitled to receive (A) in the case of
a dividend or distribution, the sum of (1) the number of Warrant
Shares that, if such Warrant had been exercised immediately prior to
such adjustment, such Holder would have received upon such exercise
and (2) the number and kind of additional shares of capital stock that
such Holder would have been entitled to receive as a result of such
dividend or distribution by virtue of its ownership of such Warrant
Shares, (B) in the case of a subdivision or combination, the number of
Warrant Shares that, if such Warrant had been exercised immediately
prior to such adjustment, such Holder would have received upon such
exercise, adjusted to give effect to such subdivision or combination
as if such Warrant Shares had been subject thereto, or (C) in the case
of an issuance in a reclassification, the sum of (1) the number of
Warrant Shares that, if such Warrant had been exercised immediately
prior to such adjustment, such Holder would have received upon such
exercise and retained after giving effect to such reclassification as
if such Warrants Shares had been subject thereto and (2) the number
and kind of additional shares of capital stock that such Holder would
have been entitled to receive as a result of such reclassification as
if such Warrant Shares had been subject thereto. An adjustment made
pursuant to this paragraph (a) will become effective immediately after
the record date for the
6
<PAGE> 7
determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution and will become
effective immediately after the effective date of such subdivision,
combination, or reclassification in the case of a subdivision,
combination, or reclassification.
(b) Subject to Section 4.1(f), if the Company distributes
to holders of its Common Stock, as such, (i) evidences of indebtedness
or assets (excluding regular cash dividends or cash distributions
payable out of consolidated retained earnings) of the Company or any
corporation or other legal entity a majority of the voting equity
securities or equity interests of which are owned, directly or
indirectly, by the Company (a "Subsidiary"), (ii) shares of capital
stock of any Subsidiary, (iii) securities convertible into or
exchangeable for capital stock of the Company (including Common Stock
or capital stock of any other class) or any Subsidiary, or (iv) any
rights, options, or warrants to purchase any of the foregoing
(excluding those described in Section 4.1(c)), then, the number of
Warrant Shares thereafter purchasable upon exercise of each Warrant
will be adjusted to the number that results from multiplying the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment by a fraction, the numerator of
which will be the Current Market Price per share (as defined in
Section 4.1(e)) of Common Stock on the record date for such
distribution, and the denominator of which will be such Current Market
Price per share of Common Stock less the fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination will be conclusive if based on the financial advice of a
nationally recognized investment banking firm) of the portion of the
evidences of indebtedness, assets, securities, or rights, options, or
warrants so distributed on account of one share of Common Stock. Such
adjustment will be made whenever any such distribution is made, and
will become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
Except as provided in Section 4.1(i), no further adjustments of the
number of Warrant Shares will be made upon the actual issue of shares
of Common Stock upon conversion or exchange of such securities
convertible or exchangeable for shares of Common Stock or upon
exercise of such rights, warrants, or options for shares of Common
Stock.
(c) Subject to Section 4.1(f), if the Company issues
rights, options, or warrants to holders of the outstanding shares of
Common Stock, as such, entitling the holders of such rights, options,
or warrants (for a period expiring within 60 calendar days after the
record date mentioned below) to subscribe for or purchase shares of
Common Stock at a price per share that is lower on the record date
7
<PAGE> 8
mentioned below than the Current Market Price per share of Common
Stock on such record date, then the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant will be
adjusted to the number that results from multiplying the number of
Warrant Shares purchasable upon exercise of each Warrant immediately
prior to such adjustment by a fraction (not to be less than one), the
numerator of which will be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares
of Common Stock offered by such rights, options, or warrants for
subscription or purchase and the denominator of which will be the
number of shares of Common Stock outstanding on such record date plus
the number of shares of Common Stock which the aggregate subscription
or purchase price of the total number of shares of Common Stock so
offered would purchase at the Current Market Price per share of Common
Stock on such record date. Such adjustment will be made whenever such
rights, options, or warrants are issued, and will become effective
immediately after the record date for the determination of
stockholders entitled to receive such rights, options, or warrants.
In case such subscription or purchase price may be paid in a
consideration part or all of which is in a form other than cash, the
fair value of such consideration will be as determined by the Board of
Directors of the Company, whose determination will be conclusive if
based on the financial advice of a nationally recognized investment
banking firm. Except as provided in Section 4.1(i), no further
adjustments of the number of Warrant Shares will be made upon the
actual issue of shares of Common Stock upon exercise of such rights,
options, or warrants.
(d) Subject to Section 4.1(f), if the Company issues
shares of Common Stock or securities convertible into or exchangeable
for shares of Common Stock (excluding shares of Common Stock or
convertible or exchangeable securities issued in any of the
transactions described in paragraph (a), (b), or (c) of this Section
4.1) for a purchase price per share of such Common Stock, or for a
conversion or exchange price per share of Common Stock initially
deliverable upon conversion or exchange of such securities, that is
less than the Current Market Price per share of Common Stock on the
date the purchase, conversion, or exchange price of such additional
shares of Common Stock are first fixed, then the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant will
be adjusted to the number that results from multiplying the number of
Warrant Shares purchasable upon exercise of each Warrant immediately
prior to such adjustment by a fraction (not to be less than one), the
numerator of which will be the number of shares of Common Stock
outstanding on such date plus the number of additional shares of
Common Stock so issued or issuable upon such conversion or exchange,
and the denominator of which will be the number of shares of Common
8
<PAGE> 9
Stock outstanding on such date plus the number of shares of Common
Stock which the aggregate purchase, conversion, or exchange price
received or receivable by the Company for such additional shares of
Common Stock would purchase at the Current Market Price per share of
Common Stock on such date. Such adjustment will be made whenever such
shares of Common Stock or convertible or exchangeable securities are
issued, and will become effective immediately after the effective date
of such event. In case such purchase, conversion, or exchange price
may be paid in a consideration part or all of which is in a form other
than cash, the fair value of such consideration will be as determined
by the Board of Directors of the Company, whose determination will be
conclusive if based on the financial advice of a nationally recognized
investment banking firm. Except as provided in 4.1(i), no further
adjustment will be made upon the actual issue of shares of Common
Stock upon conversion or exchange of such securities convertible into
or exchangeable for shares of Common Stock.
(e) For purposes of this Agreement, the "Current Market
Price" per share of Common Stock on any date will be the average of
the daily closing prices for 20 consecutive Trading Days commencing 30
Trading Days before the date of such computation. The closing price
for each day (the "Closing Price") will be the last reported sales
price regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices regular way
for such day, in each case on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if not so listed or admitted to trading, the average of
the closing bid and asked prices of the shares of Common Stock in the
over-the-counter market as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or any comparable
system. In the absence of one or more such quotations, the Board of
Directors of the Company will determine the Current Market Price in
good faith on the basis of such quotations or other relevant
information as it considers appropriate.
(f) No adjustment in the number of Warrant Shares
purchasable upon the exercise of a Warrant will be required unless
such adjustment would require an increase or decrease in the number of
Warrant Shares purchasable upon the hypothetical exercise of a Warrant
of at least 1%; PROVIDED, HOWEVER, that any adjustments which by reason
of this paragraph (f) are not required to be made currently will be
carried forward and made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, would require an increase or decrease in the number of
Warrant Shares purchasable upon the hypothetical exercise of a Warrant
of 1% or more. All calculations with respect to the number of Warrant
Shares
9
<PAGE> 10
will be made to the nearest one-thousandth of a share and all
calculations with respect to the Warrant Price will be to the nearest
whole cent. No adjustment in the number of Warrant Shares purchasable
upon the exercise of a Warrant will be made under paragraph (b), (c),
or (d) of this Section 4.1 if the Company issues or distributes to
each Holder the shares, rights, options, warrants, convertible or
exchangeable securities, evidences of indebtedness, assets, or other
securities referred to in the applicable paragraph that such Holder
would have been entitled to receive had the Warrants been exercised
prior to the happening of such event on the record date with respect
thereto (provided that, in any case in which such Holder would have
been so entitled to receive a fractional interest in any such
securities or assets, the Company may distribute to such Holder in
lieu of such fractional interest cash in an amount equal to the fair
value of such fractional interest as determined in good faith by the
Board of Directors of the Company). No adjustment in the number of
Warrant Shares purchasable upon the exercise of a Warrant will be made
on account of: (1) any issuance of shares of Common Stock, or of
options, rights, or warrants to purchase, or securities convertible
into or exchangeable for, shares of Common Stock, pursuant to the
Plan, (2) any issuance of shares of Common Stock upon the exercise of
options, rights, or warrants or upon the conversion or exchange of
convertible or exchangeable securities, in either case issued pursuant
to the Plan or outstanding as of the date hereof, (3) any issuance of
shares of Common Stock, or of options, rights, or warrants to
purchase, or securities exchangeable for or convertible into, shares
of Common Stock, in accordance with any plan for the benefit of the
employees or Directors of the Company existing as of the date hereof,
contemplated by the Plan, or assumed by the Company as a result of or
in connection with the Merger, or any other plan adopted by the
Directors of the Company for the benefit of the employees or Directors
of the Company or any of its Subsidiaries, (4) any issuance of shares
of Common Stock in connection with a Company-sponsored plan for
reinvestment of dividends or interest, (5) any issuance of share
purchase rights pursuant to the New Combined Company Share Purchase
Rights Agreement, as from time to time amended, or any similar
successor or replacement share purchase rights plan, or (6) any
issuance of shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock pursuant to an underwritten
public offering for a price per share of Common Stock in the case of
an issuance of shares of Common Stock, or for a price per share of
Common Stock initially deliverable upon conversion or exchange of such
securities, that is equal to or greater than 95% of the Closing Price
per share of Common Stock on the date the offering, conversion, or
exchange price of such additional shares of Common Stock is first
fixed. No adjustment in the number of
10
<PAGE> 11
Warrant Shares will be made for a change in the par value of the
shares of Common Stock.
(g) Whenever the number of Warrant Shares purchasable upon
the exercise of each Warrant is adjusted as herein provided, the
Warrant Price will be adjusted by multiplying the Warrant Price in
effect immediately prior to such adjustment by a fraction, the
numerator of which will be the number of Warrant Shares purchasable
upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which will be the number of Warrant
Shares so purchasable immediately thereafter.
(h) For the purpose of this Section 4, the term "Common
Stock" means (i) the class of shares designated as the Common Stock of
the Company as of the date of this Agreement, (ii) all shares of any
class or classes (however designated) of the Company, now or hereafter
authorized, the holders of which have the right, without limitation as
to amount, either to all or to a part of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of
which are ordinarily entitled to vote generally in the election of
directors of the Company, or (iii) any other class of shares resulting
from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to Section 4.1(a), the Warrants
become exercisable to purchase Warrant Shares other than shares of
Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Warrant and the Warrant Price
payable in respect of such other shares upon the exercise of each
Warrant will be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares and the Warrant Price contained in
this Section 4.1.
(i) Upon the expiration of any rights, options, warrants,
or conversion or exchange privileges, if any thereof have not been
exercised, the Warrant Price and the number of Warrant Shares
purchasable upon the exercise of each Warrant will, upon such
expiration, be readjusted and will thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment
not been required, as the case may be) as if (i) the only shares of
Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options,
warrants, or conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, conversion, or
exchange plus the aggregate consideration, if any, actually received
by the
11
<PAGE> 12
Company for the issuance, sale, or grant of all such rights, options,
warrants, or conversion or exchange rights whether or not exercised;
PROVIDED, HOWEVER, that no such readjustment will have the effect of
increasing the Warrant Price or decreasing the number of Warrant
Shares purchasable upon the exercise of each Warrant by an amount in
excess of the amount of the adjustment initially made in respect of
the issuance, sale, or grant of such rights, options, warrants, or
conversion or exchange privileges.
4.2. NOTICE OF ADJUSTMENT. Whenever the Warrant Price or the number
or kind of Warrant Shares purchasable upon exercise of the Warrants is adjusted
pursuant to any of the provisions of this Agreement, the Company will promptly
give notice to the Holders of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected by the Company
(who may be the regular accountants employed by the Company) setting forth the
adjustments in the Warrant Price and the number or kind of Warrant Shares
purchasable upon exercise of each Warrant, and also setting forth a brief
statement of the facts requiring such adjustments and the computations upon
which such adjustments are based. Such certificate will be conclusive evidence
of the correctness of such adjustments.
4.3. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 4.1,
no adjustment or payment in respect of any dividends will be made at any time.
4.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
In case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale, transfer, or lease to another
corporation of all or substantially all the property of the Company, the
Company or such successor or purchasing corporation, as the case may be, will
execute an agreement providing that each Holder will have the right thereafter,
upon payment of an amount equal to the amount payable upon the exercise of a
Warrant immediately prior thereto, to purchase upon exercise of each Warrant
the kind and amount of securities or property that it would have owned or have
been entitled to receive after giving effect to such consolidation, merger,
sale, transfer, or lease on account of the Warrant Shares that would have been
purchasable upon the exercise of such Warrant had such Warrant been exercised
immediately prior thereto (provided that, to the extent that such Holder would
have been so entitled to receive cash on account of such Warrant Shares, such
Holder may elect in connection with the exercise of a Warrant in accordance
with Section 3.1 to reduce the amount of cash that it would be entitled to
receive upon such exercise in exchange for a corresponding reduction in the
amount payable upon such exercise); PROVIDED, HOWEVER, that no adjustment in
respect of dividends, interest, or other income on or from such shares or other
securities or property will be made during the term of a Warrant or upon the
exercise of a Warrant. Such agreement will
12
<PAGE> 13
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of this
Section 4.4 will similarly apply to successive consolidations, mergers, sales,
transfers, or leases.
4.5. WARRANT CERTIFICATES. Whether or not any adjustments in the
Warrant Price or the number or kind of Warrant Shares purchasable upon the
exercise of the Warrants has been made, Warrant Certificates theretofore or
thereafter issued may continue to express the same Warrant Price and number and
kind of Warrant Shares as are stated in the Warrant Certificate initially
issued.
5. FRACTIONAL INTERESTS. Neither the Company nor the Warrant Agent
will be required to issue fractional Warrant Shares or fractional interests in
any other securities on the exercise of the Warrants. If any fraction of a
Warrant Share or other security would, except for the provisions of this
Section 5, be issuable upon the exercise of the Warrants, the Company will pay
an amount in cash (a) in lieu of a fractional Warrant Share, equal to the
Current Market Price for one share of Common Stock, as defined in Section
4.1(e), on the Trading Day immediately preceding the date on which the Warrants
are presented for exercise, multiplied by such fraction of a Warrant Share, or
(b) in lieu of a fractional interest in any other security, equal to the fair
value of such fractional interest, determined in a manner as similar as
possible, taking into account the difference in the fractional interest being
valued, to the calculation described in clause (a) of this Section 5.
6. WARRANT AGENT MATTERS.
6.1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as agent for the Company and the Holders in accordance
with the terms and conditions hereof, and the Warrant Agent hereby accepts such
appointment and hereby certifies that it complies with the requirements of the
New York Stock Exchange governing transfer agents and registrars.
6.2. CONCERNING THE WARRANT AGENT. (a) The Company will pay to the
Warrant Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Warrant Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will indemnify the Warrant Agent for, and hold it
harmless against, any loss, liability, suit, action, proceeding, or expense,
incurred without negligence, bad faith, or willful misconduct on the part of
the Warrant Agent, for anything done or omitted by the Warrant Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
13
<PAGE> 14
(b) The Warrant Agent will be protected and will incur no
liability for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Warrant Certificate or certificate evidencing Common Stock or other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
person or persons.
6.3. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent or any successor Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent or any successor Warrant
Agent is a party, or any corporation succeeding to the corporate trust business
of the Warrant Agent or any successor Warrant Agent, will be the successor to
the Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 6.5.
6.4. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrant Certificates, will be bound:
(a) The Warrant Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel will be full
and complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Warrant Agent deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the President, or any Vice President of the Company and delivered to the
Warrant Agent; and such certificate will be full authorization to the Warrant
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Warrant Agent will be liable hereunder only for its own
negligence, bad faith, or willful misconduct.
(d) The Warrant Agent will not be liable for or by reason of any
of the statements of fact or recitals contained in this
14
<PAGE> 15
Agreement or in the Warrant Certificates or be required to verify the same, but
all such statements and recitals are and will be deemed to have been made by
the Company only.
(e) The Warrant Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant Certificate (except the due
countersignature thereof by the Warrant Agent); nor will it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor will it be responsible for any
adjustment required under the provisions of Section 4 hereof or responsible for
the manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Warrants evidenced by Warrant Certificates after actual
notice of any such adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of stock or other securities to be issued pursuant to this Agreement
or any Warrant Certificate or as to whether any shares of stock or other
securities will, when issued, be validly authorized and issued, fully paid, and
nonassessable.
(f) The Company will perform, execute, acknowledge, and deliver or
cause to be performed, executed, acknowledged, and delivered all such further
and other acts, instruments, and assurances as may reasonably be required by
the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, or any Vice President of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein will preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents,
15
<PAGE> 16
and the Warrant Agent will not be answerable or accountable for any act,
default, neglect, or misconduct of any such attorneys or agents or for any
loss to the Company resulting from any such act, default, neglect, or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof. The Warrant Agent will not be under any duty or
responsibility to insure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer, or exchange of
Warrant Certificates.
6.5. CHANGE OF WARRANT AGENT. The Warrant Agent or any successor
Warrant Agent may resign and be discharged from its duties under this Agreement
upon 30 calendar days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock by registered or certified mail, and to the
Holders by first-class mail. The Company may remove the Warrant Agent or any
successor Warrant Agent upon 30 calendar days' notice in writing, mailed to the
Warrant Agent or successor Warrant Agent, as the case may be, and to each
transfer agent of the Common Stock by registered or certified mail, and to the
Holders by first-class mail. If the Warrant Agent resigns or is removed or
otherwise becomes incapable of acting, the Company will appoint a successor to
the Warrant Agent. If the Company fails to make such appointment within a
period of 30 calendar days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who will, with such notice,
submit his Warrant Certificate for inspection by the Company), then any Holder
may apply to any court of competent jurisdiction for the appointment of a
successor Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court, will be a corporation organized and doing business
under the laws of the United States or of the State of Ohio or New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of Ohio or New York), in
good standing, having a principal office in the State of Ohio or New York,
which is authorized under such laws to exercise corporate trust powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Warrant Agent a combined capital and
surplus of at least $50 million. After appointment, the successor Warrant
Agent will be vested with the same powers, rights, duties, and responsibilities
as if it had been originally named as Warrant Agent without further act or
deed; but the predecessor Warrant Agent will deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act, or deed necessary
for the purpose. Not later than the effective date of any such appointment,
the Company will file notice thereof in writing with the predecessor Warrant
Agent and each transfer agent of the Common Stock, and mail by first class mail
a notice thereof to each Holder. Failure to give any notice provided for in
this Section 6.5, however, or any defect therein, will not affect the
16
<PAGE> 17
legality or validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Notwithstanding anything to the contrary contained herein, no resignation or
removal of the Warrant Agent or any successor Warrant Agent will become
effective prior to the effectiveness of the appointment of a successor Warrant
Agent therefor.
7.1 NO RIGHTS AS A STOCKHOLDER; NOTICES TO HOLDERS. Nothing
contained in this Agreement or in the Warrant Certificate will be construed as
conferring upon the Holders or their transferees the right to vote, or to
receive dividends, or to consent or to receive notice as a stockholder in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as a stockholder of the
Company; PROVIDED, HOWEVER, that if, at any time prior to the Expiration Date
and prior to the exercise of all of the Warrants, any of the following events
occur:
(a) The Company declares any dividend payable in any
securities upon its shares of Common Stock or makes any distribution
(other than a regular cash dividend payable out of consolidated
retained earnings) to the holders of its shares of Common Stock;
(b) The Company offers to the holders of its Common Stock
any shares of capital stock of the Company or any Subsidiary or
securities convertible into or exchangeable for shares of capital
stock of the Company or any Subsidiary or any option, right, or
warrant to subscribe for or purchase any thereof;
(c) The Company distributes to the holders of its Common
Stock evidences of indebtedness or assets (including any cash dividend
which would result in an adjustment under Section 4.1) of the Company
or any Subsidiary;
(d) Any reclassification of the Common Stock, any
consolidation of the Company with or merger of the Company into
another corporation, any sale, transfer, or lease to another
corporation of all or substantially all the property of the Company,
or any proposal of the Company to effect any of the foregoing
transactions that has been publicly announced by the Company; or
(e) Any proposal by the Company to effect a dissolution,
liquidation, or winding up of the Company that has been publicly
announced by the Company;
then in any one or more of such events the Company will give notice of such
event to the Holders, as provided in Section 11 hereof, such giving of notice
to be completed at least ten days prior to the date fixed as a record date or
the date of closing
17
<PAGE> 18
the transfer books for the determination of the stockholders entitled to such
dividend, distribution, or subscription rights, or for the determination of
stockholders entitled to vote on such proposed reclassification, consolidation,
merger, sale, transfer or lease, dissolution, liquidation, or winding up;
PROVIDED, HOWEVER, that no such notice will be required in respect of any of
the matters referred to in the penultimate sentence of Section 4.1(f). Such
notice will specify such record date or the date of closing the transfer books,
as the case may be, for such event. Failure to mail or receive such notice or
any defect therein or in the mailing thereof will not affect the validity of
any action taken in connection with such event.
7.2. REPORTS TO HOLDERS. To the extent such documents are required to
be sent by the Company to the holders of outstanding Common Stock, the Company
will file with the Warrant Agent and provide each Holder, within 15 calendar
days after it files them with the Securities and Exchange Commission (the
"SEC"), copies of its annual report and of the information, documents, and
other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
7.3. AGREEMENTS RESPECTING WARRANTS. The Company will not enter into
any agreement or instrument which would preclude the exercise of the Warrants
as herein provided.
8. AGREEMENT OF WARRANT HOLDERS. Every Holder by accepting a
Warrant Certificate consents and agrees with the Company and the Warrant Agent
and with every other Holder that:
(a) The Warrant Certificates are transferable only in accordance
with the terms of this Agreement and only on the registry books of the Warrant
Agent if surrendered at the principal office of the Warrant Agent designated
for such purpose, duly endorsed or accompanied by a proper instrument of
transfer, and otherwise in compliance with Section 2;
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the absolute
owner thereof and of the Warrants evidenced thereby (notwithstanding any
notations of ownership or writing on the Warrant Certificate made by anyone
other than the Company or the Warrant Agent) for all purposes whatsoever, and
neither the Company nor the Warrant Agent will be affected by any notice to the
contrary;
(c) Such Holder expressly waives any right to receive any
fractional Warrants and any fractional securities upon exercise or exchange of
a Warrant; and
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Warrant Agent will have any
18
<PAGE> 19
liability to any Holder or other person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree, or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory, or administrative
agency or commission, or any statute, rule, regulation, or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; PROVIDED, HOWEVER, that the Company
will use reasonable efforts to have any such order, decree, or ruling lifted or
otherwise overturned as soon as possible.
9. RESERVATION OF COMMON STOCK. The Company will, for so long as
Warrants remain outstanding, reserve and keep available, solely for issuance
and delivery upon the exercise of Warrants, a number of shares of Common Stock
(or, if applicable, other securities) sufficient to provide for the exercise of
all outstanding Warrants. The transfer agent for the Common Stock (or, if
applicable, other securities) will be irrevocably authorized and directed at
all times until the exercise or expiration of the Warrants to reserve such
number of authorized shares of Common Stock (or, if applicable, other
securities) as necessary for such purpose. The Company will keep copies of
this Agreement on file with the transfer agent and will supply the transfer
agent with duly executed stock certificates for such purpose.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Warrant Agent that:
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to execute,
deliver, and perform its obligations hereunder and to consummate the
transactions contemplated hereby;
(b) The execution, delivery, and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of the Company;
(c) The execution, delivery, and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby in accordance with the terms hereof
will not conflict with, violate, or constitute a breach of any
material contract, agreement, or instrument by which the Company is
bound or any judgment, order, decree, law, statute, rule, regulation,
or other judicial or governmental restriction to which the Company is
subject;
19
<PAGE> 20
(d) This Agreement constitutes the legal, valid, and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally; and
(e) The Warrants, when issued and delivered to the
initial Holders as provided in this Agreement, and the Warrant Shares
issued upon exercise of the Warrants, when issued, paid for, and
delivered as provided in this Agreement, will be duly and validly
issued and outstanding, fully paid, and nonassessable.
11. NOTICES. All notices, requests, waivers, releases, consents, and
other communications required or permitted by this Agreement (collectively,
"Notices") must be in writing. Except as expressly otherwise provided herein
with respect to manner of delivery, notices will be deemed sufficiently given
for all purposes when delivered in person, when dispatched by telegram or
electronic facsimile transmission, when sent by first-class mail, postage
prepaid, or upon confirmation of receipt when dispatched by a nationally
recognized overnight courier service to the appropriate party as follows: (a)
if to a Holder, at the address of such Holder as shown in the registry books
maintained by the Warrant Agent; (b) if to the Company, at 7 West Seventh
Street, Cincinnati, Ohio 45202, Telecopy No. (513) 579-7897 (marked for the
attention of the Chief Financial Officer and the General Counsel), or at such
other address as the Company may have furnished to the Holders and the Warrant
Agent in writing; and (c) if to the Warrant Agent, at 101 Barclay Street, New
York, New York 10286, Telecopy No. (212) 815-3201 (marked for the attention of
William Skinner) or at such other address as the Warrant Agent may have
furnished to the Company and the Holders in writing.
12. AMENDMENT AND WAIVER. No failure or delay of the Holder in
exercising any power or right hereunder (other than a failure to exercise
Warrants in accordance with the provisions hereof) will operate as a waiver
thereof, nor will any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case will entitle
the Company to any other or future notice or demand in similar or other
circumstances. Subject to the last sentence of this Section 12, (a) if the
Company so directs, the Company and the Warrant Agent will supplement or amend
this Agreement without the approval of any Holders in order to cure any
ambiguity or correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein and (b) the Company
and the Warrant Agent may from time to time supplement or amend this Agreement,
with the consent of Holders of at least 50% of the Warrants then
20
<PAGE> 21
outstanding, for any other for purpose. Notwithstanding anything in this
Agreement to the contrary, no supplement or amendment which increases the
Warrant Price, decreases the period of time remaining during which the Warrants
may be exercised, or changes in a manner adverse to Holders the number of
Warrant Shares purchasable upon the exercise of Warrants will be made without
the consent of all Holders. Any such amendment, modification, or waiver
effected pursuant to and in accordance with the provisions of this Section 12
will be binding upon all Holders and upon each future Holder, the Company, and
the Warrant Agent. In the event of any such amendment, modification, or
waiver, the Company will given prompt notice thereof to all Holders and, if
appropriate, notation thereof will be made on all Warrant Certificates
thereafter surrendered for registration of transfer or exchange.
13. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties hereto, their respective successors and
permitted assigns, and, subject to Sections 1.4 and 8(d), all Holders, but will
not be assignable or delegable by any party without the prior written consent
of the other party. In the absence of such prior written consent, any
purported assignment or delegation of any right or obligation hereunder will be
null and void.
14. RIGHTS OF THE PARTIES. Except as provided in Section 13, nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the parties hereto and the
Holders any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby. All rights of action in respect of this
Agreement are vested in the Holders, and any Holder without the consent of the
Warrant Agent or any other Holder may, on such Holder's own behalf and for such
Holder's own benefit, enforce such Holder's rights hereunder, including the
right to exercise, exchange, or surrender for transfer such Holder's Warrant
Certificates in accordance with the provisions hereof.
15. TITLES AND HEADINGS. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
16. CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS.
(a) Unless the context otherwise requires, (i) all
references to Sections or Exhibits are to Sections or Exhibits of or
to this Agreement, (ii) each term defined in this Agreement has the
meaning assigned to it, (iii) "or" is disjunctive but not necessarily
exclusive, and (iv) words in the singular include the plural and VICE
VERSA. All references to "$" or dollar amounts are to lawful currency
of the United States of America.
21
<PAGE> 22
(b) No provision of this Agreement will be interpreted in
favor of, or against, any party hereto by reason of the extent to
which such party or its counsel participated in the drafting thereof
or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
17. ENTIRE AGREEMENT. This Agreement, together with its Exhibits,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements among the parties hereto
with respect thereto except as expressly set forth herein.
18. SEVERABILITY. In case any provision contained in this Agreement
is invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby. The Company and the Warrant Agent will endeavor in good
faith to replace the invalid, illegal, or unenforceable provisions with valid,
legal, and enforceable provisions the economic effect of which comes as close
as possible to that of the invalid, illegal, or unenforceable provisions.
19. GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed will be deemed to be an original; such
counterparts will together constitute but one agreement.
21. REFERENCES TO THE PLAN. Terms used herein with initial capital
letters that are not otherwise defined are used herein as defined in the Plan.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
-----------------------------
Name: Dennis J. Broderick
-----------------------
Title: Senior Vice President
-----------------------
THE BANK OF NEW YORK
By: /s/ John I. Siverrsen Name:
-----------------------------
Name: John I. Siverrsen
-----------------------
Title: Vice President
-----------------------
23
<PAGE> 24
EXHIBIT A
---------
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE WARRANT AGREEMENT (AS HEREINAFTER DEFINED), A COPY
OF WHICH WILL BE MADE AVAILABLE BY THE ISSUER UPON REQUEST. THE TRANSFER OR
EXCHANGE OF THESE WARRANTS MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT
AGREEMENT.
NO. _______ WARRANTS ______________
VOID AFTER 5:00 P.M. CINCINNATI TIME
ON DECEMBER 19, 1999
Federated Department Stores, Inc. Series C Warrant Certificate
THIS CERTIFIES THAT for value received, __________, or its
registered assigns (the "Holder"), is the owner of the number of Warrants set
forth above that initially entitle it to purchase from Federated Department
Stores, Inc., a Delaware corporation (the "Company"), at any time and from time
to time on or prior to 5:00 p.m. Cincinnati time on December 19, 1999 (the
"Expiration Date"), a like number of fully paid and nonassessable shares of the
Common Stock, par value $.01 per share, of the Company (the "Common Stock") at
an initial purchase price of $25.93 per share (the "Warrant Price"), subject to
adjustment as provided in the Warrant Agreement. The shares of Common Stock
purchasable upon exercise of the Warrants are hereinafter referred to as the
"Warrant Shares." Subject to the terms and conditions of the Warrant
Agreement, the Warrants may be exercised by surrendering to the Warrant Agent
(as hereinafter defined) this Warrant Certificate, with the Form of Exercise
Notice on the reverse side hereof duly executed, together with cash, a
certified or bank cashier's check payable to the order of the Company, or a
wire transfer to an account designated by the Company, in each case in an
amount of lawful currency of the United States of America equal to the product
of (a) the number of Warrant Shares purchasable upon the exercise of the
Warrants designated for exercise in the Form of Exercise Notice and (b) the
Warrant Price.
The number and kind of Warrant Shares that may be purchased
upon exercise of the Warrants evidenced by this Warrant Certificate are the
number as of the date of the original issue of such Warrants, based on the
shares of Common Stock of the Company as constituted at such date. As provided
in the Warrant Agreement, the Warrant Price and the number and kind of Warrant
A-1
<PAGE> 25
Shares purchasable upon exercise of the Warrants are subject to adjustment.
This Warrant Certificate and the Warrants it represents are
subject to, and entitled to the benefits of, all of the terms, provisions, and
conditions of the Warrant Agreement, dated as of December 19, 1994 (the
"Warrant Agreement"), by and between the Company and The Bank of New York, a
New York banking corporation (the "Warrant Agent"), which Warrant Agreement is
hereby incorporated herein by reference and made a part hereof and to which
Warrant Agreement reference is hereby made for a full description of the
rights, limitation of rights, obligations, and duties hereunder of the Company
and the Holder. A copy of the Warrant Agreement will be made available to the
Holders by the Company upon request of the Holders.
Subject to the provisions set forth in the Warrant Agreement
or in this Certificate, this Warrant Certificate, with or without other Warrant
Certificates, may be transferred, split up, combined, or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the Holder to purchase a
like aggregate number of Warrant Shares as the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder (or former Holder in the case of
a transfer) to purchase, upon presentation and surrender hereof at the
principal office of the Warrant Agent designated for such purpose, with the
Form of Assignment (if appropriate) and the related Certificate duly executed.
The Company will not be required to issue fractional Warrant
Shares or other fractional interests in securities upon the exercise of any
Warrants evidenced by this Warrant Certificate, but in lieu thereof a cash
payment will be made, as provided in the Warrant Agreement.
Nothing contained in the Warrant Agreement or in this Warrant
Certificate will be construed as conferring upon the holder of this Warrant
Certificate the right to vote, or to receive dividends, or to consent or
(except as provided in the Warrant Agreement) to receive notice in respect of
any meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company.
This Warrant Certificate will not be valid or obligatory for
any purpose until it has been countersigned by the Warrant Agent.
A-2
<PAGE> 26
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its corporate officers duly authorized.
Attest: FEDERATED DEPARTMENT STORES, INC.
By:
- - ----------------------------------- --------------------------------
[Name, title] [Name, title]
Dated: ,
---------- ----
Countersigned:
THE BANK OF NEW YORK
By:
-------------------------------
[Authorized Signature]
A-3
<PAGE> 27
Form of Reverse Side of Warrant Certificate
FORM OF ASSIGNMENT
------------------
(To be executed if the Holder desires to transfer Warrants)
FOR VALUE RECEIVED, __________________________________________
hereby sells, assigns, and transfers unto _____________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Warrant Certificate, together with all right, title, and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ____________________, ______
_______________________________
Signature
Signature Guaranteed:
A-4
<PAGE> 28
FORM OF EXERCISE NOTICE
-----------------------
(To be executed if the Holder desires to exercise Warrants)
TO FEDERATED DEPARTMENT STORES, INC.:
The undersigned hereby irrevocably elects to exercise
__________ Warrants evidenced by this Warrant Certificate to purchase the
Warrant Shares issuable upon the exercise of such Warrants and requests that
certificates for such Warrant Shares be issued in the name of:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Please insert social security or
other identifying number: _____________________________________________________
If such number of Warrants is not all the Warrants evidenced by this Warrant
Certificate, a new Warrant Certificate for the balance remaining of such
Warrants will be registered in the name of and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Please insert social security
or other identifying number: __________________________________________________
Dated: _______________________, _____
_______________________________
Signature
Signature Guaranteed:
A-5
<PAGE> 29
NOTICE
------
Signatures on the foregoing Form of Assignment and Form of
Exercise Notice and in the related Warrant Certificates must correspond to the
name as written upon the face of this Warrant Certificate in every particular,
without alternation or enlargement or any change whatsoever.
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
A-6
<PAGE> 1
SERIES D WARRANT AGREEMENT
--------------------------
This SERIES D WARRANT AGREEMENT, dated as of December 19, 1994 (this
"Agreement"), is made and entered into by and between Federated Department
Stores, Inc., a Delaware corporation (the "Company"), and The Bank of New York,
a New York banking corporation (the "Warrant Agent").
RECITALS
--------
A. A plan of reorganization of R.H. Macy & Co., Inc. (a
predecessor of the Company, "Macy") and certain of its subsidiaries (the
"Plan") proposed by Macy and Federated Department Stores, Inc. (a predecessor
of the Company, "Old Federated") was confirmed by the United States Bankruptcy
Court for the Southern District of New York on December 8, 1994.
B. Pursuant to the Plan and an Agreement and Plan of Merger,
dated as of August 16, 1994, between Old Federated and Macy, Old Federated and
Macy were merged (the "Merger"), with the Company being the surviving
corporation in the Merger.
C. The Plan provides for the execution and delivery of this
Agreement by the Company.
D. The Company desires to issue the Warrants (as defined below)
on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto hereby agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANTS.
1.1. ISSUANCE OF WARRANTS. On the terms and subject to the conditions
set forth in the Plan, the Company will issue and deliver to the holders of
Allowed Claims in Classes M-10, MOS-10, M-11, and MOS-11 (as such terms are
defined in the Plan) an aggregate of 9,999,841 warrants (the "Warrants"), each
Warrant initially representing the right to purchase one share of Common Stock,
par value $.01 per share, of the Company (the "Common Stock"). The purchase
price per Warrant Share payable upon the exercise of a Warrant (the "Warrant
Price") will initially be $29.92. The shares of Common Stock purchasable upon
exercise of the Warrants are hereinafter referred to as the "Warrant Shares."
The Warrant Price and the number and kind of Warrant Shares purchasable upon
exercise of the Warrants are subject to adjustment pursuant to the provisions
of Section 4.
1.2. FORM OF WARRANTS. Each Warrant, including without limitation any
Warrants that may be issued upon partial exercise, replacement, or transfer of
Warrants, will be evidenced by, and subject to the terms of, a Warrant
certificate (including the
<PAGE> 2
Form of Exercise Notice and Form of Assignment to be printed on the reverse
thereof, a "Warrant Certificate") in substantially the form of Exhibit A, with
such changes, marks of identification or designation, and such legends,
summaries, or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto.
1.3. COUNTERSIGNATURE OF WARRANTS. The Warrant Certificates will be
executed on behalf of the Company by the manual or facsimile signature of its
Chairman, President, or any Vice President, and attested by its Secretary or
any Assistant Secretary. The Warrant Certificates will be countersigned by the
Warrant Agent, either manually or by facsimile signature, and will not be valid
for any purpose unless so countersigned. In case any officer of the Company
who has signed any of the Warrant Certificates ceases to be such officer of the
Company before countersignature by the Warrant Agent and issuance and delivery
by the Company, such Warrant Certificates, nevertheless, may be countersigned
by the Warrant Agent, and issued and delivered by the Company with the same
force and effect as though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company; and any Warrant Certificate may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, is a proper officer of the Company to
sign such Warrant Certificate, although on any other date such person was not
such an officer.
1.4 REGISTRATION OF WARRANTS. The Warrant Agent will keep or
cause to be kept, at the principal office of the Warrant Agent designated for
such purpose, books for registration and transfer of the Warrant Certificates
issued hereunder. Such books will show the names and addresses of the
respective holders of the Warrant Certificates, the number of Warrants
evidenced on its face by each of the Warrant Certificates, and the date of each
of the Warrant Certificates. The Company and the Warrant Agent will be
entitled to treat the registered holder of any Warrant Certificate (the
"Holder") as the sole owner of the Warrants represented by such Warrant
Certificate for all purposes and will not be bound to recognize any equitable
or other claim or interest in such Warrants on the part of any other person.
Neither the Company nor the Warrant Agent will be liable for any registration
of transfer of any Warrants that are registered or to be registered in the name
of a fiduciary or the nominee of a fiduciary.
2. TRANSFER AND EXCHANGE OF WARRANTS.
2.1. TRANSFER AND EXCHANGE. Any Warrant Certificate may be
transferred, split up, combined, or exchanged for another Warrant Certificate
or Warrant Certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the Warrant Certificate or Warrant
Certificates surrendered then
-2-
<PAGE> 3
entitled such Holder (or former Holder in the case of a transfer) to purchase.
Any Holder desiring to transfer, split up, combine, or exchange any such
Warrant Certificate will make such request in writing delivered to the Warrant
Agent, and will surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined, or exchanged, with the Form of Assignment duly
executed by the Holder thereof, at the principal office of the Warrant Agent
designated for such purpose. Thereupon or as promptly as practicable
thereafter, the Company will prepare, execute, and deliver to the Warrant
Agent, and the Warrant Agent will countersign and deliver, a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
Neither the Company nor the Warrant Agent will be required to issue or deliver
any Warrant Certificates in connection with any transfer, split up,
combination, or exchange of Warrants or Warrant Certificates unless and until
the person or persons requesting the issuance or delivery thereof has paid to
the Warrant Agent the amount of any tax or governmental charge that may be
payable in connection with such transfer, split up, combination, or exchange or
has established to the satisfaction of the Warrant Agent that any tax or
governmental charge has been paid. Holders will not be required to pay any
other charge in connection with the transfer, split up, combination, or
exchange of Warrants.
2.2. LOST, STOLEN, AND MUTILATED WARRANT CERTIFICATES. Upon receipt
by the Company and the Warrant Agent of evidence reasonably satisfactory to
them of the loss, theft, destruction, or mutilation of a Warrant Certificate,
and, in case of loss, theft, or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the Company and the
Warrant Agent of all reasonable expenses incidental thereto, and upon surrender
to the Warrant Agent and cancellation of the Warrant Certificate if mutilated,
the Company will prepare, execute, and deliver a new Warrant Certificate of
like tenor to the Warrant Agent and the Warrant Agent will countersign and
deliver such new Warrant Certificate to the Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed, or mutilated.
2.3. PAYMENT OF TAXES. The Company will pay all documentary or stamp
taxes, if any, attributable to the initial issuance of the Warrants and the
initial issuance of the Warrant Shares upon the exercise of Warrants; PROVIDED,
HOWEVER, that the Company's obligations in this regard will in all events be
conditioned upon the Holder cooperating with the Company and the Warrant Agent
in any reasonable arrangement designed to minimize or eliminate any such taxes.
Neither the Company nor the Warrant Agent will be required to pay any tax or
governmental charge that may be payable in connection with any transfer, split
up, combination, or exchange of Warrants or Warrant Certificates.
2.4. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All
Warrant Certificates surrendered for the purpose of exercise, transfer, split
up, combination, or exchange will, if surrendered to the Company, be delivered
to the Warrant Agent for
-3-
<PAGE> 4
cancellation or in canceled form, or, if surrendered to the Warrant Agent, will
be canceled by it, and no Warrant Certificates will be issued in lieu thereof
except as expressly permitted by this Agreement. The Company will deliver to
the Warrant Agent for cancellation and retirement, and the Warrant Agent will
so cancel and retire, any other Warrant Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The Warrant Agent will
deliver all canceled Warrant Certificates to the Company, or will, at the
written request of the Company, destroy such canceled Warrant Certificates, and
in such case will deliver a certificate of destruction thereof to the Company.
3. EXERCISE OF WARRANTS.
3.1. EXERCISE OF WARRANTS. (a) Warrants may be exercised by the
Holder thereof, in whole or in part, at any time and from time to time after
the date hereof and prior to 5:00 p.m., Cincinnati, Ohio time on the seventh
anniversary of the date hereof (the "Expiration Date") by delivering to the
Warrant Agent, at its principal office designated for such purpose, the
following:
(i) the Warrant Certificate or Warrant Certificates
representing the Warrants to be exercised, with the Form of Exercise
Notice duly executed by the Holder thereof; and
(ii) cash, a certified or bank cashier's check payable to
the order of the Company, or a wire transfer to an account designated
by the Company, in each case in an amount equal to the product of (A)
the number of Warrant Shares purchasable upon the exercise of the
Warrants designated for exercise in the Form of Exercise Notice and
(B) the Warrant Price.
(b) As promptly as practicable after an exercise of Warrants in
accordance with Section 3.1(a), and in any event within 10 Business Days after
such exercise, the Warrant Agent will (i) requisition from any transfer agent
for the Common Stock (or make available, if the Warrant Agent is the transfer
agent) certificates representing the number of Warrant Shares to be purchased
(and the Company hereby irrevocably authorizes and directs its transfer agent
to comply with all such requests), (ii) after receipt of such certificates,
cause the same to be delivered to or upon the order of the Holder exercising
such Warrants, registered in such name or names as may be designated by such
Holder, (iii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of the issuance of fractional Warrant Shares in accordance
with the provisions of Section 5, and (iv) when appropriate, after receipt,
deliver such cash to or upon the order of the Holder exercising such Warrants.
(c) If the number of Warrants represented by a Warrant Certificate
are not exercised in full, the Company will prepare,
-4-
<PAGE> 5
execute, and deliver to the Warrant Agent a new Warrant Certificate evidencing
Warrants equivalent to such Warrants remaining unexercised and the Warrant
Agent will countersign and deliver such new Warrant Certificate to or upon the
order of the Holder exercising such Warrants, registered in such name or names
as may be designated by such Holder.
(d) The Company will take all such action as may be necessary to
ensure that all Warrant Shares delivered upon exercise of Warrants, at the time
of delivery of the certificates for such Warrant Shares, will (subject to
payment of the Warrant Price) be duly and validly authorized and issued, fully
paid, and nonassessable and, if shares of Common Stock are then listed on any
national securities exchange (as defined in the Securities Exchange Act of
1934, as amended) or qualified for quotation on the National Association of
Securities Dealers, Inc. Automated Quotation System, will be duly listed or
qualified for quotation thereon, as the case may be.
(e) In the event that the Company is obligated to pay cash in lieu
of fractional Warrant Shares pursuant to Section 5 in connection with any
exercise of Warrants, it will make all arrangements necessary so that such cash
is available for distribution by the Warrant Agent, if and when appropriate.
(f) The Company will pay all expenses, taxes, and other charges
payable in connection with the preparation, issuance, and delivery of
certificates representing Warrant Shares or Warrant Certificates representing
unexercised Warrants in connection with any exercise of Warrants in accordance
with Section 3.1(a), except that, if any such certificates representing Warrant
Shares or any such Warrant Certificates are to be registered in a name or names
other than that of the Holder at the time of any such exercise of Warrants,
funds sufficient to pay all transfer or similar taxes payable as a result of
such transfer shall be paid by the Holder at the time of such exercise or
promptly upon receipt of a written request of the Company for payment thereof.
In connection with any exercise of Warrants in accordance with Section 3.1(a),
the Warrants will be deemed to have been exercised, any certificate
representing Warrant Shares or any Warrant Certificate issued on account
thereof will be deemed to have been issued, and the person in whose name any
such certificate or Warrant Certificate is issued will be deemed for all
purposes to have become a holder of record of the Warrant Shares or Warrants,
as the case may be, represented thereby as of the date of such exercise.
3.2. CERTAIN DEFINITIONS. For purposes of this Agreement, (a) the
term "Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the state of Ohio are authorized or obligated by
law or executive order to close and (b) the term "Trading Day" means any day on
which shares of Common Stock are traded on the principal national securities
exchange on which the shares of Common Stock are
-5-
<PAGE> 6
listed or admitted to trading or, if shares of Common Stock are not so listed
or admitted to trading, in the over-the-counter market.
4. ADJUSTMENTS OF WARRANT PRICE AND WARRANT SHARES. The Warrant Price
and the number and kind of Warrant Shares purchasable upon exercise of the
Warrants will be subject to adjustment from time to time upon the occurrence of
certain events as provided in this Section 4.
4.1. MECHANICAL ADJUSTMENTS. The Warrant Price and the number and
kind of Warrant Shares purchasable upon exercise of a Warrant will be subject
to adjustment as follows:
(a) Subject to Section 4.1(f), if the Company (i) pays a
dividend or otherwise distributes to holders of its Common Stock, as
such, shares of its capital stock (whether Common Stock or capital
stock of any other class), (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares of Common Stock, (iii)
combines its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issues any shares of its capital
stock in a reclassification of its outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation, merger, or other business combination transaction in
which the Company is the continuing or surviving corporation), then
the number and kind of Warrant Shares purchasable upon exercise of
each Warrant immediately prior thereto will be adjusted so that the
Holder of each Warrant will be entitled to receive (A) in the case of
a dividend or distribution, the sum of (1) the number of Warrant
Shares that, if such Warrant had been exercised immediately prior to
such adjustment, such Holder would have received upon such exercise
and (2) the number and kind of additional shares of capital stock that
such Holder would have been entitled to receive as a result of such
dividend or distribution by virtue of its ownership of such Warrant
Shares, (B) in the case of a subdivision or combination, the number of
Warrant Shares that, if such Warrant had been exercised immediately
prior to such adjustment, such Holder would have received upon such
exercise, adjusted to give effect to such subdivision or combination
as if such Warrant Shares had been subject thereto, or (C) in the case
of an issuance in a reclassification, the sum of (1) the number of
Warrant Shares that, if such Warrant had been exercised immediately
prior to such adjustment, such Holder would have received upon such
exercise and retained after giving effect to such reclassification as
if such Warrants Shares had been subject thereto and (2) the number
and kind of additional shares of capital stock that such Holder would
have been entitled to receive as a result of such reclassification as
if such Warrant Shares had been subject thereto. An adjustment made
pursuant to this paragraph (a) will become effective immediately after
the record date for the
-6-
<PAGE> 7
determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution and will become
effective immediately after the effective date of such subdivision,
combination, or reclassification in the case of a subdivision,
combination, or reclassification.
(b) Subject to Section 4.1(f), if the Company distributes
to holders of its Common Stock, as such, (i) evidences of indebtedness
or assets (excluding regular cash dividends or cash distributions
payable out of consolidated retained earnings) of the Company or any
corporation or other legal entity a majority of the voting equity
securities or equity interests of which are owned, directly or
indirectly, by the Company (a "Subsidiary"), (ii) shares of capital
stock of any Subsidiary, (iii) securities convertible into or
exchangeable for capital stock of the Company (including Common Stock
or capital stock of any other class) or any Subsidiary, or (iv) any
rights, options, or warrants to purchase any of the foregoing
(excluding those described in Section 4.1(c)), then, the number of
Warrant Shares thereafter purchasable upon exercise of each Warrant
will be adjusted to the number that results from multiplying the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment by a fraction, the numerator of
which will be the Current Market Price per share (as defined in
Section 4.1(e)) of Common Stock on the record date for such
distribution, and the denominator of which will be such Current Market
Price per share of Common Stock less the fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination will be conclusive if based on the financial advice of a
nationally recognized investment banking firm) of the portion of the
evidences of indebtedness, assets, securities, or rights, options, or
warrants so distributed on account of one share of Common Stock. Such
adjustment will be made whenever any such distribution is made, and
will become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
Except as provided in Section 4.1(i), no further adjustments of the
number of Warrant Shares will be made upon the actual issue of shares
of Common Stock upon conversion or exchange of such securities
convertible or exchangeable for shares of Common Stock or upon
exercise of such rights, warrants, or options for shares of Common
Stock.
