SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal quarter ended July
29, 1995.
FEDERATED DEPARTMENT STORES, INC.
151 West 34th Street
New York, New York 10001
(212) 695-4400
and
7 West Seventh St.
Cincinnati, Ohio 45202
(513) 579-7000
Delaware 1-13536 13-3324058
(State of (Commission File No.) (I.R.S. Employer
incorporation) Identification Number)
The 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.
183,035,890 shares of the Registrant's Common Stock, $.01 par
value, were outstanding as of August 26, 1995.
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Operations
(Unaudited)
(thousands, except per share figures)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales, including leased
department sales $3,047,249 $1,596,100 $6,035,255 $3,249,731
Cost of sales 1,862,915 975,339 3,686,836 1,983,475
Selling, general and
administrative expenses 1,067,887 534,791 2,137,846 1,076,879
Business integration and
consolidation expenses 89,023 27,005 172,345 27,005
Charitable contribution to
Federated Department Stores
Foundation 25,581 - 25,581 -
Operating Income 1,843 58,965 12,647 162,372
Interest expense (114,057) (59,318) (223,558) (115,681)
Interest income 10,841 10,620 22,790 21,644
Income (Loss) Before Income
Taxes (101,373) 10,267 (188,121) 68,335
Federal, state and local income
tax benefit (expense) 34,447 (6,495) 64,196 (32,341)
Net Income (Loss) $ (66,926) $ 3,772 $ (123,925) $ 35,994
Earnings (Loss) per Share $ (.37) $ .03 $ (.68) $ .28
Average Number of Shares
Outstanding 182,830 126,578 182,754 126,517
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets
(Unaudited)
(thousands)
<TABLE>
<CAPTION>
July 29, January 28, July 30,
1995 1995 1994
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash $ 238,173 $ 206,490 $ 98,135
Accounts receivable 2,157,512 2,265,651 1,791,774
Merchandise inventories 2,694,564 2,380,621 1,341,496
Supplies and prepaid expenses 107,509 99,559 60,188
Deferred income tax assets 198,123 135,405 86,123
Total Current Assets 5,395,881 5,087,726 3,377,716
Property and Equipment - net 5,261,698 5,349,912 2,623,798
Intangible Assets - net 1,027,033 1,006,547 328,339
Notes Receivable 407,276 408,134 407,949
Other Assets 365,436 424,671 792,354
Total Assets $ 12,457,324 $ 12,276,990 $ 7,530,156
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 259,988 $ 463,042 $ 220,602
Accounts payable and accrued
liabilities 2,139,335 2,183,711 1,178,641
Income taxes 35,729 65,319 68,892
Total Current Liabilities 2,435,052 2,712,072 1,468,135
Long-Term Debt 5,121,445 4,529,220 2,715,395
Deferred Income Taxes 873,285 890,729 801,308
Other Liabilities 503,223 505,359 226,492
Shareholders' Equity 3,524,319 3,639,610 2,318,826
Total Liabilities and Shareholders'
Equity $ 12,457,324 $ 12,276,990 $ 7,530,156
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 29, 1995 July 30, 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (123,925) $ 35,994
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment 206,556 110,922
Amortization of intangible assets 21,656 9,381
Amortization of financing costs 9,955 5,097
Amortization of original issue discount 981 8,857
Amortization of unearned restricted stock 2,569 972
Changes in assets and liabilities:
Decrease in accounts receivable 108,139 18,388
Increase in merchandise inventories (313,943) (125,728)
Increase in supplies and prepaid expenses (7,950) (11,945)
Decrease in other assets not separately
identified 29,982 13,006
Decrease in accounts payable and accrued
liabilities not separately identified (9,700) (33,103)
Decrease in current income taxes (29,590) (34,414)
Decrease in deferred income taxes (69,064) (242)
Increase (decrease) in other liabilities
not separately identified (1,612) 2,816
Net cash provided (used) by operating
activities (175,946) 1
Cash flows from investing activities:
Purchase of property and equipment (169,932) (106,839)
Disposition of property and equipment 23,841 1,442
Acquisition of company, net of cash acquired - (75,846)
Net cash used by investing activities (146,091) (181,243)
Cash flows from financing activities:
Debt issued 597,106 109,950
Financing costs (3,859) (2,258)
Debt repaid (208,916) (21,178)
Decrease in outstanding checks (36,676) (33,181)
Acquisition of treasury stock (375) (331)
Issuance of common stock 6,440 3,947
Net cash provided by financing activities 353,720 56,949
</TABLE>
(Continued)
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 29, 1995 July 30, 1994
<S> <C> <C>
Net increase (decrease) in cash 31,683 (124,293)
Cash at beginning of period 206,490 222,428
Cash at end of period $ 238,173 $ 98,135
Supplemental cash flow information:
Interest paid $ 168,239 $ 102,283
Interest received 23,046 22,529
Income taxes paid (net of refunds received) 28,861 66,257
Schedule of noncash investing and financing
activities:
Capital lease obligations for new store
fixtures - 1,545
Debt assumed in acquisition of company - 40,000
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
A description of the Company's significant accounting policies
is included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 28, 1995 (the "1994 10-K"). The
accompanying Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and
notes thereto in the 1994 10-K.
Because of the seasonal nature of the general merchandising
business, the results of operations for the 13 and 26 weeks
ended July 29, 1995 and July 30, 1994 (which do not include
the Christmas season) are not indicative of such results for
the fiscal year.
The Consolidated Financial Statements for the 13 and 26 weeks
ended July 29, 1995 and July 30, 1994, in the opinion of
management, include all adjustments (consisting only of normal
recurring adjustments) considered necessary to present fairly,
in all material respects, the consolidated financial position
and results of operations of the Company and its subsidiaries.
Certain reclassifications were made to prior years' amounts to
conform with the classifications of such amounts for the
current period.
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 July 30, 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
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
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>
(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 and the purchase price has been
allocated to Macy's assets and liabilities based on their
estimated fair values at the date of acquisition. Including
certain adjustments recorded in the 26 weeks ended July 29,
1995 to the assets and liabilities acquired, the excess of
cost over net assets acquired is approximately $350.6 million.
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 period presented.
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 30, 1994 July 30, 1994
<S> <C> <C>
(millions, except per share figures)
Net sales $ 2,987.8 $ 5,984.8
Net income (loss) 18.7 (20.9)
Earnings (loss) per share .10 (.12)
</TABLE>
The foregoing unaudited pro forma condensed statements of
operations give effect to, among other pro forma adjustments,
the following:
(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.
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
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
approximates the estimated fair value of the assets and
liabilities acquired. Results of operations for the stores
acquired are included in the Consolidated Financial Statements
from the date of acquisition. Pro forma financial results
have not been presented for this acquisition since it did not
significantly affect results of operations of the Company.
3. Business Integration and Consolidation Expenses
During the 26 weeks ended July 29, 1995, the Company recorded
$172.3 million of business integration and consolidation
expenses associated with the integration of Macy's into the
Company ($145.2 million) and the consolidation of the
Company's Rich's/Goldsmith's and Lazarus divisions ($27.1
million). The primary components of the Macy's integration
expenses were $67.8 million of inventory valuation adjustments
to merchandise in lines of business which the Company,
subsequent to the acquisition, eliminated or replaced, $21.6
million of costs to close and sell certain stores and to
convert a number of stores to other nameplates, $19.7 million
of severance costs and $36.1 million of other costs and
expenses associated with integrating Macy's into the Company.
Of the $27.1 million of expenses associated with the
divisional consolidation referred to above, $20.4 million
relates to inventory valuation adjustments to merchandise of
the affected divisions in lines of business which were
eliminated or replaced as a result of the consolidation.
During the 26 weeks ended July 30, 1994, the Company recorded
$27.0 million of business integration and consolidation
expenses for the integration of the facilities, and the
merchandising and operating functions, of the ten Horne's
department stores into the Company's Lazarus division.
The Company's accrued severance liability related to business
integration and consolidation expenses of $26.1 million at
January 28, 1995 was paid out during the 26 weeks ended July
29, 1995.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company acquired Macy's on December 19, 1994, and effected
other acquisitions (and dispositions) during its 1994 fiscal
year. Under the purchase method of accounting, the assets,
liabilities and results of operations associated with such
acquisitions have been included in the Company's financial
position and results of operations since the respective dates
thereof. Accordingly, the financial position and results of
operations of the Company presented and discussed herein are
generally not directly comparable between years.
Results of Operations
Comparison of the 13 Weeks Ended July 29, 1995 and July 30, 1994
For purposes of the following discussion, all references to
"second quarter of 1995" and "second quarter of 1994" are to
the Company's 13-week fiscal periods ended July 29, 1995 and
July 30, 1994, respectively.
Net sales for the second quarter of 1995 totaled $3,047.3
million, compared to net sales of $1,596.1 million for the
second quarter of 1994, an increase of 90.9%. Since July 30,
1994, the company added 133 department stores (121 through the
Macy's acquisition) and more than 135 specialty and clearance
stores and closed nine department stores. All of the specialty
and clearance stores were added through the Macy's
acquisition. Comparable store sales for the second quarter of
1995 increased 6.2% over the second quarter of 1994, including
sales of the Macy's stores that were open throughout both such
quarters.
