SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal quarter ended
October 28, 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 Incorporation) (Commission File No.) (I.R.S. Employer
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.
202,595,362 shares of the Registrant's Common Stock, $.01 par
value, were outstanding as of November 25, 1995.
<TABLE>
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(THOUSANDS, EXCEPT PER SHARE FIGURES)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales, including leased
department sales $3,748,369 $1,926,811 $9,783,624 $5,176,542
Cost of sales 2,328,577 1,185,926 6,015,413 3,169,401
Selling, general and
administrative expenses 1,275,680 611,563 3,413,526 1,688,442
Business integration and
consolidation expenses 39,134 - 211,479 27,005
Charitable contribution to
Federated Department Stores
Foundation - - 25,581 -
Operating Income 104,978 129,322 117,625 291,694
Interest expense (142,217) (61,897) (365,775) (177,578)
Interest income 11,928 10,911 34,718 32,555
Income (Loss) Before Income
Taxes (25,311) 78,336 (213,432) 146,671
Federal, state and local
income tax benefit
(expense) (21,084) (33,993) 43,112 (66,334)
Net Income (Loss) $ (46,395) $ 44,343 $ (170,320) $ 80,337
Earnings (Loss) per Share $ (.24) $ .35 $ (.91) $ .63
Average Number of Shares
Outstanding 197,017 126,600 187,508 126,545
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
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<TABLE>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS)
<CAPTION>
October 28, January 28, October 29,
1995 1995 1994
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash $ 158,027 $ 206,490 $ 125,924
Accounts receivable 2,780,861 2,265,651 1,986,023
Merchandise inventories 3,905,535 2,380,621 1,730,602
Supplies and prepaid expenses 120,191 99,559 52,121
Deferred income tax assets 177,596 135,405 83,182
Total Current Assets 7,142,210 5,087,726 3,977,852
Property and Equipment - net 6,220,895 5,349,912 2,663,954
Intangible Assets - net 1,160,661 1,006,547 323,648
Notes Receivable 407,209 408,134 408,141
Other Assets 423,227 424,671 795,710
Total Assets $15,354,202 $12,276,990 $8,169,305
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 941,375 $ 463,042 $ 441,621
Accounts payable and accrued
liabilities 2,909,517 2,183,711 1,512,227
Income taxes 31,449 65,319 95,968
Total Current Liabilities 3,882,341 2,712,072 2,049,816
Long-Term Debt 5,943,473 4,529,220 2,723,777
Deferred Income Taxes 911,525 890,729 802,346
Other Liabilities 593,023 505,359 228,845
Shareholders' Equity 4,023,840 3,639,610 2,364,521
Total Liabilities and
Shareholders' Equity $15,354,202 $12,276,990 $8,169,305
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
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<TABLE>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS)
<CAPTION>
39 Weeks Ended 39 Weeks Ended
October 28, 1995 October 29, 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (170,320) $ 80,337
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property
and equipment 326,341 169,701
Amortization of intangible assets 34,811 14,072
Amortization of financing costs 15,428 8,052
Amortization of original issue discount 1,090 13,352
Amortization of unearned restricted stock 3,726 1,554
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 44,729 (175,861)
Increase in merchandise inventories (1,169,834) (514,834)
Increase in supplies and prepaid expenses (11,014) (3,878)
Decrease in other assets not separately
identified 24,125 12,556
Increase in accounts payable and accrued
liabilities not separately identified 444,013 266,906
Decrease in current income taxes (34,694) (7,338)
Increase (decrease) in deferred income taxes (50,352) 3,737
Increase in other liabilities not separately
identified 21,381 4,856
Net cash used by operating activities (520,570) (126,788)
Cash flows from investing activities:
Purchase of property and equipment (356,816) (202,683)
Disposition of property and equipment 23,842 1,748
Acquisition of company, net of cash acquired 15,901 (75,846)
Net cash used by investing activities (317,073) (276,781)
Cash flows from financing activities:
Debt issued 1,347,106 331,007
Financing costs (26,375) (6,587)
Debt repaid (546,675) (22,450)
Decrease in outstanding checks 4,544 709
Acquisition of treasury stock (388) (334)
Issuance of common stock 10,968 4,720
Net cash provided by financing activities 789,180 307,065
</TABLE>
(Continued)
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS)
<CAPTION>
39 Weeks Ended 39 Weeks Ended
October 28, 1995 October 29, 1994
<S> <C> <C>
Net decrease in cash (48,463) (96,504)
Cash at beginning of period 206,490 222,428
Cash at end of period $ 158,027 $ 125,924
Supplemental cash flow information:
Interest paid $ 291,928 $ 144,081
Interest received 35,034 33,470
Income taxes paid (net of refunds received) 36,903 69,124
Schedule of noncash investing and financing
activities:
Capital lease obligations for new store
fixtures 2,818 6,666
Debt assumed in acquisition........... 1,267,074 40,000
Equity issued in acquisition 352,902 -
Debt and equity issued for purchase of debt 429,665 -
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 39 weeks
ended October 28, 1995 and October 29, 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 39 weeks
ended October 28, 1995 and October 29, 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
In the 13 weeks ended October 28, 1995, the Company completed
its acquisition of Broadway Stores, Inc. ("Broadway") pursuant
to an Agreement and Plan of Merger dated August 14, 1995. The
total purchase price of the Broadway acquisition was
approximately $1,620.0 million, consisting of (i) 12.6 million
shares of common stock and options to purchase an additional
1.5 million shares of common stock valued at $352.9 million
and (ii) $1,267.1 million of Broadway debt. In addition, a
wholly owned subsidiary of the Company purchased $422.3
million of mortgage indebtedness of Broadway for 6.8 million
shares of common stock of the Company and a $242.3 million
promissory note.
The Broadway acquisition was accounted for under the purchase
method and, accordingly, the results of operations of Broadway
have been included in the Company's results of operations
since July 29, 1995 and the purchase price has been allocated
to Broadway's assets and liabilities based on their estimated
fair values as of that date. Based upon management's initial
estimates, the excess of cost over net assets acquired is
approximately $186.2 million.
The Company is in the process of formulating and implementing
a strategy to integrate Broadway's operations with the
Company's other operations. Although a majority of Broadway's
stores will be converted to other nameplates of the Company in
fiscal 1996, it is also anticipated that certain Broadway
stores will be disposed of during fiscal 1996 and beyond. (As
of the date of this report, the Company had entered into a
definitive agreement to sell nine stores, had identified 10
additional stores to be sold, and had yet to make a
determination with respect to certain other stores.)
Accordingly, the allocation of the purchase price to the
property and equipment acquired has yet to
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
be determined, and the Company is presently unable to
determine the amount of one-time costs that will ultimately be
incurred in connection with the Broadway acquisition. The
Company has recorded an accrued severance liability in the
amount of $27.0 million as an adjustment to the purchase price
allocation for the recognition of certain estimated
involuntary termination benefits.
On December 19, 1994, the Company acquired R. H. Macy & Co.,
Inc. ("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, among other transactions, Macy's merged
with the Company, which became responsible for making
distributions of cash and debt and equity securities pursuant
to the Macy's POR. The total purchase price of the Macy's
acquisition was approximately $3,815.9 million and consisted
of the following:
(millions)
Cash payments 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
Net cost of the initial investment 444.6
$3,815.9
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 39 weeks ended October 28,
1995 to the assets and liabilities acquired, the excess of
cost over net assets acquired was approximately $311.2
million.
The following unaudited pro forma condensed statements of
operations give effect to the Broadway and Macy's acquisitions
and related financing transactions as if such transactions had
occurred at the beginning of each period presented.
<TABLE>
<CAPTION>
39 Weeks Ended 13 Weeks Ended 39 Weeks Ended
October 28, 1995 October 29, 1994 October 29, 1994
(millions, except per share figures)
<S> <C> <C> <C>
Net sales $ 10,668.2 $ 3,873.7 $ 10,746.7
Net loss (220.4) (57.2) (99.0)
Loss per share (1.09) (.28) (.49)
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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
acquisitions, the reversal of certain of Macy's and Broadway's
historical interest expenses and the reversal of the Company's
historical interest expense on certain indebtedness redeemed in
connection with the acquisitions;
(ii) Amortization of deferred debt expense related to debt
incurred to finance the acquisitions;
(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 the
fair market value of assets acquired;
(v) Adjustments to income tax expense related to the above; and
(vi) Adjustments for shares issued.
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 acquisitions been consummated on the first day of the
periods presented or of future results.
3. BUSINESS INTEGRATION AND CONSOLIDATION EXPENSES
During the 39 weeks ended October 28, 1995, the Company
recorded $211.5 million of business integration and
consolidation expenses associated with the integration of
Macy's and Broadway into the Company ($171.4 million and $7.3
million, respectively) and the consolidation of the Company's
Rich's/Goldsmith's and Lazarus divisions ($32.8 million). The
primary components of the Macy's integration expenses were
$68.1 million of inventory valuation adjustments to
merchandise in lines of business which the Company, subsequent
to the acquisition, eliminated or replaced, $25.4 million
of costs to close and sell certain stores and to convert a
number of stores to other nameplates, $25.8 million of
severance costs and $52.1 million of other costs and expenses
associated with integrating Macy's into the Company. Of the
$32.8 million of expenses associated with the divisional
consolidation referred to above, $22.5 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 39 weeks ended October 29, 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 ten
department stores acquired in May 1994 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 39 weeks ended
October 28, 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. Additionally, in the 13 weeks ended October 28, 1995,
the Company acquired Broadway and recorded the acquisition as
of July 29, 1995. 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 of acquisition. Accordingly, the financial
position and results of operations of the Company presented
and discussed herein are generally not directly comparable
between the periods presented.
RESULTS OF OPERATIONS
COMPARISON OF THE 13 WEEKS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
For purposes of the following discussion, all references to
"third quarter of 1995" and "third quarter of 1994" are to the
Company's 13-week fiscal periods ended October 28, 1995 and
October 29, 1994, respectively.
Net sales for the third quarter of 1995 totaled $3,748.4
million, compared to net sales of $1,926.8 million for the
third quarter of 1994, an increase of 94.5%. Since the end of
the third quarter of 1994, the Company added 215 department
stores (82 through the Broadway acquisition and 121 through
the Macy's acquisition) and more than 150 specialty and
clearance stores, and closed nine department stores.
Comparable store sales for the third quarter of 1995 increased
1.5% over the third quarter of 1994, including sales of the
Macy's stores that were open throughout both such quarters.
Net sales for the third quarter of 1995 include $414.8 million
of Broadway sales.
Cost of sales was 62.1% as a percent of net sales for the
third quarter of 1995 compared to 61.6% for the third quarter
of 1994. Cost of sales was negatively impacted by greater
markdowns at stores added through the Broadway acquisition.
Excluding these stores, cost of sales would have been 61.2% as
a percent net sales for the third quarter of 1995. Cost of
sales includes no charge in the third quarter of 1995 compared
to a charge of $3.4 million in the third quarter of 1994
resulting from the valuation of merchandise inventory on the
last-in, first-out basis.