(c) Subject to Section 4.1(f), if the Company issues
rights, options, or warrants to holders of the outstanding shares of
Common Stock, as such, entitling the holders of such rights, options,
or warrants (for a period expiring within 60 calendar days after the
record date mentioned below) to subscribe for or purchase shares of
Common Stock at a price per share that is lower on the record date
-7-
<PAGE> 8
mentioned below than the Current Market Price per share of Common
Stock on such record date, then the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant will be
adjusted to the number that results from multiplying the number of
Warrant Shares purchasable upon exercise of each Warrant immediately
prior to such adjustment by a fraction (not to be less than one), the
numerator of which will be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares
of Common Stock offered by such rights, options, or warrants for
subscription or purchase and the denominator of which will be the
number of shares of Common Stock outstanding on such record date plus
the number of shares of Common Stock which the aggregate subscription
or purchase price of the total number of shares of Common Stock so
offered would purchase at the Current Market Price per share of Common
Stock on such record date. Such adjustment will be made whenever such
rights, options, or warrants are issued, and will become effective
immediately after the record date for the determination of
stockholders entitled to receive such rights, options, or warrants.
In case such subscription or purchase price may be paid in a
consideration part or all of which is in a form other than cash, the
fair value of such consideration will be as determined by the Board of
Directors of the Company, whose determination will be conclusive if
based on the financial advice of a nationally recognized investment
banking firm. Except as provided in Section 4.1(i), no further
adjustments of the number of Warrant Shares will be made upon the
actual issue of shares of Common Stock upon exercise of such rights,
options, or warrants.
(d) Subject to Section 4.1(f), if the Company issues
shares of Common Stock or securities convertible into or exchangeable
for shares of Common Stock (excluding shares of Common Stock or
convertible or exchangeable securities issued in any of the
transactions described in paragraph (a), (b), or (c) of this Section
4.1) for a purchase price per share of such Common Stock, or for a
conversion or exchange price per share of Common Stock initially
deliverable upon conversion or exchange of such securities, that is
less than the Current Market Price per share of Common Stock on the
date the purchase, conversion, or exchange price of such additional
shares of Common Stock are first fixed, then the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant will
be adjusted to the number that results from multiplying the number of
Warrant Shares purchasable upon exercise of each Warrant immediately
prior to such adjustment by a fraction (not to be less than one), the
numerator of which will be the number of shares of Common Stock
outstanding on such date plus the number of additional shares of
Common Stock so issued or issuable upon such conversion or exchange,
and the denominator of which will be the number of shares of Common
-8-
<PAGE> 9
Stock outstanding on such date plus the number of shares of Common
Stock which the aggregate purchase, conversion, or exchange price
received or receivable by the Company for such additional shares of
Common Stock would purchase at the Current Market Price per share of
Common Stock on such date. Such adjustment will be made whenever such
shares of Common Stock or convertible or exchangeable securities are
issued, and will become effective immediately after the effective date
of such event. In case such purchase, conversion, or exchange price
may be paid in a consideration part or all of which is in a form other
than cash, the fair value of such consideration will be as determined
by the Board of Directors of the Company, whose determination will be
conclusive if based on the financial advice of a nationally recognized
investment banking firm. Except as provided in 4.1(i), no further
adjustment will be made upon the actual issue of shares of Common
Stock upon conversion or exchange of such securities convertible into
or exchangeable for shares of Common Stock.
(e) For purposes of this Agreement, the "Current Market
Price" per share of Common Stock on any date will be the average of
the daily closing prices for 20 consecutive Trading Days commencing 30
Trading Days before the date of such computation. The closing price
for each day (the "Closing Price") will be the last reported sales
price regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices regular way
for such day, in each case on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if not so listed or admitted to trading, the average of
the closing bid and asked prices of the shares of Common Stock in the
over-the-counter market as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or any comparable
system. In the absence of one or more such quotations, the Board of
Directors of the Company will determine the Current Market Price in
good faith on the basis of such quotations or other relevant
information as it considers appropriate.
(f) No adjustment in the number of Warrant Shares
purchasable upon the exercise of a Warrant will be required unless
such adjustment would require an increase or decrease in the number of
Warrant Shares purchasable upon the hypothetical exercise of a Warrant
of at least 1%; PROVIDED, HOWEVER, that any adjustments which by reason
of this paragraph (f) are not required to be made currently will be
carried forward and made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, would require an increase or decrease in the number of
Warrant Shares purchasable upon the hypothetical exercise of a Warrant
of 1% or more. All calculations with respect to the number of Warrant
Shares
-9-
<PAGE> 10
will be made to the nearest one-thousandth of a share and all
calculations with respect to the Warrant Price will be to the nearest
whole cent. No adjustment in the number of Warrant Shares purchasable
upon the exercise of a Warrant will be made under paragraph (b), (c),
or (d) of this Section 4.1 if the Company issues or distributes to
each Holder the shares, rights, options, warrants, convertible or
exchangeable securities, evidences of indebtedness, assets, or other
securities referred to in the applicable paragraph that such Holder
would have been entitled to receive had the Warrants been exercised
prior to the happening of such event on the record date with respect
thereto (provided that, in any case in which such Holder would have
been so entitled to receive a fractional interest in any such
securities or assets, the Company may distribute to such Holder in
lieu of such fractional interest cash in an amount equal to the fair
value of such fractional interest as determined in good faith by the
Board of Directors of the Company). No adjustment in the number of
Warrant Shares purchasable upon the exercise of a Warrant will be made
on account of: (1) any issuance of shares of Common Stock, or of
options, rights, or warrants to purchase, or securities convertible
into or exchangeable for, shares of Common Stock, pursuant to the
Plan, (2) any issuance of shares of Common Stock upon the exercise of
options, rights, or warrants or upon the conversion or exchange of
convertible or exchangeable securities, in either case issued pursuant
to the Plan or outstanding as of the date hereof, (3) any issuance of
shares of Common Stock, or of options, rights, or warrants to
purchase, or securities exchangeable for or convertible into, shares
of Common Stock, in accordance with any plan for the benefit of the
employees or Directors of the Company existing as of the date hereof,
contemplated by the Plan, or assumed by the Company as a result of or
in connection with the Merger, or any other plan adopted by the
Directors of the Company for the benefit of the employees or Directors
of the Company or any of its Subsidiaries, (4) any issuance of shares
of Common Stock in connection with a Company-sponsored plan for
reinvestment of dividends or interest, (5) any issuance of share
purchase rights pursuant to the New Combined Company Share Purchase
Rights Agreement, as from time to time amended, or any similar
successor or replacement share purchase rights plan, or (6) any
issuance of shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock pursuant to an underwritten
public offering for a price per share of Common Stock in the case of
an issuance of shares of Common Stock, or for a price per share of
Common Stock initially deliverable upon conversion or exchange of such
securities, that is equal to or greater than 95% of the Closing Price
per share of Common Stock on the date the offering, conversion, or
exchange price of such additional shares of Common Stock is first
fixed. No adjustment in the number of
-10-
<PAGE> 11
Warrant Shares will be made for a change in the par value of the
shares of Common Stock.
(g) Whenever the number of Warrant Shares purchasable upon
the exercise of each Warrant is adjusted as herein provided, the
Warrant Price will be adjusted by multiplying the Warrant Price in
effect immediately prior to such adjustment by a fraction, the
numerator of which will be the number of Warrant Shares purchasable
upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which will be the number of Warrant
Shares so purchasable immediately thereafter.
(h) For the purpose of this Section 4, the term "Common
Stock" means (i) the class of shares designated as the Common Stock of
the Company as of the date of this Agreement, (ii) all shares of any
class or classes (however designated) of the Company, now or hereafter
authorized, the holders of which have the right, without limitation as
to amount, either to all or to a part of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of
which are ordinarily entitled to vote generally in the election of
directors of the Company, or (iii) any other class of shares resulting
from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to Section 4.1(a), the Warrants
become exercisable to purchase Warrant Shares other than shares of
Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Warrant and the Warrant Price
payable in respect of such other shares upon the exercise of each
Warrant will be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares and the Warrant Price contained in
this Section 4.1.
(i) Upon the expiration of any rights, options, warrants,
or conversion or exchange privileges, if any thereof have not been
exercised, the Warrant Price and the number of Warrant Shares
purchasable upon the exercise of each Warrant will, upon such
expiration, be readjusted and will thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment
not been required, as the case may be) as if (i) the only shares of
Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options,
warrants, or conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, conversion, or
exchange plus the aggregate consideration, if any, actually received
by the
-11-
<PAGE> 12
Company for the issuance, sale, or grant of all such rights, options,
warrants, or conversion or exchange rights whether or not exercised;
PROVIDED, HOWEVER, that no such readjustment will have the effect of
increasing the Warrant Price or decreasing the number of Warrant
Shares purchasable upon the exercise of each Warrant by an amount in
excess of the amount of the adjustment initially made in respect of
the issuance, sale, or grant of such rights, options, warrants, or
conversion or exchange privileges.
4.2. NOTICE OF ADJUSTMENT. Whenever the Warrant Price or the number
or kind of Warrant Shares purchasable upon exercise of the Warrants is adjusted
pursuant to any of the provisions of this Agreement, the Company will promptly
give notice to the Holders of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected by the Company
(who may be the regular accountants employed by the Company) setting forth the
adjustments in the Warrant Price and the number or kind of Warrant Shares
purchasable upon exercise of each Warrant, and also setting forth a brief
statement of the facts requiring such adjustments and the computations upon
which such adjustments are based. Such certificate will be conclusive evidence
of the correctness of such adjustments.
4.3. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 4.1,
no adjustment or payment in respect of any dividends will be made at any time.
4.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
In case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale, transfer, or lease to another
corporation of all or substantially all the property of the Company, the
Company or such successor or purchasing corporation, as the case may be, will
execute an agreement providing that each Holder will have the right thereafter,
upon payment of an amount equal to the amount payable upon the exercise of a
Warrant immediately prior thereto, to purchase upon exercise of each Warrant
the kind and amount of securities or property that it would have owned or have
been entitled to receive after giving effect to such consolidation, merger,
sale, transfer, or lease on account of the Warrant Shares that would have been
purchasable upon the exercise of such Warrant had such Warrant been exercised
immediately prior thereto (provided that, to the extent that such Holder would
have been so entitled to receive cash on account of such Warrant Shares, such
Holder may elect in connection with the exercise of a Warrant in accordance
with Section 3.1 to reduce the amount of cash that it would be entitled to
receive upon such exercise in exchange for a corresponding reduction in the
amount payable upon such exercise); PROVIDED, HOWEVER, that no adjustment in
respect of dividends, interest, or other income on or from such shares or other
securities or property will be made during the term of a Warrant or upon the
exercise of a Warrant. Such agreement will
-12-
<PAGE> 13
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of this
Section 4.4 will similarly apply to successive consolidations, mergers, sales,
transfers, or leases.
4.5. WARRANT CERTIFICATES. Whether or not any adjustments in the
Warrant Price or the number or kind of Warrant Shares purchasable upon the
exercise of the Warrants has been made, Warrant Certificates theretofore or
thereafter issued may continue to express the same Warrant Price and number and
kind of Warrant Shares as are stated in the Warrant Certificate initially
issued.
5. FRACTIONAL INTERESTS. Neither the Company nor the Warrant Agent
will be required to issue fractional Warrant Shares or fractional interests in
any other securities upon the exercise of the Warrants. If any fraction of a
Warrant Share or other security would, except for the provisions of this
Section 5, be issuable upon the exercise of the Warrants, the Company will pay
an amount in cash (a) in lieu of a fractional Warrant Share, equal to the
Current Market Price for one share of Common Stock, as defined in Section
4.1(e), on the Trading Day immediately preceding the date on which the Warrants
are presented for exercise, multiplied by such fraction of a Warrant Share, or
(b) in lieu of a fractional interest in any other security, equal to the fair
value of such fractional interest, determined in a manner as similar as
possible, taking into account the difference in the fractional interest being
valued, to the calculation described in clause (a) of this Section 5.
6. WARRANT AGENT MATTERS.
6.1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as agent for the Company and the Holders in accordance
with the terms and conditions hereof, and the Warrant Agent hereby accepts such
appointment and hereby certifies that it complies with the requirements of the
New York Stock Exchange governing transfer agents and registrars.
6.2. CONCERNING THE WARRANT AGENT. (a) The Company will pay to the
Warrant Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Warrant Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will indemnify the Warrant Agent for, and hold it
harmless against, any loss, liability, suit, action, proceeding, or expense,
incurred without negligence, bad faith, or willful misconduct on the part of
the Warrant Agent, for anything done or omitted by the Warrant Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
-13-
<PAGE> 14
(b) The Warrant Agent will be protected and will incur no
liability for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Warrant Certificate or certificate evidencing Common Stock or other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
person or persons.
6.3. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent or any successor Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent or any successor Warrant
Agent is a party, or any corporation succeeding to the corporate trust business
of the Warrant Agent or any successor Warrant Agent, will be the successor to
the Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 6.5.
6.4. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrant Certificates, will be bound:
(a) The Warrant Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel will be full
and complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Warrant Agent deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the President, or any Vice President of the Company and delivered to the
Warrant Agent; and such certificate will be full authorization to the Warrant
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Warrant Agent will be liable hereunder only for its own
negligence, bad faith, or willful misconduct.
(d) The Warrant Agent will not be liable for or by reason of any
of the statements of fact or recitals contained in this
-14-
<PAGE> 15
Agreement or in the Warrant Certificates or be required to verify the same, but
all such statements and recitals are and will be deemed to have been made by
the Company only.
(e) The Warrant Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant Certificate (except the due
countersignature thereof by the Warrant Agent); nor will it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor will it be responsible for any
adjustment required under the provisions of Section 4 hereof or responsible for
the manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Warrants evidenced by Warrant Certificates after actual
notice of any such adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of stock or other securities to be issued pursuant to this Agreement
or any Warrant Certificate or as to whether any shares of stock or other
securities will, when issued, be validly authorized and issued, fully paid, and
nonassessable.
(f) The Company will perform, execute, acknowledge, and deliver or
cause to be performed, executed, acknowledged, and delivered all such further
and other acts, instruments, and assurances as may reasonably be required by
the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, or any Vice President of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein will preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents,
-15-
<PAGE> 16
and the Warrant Agent will not be answerable or accountable for any act,
default, neglect, or misconduct of any such attorneys or agents or for any
loss to the Company resulting from any such act, default, neglect, or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof. The Warrant Agent will not be under any duty or
responsibility to insure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer, or exchange of
Warrant Certificates.
6.5. CHANGE OF WARRANT AGENT. The Warrant Agent or any successor
Warrant Agent may resign and be discharged from its duties under this Agreement
upon 30 calendar days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock by registered or certified mail, and to the
Holders by first-class mail. The Company may remove the Warrant Agent or any
successor Warrant Agent upon 30 calendar days' notice in writing, mailed to the
Warrant Agent or successor Warrant Agent, as the case may be, and to each
transfer agent of the Common Stock by registered or certified mail, and to the
Holders by first-class mail. If the Warrant Agent resigns or is removed or
otherwise becomes incapable of acting, the Company will appoint a successor to
the Warrant Agent. If the Company fails to make such appointment within a
period of 30 calendar days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who will, with such notice,
submit his Warrant Certificate for inspection by the Company), then any Holder
may apply to any court of competent jurisdiction for the appointment of a
successor Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court, will be a corporation organized and doing business
under the laws of the United States or of the State of Ohio or New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of Ohio or New York), in
good standing, having a principal office in the State of Ohio or New York,
which is authorized under such laws to exercise corporate trust powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Warrant Agent a combined capital and
surplus of at least $50 million. After appointment, the successor Warrant
Agent will be vested with the same powers, rights, duties, and responsibilities
as if it had been originally named as Warrant Agent without further act or
deed; but the predecessor Warrant Agent will deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act, or deed necessary
for the purpose. Not later than the effective date of any such appointment,
the Company will file notice thereof in writing with the predecessor Warrant
Agent and each transfer agent of the Common Stock, and mail by first class mail
a notice thereof to each Holder. Failure to give any notice provided for in
this Section 6.5, however, or any defect therein, will not affect the
-16-
<PAGE> 17
legality or validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Notwithstanding anything to the contrary contained herein, no resignation or
removal of the Warrant Agent or any successor Warrant Agent will become
effective prior to the effectiveness of the appointment of a successor Warrant
Agent therefor.
7.1 NO RIGHTS AS A STOCKHOLDER; NOTICES TO HOLDERS. Nothing
contained in this Agreement or in the Warrant Certificate will be construed as
conferring upon the Holders or their transferees the right to vote, or to
receive dividends, or to consent or to receive notice as a stockholder in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as a stockholder of the
Company; PROVIDED, HOWEVER, that if, at any time prior to the Expiration Date
and prior to the exercise of all of the Warrants, any of the following events
occur:
(a) The Company declares any dividend payable in any
securities upon its shares of Common Stock or makes any distribution
(other than a regular cash dividend payable out of consolidated
retained earnings) to the holders of its shares of Common Stock;
(b) The Company offers to the holders of its Common Stock
any shares of capital stock of the Company or any Subsidiary or
securities convertible into or exchangeable for shares of capital
stock of the Company or any Subsidiary or any option, right, or
warrant to subscribe for or purchase any thereof;
(c) The Company distributes to the holders of its Common
Stock evidences of indebtedness or assets (including any cash dividend
which would result in an adjustment under Section 4.1) of the Company
or any Subsidiary;
(d) Any reclassification of the Common Stock, any
consolidation of the Company with or merger of the Company into
another corporation, any sale, transfer, or lease to another
corporation of all or substantially all the property of the Company,
or any proposal of the Company to effect any of the foregoing
transactions that has been publicly announced by the Company; or
(e) Any proposal by the Company to effect a dissolution,
liquidation, or winding up of the Company that has been publicly
announced by the Company;
then in any one or more of such events the Company will give notice of such
event to the Holders, as provided in Section 11 hereof, such giving of notice
to be completed at least ten days prior to the date fixed as a record date or
the date of closing
-17-
<PAGE> 18
the transfer books for the determination of the stockholders entitled to such
dividend, distribution, or subscription rights, or for the determination of
stockholders entitled to vote on such proposed reclassification, consolidation,
merger, sale, transfer or lease, dissolution, liquidation, or winding up;
PROVIDED, HOWEVER, that no such notice will be required in respect of any of
the matters referred to in the penultimate sentence of Section 4.1(f). Such
notice will specify such record date or the date of closing the transfer books,
as the case may be, for such event. Failure to mail or receive such notice or
any defect therein or in the mailing thereof will not affect the validity of
any action taken in connection with such event.
7.2. REPORTS TO HOLDERS. To the extent such documents are required to
be sent by the Company to the holders of outstanding Common Stock, the Company
will file with the Warrant Agent and provide each Holder, within 15 calendar
days after it files them with the Securities and Exchange Commission (the
"SEC"), copies of its annual report and of the information, documents, and
other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
7.3. AGREEMENTS RESPECTING WARRANTS. The Company will not enter into
any agreement or instrument which would preclude the exercise of the Warrants
as herein provided.
8. AGREEMENT OF WARRANT HOLDERS. Every Holder by accepting a
Warrant Certificate consents and agrees with the Company and the Warrant Agent
and with every other Holder that:
(a) The Warrant Certificates are transferable only in accordance
with the terms of this Agreement and only on the registry books of the Warrant
Agent if surrendered at the principal office of the Warrant Agent designated
for such purpose, duly endorsed or accompanied by a proper instrument of
transfer, and otherwise in compliance with Section 2;
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the absolute
owner thereof and of the Warrants evidenced thereby (notwithstanding any
notations of ownership or writing on the Warrant Certificate made by anyone
other than the Company or the Warrant Agent) for all purposes whatsoever, and
neither the Company nor the Warrant Agent will be affected by any notice to the
contrary;
(c) Such Holder expressly waives any right to receive any
fractional Warrants and any fractional securities upon exercise or exchange of
a Warrant; and
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Warrant Agent will have any
-18-
<PAGE> 19
liability to any Holder or other person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree, or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory, or administrative
agency or commission, or any statute, rule, regulation, or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; PROVIDED, HOWEVER, that the Company
will use reasonable efforts to have any such order, decree, or ruling lifted or
otherwise overturned as soon as possible.
9. RESERVATION OF COMMON STOCK. The Company will, for so long as
Warrants remain outstanding, reserve and keep available, solely for issuance
and delivery upon the exercise of Warrants, a number of shares of Common Stock
(or, if applicable, other securities) sufficient to provide for the exercise of
all outstanding Warrants. The transfer agent for the Common Stock (or, if
applicable, other securities) will be irrevocably authorized and directed at
all times until the exercise or expiration of the Warrants to reserve such
number of authorized shares of Common Stock (or, if applicable, other
securities) as necessary for such purpose. The Company will keep copies of
this Agreement on file with the transfer agent and will supply the transfer
agent with duly executed stock certificates for such purpose.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Warrant Agent that:
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to execute,
deliver, and perform its obligations hereunder and to consummate the
transactions contemplated hereby;
(b) The execution, delivery, and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of the Company;
(c) The execution, delivery, and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby in accordance with the terms hereof
will not conflict with, violate, or constitute a breach of any
material contract, agreement, or instrument by which the Company is
bound or any judgment, order, decree, law, statute, rule, regulation,
or other judicial or governmental restriction to which the Company is
subject;
-19-
<PAGE> 20
(d) This Agreement constitutes the legal, valid, and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally; and
(e) The Warrants, when issued and delivered to the
initial Holders as provided in this Agreement, and the Warrant Shares
issued upon exercise of the Warrants, when issued, paid for, and
delivered as provided in this Agreement, will be duly and validly
issued and outstanding, fully paid, and nonassessable.
11. NOTICES. All notices, requests, waivers, releases, consents, and
other communications required or permitted by this Agreement (collectively,
"Notices") must be in writing. Except as expressly otherwise provided herein
with respect to manner of delivery, notices will be deemed sufficiently given
for all purposes when delivered in person, when dispatched by telegram or
electronic facsimile transmission, when sent by first-class mail, postage
prepaid, or upon confirmation of receipt when dispatched by a nationally
recognized overnight courier service to the appropriate party as follows: (a)
if to a Holder, at the address of such Holder as shown in the registry books
maintained by the Warrant Agent; (b) if to the Company, at 7 West Seventh
Street, Cincinnati, Ohio 45202, Telecopy No. (513) 579-7897 (marked for the
attention of the Chief Financial Officer and the General Counsel), or at such
other address as the Company may have furnished to the Holders and the Warrant
Agent in writing; and (c) if to the Warrant Agent, at 101 Barclay Street, New
York, New York 10286, Telecopy No. (212) 815-3201 (marked for the attention of
William Skinner) or at such other address as the Warrant Agent may have
furnished to the Company and the Holders in writing.
12. AMENDMENT AND WAIVER. No failure or delay of the Holder in
exercising any power or right hereunder (other than a failure to exercise
Warrants in accordance with the provisions hereof) will operate as a waiver
thereof, nor will any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case will entitle
the Company to any other or future notice or demand in similar or other
circumstances. Subject to the last sentence of this Section 12, (a) if the
Company so directs, the Company and the Warrant Agent will supplement or amend
this Agreement without the approval of any Holders in order to cure any
ambiguity or correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein and (b) the Company
and the Warrant Agent may from time to time supplement or amend this Agreement,
with the consent of Holders of at least 50% of the Warrants then
-20-
<PAGE> 21
outstanding, for any other for purpose. Notwithstanding anything in this
Agreement to the contrary, no supplement or amendment which increases the
Warrant Price, decreases the period of time remaining during which the Warrants
may be exercised, or changes in a manner adverse to Holders the number of
Warrant Shares purchasable upon the exercise of Warrants will be made without
the consent of all Holders. Any such amendment, modification, or waiver
effected pursuant to and in accordance with the provisions of this Section 12
will be binding upon all Holders and upon each future Holder, the Company, and
the Warrant Agent. In the event of any such amendment, modification, or
waiver, the Company will given prompt notice thereof to all Holders and, if
appropriate, notation thereof will be made on all Warrant Certificates
thereafter surrendered for registration of transfer or exchange.
13. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties hereto, their respective successors and
permitted assigns, and, subject to Sections 1.4 and 8(d), all Holders, but will
not be assignable or delegable by any party without the prior written consent
of the other party. In the absence of such prior written consent, any
purported assignment or delegation of any right or obligation hereunder will be
null and void.
14. RIGHTS OF THE PARTIES. Except as provided in Section 13, nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the parties hereto and the
Holders any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby. All rights of action in respect of this
Agreement are vested in the Holders, and any Holder without the consent of the
Warrant Agent or any other Holder may, on such Holder's own behalf and for such
Holder's own benefit, enforce such Holder's rights hereunder, including the
right to exercise, exchange, or surrender for transfer such Holder's Warrant
Certificates in accordance with the provisions hereof.
15. TITLES AND HEADINGS. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
16. CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS.
(a) Unless the context otherwise requires, (i) all
references to Sections or Exhibits are to Sections or Exhibits of or
to this Agreement, (ii) each term defined in this Agreement has the
meaning assigned to it, (iii) "or" is disjunctive but not necessarily
exclusive, and (iv) words in the singular include the plural and VICE
VERSA. All references to "$" or dollar amounts are to lawful currency
of the United States of America.
-21-
<PAGE> 22
(b) No provision of this Agreement will be interpreted in
favor of, or against, any party hereto by reason of the extent to
which such party or its counsel participated in the drafting thereof
or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
17. ENTIRE AGREEMENT. This Agreement, together with its Exhibits,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements among the parties hereto
with respect thereto except as expressly set forth herein.
18. SEVERABILITY. In case any provision contained in this Agreement
is invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby. The Company and the Warrant Agent will endeavor in good
faith to replace the invalid, illegal, or unenforceable provisions with valid,
legal, and enforceable provisions the economic effect of which comes as close
as possible to that of the invalid, illegal, or unenforceable provisions.
19. GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed will be deemed to be an original; such
counterparts will together constitute but one agreement.
21. REFERENCES TO THE PLAN. Terms used herein with initial capital
letters that are not otherwise defined are used herein as defined in the Plan.
-22-
<PAGE> 23
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
-----------------------------
Name: Dennis J. Broderick
-----------------------
Title: Senior Vice President
-----------------------
THE BANK OF NEW YORK
By: /s/ John I. Siverrsen Name:
-----------------------------
Name: John I. Siverrsen
-----------------------
Title: Vice President
-----------------------
-23-
<PAGE> 24
EXHIBIT A
---------
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE WARRANT AGREEMENT (AS HEREINAFTER DEFINED), A COPY
OF WHICH WILL BE MADE AVAILABLE BY THE ISSUER UPON REQUEST. THE TRANSFER OR
EXCHANGE OF THESE WARRANTS MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT
AGREEMENT.
NO. _______ WARRANTS ______________
VOID AFTER 5:00 P.M. CINCINNATI TIME
ON December 19, 2001
Federated Department Stores, Inc. Series D Warrant Certificate
THIS CERTIFIES THAT for value received, __________, or its
registered assigns (the "Holder"), is the owner of the number of Warrants set
forth above that initially entitle it to purchase from Federated Department
Stores, Inc., a Delaware corporation (the "Company"), at any time and from time
to time prior to 5:00 p.m. Cincinnati time on December 19, 2001 (the
"Expiration Date"), a like number of fully paid and nonassessable shares of the
Common Stock, par value $.01 per share, of the Company (the "Common Stock") at
an initial purchase price of $29.92 per share (the "Warrant Price"), subject to
adjustment as provided in the Warrant Agreement. The shares of Common Stock
purchasable upon exercise of the Warrants are hereinafter referred to as the
"Warrant Shares." Subject to the terms and conditions of the Warrant
Agreement, the Warrants may be exercised by surrendering to the Warrant Agent
(as hereinafter defined) this Warrant Certificate, with the Form of Exercise
Notice on the reverse side hereof duly executed, together with cash, a
certified or bank cashier's check payable to the order of the Company, or a
wire transfer to an account designated by the Company, in each case in an
amount of lawful currency of the United States of America equal to the product
of (a) the number of Warrant Shares purchasable upon the exercise of the
Warrants designated for exercise in the Form of Exercise Notice and (b) the
Warrant Price.
The number and kind of Warrant Shares that may be purchased
upon exercise of the Warrants evidenced by this Warrant Certificate are the
number as of the date of the original issue of such Warrants, based on the
shares of Common Stock of the Company as constituted at such date. As provided
in the Warrant Agreement, the Warrant Price and the number and kind of Warrant
A-1
<PAGE> 25
Shares purchasable upon exercise of the Warrants are subject to adjustment.
This Warrant Certificate and the Warrants it represents are
subject to, and entitled to the benefits of, all of the terms, provisions, and
conditions of the Warrant Agreement, dated as of December 19, 1994 (the
"Warrant Agreement"), by and between the Company and The Bank of New York, a
New York banking corporation (the "Warrant Agent"), which Warrant Agreement is
hereby incorporated herein by reference and made a part hereof and to which
Warrant Agreement reference is hereby made for a full description of the
rights, limitation of rights, obligations, and duties hereunder of the Company
and the Holder. A copy of the Warrant Agreement will be made available to the
Holders by the Company upon request of the Holders.
Subject to the provisions set forth in the Warrant Agreement
or in this Certificate, this Warrant Certificate, with or without other Warrant
Certificates, may be transferred, split up, combined, or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the Holder to purchase a
like aggregate number of Warrant Shares as the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder (or former Holder in the case of
a transfer) to purchase, upon presentation and surrender hereof at the
principal office of the Warrant Agent designated for such purpose, with the
Form of Assignment (if appropriate) and the related Certificate duly executed.
The Company will not be required to issue fractional Warrant
Shares or other fractional interests in securities upon the exercise of any
Warrants evidenced by this Warrant Certificate, but in lieu thereof a cash
payment will be made, as provided in the Warrant Agreement.
Nothing contained in the Warrant Agreement or in this Warrant
Certificate will be construed as conferring upon the holder of this Warrant
Certificate the right to vote, or to receive dividends, or to consent or
(except as provided in the Warrant Agreement) to receive notice in respect of
any meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company.
This Warrant Certificate will not be valid or obligatory for
any purpose until it has been countersigned by the Warrant Agent.
A-2
<PAGE> 26
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed on this ____ day of __________, ____, by its
corporate officers duly authorized.
Attest: FEDERATED DEPARTMENT STORES, INC.
By:
- - ----------------------------------- --------------------------------
[Name, title] [Name, title]
Dated:
----------, ----
Countersigned:
THE BANK OF NEW YORK
By:
-------------------------------
[Authorized Signature]
A-3
<PAGE> 27
Form of Reverse Side of Warrant Certificate
FORM OF ASSIGNMENT
------------------
(To be executed if the Holder desires to transfer Warrants)
FOR VALUE RECEIVED, __________________________________________
hereby sells, assigns, and transfers unto _____________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Warrant Certificate, together with all right, title, and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ____________________, ______
_______________________________
Signature
Signature Guaranteed:
A-4
<PAGE> 28
FORM OF EXERCISE NOTICE
-----------------------
(To be executed if the Holder desires to exercise Warrants)
TO FEDERATED DEPARTMENT STORES, INC.:
The undersigned hereby irrevocably elects to exercise
__________ Warrants evidenced by this Warrant Certificate to purchase the
Warrant Shares issuable upon the exercise of such Warrants and requests that
certificates for such Warrant Shares be issued in the name of:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Please insert social security or
other identifying number: _____________________________________________________
If such number of Warrants is not all the Warrants evidenced by this Warrant
Certificate, a new Warrant Certificate for the balance remaining of such
Warrants will be registered in the name of and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Please insert social security
or other identifying number: __________________________________________________
Dated: _______________________, _____
_______________________________
Signature
Signature Guaranteed:
A-5
<PAGE> 29
NOTICE
------
Signatures on the foregoing Form of Assignment and Form of
Exercise Notice and in the related Warrant Certificates must correspond to the
name as written upon the face of this Warrant Certificate in every particular,
without alternation or enlargement or any change whatsoever.
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
A-6
<PAGE> 1
EXECUTION COPY
$2,800,000,000
CREDIT AGREEMENT
Dated as of December 19, 1994
Among
FEDERATED DEPARTMENT STORES, INC.
As Borrower
-----------
and
THE INITIAL LENDERS NAMED HEREIN
As Initial Lenders
------------------
and
CITIBANK, N.A.
as Administrative Agent
-----------------------
and
CHEMICAL BANK
As Agent
--------
and
CITICORP SECURITIES, INC.
As Arranger
-----------
and
CHEMICAL SECURITIES INC.
As Co-Arranger
--------------
<PAGE> 2
<TABLE>
T A B L E O F C O N T E N T S
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<CAPTION>
SECTION PAGE
<S> <C> <C>
1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . 36
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
1.04. Currency Equivalents Generally . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.02. Making the Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.03. The Competitive Bid Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.04. Repayment of Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.05. Termination or Reduction of the Commitments . . . . . . . . . . . . . . . . . . . 45
2.06. Prepayments of Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.07. Interest on Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.09. Conversion of Regular Advances . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.10. Increased Costs, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.11. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.13. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.14. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
2.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
2.16. Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit . . . . . . . . . . . . . . . 66
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.02. Conditions Precedent to Each Regular Borrowing, Issuance and Renewal . . . . . . 71
3.03. Conditions Precedent to Each Competitive Bid Borrowing . . . . . . . . . . . . . 72
3.04. Determinations Under Section 3.01 . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . 73
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
5.03. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
5.04. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.02. Actions in Respect of the Letters of Credit upon Default . . . . . . . . . . . . 112
ARTICLE VII
THE ADMINISTRATIVE AGENT AND THE AGENT
7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
7.02. Administrative Agent's and Agent's Reliance, Etc. . . . . . . . . . . . . . . . . 113
7.03. Citibank, Chemical and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 114
7.04. Lender Party Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.06. Successor Administrative Agents . . . . . . . . . . . . . . . . . . . . . . . . . 116
7.07. Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
8.04. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
8.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
8.07. Assignments, Designations and Participations . . . . . . . . . . . . . . . . . . . . . . 121
8.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
8.09. No Liability of the Issuing Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
8.10. Release of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
8.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
8.13. Jurisdiction, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
8.14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
8.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
SCHEDULES
- - ---------
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Guarantors
Schedule 2.04(a) - Amortization of Term Advances
Schedule 2.14(g) - Existing Letters of Credit
Schedule 3.01(e) - Surviving Debt
Schedule 3.01(g) - Disclosed Litigation
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations and Approvals
Schedule 4.01(n) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(bb) - Open Years
Schedule 4.01(ff) - Net Operating Loss Carryforwards
Schedule 4.01(jj) - Existing Debt
Schedule 4.01(ll) - Investments
Schedule 5.02(a) - Existing Liens
Schedule 5.02(b) - Cash Management System
</TABLE>
<PAGE> 5
EXHIBITS
- - --------
Exhibit A-1 - Form of Term Note
Exhibit A-2 - Form of Working Capital Note
Exhibit A-3 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Security Agreement
Exhibit F - Form of Guaranty
Exhibit G-1 - Form of Opinion of Counsel for the Loan Parties
Exhibit G-2 - Form of Opinion of General Counsel to the Borrower
<PAGE> 6
1
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of December 19, 1994 among FEDERATED
DEPARTMENT STORES, INC., a Delaware corporation ("FEDERATED", and together with
the Surviving Corporation (as hereinafter defined) following the Merger, the
"BORROWER"), the banks, financial institutions and other institutional lenders
(the "INITIAL LENDERS") listed on the signature pages hereof, CITIBANK, N.A.
("CITIBANK"), as administrative agent (together with any successor appointed
pursuant to Article VII, the "ADMINISTRATIVE AGENT") for the Lender Parties (as
hereinafter defined), CHEMICAL BANK ("CHEMICAL"), as agent (the "AGENT"),
CITICORP SECURITIES, INC., as arranger (the "ARRANGER"), and CHEMICAL
SECURITIES INC., as co-arranger (the "CO-ARRANGER").
PRELIMINARY STATEMENTS:
(1) R. H. Macy & Co., Inc., a Delaware corporation (the
"COMPANY"), and certain of its Subsidiaries (as hereinafter defined) (together
with the Company, the "DEBTORS") are debtors and debtors in possession under
Chapter 11 of the Bankruptcy Code (11 U.S.C. Section Section 101 ET SEQ.; the
"BANKRUPTCY CODE") in the United States Bankruptcy Court for the Southern
District of New York (the "BANKRUPTCY COURT").
(2) The Debtors have filed an amended joint plan of
reorganization (as amended or otherwise modified from time to time in
accordance with its terms, to the extent permitted in accordance with the Loan
Documents (as hereinafter defined), the "PLAN OF REORGANIZATION") for the
resolution of the outstanding creditor claims against and equity interests in
the Company and the other Debtors.
(3) The Plan of Reorganization contemplates, among
other things, that Federated and the Company will merge.
(4) Pursuant to the Agreement and Plan of Merger dated
as of August 16, 1994 (as amended or otherwise modified from time to time in
accordance with its terms, to the extent permitted in accordance with the Loan
Documents, the "MERGER AGREEMENT") between Federated and the Company, Federated
has agreed to consummate a merger (the "MERGER") with the Company in which the
Company will be the surviving corporation (the "SURVIVING CORPORATION"). At
the time of the Merger, the Borrower will be reorganized (the
"REORGANIZATION"), with certain divisions and certain other business units of
the Borrower constituting direct or indirect wholly owned Subsidiaries of the
Surviving Corporation holding all assets of such divisions and units material
or necessary to the conduct of the business of
<PAGE> 7
2
such divisions and units, substantially as described on pages 47 and 48 of
the Disclosure Statement (as hereinafter defined).
(5) Upon consummation of the Merger and the
Reorganization, the Surviving Corporation will change its name from R. H. Macy
& Co., Inc. to Federated Department Stores, Inc.
(6) The Borrower has requested that, immediately upon
the consummation of the Merger and the Reorganization, the Lenders lend to the
Surviving Corporation up to $2,800,000,000 in order to pay to certain creditors
of the Debtors the cash consideration for their claims against the Debtors, pay
transaction fees and expenses, refinance certain Existing Debt (as hereinafter
defined) of Federated and provide working capital for the Surviving Corporation
and its Subsidiaries. The Lenders have indicated their willingness to agree to
lend such amounts on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"ADJUSTED DEBT" means, at any time, the amount by which (a)
Consolidated Debt (other than Debt of the type referred to in clauses
(f) and (h) in the definition of "DEBT") of the Borrower and its
Subsidiaries exceeds (b) the sum of (to the extent otherwise included
in the calculation of Consolidated Debt under clause (a) above) (i)
non-recourse Debt of Ridge Capital Trust II outstanding under the May
Note Monetization Facility and (ii) non-recourse Debt and Debt
consisting of indemnification obligations and guaranties thereof, in
each case of the Borrower or any of its Subsidiaries outstanding under
the Receivables Financing Facility, in each case calculated on a
Consolidated basis in accordance with GAAP.
"ADMINISTRATIVE AGENT" has the meaning specified in the
recital of parties to this Agreement.
<PAGE> 8
3
"ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the
Administrative Agent maintained by Citibank at its office at 399 Park
Avenue, New York, New York 10043, Account No. 36852248, Account Name:
Medium Term Finance, Reference: Federated.
"ADVANCE" means a Term Advance, a Working Capital Advance, a
Competitive Bid Advance, a Swing Line Advance or a Letter of Credit
Advance.
"AFFILIATE" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling," "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"AGENT" has the meaning specified in the recital of parties to
this Agreement.
"ALTERNATIVE CURRENCY" means lawful money of Austria, Belgium,
the Federal Republic of Germany, France, Italy, the Swiss
Confederation, the United Kingdom and such other lawful currencies
other than Dollars that are freely transferable and convertible into
Dollars as the Borrower, with the consent of the Administrative Agent
and the applicable Issuing Bank, shall designate.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender
and each Issuing Bank, such Lender's or such Issuing Bank's Domestic
Lending Office in the case of a Base Rate Advance and such Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Advance
and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Administrative Agent as its
Applicable Lending Office with respect to such Competitive Bid
Advance.
"APPLICABLE MARGIN" means, as of any date, 0% per annum for
Base Rate Advances, and (a) from the date hereof until July 31, 1995,
the percentage per annum for Eurodollar Rate Advances set forth below
for level 5 and the percentage per annum for Trade Letters of Credit
set forth below for level 5 and (b) thereafter, a percentage per annum
for Eurodollar Rate Advances and Trade Letters of Credit determined by
reference to the Interest Coverage Ratio and Debt Rating as set forth
below:
<PAGE> 9
4
<TABLE>
<CAPTION>
DEBT RATING EURODOLLAR TRADE
INTEREST COVERAGE RATE LETTERS OF
LEVEL RATIO ----------------------- ADVANCES CREDIT
S&P MOODY'S
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 4.50:1 or greater BBB+ or Baa1 or 0.375% 0.250%
above above
2 Less than 4.50:1 but BBB Baa2 0.500% 0.375%
greater than or equal
to 4.25:1
3 Less than 4.25:1 but BBB- Baa3 0.625% 0.425%
greater than or equal
to 3.75:1
4 Less than 3.75:1 but BB+ Ba1 0.750% 0.500%
greater than or equal
to 3.25:1
5 Less than 3.25:1 BB or Ba2 or 1.000% 0.625%
below below
</TABLE>
The Applicable Margin for each Eurodollar Rate Advance and each Trade
Letter of Credit shall be determined by reference to the Interest
Coverage Ratio and Debt Rating in effect from time to time; PROVIDED,
HOWEVER, that
(A) if the applicable Debt Ratings established by
S&P and Moody's shall be the same grade and shall fall within
the same level, and the Interest Coverage Ratio falls within a
different level, the Applicable Margin shall be a percentage
per annum equal to the lower of the two applicable percentages
for such levels,
(B) if the applicable Debt Ratings established by
S&P and Moody's shall be different grades, (i) if such grades
are one grade apart, the Applicable Margin shall be a
percentage per annum equal to the lower of (x) the lower of
the two applicable percentages for such grades and (y) the
percentage for the applicable Interest Coverage Ratio and (ii)
if such grades are more than one grade apart, the Applicable
Margin shall be a percentage per annum equal to the lower of
(x) the applicable percentage for the grade that is one grade
below the Debt Rating with the higher grade and (y) the
percentage for the applicable Interest Coverage Ratio,
<PAGE> 10
5
(C) if only one of S&P and Moody's shall have in
effect a Debt Rating, the Applicable Margin shall be a
percentage per annum equal to the lower of (x) so long as both
S&P and Moody's are engaged in the business of rating Debt,
the applicable percentage for the grade that is one grade
below the available Debt Rating, or if either S&P or Moody's
is no longer engaged in the business of rating Debt, the
applicable percentage for the available Debt Rating and (y)
the percentage for the applicable Interest Coverage Ratio,
(D) if neither S&P nor Moody's shall have in
effect a Debt Rating, the Applicable Margin shall be
determined by reference to the Interest Coverage Ratio,
(E) no change in the Applicable Margin shall be
effective until five Business Days after the date on which the
Administrative Agent receives financial statements pursuant to
Section 5.03(c) or (d), in the case of a change in the
Applicable Margin due to an increase in the Interest Coverage
Ratio, and, in any case, a certificate of the chief financial
officer of the Borrower demonstrating such Interest Coverage
Ratio and Debt Rating, and no change in the Applicable Margin
shall be effective, in the case of a change in the Applicable
Margin due to a decrease in the Interest Coverage Ratio, until
five Business Days after the date on which the Administrative
Agent should have received financial statements pursuant to
Section 5.03(c) or (d) and a certificate of the chief
financial officer of the Borrower demonstrating such Interest
Coverage Ratio and Debt Rating,
(F) for the period from the date hereof until
February 4, 1996, the Applicable Margin shall not decrease by
more than one level and thereafter, the Applicable Margin
shall not decrease by more than one level in any three-month
period,
(G) during such time as the most recently
available Consolidated financial statements of the Borrower
are those for the second fiscal quarter in the Fiscal Year
ending on February 3, 1996, (i) if EBITDA for the Measurement
Period ending on the last day of such fiscal quarter shall
exceed $410,000,000 and the Interest Coverage Ratio for such
Measurement Period shall exceed 1.9:1, the applicable
percentage for such Interest Coverage Ratio shall be deemed to
be at level 4, and (ii) in all other cases, the applicable
percentage for such Interest Coverage Ratio shall be deemed to
be at level 5, and
<PAGE> 11
6
(H) during such time as the most recently
available Consolidated financial statements of the Borrower
are those for the third fiscal quarter in the Fiscal Year
ending on February 3, 1996, (i) if EBITDA for the Measurement
Period ending on the last day of such fiscal quarter shall
exceed $700,000,000 and the Interest Coverage Ratio for such
Measurement Period shall exceed 2.13:1, the applicable
percentage for such Interest Coverage Ratio shall be deemed to
be at level 4, and (ii) in all other cases, the applicable
percentage for such Interest Coverage Ratio shall be deemed to
be at level 5;
PROVIDED FURTHER, HOWEVER, that the foregoing is subject to the
requirements contained in the definition of "DEBT RATING". For
purposes of this definition, the term "grades" refers to the grades of
the Debt Ratings established by S&P and the equivalent grades of the
Debt Ratings established by Moody's.
"APPLICABLE PERCENTAGE" means, as of any date, (a) from the
date hereof until July 31, 1995, 1/4 of 1% per annum, and (b)
thereafter, a percentage per annum determined by reference to the
Applicable Margin Level as set forth below:
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
MARGIN PERCENTAGE
LEVEL
<S> <C>
1 0.1500%
2 0.1875%
3 0.2000%
4 0.2500%
5 0.3125%
</TABLE>
The Applicable Percentage shall be determined by reference to the
applicable level for the Applicable Margin in effect from time to
time.
"APPROPRIATE LENDER" means, at any time, with respect to (a)
the Term Facility or the Working Capital Facility, a Lender that has a
Commitment with respect to such Facility at such time, (b) the Letter
of Credit Facility, (i) any Issuing Bank and (ii) if the other Working
Capital Lenders have made Letter of Credit Advances pursuant to
<PAGE> 12
7
Section 2.14(c) that are outstanding at such time, each such other
Working Capital Lender and (c) the Swing Line Facility, (i) any Swing
Line Bank and (ii) if the other Working Capital Lenders have made
Swing Line Advances pursuant to Section 2.02(b) that are outstanding
at such time, each such other Working Capital Lender.
"ARRANGER" has the meaning specified in the recital of parties
to this Agreement.
"ASGREC" means Allied Stores General Real Estate Company, a
Delaware corporation and a direct wholly owned Subsidiary of the
Borrower.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted
by the Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"AVAILABLE AMOUNT" of any Letter of Credit or any Documentary
L/C means, at any time, the maximum amount available to be drawn under
such Letter of Credit or Documentary L/C at such time (assuming
compliance at such time with all conditions to drawing), provided that
with respect to any Letter of Credit denominated in an Alternative
Currency, such maximum amount shall be calculated as the equivalent
Dollar amount, determined in accordance with Section 1.04, of the
stated maximum amount.
"BANK HEDGE AGREEMENT" means any interest rate Hedge Agreement
required or permitted under Article V that is entered into by and
between the Borrower and any Lender.
"BANKRUPTCY CODE" has the meaning specified in the Preliminary
Statements.
"BANKRUPTCY COURT" has the meaning specified in the
Preliminary Statements.
"BASE RATE" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1%
or, if there is no nearest 1/4 of 1%, to the next higher 1/4
of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained
by dividing (A) the latest three-week moving average of
secondary market morning offering rates in the United States
for three-month
<PAGE> 13
8
certificates of deposit of major United States money market
banks, such three-week moving average (adjusted to the basis
of a year of 360 days) being determined weekly on each Monday
(or, if such day is not a Business Day, on the next succeeding
Business Day) for the three-week period ending on the previous
Friday by the Administrative Agent on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by the Administrative Agent from three
New York certificate of deposit dealers of recognized standing
selected by the Administrative Agent, by (B) a percentage
equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but
not limited to, any emergency, supplemental or other marginal
reserve requirement) for the Administrative Agent with respect
to liabilities consisting of or including (among other
liabilities) three-month U.S. dollar non-personal time
deposits in the United States, PLUS (iii) the average during
such three-week period of the annual assessment rates
estimated by the Administrative Agent for determining the then
current annual assessment payable by the Administrative Agent
to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of the
Administrative Agent in the United States; and
(c) 1/2 of one percent per annum above the
Federal Funds Rate.
"BASE RATE ADVANCE" means a Regular Advance that bears
interest as provided in Section 2.07(a)(i).
"BORROWER" has the meaning specified in the recital of parties
to this Agreement.
"BORROWER'S ACCOUNT" means the account of the Borrower
maintained by the Borrower with Citibank at its office at 399 Park
Avenue, New York, New York 10043, Account No. 405-448-38.
"BORROWING" means a Term Borrowing, a Working Capital
Borrowing, a Competitive Bid Borrowing or a Swing Line Borrowing.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day
<PAGE> 14
9
relates to any Eurodollar Rate Advances, on which dealings are carried
on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any Person for any period,
the sum of (a) all expenditures (other than interest capitalized
during construction) made, directly or indirectly, by such Person and
its Subsidiaries during such period for equipment, fixed assets, real
property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in
accordance with GAAP, reflected as additions to property, plant or
equipment on a Consolidated balance sheet of such Person plus (b) the
aggregate principal amount of all Debt (including obligations under
Capitalized Leases) assumed or incurred in connection with any such
expenditures. For purposes of this definition, the purchase price of
equipment that is purchased simultaneously with the trade-in of
existing equipment or with insurance proceeds shall be included in
Capital Expenditures only to the extent of the gross amount of such
purchase price less the credit granted by the seller of such equipment
for the equipment being traded in at such time or the amount of such
proceeds, as the case may be.
"CAPITALIZED LEASES" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"CARRY-OVER AMOUNT" has the meaning specified in Section
5.02(o).
"CASH CAPITAL EXPENDITURES" means Capital Expenditures other
than those referred to in clause (b) of the definition of "CAPITAL
EXPENDITURES".