Cost of sales was 61.1% as a percent of net sales for both the
second quarter of 1995 and the second quarter of 1994. Cost of
sales includes no charge in the second quarter of 1995
compared to a charge of $0.6 million in the second quarter of
1994 resulting from the valuation of merchandise inventory on
the last-in, first-out basis.
Selling, general and administrative expenses were 35.1% as a
percent of net sales for the second quarter of 1995 compared
to 33.5% for the second quarter of 1994. Since the credit card
programs relating to the acquired Macy's divisions are owned
by a third party, revenue from credit operations decreased as
a percentage of sales. Because selling, general and
administrative expenses are reported net of revenue from
credit operations, such decrease was the major factor
contributing to the increase in the selling, general and
administrative expense rate.
Business integration and consolidation expenses for the second
quarter of 1995 consist of $71.7 million associated with
integration of Macy's into the Company and $17.3 million
related to the consolidation of the Company's
Rich's/Goldsmith's and Lazarus divisions. For the second
quarter of 1994, business integration and consolidation
expenses of $27.0 million represents the one-time charge
associated with the integration of the ten Horne's stores into
the Company's Lazarus division.
Net interest expense was $103.2 million for the second quarter
of 1995, compared to $48.7 million for the second quarter of
1994. The higher interest expense for the second quarter of
1995 is principally due to the higher levels of borrowings
incurred in connection with the acquisition of Macy's.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
The Company's effective income tax rate of 34.0% for the
second quarter of 1995 differs from the federal income tax
statutory rate of 35% principally because of permanent
differences arising from the amortization of intangible assets
and state and local income taxes.
Comparison of the 26 Weeks Ended July 29, 1995 and July 30, 1994
For purposes of the following discussion, all references to
"1995" and "1994" are to the Company's 26 week fiscal periods
ended July 29, 1995 and July 30, 1994, respectively.
Net sales for 1995 were $6,035.3 million compared to $3,249.7
million for 1994, an increase of 85.7%. On a comparable store
basis, net sales increased 3.7%, including sales of the Macy's
stores that were open throughout both periods.
Cost of sales was 61.1% as a percent of net sales for 1995
compared to 61.0% for 1994. Cost of sales includes charges of
$1.8 million in 1995 compared to $5.8 million in 1994
resulting from the valuation of merchandise inventory on the
last-in, first-out basis. Additionally, because the Macy's
divisions have historically experienced higher inventory
shortages than the Company prior to the Macy's acquisition,
cost of sales for 1995 reflects higher anticipated inventory
shortage adjustments.
Selling, general and administrative expenses were 35.4% as a
percent of net sales for 1995 compared to 33.2% for 1994.
Since the credit card programs relating to the acquired Macy's
divisions are owned by a third party, revenue from credit
operations decreased as a percentage of sales. Because
selling, general and administrative expenses are reported net
of revenue from credit operations, such decrease was the major
factor contributing to the increase in the selling, general
and administrative expense rate.
Business integration and consolidation expenses for 1995
consist of $145.2 million associated with the integration of
Macy's into the Company and $27.1 million related to the
consolidation of the Company's Rich's/Goldsmith's and Lazarus
divisions. During the remainder of fiscal 1995, the Company
presently expects to incur approximately $90.0 million of
additional business integration and consolidation expenses as
a result of the Macy's acquisition, the divisional
consolidation referred to above and the discontinuation of
the Company's clearance store operations.
Net interest expense was $200.8 million for 1995 compared to
$94.0 million for 1994. The higher interest expense for 1995
is principally due to higher levels of borrowing incurred in
connection with the acquisition of Macy's.
The Company's effective income tax rate of 34.1% for 1995
differs from the federal income tax statutory rate of 35.0%
principally because of permanent differences arising from the
amortization of intangible assets and state and local income
taxes.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Liquidity and Capital Resources
For purposes of the following discussion, all references to
"1995" and "1994" are to the Company's 26 week fiscal periods
ended July 29, 1995 and July 30, 1994, respectively.
The Company's principal sources of liquidity are cash from
operations, cash on hand and available credit facilities.
Net cash used by operating activities in 1995 increased $175.9
million compared to net cash provided by operating activities
in 1994. The most significant factors contributing to this
increased use of cash were lower net income in 1995 and higher
payments of non-merchandise payables and accrued liabilities
(including merger - related liabilities). Partially
offsetting these factors was the higher decrease in accounts
receivable balances during 1995.
Net cash provided by the Company for all financing activities
was $353.7 million for 1995, and net cash used in investing
activities was $146.1 million. During 1995, the Company sold
$597.1 million of receivables backed certificates. The Company
repaid $99.9 million of short-term debt under its bank credit
facility and commercial paper program and $109.1 million of
other debt, consisting primarily of the Company's subsidiary
trade obligations. The Company opened five department stores
and closed four department stores in 1995.
As discussed in Item 5 of this report, the Company has entered
into agreements providing for the acquisition by the Company
of Broadway Stores, Inc. ("Broadway") in exchange for
approximately 12.7 million shares of the Company's common
stock. In addition, the Company, a wholly owned subsidiary of
the Company ("FNC II"), and Prudential entered into an
agreement (the "Prudential Agreement") providing for the
purchase by FNC II from Prudential of certain mortgage
indebtedness of Broadway for consideration consisting of a
$221.1 million promissory note of FNC II and, at FNC II's
option, either $200.0 million in cash or a number of shares of
the Company's common stock determined in accordance with the
provisions of the Prudential Agreement. According to
information furnished to the Company by Broadway, at and for
the 26 weeks ended July 29, 1995, Broadway had total assets of
$1,911.6 million, shareholders' equity of $305.4 million,
sales of $884.6 million, and a net loss of $80.7 million.
Management believes the department store industry will
continue to consolidate. Accordingly, the Company intends
from time to time to consider additional acquisitions of
department store assets and companies.
Management of the Company believes that, with respect to its
current operations, cash on hand and funds from operations,
together with its credit facilities, will be sufficient to
cover its reasonably foreseeable working capital, capital
expenditure and debt service requirements. 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. Depending upon conditions in the capital markets
and other factors, the Company will from time to time consider
other possible capital markets transactions to reduce its cost
of capital, including the refinancing of indebtedness.
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Item 1. Legal Proceedings
The information regarding legal proceedings contained in
the Company's Quarterly Report on Form 10-Q for the period
ended April 29, 1995 covers events known to the Company
and occurring prior to June 6, 1995. The following is a
general description of certain developments in the legal
proceedings known to the Company that arose subsequent to
that date and prior to September 5, 1995.
Cash Payment Claims Against Macy's Debtors. As reported
in the 1994 10-K, certain claims or portions thereof
(collectively the "Cash Payment Claims") against the
Macy's Debtors which, to the extent allowed by the United
States Bankruptcy Court for the Southern District of New
York, will be paid in cash pursuant to the Macy's POR, are
currently disputed by the Company. As of September 5,
1995, the aggregate face amount of disputed Cash Payment
Claims was approximately $385.4 million, while the
estimated allowed amount thereof was approximately $257.0
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.
Other Proceedings. 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 consolidated financial
position or results of operations.
Item 5. Other Information
On August 14, 1995, the Company, a wholly owned subsidiary
of the Company ("Newco"), and Broadway entered into an
agreement (the "Merger Agreement") pursuant to which, on
the terms and subject to the conditions set forth therein,
Newco will be merged with and into Broadway (the
"Merger"), and Broadway will thereby become a subsidiary
of the Company. At the effective time of the Merger,
among other things, each outstanding share of Broadway
common stock will be converted into 0.27 shares of the
Company's common stock, resulting in the issuance of
approximately 12.7 million shares of the Company's common
stock. In connection with the Merger Agreement, the
Company and Zell/Chilmark Fund, L.P. ("Zell/Chilmark")
entered into an agreement (the "Stock Agreement"),
pursuant to which, among other things, Zell/Chilmark
agreed to vote the approximately 54% of the outstanding
shares of Broadway common stock owned by it in favor of
the adoption of the Merger Agreement and granted to the
Company an option to purchase such shares for
consideration consisting of 0.27 shares of the Company's
common stock for each such share of Broadway common stock.
In addition, the Company, FNC II, and Prudential entered
into the Prudential Agreement providing for the purchase
by FNC II from Prudential of certain mortgage indebtedness
of Broadway for consideration consisting of a $221.1
million promissory note of FNC II and, at FNC II's option,
either $200.0 million in cash or a number of shares of the
Company's common stock determined in accordance with the
provisions of the Prudential Agreement.
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC. - continued
The consummation of the foregoing transactions is subject
to the satisfaction or waiver of various conditions, as to
which there can be no assurance. The Merger Agreement,
the Stock Agreement, and the Prudential Agreement are
filed herewith as Exhibits 10.1, 10.2, and 10.3,
respectively, and are incorporated herein by this
reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Agreement and Plan of Merger, dated as of August
14, 1995, among Broadway, the Company, and Newco
(incorporated by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4, Registration No.