Selling, general and administrative expenses were 34.0% as a
percent of net sales for the third quarter of 1995 compared to
31.7% for the third quarter of 1994. Because the credit card
programs relating to Macy's 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. The
Broadway acquisition also negatively impacted selling general
and administrative expenses. Excluding Broadway, selling,
general and administrative expenses would have been 33.2% as a
percent of net sales for the third quarter of 1995.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Business integration and consolidation expenses for the third
quarter of 1995 consist of $26.2 million associated with
integration of Macy's into the Company, $5.6 million related
to the consolidation of the Company's Rich's/Goldsmith's and
Lazarus divisions and $7.3 million related to the integration
of Broadway into the Company. During the remainder of fiscal
1995, the Company expects to incur approximately $45.0 million
of additional business integration and consolidation expenses
as a result of the Macy's acquisition and the divisional
consolidation referred to above. The Company also expects to
incur a presently indeterminable amount of additional business
integration and consolidation expenses in the remainder of
fiscal 1995 and in fiscal 1996 as a result of the Broadway
acquisition.
Net interest expense was $130.3 million for the third quarter
of 1995, compared to $51.0 million for the third quarter of
1994. The higher interest expense for the third quarter of
1995 is principally due to the higher levels of borrowings
resulting from the Macy's and Broadway acquisitions.
The Company's effective income tax rate for the third quarter
of 1995 differs from the federal income tax statutory rate of
35% principally because of permanent differences arising from
the non-deductibility of approximately $65.0 million of pre-
tax losses of Broadway and the amortization of intangible
assets and the effect of state and local income taxes.
COMPARISON OF THE 39 WEEKS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
For purposes of the following discussion, all references to
"1995" and "1994" are to the Company's 39 week fiscal periods
ended October 28, 1995 and October 29, 1994, respectively.
Net sales for 1995 were $9,783.6 million compared to $5,176.5
million for 1994, an increase of 89.0%. On a comparable store
basis, net sales increased 2.9%, including sales of the Macy's
stores that were open throughout both periods. Net sales for
1995 include $414.8 million of Broadway sales.
Cost of sales was 61.5% as a percent of net sales for 1995
compared to 61.3% for 1994. Cost of sales includes charges of
$1.8 million in 1995 compared to $9.2 million in 1994
resulting from the valuation of merchandise inventory on the
last-in, first-out basis. Excluding Broadway stores, cost of
sales would have been 61.1% as a percent of net sales for
1995.
Selling, general and administrative expenses were 34.9% as a
percent of net sales for 1995 compared to 32.6% for 1994.
Because 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. Excluding Broadway, selling,
general and administrative expenses would have been 34.7% as a
percent of net sales for 1995.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Business integration and consolidation expenses for 1995
consist of $171.4 million associated with the integration of
Macy's into the Company, $32.8 million related to the
consolidation of the Company's Rich's/Goldsmith's and Lazarus
divisions and $7.3 million related to the integration of
Broadway into the Company. During the remainder of fiscal
1995, the Company expects to incur approximately $45.0 million
of additional business integration and consolidation expenses
as a result of the Macy's acquisition and the divisional
consolidation referred to above. The Company also expects to
incur a presently indeterminable amount of additional business
integration and consolidation expenses in the remainder of
fiscal 1995 and in fiscal 1996 as a result of the Broadway
acquisition.
Net interest expense was $331.1 million for 1995 compared to
$145.0 million for 1994. The higher interest expense for
1995 is principally due to higher levels of borrowing
resulting from the Macy's and Broadway acquisitions.
The Company's effective income tax rate of 20.2% for 1995
differs from the federal income tax statutory rate of 35.0%
principally because of permanent differences arising from the
non-deductibility of approximately $65.0 million of pre-tax
losses of Broadway and the amortization of intangible assets
and the effect of state and local income taxes.
LIQUIDITY AND CAPITAL RESOURCES
For purposes of the following discussion, all references to
"1995" and "1994" are to the Company's 39 week fiscal periods
ended October 28, 1995 and October 29, 1994, respectively.
The Company's principal sources of liquidity are cash from
operations, cash on hand and available credit facilities. The
net decrease in cash in 1995 was $48.5 million compared to a
net decrease in 1994 of $96.5 million.
Net cash used by operating activities in 1995 increased $393.8
million compared to net cash used by operating activities in
1994. The most significant factors contributing to this
increased use of cash were greater increases in merchandise
inventories and lower net income in 1995, principally due to
the Macy's acquisition, partially offset by a decrease in
accounts receivable balances during 1995 (as compared to an
increase in 1994).
Net cash used in investing activities was $317.1 million in
1995. Capital expenditures for property and equipment were
$356.8 million. The Company opened nine department stores and
closed five department stores in 1995. The Company added
$15.9 million in cash as a result of the acquisition of
Broadway. The total purchase price for Broadway, consisting
solely of non-cash items, was $1,620.0 million.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net cash provided by the Company for all financing activities
was $789.2 million for 1995. During 1995, the Company sold
$597.1 million of receivables backed certificates, $400.0
million of 8-1/8% Senior Notes due 2002 and $350.0 million of
5.0% Convertible Subordinated Notes due 2003. During 1995,
the Company repaid all $307.4 million of its Senior
Convertible Discount Notes due 2004, $126.0 million of short-
term debt ($76.1 million under Broadway's working capital and
receivables financing facilities and $49.9 million under the
Company's bank credit facility and commercial paper program)
and $113.3 million of other debt, consisting primarily of the
Company's subsidiary trade obligations. Additionally, on
December 11, 1995, the Company repurchased for cash $142.0
million of Broadway's 6-1/4% Convertible Senior Subordinated
Notes Due 2000.
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 July 29, 1995 covers events known to the Company and
occurring prior to September 5, 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 December 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 December 5,
1995, the aggregate face amount of disputed Cash Payment
Claims was approximately $362.5 million, while the
estimated allowed amount thereof was approximately $242.5
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 exceed the
estimated allowed amount thereof.
ACQUISITION OF BROADWAY
The Office of the Attorney General of the State of
California has advised the Company that it is reviewing
the competitive effects of the Company's consummated
acquisition of Broadway. The Company is cooperating with
the Office of the Attorney General in the review. There
can be no assurances as to the outcome of the review.
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Fourth Supplemental Indenture, dated as of September
27, 1995, between the Company and The First National
Bank of Boston, as Trustee (incorporated by reference
to Exhibit 4.2 of the Company's Registration
Statement on Form 8-A dated November 29, 1995)
4.2 Form of 5% Note due 2003 (included in Exhibit 4.1
hereto)
4.3 Fifth Supplemental Indenture, dated as of October 6,
1995, between the Company and State Street Bank and
Trust Company (successor to The First National Bank
of Boston), as Trustee (incorporated by reference to
Exhibit 2 of the Company's Registration Statement on
Form 8-A dated October 4, 1995)
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
4.4 Form of 8.125% Senior Note due 2002 (included in
Exhibit 4.3 hereto)
4.5 Warrant Agreement (incorporated by reference to
Exhibit 4.1 of Broadway's Annual Report on Form 10-K
(File No. 1-8765) for the fiscal year ended January
30, 1993 (the "Broadway 1992 10-K")
4.5.1Letter Agreement dated October 11, 1995,
between Broadway and The Bank of New York.
10.1 Note Amendment Agreement among Prudential, FNC II
and the Company, dated as of November 1, 1995
10.2 Amended and Restated Term Loan Agreement by and
among the Banks party thereto, Bank of America
National Trust and Savings Association as Agent for
Banks and Carter Hawley Hale Stores, Inc., dated as
of October 8, 1992 (incorporated by reference to
Exhibit 4.23 to the Broadway 1992 10-K / Amendment
No. 1)
10.2.1Master Capitalized Interest Note in favor of
Bank of America National Trust and Savings
Association as Agent for certain banks in the amount
of $10,750,830.46 dated as of October 8, 1992
(incorporated by reference to Exhibit 4.24 to the
Broadway 1992 10-K / Amendment No. 1)
10.2.2 Master Principal Note in favor of Bank of
America National Trust and Savings Association as
Agent for certain banks in the amount of
$89,662,700.00 dated as of October 8, 1992
(incorporated by reference to Exhibit 4.25 to the
Broadway 1992 10-K / Amendment No. 1)
10.2.3 First Amendment to Amended and Restated Term
Loan Agreement, dated as of October 11, 1995, by and
among Broadway, the Banks party thereto and Bank of
America National Trust and Savings Association, as
Agent for Banks
10.3 Receivables-Backed Credit Agreement among CHH
Receivables, Inc., Blue Hawk Funding Corporation and
General Electric Capital Corporation, as Agent
(incorporated by reference to Exhibit 10.1 to the
Broadway 1992 10-K)
10.3.1 Amendment No. 1 to Receivables-Backed Credit
Agreement, dated as of September 28, 1993, among CHH
Receivables, Inc., Blue Hawk Funding Corporation and
General Electric Capital Corporation, as Agent
(incorporated by reference to Exhibit 4.1 to
Broadway's Current Report on Form 8-K filed
September 13, 1994)
10.3.2 Amendment No. 2 to Receivables-Backed Credit
Agreement, dated as of September 13, 1994, among
Broadway Receivables, Inc., Blue Hawk Funding
Corporation and General Electric Capital Corporation
(incorporated by reference to Exhibit 4.2 to
Broadway's Current Report on Form 8-K filed
September 13, 1994)
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
10.3.3 Assignment and Security Agreement among CHH
Receivables, Inc., Blue Hawk Funding Corporation,
Cash Collateral Bank and General Electric Capital
Corporation, as Agent, Letter of Credit Agent,
Liquidity Agent and Collateral Agent (incorporated
by reference to Exhibit 10.2 to the Broadway 1992 10-
K)
10.3.4 Amended and Restated Assignment and Security
Agreement dated as of September 13, 1994 among
Broadway Receivables, Inc. and Blue Hawk Funding
Corporation (incorporated by reference to Exhibit
4.3 to Broadway's Current Report on Form 8-K filed
September 13, 1994)
10.3.5 Receivables Purchase Agreement among Carter
Hawley Hale Stores, Inc. and CHH Receivables, Inc.