"CASH EQUIVALENTS" means any of the following, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all
Liens and having a maturity of not greater than one year from the date
of acquisition thereof:
(a) readily marketable direct obligations of the
Government of the United States or any agency or
instrumentality thereof or obligations unconditionally
guaranteed by the full faith and credit of the Government of
the United States,
(b) certificates of deposit, eurodollar time
deposits, overnight bank deposits and bankers' acceptances of
any commercial bank organized under the laws of the United
States or any State thereof or any branch of a foreign bank
that (i) is a Lender or a member of the Federal Reserve
System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c) below, and (iii) has
combined capital and surplus of at least $100,000,000, to
<PAGE> 15
10
the extent Cash Equivalents under this clause (b) do not
exceed $10,000,000 in the aggregate, or at least $500,000,000,
to the extent such Cash Equivalents exceed $10,000,000 in the
aggregate,
(c) commercial paper in an aggregate amount of no
more than $75,000,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any
State of the United States and rated at least "Prime-1" (or
the then equivalent grade) by Moody's or "A-1" (or the then
equivalent grade) by S&P, or carrying an equivalent rating by
a nationally recognized rating agency if both S&P and Moody's
cease publishing ratings of investments,
(d) repurchase obligations with a term of not
more than seven days for underlying securities of the type
described in clause (a) above entered into with any commercial
bank organized under the laws of the United States or any
State thereof or any branch of a foreign bank that (i) is a
Lender or a member of the Federal Reserve System, (ii) issues
(or the parent of which issues) commercial paper rated as
described in clause (c) above or has a short term Debt rating
of at least "Prime-1" (or the then equivalent grade) by
Moody's or "A-1" (or the then equivalent grade) by S&P, and
(iii) has combined capital and surplus of at least
$500,000,000, or
(e) Investments in money market or mutual funds
that invest primarily in Cash Equivalents of the type
described in clauses (a), (b) and (c) above.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"CHEMICAL" has the meaning specified in the recital of parties
to this Agreement.
"CITIBANK" has the meaning specified in the recital of parties
to this Agreement.
"CLEAN-DOWN AMOUNT" means (a) for the first Clean-Down Period
occurring after the date hereof, the amount by which the aggregate
amount of the Working
<PAGE> 16
11
Capital Commitments on the first day of such Clean-Down Period exceeds
$900,000,000 and (b) for each Clean-Down Period occurring thereafter,
the amount by which the aggregate amount of the Working Capital
Commitments on the first day of such Clean-Down Period exceeds
$1,000,000,000.
"CLEAN-DOWN PERIOD" means, for each consecutive 12-month
period commencing on December 1 of each year, a period of 30
consecutive days commencing between December 1 and March 1 of such
12-month period, with the first such Clean-Down Period commencing no
later than March 1, 1996, provided that if a Clean-Down Period has not
commenced prior to March 1 of any such 12-month period, a Clean-Down
Period shall commence on such date.
"CO-ARRANGER" has the meaning specified in the recital of
parties to this Agreement.
"COLLATERAL" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is intended to
be subject to any Lien in favor of the Administrative Agent for its
benefit and the benefit of the Agent, the Lender Parties and the Hedge
Banks.
"COLLATERAL DOCUMENTS" means the Security Agreement and any
other agreement that creates or purports to create a Lien in favor of
the Administrative Agent for its benefit and the benefit of the Agent,
the Lender Parties and the Hedge Banks.
"COMMITMENT" means a Term Commitment, a Working Capital
Commitment or a Letter of Credit Commitment.
"COMPANY" has the meaning specified in the Preliminary
Statements.
"COMPETITIVE BID ADVANCE" means an advance by a Working
Capital Lender to the Borrower as part of a Competitive Bid Borrowing
resulting from the competitive bidding procedure described in Section
2.03 and refers to a Fixed Rate Advance or a LIBO Rate Advance.
"COMPETITIVE BID AMOUNT" means, at any time, the aggregate
amount of the Competitive Bid Advances then outstanding.
"COMPETITIVE BID BORROWING" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Working Capital
Lenders whose offer to
<PAGE> 17
12
make one or more Competitive Bid Advances as part of such borrowing
has been accepted under the competitive bidding procedure described in
Section 2.03.
"COMPETITIVE BID NOTE" means a promissory note of the Borrower
payable to the order of any Working Capital Lender, in substantially
the form of Exhibit A-3 hereto, evidencing the indebtedness of the
Borrower to such Lender resulting from a Competitive Bid Advance made
by such Lender.
"CONFIDENTIAL INFORMATION" means all information about the
Borrower, the Company and their respective Subsidiaries that has been
furnished by the Borrower, the Company or any of their respective
Subsidiaries to the Administrative Agent, the Agent or any Lender
Party whether furnished before or after the date of this Agreement,
and regardless of the manner in which it is furnished, but does not
include any such information that (a) is or becomes generally
available to the public other than as a result of a disclosure by the
Administrative Agent, the Agent or any Lender Party not permitted by
this Agreement, (b) was available to the Administrative Agent, the
Agent or any Lender Party on a non-confidential basis prior to its
disclosure to the Administrative Agent, the Agent or such Lender Party
or (c) becomes available to the Administrative Agent, the Agent or any
Lender Party on a non-confidential basis from a Person other than the
Borrower or any of its Subsidiaries that is not, to the best of the
Administrative Agent's, the Agent's or such Lender Party's knowledge,
acting in violation of a confidentiality agreement with the Borrower
or any of its Subsidiaries or is not otherwise prohibited from
disclosing the information to the Administrative Agent, the Agent or
such Lender Party.
"CONFIRMATION ORDER" has the meaning specified in Section
3.01(m)(ii).
"CONSOLIDATED" refers to the consolidation of accounts in
accordance with GAAP.
"CONVERSION", "CONVERT" and "CONVERTED" each refer to a
conversion of Regular Advances of one Type into Regular Advances of
the other Type pursuant to Section 2.09 or 2.10.
"CONVERTIBLE DEBENTURES" means the Senior Convertible Discount
Notes due February 15, 2004 issued by the Borrower pursuant to the
Senior Convertible Discount Note Agreement dated as of February 5,
1992, among the Borrower, the financial institutions party thereto and
Citibank, as agent, and the Indenture dated as of April 8, 1993
between the Borrower and The First National Bank of Boston, as
trustee.
<PAGE> 18
13
"CURRENT ASSETS" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets
of a company conducting a business the same as or similar to that of
such Person, after deducting adequate reserves in each case in which a
reserve is proper in accordance with GAAP.
"CURRENT LIABILITIES" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one
year after the date of determination (excluding any Debt renewable or
extendible, at the option of such Person, to a date more than one year
from such date or arising under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during
a period of more than one year from such date) and (b) all other items
(including taxes accrued as estimated) that in accordance with GAAP
would be classified as current liabilities of such Person.
"DEBT" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services
(other than Obligations for property (excluding real property, capital
stock and property subject to Capitalized Leases) and services
purchased, and expense accruals and deferred compensation items
arising, in the ordinary course of such Person's business), (c) all
Obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments (other than performance, surety and appeals
bonds arising in the ordinary course of business), (d) all payment
Obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (unless the rights and remedies of the seller,
lessor or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all payment
Obligations of such Person as lessee under Capitalized Leases, (f) all
Obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (g) all Obligations of such
Person to purchase, redeem, retire, defease or otherwise make any
payment in respect of any capital stock of or other ownership or
profit interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock (other than
Obligations of such Person in respect of employee stock plans),
valued, in the case of Redeemable Preferred Stock, at the greater of
its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all Obligations of such Person in respect of
Hedge Agreements, (i) all Debt of others referred to in clauses (a)
through (h) above or clause (j) below guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay
or purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services,
<PAGE> 19
14
primarily for the purpose of enabling the debtor to make payment of
such Debt or to assure the holder of such Debt against loss, (iii) to
supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether
such property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (j) all Debt referred
to in clauses (a) through (i) above of another Person secured by (or
for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Debt; PROVIDED that the amount of Debt of the type referred to in
clauses (i) and (j) above will be included within the definition of
"DEBT" only to the extent of the amount of the obligations so
guaranteed or otherwise supported.
"DEBTORS" has the meaning specified in the Preliminary
Statements.
"DEBT RATING" means, as of any date, the lowest rating that
has been most recently announced by either S&P or Moody's, as the case
may be, for any class of long-term senior unsecured Debt issued by the
Borrower or, if applicable, the rating assigned (in writing) by either
S&P or Moody's, as the case may be, to the "implied rating" of the
Borrower's long-term senior unsecured Debt. For purposes of the
foregoing, (a) if any rating established by S&P or Moody's shall be
changed, such change shall be effective as of the date on which such
change is first announced publicly by the rating agency making such
change, and (b) if S&P or Moody's shall change the basis on which
ratings are established, each reference to the Debt Rating announced
by S&P or Moody's, as the case may be, shall refer to the then
equivalent rating by S&P or Moody's, as the case may be.
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"DEFAULTED ADVANCE" means, with respect to any Lender at any
time, the portion of any Advance required to be made by such Lender to
the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
which has not been made by such Lender or by the Administrative Agent
for the account of such Lender pursuant to Section 2.02(e) as of such
time. In the event that a portion of a Defaulted Advance shall be
deemed made pursuant to Section 2.16(a), the remaining portion of such
Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 on the same date as the
Defaulted Advance so deemed made in part.
<PAGE> 20
15
"DEFAULTED AMOUNT" means, with respect to any Lender at any
time, any amount required to be paid by such Lender to the
Administrative Agent, any other Lender or any Issuing Bank hereunder
or under any other Loan Document at or prior to such time which has
not been so paid as of such time, including, without limitation, any
amount required to be paid by such Lender to (a) any Swing Line Bank
pursuant to Section 2.02(b) to purchase a portion of a Swing Line
Advance made by such Swing Line Bank, (b) any Issuing Bank pursuant to
Section 2.14(c) to purchase a portion of a Letter of Credit Advance
made by such Issuing Bank, (c) the Administrative Agent pursuant to
Section 2.02(e) to reimburse the Administrative Agent for the amount
of any Advance made by the Administrative Agent for the account of
such Lender, (d) any other Lender pursuant to Section 2.13 to purchase
any participation in Advances owing to such other Lender or an Issuing
Bank and (e) the Administrative Agent or any Issuing Bank pursuant to
Section 7.05 to reimburse the Administrative Agent or such Issuing
Bank for such Lender's ratable share of any amount required to be paid
by the Lenders to the Administrative Agent or such Issuing Bank as
provided therein. In the event that a portion of a Defaulted Amount
shall be deemed paid pursuant to Section 2.16(b), the remaining
portion of such Defaulted Amount shall be considered a Defaulted
Amount originally required to be paid hereunder or under any other
Loan Document on the same date as the Defaulted Amount so deemed paid
in part.
"DEFAULTING LENDER" means, at any time, any Lender that, at
such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take any action or be the subject of any action or proceeding of
a type described in Section 6.01(f).
"DESIGNATED BIDDER" means (a) an Eligible Assignee or (b) a
special purpose corporation that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and that issues (or the parent of which issues) commercial
paper rated at least "Prime-1" (or the then equivalent grade) by
Moody's or "A-1" (or the then equivalent grade) by S&P that, in the
case of either clause (a) or (b), (i) is organized under the laws of
the United States or any State thereof, (ii) shall have become a party
hereto pursuant to Section 8.07(f), (g) and (h) and (iii) is not
otherwise a Working Capital Lender.
"DESIGNATION AGREEMENT" means a designation agreement entered
into by a Working Capital Lender (other than a Designated Bidder) and
a Designated Bidder, and accepted by the Administrative Agent, in
substantially the form of Exhibit D hereto.
"DISCLOSED LITIGATION" has the meaning specified in Section
3.01(g).
<PAGE> 21
16
"DISCLOSURE STATEMENT" means the Disclosure Statement dated
October 21, 1994 and filed with the Bankruptcy Court by the Debtors.
"DOCUMENTARY L/C" means any letter of credit (other than a
Letter of Credit issued pursuant to this Agreement) that is issued for
the benefit of a supplier of inventory to the Borrower or any of its
Subsidiaries to effect payment for such inventory.
"DOCUMENTARY L/C AMOUNT" means, at any time during a
Non-Investment Grade Period, the Available Amount of Documentary L/Cs
outstanding at such time and at any time during an Investment Grade
Period, zero.
"DOLLARS" and the sign "$" each means lawful money of the
United States.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party,
or such other office of such Lender Party as such Lender Party may
from time to time specify to the Borrower and the Administrative
Agent.
"EBITDA" means, for any period, (i) the sum, determined on a
Consolidated basis, of (a) net income (or net loss), (b) Net Interest
Expense, (c) income tax expense, (d) depreciation expense, (e)
amortization expense (including, without limitation, amortization of
(1) excess of cost over net assets acquired, (2) reorganization value
in excess of amounts allocable to identifiable assets and (3) unearned
restricted stock) and (f) unusual and extraordinary losses less (ii)
unusual and extraordinary gains, in each case of the Borrower and its
Subsidiaries determined in accordance with GAAP for such period.
"ELECTRONIC ISSUING BANK" has the meaning specified in Section
2.14(a).
"ELECTRONIC L/C" and "ELECTRONIC L/C RESERVE" each has the
meaning specified in Section 2.14(a).
"ELIGIBLE ASSIGNEE" means (a) with respect to the Term
Facility, (i) a Lender; (ii) an Affiliate of a Lender; or (iii) any
other Person approved by the Administrative Agent and, so long as no
Event of Default shall have occurred and be continuing, the Borrower,
such approval not to be unreasonably withheld or delayed, (b) with
respect to the Working Capital Facility, (i) a Working Capital Lender;
(ii) an Affiliate of a Working Capital Lender; or (iii) any other
Person approved by the Administrative
<PAGE> 22
17
Agent, the Agent and, so long as no Event of Default shall have
occurred and be continuing, the Borrower, such approval not to be
unreasonably withheld or delayed and (c) with respect to the Letter of
Credit Facility, any Person approved by the Administrative Agent, the
Agent and, so long as no Event of Default shall have occurred and be
continuing, the Borrower, such approval not to be unreasonably
withheld or delayed; PROVIDED, HOWEVER, that neither any Loan Party
nor any Affiliate of any Loan Party shall qualify as an Eligible
Assignee under this definition.
"ENVIRONMENTAL ACTION" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, any
Environmental Permit or Hazardous Material or arising from alleged
injury or threat to health, safety or the environment by Hazardous
Material, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any federal, state, local or (to the
extent applicable) foreign statute, law, ordinance, rule, regulation,
code, order, writ, judgment, injunction, decree or judicial or agency
interpretation, policy or guidance, relating to the environment,
health, safety or Hazardous Materials.
"ENVIRONMENTAL PERMIT" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title
IV of ERISA is a member of the controlled group of any Loan Party, or
under common control with any Loan Party, within the meaning of
Section 414 of the Internal Revenue Code.
"ERISA EVENT" means (a) the occurrence of a Reportable Event
with respect to any Plan; (b) the application for a minimum funding
waiver with respect to a Plan; (c) the provision by the administrator
of any Plan of a notice of intent to terminate such Plan, pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to
a plan amendment referred to in Section 4041(e) of ERISA); (d) the
cessation of
<PAGE> 23
18
operations at a facility of any Loan Party or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the failure
by any Loan Party or any ERISA Affiliate to make a payment to a Plan
required under Section 302(f)(1) of ERISA; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC
of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA,
or the occurrence of any event or condition described in Section 4042
of ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"EUROCURRENCY LIABILITIES" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"EURODOLLAR RATE" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars are
offered by the principal office of the Administrative Agent in London,
England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to the Administrative Agent's
Eurodollar Rate Advance comprising part of such Borrowing to be
outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period.
"EURODOLLAR RATE ADVANCE" means a Regular Advance that bears
interest as provided in Section 2.07(a)(ii).
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period
for all Eurodollar Rate Advances or LIBO Rate Advances comprising part
of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors
<PAGE> 24
19
of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with
respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest
rate on Eurodollar Rate Advances or LIBO Rate Advances is determined)
having a term equal to such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCESS CASH FLOW" means, for any Fiscal Year, an amount equal
to Consolidated EBITDA of the Borrower and its Subsidiaries for such
Fiscal Year,
plus (A) (without duplication) the sum of
(i) if there was a net increase in Consolidated
Current Liabilities (excluding, to the extent otherwise
included therein, income taxes payable, Funded Debt and
non-recourse Debt under the Receivables Financing Facility) of
the Borrower and its Subsidiaries during such Fiscal Year, the
amount of such net increase,
(ii) if there was a net decrease in Consolidated
Current Assets (excluding, to the extent otherwise included
therein, cash, Cash Equivalents, deferred income tax assets,
Debt outstanding under the note receivable monetized pursuant
to the May Note Monetization Facility and receivables sold
under the Receivables Financing Facility) of the Borrower and
its Subsidiaries during such Fiscal Year, the amount of such
net decrease,
(iii) an amount equal to the lesser of (A) the
Carry-Over Amount (if any) for such Fiscal Year and (B) the
amount by which the Maximum Permitted Amount for such Fiscal
Year exceeds the Cash Capital Expenditures actually made by
the Borrower and its Subsidiaries on a Consolidated basis
during such Fiscal Year, and
(iv) the amount (if any) of unusual and
extraordinary cash gains during such Fiscal Year
LESS (b) (without duplication) the sum of
<PAGE> 25
20
(i) if there was a net decrease in Consolidated
Current Liabilities (excluding, to the extent otherwise
included therein, income taxes payable, Funded Debt and
non-recourse Debt under the Receivables Financing Facility) of
the Borrower and its Subsidiaries during such Fiscal Year, the
amount of such net decrease,
(ii) if there was a net increase in Consolidated
Current Assets (excluding, to the extent otherwise included
therein, cash, Cash Equivalents, deferred income tax assets,
Debt outstanding under the note receivable monetized pursuant
to the May Note Monetization Facility and receivables sold
under the Receivables Financing Facility) of the Borrower and
its Subsidiaries during such Fiscal Year, the amount of such
net increase,
(iii) the amount of Cash Capital Expenditures
actually made by the Borrower and its Subsidiaries on a
Consolidated basis during such Fiscal Year,
(iv) the Carry-Over Amount (if any) for the
immediately succeeding Fiscal Year,
(v) the amount (if any) of unusual and
extraordinary cash losses during such Fiscal Year,
(vi) the amount of cash income taxes actually paid
by the Borrower and its Subsidiaries on a Consolidated basis
during such Fiscal Year,
(vii) the amount of Net Cash Interest and financing
fees actually paid by the Borrower and its Subsidiaries on a
Consolidated basis during such Fiscal Year, and
(viii) Funded Debt (excluding Funded Debt under the
May Note Monetization Facility) of the Borrower and its
Subsidiaries permanently repaid or prepaid by any of them (to
the extent such Debt is not refunded or refinanced (other than
with proceeds of the Advances) and to the extent such
repayment or prepayment is permitted, in each case in
accordance with the Loan Documents) during such Fiscal Year.
"EXISTING DEBT" means Debt of the Company, Federated and their
respective Subsidiaries outstanding immediately before giving effect
to the Merger.
"EXISTING LETTERS OF CREDIT" has the meaning specified in
Section 2.14(g).
<PAGE> 26
21
"FACILITY" means the Term Facility, the Working Capital
Facility, the Swing Line Facility or the Letter of Credit Facility.
"FDS NATIONAL BANK" means FDS National Bank, a national
banking association and an indirect wholly owned Subsidiary of the
Borrower.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is
a Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"FEDERATED" has the meaning specified in the recital of
parties to the Agreement.
"FISCAL YEAR" means a fiscal year of the Borrower and its
Consolidated Subsidiaries ending on the Saturday closest to January 31
in any calendar year.
"FIXED RATE ADVANCES" has the meaning specified in Section
2.03(a)(i).
"FNC" means Federated Noteholding Corporation, a Delaware
corporation and a direct wholly owned Subsidiary of the Borrower.
"FRH" means Federated Retail Holdings, Inc., a Delaware
corporation and a direct wholly owned Subsidiary of the Borrower.
"FUNDED DEBT" of any Person means Debt in respect of the
Advances, in the case of the Borrower, and all other Debt of such
Person that by its terms matures more than one year after the date of
its creation or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more
than one year after such date or arises under a revolving credit or
similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year after such date,
including, without limitation, all amounts of Funded Debt of such
Person required to be paid or prepaid within one year after the date
of determination.
<PAGE> 27
22
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in
the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards
Board, or in such other statements by any successor entity as may be
in general use by significant segments of the accounting profession,
which are applicable to the circumstances as of the date of
determination; PROVIDED that, with respect to the calculation of the
financial ratios and the terms used in the covenants contained in this
Agreement and the definitions related thereto, "GAAP" means generally
accepted accounting principles in effect in the United States on the
date of the financial statements referred to in Section 4.01(f), it
being understood that, upon any change in GAAP as at such date that
affects in any material respect the financial ratios and the covenants
contained in this Agreement, the Borrower and the Administrative Agent
will negotiate in good faith to adapt or conform any such financial
ratios and covenants and the definitions related thereto to any such
changes in GAAP to the extent necessary to maintain the original
economic terms of such financial ratios and covenants as in effect
under this Agreement on the date hereof, the Administrative Agent
shall promptly notify the Lenders in writing of the negotiated changes
to such financial ratios, covenants and definitions, and if, by the
30th day after the date such notice is given (i) the Required Lenders
shall not have objected in writing to such changes, such changes shall
be deemed to be effective, and this Agreement shall be deemed to be
amended accordingly, as of such 30th day, without further action on
the part of any party hereto or (ii) the Required Lenders shall have
objected to such changes, then, until this Agreement shall be amended
in accordance with the terms of Section 8.01 to reflect such changes
as may be necessary to maintain the original economic terms of such
financial ratios and covenants, the financial ratios and covenants
immediately in effect prior to such amendment shall remain in effect.
"GUARANTORS" means the Subsidiaries of the Borrower listed on
Schedule II hereto and each other Subsidiary of the Borrower that
shall be required to execute and deliver a guaranty pursuant to
Section 5.01(l).
"GUARANTY" has the meaning specified in Section 3.01(m)(ix).
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials and radon gas and (b) any other
chemicals, materials or substances designated, classified or regulated
as being "hazardous" or "toxic" or words of similar import under any
Environmental Law.
<PAGE> 28
23
"HEDGE AGREEMENTS" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"HEDGE BANK" means any Lender in its capacity as a party to a
Bank Hedge Agreement.
"INDEMNIFIED PARTY" has the meaning specified in Section
8.04(b).
"INFORMATION MEMORANDUM" means, collectively, the information
memoranda dated September 1994 and October 1994 used by the Arranger
and Co-Arranger in connection with the syndication of the Commitments.
"INITIAL EXTENSION OF CREDIT" means the earlier to occur of
the initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"INITIAL LENDERS" has the meaning specified in the recital of
parties to this Agreement.
"INSUFFICIENCY" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"INTEREST COVERAGE RATIO" means, at any date of determination,
the ratio of Consolidated EBITDA for the Measurement Period then most
recently ended to Net Interest Expense for such Measurement Period
determined in accordance with GAAP.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance
comprising part of the same Regular Borrowing and each LIBO Rate
Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurodollar Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurodollar Rate Advance, and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent
period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be one, two, three or six months, as the
Borrower may, upon notice received by the Administrative Agent not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the first day of such Interest Period, select; PROVIDED,
HOWEVER, that at any time when a Default (but not an Event of Default)
has
<PAGE> 29
24
occurred and is continuing, the Borrower may only select Interest
Periods of one month; PROVIDED FURTHER, HOWEVER, that:
(a) the Borrower may not select any Interest
Period with respect to any Eurodollar Rate Advance under a
Facility that ends after any principal repayment installment
date for such Facility unless, after giving effect to such
selection, the aggregate principal amount of Base Rate
Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment
installment date for such Facility shall be at least equal to
the aggregate principal amount of Advances under such Facility
due and payable on or prior to such date;
(b) the Borrower may not select any Interest
Period with respect to any LIBO Rate Advance that ends after
the Termination Date;
(c) Interest Periods commencing on the same date
for Eurodollar Rate Advances comprising part of the same
Regular Borrowing or for LIBO Rate Advances comprising part of
the same Competitive Bid Borrowing shall be of the same
duration; PROVIDED, HOWEVER, that the Borrower may select up
to three separate Interest Periods of different durations in
connection with (i) the initial refinancing of the Regular
Advances made as part of the Initial Extension of Credit, and
(ii) the prepayment on or prior to January 31, 1995 of the
Series A Notes, Series B Notes and Series C Notes issued
pursuant to the Plan of Reorganization, in each case so long
as each Regular Borrowing with an Interest Period of any
specified duration consists of Advances made by the
Appropriate Lenders ratably according to their Commitments
under the relevant Facility;
(d) 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 shall be extended to occur on
the next succeeding Business Day, PROVIDED, HOWEVER, 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 shall occur on the next preceding
Business Day; and
(e) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
<PAGE> 30
25
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"INVESTMENT" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or
other ownership or profit interest, warrants, rights, options,
obligations or other securities of such Person or any capital
contribution to such Person.
"INVESTMENT GRADE PERIOD" means any period during which an
Investment Grade Rating shall be in effect.
"INVESTMENT GRADE RATING" means a Debt Rating of (a) BBB- or
above from S&P and Ba1 or above from Moody's or (b) Baa3 or above from
Moody's and BB+ or above from S&P.
"ISSUING BANK" means Citibank, Chemical, any other Working
Capital Lender that has a Letter of Credit Commitment set forth
opposite its name on Schedule I hereto, any other Working Capital
Lender approved as an Issuing Bank by the Administrative Agent, the
Agent and, so long as no Event of Default shall have occurred and be
continuing, the Borrower (such approval not to be unreasonably
withheld or delayed) and each Eligible Assignee to which a Letter of
Credit Commitment hereunder has been assigned pursuant to Section 8.07
so long as each such Working Capital Lender or Eligible Assignee
expressly agrees to perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be
performed by it as an Issuing Bank and notifies the Administrative
Agent of its Applicable Lending Office and the amount of its Letter of
Credit Commitment (which information shall be recorded by the
Administrative Agent in the Register).
"L/C CASH COLLATERAL ACCOUNT" means the "L/C Cash Collateral
Account" as defined in the Security Agreement or any other account
established by the Borrower with the Administrative Agent for purposes
of cash collateralizing Letters of Credit, on terms and conditions and
subject to documentation satisfactory to the Administrative Agent.
"L/C RELATED DOCUMENTS" has the meaning specified in Section
2.14(e).
"LENDER PARTY" means any Lender, any Issuing Bank or any
Swing Line Bank.
<PAGE> 31
26
"LENDERS" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Section 8.07(a), (b), (c), (d) and
(e) and, except when used in reference to a Regular Advance, a Regular
Borrowing, a Note (other than a Competitive Bid Note), a Commitment or
a related term, each Designated Bidder.
"LETTER OF CREDIT" has the meaning specified in Section
2.14(a).
"LETTER OF CREDIT ADVANCE" means an advance made by any
Issuing Bank or any Working Capital Lender pursuant to Section
2.14(c).
"LETTER OF CREDIT AGREEMENT" has the meaning specified in
Section 2.14(b)(i).
"LETTER OF CREDIT COMMITMENT" means, with respect to any
Issuing Bank at any time, the amount set forth opposite such Issuing
Bank's name on Schedule I hereto under the caption "Letter of Credit
Commitment" or, if such Issuing Bank has entered into one or more
Assignments and Acceptances or if a Working Capital Lender has
otherwise become an Issuing Bank, set forth for such Issuing Bank in
the Register maintained by the Administrative Agent pursuant to
Section 8.07(i) as such Issuing Bank's "Letter of Credit Commitment",
as such amount may be reduced at or prior to such time pursuant to
Section 2.05.
"LETTER OF CREDIT FACILITY" means, at any time, an amount
equal to the lesser of (a) the aggregate amount of the Issuing Banks'
Letter of Credit Commitments and (b) $500,000,000, as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"LEVERAGE RATIO" means, at any date of determination, the
ratio of Adjusted Debt to the sum of Adjusted Debt plus Consolidated
net worth of the Borrower and its Subsidiaries calculated on a
Consolidated basis in accordance with GAAP.
"LIBO RATE" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars are
offered by the principal office of the Administrative Agent in London,
England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to the amount that would be
the Administrative Agent's Pro Rata Share of such Borrowing if such
Borrowing were to be a Regular Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period
<PAGE> 32
27
by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Interest Period.
"LIBO RATE ADVANCES" has the meaning specified in Section
2.03(a)(i).
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way
or other encumbrance on title to real property.
"LOAN DOCUMENTS" means (a) for purposes of this Agreement and
the Notes and any amendments or modifications hereof or thereof and
for all other purposes other than for purposes of the Collateral
Documents and the Guaranty, (i) this Agreement, (ii) the Notes, (iii)
the Guaranty, (iv) the Collateral Documents and (v) each Letter of
and (b) for purposes of the Collateral Documents and
the Guaranty, (i) this Agreement, (ii) the Notes, (iii) the Guaranty,
(iv) the Collateral Documents, (v) each Letter of and
(vi) each Bank Hedge Agreement, in the case of each of the foregoing
agreements referred to in clause (a) or (b), as it may be amended or
otherwise modified from time to time.
"LOAN PARTIES" means the Borrower, the Guarantors and the
Pledgors.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MATERIAL ADVERSE EFFECT" means an effect that causes or
results in or has a reasonable likelihood of causing or resulting in
any material adverse change in (a) the financial condition, business,
results of operations or prospects of the Borrower and its
Subsidiaries taken as a whole, (b) the legality, validity or
enforceability of any Loan Document, (c) the attachment, perfection or
priority of the liens and security interests created under the Loan
Documents, (d) the ability of any Loan Party to perform its
Obligations under any Loan Document or Related Document to which it is
or is to be a party or (e) the rights and remedies of the
Administrative Agent or any Lender Party under any Loan Document or
Related Document.
"MATERIAL CONTRACT" means a "material contract", as defined in
Item 601(b)(10) of Regulation S-K promulgated by the Securities and
Exchange Commission, of any Loan Party or any of its Subsidiaries.
"MAXIMUM PERMITTED AMOUNT" has the meaning specified in
Section 5.02(o).
<PAGE> 33
28
"MAY NOTE MONETIZATION FACILITY" means the monetization
facility established July 26, 1988, between the Borrower and a grantor
trust of which the Borrower is the beneficiary, pursuant to which such
grantor trust distributed approximately $352,000,000 to the Borrower.
"MEASUREMENT PERIOD" means, at any date of determination, the
period of the four consecutive fiscal quarters of the Borrower then
most recently ended; provided that, for the first three fiscal quarters
of the Fiscal Year ending on February 3, 1996, "MEASUREMENT PERIOD"
means the period commencing on the first day of such Fiscal Year and
ending on the last day of such fiscal quarter.
"MERGER" has the meaning specified in the Preliminary
Statements.
"MERGER AGREEMENT" has the meaning specified in the
Preliminary Statements.
"MINOR SUBSIDIARY" means any Subsidiary of the Borrower other
than a Loan Party or a Pledged Subsidiary.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and at least one
Person other than the Loan Parties and the ERISA Affiliates or (b) was
so maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"NET CASH INTEREST" means, for any period, the amount (if any)
by which (a) Net Interest Expense exceeds (b) to the extent included
in clause (a), amortization of deferred financing fees and debt
discount in respect of Debt of the Borrower and its Subsidiaries for
such period, calculated on a Consolidated basis in accordance with
GAAP.
"NET CASH PROCEEDS" means, with respect to any sale, lease,
transfer or other disposition of any asset or the sale or issuance of
any Debt or capital stock or other
<PAGE> 34
29
ownership or profit interest, any securities convertible into or
exchangeable for capital stock or other ownership or profit interest
or any warrants, rights, options or other securities to acquire
capital stock or other ownership or profit interest by any Person, the
aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions, (b) the amount of taxes payable in connection with or as
a result of such transaction and (c) the amount of any Debt owing to a
Person that is not a Loan Party or any of its Subsidiaries or any of
their respective Affiliates secured by a Lien on such asset that, by
the terms of such transaction, is required to be repaid upon such
disposition, in each case to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash,
actually paid to a Person that is not an Affiliate of such Person or
any Loan Party and are properly attributable to such transaction or to
the asset that is the subject thereof.
"NET INTEREST EXPENSE" means, for any period, the amount (if
any) by which (a) interest payable on all Debt (including, without
limitation, the interest component of Capitalized Leases) and
amortization of deferred financing fees and debt discount in respect
of all Debt exceeds (b) interest income, in each case of the Borrower
and its Subsidiaries for such period, calculated on a Consolidated
basis in accordance with GAAP.
"NON-INVESTMENT GRADE PERIOD" means any period during which an
Investment Grade Rating shall not be in effect.
"NOTE" means a Term Note, a Working Capital Note or a
Competitive Bid Note.
"NOTICE OF BORROWING" has the meaning specified in Section
2.02(a).
"NOTICE OF COMPETITIVE BID BORROWING" has the meaning
specified in Section 2.03(a)(i).
"NOTICE OF ISSUANCE" has the meaning specified in Section
2.14(b)(i).
"NOTICE OF RENEWAL" has the meaning specified in Section
2.14(a).
<PAGE> 35
30
"NOTICE OF SWING LINE BORROWING" has the meaning specified in
Section 2.02(b).
"NOTICE OF TERMINATION" has the meaning specified in Section
2.14(a).
"NPL" means the National Priorities List under CERCLA.
"OBLIGATION" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim
is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents include (a) the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts
payable by any Loan Party under any Loan Document and (b) the
obligation of any Loan Party to reimburse any amount in respect of any
of the foregoing that any Lender, in its sole discretion, may elect to
pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"OPEN YEAR" has the meaning specified in Section 4.01(bb).
"OTHER TAXES" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days or that are being contested in good faith by appropriate
proceedings; (c) Liens (if any) arising by operation of law and
pledges or deposits made in the ordinary course of business in
connection with liability insurance, workers' compensation,
unemployment insurance, old-age pensions and other social
<PAGE> 36
31
security benefits, other than in respect of employee benefit plans
subject to ERISA; and (d) zoning restrictions, easements, rights of
way, reciprocal easement agreements, operating agreements, covenants,
conditions or restrictions on the use of any real property that do not
interfere in any material respect with the ordinary conduct of the
business of the Borrower and its Subsidiaries or materially adversely
affect the value of such property for the purpose of such business.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency
thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer
Plan.
"PLAN OF REORGANIZATION" has the meaning specified in the
Preliminary Statements.
"PLEDGED SUBSIDIARY" means any Subsidiary of the Borrower the
capital stock of which has been, or is required to be under the terms
of the Loan Documents, pledged to the Administrative Agent as
Collateral.
"PLEDGORS" means the Borrower, FRH and each Subsidiary of the
Borrower that shall be required to execute and deliver a security
agreement pursuant to Section 5.01(l).
"PREFERRED STOCK" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets,
whether by dividend or upon liquidation.
"PRO RATA SHARE" of any amount means, with respect to any
Working Capital Lender at any time, the product of such amount times a
fraction the numerator of which is the amount of such Lender's Working
Capital Commitment at such time and the denominator of which is the
Working Capital Facility at such time.
"RECEIVABLES FINANCING FACILITY" means the receivables
financing facility established by the Borrower in 1992 and any
replacement thereof that is on terms no less favorable, taken as a
whole, to the Borrower and its Subsidiaries, pursuant to which certain
Subsidiaries of the Borrower issue non-recourse public term Debt and
commercial paper secured by certain receivables of the Borrower and
its Subsidiaries.
<PAGE> 37
32
"REDEEMABLE" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any
such right or Obligation that (a) the issuer has undertaken to redeem
at a fixed or determinable date or dates, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable at the
option of the holder.
"REDUCTION AMOUNT" has the meaning specified in Section
2.06(b)(vii).
"REGISTER" has the meaning specified in Section 8.07(i).
"REGULAR ADVANCE" means any Advance other than a Competitive
Bid Advance.
"REGULAR BORROWING" means a Term Borrowing, a Working Capital
Borrowing or a Swing Line Borrowing.
"REGULATION U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the Merger Agreement, the Plan of
Reorganization and the Tax Agreement.
"RELEASE DATE" means the earlier of (a) the later of (i) the
Termination Date and (ii) the payment in full of the Obligations of
the Loan Parties under the Loan Documents and (b) the earlier of (i)
the date on which the Administrative Agent receives evidence
satisfactory to it that an Investment Grade Rating shall have been in
effect continuously for six months and is then in effect and (ii) the
date on which the Administrative Agent receives evidence satisfactory
to it that a Debt Rating of BBB- or above from S&P and Baa3 or above
from Moody's shall have been in effect continuously for three months
and is then in effect, PROVIDED that the Borrower was not placed on
"credit watch" (or any like designation by S&P or Moody's from time to
time) by either S&P or Moody's at any time during such six-month or
three-month period, as the case may be, PROVIDED FURTHER that no
Default shall have occurred and shall be continuing on such date.
"REORGANIZATION" has the meaning specified in the Preliminary
Statements.
<PAGE> 38
33
"REPORTABLE EVENT" has the meaning specified in Section 4043
of ERISA, excluding any event with respect to which the 30-day notice
requirement has been waived.
"REQUIRED LENDERS" means at any time Lenders owed or holding
at least a majority in interest of the sum of (a) the aggregate
principal amount of the Regular Advances outstanding at such time, (b)
the aggregate Available Amount of all Letters of Credit outstanding at
such time, (c) the aggregate unused Term Commitments at such time and
(d) the aggregate Unused Working Capital Commitments at such
time; PROVIDED, HOWEVER, that if any Lender shall be a Defaulting
Lender at such time, there shall be excluded from the determination of
Required Lenders at such time (i) the aggregate principal amount of
the Regular Advances made by such Lender (in its capacity as a Lender)
and outstanding at such time, (ii) if such Lender shall be an Issuing
Bank, the aggregate Available Amount of all Letters of Credit issued
by such Lender and outstanding at such time, (iii) the unused Term
Commitment of such Lender at such time and (iv) the Unused Working
Capital Commitment of such Lender at such time. For purposes of this
definition, the aggregate principal amount of Swing Line Advances
owing to any Swing Line Bank and of Letter of Credit Advances owing to
any Issuing Bank and the Available Amount of each Letter of Credit
shall be considered to be owed to the Working Capital Lenders ratably
in accordance with their respective Working Capital Commitments.
"RESPONSIBLE OFFICER" means any executive officer of the
Borrower or any of its Subsidiaries or any other officer of the
Borrower or any of its Subsidiaries responsible for overseeing or
reviewing compliance with this Agreement or any other Loan Document.
"S&P" means Standard & Poor's, a division of McGraw-Hill, Inc.
"SECURED OBLIGATIONS" has the meaning specified in the
Security Agreement.
"SECURITY AGREEMENT" has the meaning specified in Section
3.01(m)(viii).
"SINGLE EMPLOYER PLAN" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and no Person other
than the Loan Parties and the ERISA Affiliates or (b) was so
maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
<PAGE> 39
34
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature and (d) such Person is
not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"STANDBY LETTER OF CREDIT" means any Letter of Credit issued
under the Letter of Credit Facility, other than a Trade Letter of
Credit.
"SUBSIDIARY" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital
stock having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"SURVIVING CORPORATION" has the meaning specified in the
Preliminary Statements.
"SURVIVING DEBT" means Existing Debt that will remain
outstanding immediately after giving effect to the Merger.
"SWING LINE ADVANCE" means an advance made by (a) any Swing
Line Bank pursuant to Section 2.01(c) or (b) any Working Capital
Lender pursuant to Section 2.02(b).
"SWING LINE BANK" means each of Citibank, Chemical and up to
three additional Working Capital Lenders as may be designated by the
Borrower from time
<PAGE> 40
35
to time (with the consent of any Lender so designated), PROVIDED that
any of Citibank, Chemical or any other Lender as shall have been so
designated may resign upon 30 days' prior written notice to the
Borrower and the Administrative Agent.
"SWING LINE BORROWING" means a borrowing consisting of a Swing
Line Advance made by any Swing Line Bank.
"SWING LINE FACILITY" has the meaning specified in Section
2.01(c).
"TAX AGREEMENT" means the Tax Sharing Agreement dated as of
February 5, 1992 among the Borrower and the "Members" referred to
therein, as amended or otherwise modified from time to time in
accordance with its terms, to the extent permitted in accordance with
the Loan Documents.
"TAXES" has the meaning specified in Section 2.12(a).
"TERM ADVANCE" has the meaning specified in Section 2.01(a).
"TERM BORROWING" means a borrowing consisting of simultaneous
Term Advances of the same Type made by the Term Lenders.
"TERM COMMITMENT" means, with respect to any Term Lender at
any time, the amount set forth opposite such Lender's name on Schedule
I hereto under the caption "Term Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for
such Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(i) as such Lender's "Term Commitment", as
such amount may be reduced at or prior to such time pursuant to
Section 2.05.
"TERM FACILITY" means, at any time, the aggregate amount of
the Term Lenders' Term Commitments at such time.
"TERM LENDER" means any Lender that has a Term Commitment.
"TERM NOTE" means a promissory note of the Borrower payable to
the order of any Term Lender, in substantially the form of Exhibit A-1
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term Advance made by such Lender.
"TERMINATION DATE" means the earlier of March 31, 2000 and the
date of termination in whole of the Term Commitments, the Working
Capital Commitments,
<PAGE> 41
36
the Letter of Credit Commitments and the Swing Line Facility pursuant
to Section 2.05 or 6.01.
"TRADE LETTER OF CREDIT" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a
supplier of inventory to the Borrower or any of its Subsidiaries to
effect payment for such inventory, the conditions to drawing under
which include the presentation to the Issuing Bank that issued such
Letter of Credit of negotiable bills of lading, invoices and related
documents sufficient, in the judgment of such Issuing Bank, to create
a valid and perfected lien on or security interest in such inventory,
bills of lading, invoices and related documents in favor of such
Issuing Bank.
"TYPE" refers to the distinction between Regular Advances
bearing interest at the Base Rate and Regular Advances bearing
interest at the Eurodollar Rate.
"UNUSED WORKING CAPITAL COMMITMENT" means, with respect to any
Working Capital Lender at any time,
(a) such Lender's Working Capital Commitment at
such time MINUS
(b) the sum of
(i) the aggregate principal amount of
all Working Capital Advances, Swing Line Advances
and Letter of Credit Advances made by such Lender,
in each case in its capacity as a Lender, and
outstanding at such time, and
(ii) such Lender's Pro Rata Share of
(A) the aggregate Available Amount
of all Letters of Credit outstanding at such
time,
(B) the Competitive Bid Amount at
such time,
(C) to the extent not included in
clause (b)(i) of this definition, the
aggregate principal amount of all Letter of
Credit Advances made by the Issuing Banks
pursuant to Section 2.14(c) and outstanding
at such time and
<PAGE> 42
37
(D) to the extent not included in
clause (b)(i) of this definition, the
aggregate principal amount of all Swing Line
Advances made by the Swing Line Banks
pursuant to Section 2.01(c) and outstanding
at such time.
"VOTING STOCK" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of
such Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"WELFARE PLAN" means a welfare plan, as defined in Section
3(1) of ERISA.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"WORKING CAPITAL ADVANCE" has the meaning specified in Section
2.01(b).
"WORKING CAPITAL BORROWING" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the
Working Capital Lenders.
"WORKING CAPITAL COMMITMENT" means, with respect to any
Working Capital Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "Working Capital
Commitment" or, if such Lender has entered into one or more
Assignments and Acceptances, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(i) as
such Lender's "Working Capital Commitment", as such amount may be
reduced at or prior to such time pursuant to Section 2.05.
"WORKING CAPITAL FACILITY" means, at any time, the aggregate
amount of the Working Capital Lenders' Working Capital Commitments at
such time.
"WORKING CAPITAL LENDER" means any Lender that has a Working
Capital Commitment and, except when used in reference to a Regular
Advance, a Regular Borrowing, a Note (other than a Competitive Bid
Note), a Commitment or a related term, any Designated Bidder.
"WORKING CAPITAL NOTE" means a promissory note of the Borrower
payable to the order of any Working Capital Lender, in substantially
the form of Exhibit A-2
<PAGE> 43
38
hereto, evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Working Capital Advances made by such Lender.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
SECTION 1.04 CURRENCY EQUIVALENTS GENERALLY. For all
purposes of this Agreement except as otherwise specifically provided herein,
the equivalent in any Alternative Currency of an amount in Dollars shall be
determined at the rate of exchange quoted by Citibank in New York City, at 9:00
A.M. (New York City time) on the date of determination, to prime banks in New
York City for the spot purchase in the New York foreign exchange market of such
amount of Dollars with such Alternative Currency. Citibank's determination of
each spot rate of exchange pursuant to this Agreement shall be final and
conclusive absent manifest error.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. THE REGULAR ADVANCES.
(a) THE TERM ADVANCES. Each Term Lender severally
agrees, on the terms and conditions hereinafter set forth, to make a single
advance (a "TERM ADVANCE") to the Borrower on any Business Day during the
period from the date hereof until January 31, 1995 in an amount not to exceed
such Lender's Term Commitment at such time. The Term Borrowing shall consist
of Term Advances made by the Term Lenders ratably according to their Term
Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid
may not be reborrowed.
(b) THE WORKING CAPITAL ADVANCES. Each Working Capital
Lender severally agrees, on the terms and conditions hereinafter set forth, to
make advances (each a "WORKING CAPITAL ADVANCE") to the Borrower from time to
time on any Business Day during the period from the date hereof until the
Termination Date in an amount for each such Advance not to exceed an amount
equal to such Lender's Unused Working Capital
<PAGE> 44
39
Commitment at such time less such Lender's Pro Rata Share of the Documentary
L/C Amount at such time. Each Working Capital Borrowing shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof (other than a Borrowing the proceeds of which shall be used solely to
repay or prepay in full outstanding Swing Line Advances made by any Swing Line
Bank or outstanding Letter of Credit Advances made by any Issuing Bank) or, if
less, an aggregate amount equal to the amount by which the aggregate amount of
a proposed Competitive Bid Borrowing requested by the Borrower exceeds the
aggregate amount of Competitive Bid Advances offered to be made by the Working
Capital Lenders and accepted by the Borrower in respect of such Competitive Bid
Borrowing, if such Competitive Bid Borrowing is made on the same date as such
Working Capital Borrowing. Each Working Capital Borrowing shall consist of
Working Capital Advances made by the Working Capital Lenders ratably according
to their Working Capital Commitments. Within the limits referred to in the
first sentence of this Section 2.01(b), the Borrower may borrow under this
Section 2.01(b), prepay pursuant to Section 2.06(a) and reborrow under this
Section 2.01(b).
(c) THE SWING LINE ADVANCES. Each Swing Line Bank
severally agrees, on the terms and conditions hereinafter set forth, to make
Swing Line Advances to the Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date (i) in an
aggregate amount for all Swing Line Advances owing to such Swing Line Bank (in
its capacity as such) not to exceed at any time outstanding $25,000,000, (ii)
in an aggregate amount owing to all Swing Line Banks not to exceed at any time
outstanding $50,000,000, as such amount may be reduced from time to time
pursuant to Section 2.05 (the "SWING LINE FACILITY") and (iii) in an amount for
each such Borrowing not to exceed an amount equal to the aggregate of the
Unused Working Capital Commitments of the Working Capital Lenders at such time
less the Documentary L/C Amount at such time; PROVIDED, HOWEVER, that if at any
time of receipt by any Swing Line Bank of a Notice of Swing Line Borrowing, (x)
any Working Capital Lender shall be a Defaulting Lender or such Swing Line Bank
determines in good faith that any Lender is reasonably likely to become a
Defaulting Lender within the next 30 days (a "POTENTIAL DEFAULTING LENDER") and
(y) the aggregate Unused Working Capital Commitments of the Working Capital
Lenders (other than Working Capital Lenders that are Defaulting Lenders or
Potential Defaulting Lenders) shall be less than the amount of the requested
Swing Line Borrowing, such Swing Line Bank shall not be required to, but may,
if in its sole discretion it elects to do so, make the Swing Line Advance
requested in such Notice of Swing Line Borrowing. No Swing Line Advance shall
be used for the purpose of funding the payment of principal of any other Swing
Line Advance. Each Swing Line Borrowing shall be in an amount of $5,000,000 or
an integral multiple of $1,000,000 in excess thereof and shall be made as a
Base Rate Advance. Within the limits of the Swing Line Facility and within the
limits referred to in clauses (i) and (iii) above (and if at the time of
receipt by any Swing Line Bank of a Notice of Swing Line Borrowing, any Lender
shall be a Defaulting Lender or a Potential Defaulting Lender, so long as any
Swing Line
<PAGE> 45
40
Bank, in its sole discretion, elects to make Swing Line Advances), the Borrower
may borrow under this Section 2.01(c), repay pursuant to Section 2.04(c) or
prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c).
(d) CLEAN-DOWN. Notwithstanding the provisions of
Sections 2.01(b), 2.01(c), 2.03(a) and 2.14(a), no Borrowings may be made under
Section 2.01(b), 2.01(c) or 2.03(a), and no Standby Letters of Credit may be
issued under Section 2.14(a), during any Clean-Down Period, unless the
aggregate principal amount of Working Capital Advances, Letter of Credit
Advances, Swing Line Advances and Competitive Bid Advances plus the aggregate
Available Amount of Standby Letters of Credit outstanding after giving effect
to such Borrowing or the issuance of such Standby Letter of Credit does not
exceed the Clean-Down Amount.
SECTION 2.02. MAKING THE REGULAR ADVANCES. (a) Except as
otherwise provided in Section 2.02(b) or 2.14, each Regular Borrowing shall be
made on notice, given not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or the first Business Day
prior to the date of the proposed Borrowing in the case of a Borrowing
consisting of Base Rate Advances, by the Borrower to the Administrative Agent,
which shall give to each Appropriate Lender prompt notice thereof by telex or
telecopier. Each such notice of a Regular Borrowing (a "NOTICE OF BORROWING")
shall be by telephone, confirmed immediately in writing, or telex or
telecopier, in substantially the form of Exhibit B-1 hereto, specifying therein
the requested (i) date of such Borrowing, (ii) Facility under which such
Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv)
aggregate amount of such Borrowing and (v) in the case of a Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Advance. Each Appropriate Lender shall, before 11:00 A.M. (New York City time)
on the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing in
accordance with the respective Commitments under the applicable Facility of
such Lender and the other Appropriate Lenders. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Administrative Agent will make such funds
available to the Borrower by crediting the Borrower's Account; PROVIDED,
HOWEVER, that, in the case of any Working Capital Borrowing, the Administrative
Agent shall first make a portion of such funds equal to the aggregate principal
amount of any Swing Line Advances and Letter of Credit Advances made by any
Swing Line Bank or any Issuing Bank, as the case may be, and by any other
Working Capital Lender and outstanding on the date of such Working Capital
Borrowing, plus interest accrued and unpaid thereon to and as of such date,
available to such Swing Line Bank or such Issuing
<PAGE> 46
41
Bank, as the case may be, and such other Working Capital Lenders for repayment
of such Swing Line Advances and Letter of Credit Advances.