33-62077)
10.2 Stock Agreement, dated as of August 14, 1995,
between the Company and Zell/Chilmark (incorporated by
reference to the Company's Schedule 13D, dated August 14,
1995, relating to the common stock of Broadway)
10.3 Purchase Agreement, dated as of August 14, 1995,
among Prudential, the Company, and FNC II
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter
ended July 29, 1995.
FEDERATED DEPARTMENT STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
FEDERATED DEPARTMENT STORES, INC.
Date September 8, 1995 /s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President, General
Counsel and Secretary
/s/ John E. Brown
John E. Brown
Senior Vice President
and Controller
(Principal Accounting Officer)
PURCHASE AGREEMENT,
Dated as of August 14, 1995,
Among
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
FEDERATED NOTEHOLDING CORPORATION II,
and
FEDERATED DEPARTMENT STORES, INC.
This Purchase Agreement (this "Agreement") is made and
entered into on August 14, 1995 by and among The Prudential
Insurance Company of America, a New Jersey corporation
("Seller"), Federated Noteholding Corporation II, a Delaware
corporation ("Buyer"), and Federated Department Stores, Inc., a
Delaware corporation ("Parent").
RECITALS:
A. Seller holds the promissory notes (collectively, the
"Notes") and mortgages and deeds of trust (collectively, the
"Mortgages") listed on Schedule A issued pursuant to the Loan
Modification Implementation Agreement and Amendment to Loan
Agreements, License Agreement and Other Loan Documentation, dated
as of October 8, 1992 (the "Loan Agreement"), by and between
Seller and Broadway Stores, Inc., a Delaware corporation
(formerly known as Carter Hawley Hale Stores, Inc.)(the
"Company"), pursuant to which the Company and Seller restructured
the $350,000,000 Secured Loan made by Seller to the Company on
August 27, 1987 and the $30,000,000 Secured Loan made by Seller
to the Company on August 3, 1990.
B. Seller wishes to sell, transfer, assign, and deliver
(collectively, "Transfer") to Buyer, and Buyer wishes to purchase
and acquire from Seller, Seller's entire right, title, and
interest in and to the Indebtedness (as hereafter defined) upon
the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE
1.1. Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, Seller shall Transfer to
Buyer, and Buyer shall purchase and accept from Seller, at the
Closing (as hereafter defined), the Indebtedness. As used in
this Agreement, "Indebtedness" means any and all right, title,
and interest of Seller in and to: (a) all rights and claims of
Seller arising under, in connection with, or relating to the
Notes, the Mortgages, the Loan Agreement, and all other
promissory notes, security agreements, title insurance policies,
financing statements, assignments, assignments of leases,
mortgages, deeds of trust, license agreements, environmental
agreements, and any other agreements entered into or other
documents executed under, in connection with, or relating to the
Notes, the Mortgages, or the Loan Agreement, or any extension
thereof or substitution for any of the foregoing (collectively,
the "Loan Documents"), including without limitation all (i)
principal amounts due under the Notes, the Mortgages, the Loan
Agreement, the Loan Documents, or any such extension thereof or
substitution therefor, (ii) accrued and unpaid installments of
monthly interest under the Loan Documents ("Regular Interest"),
accruing subsequent to the Closing, and (iii) any accrued and
unpaid additional or contingent interest, any rights to payment
of yield maintenance, any interest rate kicker, and any other
similar amounts at any time payable under the Loan Documents
("Other Payments") accruing subsequent to the Closing; (b) all
collateral securing any of the obligations of the Company under
the Loan Documents (the "Collateral"); (c) any payment or other
distribution on account of the Indebtedness on or after the date
hereof, including without limitation: (1) payments made on or
after the date hereof on account of the Indebtedness under the
terms of or otherwise pursuant to the Loan Documents or on
account of the Collateral; (2) adequate protection payments made
pursuant to applicable provisions of the United States Bankruptcy
Code, 11 U.S.C. 101-1330, and authorizing orders of a
Bankruptcy Court; (3) distributions required or permitted under,
or otherwise contemplated by, a confirmed plan or reorganization
for the Company; (4) distributions made on account of the
Indebtedness by any trustee appointed in any Bankruptcy Case of
the Company or any succeeding cases under chapter 7 of the
Bankruptcy Code; and (5) distributions of any proceeds from the
foreclosure, sale, liquidation, collection, exchange, or other
disposition of some or all of the Collateral; and (d) any and all
causes of action or claims of Seller (whether known or unknown)
against any person or entity which in any way is based upon,
arises out of, or is related to any of the foregoing, including
without limitation (A) any right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured and (B) any right to an
equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured;
it being understood and agreed, however, that the Indebtedness
shall not include, and that Seller shall retain all right, title,
and interest in and to, (x) causes of action or claims of Seller
relating solely to indemnification rights of Seller against the
Company pursuant to the Loan Documents ("Indemnity Claims") (but
only to the extent, if any, that such exclusion is necessary to
preserve Seller's ability effectively to exercise in full its
rights against the Company with respect to such Indemnity Claims
to the extent that it is actually exposed to the risks
contemplated to be addressed thereby, (y) Other Payments accruing
and paid prior to the Closing, and (z) Regular Interest accruing
and paid prior to the Closing.
1.2. Consideration for the Indebtedness. In consideration
of the Transfer of the Indebtedness to Buyer and the other
undertakings of Seller in this Agreement, Buyer shall deliver to
Seller the following:
1.2.1. Cash or Common Stock of Parent. Upon the Closing,
Buyer shall, at its option, either (a) pay to Seller cash in the
amount of $200,000,000 or (b) deliver to Seller the number of
shares of Common Stock, par value $.01 per share, of Parent
("Common Stock") determined in accordance with the next sentence
of this Section 1.2.1. If the closing price for shares of Common
Stock on the New York Stock Exchange (the "NYSE") on the trading
day next preceding the date upon which the Closing (as hereafter
defined) occurs (such date, the "Closing Date") is greater than
$29-5/8, the number of shares deliverable to Seller pursuant to
this Section 1.2.1 shall be equal to the quotient that results
from dividing $200,000,000 by such closing price; if the closing
price for shares of Common Stock on the NYSE on the trading day
next preceding the Closing Date is less than $29-5/8 or less, the
number of shares deliverable to Seller pursuant to this Section
1.2.1 shall be 6,751,055.
1.2.2. Buyer's Note. Upon the Closing, Buyer shall deliver
to Seller a promissory note, in the form of Exhibit A (the "Buyer's
Note"), in the aggregate principal amount equal to
$221,149,531.00, reduced by the amount of all payments or
distributions referred to in clauses (a) through (c) of the
second sentence of Section 1.1 (other than those in respect of
the items excluded pursuant to clauses (x), (y), and (z) of the
last sentence of Section 1.1) (collectively, the "Distributions")
received by Seller between the date hereof and the Closing, and
increased by (i) expenses incurred on or after the date hereof
and prior to the Closing by Seller to preserve the Collateral and
protect its interests therein, (ii) Regular Interest and Other
Payments accruing but not paid prior to the Closing.
1.2.3. Contingent Payment. If the closing price for shares
of Common Stock on the NYSE on the trading day next preceding the
Closing Date is less than $29-5/8, and the average closing price
for shares of Common Stock on the NYSE for the period of 10
trading days next following the Closing Date (the "Post-Closing
Average Price") is also less than $29-5/8, Buyer shall pay or
deliver to Seller an additional amount (the "Contingent Payment
Amount") equal to the product of (a) the amount by which $29-5/8
is greater than the Post-Closing Average Price and (b) 6,751,055.
The Contingent Payment Amount, if any, will be payable at Buyer's
option, in (x) cash, (y) shares of Common Stock (valued for such
purpose at the closing price for shares of Common Stock on the
NYSE on the last day of the 10-trading day period referred to
above), or (z) by amending the Buyer's Note (and, to the extent
necessary to reflect such amendment, the Other Buyer Documents
and Other Seller Documents (as such terms are hereafter defined)
to increase the principal amount thereof by an amount equal to
the Contingent Payment Amount. The Contingent Payment Amount, if
any, shall be paid (i) on the first business day next following
the conclusion of the aforementioned 10-trading day period, if
paid in cash or (ii) on the fifth business day next following the
conclusion of the aforementioned 10-trading day period, if paid
in shares of Common Stock or by amending the Buyer's Note (with
the issuance to Seller of such shares of Common Stock or the
amendment to the Buyer's Note, as the case may be, being deemed
to have been effective as of the first business day next
following the conclusion of the aforementioned 10-trading day
period).
1.3. Security. Upon the Closing, as security for payment of
Buyer's obligations evidenced by the Buyer's Note (and the other
obligations of Buyer and/or Parent under the Other Buyer
Documents and the Other Parent Documents (collectively, the
"Other Buyer/Parent Documents)), (a) Buyer shall grant to Seller
a security interest in the Indebtedness pursuant to the security
agreement in the form of Exhibit B (the "Security Agreement"),
(b) Parent shall enter into the Guaranty in the form of Exhibit C
(the "Guaranty"), and (c) Parent shall grant to Seller a security
interest in and shall pledge to Seller all of the issued and
outstanding capital stock of Buyer pursuant to a pledge agreement
in the form of Exhibit D (the "Parent Pledge Agreement").