(incorporated by reference to Exhibit 10.3 to the
Broadway 1992 10-K)
10.3.6 Amendment No. 1 to Receivables Purchase
Agreement, dated as of September 13, 1994 by and
between Broadway Receivables, Inc. and Broadway
Stores, Inc. (incorporated by reference to Exhibit
4.4 to Broadway's Form 8-K filed September 13, 1994)
10.3.7 Promissory Note made by CHH Receivables, Inc.
in favor of Blue Hawk Funding Corporation
(incorporated by reference to Exhibit 10.4 to the
Broadway 1992 10-K)
10.3.8 Letter of Credit Reimbursement Agreement among
CHH Receivables, Inc., Blue Hawk Funding
Corporation, and General Electric Capital
Corporation, as Letter of Credit Agent (incorporated
by reference to Exhibit 10.5 to the Broadway 1992 10-
K)
10.3.9 First Amendment, dated as of September 13,
1994, to the Letter of Credit Reimbursement
Agreement, dated as of October 8, 1992 among
Broadway Receivables, Inc., Blue Hawk Funding
Corporation, the financial institutions party
thereto and General Electric Capital Corporation
(incorporated by reference to Exhibit 4.6 to
Broadway's Current Report on Form 8-K filed
September 13, 1994)
10.3.10 Subordinated Retailer Security Agreement made
by Carter Hawley Hale Stores, Inc. in favor of CHH
Receivables, Inc. (incorporated by reference to
Exhibit 10.6 to the Broadway 1992 10-K)
10.4 Credit Agreement, dated as of October 8, 1992, among
Carter Hawley Hale Stores, Inc., Certain Commercial
Lending Institutions, and General Electric Capital
Corporation as the agent for lenders (incorporated
by reference to Exhibit 10.9 to the Broadway 1992 10-
K)
10.4.1 Form of Revolving Credit Note (incorporated by
reference to Exhibit 10.10 to the Broadway 1992 10-
K)
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
10.4.2 Pledge and Security Agreement made by Carter
Hawley Hale Stores, Inc. in favor of General
Electric Capital Corporation (incorporated by
reference to Exhibit 10.11 to the Broadway 1992 10-
K)
10.4.3 Trademark Security Agreement made by Carter
Hawley Hale Stores, Inc. in favor of General
Electric Capital Corporation (incorporated by
reference to Exhibit 10.12 to the Broadway 1992 10-
K)
10.4.4 Letter agreement dated as of April 29, 1993, by
and between General Electric Capital Corporation, as
agent and as a lender, and Carter Hawley Hale
Stores, Inc. (incorporated by reference to Exhibit
4.1 to Broadway's Quarterly Report on Form 10-Q for
the period ended May 1, 1993)
10.4.5 Second Amendment to Credit Agreement, dated as
of May 14, 1993, among Carter Hawley Hale Stores,
Inc., various financial institutions and General
Electric Capital Corporation, as agent for the
lenders (incorporated by reference to Exhibit 4.2 to
Broadway's Quarterly Report on Form 10-Q for the
period ended May 1, 1993)
10.4.6 Amended and Restated Second Amendment to Credit
Agreement, dated as of August 20, 1993, among Carter
Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital
Corporation, as agent for the lenders (incorporated
by reference to Exhibit 4.1 to Broadway's Quarterly
Report on Form 10-Q for the period ended July 31,
1993)
10.4.7 Third Amendment to Credit Agreement, dated as
of September 30, 1993, among Carter Hawley Hale
Stores, Inc., various financial institutions and
General Electric Capital Corporation, as agent for
the lenders (incorporated by reference to Broadway's
Current Report on Form 8-K dated October 25, 1993)
10.4.8 Fourth Amendment to Credit Agreement, dated as
of October 31, 1993, among Carter Hawley Hale
Stores, Inc., various financial institutions and
General Electric Capital Corporation, as agent for
the lenders (incorporated by reference to Broadway's
Current Report on Form 8-K dated November 8, 1993)
10.4.9 Fifth Amendment to Credit Agreement, dated as
of December 10, 1993, among Carter Hawley Hale
Stores, Inc., various financial institutions and
General Electric Capital Corporation, as agent for
the lenders (incorporated by reference to Broadway's
Current Report Form 8-K dated December 21, 1993)
10.4.10 Sixth Amendment to Credit Agreement, dated as
of February 26, 1994, among Carter Hawley Hale
Stores, Inc., various financial institutions and
General Electric Capital Corporation, as agent for
the lenders (incorporated by reference to Broadway's
Current Report Form 8-K dated March 9, 1994)
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
10.4.11 Seventh Amendment to Credit Agreement, dated as
of September 13, 1994 among Broadway Stores, Inc., a
Delaware corporation previously known as Carter
Hawley Hale Stores, Inc., the financial institutions
parties thereto and General Electric Capital
Corporation, a New York corporation, as agent for
the lenders (incorporated by reference to Exhibit
4.11 to Broadway's Form 8-K filed September 13,
1994)
10.4.12 Eighth Amendment to Credit Agreement, dated as
of March 3, 1995 among Broadway Stores, Inc., a
Delaware corporation previously known as Carter
Hawley Hale Stores, Inc., the financial institutions
parties thereto and General Electric Capital
Corporation, a New York corporation, as agent for
the lender (incorporated by reference to Exhibit 4.1
of Broadway's Current Report on Form 8-K filed on
March 6, 1995)
10.4.13 Ninth Amendment to Credit Agreement, dated as
of June 28, 1995, among Broadway Stores, Inc., a
Delaware corporation previously known as Carter
Hawley Hale Stores, Inc., the financial institutions
parties thereto and General Electric Capital
Corporation, a New York corporation, as agent for
the lenders (incorporated by reference to Broadway's
Current Report on Form 8-K dated June 29, 1995)
10.4.14 Tenth Amendment to Credit Agreement, dated as
of August 17, 1995, among Broadway Stores, Inc., a
Delaware corporation previously known as Carter
Hawley Hale Stores, Inc., the financial institutions
parties thereto and General Electric Capital
Corporation, a New York corporation, as agent for
the lenders (incorporated by reference to Exhibit
4.1 to Broadway's Current Report on Form 8-K dated
August 14, 1995, as amended on Form 8-K/A dated
August 14, 1995)
10.5 Amendment #2 and Waiver, dated as of August 30,
1995, to the Credit Agreement dated December 19,
1994 among the Company, the Lenders party thereto
and Citibank, N.A. as Administrative Agent and
Chemical Bank as Agent.
10.6 First Amendment to Loan Agreement, dated as of
December 6, 1995, among Lazarus PA, Inc., as
successor to Joseph Horne Co., Inc. and PNC Bank,
Ohio, National Association.
11 Statement re: computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K, dated September 21, 1995
reporting matters under Item 5 thereof
Current Report on Form 8-K, dated September 22, 1995
reporting matters under Item 5 thereof
PART II - - OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Current Report on Form 8-K, dated September 26, 1995
reporting matters under Item 5 thereof
Current Report on Form 8-K, dated September 27, 1995
reporting matters under Item 5 thereof
Current Report on Form 8-K, dated October 4, 1995
reporting matters under Item 5 thereof
Current Report on Form 8-K, dated October 11, 1995
reporting matters under Item 2 thereof.
FEDERATED DEPARTMENT STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
FEDERATED DEPARTMENT
STORES, INC.
Date December 12, 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)
BROADWAY STORES, INC.
3880 North Mission Road
Los Angeles, CA 90031
October 11, 1995
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Warrant Agreement
Reference is made to the Warrant Agreement, dated as of
October 1, 1992 (the "Warrant Agreement"), between Broadway
Stores, Inc. (f/k/a Carter Hawley Hale Stores, Inc.) (the
"Company") and The Bank of New York, as Warrant Agent (successor
in such capacity to Chemical Bank). This Letter Agreement is
being entered into pursuant to Section 9(b) of the Warrant
Agreement in connection with the merger of a wholly owned
subsidiary of Federated Department Stores, Inc. ("Federated")
with and into the Company (the "Merger"). Unless otherwise
defined herein, terms used herein with initial capital letters
are so used with the respective meanings ascribed thereto in the
Warrant Agreement.
From and after the effective time of the Merger (the
"Effective Time") until 5:00 p.m., New York City time, on the
Expiration Date, on the terms and subject to the conditions set
forth in the Warrant Agreement, each Warrant will be exercisable
to purchase at the Warrant Price (presently $17.00) 0.27 shares
of Common Stock, par value $0.01 per share, of Federated, subject
to adjustment following the Effective Time in a manner as nearly
equivalent as may be practicable to the adjustments provided for
in Section 9 of the Warrant Agreement.
Sincerely,
BROADWAY STORES, INC.
By: /s/ John C. Haeckel
Name: John C. Haeckel Title:
Executive Vice President
Accepted and Agreed to as of
the Date First Above Written:
THE BANK OF NEW YORK
By: /s/ Patrick P. Falciglia
Name: Patrick P. Falciglia
Title: Vice President
NOTE AMENDMENT AGREEMENT
NOTE AMENDMENT AGREEMENT, dated as of November 1, 1995 (this
"Agreement"), among The Prudential Insurance Company of America,
a New Jersey corporation ("Holder"), Federated Noteholding
Corporation II, a Delaware corporation ("Maker"), and Federated
Department Stores, Inc., a Delaware corporation ("Parent").
RECITALS:
A. Holder is the payee of a Promissory Note of Maker,
dated October 11, 1995, in the principal amount of
$222,322,613.20 (the "Existing Note").
B. In connection with the Purchase Agreement, dated as of
August 14, 1995 (as such agreement may be amended, supplemented
or otherwise modified from time to time, the "Purchase
Agreement"), among Holder, Maker and Parent, Holder and Maker
have agreed to amend and restate the Existing Note to increase
the principal amount thereof to $242,322,613.20.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Note. On November 3, 1995, Maker shall
amend and restate the Existing Note by executing and delivering
to Holder an Amended and Restated Promissory Note in the form
attached hereto as Exhibit A (the "Amended and Restated Note").
Contemporaneously with and in exchange for Maker's execution and
delivery of the Amended and Restated Note, Holder agrees to
deliver the Existing Note to Maker for cancellation.
2. Buyer's Note. From and after the execution and
delivery of the Amended and Restated Note, the term "Buyer's
Note" shall mean and refer to the Amended and Restated Note (as
such note may be amended, supplemented or otherwise modified from
time to time) for all purposes under the Transaction Documents
(as defined in the Amended and Restated Note), including, without
limitation, the definition of "Buyer's Note" in Section 1.2.2 of
the Purchase Agreement.
3. Consent of Parent. Parent hereby consents to the
execution and delivery by the Maker of the Amended and Restated
Note in exchange for the Existing Note and confirms that the
amendment and restatement of the Existing Note will not alter or
impair the liability or obligations of the Parent, or the rights
and security interests of Holder, under any Transaction Document,
including, without limitation, the Guaranty (as defined in the
Purchase Agreement) and the Parent Pledge Agreement (as defined
in the Purchase Agreement), to which the Parent is a party.
4. 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.
5. 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: \s\ Ray Giordano
Name: Ray Giordano
Title: Vice President
FEDERATED NOTEHOLDING
CORPORATION II
By: \s\ Dennis J. Broderick
Name: Vice President
Title: Vice President
FEDERATED DEPARTMENT STORES, INC.
By: \s\ Dennis J. Broderick
Name: Vice President
Title: Vice President
Exhibit A
AMENDED AND RESTATED PROMISSORY NOTE
$242,322,613.20 New York, N.Y.