(b) Each Swing Line Borrowing shall be made on notice,
given not later than 11:00 A.M. (New York City time) on the date of the
proposed Swing Line Borrowing, by the Borrower to any Swing Line Bank and the
Administrative Agent. Each such notice of a Swing Line Borrowing (a "NOTICE OF
SWING LINE BORROWING") shall be by telephone, confirmed immediately in
writing, or telex or telecopier, specifying therein the requested (i) date of
such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such
Borrowing (which maturity shall be no later than the seventh day after the
requested date of such Borrowing). If, in accordance with Section 2.01(c), it
makes the requested Swing Line Advance, such Swing Line Bank will make the
amount thereof available to the Administrative Agent at the Administrative
Agent's Account, in same day funds. After the Administrative Agent's receipt
of such funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will make such funds available to the
Borrower by crediting the Borrower's Account. Upon written demand by any Swing
Line Bank with an outstanding Swing Line Advance, with a copy of such demand to
the Administrative Agent, each other Working Capital Lender shall purchase from
such Swing Line Bank, and such Swing Line Bank shall sell and assign to each
such other Working Capital Lender, such other Lender's Pro Rata Share of such
outstanding Swing Line Advance as of the date of such demand, by making
available for the account of its Applicable Lending Office to the
Administrative Agent for the account of such Swing Line Bank, by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Swing Line Advance to be
purchased by such Lender. The Borrower hereby agrees to each such sale and
assignment. Each Working Capital Lender agrees to purchase its Pro Rata Share
of an outstanding Swing Line Advance on (i) the Business Day on which demand
therefor is made by the Swing Line Bank that made such Advance, provided that
notice of such demand is given not later than 11:00 A.M. (New York City time)
on such Business Day or (ii) the first Business Day next succeeding such demand
if notice of such demand is given after such time. Upon any such assignment by
a Swing Line Bank to any other Working Capital Lender of a portion of a Swing
Line Advance, such Swing Line Bank represents and warrants to such other Lender
that such Swing Line Bank is the legal and beneficial owner of such interest
being assigned by it, but makes no other representation or warranty and assumes
no responsibility with respect to such Swing Line Advance, the Loan Documents
or any Loan Party. If and to the extent that any Working Capital Lender shall
not have so made the amount of such Swing Line Advance available to the
Administrative Agent, such Working Capital Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by such Swing Line Bank until the
date such amount is paid to the Administrative Agent, at the Federal Funds
Rate. If such Lender shall pay to the Administrative Agent such amount for the
account
<PAGE> 47
42
of such Swing Line Bank on any Business Day, such amount so paid in respect of
principal shall constitute a Swing Line Advance made by such Lender on such
Business Day for purposes of this Agreement, and the outstanding principal
amount of the Swing Line Advance made by such Swing Line Bank shall be reduced
by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
the initial Borrowing hereunder or for any Borrowing if the aggregate amount of
such Borrowing is less than $25,000,000 or if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.09 or 2.10 and (ii) the Eurodollar Rate Advances may not be
outstanding as part of more than 10 separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line
Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Borrowing that the related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender
against any loss, cost or expense incurred by such Lender as a result of any
failure to fulfill on or before the date specified in such Notice of Borrowing
for such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Advance to be
made by such Lender as part of such Borrowing when such Advance, as a result of
such failure, is not made on such date.
(e) Unless the Administrative Agent shall have received
notice from an Appropriate Lender prior to the date of any Regular Borrowing
under a Facility under which such Lender has a Commitment that such Lender will
not make available to the Administrative Agent such Lender's ratable portion of
such Borrowing, the Administrative Agent may assume that such Lender has made
such portion available to the Administrative Agent on the date of such
Borrowing in accordance with subsection (a) or (b) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have so made such ratable portion available to the
Administrative Agent, the Borrower and such Lender severally agree to repay or
pay to the Administrative Agent forthwith on demand such corresponding amount
and to pay interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid or paid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at such time under Section 2.07 to Advances comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall pay to the Administrative Agent such corresponding amount, such
amount so paid shall constitute such Lender's Advance as part of such Borrowing
for purposes of this Agreement. If the Borrower shall repay to the
<PAGE> 48
43
Administrative Agent such corresponding amount, such payment shall not relieve
such Lender of any obligation it may have to the Borrower hereunder.
(f) The failure of any Lender to make the Advance to be
made by it as part of any Regular Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its Advance on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on the date of any
Borrowing.
SECTION 2.03. THE COMPETITIVE BID ADVANCES. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; provided that (x) such Competitive Bid Borrowing
shall not exceed an amount equal to the aggregate Unused Working Capital
Commitments of the Lenders in effect immediately prior to giving effect to such
Competitive Bid Borrowing less the Documentary L/C Amount at such time and (y)
following the making of each Competitive Bid Borrowing, (I) the aggregate
amount of the Competitive Bid Advances of all Lenders then outstanding shall
not exceed $1,000,000,000 and (II) the aggregate amount of the Competitive Bid
Advances of any one Lender then outstanding shall not exceed the greater of (x)
the Working Capital Commitment of such Lender and (y) $50,000,000.
(i) The Borrower may request a Competitive Bid Borrowing
under this Section 2.03 by delivering to the Administrative Agent, by
telecopier or telex, a notice of a Competitive Bid Borrowing (a "NOTICE
OF COMPETITIVE BID BORROWING"), in substantially the form of Exhibit
B-2 hereto, specifying therein the requested (v) date of such proposed
Competitive Bid Borrowing, (w) aggregate amount of such proposed
Competitive Bid Borrowing, (x) in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances, Interest Period, or in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances,
maturity date for repayment of each Fixed Rate Advance to be made as
part of such Competitive Bid Borrowing (which maturity date may not be
earlier than the date occurring 7 days and not later than 180 days
after the date of such Competitive Bid Borrowing), (y) interest
payment date or dates relating thereto, and (z) other terms (if any)
to be applicable to such Competitive Bid Borrowing, not later than
10:00 A.M. (New York City time) (A) at least one Business Day prior to
the date of the proposed Competitive Bid Borrowing, if the Borrower
shall specify in the Notice of Competitive Bid Borrowing that the
rates of interest to be offered by the Working Capital Lenders shall
be fixed rates per annum (the Advances comprising any such Competitive
Bid Borrowing being referred to herein as "FIXED RATE ADVANCES") and
(B) at least four Business Days prior to the date
<PAGE> 49
44
of the proposed Competitive Bid Borrowing, if the Borrower shall
instead specify in the Notice of Competitive Bid Borrowing that the
rates of interest to be offered by the Working Capital Lenders are to
be based on the LIBO Rate (the Advances comprising such Competitive
Bid Borrowing being referred to herein as "LIBO RATE ADVANCES"). The
Administrative Agent shall in turn promptly notify each Working
Capital Lender of each request for a Competitive Bid Borrowing
received by it from the Borrower by sending such Lender a copy of the
related Notice of Competitive Bid Borrowing.
(ii) Each Working Capital Lender may, if, in its sole
discretion, it elects to do so, irrevocably offer to make one or more
Competitive Bid Advances to the Borrower as part of such proposed
Competitive Bid Borrowing at a rate or rates of interest specified by
such Lender in its sole discretion, by notifying the Administrative
Agent (which shall give prompt notice thereof to the Borrower), before
10:00 A.M. (New York City time) on the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of Fixed Rate Advances, and three Business Days before the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of LIBO Rate Advances, of the
minimum amount and maximum amount of each Competitive Bid Advance
which such Lender would be willing to make as part of such proposed
Competitive Bid Borrowing (which amounts may, subject to the proviso
to the first sentence of this Section 2.03(a), exceed such Lender's
Working Capital Commitment, if any), the rate or rates of interest
therefor and such Lender's Applicable Lending Office with respect to
such Competitive Bid Advance; PROVIDED that if the Administrative Agent
in its capacity as a Working Capital Lender shall, in its sole
discretion, elect to make any such offer, it shall notify the Borrower
of such offer before 9:00 A.M. (New York City time) on the date on
which notice of such election is to be given to the Administrative
Agent by the other Working Capital Lenders. If any Working Capital
Lender shall elect not to make such an offer, such Lender shall so
notify the Administrative Agent, before 10:00 A.M. (New York City
time) on the date on which notice of such election is to be given to
the Administrative Agent by the other Working Capital Lenders, and
such Lender shall not be obligated to, and shall not, make any
Competitive Bid Advance as part of such Competitive Bid Borrowing;
PROVIDED that the failure by any Lender to give such notice shall not
cause such Lender to be obligated to make any Competitive Bid Advance
as part of such proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, before 11:00 A.M. (New
York City time) on the date of such proposed Competitive Bid
Borrowing, in the case of a Competitive Bid Borrowing consisting of
Fixed Rate Advances, and before 1:00 P.M. (New York City time) three
Business Days before the date of such proposed Competitive Bid
<PAGE> 50
45
Borrowing, in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by
giving the Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Administrative Agent
of the amount of each Competitive Bid Advance (which amount
shall be equal to or greater than the minimum amount, and
equal to or less than the maximum amount, notified to the
Borrower by the Administrative Agent on behalf of such Lender
for such Competitive Bid Advance pursuant to paragraph (ii)
above) to be made by each Lender as part of such Competitive
Bid Borrowing, and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving the Administrative
Agent notice to that effect. The Borrower shall accept the
offers made by any Lender or Lenders to make Competitive Bid
Advances in order of the lowest to the highest rates of
interest offered by such Lenders. If two or more Lenders have
offered the same interest rate, the amount to be borrowed at
such interest rate will be allocated among such Lenders in
proportion to the amount that each such Lender offered at such
interest rate.
(iv) If the Borrower notifies the Administrative Agent
that such Competitive Bid Borrowing is cancelled pursuant to paragraph
(iii)(x) above, the Administrative Agent shall give prompt notice
thereof to the Working Capital Lenders and such Competitive Bid
Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers
made by any Lender or Lenders pursuant to paragraph (iii)(y) above,
the Administrative Agent shall in turn promptly notify (A) each Lender
that has made an offer as described in paragraph (ii) above, of the
date and aggregate amount of such Competitive Bid Borrowing and
whether or not any offer or offers made by such Lender pursuant to
paragraph (ii) above have been accepted by the Borrower, (B) each
Lender that is to make a Competitive Bid Advance as part of such
Competitive Bid Borrowing, of the amount of each Competitive Bid
Advance to be made by such Lender as part of such Competitive Bid
Borrowing, and (C) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, upon receipt, that
the Administrative Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each
Lender that is to make a Competitive Bid Advance as part of such
Competitive Bid Borrowing shall, before 12:00 noon (New York City
time) on the date
<PAGE> 51
46
of such Competitive Bid Borrowing specified in the notice received
from the Administrative Agent pursuant to clause (A) of the preceding
sentence or any later time when such Lender shall have received notice
from the Administrative Agent pursuant to clause (C) of the preceding
sentence, make available for the account of its Applicable Lending
Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's portion of such Competitive
Bid Borrowing. Upon fulfillment of the applicable conditions set
forth in Article III and after receipt by the Administrative Agent of
such funds, the Administrative Agent will make such funds available to
the Borrower by crediting the Borrower's Account. Promptly after each
Competitive Bid Borrowing the Administrative Agent will notify each
Working Capital Lender of the amount and maturity of the Competitive
Bid Borrowing and the consequent Competitive Bid Amount.
(vi) If the Borrower notifies the Administrative Agent
that it accepts one or more of the offers made by any Lender or
Lenders pursuant to paragraph (iii)(y) above, such notice of
acceptance shall be irrevocable and binding on the Borrower. The
Borrower shall indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill on or
before the date specified in the related Notice of Competitive Bid
Borrowing for such Competitive Bid Borrowing the applicable conditions
set forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Competitive Bid Advance to be made
by such Lender as part of such Competitive Bid Borrowing when such
Competitive Bid Advance, as a result of such failure, is not made on
such date.
(b) Each Competitive Bid Borrowing shall be in an
aggregate amount of $25,000,000 or an integral multiple of $1,000,000 in excess
thereof and, following the making of each Competitive Bid Borrowing, the
Borrower and each Lender shall be in compliance with the limitations set forth
in the proviso to the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in
this Section 2.03, the Borrower may from time to time borrow under this Section
2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, PROVIDED that a Competitive Bid Borrowing shall not be made
within three Business Days of the date of any other Competitive Bid Borrowing;
PROVIDED, HOWEVER, that notwithstanding the immediately preceding proviso, up
to three Competitive Bid Borrowings may be made within three Business Days of
any other Competitive Bid Borrowing in connection with (i) the initial
refinancing of the Regular Advances made as part of the Initial Extension of
Credit and (ii) the prepayment on or prior to
<PAGE> 52
47
January 31, 1995 of the Series A Notes, the Series B Notes and the Series C
Notes issued pursuant to the Plan of Reorganization.
(d) The Borrower shall repay to the Administrative Agent
for the account of each Lender that has made a Competitive Bid Advance, on the
maturity date of each Competitive Bid Advance (such maturity date being that
specified by the Borrower for repayment of such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and provided in the Competitive Bid Note evidencing such
Competitive Bid Advance), the then unpaid principal amount of such Competitive
Bid Advance. The Borrower shall have no right to prepay any principal amount
of any Competitive Bid Advance unless, and then only on the terms, specified by
the Borrower for such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and set
forth in the Competitive Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid
principal amount of each Competitive Bid Advance from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive
Bid Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by the Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and
during the continuance of an Event of Default, the Borrower shall pay interest
on the amount of unpaid principal of and interest on each Competitive Bid
Advance owing to a Lender, payable in arrears on the date or dates interest is
payable thereon, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such Competitive Bid Advance under
the terms of the Competitive Bid Note evidencing such Competitive Bid Advance
unless otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid
Borrowing, the Borrower shall pay a non-refundable competitive bid fee of
$3,000 to the Administrative Agent for its own account.
SECTION 2.04. REPAYMENT OF REGULAR ADVANCES.
<PAGE> 53
48
(a) TERM ADVANCES. The Borrower shall repay to the
Administrative Agent for the ratable account of the Term Lenders the aggregate
outstanding principal amount of the Term Advances on the dates and in the
amounts indicated on Schedule 2.04(a) hereto.
(b) WORKING CAPITAL ADVANCES. The Borrower shall repay
to the Administrative Agent for the ratable account of the Working Capital
Lenders on the Termination Date the aggregate principal amount of the Working
Capital Advances then outstanding.
(c) SWING LINE ADVANCES. The Borrower shall repay to the
Administrative Agent for the account of each Swing Line Bank and each other
Working Capital Lender that has made a Swing Line Advance the outstanding
principal amount of each Swing Line Advance made by each of them on the earlier
of the maturity date specified in the applicable Notice of Swing Line Borrowing
(which maturity shall be no later than the seventh day after the requested date
of such Borrowing) and the Termination Date.
(d) LETTER OF CREDIT ADVANCES. The Borrower shall repay
to the Administrative Agent for the account of each Issuing Bank and each other
Working Capital Lender that has made a Letter of Credit Advance the outstanding
principal amount of each Letter of Credit Advance made by each of them on
demand.
SECTION 2.05. TERMINATION OR REDUCTION OF THE COMMITMENTS.
(a) OPTIONAL. The Borrower may, upon at least three Business Days' notice to
the Administrative Agent, terminate in whole or reduce in part the unused
portions of the Term Commitments, the Letter of Credit Facility and the Swing
Line Facility and the Unused Working Capital Commitments; PROVIDED, HOWEVER,
that each partial reduction of a Facility (i) shall be in an aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii)
shall be made ratably among the Appropriate Lenders in accordance with their
Commitments with respect to such Facility.
(b) MANDATORY. (i) The Working Capital Facility shall be
automatically and permanently reduced on a pro rata basis on each date on which
prepayment thereof is required to be made pursuant to Section 2.06(b)(i) or
(ii) in an amount equal to the applicable Reduction Amount, PROVIDED that each
such reduction of the Working Capital Facility shall be made ratably among the
Working Capital Lenders in accordance with their Working Capital Commitments,
PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing and Section
2.06(b)(vii), in no event shall the Working Capital Facility be reduced,
pursuant to this Section 2.05(b)(i), to less than $1,100,000,000.
<PAGE> 54
49
(ii) The Letter of Credit Facility and the Swing Line
Facility shall be permanently reduced from time to time on the date of each
reduction in the Working Capital Facility by the amounts, if any, by which the
aggregate amounts of the Letter of Credit Facility and the Swing Line Facility,
respectively, exceed the Working Capital Facility after giving effect to such
reduction of the Working Capital Facility.
(iii) On the date of the Term Borrowing, after giving
effect to such Term Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term Advances, the aggregate Term Commitments of
the Term Lenders shall be automatically and permanently reduced, on a pro rata
basis, by an amount equal to the amount by which the aggregate Term Commitments
immediately prior to such reduction exceed the aggregate unpaid principal
amount of the Term Advances then outstanding.
SECTION 2.06. PREPAYMENTS OF REGULAR ADVANCES. (a)
OPTIONAL. The Borrower may, upon at least three Business Days' notice in the
case of Eurodollar Rate Advances and same day notice in the case of Base Rate
Advances, in each case to the Administrative Agent stating the proposed date
and aggregate principal amount of the prepayment, and if such notice is given
the Borrower shall, prepay the outstanding aggregate principal amount of the
Regular Advances comprising part of the same Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
aggregate principal amount prepaid; PROVIDED, HOWEVER, that (x) each partial
prepayment shall be in an aggregate principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and (y) if any prepayment of
a Eurodollar Rate Advance is made other than on the last day of an Interest
Period for such Advance, the Borrower shall also pay any amounts owing pursuant
to Section 8.04(c). With respect to each such prepayment of any Term Advances,
50% of such prepayment shall be applied to the installments thereof pro rata
and the remaining 50% of such prepayment shall be applied to the installments
thereof in inverse order of maturity.
(b) MANDATORY. (i) If on the 90th day following the end
of any Fiscal Year, an Investment Grade Rating shall not be in effect, the
Borrower shall, on or before such 90th day, commencing with the Fiscal Year
ending on February 3, 1996, prepay an aggregate principal amount of the Regular
Advances comprising part of the same Borrowings in an amount equal to (x) 35%,
if the Interest Coverage Ratio at the end of such Fiscal Year is greater than
3.75:1 or (y) 50%, in all other cases, in each case of the amount of Excess
Cash Flow for such Fiscal Year. Each such prepayment shall be applied ratably
FIRST to the Term Facility, with 50% of such prepayment applied to the
installments thereof pro rata and the remaining 50% of such prepayment applied
to the installments thereof in inverse order of maturity and SECOND to the
Working Capital Facility as set forth in clause (vii) below.
<PAGE> 55
50
(ii) During each Non-Investment Grade Period, the Borrower
shall, on the date of receipt of the Net Cash Proceeds by the Borrower or any
of its Subsidiaries from (A) the sale, lease, transfer or other disposition of
any assets of the Borrower or any of its Subsidiaries (other than any sale,
lease, transfer or other disposition of assets pursuant to clause (i), (ii),
(iii), (v) or (vi) of Section 5.02(d)) and (B) the incurrence or issuance by
the Borrower or any of its Subsidiaries of any Debt (other than Debt incurred
or issued pursuant to clause (i)(A), (B) or (D), (ii) or (iii) of Section
5.02(b)), prepay an aggregate principal amount of the Advances comprising part
of the same Borrowings in an amount equal to 50% of the amount of such Net Cash
Proceeds. Each such prepayment shall be applied FIRST to the Term Facility,
with 50% of such prepayment applied to the installments thereof pro rata and
the remaining 50% of such prepayment applied in inverse order of maturity and
SECOND to the Working Capital Facility as set forth in clause (vii) below.
(iii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Working Capital Advances comprising part of
the same Borrowings, the Letter of Credit Advances and the Swing Line Advances
equal to the amount by which (A) the sum of the aggregate principal amount of
(w) the Working Capital Advances, (x) the Letter of Credit Advances, (y) the
Swing Line Advances and (z) the Competitive Bid Advances then outstanding plus
the aggregate Available Amount of all Letters of Credit then outstanding
exceeds (B) the Working Capital Facility on such Business Day.
(iv) The Borrower shall, on each Business Day and on the
Termination Date, pay to the Administrative Agent for deposit in the L/C Cash
Collateral Account an amount sufficient to cause the aggregate amount on
deposit in such Account to equal the amount by which the aggregate Available
Amount of all Letters of Credit then outstanding exceeds the Letter of Credit
Facility on such Business Day or the Termination Date, as the case may be,
PROVIDED that with respect to any payment to be made under this clause (iv) on
the Termination Date, the Borrower shall make such payment or, at its option,
provide a "back-to-back" letter of credit to the Issuing Banks that issued the
Letters of Credit outstanding at such time in a form satisfactory to such
Issuing Banks and the Administrative Agent in their sole discretion, issued by
a bank satisfactory to such Issuing Banks and the Administrative Agent in their
sole discretion, in an amount equal to the aggregate Available Amount of the
Letters of Credit then outstanding.
(v) The Borrower shall pay to the Administrative Agent,
on the first day of each Clean-Down Period, an amount equal to the amount by
which the aggregate principal amount of the Working Capital Advances, the
Letter of Credit Advances, the Swing Line Advances and the Competitive Bid
Advances plus the aggregate Available Amount of outstanding Standby Letters of
Credit exceeds the Clean-Down Amount, FIRST to be applied to
<PAGE> 56
51
prepay the Working Capital Advances, the Letter of Credit Advances and the
Swing Line Advances and SECOND to be deposited in the L/C Cash Collateral
Account.
(vi) The Borrower shall, on or within the 30 Business Days
immediately preceding the date of any prepayment, redemption, purchase or
defeasance of Debt by the Borrower or any of its Subsidiaries pursuant to
clause (viii) of Section 5.02(j), prepay an aggregate principal amount of the
Advances comprising part of the same Borrowings in an amount equal to the
aggregate principal amount of the other Debt being so prepaid, redeemed,
purchased or defeased. Each such prepayment shall be applied ratably to the
Term Facility, with 50% of such prepayment applied to the installments thereof
pro rata and the remaining 50% of such prepayment applied to the installments
thereof in inverse order of maturity.
(vii) Prepayments of the Working Capital Facility made
pursuant to clause (i), (ii), (iii) or (v) above shall be FIRST applied to
prepay Letter of Credit Advances then outstanding until such Advances are paid
in full, SECOND applied to prepay Swing Line Advances then outstanding until
such Advances are paid in full, THIRD applied to prepay Working Capital
Advances then outstanding comprising part of the same Borrowings until such
Advances are paid in full and FOURTH deposited in the L/C Cash Collateral
Account to cash collateralize 100% of the Available Amount of the Letters of
Credit then outstanding; and, in the case of prepayments of the Working Capital
Facility required pursuant to clause (i) or (ii) above, the amount remaining
(if any) after the prepayment in full of the Advances then outstanding and the
100% cash collateralization of the aggregate Available Amount of Letters of
Credit then outstanding (the sum of such prepayment amounts, cash
collateralization amounts and remaining amount being referred to herein as the
"REDUCTION AMOUNT") may be retained by the Borrower and the Working Capital
Facility shall be permanently reduced as set forth in Section 2.05(b)(i). Upon
the drawing of any Letter of Credit for which funds are on deposit in the L/C
Cash Collateral Account, such funds shall be applied to reimburse the relevant
Issuing Bank or Working Capital Lenders, as applicable.
(viii) All prepayments under this subsection (b) shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 2.07. INTEREST ON REGULAR ADVANCES. (a) SCHEDULED
INTEREST. The Borrower shall pay interest on the unpaid principal amount of
each Regular Advance owing to each Lender from the date of such Advance until
such principal amount shall be paid in full, at the following rates per annum:
(i) BASE RATE ADVANCES. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at all times to
the sum of (A) the Base Rate in effect from time to time and (B) the
Applicable Margin in effect from time to time,
<PAGE> 57
52
payable in arrears quarterly on the last day of each March, June,
September and December during such periods and on the date such Base
Rate Advance shall be Converted or paid in full.
(ii) EURODOLLAR RATE ADVANCES. During such periods as
such Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Advance to the sum of
(A) the Eurodollar Rate for such Interest Period for such Advance and
(B) the Applicable Margin in effect from time to time, payable in
arrears on the last day of such Interest Period and, if such Interest
Period has a duration of six months, on the day that occurs during
such Interest Period three months after the first day of such Interest
Period and on the date such Eurodollar Rate Advance shall be Converted
or paid in full.
(b) DEFAULT INTEREST. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on (i) the
unpaid principal amount of each Regular Advance owing to each Lender, payable
in arrears on the dates referred to in clause (a)(i) or (a)(ii) above and on
demand, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on such Advance pursuant to clause (a)(i) or
(a)(ii) above and (ii) to the fullest extent permitted by law, the amount of
any interest, fee or other amount payable hereunder that is not paid when due,
from the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid, in the case of interest, on the Type of Advance on which
such interest has accrued pursuant to clause (a)(i) or (a)(ii) above, and, in
all other cases, on Base Rate Advances pursuant to clause (a)(i) above.
(c) NOTICE OF INTEREST RATE. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent shall
give notice to the Borrower and each Appropriate Lender of the applicable
interest rate determined by the Administrative Agent for purposes of clause
(a)(i) or (a)(ii) above.
SECTION 2.08. FEES. (a) COMMITMENT FEE. The Borrower shall
pay to the Administrative Agent for the account of the Lenders a commitment fee
on the average daily unused portion of each Appropriate Lender's Term
Commitment and on the sum of the average daily Unused Working Capital
Commitment of such Lender plus its Pro Rata Share of the average daily
outstanding Swing Line Advances PLUS its Pro Rata Share of the average daily
outstanding Competitive Bid Advances (in each case, such average to be
calculated for the period commencing on the due date of the most recent such
payment (or the date of the Initial Extension of Credit in the case of the
first such payment) and ending on the date such payment is due) from the date
of the Initial Extension of Credit in the case of each Initial
<PAGE> 58
53
Lender and from the effective date specified in the Assignment and Acceptance
pursuant to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to the Applicable Percentage in
effect from time to time, payable in arrears, on March 31, 1995, and
thereafter, quarterly on the last Business Day of each March, June, September
and December, and on the Termination Date; PROVIDED, HOWEVER, that any
commitment fee accrued with respect to any of the Commitments of a Defaulting
Lender during the period prior to the time such Lender became a Defaulting
Lender and unpaid at such time shall not be payable by the Borrower so long as
such Lender shall be a Defaulting Lender except to the extent that such
commitment fee shall otherwise have been due and payable by the Borrower prior
to such time; and PROVIDED FURTHER that no commitment fee shall accrue on any
of the Commitments of a Defaulting Lender so long as such Lender shall be a
Defaulting Lender.
(b) UTILIZATION FEE. During each Non-Investment Grade
Period, for each day on which the sum of the aggregate outstanding Advances
plus the aggregate Available Amount of outstanding Letters of Credit plus the
aggregate Available Amount of outstanding Documentary L/Cs exceeds 50% of the
sum of (i) the Term Commitments on such day plus (ii) the Working Capital
Commitments on such day, the Borrower shall pay to the Administrative Agent for
the account of each Lender (other than the Designated Bidders) a utilization
fee on the sum of the aggregate amount of the Advances outstanding and owing to
such Lender plus such Lender's Pro Rata Share of the aggregate Available Amount
of all outstanding Standby Letters of Credit at the rate of 0.25% per annum,
payable in arrears on March 31, 1995, and thereafter, quarterly on the last
Business Day of each March, June, September and December and on the Termination
Date; PROVIDED, HOWEVER, that any utilization fee accrued with respect to any
of the Advances of a Defaulting Lender during the period prior to the time such
Lender became a Defaulting Lender and unpaid at such time shall not be payable
by the Borrower so long as such Lender shall be a Defaulting Lender except to
the extent that such utilization fee shall otherwise have been due and payable
by the Borrower prior to such time; and PROVIDED FURTHER that no utilization
fee shall accrue on any of the Advances of a Defaulting Lender so long as such
Lender shall be a Defaulting Lender.
(c) ADMINISTRATIVE AGENT'S FEES. The Borrower shall pay
to the Administrative Agent for its own account such fees as may from time to
time be agreed between the Borrower and the Administrative Agent.
SECTION 2.09. CONVERSION OF REGULAR ADVANCES. (a) OPTIONAL.
The Borrower may on any Business Day, upon notice given to the Administrative
Agent not later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Conversion in the case of a Conversion to
Eurodollar Rate Advances, or the first Business Day prior to the date of the
proposed Conversion in the case of a Conversion to Base
<PAGE> 59
54
Rate Advances and subject to the provisions of Section 2.10, Convert all or any
portion of the Regular Advances of one Type comprising the same Borrowing into
Regular Advances of the other Type; PROVIDED, HOWEVER, that any Conversion of
Eurodollar Rate Advances into Base Rate Advances shall be made only on the last
day of an Interest Period for such Eurodollar Rate Advances, any Conversion of
Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less
than the minimum amount specified in Section 2.02(c) and no Conversion of any
Advances shall result in more separate Borrowings than permitted under Section
2.02(c). Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
(b) MANDATORY. (i) On the date on which the aggregate
unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing
shall be reduced, by payment or prepayment or otherwise, to less than
$25,000,000, such Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of
any Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "INTEREST PERIOD" in Section 1.01,
the Administrative Agent will forthwith so notify the Borrower and the
Appropriate Lenders, whereupon each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Event of Default, (x) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance and (y) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.10. INCREASED COSTS, ETC. (a) If, due to either
(i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or
(ii) the compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or of
making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances
or of agreeing to issue or of issuing or maintaining Letters of Credit, then
the Borrower shall from time to time, upon demand by such Lender (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent
for the account of such Lender additional amounts sufficient to
<PAGE> 60
55
compensate such Lender for such increased cost; PROVIDED, HOWEVER, that a
Lender claiming additional amounts under this Section 2.10(a) agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, such increased cost that may thereafter accrue and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender. A certificate as to the amount of such increased cost, submitted to
the Borrower by such Lender, shall be conclusive and binding for all purposes,
absent manifest error. If the Borrower so notifies the Administrative Agent
within ten Business Days after any Lender notifies the Borrower of any
increased cost pursuant to the foregoing provisions of this Section 2.10(a),
the Borrower may, upon payment of such increased cost to such Lender, replace
such Lender with a Person that is an Eligible Assignee in accordance with the
terms of Section 8.07 (and the Lender being so replaced shall take all action
as may be necessary to assign its rights and obligations under this Agreement
to such Eligible Assignee).
(b) If any Lender Party (other than the Designated
Bidders) determines that compliance with any law or regulation or any guideline
or request from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount of capital
required or expected to be maintained by such Lender Party or any corporation
controlling such Lender Party and that the amount of such capital is increased
by or based upon the existence of such Lender Party's commitment to lend or to
issue Letters of Credit hereunder and other commitments of such type or the
issuance or maintenance of the Letters of Credit (or similar contingent
obligations), then, upon demand by such Lender Party (with a copy of such
demand to the Administrative Agent), the Borrower shall pay to the
Administrative Agent for the account of such Lender Party, from time to time as
specified by such Lender Party, additional amounts sufficient to compensate
such Lender Party in the light of such circumstances, to the extent that such
Lender Party reasonably determines such increase in capital to be allocable to
the existence of such Lender Party's commitment to lend or to issue Letters of
Credit hereunder or to the issuance or maintenance of any Letters of Credit. A
certificate as to such amounts submitted to the Borrower by such Lender Party
shall be conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances
under any Facility, Lenders owed at least a majority in interest of the then
aggregate unpaid principal amount thereof notify the Administrative Agent that
the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Lenders of making, funding or maintaining
their Eurodollar Rate Advances for such Interest Period, the Administrative
Agent shall forthwith so notify the Borrower and the Appropriate Lenders,
whereupon (i) each such Eurodollar Rate Advance under such Facility will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of
<PAGE> 61
56
the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or LIBO Rate Advances or to continue to fund or
maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder, then, on
notice thereof and demand therefor by such Lender to the Borrower through the
Administrative Agent, (i) each Eurodollar Rate Advance under each Facility
under which such Lender has a Commitment or LIBO Rate Advance, as the case may
be, will automatically, upon such demand, Convert into a Base Rate Advance or
an Advance that bears interest at the rate set forth in Section 2.07(a)(i), as
the case may be, and (ii) the obligation of the Appropriate Lenders to make, or
to Convert Regular Advances into, Eurodollar Rate Advances shall be suspended
until the Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.
SECTION 2.11. PAYMENTS AND COMPUTATIONS. (a) The Borrower
shall make each payment hereunder and under the Notes, irrespective of any
right of counterclaim or set-off (except as otherwise provided in Section
2.16), not later than 12:00 Noon (New York City time) on the day when due in
U.S. dollars to the Administrative Agent at the Administrative Agent's Account
in same day funds. The Administrative Agent will promptly thereafter cause
like funds to be distributed (i) if such payment by the Borrower is in respect
of principal, interest, commitment fees, utilization fees or any other
Obligation then payable hereunder and under the Notes to more than one Lender
or Issuing Bank, to such Lenders or such Issuing Banks, as the case may be, for
the account of their respective Applicable Lending Offices ratably in
accordance with the amounts of such respective Obligations then payable to such
Lenders or Issuing Banks and (ii) if such payment by the Borrower is in respect
of any Obligation then payable hereunder to one Lender or one Issuing Bank, to
such Lender or such Issuing Bank for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording
of the information contained therein in the Register pursuant to Section
8.07(i), from and after the effective date of such Assignment and Acceptance,
the Administrative Agent shall make all payments hereunder and under the Notes
in respect of the interest assigned thereby to the Lender assignee or Issuing
Bank assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
<PAGE> 62
57
(b) If the Administrative Agent receives funds for
application to the Obligations under the Loan Documents under circumstances for
which the Loan Documents do not specify the Advances or the Facility to which,
or the manner in which, such funds are to be applied, the Administrative Agent
may, but shall not be obligated to, elect to distribute such funds to each
Lender ratably in accordance with such Lender's proportionate share of the
principal amount of all outstanding Advances and the Available Amount of all
Letters of Credit then outstanding, in repayment or prepayment of such of the
outstanding Advances or other Obligations owed to such Lender, and for
application to such principal installments, as the Administrative Agent shall
direct.
(c) The Borrower hereby authorizes each Lender Party, if
and to the extent payment owed to such Lender Party is not made when due
hereunder or, in the case of a Lender, under the Note held by such Lender, to
charge from time to time against any or all of the Borrower's accounts with
such Lender Party any amount so due.
(d) All computations of interest, fees and Letter of
Credit commissions shall be made by the Administrative Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest, fees or commissions are payable. Each determination by the
Administrative Agent of an interest rate, fee or commission hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest,
commitment fee or utilization fee, as the case may be; PROVIDED, HOWEVER, that,
if such extension would cause payment of interest on or principal of Eurodollar
Rate Advances or LIBO Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(f) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to any
Lender or any Issuing Bank hereunder that the Borrower will not make such
payment in full, the Administrative Agent may assume that the Borrower has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each such Lender or such Issuing Bank on such due date an amount
equal to the amount then due each such Lender or such Issuing Bank, as the case
may be. If and to the extent the Borrower shall not have so made such payment
in full to the Administrative Agent, each such Lender or such Issuing Bank, as
the case may be, shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender or such Issuing Bank
<PAGE> 63
58
together with interest thereon, for each day from the date such amount is
distributed to such Lender or such Issuing Bank until the date such Lender or
such Issuing Bank repays such amount to the Administrative Agent, at the
Federal Funds Rate.
SECTION 2.12. TAXES. (a) Any and all payments by the
Borrower hereunder or under the Notes shall be made, in accordance with Section
2.11, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, EXCLUDING, in the case of each Lender Party
and the Administrative Agent, net income taxes that are imposed by the United
States and franchise taxes and net income taxes that are imposed on such Lender
Party or the Administrative Agent by the state or foreign jurisdiction under
the laws of which such Lender Party or the Administrative Agent (as the case
may be) is organized or any political subdivision thereof and, in the case of
each Lender Party, franchise taxes and net income taxes that are imposed on
such Lender Party by the state or foreign jurisdiction of such Lender Party's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender Party or the Administrative Agent,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.12) such Lender Party or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or
future stamp, documentary, excise, property or similar taxes, charges or levies
that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as "OTHER TAXES").
(c) The Borrower shall indemnify each Lender Party and
the Administrative Agent for the full amount of Taxes and Other Taxes, and for
the full amount of taxes imposed by any jurisdiction on amounts payable under
this Section 2.12, paid by such Lender Party or the Administrative Agent (as
the case may be) and any liability (including penalties, additions to tax,
interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
the Administrative Agent (as the case may be) makes written demand therefor.
<PAGE> 64
59
(d) Within 30 days after the date of any payment of
Taxes, the Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 8.02, the original receipt of payment thereof or a
certified copy of such receipt. In the case of any payment hereunder or under
the Notes by or on behalf of the Borrower through an account or branch outside
the United States or on behalf of the Borrower by a payor that is not a United
States person, if the Borrower determines that no Taxes are payable in respect
thereof, the Borrower shall furnish, or shall cause such payor to furnish, to
the Administrative Agent, at such address, an opinion of counsel acceptable to
the Administrative Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "UNITED STATES"
and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender or
initial Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender Party in the case of each other
Lender Party, and from time to time thereafter if requested in writing by the
Borrower or the Administrative Agent (but only so long thereafter as such
Lender Party remains lawfully able to do so), provide the Administrative Agent
and the Borrower with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender Party is exempt from or is entitled to a
reduced rate of United States withholding tax on payments under this Agreement
or the Notes. To the extent permitted by law, as an alternative to form 1001
or 4224, each such Lender Party may provide the Administrative Agent with two
duly completed copies of Internal Revenue Service Form W-8, or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender
Party is exempt from United States federal withholding tax pursuant to Section
871(h) or 881(c) of the Internal Revenue Code, together with an annual
certificate stating that such Lender Party is not a "person" described in
Section 871(h)(3) or 881(c)(3) of the Internal Revenue Code. If the form
provided by a Lender Party at the time such Lender Party first becomes a party
to this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Lender Party provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; PROVIDED, HOWEVER, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender Party assignee becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) in
respect of United States withholding tax with respect to interest paid at such
date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise
includable in Taxes) United States withholding tax, if any, applicable with
respect to the Lender Party assignee on such date. If
<PAGE> 65
60
any form or document referred to in this subsection (e) requires the disclosure
of information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001,
4224 or W-8, that the Lender Party reasonably considers to be confidential, the
Lender Party shall give notice thereof to the Borrower and shall not be
obligated to include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party
has failed to provide the Borrower with the appropriate form described in
subsection (e) (OTHER THAN if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided or if
such form otherwise is not required under subsection (e)), such Lender Party
shall not be entitled to indemnification under subsection (a) or (c) with
respect to Taxes imposed by the United States; PROVIDED, HOWEVER, that should a
Lender Party become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such Lender Party
shall reasonably request to assist such Lender Party to recover such Taxes.
(g) Any Lender Party claiming any additional amounts
payable pursuant to this Section 2.12 agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
change the jurisdiction of its Eurodollar Lending Office if the making of such
a change would avoid the need for, or reduce the amount of, any such additional
amounts that may thereafter accrue and would not, in the reasonable judgment of
such Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 2.13. SHARING OF PAYMENTS, ETC. If any Lender or any
Issuing Bank shall obtain at any time any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) (a) on
account of Obligations due and payable to such Lender or Issuing Bank hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations due and payable to such
Lender or Issuing Bank at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lenders and all Issuing Banks hereunder and
under the Notes at such time) of payments on account of the Obligations due and
payable to all Lenders and all Issuing Banks hereunder and under the Notes at
such time obtained by all the Lenders at such time or (b) on account of
Obligations owing (but not due and payable) to such Lender or Issuing Bank
hereunder and under the Notes at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing to
such Lender or Issuing Bank at such time to (ii) the aggregate amount of the
Obligations owing (but not due and payable) to all Lenders and all Issuing
Banks hereunder and under the Notes at such time) of payments on account of the
Obligations owing (but not due and payable) to all Lenders and all Issuing
Banks hereunder and under the Notes at such time obtained by all of the Lenders
and all of the
<PAGE> 66
61
Issuing Banks at such time, such Lender or Issuing Bank shall forthwith
purchase from the other Lenders and the other Issuing Banks such participations
in the Obligations due and payable or owing to them, as the case may be, as
shall be necessary to cause such purchasing Lender or Issuing Bank to share the
excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender or Issuing Bank, such purchase from each other Lender and each other
Issuing Bank shall be rescinded and such other Lender or Issuing Bank shall
repay to the purchasing Lender or Issuing Bank the purchase price to the extent
of such other Lender's or Issuing Bank's ratable share (according to the
proportion of (i) the purchase price paid to such Lender or Issuing Bank to
(ii) the aggregate purchase price paid to all Lenders or Issuing Banks) of such
recovery together with an amount equal to such Lender's or Issuing Bank's
ratable share (according to the proportion of (i) the amount of such other
Lender's or Issuing Bank's required repayment to (ii) the total amount so
recovered from the purchasing Lender or Issuing Bank) of any interest or other
amount paid or payable by the purchasing Lender or Issuing Bank in respect of
the total amount so recovered. The Borrower agrees that any Lender or Issuing
Bank so purchasing a participation from another Lender or Issuing Bank pursuant
to this Section 2.13 may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender or Issuing Bank were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.14. LETTERS OF CREDIT. (a) THE LETTER OF CREDIT
FACILITY. Each Issuing Bank severally agrees, on the terms and conditions
hereinafter set forth, to issue letters of credit (together with the Existing
Letters of Credit referred to in Section 2.14(g), the "LETTERS OF CREDIT") for
the account of the Borrower or the Borrower and any Guarantor specified by the
Borrower from time to time on any Business Day during the period from the date
hereof until 10 days before the Termination Date (i) in an aggregate Available
Amount for all Letters of Credit issued by such Issuing Bank not to exceed at
any time such Issuing Bank's Letter of Credit Commitment (or such greater
amount as such Issuing Bank shall agree) and (ii) in an Available Amount for
each such Letter of Credit not to exceed an amount equal to (1) the lesser of
(x) the Letter of Credit Facility at such time and (y) an amount equal to the
Unused Working Capital Commitments of the Working Capital Lenders at such time
less (2) the sum of (I) the Electronic L/C Reserve then in effect and (II) the
Documentary L/C Amount then in effect, provided that no Standby Letters of
Credit shall be denominated in an Alternative Currency and no Trade Letter of
Credit denominated in an Alternative Currency shall be issued if the aggregate
Available Amount of all outstanding Letters of Credit denominated in
Alternative Currencies shall exceed the equivalent Dollar amount, determined in
accordance with Section 1.04, of $10,000,000. No Letter of Credit shall have
an expiration date (including all rights of the Borrower or the beneficiary to
require renewal) later than the earlier of (A) in the case of a Letter of
Credit denominated in an Alternative Currency, 60
<PAGE> 67
62
days before the Termination Date, and in all other cases, 10 days before the
Termination Date and (B) (1) in the case of a Standby Letter of Credit, one
year after the date of issuance thereof (but such Standby Letter of Credit may
by its terms be automatically renewable annually upon notice (a "NOTICE OF
RENEWAL") given to the Issuing Bank that issued such Standby Letter of Credit
and the Administrative Agent on or prior to any date for notice of renewal set
forth in such Letter of Credit but in any event at least three Business Days
prior to the date of the proposed renewal of such Standby Letter of Credit and
upon fulfillment of the applicable conditions set forth in Article III unless
such Issuing Bank has notified the Borrower (with a copy to the Administrative
Agent) on or prior to the date for notice of termination set forth in such
Letter of Credit but in any event at least 30 Business Days prior to the date
of automatic renewal of its election not to renew such Standby Letter of Credit
(a "NOTICE OF TERMINATION")) and (2) in the case of a Trade Letter of Credit,
one year after the date of issuance thereof; provided that the terms of each
Standby Letter of Credit that is automatically renewable annually shall (x)
require the Issuing Bank that issued such Standby Letter of Credit to give the
beneficiary named in such Standby Letter of Credit notice of any Notice of
Termination, (y) permit such beneficiary, upon receipt of such notice, to draw
under such Standby Letter of Credit prior to the date such Standby Letter of
Credit otherwise would have been automatically renewed and (z) not permit the
expiration date (after giving effect to any renewal) of such Standby Letter of
Credit in any event to be extended to a date after the dates referred to in
clause (A) above. If either a Notice of Renewal is not given by the Borrower
or a Notice of Termination is given by the relevant Issuing Bank pursuant to
the immediately preceding sentence, such Standby Letter of Credit shall expire
on the date on which it otherwise would have been automatically renewed;
PROVIDED, HOWEVER, that even in the absence of receipt of a Notice of Renewal
the relevant Issuing Bank may in its discretion, unless instructed to the
contrary by the Administrative Agent or the Borrower, deem that a Notice of
Renewal had been timely delivered and in such case, a Notice of Renewal shall
be deemed to have been so delivered for all purposes under this Agreement.
Within the limits of the Letter of Credit Facility, and subject to the limits
referred to above, the Borrower may request the issuance of Letters of Credit
under this Section 2.14(a), repay any Letter of Credit Advances resulting from
drawings thereunder pursuant to Section 2.14(c) and request the issuance of
additional Letters of Credit under this Section 2.14(a). The Borrower and any
one Issuing Bank (the "ELECTRONIC ISSUING BANK") may from time to time agree to
reserve under the Letter of Credit Facility an amount (the "ELECTRONIC L/C
RESERVE") not to exceed $400,000,000, which reserve shall (i) be available
solely for electronically issued Trade Letters of Credit from time to time in
accordance with customary procedures applicable thereto and each such
electronically issued Letter of Credit (an "ELECTRONIC L/C") shall be
considered a Letter of Credit for all purposes under this Agreement and (ii) be
established or revised upon not less than 2 Business Days' prior written notice
thereof from the Borrower to the Administrative Agent, PROVIDED, that upon the
occurrence and during the continuance of a Default, the ability to establish
and
<PAGE> 68
63
maintain the Electronic L/C Reserve and the ability of an Issuing Bank to
electronically issue Trade Letters of Credit under this Agreement shall be
suspended.
(b) REQUEST FOR ISSUANCE. (i) Each Letter of Credit
shall be issued upon notice, given not later than 11:00 A.M. (New York City
time) on the second Business Day prior to the date of the proposed issuance of
such Letter of Credit, by the Borrower to any Issuing Bank or by such later
date as may be agreed by the Borrower and such Issuing Bank (subject to the
proviso to the last sentence in Section 2.14(a)), which shall give to the
Administrative Agent and each Working Capital Lender prompt notice thereof by
telex or telecopier; PROVIDED, HOWEVER, that the Borrower may request (and if
such request is made, the Borrower shall represent and warrant that after
giving effect to such issuance, the aggregate Available Amount of Trade Letters
of Credit outstanding does not exceed $400,000,000) and the Electronic Issuing
Bank may issue, up to $400,000,000 in the aggregate of Electronic L/Cs without
the giving of notice thereof by such Issuing Bank to the Administrative Agent
and each Working Capital Lender unless and until the Administrative Agent has
notified such Issuing Bank that it must give such notice prior to any issuance
of Letters of Credit and, PROVIDED FURTHER that the amount, if any, of the
Electronic L/C Reserve shall reduce the amount of non-electronically issued
Trade Letters of Credit that may be issued. Each such notice of issuance of a
Letter of Credit (a "NOTICE OF ISSUANCE") shall be by telephone, confirmed
immediately in writing, or telex or telecopier (or, in the case of Electronic
L/Cs, transmitted electronically), specifying therein the requested (A) date of
such issuance (which shall be a Business Day), (B) Available Amount of such
Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and
address of the beneficiary of such Letter of Credit and (E) form of such Letter
of Credit, and shall be accompanied by such application and agreement for
letter of credit as such Issuing Bank may specify to the Borrower for use in
connection with such requested Letter of Credit or, in the case of Electronic
L/Cs, shall be subject to the agreement entered into with the Electronic
Issuing Bank with respect thereto (in each case, a "LETTER OF CREDIT
AGREEMENT"). If (x) the requested form of such Letter of Credit is reasonably
acceptable to such Issuing Bank in its sole discretion and (y) it has not
received notice of objection to such issuance on the grounds that the Borrower
has failed to satisfy the conditions set forth in Section 3.02 from Lenders
holding at least a majority in interest of the Working Capital Commitments,
such Issuing Bank will, upon fulfillment of the applicable conditions set forth
in Article III, make such Letter of Credit available to the Borrower at its
office referred to in Section 8.02 or as otherwise agreed with the Borrower in
connection with such issuance. In the event and to the extent that the
provisions of any Letter of shall conflict with this
Agreement, the provisions of this Agreement shall govern.
(ii) Each Issuing Bank shall furnish (A) to the
Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued by such
Issuing Bank during the previous week and drawings during
<PAGE> 69
64
such week under all Letters of Credit issued by such Issuing Bank, (B) to each
Working Capital Lender on the first Business Day of each month a written report
summarizing issuance and expiration dates of Letters of Credit issued by such
Issuing Bank during the preceding month and drawings during such month under
all Letters of Credit issued by such Issuing Bank and (C) to the Administrative
Agent and each Working Capital Lender on the first Business Day of each
calendar quarter a written report setting forth the average daily aggregate
Available Amount during the preceding calendar quarter of all Letters of Credit
issued by such Issuing Bank.