II. CLOSING
2.1. Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall not occur
until all of the conditions precedent to the obligations of Buyer
and Seller set forth in Articles VI and VII of this Agreement
shall have been satisfied or duly waived.
2.2. Seller's Deliveries at Closing. At the Closing, in
addition to any other documents specifically required to be
delivered pursuant to this Agreement, Seller shall deliver or
cause to be delivered to Buyer originals of each of the Loan
Documents listed on Schedule 2.2.
2.3. Buyer's Deliveries at Closing. At the Closing, in
addition to any other documents specifically required to be
delivered pursuant to this Agreement, Buyer shall deliver or
cause to be delivered to Seller the following: (a) the cash or
shares of Common Stock, as the case may be, provided for in
Section 1.2.1, (b) the Buyer's Note, (c) the Security Agreement,
(d) the Guaranty, (e) the Parent Pledge Agreement, (f) UCC
financing statements appropriate to perfect the security
interests granted pursuant to the Security Agreement and the
Parent Pledge Agreement, (g) an opinion of Jones, Day, Reavis &
Pogue, counsel to Buyer and Parent, substantially in the form of
Exhibit E, addressed to Seller and dated the Closing Date, (h) an
opinion of the General Counsel of Parent substantially in the
form of Exhibit F, addressed to Seller and dated the Closing
Date, and (i) a certificate of the Secretary of Parent, dated the
Closing Date, certifying as to the certificate of incorporation
and by-laws of Parent, the authorization by Parent's board of
directors of the execution, delivery, and performance of this
Agreement and the Parent Pledge Agreement, and the equity
capitalization of the Company giving pro forma effect to the
merger (the "Merger") provided for in the Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"),
among the Company, Parent, and Nomo Company, Inc.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1. Seller represents and warrants to Buyer and Parent as
follows:
3.1.1. Power and Authority; No Conflict. Seller is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of New Jersey, with all
requisite corporate power and authority to enter into this
Agreement and the Other Seller Documents (as used in this
Agreement, "Other Seller Documents" means the documents listed on
Schedule 3.1.1) and to perform its obligations hereunder and
thereunder. This Agreement and each of the Other Seller
Documents have been duly and validly authorized, executed, and
delivered by Seller. The execution, delivery, and performance of
this Agreement and each of the Other Seller Documents by Seller
do not and shall not violate, breach, or constitute a default (or
an event which with or without notice and/or lapse of time would
constitute a default) under Seller's organizational documents or
by-laws or any agreement or instrument to which Seller is a party
or by which it is bound (assuming the satisfaction of the
condition specified in Section 7.4), including without limitation
under the Loan Documents or any statute, ordinance, rule,
regulation, or order (collectively, any "Legal Requirement") of
any Governmental Authority (as hereafter defined) applicable to
Seller, or result in the creation of any lien, encumbrance, or
security interest (collectively, any "Lien") on or in any
Indebtedness except as contemplated hereby; provided, however,
that insofar as the foregoing representation and warranty relates
to the Loan Documents or any other document affecting or relating
to any of the Mortgaged Properties, it is limited to Seller's
knowledge (which Seller's knowledge is for purposes hereof,
deemed to be only the actual knowledge' of Mark E. Couchman).
This Agreement and each of the Other Seller Documents is a legal,
valid, and binding obligation of Seller, enforceable against
Seller in accordance with its terms.
3.1.2. No Required Consents. No registration or filing with,
notice to, or consent or approval of, or other action by, any
federal, state, or other governmental agency, authority,
administrative or regulatory body, arbitrator, or court or other
tribunal, foreign or domestic (any "Governmental Authority"), or
of the Company (assuming the satisfaction of the condition
specified in Section 7.4), is required in connection with the
execution, delivery, and performance of this Agreement or the
Other Seller Documents by Seller or the Transfer by Seller of the
Indebtedness hereunder provided, however, that insofar as the
foregoing representation and warranty relates to notices,
consents, approvals, or other actions required of the Company, it
is limited to Seller's knowledge (which Seller's knowledge is,
for purposes hereof, deemed to be only the actual knowledge of
Mark E. Couchman).
3.1.3. Status of Notes. The aggregate unpaid principal amount
of the Notes as of the date hereof is $421,149,531.00. No
default in the timely payment of principal, interest, or any
other amount due and payable under the Notes, the Loan Agreement,
or any of the other Loan Documents has occurred and is
continuing. To Seller's knowledge (which Seller's knowledge is,
for purposes hereof, deemed to be only the actual knowledge of
Mark E. Couchman), no other event of default or event which, with
notice or the passage of time (or both), would constitute an
event of default under the Notes, the Loan Agreement, or any of
the other Loan Documents (other than any default that may be
triggered by a material adverse change in the financial condition
of the Company) has occurred. Neither the Company nor any other
person or entity has asserted or threatened to contest the
validity, priority, amount, or nature of any of the Indebtedness.
None of the Loan Documents requires Seller to extend any
additional credit to the Company, and no sum is due from Seller
or has been demanded from Seller by the Company. Seller has no
knowledge (which Seller's knowledge is, for purposes hereof,
deemed to be only the actual knowledge of Mark E. Couchman) that
any of the Loan Documents are not (a) legal, valid, and binding
obligations of the Company enforceable against the Company in
accordance with their terms, and Seller has no knowledge (which
Seller's knowledge is, for purposes hereof, deemed to be only the
actual knowledge of Mark E. Couchman) that (x) the Liens securing
the obligations of the Company under the Loan Documents are not
valid and enforceable against the Company or are not entitled to
the priorities set forth in the Loan Documents or (y) since the
issuance of the Notes, Seller has not made all necessary
recordings and filings, and any required renewals thereof, in
order to perfect and maintain the priority of Liens in the
Collateral existing as of the initial execution date of the Loan
Documents, subject to any subsequently arising superior Liens in
respect of real property taxes.
3.1.4. Ownership of the Notes and the Indebtedness. Seller is
the sole legal and beneficial owner and holder of the Notes and
the Indebtedness, and has good and marketable title thereto, free
and clear of any Liens. Seller's right, title, and interest in
and to the Notes and the Indebtedness is not subject, directly or
indirectly, to any pledge, encumbrance, assignment, transfer,
conveyance, disposition of, or termination, in whole or in part,
except to Buyer hereunder and except as created pursuant to the
terms and conditions of the Loan Documents.
3.1.5. No Violation of Securities Laws. Without implying any
characterization of the Notes or the Indebtedness or any interest
therein as a "security" within the meaning of any applicable
securities laws, neither Seller nor any of its Affiliates, nor
any agent or other representative of any of the foregoing, has
offered to sell or solicited any offer to buy the Notes or the
Indebtedness or any portion thereof in a manner that requires
registration of any such act under any applicable securities
laws.
3.1.6. No Brokers. Seller is not party to any agreement nor
has it taken any action as a result of which Buyer or Parent
would become obligated to pay any broker, finder, or other person
or entity a commission, finder's fee, or other similar payment as
a result of this Agreement or the transactions contemplated
hereby.
3.1.7. Investment Purposes. The Stock is being acquired by
and shall be held by Seller solely for the "purpose of
investment" as that phrase is defined in 16 C.F.R. 802.9.
3.2. Buyer and Parent Acknowledgement. Each of Buyer and
Parent hereby (a) acknowledges that, as among the parties only,
based on publicly available information and a review of the Loan
Documents, it has made its own independent investigation,
analysis, and interpretation of the Indebtedness, Loan Documents,
the Company, the Collateral, the business, financial condition,
capital structure, and results of operations of the Company (the
Indebtedness, the Loan Documents, the Company, the Collateral,
and such business, financial condition, capital structure, and
results of operations being hereafter referred to as the
"Reviewed Information"), and is satisfied as to such
investigation, analysis, and interpretation, and the terms of
this Agreement, the Other Seller Documents, and the Other
Buyer/Parent Documents (as hereafter defined), (b) irrevocably
waives any claim against Seller based on nondisclosure, including
without limitation nondisclosure relating to the Reviewed
Information whether based upon any actual or alleged common law
fraud, breach of any securities, deceptive trade practices, or
other laws, or otherwise, except as set forth in the last clause
of clause (c) immediately below, and (c) acknowledges that Seller
has not made any representation or warranty, whether express or
implied, of any kind or character, including without limitation
any representation or warranty relating to (i) compliance of the
Collateral with any Legal Requirements relating to the protection
of the environment, (ii) the physical condition of the real
property subject to the Mortgages or of any improvements located
thereon and/or which secure the Loans, (iii) the business,
financial condition, or prospects of the Company or of any store
located on any of the Mortgaged Properties, or (iv) the
compliance of the Company with any Legal Requirements, except as
expressly set forth in this Agreement, any of the Other Seller
Documents, or in any other document or instrument executed by
Seller and delivered to Buyer or Parent making express reference
to this Section 3.2.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
4.1. Representations and Warranties. Parent and Buyer
jointly and severally represent and warrant to Seller as follows:
4.1.1. Power and Authority; No Conflict, Etc. (a) Each of
Buyer and Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to
enter into and to perform its obligations hereunder and under
each of the Other Buyer Documents (as used in this Agreement,
"Other Buyer Documents" means the documents listed on Schedule
4.1.1(a)) and the Other Parent Documents (as used in this
Agreement, "Other Parent Documents" means the documents listed on
Schedule 4.1.1(b)) (collectively, the "Other Buyer/Parent
Documents") to which it is a party. This Agreement and each of
the Other Buyer/Parent Documents has been duly and validly
authorized, executed, and delivered by each of Parent and Buyer
that is party thereto. The execution, delivery, and performance
of this Agreement and each of the Other Buyer/Parent Documents to
which Buyer or Parent is a party does not and shall not violate,
breach, or constitute a default (or an event which with or
without notice and/or lapse or time would constitute a default)
under Buyer's or Parent's organizational documents or any
agreement or instrument to which Parent or Buyer is a party or by
which either of them is bound (assuming the receipt of the
consents and waivers identified on Schedule 6.4), or any Legal
Requirement applicable to Parent or Buyer, or result in the
creation of any Lien on or in any Indebtedness except as
contemplated hereby. Each of this Agreement and the Other
Buyer/Parent Documents to which Buyer or Parent is a party is a
legal, valid, and binding obligation of Buyer and Parent,
enforceable against each of them in accordance with its terms.