October 11, 1995
FOR VALUE RECEIVED, the undersigned, Federated
Noteholding Corporation II, a Delaware corporation ("Maker"),
promises to pay to the order of The Prudential Insurance Company
of America, a New Jersey corporation (together with any
subsequent holder of this Note, "Holder"), at its offices located
at 751 Broad Street, Newark, New Jersey 07102, or at such other
address as Holder may from time to time designate in writing, the
principal sum of $242,322,613.20, together with interest thereon
from the date hereof on the unpaid principal balance at the rate
and as herein provided. Unless otherwise specified by Holder in
writing, all payments on this Note shall be made in lawful money
of the United States of America and in immediately available
funds, by a wire transfer of funds to The Prudential Insurance
Company of America Mortgage Loan Service Account No. 050-54-493
at Morgan Guaranty Trust Company of New York, 23 Wall Street, New
York, New York 10015, Reference Mortgage Loan No. 6 101 003.
The principal amount of this Note and all accrued and unpaid
interest thereon shall become due and be paid at 12:00 noon,
Eastern Time, on October 11, 2000 (the "Maturity Date") or any
earlier date on which such principal and interest becomes due
under the terms of this Note.
All capitalized terms used in this Note and not
otherwise defined have the meanings given in the Purchase
Agreement dated as of August 14, 1995 (the "Purchase Agreement")
among Maker, Holder and Federated Department Stores, Inc., a
Delaware corporation and the parent company of Maker ("Parent").
The principal amount from time to time outstanding
hereunder shall bear interest at a rate per annum (the "Interest
Rate") (i) from the date hereof through the Conversion Date (as
hereafter defined), equal to the LIBOR Rate (as hereafter
defined) plus one and one quarter percent (1.25%), provided that
$20,000,000 principal amount of this Note shall not begin to bear
interest until October 26, 1995, but shall not otherwise be
treated any differently than the remaining principal amount of
this Note, and (ii) from the Conversion Date through the Maturity
Date, equal to the Fixed Rate (as hereafter defined). Interest
on the unpaid balance of the Note shall be computed on the actual
number of days elapsed, and a year of 360 days.
On the Conversion Date, Maker shall pay to Holder a fee
equal to the product of (i) one half percent (0.5%) and (ii) an
amount equal to the difference of Seventy Five Million Dollars
($75,000,000) (or such lower amount, if any, that Maker may have
elected on or prior to the Conversion Date for purposes of the
third paragraph immediately succeeding this paragraph) minus the
aggregate principal amount of Asset Sale Prepayments (as
hereafter defined) made on this Note on or prior to such
Conversion Date (such amount to be deemed to equal zero if such
difference is a negative number).
For purposes of this Note, (i) "LIBOR Rate" means, with
respect to any Interest Period (as hereafter defined), the rate
for deposits in U.S. dollars for a period equal to such Interest
Period (a) that appears in the Wall Street Journal as the London
Interbank Offered Rate in effect for the day that is two business
days (i.e., days on which banks are not required or authorized to
close in New York City and, if the applicable business day
applies to principal amounts bearing interest at the LIBOR Rate,
days on which business in the London interbank market is
conducted) before the first day of such Interest Period and, if
such rate is not published in the Wall Street Journal, (b) that
appears on the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that
service for the purpose of displaying London interbank offered
rates of major banks) at 11:00 a.m. (London time) two business
days before the first day of such Interest Period; (ii) "Interest
Period" means a period of one month, with the first such Interest
Period commencing on the date of this Note and each succeeding
Interest Period commencing on the last day of the preceding
Interest Period, provided that, if the date of this Note shall be
a date other than the first day of a month, the initial interest
period shall begin on the date of this Note and end on the first
business day of the second month immediately succeeding the date
of this Note and the LIBOR Rate payable with respect to such
initial Interest Period shall be determined as if such initial
Interest Period was a period of one month; it being understood
that whenever the last day of any Interest Period would otherwise
occur on a day other than a business day, the last day of such
Interest Period shall be extended to occur on the next succeeding
business day, provided that if such extension would cause the
last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur
on the next preceding business day, and whenever the first day of
any Interest Period occurs on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
business day of such calendar month; (iii) "Conversion Date"
means the earlier of (a) April 11, 1996 and (b) any date that the
Maker shall specify, upon one business day's prior written notice
to the Holder, as the Conversion Date; and (iv) "Fixed Rate"
means a rate per annum, determined as of 1:00 p.m. (New York City
time) on the second business day immediately preceding the
Conversion Date, equal to (a) the annual yield of actively traded
United States Treasury securities having an original maturity
equal to the remaining life of this Note (determined based on the
period extending from the Conversion Date through the Maturity
Date) or, if no such securities shall exist, the average annual
yield (based on a straight-line interpolation) of such securities
having original maturities most closely approximating the
remaining life of this Note, in each case, as such annual yield
for such securities appears, at such time and on such business
day, on the applicable display on the Telerate Service displaying
the annual yields of United States Treasury securities, plus (b)
one and three quarters percent (1.75%); and (v) "Cumulative Asset
Sale Deficiency" means, on any date, the amount by which (a) the
aggregate Stated Value (as hereafter defined) of all retail
stores on or constituting Mortgaged Properties (as hereafter
defined) sold in Assets Sales (as hereafter defined) on or prior
to such date exceeds (b) the sum of (1) the aggregate Net
Proceeds (as hereafter defined) of all retail stores on or
constituting Mortgaged Properties sold in Asset Sales on or prior
to such date and (2) the aggregate amount paid pursuant to
subclause (ii) of clause (b) of the fourth following paragraph on
account of all Asset Sales on or prior to such date.
Interest on the outstanding principal amount of this
Note shall be payable monthly in arrears on the last day of each
Interest Period prior to the Conversion Date, monthly in arrears
on the first business day of each month following the Conversion
Date and on the Maturity Date.
At any time and from time to time (i) from the date of
this Note through (but excluding) the Conversion Date, Maker may
prepay this Note, in whole or in part, without penalty or
premium, and (ii) from and including the Conversion Date through
and including the day occurring 18 months after the Conversion
Date (such 18-month period being the "Prepayment Period"), Maker
may prepay this Note, without penalty or premium, in an aggregate
principal amount up to an amount (the "Yield-Free Prepayment
Amount") equal to the difference of (a) Seventy Five Million
Dollars ($75,000,000) (or such lower amount as Maker may have
elected by notice to the Holder on or prior to the Conversion
Date) minus (b) the aggregate principal amount of Asset Sale
Prepayments (as hereafter defined) made during the period covered
by clause (i) above (such amount to be deemed to equal zero if
such difference is a negative number), together, in each case
above, with accrued and unpaid interest on the principal amount
prepaid, and, in any such case, Maker shall give Holder at least
five business days' prior notice of the intended prepayment.
The Maker shall, on any day on which the outstanding
principal balance of this Note shall be less than $100,000,000,
prepay the outstanding principal balance of this Note in whole,
together with accrued and unpaid interest on the principal amount
so prepaid.
Upon any sale (an "Asset Sale") by any person,
including Parent or any subsidiary of Parent, of any mortgaged
property included within the Collateral and listed on Schedule 1
hereto (each such property, a "Mortgaged Property") other than a
Mortgaged Property in respect of which a prepayment has
theretofore been made pursuant to the next following paragraph,
Maker shall prepay the outstanding principal balance of this Note
(each such prepayment, an "Asset Sale Prepayment") in an amount
equal to the sum of (i) the lesser of, or, if after giving effect
to such Asset Sale, more than ten (10) retail stores (exclusive
of any warehouse or storage facilities) on or constituting
Mortgaged Properties shall have been sold by any Asset Seller (as
hereafter defined), the greater of, (a) the net proceeds (net of
reasonable and customary selling costs and expenses, including,
without limitation, fees and expenses with respect to legal and
brokerage fees, commissions and disbursements, incurred in
connection with such sale and of all taxes and other governmental
costs and expenses, other than income taxes, actually paid or
estimated, in good faith, to be payable by the seller in
connection with such sale) of such Asset Sale (the "Net
Proceeds") actually received by the seller of the Mortgaged
Property (the "Asset Seller") and (b) the stated value of such
Mortgaged Property set forth on Schedule 1 hereto (the "Stated
Value") and (ii) such additional amount, if any, as may be
required to result in the Cumulative Asset Sale Deficiency, after
giving effect to such Asset Sale and all amounts prepaid in
respect thereof pursuant to this paragraph, being no greater than
$10,000,000. For purposes of the foregoing, if the Asset Seller
shall receive noncash proceeds as all or part of the
consideration for an Asset Sale, the Asset Seller shall be deemed
to have actually received gross proceeds in an amount equal to
the principal amount of any debt instruments, and the fair value
(as determined in good faith by the Asset Seller) of any other
noncash proceeds, included in such consideration and Maker shall
make a prepayment under this Note as required above as if the
Asset Seller actually received Net Proceeds in an amount
determined based upon such Asset Seller's deemed receipt of gross
proceeds.
Each Asset Sale Prepayment shall be due and payable on
the date on which the Asset Seller receives (or, in the case of
noncash proceeds, is deemed to have received) the Net Proceeds of
the Asset Sale relating thereto.
In addition to the foregoing, if, on the last day of
the Prepayment Period, one or more stores on the Mortgaged
Properties are then Closed for Business (as hereafter defined),
Maker shall, on such last day, prepay the outstanding principal
balance of this Note in an amount equal to the aggregate of the
Stated Values of all such Mortgaged Properties, if any.
Following the Prepayment Period, whenever a store on a Mortgaged
Property is Closed for Business, (a) Maker shall, on or before
the fifth business day after such store is Closed for Business,
prepay the outstanding principal balance of this Note in an
amount equal to the Stated Value of such Mortgaged Property and
(b) such store shall be deemed to have been sold by an Asset
Seller for purposes of clause (i) of the second preceding
paragraph. A store shall be considered "Closed for Business," if
such store has been permanently closed for business or if more
than fifty percent (50%) of the selling area of such store has
been closed to the public for more than thirty (30) consecutive
days other than for repair or remodeling.
With respect to any prepayments (whether voluntary or
mandatory or upon an Asset Sale or pursuant to the immediately
preceding paragraph or upon acceleration following the occurrence
and during the continuance of a Default) of principal on this
Note (i) made during the Prepayment Period in an aggregate
principal amount in excess of the Yield-Free Prepayment Amount or
(ii) made after the expiration of the Prepayment Period, the
Maker shall pay, in addition to accrued and unpaid interest on
the principal amount prepaid, the Yield Maintenance Premium set
forth in Schedule 2 hereto.