(c) DRAWING AND REIMBURSEMENT. Unless the Borrower shall
have paid the Administrative Agent for the account of the applicable Issuing
Bank simultaneously with or prior to such Issuing Bank's payment of a draft
drawn under a Letter of Credit issued by it in accordance with the terms of
Section 2.14(a) an amount equal to the amount of such payment (such amount to
be notified to the Borrower by the Issuing Bank on the Business Day immediately
preceding any such payment), the payment by such Issuing Bank of a draft drawn
under any such Letter of Credit shall constitute for all purposes of this
Agreement the making by such Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft or, in the case of
any such Letter of Credit denominated in an Alternative Currency, an amount
equal to the Dollar equivalent of such draft. Upon written demand by any
Issuing Bank with an outstanding Letter of Credit Advance, with a copy of such
demand to the Administrative Agent, each Working Capital Lender shall purchase
from such Issuing Bank, and such Issuing Bank shall sell and assign to each
such Working Capital Lender, such Lender's Pro Rata Share of such outstanding
Letter of Credit Advance as of the date of such purchase, by making available
for the account of its Applicable Lending Office to the Administrative Agent
for the account of such Issuing Bank, by deposit to the Administrative Agent's
Account, in same day funds, an amount equal to the portion of the outstanding
principal amount of such Letter of Credit Advance to be purchased by such
Lender. The Borrower hereby agrees to each such sale and assignment. Each
Working Capital Lender agrees to purchase its Pro Rata Share of an outstanding
Letter of Credit Advance on (i) the Business Day on which demand therefor is
made by the Issuing Bank which made such Advance, provided notice of such
demand is given not later than 11:00 A.M. (New York City time) on such
Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment by an
Issuing Bank to any Working Capital Lender of a portion of a Letter of Credit
Advance, such Issuing Bank represents and warrants to such Lender that such
Issuing Bank is the legal and beneficial owner of such interest being assigned
by it, free and clear of any liens, but makes no other representation or
warranty and assumes no responsibility with respect to such Letter of Credit
Advance, the Loan Documents or any Loan Party. If and to the extent that any
Working Capital Lender shall not have so made the amount of such Letter of
Credit Advance available to the Administrative Agent, such Working Capital
Lender agrees to pay to
<PAGE> 70
65
the Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by such Issuing Bank until the
date such amount is paid to the Administrative Agent, at the Federal Funds Rate
for its account or the account of such Issuing Bank, as applicable. If such
Lender shall pay to the Administrative Agent such amount for the account of
such Issuing Bank on any Business Day, such amount so paid in respect of
principal shall constitute a Letter of Credit Advance made by such Lender on
such Business Day for purposes of this Agreement, and the outstanding principal
amount of the Letter of Credit Advance made by such Issuing Bank shall be
reduced by such amount on such Business Day. For purposes of this subsection
(c), the equivalent Dollar amount of any reimbursement obligation of the
Borrower in respect of any Letter of Credit denominated in an Alternative
Currency, and of any obligation of the Working Capital Lenders to pay to the
applicable Issuing Bank their Pro Rata Share of drafts drawn under any Letter
of Credit that is denominated in an Alternative Currency, shall be determined
by using the quoted spot rate at which the applicable Issuing Bank offers to
exchange Dollars for such Alternative Currency at the office where the draft
giving rise to such reimbursement obligation was presented at 11:00 a.m. local
time for such office on the date on which the applicable Issuing Bank honors a
draft drawn under such Letter of Credit. The applicable Issuing Bank's
determination of each spot rate of exchange pursuant to this Section 2.14(c)
shall be final and conclusive in the absence of manifest error.
(d) FAILURE TO MAKE LETTER OF CREDIT ADVANCES. The
failure of any Lender to make the Letter of Credit Advance to be made by it on
the date specified in Section 2.14(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
(e) OBLIGATIONS ABSOLUTE. The Obligations of the
Borrower under this Agreement, any Letter of and any other
agreement or instrument relating to any Letter of Credit shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement, such Letter of and such other agreement or
instrument under all circumstances, including, without limitation, the
following circumstances:
(i) any lack of validity or enforceability of any Loan
Document, any Letter of , any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C RELATED DOCUMENTS");
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations of the
Borrower in respect of any L/C Related
<PAGE> 71
66
Document or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary
or any transferee of a Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), any Issuing
Bank or any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated
transaction;
(iv) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by any Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit, unless such draft or
certificate is substantially different from the applicable form
specified by such Letter of Credit;
(vi) any exchange, release or non-perfection of any
Collateral or other collateral, or any release or amendment or waiver
of or consent to departure from the Guaranty or any other guarantee,
for all or any of the Obligations of the Borrower in respect of the
L/C Related Documents; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor.
(f) COMPENSATION. (i) The Borrower shall pay to the
Administrative Agent for the account of each Working Capital Lender a
commission on such Lender's Pro Rata Share of the average daily aggregate
Available Amount of (A) all Standby Letters of Credit outstanding from time to
time at a rate per annum equal to the Applicable Margin in effect from time to
time for Eurodollar Rate Advances and (B) all Trade Letters of Credit
outstanding from time to time at a rate per annum equal to the Applicable
Margin in effect from time to time for Trade Letters of Credit, in each case
payable in arrears quarterly on the last Business Day of each March, June,
September and December, commencing March 31, 1995, and on the Termination Date.
(ii) The Borrower shall pay to each Issuing Bank, for its
own account, such commissions, issuance fees, fronting fees, transfer fees and
other fees and charges in
<PAGE> 72
67
connection with the issuance or administration of each Letter of Credit as the
Borrower and such Issuing Bank shall agree.
(g) EXISTING LETTERS OF CREDIT. Effective as of the
first date on which the conditions set forth in Sections 3.01 and 3.02 shall
have been satisfied, (i) the letters of credit issued for the account of the
Borrower prior to such date by Persons that are Issuing Banks hereunder and set
forth on Schedule 2.14(g) hereto (such letters of credit being the "EXISTING
LETTERS OF CREDIT") in an aggregate face amount not exceeding the total amount
set forth on such Schedule will be deemed to have been issued as, and be,
Letters of Credit hereunder and (ii) the Existing Letters of Credit and the
reimbursement obligations in respect thereof shall be Obligations hereunder and
shall no longer be Obligations under the documents pursuant to which such
Existing Letters of Credit were initially issued.
SECTION 2.15. USE OF PROCEEDS. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely to pay to certain creditors of the Debtors the cash consideration for
their claims against the Debtors, purchase the claims of The Prudential
Insurance Company of America against the Company pursuant to an option to do so
held by FNC, refinance the Series A Notes, the Series B Notes and the Series C
Notes to be issued pursuant to the Plan of Reorganization, pay transaction fees
and expenses, refinance certain Existing Debt of Federated and provide working
capital for the Borrower and its Subsidiaries and for other general corporate
purposes, including, without limitation, non-hostile acquisitions.
SECTION 2.16. DEFAULTING LENDERS. (a) In the event that, at
any one time, (i) any Lender shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan
Document to or for the account of such Defaulting Lender, then the Borrower
may, so long as no Default shall occur or be continuing at such time and to the
fullest extent permitted by applicable law: (x) replace such Lender with a
Person that is an Eligible Assignee in accordance with the terms of Section
8.07 (and the Lender being so replaced shall take all action as may be
necessary to assign its rights and obligations under this Agreement to such
Eligible Assignee) and (y) set off and otherwise apply the Obligation of the
Borrower to make such payment to or for the account of such Defaulting Lender
against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its Obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to
such date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on such date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance
<PAGE> 73
68
shall be a Base Rate Advance and shall be considered, for all purposes of this
Agreement, to comprise part of the Borrowing in connection with which such
Defaulted Advance was originally required to have been made pursuant to Section
2.01, even if the other Advances comprising such Borrowing shall be Eurodollar
Rate Advances on the date such Advance is deemed to be made pursuant to this
subsection (a). The Borrower shall notify the Administrative Agent at any time
the Borrower exercises its right of set-off pursuant to this subsection (a) and
shall set forth in such notice (A) the name of the Defaulting Lender and the
Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise
required to be made by the Borrower to or for the account of such Defaulting
Lender which is paid by the Borrower, after giving effect to the amount set off
and otherwise applied by the Borrower pursuant to this subsection (a), shall be
applied by the Administrative Agent as specified in subsection (b) or (c) of
this Section 2.16.
(b) In the event that, at any one time, (i) any Lender
shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted
Amount to the Administrative Agent or any of the other Lenders and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lenders and
to the fullest extent permitted by applicable law, apply at such time the
amount so paid by the Borrower to or for the account of such Defaulting Lender
to the payment of each such Defaulted Amount to the extent required to pay such
Defaulted Amount. In the event that the Administrative Agent shall so apply
any such amount to the payment of any such Defaulted Amount on any date, the
amount so applied by the Administrative Agent shall constitute for all purposes
of this Agreement and the other Loan Documents payment, to such extent, of such
Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lenders, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lenders and, if the amount
of such payment made by the Borrower shall at such time be insufficient to pay
all Defaulted Amounts owing at such time to the Administrative Agent and the
other Lenders, in the following order of priority:
(i) FIRST, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent; and
(ii) SECOND, to any other Lenders for any Defaulted
Amounts then owing to such other Lenders, ratably in accordance with
such respective Defaulted Amounts then owing to such other Lenders.
<PAGE> 74
69
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.16.
(c) In the event that, at any one time, (i) any Lender
shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a
Defaulted Advance or a Defaulted Amount and (iii) the Borrower, the
Administrative Agent or any other Lender shall be required to pay or distribute
any amount hereunder or under any other Loan Document to or for the account of
such Defaulting Lender, then the Borrower or such other Lender shall pay such
amount to the Administrative Agent to be held by the Administrative Agent, to
the fullest extent permitted by applicable law, in escrow or the Administrative
Agent shall, to the fullest extent permitted by applicable law, hold in escrow
such amount otherwise held by it. Any funds held by the Administrative Agent
in escrow under this subsection (c) shall be deposited by the Administrative
Agent in an account with Citibank, in the name and under the control of the
Administrative Agent, but subject to the provisions of this subsection (c).
The terms applicable to such account, including the rate of interest payable
with respect to the credit balance of such account from time to time, shall be
Citibank's standard terms applicable to escrow accounts maintained with it.
Any interest credited to such account from time to time shall be held by the
Administrative Agent in escrow under, and applied by the Administrative Agent
from time to time in accordance with the provisions of, this subsection (c).
The Administrative Agent shall, to the fullest extent permitted by applicable
law, apply all funds so held in escrow from time to time to the extent
necessary to make any Advances required to be made by such Defaulting Lender
and to pay any amount payable by such Defaulting Lender hereunder and under the
other Loan Documents to the Administrative Agent or any other Lender, as and
when such Advances or amounts are required to be made or paid and, if the
amount so held in escrow shall at any time be insufficient to make and pay all
such Advances and amounts required to be made or paid at such time, in the
following order of priority:
(i) FIRST, to the Administrative Agent for any amount
then due and payable by such Defaulting Lender to the Administrative
Agent hereunder;
(ii) SECOND, to any other Lenders for any amount then due
and payable by such Defaulting Lender to such other Lenders hereunder,
ratably in accordance with such respective amounts then due and
payable to such other Lenders; and
(iii) THIRD, to the Borrower for any Advance then required
to be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
<PAGE> 75
70
In the event that such Defaulting Lender shall, at any time, cease to be a
Defaulting Lender, any funds held by the Administrative Agent in escrow at such
time with respect to such Defaulting Lender shall be distributed by the
Administrative Agent to such Defaulting Lender and applied by such Defaulting
Lender to the Obligations owing to such Lender at such time under this
Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender
under this Section 2.16 are in addition to other rights and remedies that the
Borrower may have against such Defaulting Lender with respect to any Defaulted
Advance and that the Administrative Agent or any Lender may have against such
Defaulting Lender with respect to any Defaulted Amount.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL EXTENSION OF
CREDIT. The obligation of each Lender to make an Advance or of any Issuing
Bank to issue a Letter of Credit on the occasion of the Initial Extension of
Credit hereunder is subject to the satisfaction of the following conditions
precedent before or concurrently with the Initial Extension of Credit:
(a) The Merger Agreement shall be in full force and
effect; and the Merger shall have been consummated substantially in
accordance with the terms of the Merger Agreement, without any waiver
or amendment not consented to by the Lenders (such consent not to be
unreasonably withheld or delayed) of any material term, provision or
condition set forth therein, and in compliance in all material
respects with all applicable laws.
(b) The Reorganization shall have been consummated
substantially in accordance with the terms described in the Disclosure
Statement or the Plan of Reorganization.
(c) The Plan of Reorganization shall have been confirmed
by the Bankruptcy Court in substantially the form of the draft dated
October 21, 1994 furnished to the Lenders prior to the date hereof,
without any waiver or amendment not consented to by the Lenders (such
consent not to be unreasonably withheld or delayed) of any term,
provision or condition set forth therein, and in compliance in all
material respects with
<PAGE> 76
71
all applicable laws; and the Confirmation Order shall be in full force
and effect, and shall not have been reversed, modified or amended in
any respect, and (i) all applicable appeal periods shall have expired
without the pendency of any appeal or the entry of any stay or (ii)
the "Effective Date" (as defined in the Plan of Reorganization) shall
have occurred.
(d) The Lender Parties shall be satisfied with the
corporate and legal structure of each Loan Party and each of its
Subsidiaries and the capitalization of Federated and each of its
Subsidiaries as set forth in the financial statements referred to in
Section 4.01(f), including the terms and conditions of the charter,
bylaws and each class of capital stock of each Loan Party and of each
agreement or instrument relating to such corporate and legal
structure.
(e) The Lender Parties shall be satisfied that all
Existing Debt, other than the Surviving Debt (which is identified on
Schedule 3.01(e)), has been prepaid, redeemed or defeased in full or
otherwise satisfied and extinguished and that all Surviving Debt shall
be on terms and conditions described in the Information Memorandum or
the Disclosure Statement or otherwise satisfactory to the Lender
Parties.
(f) Before giving effect to the Merger, the
Reorganization and the other transactions contemplated by this
Agreement, there shall have occurred no material adverse change in the
business, financial condition, results of operations, or prospects of
Federated or any of its Subsidiaries since January 29, 1994 or of the
Company or any of its Subsidiaries since July 30, 1994.
(g) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect other than the matters described on Schedule
3.01(g) (the "DISCLOSED LITIGATION") or (ii) purports to affect the
legality, validity or enforceability of the Merger, the
Reorganization, this Agreement, any Note, any other Loan Document, any
Related Document or the consummation of the transactions contemplated
hereby, and there shall have been no adverse change in the status, or
financial effect on any Loan Party or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 3.01(g).
(h) The Lender Parties shall have completed a due
diligence investigation of the Loan Parties and their Subsidiaries in
scope, and with results, satisfactory to the Lender Parties, and
nothing shall have come to the attention of the Lender Parties
<PAGE> 77
72
during the course of such due diligence investigation to lead them to
believe (i) that the Information Memorandum was or has become
misleading, incorrect or incomplete in any material respect, (ii)
that, following the consummation of the Merger and the Reorganization,
the Borrower and its Subsidiaries would not have good title to all
material assets of the Company and its Subsidiaries reflected in the
Information Memorandum and (iii) that the Merger or the Reorganization
will have a Material Adverse Effect; without limiting the generality
of the foregoing, the Lender Parties shall have been given such access
to the management, records, books of account, contracts and properties
of the Loan Parties and their Subsidiaries as they shall have
requested.
(i) All of the Collateral shall be owned by the Borrower
or one or more of the Borrower's Subsidiaries, in each case free and
clear of any lien, charge or encumbrance; the Administrative Agent
shall have a valid and perfected first priority lien on and security
interest in the Collateral for the benefit of itself and the benefit
of the Agent, the Lender Parties and the Hedge Banks; and all filings,
recordations and searches necessary or desirable in connection with
such liens and security interests shall have been duly made.
(j) All governmental and third party consents and
approvals necessary in connection with the Loan Documents and the
transactions contemplated thereby shall have been obtained (without
the imposition of any conditions that are not acceptable to the Lender
Parties) and shall remain in effect to the extent that a failure to
obtain any such consents and approvals could not reasonably be
expected to have a Material Adverse Effect; all applicable waiting
periods shall have expired without any action being taken by any
competent authority; and no law or regulation shall be applicable in
the judgment of the Lender Parties that restrains, prevents or imposes
materially adverse conditions upon the Loan Documents or the
transactions contemplated thereby.
(k) The Lender Parties shall be satisfied (i) that the
Borrower and its Subsidiaries, after giving effect to the transactions
contemplated by the Loan Documents, will be able to meet their
obligations under all Welfare Plans, (ii) that the employee benefit
plans of the Loan Parties and the ERISA Affiliates have been, in all
material respects, funded not less than in accordance with the
applicable minimum statutory requirements, (iii) that no Reportable
Event has occurred that would cause a material liability to any Loan
Party or any ERISA Affiliate and (iv) that no termination of, or
withdrawal from, any employee benefit plan of any Loan Party or any
ERISA Affiliate has occurred, is reasonably expected to occur or is
contemplated that could result in a material liability to any Loan
Party or any ERISA Affiliate.
<PAGE> 78
73
(l) The Borrower shall have paid all accrued fees and
expenses of the Administrative Agent and the Lender Parties (including
the accrued fees and expenses of counsel to the Administrative Agent
and the Agent).
(m) The Administrative Agent shall have received on or
before the day of the Initial Extension of Credit the following, each
dated such day (unless otherwise specified), in form and substance
satisfactory to the Lender Parties (unless otherwise specified) and
(except for the Revolving Credit Notes and the Term Notes) in
sufficient copies for each Lender Party:
(i) The Working Capital Notes and the Term Notes
payable to the order of the Lenders.
(ii) A certified copy of an order of the
Bankruptcy Court approving the Plan of Reorganization (the
"CONFIRMATION ORDER").
(iii) Certified copies of the resolutions of the
Board of Directors of the Company approving the Merger, the
Merger Agreement and the Plan of Reorganization and of the
Borrower and each other Loan Party approving the Merger, the
Reorganization, this Agreement, the Notes, each other Loan
Document and each Related Document to which it is or is to be
a party, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to the Merger, the Reorganization, this Agreement, the
Notes, each other Loan Document and each Related Document.
(iv) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the date of the Initial Extension of Credit,
listing the charter of the Borrower and each other Loan Party
and each amendment thereto on file in his office and
certifying that (A) such amendments are the only amendments to
the Borrower's or such other Loan Party's charter on file in
his office, (B) the Borrower and each other Loan Party have
paid all franchise taxes to the date of such certificate and
(C) the Borrower and each other Loan Party are duly
incorporated and in good standing or presently subsisting
under the laws of the state of the jurisdiction of its
incorporation.
(v) Certified copies of a certificate of merger
or other confirmation from the Secretary of State of the State
of Delaware satisfactory to the Administrative Agent of the
consummation of the Merger.
<PAGE> 79
74
(vi) A certificate of the Borrower and each other
Loan Party, signed on behalf of the Borrower and such other
Loan Party by its President or a Vice President and its
Secretary or an Assistant Secretary, dated the date of the
Initial Extension of Credit (the statements made in which
certificate shall be true on and as of the date of the Initial
Extension of Credit), certifying as to (A) the absence of any
amendments to the charter of the Borrower or such other Loan
Party since the date of the Secretary of State's certificate
referred to in Section 3.01(m)(iv), (B) a true and correct
copy of the bylaws of the Borrower and such other Loan Party
as in effect on the date of the Initial Extension of Credit,
(C) the due incorporation and good standing of the Borrower
and such other Loan Party as a corporation organized under the
laws of the state of the jurisdiction of its incorporation,
and the absence of any proceeding for the dissolution or
liquidation of the Borrower or such other Loan Party, (D) the
truth of the representations and warranties contained in the
Loan Documents as though made on and as of the date of the
Initial Extension of Credit and (E) the absence of any event
occurring and continuing, or resulting from the Initial
Extension of Credit, that constitutes a Default.
(vii) A certificate of the Secretary or an
Assistant Secretary of the Borrower and each other Loan Party
certifying the names and true signatures of the officers of
the Borrower and such other Loan Party authorized to sign this
Agreement, the Notes, each other Loan Document and each
Related Document to which they are or are to be parties and
the other documents to be delivered hereunder and thereunder.
(viii) A security agreement in substantially the
form of Exhibit E (together with each other security agreement
delivered pursuant to Section 5.01(l), in each case as amended
from time to time in accordance with its terms, the "SECURITY
AGREEMENT"), duly executed by each Pledgor, together with
certificates representing the Pledged Shares referred to
therein accompanied by undated stock powers executed in blank
and instruments evidencing the Pledged Debt referred to
therein indorsed in blank and evidence that all other action
that the Administrative Agent may deem necessary or desirable
in order to perfect and protect the liens and security
interests created under the Security Agreement has been taken.
(ix) A guaranty in substantially the form of
Exhibit F (together with each other guaranty delivered
pursuant to Section 5.01(l), in each case as amended from time
to time in accordance with its terms, the "GUARANTY"), duly
executed by each Guarantor.
<PAGE> 80
75
(x) Certified copies of each of the Related
Documents, duly executed by the parties thereto and in form
and substance reasonably satisfactory to the Lender Parties,
together with all agreements, instruments and other documents
delivered in connection therewith.
(xi) Such financial, business and other
information regarding each Loan Party and its Subsidiaries as
the Lender Parties shall have requested, including, without
limitation, information as to possible contingent liabilities,
tax matters, environmental matters, obligations under ERISA
and Welfare Plans, collective bargaining agreements and other
arrangements with employees, annual financial statements of
Federated and its Subsidiaries dated January 29, 1994, annual
financial statements of the Company and its Subsidiaries dated
July 30, 1994, interim financial statements dated the end of
the most recent fiscal quarter for which financial statements
are available (or, in the event the Lender Parties' due
diligence review reveals material changes since such financial
statements, as of a later date within 45 days of the day of
the Initial Extension of Credit), forecasted financial
information prepared by management of the Borrower, in form
and substance satisfactory to the Administrative Agent and the
Agent on a quarterly basis for the first two years following
the day of the Initial Extension of Credit.
(xii) A letter, in form and substance satisfactory
to the Administrative Agent, from KPMG Peat Marwick LLP, the
Borrower's independent certified public accountants, to the
Borrower, acknowledging that the Lender Parties have relied
and will rely upon the financial statements of the Borrower
examined by such accountants in determining whether to enter
into, and to take action or refrain from taking action under,
the Loan Documents.
(xiii) A favorable opinion of Jones, Day, Reavis &
Pogue, counsel for the Loan Parties, in substantially the form
of Exhibit G-1 hereto and a favorable opinion of Dennis J.
Broderick, General Counsel to the Borrower, in substantially
the form of Exhibit G-2 hereto and, in each case, as to such
other matters as the Administrative Agent may reasonably
request.
(xiv) A favorable opinion of Shearman & Sterling,
counsel for the Administrative Agent and the Agent, in form
and substance satisfactory to the Administrative Agent and the
Agent.
<PAGE> 81
76
SECTION 3.02. CONDITIONS PRECEDENT TO EACH REGULAR BORROWING,
ISSUANCE AND RENEWAL. The obligation of each Appropriate Lender to make a
Regular Advance (other than a Letter of Credit Advance made by an Issuing Bank
or a Working Capital Lender pursuant to Section 2.14(c), a Swing Line Advance
made by a Working Capital Lender pursuant to Section 2.02(b), or a Working
Capital Advance made by a Working Capital Lender pursuant to Section 2.02(a) so
long as the proceeds thereof are used solely for purposes of repaying or
prepaying outstanding Swing Line Advances) on the occasion of each Regular
Borrowing (including the initial Borrowing) and the obligation of each Issuing
Bank to issue a Letter of Credit (including the initial issuance) or renew a
Standby Letter of Credit, and the right of the Borrower to request a Swing Line
Borrowing, shall be subject to the further conditions precedent that on the
date of such Borrowing, issuance or renewal (a) the following statements shall
be true (and each of the giving of the applicable Notice of Borrowing, Notice
of Issuance, Notice of Swing Line Borrowing or Notice of Renewal and the
acceptance by the Borrower of the proceeds of such Borrowing or of such Letter
of Credit or the renewal of such Standby Letter of Credit shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing,
issuance or renewal such statements are true):
(i) the representations and warranties contained in each
Loan Document are correct on and as of the date of such Borrowing,
issuance or renewal, before and after giving effect to such Borrowing,
issuance or renewal and to the application of the proceeds therefrom,
as though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a
specific date other than the date of such Borrowing, issuance or
renewal, in which case as of such specific date;
(ii) no event has occurred and is continuing, or would
result from such Borrowing, issuance or renewal or from the
application of the proceeds therefrom, that constitutes a Default; and
(iii) in the case of a Borrowing (other than any Term
Borrowing) or the issuance or renewal of a Letter of Credit, the
aggregate amount of such Borrowing, issuance or renewal and all other
Borrowings (other than any Term Borrowing), issuances and renewals to
be made on the same day does not exceed an amount equal to the
aggregate Unused Working Capital Commitments LESS the Documentary L/C
Amount;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender (other than the Designated
Bidders) through the Administrative Agent may reasonably request.
<PAGE> 82
77
SECTION 3.03. CONDITIONS PRECEDENT TO EACH COMPETITIVE BID
BORROWING. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Administrative Agent shall have received the
written confirmatory Notice of Competitive Bid Borrowing with respect thereto,
(ii) on or before the date of such Borrowing, but prior to such Borrowing, the
Administrative Agent shall have received a Competitive Bid Note payable to the
order of such Lender for each of the one or more Competitive Bid Advances to be
made by such Lender as part of such Borrowing, in a principal amount equal to
the principal amount of the Competitive Bid Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such Competitive Bid Advance in
accordance with Section 2.03, and (iii) on the date of such Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Competitive Bid Borrowing and the acceptance by the Borrower of the
proceeds of such Borrowing shall constitute a representation and warranty by
the Borrower that on the date of such Borrowing such statements are true):
(a) the representations and warranties contained in each
Loan Document are correct on and as of the date of such Borrowing,
before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of
such date other than any such representations or warranties that, by
their terms, refer to a specific date other than the date of such
Borrowing or issuance, in which case as of such specific date;
(b) no event has occurred and is continuing, or would
result from such Borrowing or from the application of the proceeds
therefrom, that constitutes a Default;
(c) no event has occurred and no circumstance exists as a
result of which the information concerning the Borrower that has been
provided to the Administrative Agent and each Lender by the Borrower
in connection herewith would include an untrue statement of a material
fact or omit to state any material fact or any fact necessary to make
the statements contained therein, in the light of the circumstances
under which they were made, not misleading; and
(d) the aggregate amount of such Borrowing and all other
Borrowings (other than any Term Borrowing) and issuances and renewals
of Letters of Credit to be made on the same day does not exceed an
amount equal to the aggregate Unused Working Capital Commitments LESS
the Documentary L/C Amount.
SECTION 3.04. DETERMINATIONS UNDER SECTION 3.01. For
purposes of determining compliance with the conditions specified in Section
3.01, each Lender Party shall be
<PAGE> 83
78
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to the Lender Parties unless an officer of the
Administrative Agent responsible for the transactions contemplated by the Loan
Documents shall have received notice from such Lender Party prior to the
Initial Extension of Credit specifying its objection thereto and if the Initial
Extension of Credit consists of a Borrowing, such Lender Party shall not have
made available to the Administrative Agent such Lender Party's ratable portion
of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower represents and warrants as follows (and for purposes of the
Initial Extension of Credit, such representations and warranties shall be
deemed to have been made immediately after giving effect to the Merger and the
Reorganization):
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to
so qualify or be licensed is not reasonably likely to have a Material
Adverse Effect and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on
its business as now conducted and as proposed to be conducted. All of
the outstanding capital stock of the Guarantors has been validly
issued, is fully paid and non-assessable and is directly or indirectly
owned by the Borrower free and clear of all Liens except those created
under the Loan Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete
and accurate list of all Subsidiaries of each Loan Party, showing as
of the date hereof (as to each such Subsidiary) the jurisdiction of
its incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date hereof and the
percentage of the outstanding shares of each such class owned
(directly or indirectly) by such Loan Party and the number of shares
covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the date hereof. All of the
outstanding capital stock of all of such Subsidiaries has been validly
issued, is fully paid and non-assessable and is owned by such Loan
Party or one or more of its Subsidiaries free and clear of all Liens,
except those created under the Loan
<PAGE> 84
79
Documents. Each such Subsidiary (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to
so qualify or be licensed is not reasonably likely to have a Material
Adverse Effect and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on
its business as now conducted and as proposed to be conducted.
(c) The execution, delivery and performance by each Loan
Party of this Agreement, the Notes, each other Loan Document and each
Related Document to which it is or is to be a party, and the
consummation of the Merger, the Reorganization and the other
transactions contemplated hereby, are within such Loan Party's
corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene such Loan Party's charter or bylaws,
(ii) violate any law (including, without limitation, the Securities
Exchange Act of 1934 and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970),
rule, regulation (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination or award, (iii) conflict
with or result in the breach of, or constitute a default under, any
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties or (iv) except for the Liens
created under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties
of any Loan Party or any of its Subsidiaries. No Loan Party or any of
its Subsidiaries is in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or
in breach of any such contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument, the violation or breach of
which is reasonably likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes, any other Loan Document or any Related Document
to which it is or is to be a party, (ii) the consummation of the
Merger, the Reorganization or the other transactions contemplated
hereby, (iii) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents, (iv) the perfection or
maintenance of the Liens created by the Collateral Documents
(including the first priority nature thereof) or (v) the exercise by
the Administrative Agent, the Agent or any Lender Party of its rights
under the Loan Documents or the remedies in
<PAGE> 85
80
respect of the Collateral pursuant to the Collateral Documents, except
for the authorizations, approvals, actions, notices and filings listed
on Schedule 4.01(d), all of which have been duly obtained, taken,
given or made and are in full force and effect other than, with
respect to clause (ii) above, those authorizations, approvals,
actions, notices and filings which the failure to obtain, take, give
or make, either individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. All applicable waiting
periods in connection with the Merger, the Reorganization and the
other transactions contemplated hereby have expired without any action
having been taken by any competent authority restraining, preventing
or imposing materially adverse conditions upon the Merger or the
Reorganization or the rights of the Loan Parties or their Subsidiaries
freely to transfer or otherwise dispose of, or to create any Lien on,
any properties now owned or hereafter acquired by any of them.
(e) This Agreement has been, and each of the Notes, each
other Loan Document and each Related Document when delivered hereunder
will have been, duly executed and delivered by each Loan Party party
thereto. This Agreement is, and each of the Notes, each other Loan
Document and each Related Document when delivered hereunder will be,
the legal, valid and binding obligation of each Loan Party party
thereto, enforceable against such Loan Party in accordance with its
terms.
(f) The Consolidated and consolidating balance sheets of
Federated and its Subsidiaries as at January 29, 1994, and the related
Consolidated and consolidating statements of income and the related
Consolidated statement of cash flows of Federated and its Subsidiaries
for the fiscal year then ended, accompanied by an opinion of KPMG Peat
Marwick LLP, independent public accountants, and the Consolidated and
consolidating balance sheets of Federated and its Subsidiaries as at
October 29, 1994, and the related Consolidated and consolidating
statements of income and the related Consolidated statement of cash
flows of Federated and its Subsidiaries for the nine months then
ended, duly certified by the chief financial officer of Federated,
copies of which have been furnished to each Lender Party, fairly
present, subject, in the case of said balance sheets as at October 29,
1994, and said statements of income and cash flows for the nine months
then ended, to year-end audit adjustments, the Consolidated and
consolidating financial condition of Federated and its Subsidiaries as
at such dates and the Consolidated and consolidating results of the
operations of Federated and its Subsidiaries for the periods ended on
such dates, in the case of such Consolidated financial statements, all
in accordance with generally accepted accounting principles applied on
a consistent basis, and in the case of such Consolidated and
consolidating financial statements, all consistent with past
practices. Since January 29, 1994, (i) there has been no material
adverse change, as of the date of this Agreement, in the
<PAGE> 86
81
business, financial condition, results of operations or prospects of
any Loan Party or any of its Subsidiaries, and (ii) there has been no
material adverse change in the business, financial condition, results
of operations or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole.
(g) The Consolidated balance sheet of the Company and its
Subsidiaries as at July 30, 1994, and the related Consolidated
statements of income and cash flows of the Company and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion
of Deloitte & Touche LLP, independent public accountants, copies of
which are set forth in the Disclosure Statement furnished to each
Lender Party prior to the date hereof, and the Consolidated balance
sheet of the Company and its Subsidiaries as at October 29, 1994, and
the related Consolidated statements of income and cash flows of the
Company and its Subsidiaries for the three months then ended, duly
certified by the chief financial officer of the Company, copies of
which have been furnished to each Lender Party, fairly present,
subject, in the case of said balance sheets as at October 29, 1994,
and said statements of income and cash flows for the three months then
ended, to year-end audit adjustments, the Consolidated financial
condition of the Company and its Subsidiaries as at such dates and the
Consolidated results of the operations of the Company and its
Subsidiaries for the periods ended on such dates, all in accordance
with generally accepted accounting principles applied on a consistent
basis. Since July 30, 1994, there has been no material adverse
change, as of the date of this Agreement, in the business, financial
condition, results of operations or prospects of the Company or any of
its Subsidiaries.
(h) The Consolidated projected balance sheets, income
statements and cash flows statements of the Borrower and its
Subsidiaries delivered to the Lender Parties pursuant to Section
3.01(m)(xi) or 5.03(e) (collectively, the PROJECTIONS") were prepared
in good faith on the basis of the assumptions stated therein, which
assumptions were, in the opinion of the management of the Borrower,
fair in the light of conditions existing at the time of delivery of
such forecasts; and at the time of delivery, the management of the
Borrower believed that the forecasts of the Borrower's future
financial performance set forth in the Projections were reasonable and
attainable.
(i) Neither the Information Memorandum nor any other
written information, exhibit or report furnished by any Loan Party to
the Administrative Agent or any Lender Party in connection with the
negotiation of the Loan Documents or pursuant to the terms of the Loan
Documents (other than the Projections) contained any untrue statement
of a material fact or omitted to state a material fact necessary to
make the statements made therein not misleading.
<PAGE> 87
82
(j) There is no action, suit, investigation, litigation
or proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) would be reasonably
likely to have a Material Adverse Effect (other than the Disclosed
Litigation) or (ii) purports to affect the legality, validity or
enforceability of the Merger, the Reorganization, this Agreement, any
Note, any other Loan Document or any Related Document or the
consummation of the transactions contemplated hereby, and there has
been no adverse change in the status, or financial effect on any Loan
Party or any of its Subsidiaries, of the Disclosed Litigation from
that described on Schedule 3.01(g).
(k) No proceeds of any Advance will be used to acquire
any equity security of a class that is registered pursuant to Section
12 of the Securities Exchange Act of 1934 (other than, to the extent
applicable, in connection with (i) the acquisition of the Company and
its Subsidiaries pursuant to the Merger Agreement or (ii) an
acquisition of a company, so long as (x) the board of directors of
such company shall have approved such acquisition at the time such
acquisition is first publicly announced, (y) if such company shall
have been soliciting bids for its acquisition, the board of directors
of such company shall not have determined either to accept no offer or
to accept an offer other than the Borrower's offer or (z) if such
company shall not have been soliciting bids for its acquisition or if
the board of directors of such company shall have solicited bids for
its acquisition but shall have determined either to accept no offer or
to accept an offer other than the Borrower's offer, the existence,
amount and availability for the acquisition of such company of the
Facilities hereunder shall not have been disclosed, orally or in
writing, until after such time as the board of directors of such
company shall have approved such acquisition by the Borrower and so
long as, in any case, such acquisition is otherwise permitted
hereunder).
(l) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Advance will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock (other than, to the extent
applicable, in connection with the acquisitions referred to in clauses
(i) and (ii) of Section 4.01(k)).
(m) Following application of the proceeds of each
Advance, not more than 25 percent of the value of the assets (either
of the Borrower only or of the Borrower and its Subsidiaries on a
Consolidated basis) subject to the provisions of Section 5.02(a) or
5.02(d) or subject to any restriction contained in any agreement or
<PAGE> 88
83
instrument between the Borrower and any Lender Party or any Affiliate
of any Lender Party relating to Debt and within the scope of Section
6.01(d) will be Margin Stock.
(n) Set forth on Schedule 4.01(n) hereto is a complete
and accurate list of all Plans, Multiemployer Plans and Welfare Plans
with respect to any employees of any Loan Party or any of its
Subsidiaries.
(o) No ERISA Event has occurred or is reasonably expected
to occur with respect to any Plan (other than the Reportable Event
described in Department of Labor Regulation Section 2615.21 with
respect to the Debtors' Chapter 11 proceedings under the Bankruptcy
Code) that has resulted in or could be reasonably expected to result
in a material liability of any Loan Party or any ERISA Affiliate.
(p) As of the last annual actuarial valuation date, the
current liability (as defined in Section 412 of the Internal Revenue
Code) under each Plan does not exceed the fair market value of the
assets of such Plan and there has been no material adverse change in
the funding status of any such Plan since such date.
(q) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) for each Plan, copies of which have
been filed with the Internal Revenue Service and furnished to the
Lender Parties, is complete and accurate and fairly presents the
funding status of such Plan, and since the date of such Schedule B
there has been no material adverse change in such funding status.
(r) Neither any Loan Party nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability
to any Multiemployer Plan that could be reasonably expected to result
in a material liability of any Loan Party or any ERISA Affiliate.
(s) Neither any Loan Party nor any ERISA Affiliate has
been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA, which reorganization or termination
could be reasonably expected to result in a material liability of any
Loan Party or any ERISA Affiliate, and no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA, which reorganization or
termination could be reasonably expected to result in a material
liability of any Loan Party or any ERISA Affiliate.
(t) Except as set forth in the financial statements
referred to in this Section 4.01 or Section 5.03, the Borrower and its
Subsidiaries have no material liability with
<PAGE> 89
84
respect to "expected post retirement benefit obligations" within the
meaning of Statement of Financial Accounting Standards No. 106.
(u) Neither the business nor the properties of any Loan
Party or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that would be
reasonably likely to have a Material Adverse Effect.
(v) The operations and properties of each Loan Party and
each of its Subsidiaries comply with all Environmental Laws, all
necessary Environmental Permits have been obtained and are in effect
for the operations and properties of each Loan Party and its
Subsidiaries, each Loan Party and its Subsidiaries are in compliance
with all such Environmental Permits, except, in any case, where the
failure to so comply with or perform any of the foregoing, either
individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect, and no circumstances exist that would
be reasonably likely to (i) form the basis of an Environmental Action
against any Loan Party or any of its Subsidiaries or any of their
properties that could have a Material Adverse Effect or (ii) cause any
such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law that
could have a Material Adverse Effect.
(w) None of the properties currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous
foreign, state or local list of sites, and no underground storage
tanks, as such term is defined in 42 U.S.C. Section 6991, are owned or
operated by any Loan Party or any of its Subsidiaries; and Hazardous
Materials have not been released or disposed of on any property
currently or formerly owned or operated by any Loan Party or any of
its Subsidiaries, except, in any case under this Section 4.01(w),
where the consequence of any of the foregoing, either individually or
in the aggregate, could not be reasonably expected to have a Material
Adverse Effect.
(x) Neither any Loan Party nor any of its Subsidiaries
has transported or arranged for the transportation of any Hazardous
Materials to any location that is listed or proposed for listing on
the NPL or on the CERCLIS or any analogous foreign, state or local
list, and all Hazardous Materials generated, used, treated, handled or
stored at, or transported to or from, any property currently or
formerly owned or operated by any Loan Party or any of its
Subsidiaries have been disposed of in a manner that could result in an
Environmental Action, except, in any case, where the consequence of
any
<PAGE> 90
85
of the foregoing, either individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect.
(y) Neither any Loan Party nor any of its Subsidiaries is
a party to any indenture, loan or credit agreement or any lease or
other agreement or instrument or subject to any charter or corporate
restriction that would be reasonably likely to have a Material Adverse
Effect.
(z) The Collateral Documents create a valid and perfected
first priority security interest in the Collateral, securing the
payment of the Secured Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interest
have been duly taken. The Loan Parties are the legal and beneficial
owners of the Collateral free and clear of any Lien, except for the
liens and security interests created or permitted under the Loan
Documents.
(aa) Each Loan Party and each of its Subsidiaries and
Affiliates has filed, has caused to be filed or has been included in
all tax returns (Federal, state, local and foreign) required to be
filed and has paid all taxes shown thereon to be due, together with
applicable interest and penalties, except to the extent such taxes are
being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained and to the extent that
such non-payments, either individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect.
(bb) Set forth on Schedule 4.01(bb) hereto is a complete
and accurate list, as of the date hereof, of each taxable year of the
Borrower and each of its Subsidiaries and Affiliates for which Federal
income tax returns have been filed and for which the expiration of the
applicable statute of limitations for assessment or collection has not
occurred by reason of extension or otherwise (an "OPEN YEAR").
(cc) The aggregate unpaid amount, as of the date hereof,
of adjustments to the Federal income tax liability of the Borrower and
its Subsidiaries and Affiliates proposed by the Internal Revenue
Service with respect to Open Years, if required to be paid, could not
reasonably be expected to have a Material Adverse Effect. No issues
have been raised by the Internal Revenue Service in respect of Open
Years that, in the aggregate, would be reasonably likely to have a
Material Adverse Effect.
(dd) The aggregate unpaid amount, as of the date hereof,
of adjustments to the state, local and foreign tax liability of the
Borrower and its Subsidiaries and Affiliates proposed by all state,
local and foreign taxing authorities (other than amounts arising from
adjustments to Federal income tax returns), if required to be paid,
could
<PAGE> 91
86
not reasonably be expected to have a Material Adverse Effect. No
issues have been raised by such taxing authorities that, in the
aggregate, would be reasonably likely to have a Material Adverse
Effect.
(ee) Neither the Merger nor the Reorganization will
generate taxable income to the Borrower or any of its Subsidiaries or
Affiliates for federal income tax purposes other than income the
recognition of which is deferred under the consolidated return
regulations.
(ff) Except as a result of the Merger, no "ownership
change" as defined in Section 382(g) of the Internal Revenue Code, and
no event that would result in the application of the "separate return
limitation year" or "consolidated return change of ownership"
limitations under the Federal income tax consolidated return
regulations, has occurred with respect to the Borrower since February
4, 1992. The Borrower and its Subsidiaries have, as of the date
hereof, net operating loss carryforwards for U.S. Federal income tax
purposes equal in the aggregate to at least $600,000,000. Set forth
on Schedule 4.01(ff) hereto is the extent to which the net operating
loss carryforwards are expected to be subject to the limits imposed by
Section 382 of the Internal Revenue Code as a result of the Merger or
any other event that would earlier have triggered an ownership change
under Section 382(g) of the Internal Revenue Code.
(gg) No Loan Party is an "investment company," or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Advances,
nor the issuance of any Letters of Credit, nor the application of the
proceeds or repayment thereof by the Borrower, nor the consummation of
the other transactions contemplated hereby, will violate any provision
of such Act or any rule, regulation or order of the Securities and
Exchange Commission thereunder.
(hh) The Borrower is, individually and together with its
Subsidiaries, Solvent and as of the date of the Initial Extension of
Credit, each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ii) The payment obligations (whether contingent, deferred
or otherwise) of the Borrower and its Subsidiaries under the
employment agreements and compensation arrangements to which any of
them is a party could not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect.
<PAGE> 92
87
(jj) Set forth on Schedule 4.01(jj) hereto is a complete
and accurate list of all Existing Debt (other than Surviving Debt),
showing as of the date hereof the principal amount outstanding
thereunder.
(kk) Set forth on Schedule 3.01(e) hereto is a complete
and accurate list of all Surviving Debt, showing as of the date hereof
the principal amount outstanding thereunder.
(ll) Set forth on Schedule 4.01(ll) hereto is a complete
and accurate list of all Investments held by any Loan Party or any of
its Subsidiaries, showing as of the date hereof the amount, obligor or
issuer and maturity, if any, thereof.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding (and not cash
collateralized or for which a "back-to-back" letter of credit shall not have
been issued pursuant to Section 2.06(b)(iv)) or any Lender Party shall have any
Commitment hereunder, the Borrower will:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of
its Subsidiaries to comply, in all material respects, with all
applicable laws, rules, regulations and orders, such compliance to
include, without limitation, compliance with ERISA and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970, except, in any case, where the failure so to
comply, either individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
(b) PAYMENT OF TAXES, ETC. Pay and discharge, and cause
each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges
or levies imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, might by law become a Lien upon its
property; PROVIDED, HOWEVER, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim (x) that is being contested in good faith
and by proper proceedings and as to which appropriate reserves are
being maintained, unless and until any Lien resulting therefrom
attaches to any portion of the Collateral or any property of any
Pledged Subsidiary and becomes enforceable against its other creditors
and (y) if such non-payments, either individually
<PAGE> 93
88
or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect.
(c) COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and
cause each of its Subsidiaries and all lessees and other Persons
operating or occupying its properties to comply, in all material
respects, with all applicable Environmental Laws and Environmental
Permits; obtain and renew and cause each of its Subsidiaries to obtain
and renew all Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries to
conduct, any investigation, study, sampling and testing, and undertake
any cleanup, removal, remedial or other action necessary to remove and
clean up all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws, except, in
any case under this subsection (c), where the failure so to comply
with or perform any of the foregoing, either individually or in the
aggregate, could not be reasonably expected to have a Material Adverse
Effect; PROVIDED, HOWEVER, that neither the Borrower nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and
appropriate reserves are being maintained with respect to such
circumstances.
(d) MAINTENANCE OF INSURANCE. Maintain, and cause each
of its Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Borrower or such Subsidiary operates, except where
failure to maintain such insurance could not be reasonably expected to
have a Material Adverse Effect.
(e) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve
and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence, rights (charter and statutory),
permits, licenses, approvals, privileges and franchises, except, with
respect to such rights, permits, licenses, approvals and privileges,
where the failure to do so could not be reasonably expected to have a
Material Adverse Effect; PROVIDED, HOWEVER, that the Borrower and its
Subsidiaries may consummate the Merger and the Reorganization and any
other merger or consolidation permitted under Section 5.02(c); PROVIDED
FURTHER that neither the Borrower nor any of its Subsidiaries shall be
required to preserve or maintain (i) the corporate existence of any
Minor Subsidiary if the Board of Directors of the parent of such Minor
Subsidiary, or an executive officer of such parent to whom such Board
of Directors has delegated the requisite authority, shall determine
that the preservation and maintenance thereof is no longer desirable
in the conduct of the business of such parent and that the loss
thereof
<PAGE> 94
89
is not disadvantageous in any material respect to the Borrower, such
parent, the Administrative Agent or the Lender Parties or (ii) any
right, permit, license, approval, privilege or franchise if the
preservation and maintenance thereof is no longer desirable in the
conduct of the business of the Borrower or such Subsidiary, as the
case may be, and the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary, the Administrative
Agent or the Lender Parties.
(f) VISITATION RIGHTS. At any reasonable time and from
time to time, (i) permit the Administrative Agent, the Agent or any of
the Lender Parties or any agents or representatives thereof (x) to
examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, the Borrower and any of its
Subsidiaries, and (y) to discuss the affairs, finances and accounts of
the Borrower and any of its Subsidiaries with any of their officers or
directors and with their independent certified public accountants,
PROVIDED, HOWEVER, that with respect to the Lender Parties and their
rights described in clause (x) above, so long as no Default shall have
occurred and be continuing, such Lender Parties shall exercise such
rights at the same time (such time to be arranged by the
Administrative Agent with the Borrower) and (ii) take such action as
may be necessary to authorize its independent certified public
accountants to disclose to the Persons described in clause (i) above
any and all financial statements and other information of any kind,
including, without limitation, copies of any management letter, or the
substance of any information that such accountants may have with
respect to the business, financial condition or results of operations
of the Borrower or any of its Subsidiaries.
(g) KEEPING OF BOOKS. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, in which
full and correct entries shall be made of all financial transactions
and the assets and business of the Borrower and each such Subsidiary
in accordance with generally accepted accounting principles in effect
from time to time.
(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve,
all of its properties that are used or useful in the conduct of its
business in good working order and condition, ordinary wear and tear
excepted, except as otherwise permitted pursuant to Section 5.02(d) or
where the failure to do so, either individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect.
(i) PERFORMANCE OF RELATED DOCUMENTS, MATERIAL CONTRACTS
AND LEASES. Perform and observe all of the terms and provisions of
each Related Document, each Material Contract and each lease of real
property to which the Borrower or any of its
<PAGE> 95
90
Subsidiaries is a party to be performed or observed by it, maintain
each such Related Document, Material Contract and lease in full force
and effect and not allow, with respect to any such leases, such leases
to lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, enforce each such Related Document, Material
Contract and lease in accordance with its terms, except, in any case,
where the failure to do so, either individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect.
(j) TRANSACTIONS WITH AFFILIATES. Conduct, and cause
each of its Subsidiaries to conduct, all transactions otherwise
permitted under the Loan Documents with any of their Affiliates on
economic terms that are fair and reasonable and no less favorable to
the Borrower or such Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate, other than,
so long as no Default shall have occurred and be continuing,
transactions in the ordinary course of business (i) during any Non-
Investment Grade Period, (A) between or among Minor Subsidiaries, (B)
between or among Loan Parties (other than the Borrower) involving cash
or other consideration of less than $30,000,000, PROVIDED that such
transaction could not reasonably be expected to materially impair the
value of the Collateral or the Guaranty or (C) between or among Loan
Parties (other than the Borrower) involving cash or other
consideration of $30,000,000 or more, PROVIDED that such transaction
could not reasonably be expected to materially impair the value of the
Collateral or the Guaranty and a majority of the disinterested members
of the Board of Directors of the applicable Loan Parties determines
that such transaction could not reasonably be expected to have a
Material Adverse Effect or materially impair the value of the
Collateral or the Guaranty, or (ii) during any Investment Grade
Period, between or among the Borrower and any of its Subsidiaries,
PROVIDED that, in the case of clause (i) or (ii) above, such
transaction could not reasonably be expected to have a Material
Adverse Effect.