4.1.2. No Required Consents. Except for the filing of UCC
financing statements with respect to the security interests
granted pursuant to the Security Agreement and Parent Pledge
Agreement and such filings, notices, consents, or approvals as
may be required under the Securities Act of 1933, as amended (the
"Securities Act"), and state blue sky laws in connection with the
performance by Parent of its obligations under Section 5.7, no
registration or filing with, notice to, or consent or approval
of, or other action by, any Governmental Authority is required in
connection with the execution, delivery, and performance of this
Agreement or the Other Buyer/Parent Documents by Buyer and Parent
or the purchase and acceptance by Buyer of the Indebtedness
hereunder.
4.1.3. Buyer's Investment. Without implying any
characterization of the Notes or the Indebtedness or any interest
therein as a "security" within the meaning of any applicable
securities laws, (a) each of Buyer and Parent is an "accredited
investor" as defined in Regulation D promulgated under the
Securities Act and (b) Buyer is not purchasing the Notes or the
Indebtedness with a view to, or for resale in connection with,
any distribution or public offering of all or any part thereof or
any interest therein in a manner that would violate applicable
securities laws.
4.1.4. No Brokers. Neither Buyer nor Parent is party to any
agreement or has taken any action as a result of which Seller
would become obligated to pay any broker, finder, or other person
or entity a commission, finder's fee, or other similar payment as
a result of the consummation of this Agreement or the
transactions contemplated hereby.
4.1.5. SEC Documents. (a) Parent has timely filed all forms,
reports and documents required to be filed by it with the
Securities and Exchange Commission ("SEC") since December 19,
1994 (collectively, the "Parent Reports"). As of their
respective dates, the Parent Reports, and any such reports,
forms, and other documents filed by Parent with the SEC after the
date of this Agreement (i) complied, or shall comply, as to form
in all material respects with the applicable requirements of the
Securities Act, the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
thereunder and (ii) did not, or shall not, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of
the preceding sentence shall not apply to any misstatement or
omission in any Parent Report filed prior to the date of this
Agreement which was superseded by a subsequent Parent Report
filed prior to the date of this Agreement. No Subsidiary of
Parent is required to file any report, form, or other document
with the SEC other than Prime Receivables Corporation, which has
timely filed all such reports, forms, and other documents
required to be so filed.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into Parent Reports (including the
related notes and schedules) presents fairly, in all material
respects, the consolidated financial position of Parent and its
Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings, and cash flows included
in or incorporated by reference into Parent Reports (including
any related notes and schedules) presents fairly, in all material
respects, the results of operations, retained earnings, or cash
flows, as the case may be, of Parent and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not
be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
Neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent,
or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of Parent or in the notes
thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except for
(i) liabilities or obligations that were so reserved on, or
reflected in (including the notes to), the consolidated balance
sheet of Parent as of January 28, 1995 or April 29, 1995,
(ii) liabilities or obligations arising in the ordinary course of
business since April 29, 1995, and (iii) liabilities or
obligations which would not, individually or in the aggregate,
have a material adverse effect on the business, results of
operations, or financial condition of Parent and its Subsidiaries
taken as a whole.
(c) Since April 29, 1995, without giving effect to the
transactions contemplated hereby or by the Merger Agreement,
there has not been any material adverse change in the business,
operations, financial condition, or results of operations of
Parent and its Subsidiaries taken as a whole.
4.1.6. Capitalization. (a) The authorized capital stock of
Parent consists of 500,000,000 shares of Common Stock, and
125,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"). As of July 29, 1995, there were 182,931,302
shares of Common Stock and no shares of Preferred Stock issued
and outstanding (excluding 29,474,155 shares of Common Stock held
by wholly owned subsidiaries of Parent). All such issued and
outstanding shares of Common Stock are duly authorized, validly
issued, fully paid, and nonassessable and were issued in
compliance with the Securities Act and, except where the failure
to have been so issued would not have a material adverse effect
on the financial condition or results of operations of Parent and
its Subsidiaries taken as a whole, applicable state blue sky
laws. Except as contemplated by this Agreement, the Merger
Agreement, and the Stock Agreement, there are not at the date of
this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights or
agreements which obligate Parent or any of its Subsidiaries to
issue, transfer, or sell any shares of capital stock of Parent or
any of its Subsidiaries other than (a) Parent's Senior
Convertible Discount Notes due 2004 (which as of the date hereof
were convertible into an aggregate of 8,563,691 shares of Common
Stock), (b) Parent's Series A Warrants (which as of the date
hereof were exercisable to purchase an aggregate of 4,187,790
shares of Common Stock), (c) Parent's Series B Warrants (which as
of the date hereof were exercisable to purchase an aggregate of
1,047,000 shares of Common Stock), (d) Parent's Series C Warrants
(which as of the date hereof were exercisable to purchase an
aggregate of 9,000,000 shares of Common Stock), (e) Parent's
Series D Warrants (which as of the date hereof were exercisable
to purchase an aggregate of 9,000,000 shares of Common Stock),
(f) 81,600 shares of Common Stock issuable to the U.S. Treasury
under the Joint Plan of Reorganization of Federated Department
Stores, Inc., Allied Stores Corporation and certain of their
Subsidiaries, (g) the share purchase rights issued pursuant to
the Rights Agreement, dated as of December 19, 1994, between
Parent and the Bank of New York, as rights agent (which as of the
date hereof were not exercisable), and (h) under the Parent's
stock option and employee stock purchase plans or awards granted
pursuant thereto.
(a) All of the issued and outstanding shares of Common
Stock have been registered under Section 12(b) of the Exchange
Act and are listed on the NYSE and, to Parent's knowledge, no
proceeding for the deregistration of such shares under the
Exchange Act or the delisting of such shares by the NYSE is
pending or threatened.
(b) All shares of Common Stock that shall be issued and
delivered to Seller pursuant to this Agreement shall, upon such
issuance and delivery in accordance with the provisions hereof,
shall be duly authorized, validly existing, fully paid, and
nonassessable, and such shares are so issuable and deliverable
without the necessity of registration or qualification under the
Securities Act and applicable state blue sky laws.
4.1.7. Certain Actions. Prior to the date hereof, Buyer has not
taken any action that, had such action been taken on or after the
date hereof, would have been prohibited under Section 5.4.
4.1.8. Merger Agreement. Concurrently with the execution and
delivery of this Agreement, Parent has delivered to Seller a true
and correct copy of the Merger Agreement, together with a true
and correct copy of the Stock Agreement referred to therein (the
"Stock Agreement").
4.2. Seller's Acknowledgement. Seller hereby acknowledges
that neither Buyer nor Parent has made any representation or
warranty, whether express or implied, of any kind or character,
except as expressly set forth in this Agreement or any of the
Other Buyer/Parent Documents.
V. CERTAIN COVENANTS
5.1. Indemnification. (a) Seller shall indemnify, defend,
and hold harmless Buyer and Parent from and against any and all
expenses (including without limitation reasonable attorneys' fees
and expenses), losses, claims, damages, liabilities, and
obligations (collectively, "Indemnifiable Losses") incurred by or
threatened against either of them relating to, resulting from, or
arising out of Seller's breach of any of the representations,
warranties, covenants, or agreements of Seller set forth in this
Agreement or in any of the Other Seller Documents.
(a) Buyer and Parent, jointly and severally, shall
indemnify, defend, and hold harmless Seller from and against any
and all Indemnifiable Losses incurred by or threatened against
Seller relating to, resulting from, or arising out of Buyer's or
Parent's breach of any of the representations, warranties,
covenants, or agreements of Buyer or Parent set forth in this
Agreement or in any of the Other Buyer/Parent Documents.