The principal amount evidenced by this Note, together
with accrued and unpaid interest, may be declared to be, or may
automatically become, immediately due and payable upon the
occurrence and during the continuance of any of the following
events (each a "Default"):
(1) Maker fails to make any payment of
principal (including without limitation mandatory
prepayments of principal) or interest or other amounts
due hereunder or under any other Transaction Document
(as hereafter defined) when the same becomes due and
payable; or
(2) A default occurs under any contract,
agreement, lease, document, or other obligation to
which the Maker or Parent or any subsidiary of Parent
is a party or by which any of their respective
properties are bound (other than a Transaction
Document), and such default (i) arises from the failure
of any such entity to make, at the final maturity
thereof, after giving effect to any applicable grace
period, any payment in respect of indebtedness of any
such entity in excess of $25,000,000 aggregate
principal amount or (ii) causes indebtedness of any
such entity in excess of $25,000,000 aggregate
principal amount to become due prior to its stated
maturity or prior to its regularly scheduled dates of
payment; or
(3) (i) Maker or Parent or any subsidiary of
Parent shall (a) generally not pay its debts as such
debts become due, or shall admit in writing its
inability to pay its debts generally, or (b) make a
general assignment for the benefit of creditors, (ii)
any proceeding shall be instituted by or against any
such entity seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency, or reorganization
or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee,
custodian, or other similar official for it or for any
substantial part of its property and, in the case of
any such proceedings instituted against any such entity
(but not instituted by it), either such proceedings
shall remain undismissed or unstayed for a period of 45
calendar days or any of the actions sought in such
proceedings shall occur, or (iii) any such entity shall
take any corporate action to authorize any of the
actions set forth above in this paragraph (3); or
(4) Either of Maker or Parent is dissolved;
or
(5) Any representation or warranty made or
deemed made by Maker or Parent in this Note, the
Purchase Agreement, the Pledge and Security Agreement
dated the date hereof between Maker and Holder, the
Guarantee Agreement dated the date hereof between
Parent and Holder, the Pledge Agreement dated the date
hereof between Parent and Holder or any note, agreement
or other document delivered in connection with any
thereof or pursuant to any thereof (the foregoing
instruments collectively, whether now existing or
hereafter delivered, the "Transaction Documents") is
false in any material respect when made or deemed made;
or
(6) Maker or Parent defaults in any material
respect in the full and timely performance of any of
its obligations under any of the Transaction Documents,
provided that Holder has given Maker and Parent at
least 15 calendar days' written notice of the
occurrence or existence of such default and, unless
such obligation is under the Guarantee, such obligation
is not immaterial or insignificant in nature; or
(7) A judgment or judgments in an aggregate
amount in excess of $10,000,000, to the extent not
covered by insurance, shall be rendered against Maker
or Parent or any subsidiary of Parent and within 60
days after entry thereof such judgment is not
discharged or execution thereof stayed pending appeal,
or within 60 days after the expiration of any such
stay, such judgment is not discharged; or
(8) Maker or Parent challenges in writing
the legality, validity, enforceability or binding
effect of any of the Transaction Documents, or consents
to or acquiesces in such challenge by any other person
or entity, or any court of competent jurisdiction
determines that any of the Transaction Documents is
illegal, invalid, unenforceable or not binding; or
(9) After such time as Parent shall have,
directly or indirectly, acquired all of the Common
Stock pursuant to the Merger Agreement, Parent shall
cease to own, directly or indirectly, capital stock of
the Company representing a majority of the voting power
of shares entitled to vote generally in the election of
directors of the Company;
then, and in every such event, (i) if such Default is not a
Default specified in subclause (ii) or (iii) of clause (3) above,
Holder may, by notice in writing to Maker, immediately declare
this Note to be, and it shall thereupon become, due and
immediately payable without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly
waived, and if such Default is a Default specified in subclause
(ii) or (iii) of clause (3) above, this Note shall automatically
become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived and (ii) Holder shall have such other rights to
enforce all or any of the obligations of the Maker or Parent
under this Note and the other Transaction Documents as are given
hereunder or thereunder or by law.
All payments and prepayments of amounts due hereunder
shall be applied as follows:
(1) First, to payment or reimbursement of
all costs and expenses of Holder to be paid or
reimbursed by Maker and not theretofore paid or
reimbursed;
(2) Second, to the payment of all interest
theretofore accrued and unpaid hereunder;
(3) Third, to the payment in full of the
entire principal amount outstanding hereunder; and
(4) Fourth, to the payment of all other
amounts due to Holder under any Transaction
Document.
If Maker fails to make any payment of principal,
accrued and unpaid interest or any other amount due hereunder or
under any Transaction Document on any due date therefor, whether
at stated maturity, by required prepayment, by acceleration, or
otherwise, the unpaid amount (including, to the extent
enforceable at law, any unpaid amount of interest) shall bear
interest at the Default Rate until paid. For purposes of this
Note, the "Default Rate" shall be a rate per annum equal to the
sum of the LIBOR Rate in effect from time to time plus 3.25% or
the Fixed Rate plus 2%, as applicable. Maker shall also pay to
Holder, in addition to the amount due, all reasonable costs and
expenses incurred by Holder in collecting or enforcing, or
attempting to collect or enforce this Note, including without
limitation court costs and reasonable attorneys' fees and
expenses (including reasonable attorneys' fees and expenses on
any appeal by either Maker or Holder and in any bankruptcy
proceeding).
With respect to the amounts due pursuant to this Note,
Maker waives the following:
(1) All rights of exemption of property from levy or
sale under execution or other process for the collection of
debts under the Constitution or laws of the United States or
any State thereof;
(2) Demand, presentment, protest, notice of dishonor,
notice of nonpayment, suit against any party, diligence in
collection of this Note, and all other requirements
necessary to enforce this Note; and
(3) Any further receipt by or acknowledgment of any
collateral now or hereafter deposited as security for the
indebtedness evidenced by this Note.
In no event shall any amount deemed to constitute
interest due or payable hereunder (including interest calculated
at the Default Rate) exceed the maximum rate of interest
permitted by applicable law (the "Maximum Amount"), and in the
event such payment is inadvertently paid by Maker or
inadvertently received by Holder, then such sum shall be credited
as a payment of principal or other amounts (other than interest)
outstanding hereunder, and if in excess of the outstanding amount
of principal or other amounts outstanding hereunder, shall be
immediately returned to Maker upon such determination. It is the
express intent hereof that Maker not pay and Holder not receive,
directly or indirectly, interest in excess of the Maximum Amount.
Holder shall not by any act, delay, omission, or
otherwise be deemed to have modified, amended, waived, extended,
discharged, or terminated any of its rights or remedies, and no
modification, amendment, waiver, extension, discharge, or
termination of any kind shall be valid unless in writing and
signed by Holder. All rights and remedies of Holder under the
terms of this Note and applicable statutes or rules of law shall
be cumulative, and may be exercised successively or concurrently.
Maker agrees that there are no defenses, equities, or setoffs
with respect to the obligations set forth herein, and to the
extent any such defenses, equities, or setoffs may exist, the
same are hereby expressly released, forgiven, waived, and forever
discharged. The obligations of Maker hereunder shall be binding
upon and enforceable against Maker and its successors and
assigns.
Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is prohibited
by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Note.
Holder may, at its option, release to Maker any
collateral given to secure the indebtedness evidenced hereby, and
no such release shall impair the obligations of Maker to Holder.
This Note was negotiated in New York, and made by
Holder and accepted by Maker in the State of New York, which
State the parties agree has a substantial relationship to the
parties and to the underlying transaction embodied hereby, and in
all respects, including without limitation matters of
construction, validity, and performance, this Note and the
obligations arising hereunder shall be governed by, and construed
in accordance with, the internal laws of the State of New York
and any applicable law of the United States of America. To the
fullest extent permitted by law, Maker hereby unconditionally and
irrevocably waives any claim to assert that the laws of any other
jurisdiction governs this Note, and this Note shall be governed
by and construed in accordance with the laws of the State of New
York pursuant to 5-1401 of the New York General Obligations
Law.
Any legal suit, action, or proceeding against Holder or
Maker arising out of or relating to this Note shall be instituted
in any federal or state court in New York, New York, pursuant to
5-1402 of the New York General Obligations Law, and Maker
waives any objection which it may now or hereafter have to the
laying of venue of any such suit, action, or proceeding, and
Maker hereby irrevocably submits to the jurisdiction of any such
court in any such suit, action or proceeding. Maker does hereby
designate and appoint Jones, Day, Reavis & Pogue, 599 Lexington
Avenue, New York, New York 10022, Attention: Robert A. Profusek,
Esq., as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any
such suit, action or proceeding in any federal or state court in
New York, New York, and agrees that service of process upon said
agent at said address (or at such other office in New York, New
York as may be designated by such agent in accordance with the
terms hereof), with a copy to Maker at the following address: 7
West Seventh Street, Cincinnati, OH 45202, Attention: Mr.
Ronald W. Tysoe, shall be deemed in every respect effective
service of process upon Maker in any such suit, action, or
proceeding in the State of New York. Maker (i) shall give prompt
notice to Holder of any changed address of its authorized agent
hereunder, (ii) may at any time and from time to time designate a
substitute authorized agent with an office in New York, New York
(which office shall be designated as the address for service of
process), and (iii) shall promptly designate such a substitute if
its authorized agent ceases to have an office in New York, New
York or is dissolved without leaving a successor.
MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO
SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING
WITHOUT LIMITATION ANY TORT ACTION, BROUGHT WITH RESPECT TO THIS
NOTE. HOLDER MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS
WRITTEN EVIDENCE OF MAKER'S KNOWING, VOLUNTARY, AND BARGAINED-FOR
AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY, AND
THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY
DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER SHALL
INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
Maker may not assign or delegate this Note or any of
its rights or obligations hereunder without the prior consent of
Holder (which consent may be given or withheld in the sole
discretion of Holder). Holder may assign or delegate this Note
or any of its rights or obligations hereunder without prior
consent of or notice to Maker or Parent.
This Note is secured by, and entitled to the benefits
of, a Pledge and Security Agreement between Maker and Holder
dated concurrently herewith. Parent has guaranteed all of the
obligations of Maker under this Note and the other Transaction
Documents under a Guarantee Agreement between Parent and Holder
dated concurrently herewith. The obligations of Parent under
such Guarantee Agreement are secured by a pledge of the stock of
Maker and certain other collateral related thereto under a Pledge
Agreement between Parent and Holder dated concurrently herewith.
IN WITNESS WHEREOF, Maker has caused this Note to be
duly executed on its behalf as of the day and year first above
written.
FEDERATED NOTEHOLDING CORPORATION II
By:
Name:
Title:
SCHEDULE 1
STATED VALUES OF MORTGAGED PROPERTIES
Store Stated
Value1
San Francisco $15,500
Stonestown 11,800
Glendale 17,200
Del Amo 15,500
Stevens Crk/Valley 13,000
Fair
Oakland 6,200
Montclair 7,500
Stanford 5,300
Chula Vista 8,000
Sherman Oaks (1993 9,700
Sales)
Arden Fair 6,400
Vallco 4,400
Newpark 4,000
Newport Beach 5,300
Paradise Valley 4,800
Thousand Oaks 6,000
Fairfield/Solano 4,000
El Cerrito 5,000
Escondido 6,300
La Jolla 5,900
Huntington Beach 7,500
West Covina 6,000
Country Club 4,400
Santa Barbara 4,300
Panorama City 5,100
Biltmore 5,600
Fresno 4,200
Tuscon Mall 3,500
Long Beach 5,100
Crenshaw/Baldwin H. 3,000
Ventura 5,500
Service Center 5,000
$221,000
- -------------------------
1 In thousands.
SCHEDULE 2
YIELD MAINTENANCE PREMIUM
If the Note is prepaid for any reason, whether voluntarily or
involuntarily, or after acceleration by Holder upon an Event of
Default, at a time when the Note requires the payment of the
Yield Maintenance Premium in respect of such prepayment, Maker
shall pay a prepayment premium (the "Yield Maintenance Premium")
equal to an amount equal to the Present Value of the Loan (as
hereinafter defined) less the amount of principal being prepaid,
including accrued interest, if any, calculated as of the
Prepayment Date.