(k) INTEREST RATE HEDGING. Enter into prior to the
Initial Extension of Credit hereunder, and maintain at all times
thereafter, interest rate Hedge Agreements with Persons approved by
the Administrative Agent and the Agent (such approval not to be
unreasonably withheld or delayed), covering a notional amount in an
amount such that not less than 75%, during any period during which the
Borrower shall not have a Debt Rating of at least BBB- from S&P and at
least Baa3 from Moody's, of the Consolidated Funded Debt (calculated,
in the case of the Fiscal Year ending on January 31, 1995, based on
the pro forma balance sheet furnished to the Lenders prior to the date
hereof, and for each Fiscal Year thereafter, as at the end of the
immediately preceding Fiscal Year) of the Borrower and its
Subsidiaries is maintained at a fixed rate of interest and providing
for such Persons to make payments thereunder for a period of no less
than two years (i) for the first three years after the date hereof, to
the extent that the sum of
<PAGE> 96
91
the Applicable Margin for Eurodollar Rate Advances in effect on the
date any such Hedge Agreement is entered into PLUS the Eurodollar Rate
in effect from time to time for an Interest Period of three months
equals or exceeds 10% per annum and (ii) thereafter, to the extent
that the Eurodollar Rate in effect from time to time for an Interest
Period of three months equals or exceeds 10% per annum.
(l) COVENANT TO GUARANTEE OBLIGATIONS AND TO GIVE
SECURITY. Prior to the date on which an Investment Grade Rating is
established, and after such date if such Investment Grade Rating shall
cease to be in effect and the Release Date shall not have occurred,
and at the expense of the Borrower, at such time as any new direct or
indirect Subsidiaries of the Borrower are formed or acquired or any
existing Subsidiary of the Borrower that did not previously hold any
operating assets or real property acquires any operating assets or
real property or any existing Subsidiary of the Borrower that
previously was prohibited under the terms of its certificate of
incorporation from issuing guaranties or pledging its assets is no
longer so prohibited, (i) if such Subsidiary holds any operating
assets or real property or if such Subsidiary is not prohibited under
the terms of its certificate of incorporation from doing so, within 15
Business Days thereafter, cause such Subsidiary, and cause each direct
and indirect parent (other than the Borrower) of such Subsidiary, if
it has not already done so, to duly execute and deliver to the
Administrative Agent a guaranty, in substantially the form of Exhibit
F hereto and otherwise in form and substance satisfactory to the
Administrative Agent, guaranteeing the Borrower's Obligations under
the Loan Documents, (ii) if such Subsidiary is not prohibited under
the terms of its certificate of incorporation from doing so, within 15
Business Days thereafter, duly execute and deliver, and cause each
Subsidiary that is a direct or indirect parent of such Subsidiary, if
it has not already done so, to duly execute and deliver to the
Administrative Agent a security agreement, in substantially the form
of Exhibit E hereto and otherwise in form and substance satisfactory
to the Administrative Agent, securing the Borrower's Obligations under
the Loan Documents or such parent Subsidiary's Obligations under the
Guaranty, as the case may be, and take, or cause such parent
Subsidiary to take, whatever action as may be necessary or advisable
in the reasonable opinion of the Administrative Agent to vest in the
Administrative Agent valid and subsisting liens on and security
interests in the Collateral purported to be subject to such security
agreement and (iii) within 30 days thereafter, deliver to the
Administrative Agent a signed copy of a favorable opinion, addressed
to the Administrative Agent and the Lender Parties, of internal
counsel to the Loan Parties or other counsel for the Loan Parties
acceptable to the Administrative Agent as to the matters contained in
clauses (i) and (ii) above, as to such guaranty and security agreement
being legal, valid and binding Obligations of the Loan Party party
thereto enforceable in accordance with their terms and as to such
other matters as the Administrative Agent may reasonably
<PAGE> 97
92
request; PROVIDED, HOWEVER, that nothing contained in this Section
5.01(l) shall require that the charter of any present or future
Subsidiary of the Borrower be amended to permit such Subsidiary to
issue guaranties or pledge its assets, except that no such charter
shall restrict the issuance of Debt or the pledging of assets if the
principal purpose of the adoption of such restriction would be to
avoid the issuance of guaranties and the pledging of assets pursuant
to this Section 5.01(l); PROVIDED FURTHER, HOWEVER, that
notwithstanding anything contained herein to the contrary, no indirect
Subsidiary of the Borrower the primary assets of which are real
property shall be required to issue a guaranty so long as its capital
stock shall have been pledged to the Administrative Agent as
Collateral by its direct parent and such parent shall have executed
and delivered a guaranty hereunder.
SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding (and not cash
collateralized or for which a "back-to-back" letter of credit shall not have
been issued pursuant to Section 2.06(b)(iv)) or any Lender Party shall have any
Commitment hereunder, the Borrower will not, at any time:
(a) LIENS, ETC. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Lien on or with respect to any of its properties
of any character (including, without limitation, accounts) whether now
owned or hereafter acquired, or sign or file, or permit any of its
Subsidiaries to sign or file, under the Uniform Commercial Code of any
jurisdiction, a financing statement that names the Borrower or any of
its Subsidiaries as debtor, or sign, or permit any of its Subsidiaries
to sign, any security agreement authorizing any secured party
thereunder to file such financing statement, or assign, or permit any
of its Subsidiaries to assign, any accounts or other right to receive
income, EXCLUDING, HOWEVER, from the operation of the foregoing
restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) the Liens existing on the date hereof and
described on Schedule 5.02(a) hereto;
(iv) purchase money Liens upon or in real property
or equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property or equipment
to be subject to
<PAGE> 98
93
such Liens, or Liens existing on any such property or
equipment at the time of acquisition (other than any such
Liens created in contemplation of such acquisition that were
not incurred to finance the acquisition of such property or
equipment), or extensions, renewals or replacements of any of
the foregoing for the same or a lesser amount; PROVIDED,
HOWEVER, that no such Lien shall extend to or cover any
properties of any character other than the real property or
equipment being acquired, constructed or improved (except that
Liens incurred in connection with the construction or
improvement of real property may extend to additional real
property immediately contiguous to such property being
constructed or improved) and no such extension, renewal or
replacement shall extend to or cover any such properties not
theretofore subject to the Lien being extended, renewed or
replaced;
(v) Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(iii)(C); PROVIDED that
no such Lien shall extend to or cover any assets other than
the assets subject to such Capitalized Leases;
(vi) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the
Borrower or any Subsidiary of the Borrower or becomes a
Subsidiary of the Borrower; PROVIDED that such Liens (other
than replacement Liens permitted under clause (xii) below)
were not created in contemplation of such merger,
consolidation or investment and do not extend to any assets
other than those of the Person merged into or consolidated
with the Borrower or such Subsidiary or acquired by the
Borrower or such Subsidiary;
(vii) Liens on accounts receivable and other
related assets arising solely in connection with the sale or
other disposition of such accounts receivable pursuant to
Section 5.02(d)(v);
(viii) cash collateral securing Surviving Debt
consisting of letters of credit outstanding in an aggregate
amount not to exceed $2,000,000;
(ix) Liens securing Documentary L/Cs permitted
under Section 5.02(b)(iii)(F) or Trade Letters of Credit;
PROVIDED that no such Lien shall extend to or cover any assets
of the Borrower or any of its Subsidiaries other than the
inventory (and bills of lading and other documents related
thereto) being financed by any such Documentary L/C or Trade
Letter of Credit, as the case may be;
<PAGE> 99
94
(x) Liens in respect of goods consigned to the
Borrower or any of its Subsidiaries in the ordinary course of
business; PROVIDED that such Liens are limited to the goods so
consigned;
(xi) financing statements filed in the ordinary
course of business solely for notice purposes in respect of
operating leases and in-store retail licensing arrangements
entered into in the ordinary course of business; and
(xii) the replacement, extension or renewal of any
Lien permitted by clause (iii), (v) or (vi) above upon or in
the same property theretofore subject thereto or, in the case
of Liens on real property and related personal property of the
Borrower or any of its Subsidiaries other than ASGREC, upon or
in substitute property of like kind of the Borrower or such
Subsidiary, as the case may be, determined in good faith by
the Board of Directors of the Borrower or such Subsidiary to
be of the same or lesser value than the property theretofore
subject thereto, or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby.
(b) DEBT. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Debt other than:
(i) in the case of the Borrower,
(A) Debt owed to a wholly owned
Subsidiary of the Borrower, PROVIDED that if the
Release Date shall not have occurred, such Debt may
be incurred only to the extent that (1) such Debt
arises out of the conduct of the Borrower's ordinary
course of business pursuant to and in accordance with
the Borrower's cash management system described on
Schedule 5.02(b) hereto or (2) such Debt, together
with dividends received by the Borrower from its
Subsidiaries, is incurred and remains outstanding
solely to the extent necessary for the Borrower to
make scheduled payments and prepayments permitted
hereunder of principal of and interest on its Debt
owing to Persons other than its Affiliates and to pay
necessary administrative expenses of the Borrower on
a timely basis and at the time of incurrence or
issuance of such Debt, no Default shall have occurred
and be continuing;
(B) Debt in respect of Hedge Agreements
designed to hedge against fluctuations in interest
rates or foreign exchange rates incurred in
<PAGE> 100
95
the ordinary course of business and consistent with
prudent business practices, PROVIDED that such Hedge
Agreements shall be non-speculative in nature
(including, without limitation, with respect to the
term and purpose thereof);
(C) unsecured Debt in an aggregate
amount not to exceed $200,000,000; PROVIDED that the
Net Cash Proceeds thereof shall be applied to prepay
the Advances pursuant to and in accordance with
Section 2.06(b)(ii); and
(D) during any Investment Grade Period,
unsecured Debt in an aggregate amount not to exceed
$500,000,000 at any one time outstanding; PROVIDED,
HOWEVER, that after giving effect to the incurrence
or issuance of such Debt, the Interest Coverage
Ratio, calculated on a pro forma basis, shall equal
or exceed 3.75:1 and the Leverage Ratio shall not
exceed 0.45:1; PROVIDED FURTHER, HOWEVER, that at the
time of the incurrence or issuance of such Debt, the
Borrower shall not be on "credit watch" (or any like
designation by S&P or Moody's from time to time) for
downgrading of its Debt Rating to BB+ or below by S&P
or Ba1 or below by Moody's; PROVIDED FURTHER that if,
subsequent to the incurrence or issuance of any such
Debt, the Debt Rating shall cease to be an Investment
Grade Rating, such outstanding Debt shall be deemed
to be permitted hereunder; and
(ii) in the case of any of its Subsidiaries,
(A) during any Non-Investment Grade
Period, in the case of any such Subsidiary that is a
Guarantor or, during any Investment Grade Period, in
the case of any such Subsidiary, Debt owed to the
Borrower or to a wholly owned Subsidiary of the
Borrower;
(B) in the case of FDS National Bank,
Debt owed to the Borrower, Debt incurred in
connection with the financing of accounts receivable
in an aggregate principal amount not to exceed
$200,000,000 at any time outstanding, PROVIDED that
such Debt is evidenced by senior intercompany notes
pledged to the Administrative Agent as Collateral in
accordance with the terms of the Loan Documents; and
(C) in the case of Macy's Primary Real
Estate, Inc., Debt owed to FNC in an aggregate
principal amount not to exceed
<PAGE> 101
96
$550,926,100, PROVIDED that such Debt shall not be
pledged to any Person except to the extent permitted
or required under Section 5.01(l); and
(D) in the case of any such Subsidiary
that is not a Guarantor (other than FDS National Bank
and FNC), Debt owed to the Borrower or to a wholly
owned Subsidiary of the Borrower (1) arising out of
the conduct of the Borrower's business pursuant to
and in accordance with the Borrower's cash management
system described on Schedule 5.02(b) hereto, (2)
evidenced by intercompany notes executed by such
Subsidiary solely for purposes and arising out of
transactions consistent with past practices, so long
as such notes are pledged to the Administrative Agent
as Collateral to the extent required by, and in
accordance with the terms of, the Loan Documents or
(3) in a principal amount not to exceed $25,000,000
in the aggregate for all such Subsidiaries from the
date hereof; and
(iii) in the case of the Borrower and any of its
Subsidiaries (other than FNC),
(A) Debt under the Loan Documents;
(B) Debt secured by Liens permitted by
Section 5.02(a)(iv) not to exceed in the aggregate
(i) during any Non-Investment Grade Period,
$50,000,000 at any time outstanding and (ii) during
any Investment Grade Period, $100,000,000 at any time
outstanding, PROVIDED that if, subsequent to the
incurrence of such Debt, the Debt Rating shall cease
to be an Investment Grade Rating, such outstanding
Debt shall be deemed to be permitted hereunder to the
extent not permitted under subclause (i) above;
(C) (i) Capitalized Leases not to exceed
in the aggregate (x) during any Non-Investment Grade
Period, $50,000,000 at any time outstanding and (y)
during any Investment Grade Period, $100,000,000 at
any time outstanding, PROVIDED that if, subsequent to
entering into such Capitalized Leases, the Debt
Rating shall cease to be an Investment Grade Rating,
such outstanding Capitalized Leases shall be deemed
to be permitted hereunder to the extent not permitted
under subclause (x) above, and (ii) in the case of
Capitalized Leases to which any Subsidiary of the
Borrower is a party, Debt of the Borrower of the type
described in
<PAGE> 102
97
clause (i) of the definition of "DEBT" guaranteeing
the Obligations of such Subsidiary under such
Capitalized Leases;
(D) the Surviving Debt, and any Debt
extending the maturity of, or refunding or
refinancing, in whole or in part, any Surviving
Debt; PROVIDED that the terms (including, without
limitation, principal amount, interest rate,
limitations on liens, if any, guaranties, if any,
collateral, if any, and subordination terms, if any)
taken as a whole of any such extending, refunding or
refinancing Debt, and of any agreement entered into
and of any instrument issued in connection therewith,
are no less favorable to the Loan Parties or the
Lender Parties, as determined by the Administrative
Agent in its reasonable discretion, than the terms
governing the Debt so extended, refunded or
refinanced PROVIDED that no unsecured Debt shall be
refunded or refinanced by secured Debt); PROVIDED,
HOWEVER, that any such refunding or refinancing Debt
may provide for an earlier maturity than the Debt
being so refunded or refinanced so long as such
earlier maturity is no earlier than six months after
the Termination Date, PROVIDED FURTHER that the
principal amount of such Surviving Debt shall not be
increased above the principal amount thereof
outstanding immediately prior to such extension,
refunding or refinancing, and the direct and
contingent obligors therefor shall not be changed, as
a result of or in connection with such extension,
refunding or refinancing, PROVIDED STILL FURTHER that
nothing contained in this subclause (D) shall
prohibit the prepayment of the Series B Notes issued
pursuant to the Plan of Reorganization with the Net
Cash Proceeds from the sale or other financing of
accounts receivable to the extent otherwise permitted
under this Agreement;
(E) Debt incurred in connection with the
sale or other disposition of accounts receivable
pursuant to Section 5.02(d)(v) arising in connection
with the Receivables Financing Facility, including,
without limitation, Debt consisting of
indemnification obligations of the Borrower's
Subsidiaries and the Borrower's guaranty thereof and
Debt in respect of Hedge Agreements, PROVIDED that
such Hedge Agreements shall be subject to the
limitations described in Section 5.02(b)(i)(B);
(F) Debt in respect of Documentary L/Cs
in an aggregate Available Amount not to exceed
$250,000,000 at any time outstanding and, together
with the aggregate Available Amount of outstanding
Trade Letters of Credit, not to exceed $400,000,000
at any time outstanding;
<PAGE> 103
98
(G) Debt of any Person that becomes a
Subsidiary of the Borrower after the date hereof in
accordance with the terms of Section 5.02(e) that is
existing at the time such Person becomes a Subsidiary
of the Borrower (other than Debt incurred solely in
contemplation of such Person becoming a Subsidiary of
the Borrower); and
(H) indorsement of negotiable
instruments for deposit or collection or similar
transactions in the ordinary course of business.
(c) MERGERS, ETC. Merge into or consolidate with any
Person or permit any Person to merge into it, or permit any of its
Subsidiaries to do so, except that (i) the Borrower and its
Subsidiaries may consummate the Merger and the Reorganization, (ii)
any Subsidiary of the Borrower may merge into or consolidate with any
other Subsidiary of the Borrower, PROVIDED that, in the case of any
such merger or consolidation under this clause (ii), (x) the Person
formed by such merger or consolidation shall be a wholly owned
Subsidiary of the Borrower, and (y) if the capital stock of either
such Subsidiary is Collateral, the capital stock of the resulting
Subsidiary shall be pledged as Collateral pursuant to Section 5.01(l)
and (iii) any Minor Subsidiary may merge into or consolidate with the
Borrower; PROVIDED, HOWEVER, that in each case, immediately after
giving effect thereto, no event shall occur and be continuing that
constitutes a Default and, in the case of any such merger to which the
Borrower is a party, the Borrower is the surviving corporation.
(d) SALES, ETC. OF ASSETS. Sell, lease, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell,
lease, transfer or otherwise dispose of, any assets or grant any
option or other right to purchase, lease or otherwise acquire any
assets other than:
(i) sales of inventory, equipment and fixtures in
the ordinary course of its business;
(ii) in a transaction authorized by subsection (c)
of this Section;
(iii) sales of assets for cash or senior promissory
notes or for other assets consisting of real property and
equipment to be used in the business of the Borrower and its
Subsidiaries, in each case for fair value, in an aggregate
amount not to exceed $100,000,000 in any Fiscal Year, PROVIDED
that the Net Cash Proceeds thereof shall be reinvested as
Capital Expenditures for the businesses of the Borrower and
its Subsidiaries to the extent permitted under the
<PAGE> 104
99
Loan Documents, PROVIDED FURTHER that any notes received in
connection with any sale of assets pursuant to this clause
(iii) shall be payable within five years of such sale and
shall not exceed, in the aggregate, $30,000,000 in principal
amount in any Fiscal Year;
(iv) sales of assets for cash and for fair value
in an aggregate amount not to exceed $250,000,000 in any
Fiscal Year and in an aggregate amount from the date hereof
not to exceed $500,000,000, PROVIDED, HOWEVER, that sales of
assets in connection with sale-leaseback transactions shall
not exceed, in any Fiscal Year, the sum of (x) $100,000,000
PLUS (y) an amount equal to the aggregate amount of assets
permitted under the terms of this Agreement to be sold in
connection with sale- leaseback transactions in any prior
Fiscal Year to the extent such asset sales and related
sale-leaseback transactions shall not have been consummated in
such prior Fiscal Year;
(v) the sale or other disposition of accounts
receivable and related charge accounts in the ordinary course
of business of the Borrower and its Subsidiaries substantially
as conducted on the date hereof pursuant to the Receivables
Financing Facility and the sale of certain accounts receivable
to General Electric Capital Corporation in connection with the
transfer of certain stores operated on the date hereof by
Abraham & Straus, Inc. to Macy's East, Inc., a wholly owned
Subsidiary of the Borrower; and
(vi) the grant of any option or other right to
purchase any asset in a transaction which would be permitted
under the provisions of clause (iii), (iv) or (v) above;
PROVIDED that in the case of sales of assets pursuant to clause (iv)
above, the Borrower shall, on the date of receipt by the Borrower or
any of its Subsidiaries of the Net Cash Proceeds from such sale,
prepay the Advances pursuant to, and in the amount and the order of
priority set forth in, Section 2.06(b)(ii), as specified therein.
(e) INVESTMENTS IN OTHER PERSONS. Make or hold, or
permit any of its Subsidiaries to make or hold, any Investment in any
Person other than:
(i) Investments by the Borrower and its
Subsidiaries in their Subsidiaries outstanding on the date
hereof and additional Investments in wholly owned Subsidiaries
that are not Loan Parties, which during any Non-Investment
Grade Period, shall be in an amount invested from the date
hereof not to exceed $5,000,000 individually and $25,000,000
in the aggregate for all such
<PAGE> 105
100
Subsidiaries, PROVIDED that if, subsequent to the making of
any such Investment during any Investment Grade Period, the
Debt Rating shall cease to be an Investment Grade Rating, any
such Investment shall be deemed to be permitted hereunder, and
additional Investments in wholly owned Subsidiaries that are
Loan Parties;
(ii) loans and advances to employees in the
ordinary course of the business of the Borrower and its
Subsidiaries as presently conducted in an aggregate principal
amount not to exceed $10,000,000 at any time outstanding;
(iii) Investments by the Borrower and its
Subsidiaries in Cash Equivalents in an aggregate principal
amount not to exceed $300,000,000 at any time outstanding;
(iv) Investments by the Borrower and its
Subsidiaries in Hedge Agreements permitted under Section
5.02(b)(i)(B) or 5.02(b)(iii)(E);
(v) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(i)(A);
(vi) loans and advances in the ordinary course of
business to vendors of the Borrower and its Subsidiaries in
connection with in-store merchandising;
(vii) loans and advances in the ordinary course of
business to sublessees and licensees of the Borrower and its
Subsidiaries and Investments in overseas manufacturers in the
ordinary course of business in an aggregate amount not to
exceed $20,000,000 at any time outstanding;
(viii) construction advances made in the ordinary
course of business to developers that are not Affiliates of
the Borrower or any of its Subsidiaries in connection with
store renovations;
(ix) Investments existing on the date hereof and
described on Schedule 4.01(ll) hereto;
(x) Investments consisting of Cash Capital
Expenditures permitted under Section 5.02(o) to the extent not
otherwise permitted under clause (xii) below;
<PAGE> 106
101
(xi) Investments evidenced by senior promissory
notes representing assets and property of the Borrower and its
Subsidiaries sold pursuant to Section 5.02(d)(iii);
(xii) other Investments in an aggregate amount
invested (in any combination of cash and securities of the
Borrower) not to exceed, together with the aggregate amount of
Debt incurred pursuant to Section 5.02(b)(i)(D) and Cash
Capital Expenditures made in connection with the acquisition
of any business pursuant to an asset purchase, from the date
hereof until the Termination Date:
(a) $250,000,000 during such time as the
Debt Rating is not an Investment Grade Rating, and
(b) $500,000,000 during such time as the
Debt Rating is an Investment Grade Rating; PROVIDED
that if, subsequent to the making of any such
Investments permitted under this subclause (b), the
Debt Rating shall cease to be an Investment Grade
Rating, such Investment shall be deemed to be
permitted hereunder;
PROVIDED FURTHER that with respect to Investments made under
this clause (xii):
(1) no more than $200,000,000 may be
invested in any Fiscal Year,
(2) the aggregate amount of such
Investments shall not exceed $500,000,000 from the
date hereof,
(3) any newly acquired or created
Subsidiary of the Borrower or any of its Subsidiaries
shall be a wholly owned Subsidiary thereof,
(4) immediately before and after giving
effect thereto, no Default shall have occurred and be
continuing or would result therefrom,
(5) during any Non-Investment Grade
Period, immediately before and after giving effect to
such Investment, the Interest Coverage Ratio,
calculated on a pro forma basis, shall equal or
exceed 3.25:1 and the Leverage Ratio, calculated on a
pro forma basis, shall not exceed 0.49:1,
<PAGE> 107
102
(6) during any Investment Grade Period,
immediately before and after giving effect to such
Investment, the Interest Coverage Ratio, calculated
on a pro forma basis, shall equal or exceed 4.0:1
(unless S&P and Moody's shall have established a Debt
Rating of at least BBB- and Baa3, respectively, in
which case such Interest Coverage Ratio shall equal
or exceed 3.75:1) and the Leverage Ratio, calculated
on a pro forma basis, shall not exceed 0.45:1 and
(7) any business acquired or invested in
pursuant to this clause (xii) shall be in the same or
a similar line of business as the business of the
Borrower or any of its Subsidiaries;
PROVIDED STILL FURTHER that (1) within the aggregate limits
contained in subclauses (a) and (b) above, any amounts
permitted to be invested in any Fiscal Year and not so
invested may be carried over and invested in the immediately
succeeding Fiscal Year, subject to the limitations contained
in the immediately preceding proviso, (2) with respect to any
Investment proposed to be made during an Investment Grade
Period, if immediately before and after giving effect thereto,
the Interest Coverage Ratio, calculated on a pro forma basis
as described above, shall equal or exceed 3.25:1 and the
Leverage Ratio, calculated on a pro forma basis, shall not
exceed 0.49:1 but shall not otherwise meet the requirements
contained in clause (6) above, then Investments shall be
permitted to be made in an amount which, together with
Investments made pursuant to this clause (xii) during any
Non-Investment Grade Period, shall not exceed $250,000,000
from the date hereof and (3) for purposes of calculating the
Interest Coverage Ratio and the Leverage Ratio on a pro forma
basis, such ratios shall be calculated based on historical
financial statements but after giving effect to current market
rates and operating synergies reasonably expected to result
from such Investment.
(f) DIVIDENDS, ETC. Declare or pay any dividends,
purchase, redeem, retire, defease or otherwise acquire for value any
of its capital stock or any warrants, rights or options to acquire
such capital stock, now or hereafter outstanding, return any capital
to its stockholders as such, make any distribution of assets, capital
stock, warrants, rights, options, obligations or securities to its
stockholders as such or issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, or permit
any of its Subsidiaries to do any of the foregoing or permit any of
its Subsidiaries to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of the Borrower or any warrants,
rights or options to acquire such capital stock or to issue or sell
any capital stock or any warrants, rights or options to acquire such
capital stock,
<PAGE> 108
103
except that, so long as no Default shall have occurred and be
continuing at the time of any action described in clause (i) or (ii)
below or would result therefrom,
(i) the Borrower may
(A) declare and pay dividends and
distributions payable only in common of the Borrower,
(B) purchase, redeem, retire, defease or
otherwise acquire shares of its capital stock with
the proceeds received from the issue of new shares of
its capital stock with equal or inferior voting
powers, designations, preferences and rights,
(C) make payments in respect of the 1992
Executive Equity Incentive Plan, the 1995 Equity
Plan, the Supplementary Executive Retirement Plan,
the Executive Deferred Compensation Plan dated as of
November 1, 1993 and the Share Purchase Rights
Agreement, in each case as amended, amended and
restated or replaced from time to time in a manner
consistent with prudent business practices, and
(D) during an Investment Grade Period,
declare and pay cash dividends to its stockholders
and purchase, redeem, retire or otherwise acquire
shares of its own outstanding capital stock for cash
solely out of Consolidated net income of the Borrower
and its Subsidiaries during an Investment Grade
Period, PROVIDED that if, after the declaration of
any such dividends, the Debt Rating shall cease to be
an Investment Grade Rating, such declared dividends
shall be deemed to be permitted hereunder and
(ii) any Subsidiary of the Borrower may
(A) declare and pay cash dividends to
the Borrower, PROVIDED that if the Release Date shall
not have occurred, such cash dividends may be
declared and paid (x) by FNC with the proceeds
received in connection with the repayment of
mortgages held by it, so long as the Borrower applies
such dividends to prepay the Advances pursuant to
Section 2.06(b)(ii), (y) by Federated Credit Holdings
Corporation in the ordinary course of business and
consistent with past practices and (z) otherwise,
together with Debt incurred pursuant to Section
5.02(b)(i)(A) in accordance with clause (2) of the
proviso thereto, solely
<PAGE> 109
104
to the extent necessary for the Borrower to make
scheduled payments and prepayments permitted
hereunder of principal of and interest on its Debt
owing to Persons other than its Affiliates and to pay
necessary administrative expenses of the Borrower on
a timely basis and
(B) declare and pay cash dividends to
any other Subsidiary of the Borrower of which it is a
Subsidiary.
(g) CHANGE IN NATURE OF BUSINESS. Make, or permit any of
its Subsidiaries to make, any material change in the nature of its
business as carried on at the date hereof, except where such change
could not be reasonably expected to have a Material Adverse Effect.
(h) CHARTER AMENDMENTS. Amend, or permit any of its
Subsidiaries to amend, its certificate of incorporation or bylaws,
except where such amendment could not be reasonably expected to have a
Material Adverse Effect.
(i) ACCOUNTING CHANGES, ETC. Make or permit, or permit
any of its Subsidiaries to make or permit, any change in (i)
accounting policies or reporting practices (including, without
limitation, with respect to the reflection of accounts receivable on
the Consolidated balance sheet of the Borrower and its Subsidiaries),
except as permitted or required by generally accepted accounting
principles or law and disclosed to the Lender Parties, the Agent and
the Administrative Agent on a timely basis or (ii) Fiscal Year.
(j) PREPAYMENTS, ETC. OF DEBT. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner, or make any payment in violation of any subordination
terms of, any Debt, other than:
(i) the prepayment of the Advances in accordance
with the terms of this Agreement,
(ii) regularly scheduled or required repayments or
redemptions of Surviving Debt,
(iii) refundings and refinancings permitted under
Section 5.02(b)(iii)(D),
(iv) prepayments under, and in accordance with the
terms of, the Receivables Financing Facility,
<PAGE> 110
105
(v) prepayment of the Convertible Debentures in
an aggregate amount in any Fiscal Year not to exceed the
amount of Excess Cash Flow for the immediately preceding
Fiscal Year to the extent not required to prepay the Advances
pursuant to Section 2.06(b)(i), PROVIDED that any such
prepayment shall be made no later than the 100th day following
the end of the immediately preceding Fiscal Year,
(vi) on or prior to January 31, 1995, prepayment
of the Series A Notes, the Series B Notes and the Series C
Notes issued pursuant to the Plan of Reorganization, PROVIDED
that the Series A Notes shall be prepaid in full prior to any
prepayment of the Series B Notes and Series C Notes, PROVIDED
FURTHER that immediately after giving effect to all such
prepayments under this clause (vi), but prior to giving effect
to any prepayments made pursuant to clause (vii) below, the
aggregate outstanding principal amount of such Series A Notes,
Series B Notes and Series C Notes shall not be less than
$500,000,000,
(vii) prepayment of the Series B Notes issued
pursuant to the Plan of Reorganization (A) on or prior to
January 31, 1995, in an aggregate principal amount not to
exceed the lesser of $200,000,000 and the amount of the Net
Cash Proceeds received in connection with the sale or
non-recourse financing of accounts receivable pursuant to
Section 5.02(b)(iii)(E) pursuant to one or more accounts
receivable financing transactions other than those described
in the Information Memorandum or (B) in an aggregate amount in
any Fiscal Year not to exceed the amount of Excess Cash Flow
for the immediately preceding Fiscal Year to the extent not
required to prepay the Advances pursuant to Section 2.06(b)(i)
and not used to prepay the Convertible Debentures pursuant to
Section 5.02(j)(v), PROVIDED that, in the case of this clause
(B), the Term Advances shall have been paid in full,
(viii) during any Non-Investment Grade Period,
prepayment, redemption, purchase or defeasance of Debt in an
aggregate amount not to exceed $10,000,000 in any Fiscal Year,
and
(ix) during any Investment Grade Period,
prepayment, redemption, purchase or defeasance of Debt in an
aggregate amount not to exceed $250,000,000 in any Fiscal
Year, PROVIDED that concurrently with, or within the 30
Business Days immediately preceding, any such prepayment,
redemption, purchase or defeasance, so long as the Term
Facility shall not have been paid in full, the Borrower shall
prepay the Term Advances pursuant to, and in the
<PAGE> 111
106
amount and order of priority set forth in, Section
2.06(b)(vi), as specified therein, PROVIDED FURTHER that if,
subsequent to any such prepayment, redemption, purchase,
defeasance or satisfaction, the Debt Rating shall cease to be
an Investment Grade Rating, such prepayment, redemption,
purchase, defeasance or satisfaction shall be deemed to be
permitted hereunder,
or amend, modify or change in any manner any term or condition of any
Surviving Debt, or permit any of its Subsidiaries to do any of the
foregoing other than to prepay any Debt payable to the Borrower.
(k) AMENDMENT, ETC. OF RELATED DOCUMENTS. Cancel or
terminate any Related Document or consent to or accept any
cancellation or termination thereof, amend, modify or change in any
manner any term or condition of any Related Document or give any
consent, waiver or approval thereunder, waive any default under or any
breach of any term or condition of any Related Document, agree in any
manner to any other amendment, modification or change of any term or
condition of any Related Document or take any other action in
connection with any Related Document that would impair the rights or
interests of the Administrative Agent or any Lender Party or that
could be reasonably expected to have a Material Adverse Effect, or
permit any of its Subsidiaries to do any of the foregoing.
(l) AMENDMENT, ETC. OF MATERIAL CONTRACTS. Cancel or
terminate any Material Contract or consent to or accept any
cancellation or termination thereof, amend or otherwise modify any
Material Contract or give any consent, waiver or approval thereunder,
waive any default under or breach of any Material Contract, agree in
any manner to any other amendment, modification or change of any term
or condition of any Material Contract or take any other action in
connection with any Material Contract that could be reasonably
expected to have a Material Adverse Effect, or permit any of its
Subsidiaries to do any of the foregoing.
(m) SECTION 338 ELECTION. Make an election under Section
338(g) of the Internal Revenue Code with respect to the Merger.
(n) PARTNERSHIPS. Become a general partner in any
general or limited partnership, or permit any of its Subsidiaries to
do so, other than any Subsidiary the sole assets of which consist of
its interest in such partnership.
(o) CASH CAPITAL EXPENDITURES. During any Non-Investment
Grade Period, make, or permit any of its Subsidiaries to make, any
Cash Capital Expenditures that would cause the aggregate of all such
Cash Capital Expenditures made by the Borrower
<PAGE> 112
107
and its Subsidiaries in any period set forth below to exceed the
amount set forth below for such period:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C>
1995 $705,000,000
1996 $697,000,000
1997 $706,000,000
1998 and thereafter $713,000,000
</TABLE>
PROVIDED that, commencing with the Fiscal Year ending in January 1996,
the Borrower and its Subsidiaries shall be entitled to make additional
Cash Capital Expenditures in any Fiscal Year in an amount (the
"CARRY-OVER AMOUNT") equal to the lesser of (i) 25% of the amount set
forth above for the immediately preceding Fiscal Year and (ii) the
amount by which (A) the amount (the "MAXIMUM PERMITTED AMOUNT") of
Cash Capital Expenditures permitted under this Section 5.02(o) for the
immediately preceding Fiscal Year (after giving effect to this
proviso) exceeds (B) the actual amount of Cash Capital Expenditures
made during the immediately preceding Fiscal Year; PROVIDED FURTHER
that if, subsequent to the making of Cash Capital Expenditures during
any Investment Grade Period in excess of the amounts specified above,
the Debt Rating shall cease to be an Investment Grade Rating, such
Cash Capital Expenditures shall be deemed to be permitted hereunder;
PROVIDED STILL FURTHER that in connection with the acquisition of any
business pursuant to an asset purchase (whether during a
Non-Investment Grade Period or an Investment Grade Period), the
applicable requirements as to Investments contained in Section
5.02(e)(xii) shall have been satisfied.
SECTION 5.03. REPORTING REQUIREMENTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding (and not cash
collateralized or for which a "back-to-back" letter of credit shall not have
been issued pursuant to Section 2.06(b)(iv)) or any Lender Party shall have any
Commitment hereunder, the Borrower will furnish to the Lender Parties:
(a) DEFAULT NOTICE. As soon as possible and in any event
within five days after any Responsible Officer becomes aware of the
occurrence of each Default and each event, development or circumstance
that has or could reasonably be expected to have a Material Adverse
Effect continuing on the date of such statement, a statement of the
chief financial officer of the Borrower setting forth details of such
Default, event, development or other circumstance (including, without
limitation, the anticipated effect thereof) and the action that the
Borrower has taken and proposes to take with respect thereto.
<PAGE> 113
108
(b) MONTHLY FINANCIALS. During each Non-Investment Grade
Period, as soon as available and in any event within 45 days after the
end of January of each Fiscal Year, and within 30 days after the end
of each other month, a Consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such month and a Consolidated
statement of income of the Borrower and its Subsidiaries for the
period commencing at the end of the previous month and ending with the
end of such month and Consolidated statements of income and cash flows
of the Borrower and its Subsidiaries for the period commencing at the
end of the previous Fiscal Year and ending with the end of such month,
and divisional balance sheets and profit and loss statements for such
month and the period commencing at the end of the previous Fiscal Year
and ending with the end of such fiscal month setting forth in each
case in comparative form the corresponding figures for the
corresponding period of the preceding Fiscal Year, all in reasonable
detail and duly certified by the chief financial officer, the
treasurer or the controller of the Borrower.
(c) QUARTERLY FINANCIALS. As soon as available and in
any event within 45 days after the end of each of the first three
fiscal quarters of each Fiscal Year, Consolidated, and during any
Non-Investment Grade Period, consolidating, balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and
Consolidated, and during any Non-Investment Grade Period,
consolidating, statements of income of the Borrower and its
Subsidiaries for the period commencing at the end of the previous
fiscal quarter and ending with the end of such fiscal quarter and
Consolidated, and during any Non-Investment Grade Period,
consolidating, statements of income and a Consolidated statement of
cash flows for the period commencing at the end of the previous Fiscal
Year and ending with the end of such fiscal quarter, setting forth in
the case of such Consolidated financial statements in comparative form
the corresponding figures for the corresponding period of the
preceding Fiscal Year, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer
of the Borrower as having been prepared in accordance with GAAP,
together with (i) a certificate of said officer stating that no
Default has occurred and is continuing or, if a Default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto
and (ii) a certificate of said officer as to the then applicable Debt
Rating and Interest Coverage Ratio and containing a schedule in form
satisfactory to the Administrative Agent of the computations used by
the Borrower in determining compliance with the covenants contained in
Section 5.04.
(d) ANNUAL FINANCIALS. As soon as available and in any
event within 90 days after the end of each Fiscal Year, a copy of the
annual audit report for such year for
<PAGE> 114
109
the Borrower and its Subsidiaries, including therein Consolidated
balance sheets of the Borrower and its Subsidiaries as of the end of
such Fiscal Year and Consolidated statements of income and cash flows
of the Borrower and its Subsidiaries for such Fiscal Year, in each
case accompanied by an opinion acceptable to the Required Lenders of
KPMG Peat Marwick LLP or other independent public accountants of
recognized standing acceptable to the Required Lenders, and, during
any Non-Investment Grade Period, a consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such Fiscal Year and,
during any Non-Investment Grade Period, a consolidating statement of
income for such Fiscal Year, all in reasonable detail and duly
certified by the chief financial officer of the Borrower, in the case
of such consolidated financial statements, as having been prepared in
accordance with GAAP, and in each case, consistent with past
practices, in each case together with (i) a certificate of such
accounting firm to the Lenders stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries,
which audit was conducted by such accounting firm in accordance with
generally accepted auditing standards, such accounting firm has
obtained no knowledge that a Default has occurred and is continuing,
or if, in the opinion of such accounting firm, a Default has occurred
and is continuing, a statement as to the nature thereof, (ii) a
certificate of the chief financial officer of the Borrower as to the
then applicable Debt Rating and Interest Coverage Ratio and containing
a schedule in form satisfactory to the Administrative Agent of the
computations used by such accountants in determining, as of the end of
such Fiscal Year, compliance with the covenants contained in Section
5.04 and (iii) a certificate of the chief financial officer of the
Borrower stating that no Default has occurred and is continuing or, if
a default has occurred and is continuing, a statement as to the nature
thereof and the action that the Borrower has taken and proposes to
take with respect thereto.
(e) ANNUAL BUSINESS PLAN AND FORECASTS. During any
Non-Investment Grade Period, as soon as available and in any event no
later than April 30 of each Fiscal Year, a business plan and forecasts
prepared by management of the Borrower, in form reasonably
satisfactory to the Administrative Agent, of balance sheets, income
statements and cash flow statements for such Fiscal Year.
(f) SEMIANNUAL BUSINESS PLAN. During any Non-Investment
Grade Period, as soon as available and in any event no later than
March 8 and September 1 of each Fiscal Year, a semiannual seasonal
business plan prepared by management of the Borrower, in form and
substance reasonably satisfactory to the Administrative Agent.
<PAGE> 115
110
(g) LONG TERM PLAN. As soon as available and in any
event no later than 15 days after the final review thereof by the
board of directors of the Borrower, any long term business and
financial plan prepared by management of the Borrower.
(h) ERISA EVENTS. Promptly and in any event within 10
days after any Loan Party or any ERISA Affiliate knows or has reason
to know that any ERISA Event that is reasonably expected to result in
a material liability of any Loan Party or any ERISA Affiliate has
occurred, a statement of the chief financial officer of the Borrower
describing such ERISA Event and the action, if any, that such Loan
Party or such ERISA Affiliate has taken and proposes to take with
respect thereto.
(i) PLAN TERMINATIONS. Promptly and in any event within
two Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention
to terminate any Plan or to have a trustee appointed to administer any
such Plan if such termination or appointment could be reasonably
expected to result in a material liability of any Loan Party or any
ERISA Affiliate.
(j) PLAN ANNUAL REPORTS. Promptly and in any event
within 30 days after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) with respect to each of the Federated
Department Stores, Inc. Pension Plan, the Allied Stores Corporation
Retirement Benefit Plan and the R.H. Macy's & Co., Inc. Pension Plan
and any other Plan the "current liability" (as defined in Section
412(l)(7) of the Internal Revenue Code) of which exceeds $50,000,000.
(k) MULTIEMPLOYER PLAN NOTICES. Promptly and in any
event within five Business Days after receipt thereof by any Loan
Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan,
copies of each notice concerning (i) the imposition of Withdrawal
Liability by any such Multiemployer Plan, (ii) the reorganization or
termination, within the meaning of Title IV of ERISA, of any such
Multiemployer Plan or (iii) the amount of liability incurred, or that
may be incurred, by such Loan Party or ERISA Affiliate in connection
with any event described in clause (i) or (ii), if such imposition,
reorganization, termination or amount could be reasonably expected to
result in a material liability of any Loan Party or any ERISA
Affiliate.
(l) LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type
<PAGE> 116
111
described in Section 4.01(j), and promptly after the occurrence
thereof, notice of any adverse change in the status or the financial
effect on any Loan Party or any of its Subsidiaries of the Disclosed
Litigation from that described on Schedule 3.01(g).
(m) SECURITIES REPORTS. Promptly after the sending or
filing thereof, copies of all proxy statements, financial statements
and reports that any Loan Party or any of its Subsidiaries sends to
its stockholders, and copies of all regular, periodic and special
reports, and all registration statements (other than registration
statements on Form S-8), that any Loan Party or any of its
Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may be substituted therefor, or with any
national securities exchange.
(n) AGREEMENT NOTICES. Promptly upon receipt thereof,
copies of all notices, requests and other documents received by any
Loan Party or any of its Subsidiaries under or pursuant to the Merger
Agreement, the Plan of Reorganization or any Material Contract
(including, without limitation, any indenture, loan or credit or
similar agreement) regarding or related to any breach or default by
any party thereto or any other event that could materially impair the
value of the interests or the rights of any Loan Party or otherwise
have a Material Adverse Effect and copies of any amendment,
modification or waiver of any provision of any Related Document or any
indenture, loan or credit or similar agreement that adversely affects
the rights or interests of the Administrative Agent or any Lender
Party or that is otherwise material and, from time to time upon
request by the Administrative Agent, such information and reports
regarding the Related Documents and the Material Contracts as the
Administrative Agent may reasonably request.
(o) REVENUE AGENT REPORTS. Within 10 days after receipt,
copies of all Revenue Agent Reports (Internal Revenue Service Form
886), or other written proposals of the Internal Revenue Service, that
propose, determine or otherwise set forth positive adjustments to the
Federal income tax liability of the affiliated group (within the
meaning of Section 1504(a)(1) of the Internal Revenue Code) of which
the Borrower is a member aggregating $10,000,000 or more.
(p) ENVIRONMENTAL CONDITIONS. Promptly after the
occurrence thereof, notice of any condition or occurrence on any
property of any Loan Party or any of its Subsidiaries that results in
a material noncompliance by any Loan Party or any of its Subsidiaries
with any Environmental Law or Environmental Permit or could (i) form
the basis of an Environmental Action against any Loan Party or any of
its Subsidiaries or such property that could have a Material Adverse
Effect or (ii) cause any such property to be subject to any
restrictions on ownership, occupancy, use or
<PAGE> 117
112
transferability under any Environmental Law that could have a Material
Adverse Effect.
(q) INSURANCE. Upon request of the Administrative Agent,
a report summarizing the insurance coverage (specifying type, amount
and carrier) in effect for each Loan Party and its Subsidiaries and
containing such additional information as any Lender Party may
reasonably specify.
(r) OTHER INFORMATION. Such other information respecting
the business, condition (financial or otherwise), operations,
performance, properties or prospects of any Loan Party or any of its
Subsidiaries as any Lender Party through the Administrative Agent may
from time to time reasonably request.
SECTION 5.04. FINANCIAL COVENANTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding (and not cash
collateralized or for which a "back-to-back" letter of credit shall not have
been issued pursuant to Section 2.06(b)(iv)) or any Lender Party shall have any
Commitment hereunder, the Borrower will:
(a) LEVERAGE RATIO. Maintain at the end of each fiscal
quarter of the Borrower a Leverage Ratio of not more than the amount
set forth below for each period set forth below:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING IN THE FISCAL RATIO
MONTH OF
<S> <C>
April, 1995 0.55:1
July, 1995 0.55:1
October, 1995 0.56:1
January, 1996 0.49:1
April, 1996 0.51:1
July, 1996 0.51:1
October, 1996 0.52:1
January, 1997 0.47:1
April, 1997 0.48:1
July, 1997 0.48:1
October, 1997 0.49:1
January, 1998 0.44:1
April, 1998 0.44:1
July, 1998 0.44:1
October, 1998 0.45:1
January, 1999
and thereafter 0.40:1
</TABLE>
<PAGE> 118
113
(b) FIXED CHARGE COVERAGE RATIO. During each
Non-Investment Grade Period, maintain at the end of each Measurement
Period a ratio of the sum of (x) Consolidated EBITDA for the
Measurement Period then ended PLUS (y) in the case of any such
Measurement Period ending prior to or on February 3, 1996, the net
increase (if any) in respect of Debt of the Borrower and its
Subsidiaries under the Receivables Financing Facility during such
Measurement Period to the sum of (i) Net Cash Interest for such
Measurement Period PLUS (ii) principal amounts of all Funded Debt
payable (other than (I) Debt refunded or refinanced in accordance with
the terms of the Loan Documents and (II) Debt payable under the May
Note Monetization Facility) PLUS (iii) Cash Capital Expenditures made
PLUS (iv) cash income taxes paid PLUS (v) cash dividends made, in each
case by the Borrower and its Subsidiaries during such Measurement
Period determined in accordance with GAAP of not less than the amount
set forth below for each period set forth below:
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ENDING
IN THE FISCAL MONTH OF RATIO
<S> <C>
April, 1995 0.25:1
July, 1995 0.32:1
October, 1995 0.50:1
January, 1996 1.00:1
April, 1996 1.00:1
July, 1996 1.00:1
October, 1996 1.00:1
January, 1997 1.00:1
April, 1997 1.00:1
July, 1997 1.00:1
October, 1997 1.00:1
January, 1998
and thereafter 1.00:1
</TABLE>
<PAGE> 119
114
(c) INTEREST COVERAGE RATIO. Maintain at the end of each
Measurement Period an Interest Coverage Ratio of not less than the
amount set forth below for each Measurement Period set forth below:
<PAGE> 120
115
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ENDING
IN THE FISCAL MONTH OF RATIO
<S> <C>
April, 1995 1.10:1
July, 1995 1.10:1
October, 1995 1.50:1
January, 1996 2.75:1
April, 1996 2.75:1
July, 1996 2.75:1
October, 1996 2.75:1
January, 1997 3.00:1
April, 1997 3.00:1
July, 1997 3.00:1
October, 1997 3.00:1
January, 1998 3.50:1
April, 1998 3.50:1
July, 1998 3.50:1
October, 1998 3.50:1
January, 1999 3.75:1
April, 1999 3.75:1
July, 1999 3.75:1
October, 1999 3.75:1
January, 2000
and thereafter 4.00:1
</TABLE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following
events ("EVENTS OF DEFAULT") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of
any Advance when the same shall become due and payable or (ii) the
Borrower shall fail to pay any interest on any Advance, or any Loan
Party shall fail to make any other payment under any Loan
<PAGE> 121
116
Document, in each case under this clause (ii) within one Business Day
after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party
(or any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) the Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(e), (f) or (j),
5.02 (other than, with respect to Section 5.02(a), to the extent
described in clause (d)(i) below), 5.03 (except to the extent
described in clause (d)(i) below) or 5.04; or
(d) (i) the Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 5.02(a) (solely with
respect to the imposition of non-consensual Liens) or Section 5.03(b),
(c), (d), (e), (f), (g) or (m) if such failure shall remain unremedied
for 10 days or (ii) any Loan Party shall fail to perform any other
term, covenant or agreement contained in any Loan Document on its part
to be performed or observed if such failure shall remain unremedied
for 20 days after the earlier of the date on which (A) a Responsible
Officer of the Borrower becomes aware of such failure or (B) written
notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender Party; or
(e) any Loan Party or any of its Subsidiaries shall fail
to pay any principal of, premium or interest on or any other amount
payable in respect of any Debt that is outstanding in a principal or
notional amount of at least $30,000,000 (or its equivalent in any
Alternative Currency) either individually or in the aggregate (but
excluding Debt outstanding hereunder) of such Loan Party or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to
any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt or otherwise to cause, or to permit the
holder thereof to cause, such Debt to mature; or any such Debt shall
be declared to be due and payable or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof; or
<PAGE> 122
117
(f) any Loan Party or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against any Loan Party or any of its
Subsidiaries seeking to adjudicate it a 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, or other similar official for it
or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it) that
is being diligently contested by it in good faith, either such
proceeding shall remain undismissed or unstayed for a period of 60
days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur;
or any Loan Party or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this
subsection (f); or
(g) any judgment or order for the payment of money in
excess of $30,000,000 (or its equivalent in any Alternative Currency)
shall be rendered against any Loan Party or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be any
period of 20 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; PROVIDED, HOWEVER, that any such judgment or
order shall only be an Event of Default under this Section 6.01(g) if
and to the extent that the amount of such judgment or order not
covered by a valid and binding policy of insurance between the
defendant and the insurer covering payment thereof exceeds $30,000,000
so long as such insurer, which shall be rated at least "A" by A.M.