(b) From and after the Closing, Buyer shall indemnify, defend,
and hold harmless Seller in respect of the same matters, on the
same terms, and to the same extent, but without duplication, as
the Company is obligated to indemnify, defend, and hold harmless
Seller pursuant to the Loan Documents.
(c) From and after the date hereof, Parent shall indemnify,
defend, and hold harmless Seller against any Indemnifiable Losses
to which Seller may become subject, insofar as such Indemnifiable
Losses (or actions in respect thereof) relate to, result from, or
arise out of the transactions contemplated hereby or the Merger
Agreement, the Stock Agreement, or the respective transactions
contemplated thereby, including without limitation any alleged
participation on the part of Seller therein or action of Seller
with respect thereto.
(d) The representations and warranties of each of the
parties contained in this Agreement or in any certificate or
other instrument or document delivered simultaneously herewith
shall survive the execution of this Agreement and remain in full
force and effect until the first anniversary of such date.
5.2. Publicity. Prior to publishing any press release or
similar public announcement with respect to this Agreement, the
Other Seller Documents, the Other Buyer/Parent Documents, or the
transactions contemplated hereby or thereby, each of Seller and
Parent shall consult with each other as to the nature and content
of such public release or announcement; provided, however, that
nothing herein shall prohibit either party from publishing any
press release or similar public announcement that it determines
in good faith to be required by any law or rule of any national
securities exchange on which its securities are listed or
admitted for trading.
5.3. No Liens on Indebtedness. Until the Closing or the
termination of this Agreement in accordance with Article VIII,
Seller shall not (a) subject the Indebtedness to any Lien or
(b) Transfer, or agree to Transfer, any of the Indebtedness or
any interest therein or portion thereof.
5.4. No Distributions; Etc. Prior to the Closing or
termination of this Agreement in accordance with Article VIII,
Buyer shall not (a) amend its Certificate of Incorporation or
By-Laws, (b) create or permit to exist any Lien on any of its
assets, except for Liens arising hereunder or under any Other
Buyer/Parent Documents and tax liens arising as a matter of law
in respect of liabilities that are not overdue or that are being
contested in good faith, (c) Transfer any of its assets other
than payments or in connection with the discharge of franchise
fees, taxes, and other liabilities arising as a matter of law,
(d) incur any liability for borrowed money or any other liability
("Debt"), other than franchise fees, taxes, and other liabilities
arising as a matter of law, or enter into any direct or indirect
guaranty of Debt of another person or entity, (e) declare or pay
any dividends (other than solely of shares of Buyer's capital
stock) on or make any other distributions in respect of, any
shares of its capital stock, or purchase, redeem, or acquire for
value any shares of its capital stock, or (f) engage in any
activity other than (i) actions contemplated hereby or the Other
Buyer/Parent Documents and (ii) ordinary corporate actions not
materially inconsistent with the foregoing limitations.
5.5. Further Assurances. After the Closing, Seller shall at
its expense (subject to reimbursement by Buyer of reasonable
attorneys' fees and expenses incurred by Seller in connection
therewith), from time to time, at Buyer's request execute and
deliver to Buyer such other instruments and documents and take
such other action as Buyer may reasonably request so as more
effectively to sell, transfer, assign, and deliver and vest in
Buyer title to and possession of the Indebtedness as provided in
this Agreement or otherwise to consummate the transactions
contemplated by this Agreement. After the Closing, Buyer or
Parent, as applicable, shall at its expense, from time to time,
at Seller's request execute and deliver to Seller such other
instruments and documents and take such other action as Seller
may reasonably request so as more effectively to provide and
preserve the benefits intended to be provided to Seller under the
Security Agreement and the Parent Pledge Agreement.
5.6. Inconsistent Actions. Seller shall take no actions
under or in connection with the Loan Documents against the
Company that could reasonably be likely to result in the
Company's being unable to perform its obligations under the
Merger Agreement; the foregoing notwithstanding, nothing herein
shall, prior to the Closing, limit Seller's rights under the Loan
Documents to enforce its rights to receive Distributions or the
payment of interest under the Loan Agreement or, subject to the
provisions of Section 5.3, Seller's rights as a creditor in any
bankruptcy or insolvency proceeding of which the Company is the
subject.
5.7. Registration Rights. Following the Closing and as
promptly as practicable after the earliest of (a) the
consummation of the Merger, (b) the withdrawl of Parent's
Registration Statement on Form S-4, relating to the Merger (the
"Form S-4"), and (c) February 29, 1996 if the Form S-4 shall not
have been filed as of such vote, Parent shall file, and
thereafter use its reasonable best efforts to cause to become and
to remain (for so long as the shares of Common Stock, if any,
delivered to Seller pursuant to Section 1.2 (the "Stock") then
held by Seller may not be resold free of restrictions without
registration under the Securities Act; provided, however, that
Parent shall in no event be required to cause such registration
statement to remain in effect beyond the third anniversary of the
Closing Date, and (b) Seller will promptly notify Parent when all
shares subject to such registration shall have been earlier sold
or otherwise disposed of by Seller. For so long as Parent is
required to cause such registration statement to remain in
effect, Parent shall use its reasonable best efforts to cause the
Stock to be (x) registered or qualified (to the extent not exempt
from such registration or qualification) for sale under the blue
sky laws of such states as Seller may reasonably request and (y)
listed on a national securities exchange or accepted for
quotation on the National Association of Securities Dealers
Automated Quotation System. All costs and expenses related to
such registration and listing (but not any of Seller's related or
unrelated costs and expenses) shall be borne by Parent.
5.8. Delivery of Property Received After Closing. From and
after the Closing, Seller shall transfer and deliver to Buyer,
promptly after its receipt thereof, any property (including
without limitation Collateral or proceeds of Collateral) that it
may receive but to which Buyer is entitled pursuant to the terms
of this Agreement.
5.9. HSR Act. As promptly as practicable (and in no event
later than the fifth business day) after the date hereof, Seller
shall determine in good faith whether, based upon the current
ownership of shares of Common Stock by Seller and its affiliates,
the issuance and delivery of the Stock to Seller pursuant to this
Agreement (assuming that the consideration provided for in
Section 1.2.1 will be delivered to Seller in the form of shares
of Common Stock) will require a filing by Seller (or its ultimate
parent) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). In the event Seller determines
that such a filing will not be required, upon the delivery by
Seller of the notice referred to in the preceding sentence, each
of Seller and Parent shall be deemed to have irrevocably waived
the conditions relating to the expiration or termination of any
waiting period under the HSR Act set forth in Section 7.3 and
Section 6.3, respectively. In the event that Seller determines
that such a filing will be required, Seller and Parent shall (a)
promptly make or cause to be made their respective filings and
thereafter make or cause to be made any other required
submissions under the HSR Act and (b) use all reasonable efforts
to take, or cause to be taken, all other action and do, or cause
to be done, all other things necessary or appropriate to cause
all applicable waiting periods under the HSR Act to expire or be
terminated as soon as possible.
5.10. Title Policies. In the event that Buyer elects to
obtain any new policy of title insurance with respect to any real
property interest included in the Collateral, Buyer shall cause
such policy to be issued in the name of Buyer and Seller as their
respective interests may appear.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT
Except to the extent expressly waived in writing by Buyer or
Parent, all obligations of Buyer under this Agreement are subject
to the fulfillment, at or before the Closing, of all of the
following conditions:
6.1. Representations and Warranties True at Closing. Each
of the representations and warranties of Seller contained in this
Agreement shall be true in all material respects on and as of the
Closing with the same effect as though made on and as of such
date.
6.2. Performance. Seller shall have performed in all
material respects each of the obligations and covenants of Seller
to be performed by it on or prior to the Closing pursuant to this
Agreement, including without limitation Seller's obligation to
deliver the documents specified in this Agreement.
6.3. Legal Requirements. There shall not be pending any
injunction, order, or decree by any United States federal or
state court or other Governmental Authority restraining,
preventing, or prohibiting the consummation of the transactions
provided for herein, and any waiting period under the HSR Act
applicable to the delivery to Seller of shares of Common Stock
pursuant to Section 1.2.1 shall have expired or been terminated.
6.4. Consents and Waivers. Parent shall have obtained the
consents and waivers set forth on Schedule 6.4.
6.5. Merger. The Merger shall have been consummated in
accordance with the Merger Agreement.
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Except to the extent expressly waived in writing by Seller,
the obligations of Seller set forth in this Agreement are subject
to the fulfillment by Buyer and Parent, at or before the Closing,
of all of the following conditions:
7.1. Representations and Warranties True at Closing. Each
of the representations and warranties of Buyer and Parent
contained in this Agreement shall be true in all material
respects on and as of the Closing with the same effect as though
made on and as of such date and Buyer and Parent shall not be in
default of any of the covenants set forth in Article V of this
Agreement.
7.2. Performance. Buyer and Parent shall have performed in
all material respects each of the obligations and covenants of
Buyer and Parent to be performed on or prior to the Closing
pursuant to this Agreement.
7.3. Legal Requirements. There shall not be pending any
injunction, order, or decree by any United States federal or
state court or other Governmental Authority restraining,
preventing, or prohibiting the consummation of the transactions
provided for herein, and any waiting period under the HSR Act
applicable to the delivery to Seller of shares of Common Stock
pursuant to Section 1.2.1 shall have expired or been terminated.