The foregoing notwithstanding, if the Note is prepaid during the
ninety (90) day period immediately prior to the Maturity Date,
there shall be no Yield Maintenance Premium payable on account of
such prepayment.
Holder shall notify Maker of the approximate amount (the exact
amount to be determined on the Prepayment Date) and basis of
determination of the Yield Maintenance Premium. Holder shall not
be obligated to accept any prepayment of the principal balance of
the Note in respect of which the Yield Maintenance Premium is
payable unless such prepayment is accompanied by the Yield
Maintenance Premium and all accrued interest and other sums then
due under the Note.
For the purposes of determining the Yield Maintenance Premium,
the following terms shall have the following meanings:
The "Treasury Rate" is the semi-annual yield on the Treasury
Constant Maturity Series with maturity equal to the remaining
life of the Note, for the week prior to the Prepayment Date, as
reported in Federal Reserve Statistical Release H.15 _ Selected
Interest Rates, conclusively determined by the Holder on the
Prepayment Date, absent manifest error. The rate will be
determined by linear interpolation between the yields reported in
Release H.15, if necessary. (In the event Release H.15 is no
longer published, Holder shall select a comparable publication to
determine the Treasury Rate.)
The "Discount Rate" is the rate which, when compounded monthly,
is equivalent to the Treasury Rate, when compounded semi-
annually.
The "Present Value of the Loan" shall be determined by
discounting all scheduled payments of principal and interest
remaining to maturity of the Note, attributed to the amount being
prepaid, at the Discount Rate. If prepayment occurs on a date
other than a scheduled monthly payment date, the actual number of
days remaining from the Prepayment Date to the next scheduled
monthly payment date will be used to discount within this period.
Maker agrees that Holder shall not be obligated to actually
reinvest the amount prepaid in any Treasury obligations as a
condition precedent to receiving the Yield Maintenance Premium.
FIRST AMENDMENT TO AMENDED AND RESTATED
TERM LOAN AGREEMENT AND OTHER
RESTRUCTURED LOAN DOCUMENTS
This First Amendment to Amended and Restated Term Loan
Agreement and other Restructured Loan Documents ("First
Amendment") is made and dated as of October 11, 1995, by and
among BROADWAY STORES, INC., formerly known as CARTER HAWLEY HALE
STORES, INC., a Delaware corporation (the "Company" or "CHH"),
BARCLAYS BANK PLC, a bank organized under the laws of the United
Kingdom, THE TOKAI BANK LIMITED, a bank organized under the laws
of Japan, acting through its Los Angeles Agency, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association (collectively, "Banks," and individually, a "Bank"),
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, as agent for Banks (in such
capacity, "Agent").
RECITALS
Company, Banks and Agent are parties to that certain
Amended and Restated Term Loan Agreement, dated as of October 8, 1992
(the "Amended and Restated Term Loan Agreement"). Capitalized
terms used here without definition have the meanings given to
them in the Amended and Restated Term Loan Agreement.
Pursuant to an Agreement and Plan of Merger dated as of
August 14, 1995 (the "Merger Agreement") among the Company,
Federated Department Stores, Inc. ("Federated") and Nomo Company,
Inc., a wholly owned subsidiary of Federated ("Merger Sub"),
Merger Sub intends to merge with and into the Company, with the
Company being the surviving corporation of such merger (such
transaction hereinafter called the "Merger"), with the common and
preferred stockholders of the Company receiving shares of the
common stock of Federated in exchange for their shares of the
Company's common stock. In addition, pursuant to a Stock
Agreement dated as of August 14, 1995 between Federated and
Zell/Chilmark Fund, L.P. ("Z/C"), Federated has acquired an
option (the "Option") to purchase all of the outstanding common
stock of the Company held by Z/C for the same Federated common
stock consideration that would otherwise be provided to the
holders of the common stock of the Company in connection with the
Merger. The foregoing transactions, together with each and every
transaction, agreement and other arrangement relating thereto,
are collectively referred to herein as the "Merger Transactions."
Subject to the terms and conditions contained in that
certain letter, dated August 13, 1995, delivered to the Company
and Federated by the Agent, on behalf of itself and the Majority
Banks (the "Merger Consent Letter") the Agent, on behalf of
itself and the Majority Banks consented to the change of
ownership of the stock of the Company resulting from the Company,
Merger Sub and Federated entering into and consummating each of
the Merger Transactions, and permanently and irrevocably waived
any Default or Event of Default under the Amended and Restated
Term Loan Agreement or any other of the Restructured Loan
Documents that could arise solely as a result of a violation of
Section 8.03 of the Amended and Restated Term Loan Agreement and
analogous provisions of the other Restructured Loan Documents as
a result of the Company, Merger Sub and Federated entering into
and consummating each of the Merger Transactions.
The Company, Agent and Banks desire to enter into this First
Amendment in order to implement certain terms and conditions of
the Merger Consent Letter.
NOW THEREFORE, in consideration of the foregoing
recitals and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
Conditions to Effectiveness
1.1 Conditions Precedent. The following shall
constitute the conditions precedent to the effectiveness of the
modifications of the Amended and Restated Term Loan Agreement and
the other Restructured Loan Documents provided for herein:
(a) Company shall have executed and delivered to
Agent this First Amendment, together with a certificate in the
form attached hereto as Exhibit A (the "Modification
Certificate").
(b) All representations and warranties of Company
set forth herein shall be true and correct on and as of the date
hereof and on and as of the Effective Date (as defined below).
(c) No Default or Event of Default shall have
occurred and be continuing on and as of the date hereof or, after
giving effect to the Merger Transactions (assuming the
effectiveness of the amendments to the Amended and Restated Term
Loan Agreement set forth herein), on and as of the Effective
Date.
(d) Agent shall have received true and correct
copies of all modifications of the Organizational Documents of
the Company entered into in connection with the Merger
Transactions.
(e) Agent shall have received evidence of the
consummation of the Merger Transactions and shall have received
true and correct copies of all instruments, contracts, agreements
and documents entered into by the Company, Federated or any
Affiliate of the Company or Federated with Prudential or GE
Capital in connection with the Merger Transactions, which
instruments, contracts, agreements and documents shall be
consistent in all material respects with the instruments,
contracts, agreements and documents entered into by the Company,
Federated or any Affiliate of the Company or Federated with
Prudential or GE Capital in connection with the Merger
Transactions and disclosed in writing to the Agent prior to the
date hereof.
.(f) Agent shall have received such endorsements
to the Mortgagee's Title Policies as Agent may require insuring
that the priority of liens of the Mortgages has not been affected
as a result of the delivery of this First Amendment and showing
no exceptions other than Permitted Exceptions.
(g) Agent shall have received such amendments to
and supplements of the Restructured Loan Documents, reflecting
the terms hereof, as Agent or Majority Banks may require.
(h) Federated or its Affiliates and the Company
shall have delivered to the Agent the Federated License Agreement
(as defined below).
(i) If any portion of the $200,000,000 payable to
Prudential under Section 1.2.1 of the Prudential Purchase
Agreement (as defined below) shall be paid to Prudential in cash
(the cash portion of such payment being referred to herein as the
"Prudential cash payment"), the Company shall have prepaid the
Amended and Restated Term Loan in an amount which bears the same
ratio to the outstanding principal balance due under the Amended
and Restated Term Loan as the amount of the Prudential cash
payment bears to the outstanding principal balance under the
Prudential Loan Documents; to the extent such prepayment relates
to any Offshore Rate Portion, it shall be accompanied by the
amounts necessary to reimburse each Bank for any loss resulting
from the payment of such Portion on a date other than the last
day of the relevant Offshore Rate Period, including, without
limitation, the amount of any loss incurred in liquidating
deposits from third parties and loss of profit for the remainder
of such Offshore Rate Period.
(j) The Company shall have paid to Agent (for the
benefit of the appropriate parties) (i) all unreimbursed fees and
expenses (including, without limitation, attorneys' fees and
expenses) previously incurred by Agent and/or any Bank and
invoiced to the Company and (ii) all fees, costs and other
expenses incurred by Agent and/or any Bank (including, but not
limited to, all reasonable attorneys' fees and expenses and title
insurance premiums) in connection with the Merger Transactions,
the Merger Consent Letter, this First Amendment and the
consummation of transactions hereunder, to the extent invoiced
prior to the Effective Date, and without limiting the obligations
of the Company under Section 5.4 below .
(k) The Company shall have delivered to Agent a
release in a form satisfactory to Agent and Banks, which shall
release Agent and Banks from all potential claims arising under
the Amended and Restated Term Loan Agreement prior to the
Effective Date.
(l) The Company shall have cured all existing
Defaults and Events of Defaults under the Restructured Loan
Documents.
(m) Agent shall have received opinions of counsel
to Company, as to the matters identified on Exhibit B attached
hereto, in form and substance satisfactory to Agent.
1.2 Effective Date. As used herein, the term
"Effective Date" shall mean the date all conditions set forth in
Section 1.1 above have been satisfied. This First Amendment
shall be null and void and of no further force or effect if the
Effective Date shall not have occurred on or prior to
February 29, 1996.
ARTICLE II
Amendments to Amended and Restated Term Loan Agreement
Upon the Effective Date, Company, Agent and Banks
hereby amend the Amended and Restated Term Loan Agreement as
follows:
2.1 Definitions.
(a) All references in the Amended and Restated
Term Loan Agreement and in the Restructured Loan Documents to the
Amended and Restated Term Loan Agreement or to any Restructured
Loan Documents shall mean the Amended and Restated Term Loan
Agreement and such Restructured Loan Documents, in each case as
modified pursuant to this First Amendment.
(b) To the extent that any Restructured Loan
Document utilizes any term which is defined by reference to the
definition of that term which appears in the Amended and Restated
Term Loan Agreement, and that term in the Amended and Restated
Term Loan Agreement is modified by this First Amendment, then the
definition of that term in all other Restructured Loan Documents
is likewise hereby so amended.
(c) The terms "Federated," "Merger," "Merger
Consent Letter," "Merger Sub," "Merger Transactions," "Option"
and "Z/C," each as hereinabove defined, are each hereby added as
defined terms in the Amended and Restated Term Loan Agreement.