Best Company, has been notified of, and has not disputed the claim
made for payment of, the amount of such judgment or order; or
(h) any non-monetary judgment or order shall be rendered
against any Loan Party or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect, and there
shall be any period of 20 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(i) any provision of any Loan Document after delivery
thereof pursuant to Section 3.01 or 5.01(l) shall for any reason cease
to be valid and binding on or
<PAGE> 123
118
enforceable against any Loan Party party to it, or any such Loan Party
shall so state in writing; or
(j) any Collateral Document after delivery thereof
pursuant to Section 3.01 or 5.01(l) shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and perfected
first priority lien on and security interest in the Collateral
purported to be covered thereby; or
(k) (i) any Person or two or more Persons acting in
concert shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), directly or indirectly, of Voting
Stock of the Borrower (or other securities convertible into such
Voting Stock) representing 33-1/3% or more of the combined voting
power of all Voting Stock of the Borrower; or (ii) during any period
of up to 24 consecutive months, commencing before or after the date of
this Agreement, individuals who at the beginning of such 24-month
period were directors of the Borrower shall cease for any reason
(other than due to death, disability or previously established
mandatory retirement) to constitute a majority of the board of
directors of the Borrower; or (iii) any Person or two or more Persons
acting in concert shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of the power to
exercise, directly or indirectly, control over the management and
policies of the Borrower; or
(l) any ERISA Event shall have occurred with respect to a
Plan and the sum (determined as of the date of occurrence of such
ERISA Event) of the Insufficiency of such Plan and the Insufficiency
of any and all other Plans with respect to which an ERISA Event shall
have occurred and then exist (or the liability of the Loan Parties and
the ERISA Affiliates related to such ERISA Event) exceeds $30,000,000;
or
(m) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that,
when aggregated with all other amounts required to be paid to
Multiemployer Plans by the Loan Parties and the ERISA Affiliates as
Withdrawal Liability (determined as of the date of such notification),
exceeds $30,000,000 or requires payments exceeding $5,000,000 per
annum; or
(n) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, and as a result of such
reorganization or termination the aggregate annual contributions of
the Loan Parties
<PAGE> 124
119
and the ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the plan years
of such Multiemployer Plans immediately preceding the plan year in
which such reorganization or termination occurs by an amount exceeding
$5,000,000;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by an Issuing Bank or a Working Capital Lender
pursuant to Section 2.14(c) and Swing Line Advances by a Working Capital Lender
pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, and (ii)
shall at the request, or may with the consent, of the Required Lenders, by
notice to the Borrower, declare the Notes, all interest thereon and all other
amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; PROVIDED, HOWEVER, that in the event of an
actual or deemed entry of an order for relief with respect to any Loan Party or
any of its Subsidiaries under the Bankruptcy Code, (x) the obligation of each
Lender to make Advances (other than Letter of Credit Advances by an Issuing
Bank or a Working Capital Lender pursuant to Section 2.14(c) and Swing Line
Advances by a Working Capital Lender pursuant to Section 2.02(b)) and of each
Issuing Bank to issue Letters of Credit shall automatically be terminated and
(y) the Notes, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.
SECTION 6.02. ACTIONS IN RESPECT OF THE LETTERS OF CREDIT
UPON DEFAULT. If any Event of Default shall have occurred and be continuing,
the Administrative Agent may, irrespective of whether it is taking any of the
actions described in Section 6.01 or otherwise, make demand upon the Borrower
to, and forthwith upon such demand the Borrower will, pay to the Administrative
Agent on behalf of the Lender Parties in same day funds at the Administrative
Agent's office designated in such demand, for deposit in the L/C Cash
Collateral Account, an amount equal to the aggregate Available Amount of all
Letters of Credit then outstanding. If at any time the Administrative Agent
determines that any funds held in the L/C Cash Collateral Account are subject
to any right or claim of any Person other than the Administrative Agent and the
Lender Parties or that the total amount of such funds is less than the
aggregate Available Amount of all Letters of Credit, the Borrower will,
forthwith upon demand by the Administrative Agent, pay to the Administrative
Agent, as additional funds to be deposited and held in the L/C Cash Collateral
Account, an amount equal to the
<PAGE> 125
120
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.
ARTICLE VII
THE ADMINISTRATIVE AGENT AND THE AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender (in its
capacities as a Lender and a potential Hedge Bank) and each Issuing Bank hereby
appoints and authorizes the Administrative Agent and the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement and the other Loan Documents as are delegated to the
Administrative Agent and the Agent by the terms hereof and thereof, together
with such powers and discretion as are reasonably incidental thereto. As to
any matters not expressly provided for by the Loan Documents (including,
without limitation, enforcement or collection of the Notes), neither the
Administrative Agent nor the Agent shall be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lender Parties and all holders of Notes; PROVIDED, HOWEVER, that
neither the Administrative Agent nor the Agent shall be required to take any
action that exposes the Administrative Agent or the Agent to personal liability
or that is contrary to this Agreement or applicable law. Each of the
Administrative Agent and the Agent agrees to give to each Lender and each
Issuing Bank prompt notice of each notice given to it by the Borrower pursuant
to the terms of this Agreement.
SECTION 7.02. ADMINISTRATIVE AGENT'S AND AGENT'S RELIANCE,
ETC. Neither the Administrative Agent nor the Agent nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Administrative Agent and the Agent: (a) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (b) may consult with legal counsel (including counsel for any
Loan Party), independent public accountants and other experts selected by it
with reasonable care and shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
Party and shall not be responsible to any Lender Party for any
<PAGE> 126
121
statements, warranties or representations (whether written or oral) made in or
in connection with the Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions of any Loan Document on the part of any Loan Party or
to inspect the property (including the books and records) of any Loan Party;
(e) shall not be responsible to any Lender Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or
the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy, cable or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 7.03. CITIBANK, CHEMICAL AND AFFILIATES. With
respect to its Commitments, the Advances made by it and the Notes issued to it,
each of Citibank and Chemical shall have the same rights and powers under the
Loan Documents as any other Lender and may exercise the same as though it were
not the Administrative Agent or the Agent, as the case may be; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include each
of Citibank and Chemical in its individual capacity. Citibank and Chemical and
their respective affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if Citibank and Chemical were not the
Administrative Agent and the Agent, respectively, and without any duty to
account therefor to the Lender Parties.
SECTION 7.04. LENDER PARTY CREDIT DECISION. Each Lender
Party acknowledges that it has, independently and without reliance upon the
Administrative Agent, the Agent or any Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Lender Party also acknowledges that it will,
independently and without reliance upon the Administrative Agent, the Agent or
any Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. INDEMNIFICATION. (a) Each Lender (other than
the Designated Bidders) severally agrees to indemnify the Administrative Agent
and the Agent (to the extent not promptly reimbursed by the Borrower) from and
against such Lender's ratable share (determined as provided below) of any and
all liabilities, obligations, losses, damages,
<PAGE> 127
122
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Administrative Agent or the Agent in any way relating to or arising
out of the Loan Documents or any action taken or omitted by the Administrative
Agent or the Agent under the Loan Documents; PROVIDED, HOWEVER, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's or the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender (other than the Designated Bidders) agrees to reimburse the
Administrative Agent and the Agent promptly upon demand for its ratable share
of any reasonable costs and expenses (including, without limitation, reasonable
fees and expenses of counsel) payable by the Borrower under Section 8.04, to
the extent that the Administrative Agent or the Agent is not promptly
reimbursed for such costs and expenses by the Borrower. For purposes of this
Section 7.05(a), the Lenders' respective ratable shares of any amount shall be
determined, at any time, according to the sum of (a) the aggregate principal
amount of the Regular Advances outstanding at such time and owing to the
respective Lenders, (b) their respective Pro Rata Shares of the aggregate
Available Amount of all Letters of Credit outstanding at such time, (c) the
aggregate unused portions of their respective Term Commitments at such time and
(d) their respective Unused Working Capital Commitments at such time. In the
event that any Defaulted Advance shall be owing by any Defaulting Lender at any
time, such Lender's Commitment with respect to the Facility under which such
Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this Section 7.05(a) to the extent of the amount of such
Defaulted Advance. The failure of any Lender to reimburse the Administrative
Agent or the Agent promptly upon demand for its ratable share of any amount
required to be paid by the Lenders to the Administrative Agent or the Agent as
provided herein shall not relieve any other Lender of its obligation hereunder
to reimburse the Administrative Agent or the Agent for its ratable share of
such amount, but no Lender shall be responsible for the failure of any other
Lender to reimburse the Administrative Agent or the Agent for such other
Lender's ratable share of such amount. Without prejudice to the survival of
any other agreement of any Lender hereunder, the agreement and obligations of
each Lender contained in this Section 7.05(a) shall survive the payment in full
of principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
(b) Each Lender severally agrees to indemnify each
Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and
against such Lender's ratable share (determined as provided below) of any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against such Issuing Bank in any
way relating to or arising out of the Loan Documents or any action taken or
omitted by such Issuing Bank under the Loan Documents; PROVIDED, HOWEVER, that
no Lender shall be liable for
<PAGE> 128
123
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Issuing Bank's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse such Issuing Bank promptly upon
demand for its ratable share of any reasonable costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) payable by the
Borrower under Section 8.04, to the extent that such Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes
of this Section 7.05(b), the Lenders' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Regular Advances outstanding at such time and owing to
the respective Lenders, (b) their respective Pro Rata Shares of the aggregate
Available Amount of all Letters of Credit outstanding at such time, (c) the
aggregate unused portions of their respective Term Commitments at such time and
(d) their respective Unused Working Capital Commitments at such time. In the
event that any Defaulted Advance shall be owing by any Defaulting Lender at any
time, such Lender's Commitment with respect to the Facility under which such
Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this Section 7.05(b) to the extent of the amount of such
Defaulted Advance. The failure of any Lender to reimburse such Issuing Bank
promptly upon demand for its ratable share of any amount required to be paid by
the Lenders to such Issuing Bank as provided herein shall not relieve any other
Lender of its obligation hereunder to reimburse such Issuing Bank for its
ratable share of such amount, but no Lender shall be responsible for the
failure of any other Lender to reimburse such Issuing Bank for such other
Lender's ratable share of such amount. Without prejudice to the survival of
any other agreement of any Lender hereunder, the agreement and obligations of
each Lender contained in this Section 7.05(b) shall survive the payment in full
of principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
SECTION 7.06. SUCCESSOR ADMINISTRATIVE AGENTS. The
Administrative Agent may resign at any time by giving written notice thereof to
the Lenders and the Borrower and may be removed at any time with or without
cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving of notice of resignation or
the Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, which shall be a commercial bank organized
under the laws of the United States or of any State thereof and having a
combined capital and surplus of at least $250,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or desirable, or as the Required
<PAGE> 129
124
Lenders may request, in order to continue the perfection of the Liens granted
or purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 7.07. AGENT. The Agent, in its capacity as Agent,
assumes no responsibility or obligation hereunder for servicing, syndication,
enforcement or collection of the Debt resulting from the Advances, nor any
duties as agent hereunder for the Lender Parties. The title of "Agent" implies
no fiduciary responsibility on the part of the Agent, in its capacity as Agent,
to the Administrative Agent or any Lender Party and the use of such title does
not impose on the Agent any duties or obligations greater than those of any
Lender Party or entitle the Agent to any rights other than those to which any
other Lender Party is entitled.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the Notes (other than the Competitive Bid Notes)
or any other Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed (or, in the case of the Security Agreement, consented to) by the
Required Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that (a) no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Designated Bidders and other than any
Lender that is, at such time, a Defaulting Lender), do any of the following at
any time: (i) waive any of the conditions specified in Section 3.01 or, in the
case of the Initial Extension of Credit, Section 3.02, (ii) change the number
of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid
principal amount of the Advances or (z) the aggregate Available Amount of
outstanding Letters of Credit that, in each case, shall be required for the
Lenders or any of them to take any action hereunder, (iii) release all or
substantially all of the Collateral in any transaction or any series of related
transactions or permit the creation, incurrence, assumption or existence of any
Lien on all or substantially all of the Collateral in any transaction or any
series of related transactions to secure any Obligations other than Obligations
owing to the Lender Parties, the Hedge Banks, the Agent and the Administrative
Agent under the Loan Documents and other
<PAGE> 130
125
than Debt owing to any other Person, PROVIDED that, in the case of any Lien on
all or substantially all of the Collateral to secure Debt owing to any other
Person, (A) the Borrower shall, on the date such Debt shall be incurred or
issued, prepay the Advances pursuant to, and in the order of priority set forth
in, Section 2.06(b)(ii) in an aggregate principal amount equal to the amount of
such Net Cash Proceeds to the extent required to do so under Section 5.02(b)
and (B) the Required Lenders shall otherwise permit the creation, incurrence,
assumption or existence of such Lien and, to the extent not otherwise permitted
under Section 5.02(b), of such Debt or (iv) amend this Section 8.01 and (b) no
amendment, waiver or consent shall, unless in writing and signed by the
Required Lenders and each Lender that has a Commitment under the Term Facility
or the Working Capital Facility if affected by such amendment, waiver or
consent, (i) increase the Commitments of such Lender or subject such Lender to
any additional obligations, (ii) reduce the principal of, or interest on, the
Notes (other than the Competitive Bid Notes) held by such Lender or any fees or
other amounts payable hereunder to such Lender, (iii) postpone any date fixed
for any payment of principal of, or interest on, the Notes (other than the
Competitive Bid Notes) held by such Lender or any fees or other amounts payable
hereunder to such Lender or (iv) change the order of application of any
prepayment set forth in Section 2.06 in any manner that materially affects such
Lender; PROVIDED FURTHER that no amendment, waiver or consent shall, unless in
writing and signed by each Swing Line Bank or each Issuing Bank, as the case
may be, in addition to the Lenders required above to take such action, affect
the rights or obligations of the Swing Line Banks or of the Issuing Banks, as
the case may be, under this Agreement; and PROVIDED FURTHER that no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above to take such action, affect the
rights or duties of the Administrative Agent under this Agreement or any Note.
SECTION 8.02. NOTICES, ETC. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered, if to the Borrower, at its address at 7 West
Seventh Street, Cincinnati, Ohio 45202, Attention: Chief Financial Officer,
with a copy to General Counsel; if to any Initial Lender or any initial Issuing
Bank, at its Domestic Lending Office specified opposite its name on Schedule I
hereto; if to any other Lender or Issuing Bank, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a
Lender; and if to the Administrative Agent, at its address at 1 Court Square,
7th Floor, Zone 1, Long Island City, New York 11120, Attention: Ed Vowinkel,
Telephone No. (718) 248-4523, Telecopier No. (718) 248-4844/45; or, as to the
Borrower or the Administrative Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Administrative Agent. All such
notices and communications shall, (a) when mailed, be effective three Business
Days after the same is deposited in the mails, (b) when mailed for next day
delivery
<PAGE> 131
126
by a reputable freight company or reputable overnight courier service, be
effective one Business Day thereafter, and (c) when sent by telegraph,
telecopier or telex, be effective when the same is confirmed by telephone,
telecopier confirmation or return telecopy or telex answerback, respectively,
except that notices and communications to the Administrative Agent pursuant to
Article II, III or VII shall not be effective until received by the
Administrative Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of
any Lender or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder or under any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.04. COSTS AND EXPENSES. (a) The Borrower agrees
to pay on demand (i) all costs and expenses of the Administrative Agent and the
Agent in connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without
limitation, (A) all due diligence, collateral review, syndication,
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and expenses and (B) the reasonable fees and
expenses of counsel for the Administrative Agent and the Agent with respect
thereto, with respect to advising the Administrative Agent and the Agent as to
their respective rights and responsibilities, or the perfection, protection or
preservation of rights or interests, under the Loan Documents, with respect to
negotiations with any Loan Party or with other creditors of any Loan Party or
any of its Subsidiaries arising out of any Default or any events or
circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditors' rights generally
and any proceeding ancillary thereto directly involving or relating to the
Borrower or any of its Subsidiaries) and (ii) all costs and expenses of the
Administrative Agent, the Agent and the Lender Parties in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation,
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally or otherwise (including, without limitation, the reasonable
fees and expenses of counsel for the Administrative Agent, the Agent and each
Lender Party with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless
the Administrative Agent, the Agent, each Lender Party and each of their
Affiliates and their officers, directors, employees, agents and advisors (each,
an "INDEMNIFIED PARTY") from and against any and all
<PAGE> 132
127
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with (i) the Facilities, the actual or proposed use
of the Advances, the Loan Documents or any of the transactions contemplated
thereby, including, without limitation, any acquisition or proposed acquisition
(including, without limitation, the Merger and any of the other transactions
contemplated hereby) by Federated or any of its Subsidiaries or Affiliates of
all or any portion of the stock or substantially all the assets of the Company
or any of its Subsidiaries or (ii) the actual or alleged presence of Hazardous
Materials on any property of any Loan Party or any of its Subsidiaries or any
Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. The Borrower also agrees that no Indemnified Party shall
have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Borrower or any of its security holders or creditors arising
out of, related to or in connection with the Facilities, the actual or proposed
use of the Advances, the Loan Documents or any of the transactions contemplated
thereby, including, without limitation, the Merger and the Reorganization,
except (a) to the extent that such liability is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct and (b) for direct,
as opposed to consequential, damages for breach of the Indemnified Parties'
obligations hereunder.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or LIBO Rate Advance is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or Conversion pursuant to Section
2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason, the Borrower shall, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by any Lender to fund or maintain such Advance.
<PAGE> 133
128
(d) If any Loan Party fails to pay when due any costs,
expenses or other amounts payable by it under any Loan Document, including,
without limitation, fees and expenses of counsel and indemnities, such amount
may be paid on behalf of such Loan Party by the Administrative Agent or any
Lender, in its sole discretion.
(e) Without prejudice to the survival of any other
agreement of any Loan Party hereunder or under any other Loan Document, the
agreements and obligations of the Borrower contained in Sections 2.10 and 2.12
and this Section 8.04 shall survive the payment in full of principal, interest
and all other amounts payable hereunder and under any of the other Loan
Documents.
SECTION 8.05. RIGHT OF SET-OFF. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and otherwise apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender Party or such Affiliate to or for
the credit or the account of the Borrower against any and all of the
Obligations of the Borrower now or hereafter existing under this Agreement and
the Note or Notes held by such Lender, irrespective of whether such Lender
Party shall have made any demand under this Agreement or such Note or Notes and
although such obligations may be unmatured. Each Lender Party agrees promptly
to notify the Borrower after any such set-off and application; PROVIDED,
HOWEVER, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender Party and its
Affiliates under this Section 8.05 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Lender Party
and its Affiliates may have.
SECTION 8.06. BINDING EFFECT. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Initial Lender and each initial Issuing Bank that such Initial Lender
and such Issuing Bank has executed it and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each Lender
Party and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lender Parties.
SECTION 8.07. ASSIGNMENTS, DESIGNATIONS AND PARTICIPATIONS.
(a) Each Lender (other than the Designated Bidders) may and, if demanded by
the Borrower pursuant to
<PAGE> 134
129
Section 2.10(a) or 2.16 upon at least ten Business Days' notice to such Lender
and the Administrative Agent, will assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment or Commitments, the
Regular Advances owing to it and the Note or Notes held by it); PROVIDED,
HOWEVER, that (i) each such assignment shall be of a uniform, and not a
varying, percentage of all rights and obligations under and in respect of one
or more Facilities (other than any right to make Competitive Bid Advances,
Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, (iii) each such assignment shall be to an Eligible Assignee,
(iv) each such assignment made as a result of a demand by the Borrower pursuant
to this Section 8.07(a) shall be arranged by the Borrower after consultation
with the Administrative Agent and shall be either an assignment of all of the
rights and obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made concurrently with
another such assignment or other such assignments that together cover all of
the rights and obligations of the assigning Lender under this Agreement, (v) no
Lender shall be obligated to make any such assignment as a result of a demand
by the Borrower pursuant to this Section 8.07(a) unless and until such Lender
shall have received one or more payments from either the Borrower or one or
more Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Regular Advances owing to such Lender,
together with accrued interest thereon to the date of payment of such principal
amount and all other amounts payable to such Lender under this Agreement, and
(vi) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $2,000 for each Assignment
and Acceptance between a Lender and its Affiliate or another Lender or $3,000
for each other Assignment and Acceptance.
(b) Each Issuing Bank may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under the undrawn
portion of its Letter of Credit Commitment at any time; PROVIDED, HOWEVER, that
(i) except in the case of an assignment to a Person that immediately prior to
such assignment was an Issuing Bank or an assignment of all of an Issuing
Bank's rights and obligations under this Agreement, the amount of the Letter of
Credit Commitment of the assigning Issuing Bank being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than $10,000,000 and
shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each
such assignment shall be to an Eligible Assignee, and
<PAGE> 135
130
(iii) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee
(unless paid pursuant to Section 8.07(a)) of $2,000 for each Assignment and
Acceptance between an Issuing Bank and its Affiliate or another Issuing Bank or
$3,000 for each other Assignment and Acceptance.
(c) Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
or Issuing Bank, as the case may be, hereunder and (y) the Lender or Issuing
Bank assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's or Issuing Bank's rights and obligations under
this Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and
Acceptance, the Lender or Issuing Bank assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender or Issuing Bank, as the case may be, makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any lien
or security interest created or purported to be created under or in connection
with, this Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; (ii) such assigning Lender or
Issuing Bank, as the case may be, makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any other Loan Party or the performance or observance by any Loan
Party of any of its obligations under any Loan Document or any other instrument
or document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such
assigning Lender or Issuing Bank, as the case may be, or any other Lender or
Issuing Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is
an Eligible Assignee
<PAGE> 136
131
(subject to obtaining the approvals required, if any, from the Borrower, the
Administrative Agent and the Agent); (vi) such assignee appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Loan Documents as are delegated
to the Administrative Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender
or Issuing Bank, as the case may be.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender or Issuing Bank and an assignee, together with
any Note or Notes subject to such assignment, the Administrative Agent shall,
if such Assignment and Acceptance has been completed and is in substantially
the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrower. Such Assignment and Acceptance shall not
become effective until the information contained therein is recorded in the
Register by the Administrative Agent. In the case of any assignment by a
Lender, within five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for the surrendered Note or Notes a new Note to the order of
such Eligible Assignee in an amount equal to the Commitment assumed by it under
a Facility pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment hereunder under such Facility, a new Note to
the order of the assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Note or Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note or
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as
the case may be.
(f) Each Lender (other than the Designated Bidders) may
designate one or more banks or other entities to have a right to make
Competitive Bid Advances as a Lender pursuant to Section 2.03; PROVIDED,
HOWEVER, that (i) no such Lender shall be entitled to make more than two such
designations, (ii) each such Lender making one or more of such designations
shall retain the right to make Competitive Bid Advances as a Lender pursuant to
Section 2.03, (iii) each such designation shall be to a Designated Bidder and
(iv) the parties to each such designation shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, a
Designation Agreement. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Designation
Agreement, the designee thereunder shall be a party hereto with a right to make
Competitive Bid Advances as a Lender pursuant to Section 2.03 and the
obligations related thereto.
<PAGE> 137
132
(g) By executing and delivering a Designation Agreement,
the Lender making the designation thereunder and its designee thereunder
confirm and agree with each other and the other parties hereto as follows: (i)
such Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any other Loan Party or
the performance or observance by any Loan Party of any of its obligations under
any Loan Document or any other instrument or document furnished pursuant
thereto; (iii) such designee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Designation Agreement; (iv) such designee will, independently and without
reliance upon the Administrative Agent, such designating Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such designee confirms that it is a Designated
Bidder; (vi) such designee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such designee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(h) Upon its receipt of a Designation Agreement executed
by a designating Lender and a designee representing that it is a Designated
Bidder, the Administrative Agent shall, if such Designation Agreement has been
completed and is substantially in the form of Exhibit D hereto, (i) accept such
Designation Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower. Such
Designation Agreement shall not become effective until the information
contained therein is recorded in the Register by the Administrative Agent.
(i) The Administrative Agent, acting for this purpose as
the agent of the Borrower, shall maintain at its address referred to in Section
8.02 a copy of each Assignment and Acceptance and each Designation Agreement
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lender Parties and, with respect to Lender Parties other
than Designated Bidders, the Commitment under each Facility of, and principal
amount of, and interest on, the Advances owing to, each Lender Party from time
to
<PAGE> 138
133
time (the "REGISTER"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties shall treat each Person whose name
is recorded in the Register as a Lender Party hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender Party at any reasonable time and from time to time upon
reasonable prior notice.
(j) Each Lender may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Lender's
obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
(v) no participant under any such participation shall have any right to approve
any amendment or waiver of any provision of any Loan Document, or any consent
to any departure by any Loan Party therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral.
(k) Any Lender Party may, in connection with any
assignment, designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender Party by or on behalf of the
Borrower; PROVIDED, HOWEVER, that, prior to any such disclosure, the assignee,
designee or participant or proposed assignee, designee or participant shall
agree to preserve the confidentiality of any Confidential Information received
by it from such Lender Party.
(l) Notwithstanding any other provision set forth in this
Agreement, any Lender Party may at any time create a security interest in all
or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and any Note or Notes held by it) in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
<PAGE> 139
134
SECTION 8.08. 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 taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.09. NO LIABILITY OF THE ISSUING BANKS. The
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letter of
Credit. Neither any Issuing Bank nor any of its officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of
Credit or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by such
Issuing Bank against presentation of documents that do not comply with the
terms of a Letter of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit, unless such documents
are substantially different from the applicable form specified by such Letter
of Credit; or (d) any other circumstances whatsoever in making or failing to
make payment under any Letter of Credit, EXCEPT that the Borrower shall have a
claim against such Issuing Bank, and such Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages suffered
by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) such Issuing Bank's willful failure to make lawful payment under
a Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. RELEASE OF COLLATERAL. As soon as practicable
after the Release Date, the Administrative Agent shall, at the Borrower's
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence the release of the Collateral from the
liens and security interest created under the Collateral Documents.
SECTION 8.11. CONFIDENTIALITY. None of the Administrative
Agent, the Agent or any Lender Party shall disclose any Confidential
Information to any Person without the written consent of the Borrower, other
than (a) to the Administrative Agent's, the Agent's or such Lender Party's
Affiliates and their officers, directors, employees, agents, representatives
and advisors and to actual or prospective Eligible Assignees and participants,
and that, in each
<PAGE> 140
135
case, are advised of the confidential nature of such Confidential Information,
(b) as required by any law, rule or regulation or judicial process, (c) to any
rating agency when required by it in connection with the Competitive Bid
Advances made by, and the rating of, any Designated Bidder, provided that,
prior to any such disclosure, such rating agency shall undertake to preserve
the confidentiality of any Confidential Information received by it from such
Lender and (d) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.12. JUDGMENT. (a) If for the purposes of
obtaining judgment in any court it is necessary to convert a sum due hereunder
or under the Notes in any currency (the "ORIGINAL CURRENCY") into another
currency (the "OTHER CURRENCY") the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that
at which in accordance with normal banking procedures the Administrative Agent
could purchase the Original Currency with the Other Currency at 9:00 A.M. (New
York City time) on the first Business Day preceding that on which final
judgment is given.
(b) The obligation of the Borrower in respect of any sum
due in the Original Currency from it to any Lender or the Administrative Agent
hereunder shall, notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Business Day following receipt by
such Lender Party or the Administrative Agent (as the case may be) of any sum
adjudged to be so due in such Other Currency such Lender Party or the
Administrative Agent (as the case may be) may in accordance with normal banking
procedures purchase Dollars with such Other Currency; if the amount of the
Original Currency so purchased is less than the sum originally due to such
Lender Party or the Administrative Agent (as the case may be) in the Original
Currency, the Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender Party or the Administrative Agent (as
the case may be) against such loss, and if the amount of the Original Currency
so purchased exceeds the sum originally due to any Lender Party or the
Administrative Agent (as the case may be) in the Original Currency, such Lender
Party or the Administrative Agent (as the case may be) agrees to remit to the
Borrower such excess.
SECTION 8.13. JURISDICTION, ETC. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any of the other Loan Documents to which it is a
party, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such New York State Court or, to the extent permitted by law, in such federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing
<PAGE> 141
136
in this Agreement shall affect any right that any party may otherwise have to
bring any action or proceeding relating to this Agreement or any of the other
Loan Documents in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any of the other Loan Documents to which it is a party in any New York State or
federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
SECTION 8.14. GOVERNING LAW. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State
of New York.
SECTION 8.15. WAIVER OF JURY TRIAL. Each of the Borrower,
the Administrative Agent, the Lenders and the Issuing Banks hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
any of the Loan Documents, the Advances or the actions of the Administrative
Agent, any Lender or any Issuing Bank in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FEDERATED DEPARTMENT
STORES, INC.
By /s/ Dennis J. Broderick
-----------------------------------
Title: Senior Vice President,
General Counsel and Secretary
CITIBANK, N.A.,
as Administrative Agent
By /s/ Paul Trefrey
-----------------------------------
Title: Vice President
<PAGE> 142
137
CHEMICAL BANK,
as Agent
By /s/ William Rindfuss
------------------------------
Title: Vice President
CITICORP SECURITIES, INC.,
as Arranger
By /s/ Paul Trefrey
------------------------------
Title: Vice President
CHEMICAL SECURITIES INC.,
as Co-Arranger
By /s/ Kurt C. Jomo
------------------------------
Title: Managing Directory
<PAGE> 143
138
INITIAL LENDERS
---------------
CITIBANK, N.A.
By /s/ Paul Trefrey
-------------------------
Title: Vice President
CHEMICAL BANK
By /s/ William Rindfuss
-------------------------
Title: Vice President
<PAGE> 144
139
ALLIED IRISH BANKS, P.L.C.
By /s/ Marcia Meeker
-----------------------
Title: V. P.
By /s/
-----------------------
Title: S. V. P.
ARAB BANK PLC, GRAND CAYMAN
By /s/ Peter Boyadjian
-----------------------
Title: V. P.
THE ASAHI BANK, LTD.
By /s/ Mr. Junichi Yamada
-----------------------
Title: Senior Deputy
General Manager
BANK OF AMERICA ILLINOIS
By /s/ Adam Balbach
-----------------------
Title: Vice President
BANK OF MONTREAL
By /s/ D. Bruce Thomsen
-----------------------
Title: Director
THE BANK OF NEW YORK
<PAGE> 145
140
By /s/ Paula M. DiPonzio
---------------------------
Title: Vice President
BANK ONE, COLUMBUS, N.A.
By /s/ Wendy C. Mayhew
---------------------------
Title:
BANQUE PARIBAS
By /s/ John J. McCormick
---------------------------
Title: Assistant Vice
President
By /s/ Stan Berkman
---------------------------
Title: Senior V. P.
BERLINER HANDELS-UND
FRANKFURTER BANK
By /s/ John Sykes /s/ Contos
---------------------------
Title: AVP VP
CAISSE NATIONALE DE CREDIT
AGRICOLE
By /s/
---------------------------
Title: First V. P.
THE CHASE MANHATTAN BANK, N.A.
By /s/ Ellen Gertzog
---------------------------
<PAGE> 146
141
Title: Vice President
COMERICA BANK
By /s/ Hugh G. Porter
-----------------------------------------
Title: Vice President
COMMERZBANK AKTIENGE SELLSCHAFT,
GRAND CAYMAN BRANCH
By /s/ Basu /s/ Mark D.Monson
-----------------------------------------
Title: First Vice Vice
President President
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By /s/ W. Michael George
-----------------------------------------
Title: Authorized Signature
CREDIT SUISSE
By /s/ Christopher Eldin /s/ Daniela E. Hess
-----------------------------------------
Title: Member of Senior Associate
Management
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By /s/ Jeffrey N. Wieser /s/ Gregory M. Hill
-------------------------------------------
Title: Director Vice President
<PAGE> 147
142
THE FIFTH THIRD BANK
By /s/ Timothy Elsbrock
------------------------------
Title: A. V. P.
THE FIRST NATIONAL BANK OF
BOSTON
By /s/ Rod Guinn
------------------------------
Title: Vice President
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ Paul E. Rigby
------------------------------
Title: Vice President
THE FIRST NATIONAL BANK
OF MARYLAND
By /s/ Brooks W. Thropp
------------------------------
Title: Vice President
FLEET BANK OF MASSACHUSETTS, N.A.
By /s/ Maryann S. Smith
------------------------------
Title: Vice President
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
<PAGE> 148
143
By /s/ Katsunori Nozawa
---------------------------
Title: Vice President and
Manager
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/
---------------------------
Title: Senior Vice President
and Senior Manager
MELLON BANK, N.A.
By /s/ Gary J. Gegick
---------------------------
Title: Vice President
NATIONSBANK OF
SOUTH CAROLINA, N.A.
By /s/
---------------------------
Title: Assistant Vice
President
THE NIPPON CREDIT BANK, LTD.
By /s/ Lori Ravit
---------------------------
Title: Assistant Vice
President
PNC BANK, OHIO, NATIONAL
ASSOCIATION
By /s/ David Melin
---------------------------
Title: Commercial Banking
Officer
<PAGE> 149
144
THE SANWA BANK LIMITED,
NEW YORK BRANCH
By /s/ Kabota
------------------------
Title: Vice President
SHAWMUT BANK, N.A.
By /s/ Richard M. Seufert
------------------------
Title: Vice President
SOCIETE GENERALE
By /s/ Seth Asofsky
------------------------
Title: Vice President
SOCIETY NATIONAL BANK
By /s/ John Langenderfer
------------------------
Title: Vice President
STAR BANK, N.A.
By /s/ Nancy J. Cracolice
------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Yoshinori Kawamura
------------------------
Title: Joint General Manager
<PAGE> 150
145
THE SUMITOMO TRUST & BANKING
CO., LTD. NEW YORK BRANCH
By /s/
---------------------------
Title: Deputy General
Manager
UNION BANK OF FINLAND, LTD.
GRAND CAYMAN BRANCH
By /s/
---------------------------
Title: Senior Vice
President
By /s/ Eric I. Mann
---------------------------
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By /s/
---------------------------
Title: S. V. P.
<PAGE> 1
Exhibit 10.4.1
SUPPLEMENTAL AGREEMENT TO SENIOR
CONVERTIBLE DISCOUNT NOTE AGREEMENT
--------------------------------------
This Supplemental Agreement to Senior Convertible Discount
Note Agreement dated as of December 19, 1994 (this "Agreement") is made by
Federated Department Stores, Inc., a Delaware corporation which is the
surviving entity (the "Combined Company") following a merger of Federated
Department Stores, Inc. ("Federated") into R. H. Macy & Co., Inc. ("Macy"),
in favor of the Holders of the Notes (as such terms are defined in the Senior
Convertible Discount Note Agreement dated as of February 5, 1992 as heretofore
amended, waived or otherwise modified, the "Convertible Note Agreement") among
Federated, the financial institutions named therein, Citibank, N.A., as
Convertible Note Agent, and The Sumitomo Bank Limited, New York Branch, as
Convertible Note Co-Agent).
PRELIMINARY STATEMENTS:
- - -----------------------
A. In a merger (the "Merger") that satisfies the conditions of
Section 4.1 of the Convertible Note Agreement, Federated merged with and into
Macy pursuant to and in the manner described in the Disclosure Statement of
R.H. Macy & Co., Inc. and Certain of Its Subsidiaries dated, and filed with
the United States Bankruptcy Court for the Southern District of New York on,
August 31, 1994.
B. Pursuant to the terms of the Merger, holders of the Common
Stock of Federated received one share of common stock of the Combined Company
for each share of Common Stock held immediately prior to the consummation of
the Merger (the "Effective Time of Merger").
C. Pursuant to Section 9.5 of the Convertible Note Agreement, the
Combined Company is required to execute and deliver to Holders of the Notes
this Supplemental Agreement, in a form satisfactory to the Majority Holders.
D. In consideration of the above premises and to comply with
Section 9.5 of the Convertible Note Agreement, the Combined Company hereby
agrees as follows:
Section 1. DEFINED TERMS. Each capitalized term used and not
otherwise defined herein has the meaning assigned such term in the Convertible
Note Agreement.
Section 2. AMENDMENT TO CONVERTIBLE NOTE AGREEMENT. Simultaneously
with the Effective Time of Merger, each reference to the "Company" in the
Convertible Note Agreement will be deemed to refer to the "Combined Company".
Section 3. GOVERNING LAW; SEVERABILITY. This Agreement will be
governed by, and construed in accordance with, the laws of the State of New
York without regard to the principles thereof relating to conflict of laws.
Wherever possible, each provision of this Agreement will be
<PAGE> 2
Page 2
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement 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 Agreement.
Section 4. RATIFICATION. The Convertible Note Agreement as hereby
supplemented is in all respects ratified and confirmed, and all of the rights
and powers created thereby or thereunder shall be and remain in full force and
effect.
Section 5. SECTION TITLES. The Section titles contained in this
Agreement are and will be without substantive meaning or content of any kind
whatsoever and shall not effect the construction of this Agreement.
Section 6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Combined Company and its successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be executed by its duly authorized officer as of the data first
above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
------------------------------
Name: Dennis J. Broderick
Titles: Senior Vice President,
Secretary and General Counsel
<PAGE> 1
Exhibit 10.7.1
February 28, 1995
To: PNC Bank, Ohio, National Association
as Agent for Loan Agreement
RE: Request for Amendment #1 to the Guaranty Agreement
Please refer to the Guaranty Agreement dated as of May 26, 1994 (as
heretofore amended, waived, or otherwise modified, the "Guaranty") among
Federated Department Stores, Inc., the Banks party to the Loan Agreement and
PNC Bank, Ohio, National Association as Agent for the Banks ("PNC").
Background
- - ----------
On December 19, 1994 Federated Department Stores, Inc. merged with
R.H. Macy & Co., Inc., with the surviving corporation being renamed Federated
Department Stores, Inc. ("Federated"). At the time of the merger, Federated
entered into a $2,800,000,000 Credit Agreement dated as of December 19, 1994
with the Initial Lenders named therein and Citibank, N.A. as Administrative
Agent, Chemical Bank as Agent, Citicorp Securities, Inc. as Arranger and
Chemical Securities Inc. as Co-Arranger (the "Credit Agreement"). The Credit
Agreement has financial covenants which Federated must comply with. The
Guaranty has two financial covenants, Tangible Net Worth and Interest Coverage
Ratio, which relate to the financial structure of Federated Department Stores,
Inc. before the merger. By this Amendment, we are requesting that the
financial covenants in the Guaranty conform to the Leverage Ratio and Interest
Coverage Ratio as defined in the Credit Agreement.
Amendment
- - ---------
Section 4.04 of the Guaranty is hereby deleted in its entirety and
replaced with the following:
"Section 4.04 FINANCIAL COVENANTS. During any time that the
Bank Indebtedness is outstanding, the Guarantor shall comply with the
financial covenants as defined and detailed in the $2,800,000,000
Credit Agreement dated as of December 19, 1994 with the Initial
Lenders named therein and Citibank, N.A. as Administrative Agent,
Chemical Bank as Agent, Citicorp Securities, Inc. as Arranger and
Chemical Securities Inc. as Co-Arranger (the "Credit Agreement") in
Section 5.04 (a) titled "Leverage Ratio" and Section 5.04 (c) titled
"Interest Coverage Ratio." The related terms and definitions in the
Credit Agreement are hereby incorporated by reference into the
Guaranty."
<PAGE> 2
page 2
Except as specifically provided herein, the Guaranty shall remain in
full force and effect. Notwithstanding anything in this letter amendment #1 to
the contrary, no waiver of any default under or breach of any provision of, the
Guaranty provided for herein shall be deemed to be a waiver of any subsequent,
similar or different default under, or breach of such provision or any other
provision of, the Guaranty or of any election of remedies available in
connection with any of the foregoing.
Please indicate your consent to this letter amendment #1 by executing
a copy of this letter in the space provided and returning it to Susan Storer at
Federated.
Thanks for your continued support.
Sincerely,
FEDERATED DEPARTMENT STORES, INC.
- * -
By: /s/ Susan P. Storer
-----------------------------------
Susan P. Storer
Operating Vice President
and Assistant Treasurer
Agreed to this 15th
day of March, 1995
PNC Bank, Ohio, National Association
- * -
By: /s/ David C. Melin
------------------------------------
Title: Commercial Banking Officer
-----------------------------------
<PAGE> 1
Exhibit 10.8.3
THIRD AMENDMENT
TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
THIS THIRD AMENDMENT DATED AS OF MAY 31, 1994 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 Third
Amendment does not adversely affect in any material respect the interests of
the Certificateholders.
3. The Pooling and Servicing Agreement, as amended by this Third
Amendment shall continue in full force and effect among the parties hereto.
<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.
PRIME RECEIVABLES CORPORATION
By /s/ Susan R. Robinson
------------------------------
Title President
------------------------------
FDS NATIONAL BANK
By /s/ Susan P. Storer
------------------------------
Title Treasurer
------------------------------
CHEMICAL BANK, as Trustee
By /s/ Michael Mattone
------------------------------
Title Trust Officer
------------------------------
<PAGE> 1
Exhibit 10.13.14
FOURTH AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Fourth Amendment to Receivables Purchase Agreement dated as of May
31, 1994 (this "Fourth 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 Fourth 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 Fourth Amendment
shall continue in full force and effect among the parties hereto.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
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 Hoguet
---------------------------------
Title: Treasurer
------------------------------
BLOOMINGDALE'S, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
BURDINES, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
JORDAN MARSH STORES CORPORATION
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
LAZARUS, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
LAZARUS PA, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Karen Hoguet
---------------------------------
Title: Treasurer
------------------------------
2
<PAGE> 3
THE BON, INC.
By: /s/ Karen Hoguet
------------------------------
Title: Treasurer
------------------------------
FDS NATIONAL BANK
Date: 5/31/94 By: /s/ Susan P. Storer
------- ------------------------------
Title: Treasurer
------------------------------
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 5/31/94 By: /s/ Susan R. Robinson
------- ------------------------------
Title: President
------------------------------
3
<PAGE> 4
4th-PRG.
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 May 31, 1994 to Schedule IV of Receivables Purchase
Agreement does not adversely affect in any material respect the interests of
any of the Investor Certificateholders.
Susan P. Storer
-------------------------
FDS National Bank
As Servicer
Date: 5/31/94 Name: Susan P. Storer
------- -------------------
Title: C. E. O.
-------------------
<PAGE> 5
Schedule IV
<TABLE>
<CAPTION>
LIST OF LOCK-BOX ACCOUNTS
-------------------------
<S> <C> <C>
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
PNC Bank, N.A. Lazarus PA, Inc. 100-30967
1 Olive Plaza Attention: Cashier
210 Sixth Avenue 501 Penn Avenue
Pittsburgh, PA 15265 Pittsburgh, PA
15285-0001
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
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 1
Exhibit 10.33
FORM OF
AMENDED AND RESTATED SEVERANCE AGREEMENT
----------------------------------------
This AMENDED AND RESTATED SEVERANCE AGREEMENT, dated as of August 26, 1994
(this "Agreement"), is made and entered by and between FEDERATED DEPARTMENT
STORES, INC., a Delaware corporation (the "Company"), and
________________________ (the "Executive").
RECITALS
--------
A. The Executive is a senior executive or key employee of the Company or one
or more of its Subsidiaries and has made and is expected to continue to make
significant contributions to the profitability, growth, and financial strength
of the Company and its Subsidiaries, taken as a whole;
B. The Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as hereinafter defined)
exists;
C. The Company desires to assure itself of both present and future continuity
of management and desires to establish certain minimum severance benefits for
certain of its senior executive officers and other key employees, including the
Executive, applicable in the event of a Change in Control;
D. The Company desires to ensure that its senior executives and other key
employees are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
E. The Company desires to provide additional inducement for the Executive to
continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS: In addition to terms defined elsewhere herein, the
following terms have the following meanings when used herein with initial
capital letters:
(a) "CHANGE IN CONTROL" means the occurrence during the Term of any of the
following events (other than, for purposes of clauses (i), (ii), and (iv)
below, the Federated/Macy's Merger (as that term is defined in the Amended
Joint Plan of Reorganization of R.H. Macy & Co., Inc. and the Company (the
"Plan")) or any other event provided for in the Federated/Macy's Merger
Agreement (as that term is defined in the Plan) or the Plan):
(i) The Company is merged, consolidated, or reorganized into or with
another corporation or other legal entity, and as a result of or immediately
following such
<PAGE> 2
merger, consolidation, or reorganization less than a majority of the combined
voting power of the then-outstanding securities of such other corporation or
entity immediately after such transaction are held in the aggregate by the
holders of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock") immediately prior to
such transaction;
(ii) The Company sells or otherwise transfers all or substantially all
of its assets to another corporation or other legal entity and, as a result
of or immediately following such sale or transfer, less than a majority of
the combined voting power of the then-outstanding securities of such other
corporation or entity immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock of the Company immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report or item therein), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 30% or more the of the combined voting power of the
Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form, or report or
item therein) that a change in control of the Company has occurred or will
occur in the future pursuant to any then-existing contract or transaction; or
(v) If, during any period of two consecutive years, individuals who
at the beginning of any such period constitute the directors of the
Company cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that for purposes of this clause (v) the following persons
will in all events be deemed to be directors of the Company as of the
beginning of the relevant two-year period: each director who is (A) a
director of the Company immediately after the Federated/Macy's Merger (as
that term is defined in the Plan) or (B) first elected, or first nominated
for election by the Company's stockholders, by a vote of at least two-thirds
of the directors of the Company (or a committee thereof) then still in office
who were directors of the Company at the beginning of the relevant two-year
period (including any person deemed to be a director pursuant to the
immediately preceding clause (A)).
<PAGE> 3
Notwithstanding the foregoing provisions of Section 1(a)(iii) or 1(a)(iv),
unless otherwise determined in a specific case by majority vote of the Board of
Directors of the Company (the "Board"), a "Change in Control" will not be
deemed to have occurred for purposes of Section 1(a)(iii) or 1(a)(iv) solely
because (1) the Company, (2) an entity in which the Company, directly or
indirectly, beneficially owns 50% or more of the voting securities (a
"Subsidiary"), or (3) any employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K, or Schedule 14A (or any successor schedule, form, or
report or item therein) under the Exchange Act disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 30% or otherwise, or
because the Company reports that a change in control of the Company has
occurred or will occur in the future by reason of such beneficial ownership;
(b) "CAUSE" means that, prior to any termination pursuant to Section 3(b),
the Executive shall have committed:
(i) an intentional act of fraud, embezzlement, or theft in connection
with the Executive's duties or in the course of the Executive's employment
with the Company (if applicable) or any Subsidiary;
(ii) intentional wrongful damage to property of the Company or any
Subsidiary;
(iii) intentional wrongful disclosure of secret processes or confidential
information of the Company or any Subsidiary; or
(iv) intentional engagement in any Competing Business;
and any such act shall have been materially harmful to the Company and its
Subsidiaries, taken as a whole. For purposes of this Agreement, no act or
failure to act on the part of the Executive will be deemed "intentional" if it
was due primarily to an error in judgment or negligence, but will be deemed
"intentional" only if done or omitted to be done by the Executive not in good
faith and without reasonable belief that the Executive's act or omission was in
the best interest of the Company and its Subsidiaries, taken as a whole.
Notwithstanding the foregoing, the Executive will not be deemed to have been
terminated for "Cause" hereunder unless and until there has been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the Board then in office at a meeting of the
Board called and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel (if the Executive chooses to have counsel present at such meeting), to
be heard before the Board, finding that, in the good faith opinion of the
Board, the Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing herein will
limit the
<PAGE> 4
right of the Executive or the Executive's beneficiaries to contest the validity
or propriety of any such determination;
(c) "COMPETING BUSINESS" means any investment by the Executive of $100,000
or more in, or the rendering by the Executive of any personal services to, any
business enterprise engaged in the general merchandise department store
business which (i) at the time of determination is substantially similar to the
whole or a substantial part of the business conducted by the Company or any of
its divisions or Subsidiaries or other affiliates, (ii) at the time of
determination is operating a store or stores which, during its or their fiscal
year preceding the determination, had aggregate net sales, including sales in
leased and licensed departments, in excess of $10,000,000, if such store or any
of such stores is or are located in a city or within a radius of 25 miles from
outer limits of a city where the Company, or any of its divisions of
Subsidiaries or other affiliates, is operating a store or stores which, during
its or their fiscal year preceding the determination, had aggregate net sales,
including sales in leased and licensed departments, in excess of $10,000,000,
and (iii) had aggregate net sales at all its locations, including sales in
leased and licensed departments and sales by its divisions and Subsidiaries and
other affiliates, during its fiscal year preceding that in which the Executive
made such an investment therein, or first rendered personal services thereto,
in excess or $100,000,000;
(d) "EMPLOYEE BENEFITS" means the perquisites, benefits, and service credit
for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs, or arrangements in which the
Executive is entitled to participate, including without limitation any stock
option, stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement, and other employee benefit policies, plans, programs, or
arrangements that may now exist or any equivalent successor policies, plans,
programs, or arrangements that may be adopted hereinafter by the Company or any
Subsidiary, providing perquisites, benefits, and service credit for benefits at
least as great in the aggregate as are payable thereunder prior to a Change in
Control;
(e) "SEVERANCE BENEFIT" means an amount equal to (i) the product of (A) two
and (B) the sum of (1) the Executive's annualized base salary rate as of the
date of the first event constituting a Change in Control or, if higher, the
Executive's highest base salary received for any year in the three full
calendar years immediately preceding the first event constituting a Change in
Control and (2) the Executive's targeted annual bonus as of the date of the
first event constituting a Change in Control or, if higher, the Executive's
highest annual bonus received for any year in the three full calendar years
immediately preceding the first event constituting a Change of Control, minus
(ii) the amount of all cash payments actually
<PAGE> 5
received or to be received by the Executive following the Termination Date
which became due by virtue of the Executive's termination of employment and are
therefore in the nature of severance payments under any other employment,
retention, severance, or similar agreement with the Company or any Subsidiary
to which the Executive is a party or any severance pay plan of the Company or
any Subsidiary in which the Executive is a participant;
(f) "SEVERANCE PERIOD" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the earliest
of (i) the expiration of three years after the first occurrence of a Change in
Control, (ii) the Executive's death, and (iii) the Executive's attainment of
age 65;
(g) "TERM" means the period commencing as of the date hereof and expiring as
of the later of (i) the close of business on the fourth anniversary of the date
hereof and (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that
if, prior to a Change in Control, the Executive ceases for any reason to be an
employee of the Company or any Subsidiary, thereupon without further action the
Term will be deemed to have expired and this Agreement will immediately
terminate and be of no further effect, whether or not cause exists. For
purposes of this Section 1(g), the Executive will not be deemed to have ceased
to be an employee of the Company or any Subsidiary by reason of the transfer of
the Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries; and
(h) "TERMINATION DATE" means (i) the date on which the Executive's
employment is terminated by the Company or any Subsidiary or (ii) the date on
which the Executive terminates his or her employment pursuant to Section 3(b).