7.4. Consents and Waivers. A letter in the form of
Schedule 7.14 (the "Consent Letter") shall have been executed and
delivered by the parties thereto (which Seller hereby
acknowledges has occurred as of the date hereof) and the consent
set forth in paragraph (iv) thereof shall be in full force and
effect (except to the extent that Seller shall have withdrawn or
terminated enforcement or otherwise sought to cause each consent
to be withdrawn or terminated).
VIII. TERMINATION
8.1. Termination by Mutual Consent. At any time on or
prior to the Closing, this Agreement may be terminated by the
mutual written consent of Seller and Buyer without liability on
the part of Seller, Buyer, or Parent.
8.2. Termination Upon Breach or Default. (a) If (i) Buyer
or Parent shall materially default in the observance, or in the
due and timely performance, of any of the agreements or covenants
of either of them contained in this Agreement or (ii) if any of
Buyer's or Parent's representations or warranties set forth in
this Agreement were untrue in any material respect as of the date
of this Agreement or became untrue in any material respect as of
a subsequent date, Seller, provided it is not in material default
with respect to any of its obligations under this Agreement, may
terminate this Agreement upon ten business days' written notice
to Buyer and Parent, during which time Buyer and Parent shall
have an opportunity to cure such default or breach.
(a) If (i) Seller shall materially default in the
observance, or in the due and timely performance, of any of the
agreements or covenants contained in this Agreement or (ii)
Seller's representations or warranties set forth in this
Agreement were untrue in any material respect as of the date of
this Agreement or became untrue in any material respect as of a
subsequent date, Buyer and Parent, provided they are not in
material default with respect to any of their obligations under
the Agreement, may terminate this Agreement upon ten business
days' written notice to Seller, during which time Seller shall
have an opportunity to cure the default or breach.
8.3. Termination by Either Seller or Buyer. If the Closing
has not previously occurred, at any time after February 29, 1996,
this Agreement may be terminated by either Seller or Buyer upon
delivery to the other of a written notice to that effect, without
liability on the part of Seller or Buyer; provided, however, that
this Agreement may not be so terminated by Buyer unless the
Merger Agreement shall have been terminated.
IX. MISCELLANEOUS
9.1. Successors and Assigns. This Agreement, including the
representations, warranties, covenants, and agreements contained
herein, (a) shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and permitted
assigns and (b) shall be binding upon and enforceable against the
parties hereto and their respective successors and permitted
assigns; provided, however, that no party hereto may assign or
delegate any of its rights or obligations hereunder without the
prior written consent of the other parties hereto (which consent
may be given or withheld in the sole discretion of such other
parties).
9.2. Costs and Expenses. Buyer or Parent shall reimburse
Seller, promptly upon Seller's written request accompanied by
substantiating documentation in reasonable detail, for all
reasonable attorneys' fees and expenses incurred by Seller in
connection with the negotiation, preparation, execution, and
delivery of this Agreement, the Buyer's Note, the Security
Agreement, the Parent Pledge Agreement, and the Guaranty.
9.3. Amendments; Waivers. (a) No amendment, modification,
or supplement of any provision of this Agreement shall be
effective unless it is in writing and signed by Seller, Buyer,
and Parent.
(a) No action or inaction taken or omitted pursuant to
this Agreement shall be deemed to constitute a waiver of
compliance with any representations, warranties, or covenants
contained in this Agreement and shall not operate or be construed
as a waiver of any subsequent breach, whether of a similar or
dissimilar nature, and no failure on the part of any party to
exercise, and no delay in exercising, any right hereunder or
under any related document shall operate as a waiver thereof by
such party, nor shall any single or partial exercise of any right
hereunder or under any other related document preclude any other
or further exercise thereof or the exercise of any other right.
9.4. Notices. (a) Subject to Section 9.4(b), all demands,
notices, requests, consents, and communications hereunder shall
be in writing and shall be deemed to have been duly given if
personally delivered by courier service or messenger, sent by
overnight delivery service, or facsimile transmission, to the
following addresses, or such other persons, firms, or addresses
as may be furnished hereafter by notice in writing, to the
following parties:
(i) in the case of Seller, to:
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102
Attention: The Persons Listed on Schedule 9.4(a)
with a copy to:
(ii) in the case of Parent or Buyer, to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention: The Persons Listed on Schedule 9.4(b)
Fax No.: 513-579-7462
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Attention: Robert A. Profusek, Esq.,
Mark E. Betzen, Esq.
Fax No.: 212-755-7306
(b) All demands, notices, requests, consents, and
communications shall be deemed to have been given if addressed in
the manner described above: (i) if sent by hand, at the time of
actual delivery thereof, (ii) if sent by facsimile transmission,
upon receipt of confirmation of such facsimile transmission,
(iii) if sent by overnight delivery service, one business day
after deposit thereof with such delivery service; provided,
however, that notwithstanding the foregoing, all such demands,
requests, consents, notices, and communications shall be deemed
to have been given only if (A) in the case of Seller, the receipt
thereof is acknowledged in writing signed by one of the persons
listed on Schedule 9.4(a) at the address of Seller set forth
above, or, if after good faith efforts to obtain such
acknowledgement Buyer or Parent is unable to do so, by notice
given in the manner hereinabove contemplated to Seller's counsel,
Sonnenschein Nath & Rosenthal, 8000 Sears Tower, Chicago,
Illinois 60606-6404, Attn: Mark F. Mehlman; provided further,
however, that if after good faith efforts to obtain such
acknowledgement from such counsel, Buyer or Parent is unable to
do so, such demands, requests, consents, notices, and
communications shall be deemed to have been given if hand
delivered to each of the 3 aforesaid persons, without
acknowledgement of such receipt, or (B) in the case of Buyer or
Parent, the receipt thereof is acknowledged in writing signed by
one of the persons listed on Schedule 9.4(b) at the address of
Buyer and Parent set forth above, or, if after good faith efforts
to obtain such acknowledgement Seller is unable to do so, by
notice given in the manner here above contemplated to Parent's
and Buyer's counsel, provided, however, that if after good faith
efforts to obtain such acknowledgement from such counsel, Seller
is unable to do so, such demands, requests, consents, notices,
and communications shall be deemed to have been given if hand
delivered to each of the five aforesaid persons, without
acknowledgement of such receipt. Each party may change its
address or designate other persons or entities to receive notices
to it by giving written notice thereof to the other parties in
the manner provided above.
9.5. Specific Performance. Each of the parties hereto
acknowledges that the other parties hereto would be irreparably
damaged if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. Accordingly, in the event of a breach or
default of this Agreement, each of the parties agrees that the
other parties shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically
the Agreement in any action instituted in any court of the United
States, or any State thereof having personal and subject matter
jurisdiction, in addition to any other remedy to which such party
may be entitled at law or in equity (subject to the terms of this
Agreement as to any such other remedy).
9.6. Counterparts and Execution. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of
the parties and delivered to the other parties.
9.7. Integration. This Agreement, together with any
Schedules or Exhibits hereto and any documents delivered
simultaneously herewith, constitute the entire agreement and
understanding among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements,
understandings, or representations pertaining to the subject
matter hereof, whether oral or written. There are no
representations, warranties, covenants, or other agreements among
the parties in connection with the subject matter hereof except
as expressly set forth herein or in the Other Buyer/Parent
Documents or Other Seller Documents.
9.8. Severability. If any term or provision of this
Agreement is held by any court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms and
provisions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated
by such invalidity or unenforceability of such term or provision.
9.9. Captions. The Article and Section captions in this
Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this
Agreement. Such captions shall not be deemed to be part of this
Agreement and in no way define, limit, extend, or describe the
meaning or intent of any provisions hereof.
9.10. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State
of New York, without regard to the principles of conflict of laws
thereof.
9.11. Interpretation. Unless the context otherwise
requires, (a) all references to Sections, Articles, Exhibits, or
Schedules are to Sections, Articles, Exhibits, or Schedules of or
to this Agreement, (b) each term defined in this Agreement has
the meaning assigned to it, (c) words in the singular include the
plural and vice versa, (d) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in
accordance with generally accepted accounting principles,
(e) "or" is disjunctive but not necessarily exclusive, (f) the
term "Affiliate" has the meaning given to that term in Rule 12b-2
of Regulation 12B under the Exchange Act, as amended, (g) all
references to "business days" shall be to any day other than a
weekend day or a day which is a national holiday in the United
States or a state holiday in New York, and (h) references to "$"
or dollar amounts shall be to lawful currency of the United
States of America.
9.12. Consent of Buyer. Buyer hereby consents to the
consummation of the transactions contemplated by the Merger
Agreement and the Stock Agreement and waives any breach, default
or event of default under any of the Loan Documents that would
otherwise result from the consummation of such transactions.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: \s\ Mark E. Couchman
Name: Mark E. Couchman
Title: Vice President
FEDERATED NOTEHOLDING
CORPORATION II
By: \s\ Dennis J. Broderick
Name: Dennis J. Broderick
Title: Vice President
FEDERATED DEPARTMENT STORES, INC.