(d) The following new defined terms are hereby
added to the defined terms in Schedule 4 of the Amended and
Restated Term Loan Agreement:
(i) "Federated License Agreement" shall mean that
certain License Agreement by and among Federated
(and/or its Affiliates Bullock's, Inc. or Macy's West,
Inc.), the Company, Agent and Banks, as it may be
amended, supplemented, restated, extended or otherwise
modified from time to time, in the form of Exhibit C
attached hereto.
(ii) "Federated License Date" shall mean the
earlier of (a) sixty (60) days after the effective date
under the First Amendment to this Amended and Restated
Term Loan Agreement or (b) the date on which Federated
or its Affiliates Bullock's, Inc. or Macy's West, Inc.
grants to Prudential a license to use the "Bullock's"
or "Macy's" name.
(iii) "Prudential Purchase Agreement" means
that certain Purchase Agreement, dated as of August 14,
1995, among Prudential, Federated and Federated
Noteholding Corporation II
(iv) "Prudential Stock Repurchase" shall mean any
redemption, purchase, repurchase or other acquisition
for value (whether in cash, property or otherwise) by
Federated or any of its Affiliates of any of the common
stock of Federated acquired by Prudential pursuant to
Section 1.2 of the Prudential Purchase Agreement."
(e) All references to "CHH" in the Amended and
Restated Term Loan Agreement and the Restructured Loan Documents
shall mean the Company.
2.2 Prudential Stock Repurchase
The following sentence is hereby added at the end of
Section 2.07 of the Amended and Restated Term Loan Agreement:
"Within five (5) days after the occurrence of any Prudential
Stock Repurchase, CHH shall prepay the Amended and Restated Term
Loan in an amount which bears the same ratio to the then
outstanding principal balance of the Amended and Restated Term
Loan as the amount of the cash or value of property received by
Prudential in connection with the Prudential Stock Repurchase
bears to the then outstanding principal balance under the
Prudential Loan Documents; to the extent such prepayment relates
to any Offshore Rate Portion, it shall be accompanied by the
amounts necessary to reimburse each Bank for any loss resulting
from the payment of such Portion on a date other than the last
day of the relevant Offshore Rate Period, including, without
limitation, the amount of any loss incurred in liquidating
deposits from third parties and loss of profit for the remainder
of such Offshore Rate Period"
2.3 Collateral Security.
Section 3.01E of the Amended and Restated Term Loan
Agreement is hereby amended and restated in its entirety as
follows:
"E. Amended and Restated License.
(1) CHH hereby agrees to execute and deliver
and to cause, on or before the Federated License
Date, Federated (or its Affiliates Bullock's, Inc.
and Macy's West, Inc.) to execute and deliver to
Agent, for the ratable benefit of Agent and Banks,
the Amended and Restated License Agreement in
substantially the form of Exhibit I hereto (in the
case of CHH) and a Federated License Agreement in
the form of Exhibit I-2 attached hereto (in the
case of Federated or its Affiliates). On or prior
to the Federated License Date, CHH shall use best
efforts to cause Prudential to deliver to the Bank
an intercreditor agreement with respect to the
licenses granted by Federated or its Affiliates on
the same terms as the Intercreditor Agreement.
CHH hereby grants to Agent and Banks a present
license to use the "Broadway" or "Broadway
Southwest" or "Weinstocks" name, as the case may
be, and shall cause Federated, on or before the
Federated License Date, to grant to Agent and
Banks a present license to use the "Bullock's" or
"Macy's" name, at the applicable Store, provided
that the Banks' rights to use such name shall be
effective only if:
(a) any Shopping Center Document
requires that all or any part of a Store be
operated as a "Broadway", a "Broadway Southwest",
or a "Weinstocks", a "Bullock's" or a "Macy's" (or
any such similar covenant) ("Operating Covenant"),
and such requirement could reasonably be
interpreted to bind Agent or Banks or subsequent
transferees of Agent or Banks, as the case may be,
upon the conveyance of title to Agent (for the
ratable benefit of Agent and Banks), or upon any
such subsequent transfers, in which event such
rights shall be for the term of such Operating
Covenant, if such Operating Covenant would be
applicable to such subsequent transferee upon such
conveyance, and, subject to the foregoing, may be
transferred by Agent or Banks to a purchaser of
the applicable Store at a foreclosure sale or at a
sale upon the exercise of a right of power of
sale, or (if Agent or Banks acquire title to the
Store by deed (or other transfer) in lieu of
foreclosure) to a subsequent purchaser, or
(b) Agent (for the ratable benefit of
Agent and Banks) (or a court-appointed receiver)
obtains possession of such Store through a court
order or acquires the Store through power of sale
or foreclosure or deed (or other transfer) in lieu
of foreclosure of the applicable Store, in which
case such rights shall expire only upon the sale
of the applicable Store by Agent (for the ratable
benefit of Agent and Banks).
(2) With respect to the rights described in
clause (1)(a) above, it is understood and agreed
that:
(a) Such rights may only be exercised
upon the conveyance of title to the applicable
Store to Agent (for the ratable benefit of Agent
and Banks), or the taking of possession of the
Store by Agent (for the ratable benefit of Agent
and Banks) (or a court-appointed receiver), or its
designees, successors and assigns, and
(b) If, after the Effective Date, CHH or
Federated (or its Affiliates Bullock's or Macy's
West, Inc.) delivers to Agent a fully executed
amendment to the applicable Shopping Center
Document (satisfactory in form and substance to
Agent and Majority Banks), which either effects a
deletion of the applicable Operating Covenant or
renders the applicable Operating Covenant
inapplicable to Agent and Banks and their
designees, successors and assigns, then such
rights shall automatically be deemed terminated
with respect to the applicable Store.
(3) With respect to the rights described in
clause (1) above, (a) CHH agrees (and shall cause
Federated and/or its Affiliates Bullock's, Inc.
and Macy's West, Inc. to agree, prior to the
Federated License Date) that, in the event that
CHH (or Federated and/or its Affiliates Bullock's,
Inc. and Macy's West, Inc.) grants to any party,
other than the lenders party to the Intercreditor
Agreement, a security interest in the trade names,
trademarks or trade styles used by CHH (or
Federated and/or its Affiliates Bullock's, Inc.
and Macy's West, Inc.) in connection with any of
the Stores subject to the Amended and Restated
License Agreement or the Federated License
Agreement, CHH agrees to provide (or to cause
Federated and/or its Affiliates Bullock's, Inc.
and Macy's West, Inc. to provide) to Agent and
Banks, prior to or concurrently with such grant of
security interest, a Nondisturbance Letter in
substantially the form of Exhibit G hereto,
executed by such parties (and with appropriate
revisions therein reflecting Federated and/or its
Affiliates Bullock's, Inc. and Macy's West, Inc.
as a party if it is a party thereto), and
(b) Banks agree that (i) if Agent (for the ratable
benefit of Agent and Banks) acquires title to, or
possession (whether through a court-appointed
receiver or otherwise) of, a Store and operates
such Store under the applicable name pursuant to
the terms of the foregoing, Banks and their
successors shall use reasonable efforts to cause
such Store to be operated in such manner (x) as is
consistent with the quality of other stores then
bearing such name, and (y) as will not materially
adversely affect the reputation of any other
stores then bearing such name, and (ii) if Agent
(for the ratable benefit of Agent and Banks)
acquires title to, or possession (whether through
a court-appointed receiver or otherwise) of, a
Store and operates such Store as anything other
than a retail department store which, after a
reasonable start-up time, is of a quality
reasonably consistent with the quality of other
stores then bearing such name, Banks and their
successors shall, after written notice from CHH,
Federated and/or its Affiliates Bullock's, Inc.
and Macy's West, Inc. and continued failure by
Banks or their successors within the next sixty
(60) days to commence to operate the Store at the
required level of quality, cease to operate such
Store under the applicable name.
(4) In the event that Banks and/or their
successors cease to operate any such Store in
accordance with the requirements of clause (3)
above, neither CHH, nor Federated, nor its
Affiliates Bullock's, Inc. and Macy's West, Inc.
shall be entitled to pursue any legal or equitable
remedy against Banks other than the enforcement of
the agreement of the Banks and/or their successors
to cease operation of such Store under the
applicable name as provided in said clause (3).
Exhibit I-2 is hereby attached to the Amended and
Restated Term Loan Agreement in the form of Exhibit C attached
hereto.
2.4 Modified Reporting Obligations.
(a) Section 6.01 B of the Amended and Restated Loan
Agreement is hereby amended and restated in its entirety to read
as follows:
"B. within forty-five (45) days after the
end of each of CHH's first three (3) fiscal quarters during each
of CHH's fiscal years an unaudited quarterly balance sheet and
income statement for such fiscal quarter; within ninety (90)
days after the end of each of CHH's fourth fiscal quarters during
each of CHH's fiscal years, unaudited annual balance sheet and
income statement for the fiscal year ending with such fiscal
quarter (each such quarterly and annual financial statement shall
be certified by the Chief Financial Officer of CHH as accurately
reflecting the financial condition of CHH as of the date thereof,
and each such certificate shall certify as to the material
respects in which such statements have not been prepared in
conformity with GAAP, shall certify as to whether CHH is in
compliance with Section 7.02 below (and shall provide detail as
to any non-compliance); and shall be in such reasonable detail as
may be required by the Agent and the Banks); and promptly upon
their becoming available, copies of all press releases and other
statements made available generally concerning CHH and its
Subsidiaries;".
(b) The following is hereby added after the word "CHH"
in the fourth line of Section 6.01H of the Amended and Restated
Term Loan Agreement: ", together with such additional
information with respect to the Stores as is provided to
Prudential on a quarterly basis with respect to the collateral
under the Prudential Loan Documents."
(c) The period at the end of Section 6.01 I of the
Amended and Restated Term Loan Agreement is hereby changed to a
comma, and the following new subsections J, K, L and M are hereby
added to Section 6.01 of the Amended and Restated Term Loan
Agreement, as follows:
"J. On or before each March 8 and September 1
until the Amended and Restated Loan has been paid in full, copies
of those portions of the seasonal operating plan of Federated
both on a consolidated basis and separately for its Macy's West
division in the form delivered to Federated's working capital
lenders; and on or before each April 30 until the Amended and
Restated Loan has been paid in full, copies of those portions of
the annual plan of Federated both on a consolidated basis and
separately for its Macy's West division in the form delivered to
Federated's working capital lenders; and within fifteen (15) days
after its adoption by the Board of Directors of Federated, a copy
of any business plan of Federated both on a consolidated basis
and separately for its Macy's West division in the form delivered
to Federated's working capital lenders, it being understood that
the information delivered pursuant to this Section 6.01 J shall
be Confidential Information subject to the terms and conditions
set forth in Section 11.23 of the Amended and Restated Loan
Agreement;
K. promptly upon their becoming available copies
of: (1) all financial statements, reports, notices and proxy
statements sent or made available generally by Federated to its
security holders; (2) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by
Federated or any of its Subsidiaries with any securities exchange
or with the Securities Exchange Commission or any governmental
authority succeeding to its functions; and (3) all press releases
and other statements made available concerning Federated and its
Subsidiaries;
L. Within five (5) days after execution thereof,
copies of any agreement containing any material modification of
the Prudential Purchase Agreement, and within five (5) days after
the occurrence of the same, written notice of the occurrence of
any Prudential Stock Repurchase which notice shall specify the
amount of the cash or value of property received by Prudential in
connection with the Prudential Stock Repurchase and the then
outstanding principal balance under the Prudential Loan
Documents; and
M. Promptly upon their becoming available,
copies of all financial information delivered by CHH to
Prudential or GE Capital (except for information exclusively
relating to the collateral described in the Prudential Loan
Documents or in the documents securing the Accounts Receivable
Facility and the Working Capital Facility)."