2. OPERATION OF AGREEMENT: This Agreement will be effective and binding
immediately upon its execution, but, notwithstanding anything in this Agreement
to the contrary, will not be operative unless and until a Change in Control
occurs, whereupon without further action this Agreement will become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL: (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period without the Executive becoming
entitled to the benefits provided by Section 4 only upon the occurrence of one
or more of the following events:
(i) The Executive's death;
(ii) The Executive becoming permanently disabled within the meaning of,
and beginning actually to receive disability benefits pursuant to, the
long-term disability plan of the Company or any Subsidiary in effect for, or
applicable to, the Executive immediately prior to the Change in Control; or
<PAGE> 6
(iii) Cause.
If the Executive's employment is terminated by the Company during the Severance
Period, other than pursuant to Section 3(a)(i), 3(a)(ii), or 3(a)(iii), the
Executive will be entitled to the benefits provided by Section 4.
(b) On or after the commencement of the Severance Period, if one or more of
the following events (regardless of whether any other reason, other than Cause
as hereinabove provided, for termination exists or has occurred, including
without limitation the Executive's acceptance and/or commencement of other
employment) occurs, the Executive may terminate the Executive's employment with
the Company and any Subsidiary and become entitled to the benefits provided by
Section 4:
(i) The failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent
office or position, of or with the Company and/or a Subsidiary, as the case
may be, which the Executive held immediately prior to a Change in Control, or
the removal of the Executive as a director of the Company (or any successor
thereto) if the Executive had been a director of the Company immediately
prior to the Change in Control;
(ii) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities, or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, a reduction in the aggregate
amount of the Executive's combined base pay and incentive pay receivable from
the Company and its Subsidiaries, taken as a whole, or the termination or
denial of the Executive's rights to Employee Benefits or a reduction in the
scope or value thereof, except for any such termination or denial, or
reduction in the scope or value, of any Employee Benefits applicable
generally to all recipients of or participants in such Employee Benefits;
(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good faith
unless otherwise shown by the Company by clear and convincing evidence) that
a change in circumstances has occurred following a Change in Control,
including without limitation a change in the scope of the business or other
activities for which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive substantially unable to
carry out, has substantially hindered the Executive's performance of, or has
caused the Executive to suffer a substantial reduction in, any of the
authorities, powers, functions, responsibilities, or duties attached to the
position held by the Executive immediately prior to the Change in Control,
which situation is not remedied within 10 calendar days
<PAGE> 7
after written notice to the Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer, or otherwise) to which all
or substantially all of the Company's business and/or assets have been
transferred (directly or by operation of law) shall have assumed all duties
and obligations of the Company under this Agreement pursuant to Section
10(a);
(v) The Company relocates its principal executive offices, or
requires the Executive to have the Executive's principal location of
work changed, to any location which is in excess of 25 miles from the
location thereof immediately prior to the Change in Control, or requires the
Executive to travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties hereunder at least 20%
more (in terms of aggregate days in any calendar year or in any calendar
quarter when annualized for purposes of comparison to any prior year) than
was required of the Executive in any of the three full calendar years
immediately prior to the Change in Control without, in either case, the
Executive's prior written consent; and/or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto.
(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any other agreement, policy, plan, program, or
arrangement of the Company or any Subsidiary providing Employee Benefits
(except as provided in Section 4(a)), which rights will be governed by the
terms thereof.
4. SEVERANCE COMPENSATION: (a) If, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during the Severance
Period other than pursuant to Section 3(a), or if the Executive terminates the
Executive's employment pursuant to Section 3(b), the Company will pay to the
Executive the Severance Benefit in immediately available funds, in United
States dollars, within five business days after the Termination Date. In
addition, for a period of two years following the Termination Date, the Company
will arrange to provide the Executive Employee Benefits that are welfare
benefits (but not stock option, stock purchase, stock appreciation, or similar
compensatory benefits) substantially similar to those which the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial
described in Section 3(b)(ii)), except that the level of any such Employee
Benefits to be provided to the Executive may be
<PAGE> 8
reduced in the event of a corresponding reduction applicable to generally all
recipients of or participants in such Employee Benefits, and an additional
period of two years will be considered service with the Company and its
Subsidiaries for the purpose of determining service credits and benefits due
and payable to the Executive under the Company's retirement income,
supplemental executive retirement, and other benefit plans of the Company
applicable to the Executive, the Executive's dependents, or the Executive's
beneficiaries immediately prior to the Termination Date. If and to the extent
that any benefit described in the immediately preceding sentence is not or
cannot be paid or provided under any policy, plan, program, or arrangement of
the Company or any Subsidiary, as the case may be, then the Company will itself
pay or provide for the payment of such Employee Benefits to the Executive, and,
if applicable, the Executive's dependents and beneficiaries. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Section 4(a) will be reduced to
the extent comparable welfare benefits are actually received by the Executive
from another employer during the Severance Period following the Executive's
Termination Date.
(b) There will be no right of set-off or counterclaim in respect of any
claim, debt, or obligation against any payment to or benefit for the Executive
provided for in this Agreement, except as expressly provided in the last
sentence of Section 4(a).
(c) Without limiting the rights of the Executive at law or in equity, if the
Company fails to make any payment or provide any benefit required to be made or
provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to 1.25 times
the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Midwest Edition of THE WALL STREET JOURNAL. Such
interest will be payable as it accrues on demand. Any change in such prime
rate will be effective on and as of the date of such change.
(d) Notwithstanding anything to the contrary contained in this Agreement or
in the 1992 Incentive Bonus Plan of the Company (the "Bonus Plan"), if,
following the occurrence of a Change in Control, the Company terminates the
Executive's employment during the Severance Period other than pursuant to
Section 3(a), or if the Executive terminates the Executive's employment
pursuant to Section 3(b), the Executive will be entitled to an additional
payment in the amount of the Executive's Long-Term Incentive Awards (as defined
in the Bonus Plan), in lieu of any other Long-Term Incentive Award under the
Bonus Plan, (a) calculated as if the Executive's Operating Unit (as defined in
the Bonus Plan) and the Executive (if applicable) had achieved 100% of its or
his Performance Goals (as defined in the Bonus Plan) and (b) prorated on the
basis of the ratio of the number of months of the Executive's participation
during the Performance Period (as defined in the Bonus Plan) to which the
Long-Term Incentive Award
<PAGE> 9
related to the aggregate number of months in such Performance Period.
(e) Notwithstanding anything to the contrary contained in this Agreement,
the parties' respective rights and obligations under this Section 4 and under
Section 7 will survive any termination or expiration of this Agreement
following a Change in Control or the termination of the Executive's employment
following a Change in Control for any reason whatsoever.
(f) Notwithstanding anything to the contrary contained in this Agreement, in
the 1992 Executive Equity Incentive Plan of the Company or any similar or
successor plan (an "Equity Plan"), or in any agreement evidencing a grant made
pursuant to any Equity Plan, immediately upon the occurrence of a Change in
Control, (i) any rights theretofore granted to the Executive to purchase stock
in the Company upon the exercise of an option, and any corresponding
appreciation rights, will become exercisable in full and (ii) any risks of
forfeiture and prohibitions or restrictions on transfer pertaining to any
restricted shares theretofore granted to the Executive will lapse.
5. NO MITIGATION OBLIGATION: The Company hereby acknowledges that it will be
difficult and may be impossible (a) for the Executive to find reasonably
comparable employment following the Termination Date and (b) to measure the
amount of damages which the Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the severance compensation
to the Executive in accordance with the terms of this Agreement is hereby
acknowledged by the Company to be reasonable and will be liquidated damages,
and the Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
will any profits, income, earnings, or other benefits from any source
whatsoever create any mitigation, offset, reduction, or any other obligation on
the part of the Executive hereunder or otherwise, except as expressly provided
in the last sentence of Section 4(a).
6. LIMITATION ON PAYMENTS AND BENEFITS: Notwithstanding anything to the
contrary contained in this Agreement, if, after taking into account all amounts
or benefits otherwise to be paid or payable, any amount or benefit to be paid
or provided under this Agreement would be an "Excess Parachute Payment," within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor provision thereto, but for the application of
this sentence, then the payments and benefits to be so paid or provided under
this Agreement will be reduced to the minimum extent necessary (but in no event
to less than zero) so that no portion of any such payment or benefit, as so
reduced, constitutes an Excess Parachute Payment; provided, however, that the
foregoing reduction will be made only if and to the extent that such reduction
would result in an increase in the aggregate payments and benefits to be
provided, determined on an after-tax basis (taking into account the excise tax
imposed pursuant to Section 4999 of the Code, or any successor provision
thereto, any tax imposed by any comparable provision of state law, and any
<PAGE> 10
applicable federal, state, and local income taxes). The determination of
whether any reduction in such payments or benefits to be provided under this
Agreement is required pursuant to the preceding sentence will be made at the
expense of the Company, if requested by the Executive or the Company, by the
Company's independent accountants. The fact that the Executive's right to
payments or benefits may be reduced by reason of the limitations contained in
this Section 6 will not of itself limit or otherwise affect any other rights of
the Executive other than pursuant to this Agreement. In the event that any
payment or benefit intended to be provided under this Agreement or otherwise is
required to be reduced pursuant to this Section 6, the Executive will be
entitled to designate the payments and/or benefits to be so reduced in order to
give effect to this Section 6. The Company will provide the Executive all
information reasonably requested by the Executive to permit the Executive to
make such designation. In the event that the Executive fails to make such
designation within 10 business days of the Termination Date, the Company may
effect such reduction in any manner it deems appropriate.
7. LEGAL FEES AND EXPENSES; SECURITY: It is the intent of the Company that
the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement, or defense of the Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to the
Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of the Executive's
choice, at the expense of the Company as hereinafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement, or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Director, officer, stockholder, or other person affiliated with the
Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship will exist between the
Executive and such counsel. Without regard to whether the Executive prevails,
in whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all attorneys' and
related fees and expenses incurred by the Executive in connection with any of
the foregoing.
8. EMPLOYMENT RIGHTS; TERMINATION PRIOR TO CHANGE IN CONTROL: Nothing
expressed or implied in this Agreement will
<PAGE> 11
create any right or duty on the part of the Company or the Executive to have
the Executive remain in the employ of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of the employment of the
Executive or the removal of the Executive from any office or position in the
Company and each Subsidiary following the commencement of any discussion with a
third person that results in a Change in Control within 60 calendar days after
such termination or removal will be deemed to be a termination or removal of
the Executive after a Change in Control for purposes of this Agreement.
9. WITHHOLDING OF TAXES: The Company may withhold from any amounts payable
under this Agreement all federal, state, city, or other taxes that the Company
is required to withhold pursuant to any law or government regulation or ruling.
10. SUCCESSORS AND BINDING AGREEMENT: (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place, provided, however, that upon the occurrence of
the Federated/Macy's Merger (as that term is defined in the Plan), Macy's will
assume all of the obligations of the Company hereunder by operation of law and
without any further action on the part of any party hereto and the surviving
corporation in such transaction will be the "Company" for all purposes hereof.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any person acquiring
directly or indirectly all or substantially all of the business or assets of
the Company whether by purchase, merger, consolidation, reorganization, or
otherwise (and such successor will thereafter be deemed the "Company" for the
purposes of this Agreement), but will not otherwise be assignable,
transferable, or delegatable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
will, without the consent of the other, assign, transfer, or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in Sections 10(a), 10(b), and 10(d). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable, or delegatable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 10(c), the Company
will have no liability to pay any amount so attempted to be assigned,
transferred, or delegated.
<PAGE> 12
(d) Executive acknowledges that the Company is exploring the possibility of
establishing a corporate services company (the "Corporate Services Company") as
a wholly owned Subsidiary of the Company, which Corporate Services Company may
become the principal employer of Executive. In the event that the Corporate
Services Company is established and becomes the principal employer of
Executive, (i) without the consent of the Executive, the Company may assign its
rights and delegate its duties hereunder to the Corporate Services Company,
provided, however, that no such assignment or delegation will constitute a
novation or otherwise relieve the Company of any of its obligations hereunder,
and (ii) all references to the "Company" in Sections 3 (other than Section 3.b
(iv)), 4, 5, 7, 9, 10 (other than Section 10 (d)), 11, and 16 hereof will be
deemed to be to the Company and/or the Corporate Services Company.
11. NOTICES: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests, or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five
calendar days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or one business day after
having been sent for next-day delivery by a nationally recognized overnight
courier service such as Federal Express, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive office and to the Executive at the Executive's principal residence as
shown in the Company's most current records, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address will be effective only upon receipt.
12. GOVERNING LAW: The validity, interpretation, construction, and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to
the principles of conflict of laws of such State.
13. VALIDITY: If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable,
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstance will not be affected, and
the provision so held to be invalid, unenforceable, or otherwise illegal will
be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, or legal.
14. MISCELLANEOUS: No provision of this Agreement may be waived, modified,
or discharged unless such waiver, modification, or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions
<PAGE> 13
or conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
15. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
16. OTHER BENEFITS: Except as provided in Section 4(d), neither the
provisions of this Agreement nor the severance compensation, benefits, and
other payments provided for hereunder will reduce or increase any amounts
otherwise payable, or in any other way affect the Executive's rights as an
employee of the Company, whether existing now or hereafter, under any other
agreement or any benefit, incentive, retirement, stock option, stock bonus,
stock purchase, or other plan, program, or arrangement.
17. PRIOR AGREEMENT: This Agreement amends and restates the Agreement,
dated as of __________ __, 199_ (the "Prior Agreement"), between the Company
and the Executive, which Prior Agreement will, without further action, be
superseded as of the date hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
FEDERATED DEPARTMENT STORES, INC.
By:____________________________
Name:_______________________
Title:______________________
_______________________________
[Name of Executive]
<PAGE> 1
Exhibit 10.39.1
AMENDMENT TO
EMPLOYMENT AGREEMENT
--------------------
AMENDMENT, made as of the 6th day of December, 1994 to amended and
restated EMPLOYMENT AGREEMENT, made as of the 5th day of February, 1994, as
amended by letter agreements dated August 16, 1994, August 20, 1994 and
September 19, 1994 (the "Employment Agreement"), between R.H. Macy & Co.,
Inc., a Delaware corporation with its principal office at 151 West 34th Street,
New York, New York 10001 (the "Corporation"), and Myron E. Ullman, III residing
at 200 North Street, Greenwich, Connecticut 06830 ("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Agreement and Plan of Merger between R.H.
Macy & Co., Inc. and Federated Department Stores, Inc. ("Federated"), dated as
of August 16, 1994 (the "Merger Agreement'), Federated is to be merged with and
into the Corporation with the Corporation (to be renamed "Federated Department
Stores, Inc.") being the surviving corporation; and
WHEREAS, pursuant to Section 2.3(b) of the Merger Agreement, effective
as of the Effective Time (as defined in Section 2.5 of the Merger Agreement),
Executive shall be Deputy Chairman of the Corporation; and
WHEREAS, the Corporation desires to secure the continued services of
Executive, and Executive desires to continue to furnish services to the
Corporation and its affiliates, on the terms and conditions set forth in the
Employment Agreement as hereinafter amended;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. AMENDMENT TO EMPLOYMENT AGREEMENT. Effective as of the
Effective Time, Section 3 of the Employment Agreement is hereby amended and
restated in its entirety, to read as follows:
5272.ptc 1
<PAGE> 2
During the Term, Executive shall serve as Deputy
Chairman of the Corporation, faithfully and to the best of his ability
under the direction of the Board of Directors of the Corporation, and
shall devote substantially all of his business time, energy and skill
to such employment. Executive shall perform the duties commensurate
with the position of Deputy Chairman of the Corporation, as well as
such specific duties and services of a senior executive nature as the
Board of Directors of the Corporation shall reasonably request
consistent with Executive's position as Deputy Chairman. Neither
Executive's title nor any of his functions shall be changed without his
consent. While it is understood that the right to elect directors and
officers of the Corporation is by law vested in the stockholders and
directors of the Corporation, it is nevertheless mutually contemplated
subject to such rights that Executive shall at all times during
employment be a Director of the Corporation.
It is expressly understood by the parties hereto that
Executive's principal office and principal place of employment shall
be his residence at 200 North Street, Greenwich, Connecticut.
2. EFFECT ON EMPLOYMENT AGREEMENT. The Corporation and Executive
confirm and agree that the Employment Agreement, as amended by this Amendment,
remains in full force and effect.
3. OTHER MATTERS.
The undersigned hereby represents that he is duly authorized
to execute this Agreement on behalf of Federated Department Stores, Inc., and
that this Agreement shall be binding and enforceable in all regards against the
Corporation upon and after the Effective Time.
This Amendment shall be null and void and of no further force
or effect if the Merger Agreement is terminated prior to the Merger (as defined
in the Merger Agreement) for any reason.
This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each
5272.ptc 2
<PAGE> 3
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment on the day and year first above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Name: Dennis J. Broderick
Title: Senior Vice President
General Counsel and
Secretary
ACKNOWLEDGED BY: /s/ Myron E. Ullman
-------------------------------
Myron E. Ullman, III
R.H. MACY & CO., INC.
By: /s/ Diane P. Baker
-------------------------------
Name: Diane P. Baker
Title: Group Senior Vice
President and Chief
Financial Officer
5272.ptc 3
<PAGE> 1
Exhibit 10.39.2
December 7, 1994
To: Myron E. Ullman, III
This letter is to confirm our agreement with respect to your
separation from employment at R.H. Macy & Co., Inc., together with any
successor thereof, as constituted (and as it may from time to time be known)
upon and after the merger of Federated Department Stores, Inc. ("Federated")
with and into R.H. Macy & Co., Inc. pursuant to the Agreement and Plan of
Merger between R.H. Macy & Co., Inc. and Federated dated as of August 16, 1994
(the "Merger Agreement"). R.H. Macy & Co., Inc. as so constituted is
hereinafter referred to as "Macy's". The parties expressly agree that the
following provisions represent certain benefits entitlements and other
consideration for relinquishing your right to future employment with Macy's
pursuant to the Amended and Restated Employment Agreement, dated as of February
5, 1994, as amended by letter agreements dated August 16, 1994, August 20,
1994, September 19, 1994 and December 6, 1994, between Macy's and you (as it
may from time to time hereafter be amended, the "Employment Agreement") which
have been agreed upon in order to reach this Agreement. As set forth below in
Paragraph 22 hereof, the parties expressly acknowledge and agree that the
Employment Agreement is not superseded hereby, shall remain in full force and
effect in accordance with its terms, and that, except as expressly provided
herein in Paragraphs 6 and 11 below, the payments and benefits owed to you
hereunder are in addition to the payments and benefits owed to you under the
Employment Agreement.
1. Your last day of employment at Macy's will be January 31, 1995 or, if
later, the date on which the Effective Time (as defined in Section 2.5 of
the Merger Agreement) occurs (such last day being referred to herein as
the "Termination Date"), unless sooner terminated due to your death or
disability. The parties agree that this Agreement constitutes a Notice
of Termination for purposes of the Employment Agreement.
2. On the later of the Effective Date (as defined below) of this Agreement
or the Termination Date, Macy's will (i) forgive your outstanding
indebtedness with respect to Macy's which is equal to $100,000 (the
"Indebtedness") and (ii) pay you such amounts as are necessary to
place you in the same after-
<PAGE> 2
tax financial position that you would have been in if you had not
incurred any federal, state or local income tax liability in connection
with Macy's forgiveness of the Indebtedness, it being agreed that such
reimbursements shall be in the amount of $85,460.
3. On the later of the Effective Date of this Agreement or the Termination
Date, in lieu of any further monthly car allowance, Macy's agrees to pay
you, in a lump sum, $96,000, less applicable taxes and withholding, which
is equivalent to your car allowance for 36 months.
4. You will receive retirement benefits as set forth on Schedule A attached
hereto, less applicable taxes and withholding; provided that such
benefits shall be reduced, but not to below zero, by the aggregate
amounts (to the extent accrued through the Termination Date) payable
under the R.H. Macy & Co., Inc. Pension Plan, the R.H. Macy & Co., Inc.
Pension and Benefit Equalization Plan, the Federated Department Stores,
Inc. Pension Plan and the Retirement Income portion of the Federated
Department Stores, Retirement Income and Thrift Incentive Plan (after
adjusting such benefits for payment at the same time and in the same
manner as your benefits under the aforementioned plans), all of which
provide exclusively for defined benefit accruals. The parties expressly
acknowledge and agree that neither this Paragraph 4 nor any other
provision of this Agreement shall in any manner reduce or affect your
rights and benefits under the aforementioned plans, and that you continue
to have and will have all rights and be entitled to all benefits under
such plans and any other retirement plans of Macy's as you may otherwise
now or in the future have or be entitled to without regard to this
Agreement.
5. Macy's shall continue to pay the premiums you are obligated to pay in
connection with the split dollar life insurance policy currently in
effect between Macy's and yourself (the "Policy") (and shall continue to
pay you such additional amounts as are necessary to place you in the same
after-tax financial position that you would have been in if you had not
incurred any federal, state or local income tax liability in connection
with such payments) for a period of 36 months commencing with the
Termination Date, and all rights and obligations of the parties thereto
shall continue in full force and effect under such Policy. The parties
expressly acknowledge, without limiting the generality of the last
sentence of Paragraph 22, that the obligations of Macy's under Section
6(a) of the Employment Agreement are
2
<PAGE> 3
not limited by this Paragraph 5 and remain in full force and effect in
accordance with the terms of Section 6(a) of the Employment Agreement.
6. On the later of the Effective Date of this Agreement or the Termination
Date, Macy's will pay you, in a lump sum, the cash bonus provided for
under Section 5 of the Employment Agreement for the 12-month period
commencing July 1 within which the Termination Date occurs, prorated for
the portion of the applicable 12-month period completed as of the
Termination Date, which prorated lump sum, as of January 31, 1995, is
equal to $364,581, less applicable taxes and withholding. This payment
is not intended to, and does not, extend your employment beyond the
Termination Date. The payments under this Paragraph 6 shall subsume any
prorated bonus payments otherwise required to be made under Section 5 and
Section 10 of the Employment Agreement with respect to the 12-month
period commencing July 1 within which the Termination Date occurs.
7. On the later of the Effective Date of this Agreement or the Termination
Date, Macy's agrees to pay you, in a lump sum, $45,000, less applicable
taxes and withholding, for financing planning services.
8. Macy's will continue to make available to you office space and
secretarial services substantially comparable to the office space and
secretarial services available to you as of January 1, 1995, until the
first to occur of (i) the one-year anniversary of the later of the
Effective Date of this Agreement or the Termination Date or (ii) your
commencement of employment with an entity unaffiliated with Macy's. This
provision is not intended to, and does not, extend your employment beyond
the Termination Date.
9. You and your present wife will be entitled to a merchandise discount (the
"Discount"), as set forth herein, during your lifetime and your present
wife's lifetime. Following the effective date of the Joint Plan of
Reorganization of Macy's and certain of its subsidiaries (the "Joint
Plan"), which includes the consummation of a merger pursuant to the
Merger Agreement, and through the third anniversary of the Termination
Date, your discount will be at the rate of 40% and will be available at
all Federated divisions. Macy's will pay you such amounts as are
necessary to place you in the same after-tax financial position that you
would have been in if you had not incurred any federal, state or local
income tax liability in connection with all purchases made through such
third anniversary of the Termination Date pursuant to such merchandise
discount program. Such amounts will be paid annually in
3
<PAGE> 4
January, for purchases made during the prior year. Following such
third anniversary, you will be entitled to the merchandise discount then
applicable to Chief Executive Officers of Federated divisions at all
Federated divisions. The merchandise discount will be subject to all
terms and conditions that apply to that privilege, as may be amended from
time to time.
10. Macy's agrees to cover you for long-term disabilities, on the same terms
and conditions as are currently in effect, with respect to long-term
disabilities occurring within the period of 36 months commencing with the
Termination Date. Such coverage shall be provided for as long as you do
not receive long-term disability benefits from a subsequent employer of
yours (a "Successor Employer"); provided that you accept any coverage for
which you are eligible that is available to other similarly situated
executives of a Successor Employer; and provided, further, that, in any
event, if you receive payments on account of long-term disability
incurred within such 36-month period under a disability program of your
Successor Employer (the "Successor LTD Benefits"), or if you incur a
long-term disability within such 36-month period for which Successor LTD
Benefits are not payable, Macy's will pay or cause you to be paid the
excess of (i) the payments which you would have received under the
coverage required to be provided to you under the first sentence of this
Paragraph 10 (had you not been covered by the long-term disability
program of your Successor Employer) over (ii) the Successor LTD Benefits,
if any. Long-term disability coverage under this Paragraph 10 shall be
provided by Macy's payments to you (or, with your consent, on your
behalf) of the amount of all required premiums relating to your
participation in the long-term disability plan, program, or insurance
policy or other arrangement under which Macy's will provide the long-term
disability benefits required hereby, it being understood that you will
be subject to income taxation on such payments.
11. Macy's agrees to continue to pay the premiums for health insurance
benefits ("Health Benefits") at the same level to which you are currently
entitled, including premiums in connection with any converted policies
with respect to such Health Benefits, to the extent you currently
participate in these programs, for a period of 36 months commencing with
the Termination Date. Such payments shall be made as long as you do not
receive health insurance benefits from a Successor Employer; provided
that you accept any coverage for which you are eligible that is available
to other similarly situated executives of a Successor Employer; and
provided,
4
<PAGE> 5
further, that any benefits not payable by the Successor Employer but
that would have been payable under the insurance required to be purchased
on your behalf under the first sentence of this Paragraph 11 (had you not
been covered by the health insurance program of your Successor Employer)
shall be payable by Macy's. The benefits under this Paragraph 11 shall
subsume any medical benefits otherwise required to be provided under
Section 10(a) of the Employment Agreement.
12. You understand that Macy's makes no representations as to the income tax
treatment of any payments hereunder and that any and all payments (and
all salaries, benefits and/or other payments previously made to you by
Macy's) will be subject to such tax treatment as applies, and to such
deductions, if any, as may be required under the applicable tax laws.
13. It is expressly understood and agreed that this settlement and the
effectuation of its terms do not constitute an admission or statement by
any party that Macy's has acted unlawfully or is otherwise liable to you
in any way. It is further agreed that evidence of this settlement, its
terms or the circumstances surrounding the parties entering into this
Agreement, shall be inadmissible in any action or lawsuit of any kind,
except an action for alleged breach of this Agreement.
14. Until your last day of employment by Macy's, you agree to faithfully and
diligently perform your duties consistent with your position as Deputy
Chairman of Macy's, in a manner such as to promote a successful
transition following your separation from employment, serve Macy's and
its divisions, subsidiaries and affiliates to the best of your ability
and comply with Macy's Code of Business Conduct. You shall devote your
working time, attention and energies to the business and affairs of
Macy's and its divisions, subsidiaries and affiliates; provided, however,
that nothing herein shall prevent you from taking action, between the
date of this Agreement and your last day of employment, relating to your
future employment, so long as such action does not prevent you from
performing your required duties for Macy's.
15. These payments and benefits are not intended to, and do not, extend your
employment beyond the Termination Date. Notwithstanding the foregoing,
you are required to comply with all applicable Term (as defined in the
Employment Agreement) and post-Term terms and conditions set forth in the
Employment Agreement; provided, however, that the non-competition
5
<PAGE> 6
provisions set forth in Section 12(d) of the Employment Agreement shall
not be applicable and, therefore, nothing herein or therein shall
preclude you from accepting any other employment, including without
limitation employment with a competing retailer.
16. You agree to return to Macy's all original documents, software,
equipment, and other materials belonging to Macy's, including, but not
limited to, Macy's identification and keys, wherever such items may be
located.
17. In consideration for Macy's commitment to the various arrangements
described in the preceding paragraphs, and in lieu of any other benefits
or payments, as a full and final mutual settlement, you hereby release
and discharge Macy's, its divisions, subsidiaries and affiliates and the
current and former directors, officers, shareholders, agents and
employees of each, and each of their predecessors, successors and assigns
(herein "the Macy Entities"), from any and all claims and causes of
action arising out of or related to your employment or separation from
employment, including, but not limited to, any claims for severance pay,
vacation pay, salary, bonuses or other compensation, discrimination based
on race, color, national origin, ancestry, religion, marital status, sex,
sexual orientation, pregnancy, disability (as defined by the Americans
with Disabilities Act, or any other federal, state or local law), age or
other unlawful discrimination (under the Age Discrimination in Employment
Act, as amended by the Older Workers Benefit Protection Act of 1990,
Title VII of the Civil Rights Act, as amended, or any other federal,
state, or local laws), as well as any claims in contract or tort
including, but not limited to, claims for breach of implied or express
contracts, breach of promises, misrepresentation, fraud, estoppel or
wrongful discharge, that you, your heirs, executors, administrators,
successors, and assigns now have, ever had or may hereafter have, whether
known or unknown, suspected or unsuspected, up to and including the date
of this Agreement; provided, however, that nothing contained herein shall
be construed to release any claim you may have against Macy's (i) for
payments or benefits specifically set forth in this Agreement or under
the Employment Agreement; (ii) related to the obligation of Macy's to
indemnify you as and to the full extent it is required to indemnify
directors and officers of Macy's for services in such capacities; (iii)
related to pre-petition obligations of Macy's, to the extent such
pre-petition obligations have been provided for in the Joint Plan or (iv)
under the continuation-of-coverage provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"). It is further
agreed that you have not
6
<PAGE> 7
and will not institute any complaint, lawsuit, or action at law or
otherwise against any of the Macy Entities and shall hold each of the
Macy Entities harmless against such actions except for (i) actions
related to the various payments and benefits specified in this Agreement,
which describes the complete arrangements to which we agree as to the
subject matter thereof, or in the Employment Agreement; (ii) actions
related to the obligation of Macy's to indemnify you as and to the full
extent it is required to indemnify directors and officers of Macy's for
services in such capacities; (iii) actions related to pre-petition
obligations of Macy's, to the extent such pre-petition obligations have
been provided for in the Joint Plan and (iv) actions under COBRA.
18. In the event of a breach of this Agreement, either party will be entitled
to such relief as is provided by law or equity.
19. If any section of this Agreement should be held invalid by operation of
law or by a tribunal of competent jurisdiction, or if compliance with or
enforcement of any section is restrained by such tribunal, the
application of any and all other sections, other than those which have
been held invalid, shall not be affected.
20. This Agreement shall be binding on you, your heirs, administrators,
representatives, executors, successors and assigns and shall likewise be
binding on Macy's and its divisions, subsidiaries and affiliates, and
their respective successors and assigns, and shall inure to the benefit
of you, your heirs, administrators, representatives, executors,
successors and assigns, and of Macy's and its divisions, subsidiaries and
affiliates, and their respective successors and permitted assigns.
Macy's shall not assign this Agreement without your consent; provided
that (i) unless you consent otherwise, Macy's shall cause the purchaser
of substantially all of the assets of Macy's to assume the obligations
under this Agreement and (ii) in the event of an assignment to such a
purchaser, Macy's shall continue to remain jointly and severally liable
for such obligations.
21. Except as otherwise expressly provided above, (i) you shall be under no
duty to mitigate any of the payments and benefits otherwise provided for
herein, and (ii) such payments and benefits shall in no event be reduced
in the event that you do so mitigate.
7
<PAGE> 8
22. This Agreement sets forth the entire Agreement between the parties with
respect to the subject matter hereof and fully supersedes any and all
prior agreements or understandings between them pursuant to such subject
matter. The parties expressly acknowledge and agree that the Employment
Agreement is not superseded, and shall remain in full force and effect in
accordance with its terms, and that, except as expressly provided in the
Paragraphs 6 and 11 above, the payments and benefits owed to you
hereunder are in addition to the payments and benefits owed to you under
the Employment Agreement.
23. This Agreement shall be governed by and construed in accordance with the
laws of the state of New York without regard to principles of conflict of
laws.
24. You have the right to consult with an attorney to review this Agreement
and are encouraged to do so. Any legal expenses (at your attorneys'
standard hourly rates, plus disbursements) actually incurred by you in
connection herewith, as well as any legal expenses (at your attorneys'
standard hourly rates, plus disbursements) actually incurred by you
regarding matters in connection with the Merger (as defined in the Merger
Agreement) and the Joint Plan, but not in excess of $100,000, shall be
reimbursed to you by Macy's no later than the tenth business day to
follow the consummation of the Merger; provided that you submit proof in
reasonable detail of such expenses. Any controversy arising out of or
relating to this Agreement or the breach hereof shall be settled by
arbitration in the City of New York in accordance with the rules then
obtaining of the American Arbitration Association and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
Macy's shall pay all of the fees and expenses of such arbitrator and the
other costs of arbitration. In addition, Macy's shall pay your
reasonable legal fees and expenses incurred in connection with any
successful enforcement or defense by you of your rights hereunder.
25. You have 21 days to consider this Agreement from the date it was first
given to you although you may accept it any time within those 21 days.
26. You have seven days after signing this Agreement to revoke it by
notifying Macy's, in writing, of such revocation within the seven-day
period. However, if you do not revoke your signature, the Agreement will
become effective on the eighth day after you sign it (the "Effective
Date").
8
<PAGE> 9
27. The obligations hereunder of the parties hereto shall not become
effective until the Effective Time (as defined in Section 2.5 of the
Merger Agreement), and this Agreement shall be null and void and of no
further force or effect if the Merger Agreement is terminated prior the
Merger for any reason.
If the arrangements we have discussed and agreed upon are accurately
set forth above, please confirm your approval and acceptance of our Agreement
by signing both enclosed copies of this Agreement, and returning both copies to
the undersigned.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties thereto.
The undersigned hereby represents that he is duly authorized to
execute this Agreement on behalf of Federated Department Stores, Inc., and that
this Agreement shall be binding and enforceable in all regards against Macy's
upon and after the Effective Time (as defined in Section 2.5 of the Merger
Agreement).
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
-------------------------------------
Name: Dennis J. Broderick
Title: Senior Vice President,
General Counsel and Secretary
ACKNOWLEDGED BY:
R.H. MACY & CO., INC.
By: Diane P. Baker
---------------------
Name: Diane P. Baker
Title: Group Senior Vice President
and Chief Financial Officer
9
<PAGE> 10
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT AND UNDERSTAND ALL OF
ITS TERMS INCLUDING THE FULL AND FINAL RELEASE OF CLAIMS SET FORTH ABOVE. I
FURTHER ACKNOWLEDGE THAT I HAVE VOLUNTARILY ENTERED INTO THIS AGREEMENT, THAT I
HAVE NOT RELIED UPON ANY REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, NOT SET
FORTH IN THIS AGREEMENT, THAT I HAVE BEEN GIVEN THE OPPORTUNITY AND ENCOURAGED
TO HAVE THIS AGREEMENT REVIEWED BY MY ATTORNEY AND TAX ADVISOR. I ALSO
ACKNOWLEDGE THAT I HAVE BEEN AFFORDED 21 DAYS TO CONSIDER THIS AGREEMENT AND
THAT I HAVE SEVEN DAYS AFTER SIGNING THIS AGREEMENT TO REVOKE IT BY NOTIFYING
MACY'S, IN WRITING, OF MY REVOCATION. IF I DO NOT REVOKE MY SIGNATURE, THE
AGREEMENT WILL BECOME EFFECTIVE ON THE EIGHTH DAY AFTER I SIGN IT.
Myron E. Ullmann 12/8/94
- - ---------------------------------- --------------------------------
Myron E. Ullman, III Date
10
<PAGE> 11
January 24, 1995
513/579-7560
FAX 513/579-7354
Mr. Myron E. Ullman, III
200 North Street
Greenwich, CT 06830
Dear Mike:
We have requested that you resign as Deputy Chairman of Federated
Department Stores, Inc. (the "Company") effective as of January 27, 1995,
rather than as of January 31, 1995 as presently contemplated. In consideration
for your agreement to do so, we are hereby offering to provide you with the
assurances and administrative arrangements relating to your termination set
forth below.
First, the Company represents and agrees that your termination as of
January 27, 1995, rather than as of January 31, 1995 as currently contemplated
by your termination agreement with the Company dated December 7, 1994 (the
"Termination Agreement"), shall not have any adverse financial, economic or
other adverse effect on you of any kind. Thus, for example, but without
limitation, your salary, benefits and other compensation and remuneration will
continue as though you had terminated on January 31, 1995, whether such salary,
benefits and other compensation and remuneration are provided for under the
Termination Agreement, your Amended and Restated Employment Agreement with the
Company dated February 5, 1994, as amended by letter agreements dated August
16, 1994, August 20, 1994, September 19, 1994 and December 6, 1994
(collectively, the "Employment Agreement") or otherwise. As another example,
again without limitation, in those cases in which the Company would have
continued to provide you with salary, benefits or other compensation or
remuneration for a fixed period of time measured from January 31, 1995, the
fixed period shall not end sooner than it would have ended were you to have
terminated on January 31, 1995.
Second, the Company will pay to you (net of tax withholding) on January
25, 1995, by wire transfer, the aggregate amount of all gross-up payments it is
required to pay to you under Paragraph 5 of the Termination Agreement (i.e.,
$86,871.00). The Company expressly acknowledges that it will continue to have
all other obligations regarding your split-dollar life insurance as are
provided under Paragraph 5 of the Termination Agreement and as are provided
under Section 6(a) of the Employment Agreement.
<PAGE> 12
Mr. Myron E. Ullman, III
January 24, 1995
Page 2
Third, the Company will pay to you (net of tax withholding) on January
25, 1995, by wire transfer, $20,655.00. We understand that you will wire
transfer $20,655.00 to the Company as soon as practicable after your receipt
thereof, at which point the Company will accept your return of such sum as
prepayment of all your required premiums relating to the Company's provision,
as required by Section 10 of the Termination Agreement, of long-term disability
benefits for disabilities incurred by you on or before January 31, 1998. We
will contact you if we insure all or a portion of the coverage with an outside
insurer.
Fourth, the Company will on or before January 27, 1995 wire transfer to
you (net of applicable tax withholding):
<TABLE>
<S> <C>
Your salary for January 1995 $ 104,166.67
Your automobile allowance for January 1995 2,666.67
The amounts owed to you under Section 10(a) of
the Employment Agreement (i.e., $2,500,000 +
$1,727,300) 4,227,300.00
The amounts owed to you under Paragraph 2
of the Termination Agreement 85,460.00
The amounts owed to you under Paragraph 3
of the Termination Agreement 96,000.00
The amounts owed to you under Paragraph 6
of the Termination Agreement 364,581.00
The amounts owed to you under Paragraph 7
of the Termination Agreement
45,000.00
-------------
$4,925,174.334
=============
</TABLE>
It is expressly understood that your agreement to terminate on January 27, 1995
is subject to the condition precedent that the Company makes the wire transfer
of $4,925,174.34 (net of applicable tax withholding) on or before such date.
We also expressly acknowledge our obligation to reimburse you for your legal
expenses as provided by Paragraph 24 of the Termination Agreement, upon your
submission of proof in reasonable detail of such expenses.
<PAGE> 13
If the arrangements we have discussed and agreed upon are accurately set
forth above, please confirm your approval and acceptance of our Agreement by
signing both enclosed copies of this Agreement, retaining one copy for your
files and returning one copy to the undersigned.
The undersigned hereby represents that he is duly authorized to execute
this Agreement on behalf of the Company. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
FEDERATED DEPARTMENT STORES, INC.
/s/ Dennis J. Broderick
----------------------------------------
ACKNOWLEDGED AND AGREED:
By: /s/ Myron E. Ullman
----------------------------------
Myron E. Ullman, III
<PAGE> 1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
EXHIBIT 11
FEDERATED DEPARTMENT STORES, INC.
EXHIBIT OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 28, 1995 JANUARY 29, 1994
------------------------ ------------------------
SHARES INCOME SHARES INCOME
------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income and average number of shares
outstanding................................. 132,862 $187,616 126,293 $193,248
Earnings per share............................ $1.41 $1.53
PRIMARY COMPUTATION:
Average number of common share equivalents:
Shares to be issued to the U.S.
Treasury............................... 122 163
Deferred compensation plan............... 74 3
Stock options............................ 217 229
------- -------- ------- --------
Adjusted number of common and common
equivalent shares outstanding and
adjusted net income................. 133,275 $187,616 126,688 $193,248
Primary earnings per share............. $1.41 $1.53
FULLY DILUTED COMPUTATION:
Additional adjustments to a fully diluted
basis:
Convertible notes........................ 8,564 10,531 8,564 9,928
Stock options............................ -- 4
------- -------- ------- --------
Adjusted number of shares outstanding and
net income on a fully diluted basis.... 141,839 $198,147 135,256 $203,176
======= ======== ======= ========
Fully diluted earnings per share......... $1.40 $1.50
</TABLE>
E-1
<PAGE> 1
EXHIBIT 21
----------
<TABLE>
<CAPTION>
NAME STATE OF TRADENAME(S)
INCORPORATION
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
22 East Advertising Agency, Inc. Florida
22 East Realty Corporation Florida
3240 Properties Corp. Delaware
A&S Real Estate, Inc. Delaware
Abraham & Straus, Inc. Ohio Abraham & Straus
A&S
Allied Mortgage Financing Corp. Delaware
Allied Stores General Real Estate Company Delaware
Allied Stores International, Inc. New York
Allied Stores International Sales Company, Inc. New York
Allied Stores Marketing Corp. New York
Astoria Realty, Inc. Delaware
Auburndale Realty, Inc. Delaware
Bamrest Del, Inc. Delaware
Bamrest NJ. Inc. New Jersey
Bamrest Penn, Inc. Pennsylvania
BFC Real Estate Company Delaware
Bloomingdale's, Inc. Ohio Bloomingdale's
Bloomingdale's By Mail Ltd. New York
Bloomingdale's Real Estate, Inc. Delaware
Bullock's, Inc. Ohio Bullock's
Burdine's Main Store Real Estate, Inc. Delaware
Burdine's Real Estate, Inc. Delaware
Burdine's Real Estate II, Inc. Delaware
Burdines, Inc. Ohio Burdines
Calclove Realty Corp. California
CalVal Realty Corp. California
Cowie & Company, Limited New York
Davrest Ga., Inc. Georgia
Delphis Corporation Delaware
Douglaston Plaza, Inc. Delaware
Executive Placements Consultants, Inc. New York
FACS Group, Inc. Ohio FACS
Financial and Credit Services Group
FDS National Bank Ohio
Federated Claims Services Group, Inc. Delaware Federated Medical Services Group
Federated Corporate Services, Inc. Delaware
Federated Credit Holdings Corporation Delaware
Federated Department Stores, Inc. Delaware Federated Merchandising (FM)
Macy's Product Development (MPD)
Federated Logistics
Federated Department Stores Foundation Ohio
Federated Department Stores Insurance Company, Bermuda
Ltd.
Federated Noteholding Corporation Delaware
</TABLE>
<PAGE> 2
EXHIBIT 21 (CONT.)
------------------
<TABLE>
<CAPTION>
NAME STATE OF TRADENAME(S)
INCORPORATION
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federated Real Estate, Inc. Delaware
Federated Retail Holdings, Inc. Delaware
Federated Stores Realty, Inc. Delaware
Federated Systems Group, Inc. Delaware
Finite Limited Hong Kong
Garage Park Corp. New York
Hunt Valley Properties Corp. Maryland
I. Magnin, Inc. Delaware I. Magnin
I. Magnin Properties Corp. Delaware
I. Magnin Properties Corp. II Delaware
J. N. A. Properties Corp. New Jersey
Jor-Mar, Inc. Delaware
Jordan Marsh Insurance Agency, Inc. Massachusetts
Jordan Marsh Stores Corporation Ohio Jordan Marsh
Jordan Servicenter, Inc. Delaware
Kings Plaza Shopping Center of Avenue U, Inc. New York
L&K Properties Corp. Ohio
Lazarus, Inc. Ohio Lazarus
Lazarus PA, Inc. Ohio Lazarus
Lazarus Real Estate, Inc. Delaware
M H L Properties Corp. of Massachusetts Massachusetts
MacFla Rest, Inc. Florida
Macy Credit Corp. Delaware
Macy Financial, Inc. Delaware
Macy N. R. Properties Corp. New York
Macy Receivables Funding Corp. Delaware
Macy Receivables Master Servicing Corp. Delaware
Macy's Close-Out, Inc. Ohio Macy's Close-Out
MCO
Shoe Outlet Center
Macy's Data and Credit Services Corp. Delaware
Macy's East, Inc. Ohio Macy's East
Macy('s)
Macy's Kings Plaza Real Estate, Inc. Delaware
Macy's Primary Real Estate, Inc. Delaware
Macy's Real Estate, Inc. Delaware
Macy's Secondary Real Estate, Inc. Delaware
Macy's Specialty Stores, Inc. Ohio Aeropostale
Charter Club
Macy's West, Inc. Ohio Macy's West
Macy('s)
MCC Special Corp. Delaware
MOA Rest, Inc. Minnesota
N. B. Properties Corp. New Jersey
</TABLE>
2
<PAGE> 3
EXHIBIT 21 (CONT.)
------------------
<TABLE>
<CAPTION>
NAME STATE OF TRADENAME(S)
INCORPORATION
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nasstock, Inc. New York
New Haven Properties Corp. Connecticut
Paramustock, Inc. New Jersey
Pasadena Properties Corp. Delaware
Prime Receivables Corporation Delaware
R. H. Macy (France) S.A.R.L. France
R. H. Macy China, Ltd. Delaware
R. H. Macy Holdings (HK), Ltd. Delaware
R. H. Macy Overseas Finance N.V. Netherlands Antilles
R. H. Macy Warehouse (HK), Ltd. Delaware
Rest Tex, Inc. Texas
Rich's Department Stores, Inc. Ohio Goldsmith's
Rich's
Rich's Main Store Real Estate, Inc. Delaware
Rich's Real Estate, Inc. Delaware
Sabugo, Limited Hong Kong
Sacvent Corp. Delaware
Sacvent Garage California
Sanstoff East Properties Corp. California
Saramaas Realty Corp. Florida
Seven Hills Funding Corporation Delaware
Seven West Seventh, Inc. Delaware
Shop 34 Advertising, Inc. New York
Stern's Department Stores, Inc. Ohio Stern's
Stern's-Echelon, Inc. Delaware
Stern's-Granite Run, Inc. Delaware
Stern's-Moorestown, Inc. Delaware
Sunsac Properties Corp. California
The Bon, Inc. Ohio The Bon Marche
The Bon
Tukwila Warehousing Services Corporation Washington
U & F Realty Corp. * New York
W. P. Properties Corp. New York
Wise Chat Limited Hong Kong
<FN>
*50% Owned by Kings Plaza Shopping Center of Avenue U, Inc.
</TABLE>
3
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Federated Department Stores, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-88240 and 33-88242) on Form S-8 of Federated Department Stores, Inc.
of our report dated February 28, 1995, relating to the consolidated balance
sheets of Federated Department Stores, Inc. and subsidiaries as of January 28,
1995 and January 29, 1994, and the related consolidated statements of income
and cash flows for the fifty-two week periods ended January 28, 1995, January
29, 1994 and January 30, 1993, which report appears in the January 28, 1995,
annual report on Form 10-K of Federated Department Stores, Inc.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
April 18, 1995
<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, John R. Sims 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 20, 1995 /s/ Allen I. Questrom
--------------------------------------------
Allen I. Questrom
<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, John R. Sims 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 20, 1995 /s/ Ronald W. Tysoe
--------------------------------------------
Ronald W. Tysoe
<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, John R. Sims 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 20, 1995 /s/ John E. Brown
--------------------------------------------
John E. Brown
<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, John R. Sims 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 20, 1995 /s/ Robert A. Charpie
--------------------------------------------
Robert A. Charpie
<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, John R. Sims 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 20, 1995 /s/ Lyle Everingham
--------------------------------------------
Lyle Everingham
<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, John R. Sims 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 20, 1995 /s/ Meyer Feldberg
--------------------------------------------
Meyer Feldberg
<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, John R. Sims 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 20, 1995 /s/ Earl G. Graves
--------------------------------------------
Earl G. Graves
<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, John R. Sims 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 20, 1995 /s/ George V. Grune
--------------------------------------------
George V. Grune
<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, John R. Sims 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 20, 1995 /s/ Gertrude G. Michelson
--------------------------------------------
Gertrude G. Michelson
<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, John R. Sims 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 20, 1995 /s/ G. William Miller
--------------------------------------------
G. William Miller
<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, John R. Sims 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 20, 1995 /s/ Joseph Neubauer
--------------------------------------------
Joseph Neubauer
<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, John R. Sims 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 20, 1995 /s/ Laurence A. Tisch
--------------------------------------------
Laurence A. Tisch
<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, John R. Sims 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 20, 1995 /s/ Myron E. Ullman, III
--------------------------------------------
Myron E. Ullman, III
<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, John R. Sims 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 20, 1995 /s/ Paul W. Van Orden
--------------------------------------------
Paul W. Van Orden
<PAGE> 15
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, John R. Sims 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 20, 1995 /s/ Karl M. von der Heyden
--------------------------------------------
Karl M. von der Heyden
<PAGE> 16
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, John R. Sims 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 20, 1995 /s/ Marna C. Whittington
--------------------------------------------
Marna C. Whittington
<PAGE> 17
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, John R. Sims 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 20, 1995 /s/ James M. Zimmerman
--------------------------------------------
James M. Zimmerman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JAN-28-1995
<CASH> 206,490
<SECURITIES> 0
<RECEIVABLES> 2,265,651
<ALLOWANCES> 0
<INVENTORY> 2,380,621
<CURRENT-ASSETS> 5,190,448 <F1>
<PP&E> 5,349,912
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,379,712 <F2>
<CURRENT-LIABILITIES> 2,712,072
<BONDS> 4,529,220
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,379,712 <F3>
<SALES> 8,315,877
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,131,363
<OTHER-EXPENSES> 2,634,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262,115
<INCOME-PRETAX> 331,284 <F4>
<INCOME-TAX> 143,668
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187,616
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<FN>
<F1> Supplies and prepaid expenses 99,559
Deferred income tax assets 238,127
<F2> Intangible assets - net 1,006,547
Notes receivable 408,134
Other assets 424,671
<F3> Deferred income taxes 993,451
Other liabilities 505,359
Shareholders equity 3,639,610
<F4> Interest income 43,874
</TABLE>