By: \s\ Ronald W. Tysoe
Name: Ronald W. Tysoe
Title: Vice Chairman
Schedule A
NOTES AND MORTGAGES
1. Amended and Restated Secured Promissory Note (Broadway-
Southwest Division) made by the Company to Seller dated
October 8, 1992, in the principal amount of $7,395,000.00.
2. Amended and Restated Secured Promissory Note (Broadway-
Southern California Division) made by the Company to Seller
dated October 8, 1992, in the principal amount of
$157,638,000.00.
3. Amended and Restated Secured Promissory Note II (Broadway-
Southern California Division) made by the Company to Seller
dated October 8, 1992, in the principal amount of
$19,875,000.00.
4. Amended and Restated Secured Promissory Note (Emporium
Capwell Division) made by the Company to Seller dated
October 8, 1992, in the principal amount of $159,092,000.00.
5. Accrued Interest Note made by the Company to Seller dated
October 8, 1992, in the principal amount of $53,350,000.00
and subject to increase pursuant to paragraph 4 therein.
6. Form of Amendment to Deed of Trust, Security Agreement,
Assignment of Leases and Rents, Fixture Filing and Financing
Statement, dated as of October 8, 1992, by and between the
Company and Seller.
7. Form of Amended and Restated Amendment to Deed of Trust,
Security Agreement, Assignment of Leases and Rents, Fixture
Filing and Financing Statement, dated as of October 8, 1992,
by and between the Company and Seller.
8. Form of Deed of Trust, Security Agreement, Assignment of
Rents, Profits and Leases, Fixture Filing and Financing
Statement, dated as of October 8, 1992, by the Company, as
trustor, to Stewart Title Guaranty Company, a Texas
corporation, as trustee, for the benefit of Seller, as
beneficiary.
9. Macerich Mortgage Escrow Agreement, dated October 8, 1992,
by and among the Company, Seller and Title Company.
Schedule 2.2
LOAN DOCUMENTS
1. Loan Modification Implementation Agreement and Amendment to
Loan Agreements, License Agreement and Other Loan
Documentation, dated as of October 8, 1992 by and between
Seller and the Company, pursuant to which the Company and
Seller restructured the $350,000,000 Secured Loan made by
Seller to the Company on August 27, 1987 and the $30,000,000
Secured Loan made by Seller to the Company on August 3,
1990.
2. Amended and Restated Notes made by the Company to Seller
dated October 8, 1992, in the principal amounts of
$7,395,000.00, $157,638,000.00, $19,875,000.00, and
$159,092,000.00, pertaining to the Broadway-Southwest
Division, the Broadway-Southern California Division, the
Broadway-Southern California Division, and the Emporium
Capwell Division, respectively.
3. Accrued Interest Note made by the Company to Seller dated
October 8, 1992, in the principal amount of $53,350,000.00
and subject to increase pursuant to paragraph 4 therein.
4. Amended and Restated Term Loan Agreement dated as of
October 8, 1992, by and among the Company, Bank of America
National Trust and Savings Association, as Agent, and the
banks party thereto.
5. Intercreditor Letter Agreement, dated as of October 8, 1992,
to General Electric Credit Corporation, CHH Receivables,
Inc. and Blue Hawk Funding Corporation from Seller
acknowledged and agreed to by the Company.
6. Form of Amendment to Deed of Trust, Security Agreement,
Assignment of Leases and Rents, Fixture Filing and Financing
Statement, dated as of October 8, 1992, by and between the
Company and Seller.
7. Form of Amended and Restated Amendment to Deed of Trust,
Security Agreement, Assignment of Leases and Rents, Fixture
Filing and Financing Statement, dated as of October 8, 1992,
by and between the Company and Seller.
8. Memorandum of Trademark License, dated October 8, 1992, by
and between the Company and Seller.
9. Form of Deed of Trust, Security Agreement, Assignment of
Rents, Profits and Leases, Fixture Filing and Financing
Statement, dated as of October 8, 1992, by the Company, as
trustor, to Stewart Title Guaranty Company, a Texas
corporation, as trustee, for the benefit of Seller, as
beneficiary.
10. Hazardous Substances Remediation and Indemnity Agreement
(1992 Parcels), dated as of October 8, 1992, by the Company
in favor of Seller.
11. Remediation Letter, dated October 8, 1992, by Seller,
accepted and agreed to by the Company.
12. Release of Seller, dated March 4, 1992, by the Company with
Representation re: Ownership of Released Claims, by the
Company.
13. Macerich Mortgage Escrow Agreement, dated October 8, 1992,
by and among the Company, Seller and Title Company.
Schedule 3.1.1
OTHER SELLER DOCUMENTS
1 Pledge and Security Agreement dated as of
______________, 199__, by and between Buyer and Seller.
2. Guaranty Agreement dated as of ______________, 199__,
by and between Parent and Seller.
3. Pledge Agreement dated as of ______________, 199__, by and
between Parent and Seller.
Schedule 4.1.1(a)
OTHER BUYER DOCUMENTS
1. Pledge and Security Agreement dated as of
______________, 199__, by and between Buyer and Seller.
2. Promissory Note dated as of ______________, 199__, in the
principal amount of _____________ made by Buyer to Seller.
Schedule 4.1.1(b)
OTHER PARENT DOCUMENTS
1. Guaranty Agreement dated as of ______________, 199__,
by and between Parent and Seller.
2. Pledge Agreement dated as of ______________, 199__, by and
between Parent and Seller.
Schedule 6.4
PARENT'S CONSENTS AND WAIVERS
The consent of the "Required Lenders" under the Credit Agreement
dated as of December 19, 1994, as amended, among Parent, the
Lenders named therein, Citibank, N.A., as Administrative Agent,
Chemical Bank, as Agent, Citicorp Securities, Inc., as Arranger,
and Chemical Securities Inc., as Co-Arranger.
Schedule 7.4
SELLER'S CONSENTS AND WAIVERS
See Attached
Schedule 9.4(a)
SELLER'S NOTICE LIST
Mr. Mark E. Couchman
Mr. Alfred Toennies
Mr. Mark F. Mehlman
Schedule 9.4(b)
BUYER/PARENT'S NOTICE LIST
Mr. James M. Zimmerman
Mr. Ronald W. Tysoe
Dennis J. Broderick, Esq.
Thomas G. Cody, Esq.
Ms. Karen M. Hoguet
EXHIBIT 11
FEDERATED DEPARTMENT STORES, INC.
Exhibit of Primary and Fully Diluted Earnings (Loss) Per Share
(thousands, except per share figures)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 29, 1995 July 30, 1994 July 29, 1995 July 30, 1994
Shares Income Shares Income Shares Income Shares Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) and average
number of shares outstanding 182,830 $ (66,926) 126,578 $ 3,772 182,754 $(123,925) 126,517 $ 35,994
Earnings (loss) per share $(.37) $.03 $(.68) $.28
PRIMARY COMPUTATION:
Average number of common
share equivalents:
Shares to be issued to the U.S.
Treasury 81 122 81 122
Deferred compensation plan 158 62 151 51
Warrants 86 - 43 -
Stock options 849 - 193 - 613 - 265 -
Adjusted number of
common and common
equivalent shares
outstanding and adjusted
net income (loss) 184,004 (66,926) 126,955 3,772 183,642 (123,925) 126,955 35,994
Primary earnings (loss) per
share $(.36) $.03 $(.67) $.28
FULLY DILUTED COMPUTATION:
Additional adjustments to a fully
diluted basis:
Warrants 663 - 663 -
Stock options 450 - - - 450 - 1 -
Adjusted number of shares
outstanding and net
income (loss) on a fully
diluted basis 185,117 $ (66,926) 126,955 $ 3,772 184,755 $(123,925) 126,956 $ 35,994
Fully diluted earnings (loss)
per share $(.36) $.03 $(.67) $.28
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000794367
<NAME> FEDERATED DEPARTMENT STORES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-START> MAY-30-1995
<PERIOD-END> JUL-29-1995
<CASH> 238,173
<SECURITIES> 0
<RECEIVABLES> 2,157,512
<ALLOWANCES> 0
<INVENTORY> 2,694,564
<CURRENT-ASSETS> 5,395,881<F1>
<PP&E> 5,261,698
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,457,324<F2>
<CURRENT-LIABILITIES> 2,435,052
<BONDS> 5,121,445
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,457,324<F3>
<SALES> 3,047,249
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,862,915
<OTHER-EXPENSES> 1,182,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,057
<INCOME-PRETAX> (101,373)<F4>
<INCOME-TAX> (34,447)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,926)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.36)
<FN>
<F1>Includes the following:
Supplies and prepaid expenses 107,509
Deferred income tax assets 198,123
<F2>Includes the following:
Intangible assets - net 1,027,033
Notes receivable 407,276
Other assets 365,436
<F3>Includes the following:
Deferred income taxes 873,285
Other liabilities 503,223
Shareholders' equity 3,524,319
<F4>Includes the following:
Interest income 10,841
</FN>
</TABLE>