2.5 Repayment of Subordinated Notes. A new Section
6.11 is hereby added to the Amended and Restated Term Loan
Agreement, as follows:
"Section 6.11. Repayment of Senior Subordinated Notes.
In connection with the Merger, CHH shall cause its 6-1/4%
senior subordinated notes due 2000 to be paid in full
through an equity infusion by Federated, and not
through the incurrence of debt."
2.6 Dividends. The second sentence of Section 7.01 of
the Amended and Restated Term Loan Agreement is hereby deleted.
2.7 Contracts With Affiliates. A new Section 7.02 is
hereby added to the Amended and Restated Term Loan Agreement as
follows:
"7.02 Transactions with Affiliates.
(a) CHH shall not enter into any transaction or
agreement (including, without limitation, any agreement
for management, administrative or other services or the
sharing of overhead or general or administrative
expenses) with any Affiliate of CHH, with Federated, or
with any Affiliate of Federated, except (i) for the
consummation of the transactions included within the
Merger Transactions, or (ii) in the ordinary course of
business and pursuant to the reasonable requirements of
the business of CHH; upon fair and reasonable terms no
less favorable to CHH than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate
of CHH or of Federated.
(b) CHH shall not create, incur, assume or suffer
to exist any contingent obligations for indebtedness or
contractual obligations or tax obligations of Federated
or any Affiliate of Federated except for those
obligations with respect to tax liabilities arising by
operation of law as a result of CHH's membership in the
Federated consolidated group.
(c) CHH shall not purchase or acquire, or make
any commitment therefor, any capital stock, equity
interest, all or substantially all of the assets of, or
any obligations or other securities of, or any interest
in, Federated or any Affiliate of Federated, or make
any advance, loan, extension of credit or capital
contribution to or any other investment in, Federated
or any Affiliate of Federated, except for intercompany
indebtedness incurred in the ordinary course of
business under Federated's cash management system.
(d) CHH shall not enter into any lease or
agreement to lease any portion of a Store to Federated
or any Affiliate of Federated.
(e) CHH shall obtain from Federated and/or its
Affiliates Bullock's, Inc. and Macy's West, Inc. and
keep in effect such licenses as may be required to
operate under the Bullock's or Macy's names any Store
using such names."
2.8 Financial and Operating Covenants. A new Section
7.03 is hereby added to the Amended and Restated Term Loan
Agreement as follows:
"Section 7.03 Financial and Operating Covenants.
(a) Minimum Tangible Net Worth. CHH shall
not permit, at any time, its tangible net worth
(as determined in accordance with GAAP) to be less
than two (2) times the outstanding principal
balance of the Amended and Restated Term Loan at
such time.
(b) Operating Covenant. Unless required to
do so by a final, non-appealable order of the
California Attorney General or of another
Governmental Authority, CHH shall not cease to be
engaged in the business of owning and operating
not fewer than thirty (30) retail department
stores substantially in accordance with its past
practices or the past practices of Federated, and
shall operate, unless and until each Store is duly
released as collateral in compliance with the
provisions of Sections 3.02A or 8.03A, at each
Store a retail department store which is of a
quality reasonably consistent with the quality of
other stores then bearing such name."
2.9 Transfer of Interests in CHH.
(a) Section 8.03B of the Amended and Restated
Term Loan Agreement is hereby amended and restated in its
entirety as follows:
"B. Interests in CHH. CHH acknowledges that
Agent and Banks are making the Amended and Restated Term
Loan in reliance on the expertise, skill and experience of
CHH; thus, the Amended and Restated Term Loan includes
material elements similar in nature to a personal service
contract. Accordingly, if at any time after the effective
date under the First Amendment to this Agreement and during
the term of the Amended and Restated Term Loan any of the
following events described in (1) and (2) below shall occur:
(1) any person or group (as such terms are
defined in the Exchange Act) except Merger Sub,
Federated or a Qualified Federated Subsidiary, acquires
beneficial ownership (as defined in the Exchange Act)
of voting stock of CHH that constitutes, immediately
following such acquisition, more than forty-eight
percent (48%) of the outstanding voting stock of CHH;
or
(2) CHH shall be merged with, or
consolidated into, any other corporation (unless the
beneficial owners of one hundred percent (100%) in the
aggregate of CHH's voting stock immediately prior to
the consummation of such a transaction beneficially own
at least fifty-one percent (51%), in the aggregate, of
the voting stock of the resulting or surviving
corporation immediately following the consummation of
the transaction);
THEN an Event of Default shall be deemed to exist
hereunder. For purposes hereof, a "Qualified Federated
Subsidiary" shall mean Macy's West, Inc., or any successor
thereto, so long as Macy's West, Inc. or such successor (i)
is a wholly-owned Subsidiary of Federated, (ii) has a net
worth, immediately upon its acquisition of the voting stock
of CHH, in an amount at least equal to that of CHH
immediately before such acquisition and in no event less
than the amount required under Section 7.03, and (iii) has
delivered to the Agent such documents as the Agent may
require in connection with such acquisition, including,
without limitation, transfer and assumption documents
whereby such Subsidiary assumes, on a recourse basis, all of
the Obligations of CHH under this Amended and Restated Loan
Agreement and under all other Restructured Loan Documents,
and organizational documents and documents evidencing the
authority of such Subsidiary to enter into and perform such
acquisition and assumption."
(b) Section 8.03C of the Amended and Restated
Term Loan Agreement is hereby deleted.
2.10 Licensed Names. Section 8.04 of the Amended and
Restated Term Loan Agreement is hereby amended and restated in
its entirety as follows:
"Section 8.04 Enforcement of Restrictions on
Licensed Names. Following a judicial or nonjudicial
foreclosure sale under any Mortgage, or any deed in lieu of
foreclosure, and for so long as the Banks' rights under
Section 3.01E above and the Amended and Restated License
Agreement or Federated License Agreement shall remain in
effect, CHH shall enforce (or shall cause Federated and/or
its Affiliates Bullock's, Inc. and Macy's West, Inc. to
enforce) all restrictions on the use of the "Broadway",
"Broadway Southwest", "Weinstocks", "Bullock's" or "Macy's"
name, as the case may be, or on the operation of any store
then bearing such name, which apply to any other party who
has been granted a right to use such name. CHH acknowledges
that its failure to enforce (or to cause Federated and/or
its Affiliates Bullock's, Inc. and Macy's West, Inc. to
enforce) such restrictions could cause irreparable harm to
the Banks and their successors, and that monetary damages
would not be an adequate remedy for such breach, and CHH and
Banks accordingly agree that the Banks and their successors
shall enforce the foregoing restrictions exclusively through
injunctions, restraining orders, declaratory and other
equitable relief. The foregoing obligations shall survive
any judicial or nonjudicial foreclosure under any or all of
the Mortgages or any deed in lieu of foreclosure."
2.11 Nondisturbance Letter. Section 9.06 of the
Amended and Restated Term Loan Agreement is hereby amended and
restated in its entirety as follows:
"Section 9.06 Failure to Deliver Nondisturbance
Letter. Failure by CHH or Federated and/or its Affiliates
Bullock's, Inc. and Macy's West, Inc. to deliver to Agent
and Banks the Nondisturbance Letters required by Section
3.01E(3)(a) in the event that CHH or Federated and/or its
Affiliates Bullock's, Inc. and Macy's West, Inc. grants to
any party, other than the lenders party to the Intercreditor
Agreement, a security interest in the trade names,
trademarks or trade styles used in connection with any of
the Stores subject to the Amended and Restated License
Agreement or the Federated License Agreement; or"
2.12 Appraisal Costs. The following sentence is hereby
added to Section 11.06 of the Amended and Restated Term Loan
Agreement:
"Notwithstanding anything to the contrary set forth
herein (including, without limitation, in clause (a) of
this Section 11.06 or in Section 3.02), CHH shall pay
all costs and expenses incurred by the Agent or any
Bank in connection with the appraisal of any one or
more of the Stores (i) no more frequently than once
annually or (ii) at any time after the occurrence of
any Event of Default."
2.13 Recourse. Section 11.22 of the Amended and
Restated Term Loan Agreement, and each reference thereto
contained in the Restructured Loan Documents, is hereby deleted,
it being understood and agreed that, notwithstanding anything to
the contrary set forth in the Amended and Restated Term Loan
Agreement or the Restructured Loan Documents, the obligations of
CHH under the Amended and Restated Term Loan Agreement and all
Restructured Loan Documents shall be personal, recourse
obligations of CHH.
ARTICLE III
AMENDMENTS TO OTHER RESTRUCTURED LOAN DOCUMENTS
Upon the Effective Date, Company, Agent and Banks
hereby amend the other Restructured Loan Documents as follows:
3.1 Amendments to Notes. The Master Principal Note
and the Master Capitalized Interest Note are each hereby amended
by deleting therefrom the sentence which reads as follows: "The
obligations of Borrower hereunder are non-recourse obligations
except as described in Section 11.22 of the Agreement and Section
4.06 of the Deeds of Trust, which provisions govern the
limitations on the rights of Agent and Banks to seek a personal
or deficiency judgment on this Note."
3.2 Amendments to Security Documents.
(a) Each of the Mortgages are amended as
follows:
(i) Section 1.10(b) of each Mortgage is
amended by deleting therefrom the clause ",
subject to the provisions of Section 4.06 hereof
and Section 11.22 of the Loan Agreement".
(ii) Section 1.12(g) of each Mortgage is
amended by replacing "Pursuant to Section 10.18 of
the Loan Agreement and Section 4.06 hereof, the"
with "The".
(iii) Section 4.06 of each Mortgage,
and each reference thereto contained in the
Restructured Loan Documents, is hereby deleted, it
being understood and agreed that notwithstanding
anything to the contrary set forth in the Amended
and Restated Term Loan Agreement or the
Restructured Loan Documents, the obligations of
CHH under the Amended and Restated Term Loan
Agreement and all Restructured Loan Documents
shall be personal, recourse obligations of CHH.
(b) Section 17 of each Assignment of Leases,
Occupancy Agreements, Licenses and Concession
Agreements is hereby deleted.
(c) Section 11 of each Assignment of
Warranties, Personal Property Leases and Service
Contracts is hereby deleted.
(d) Section 15 of each Assignment of Options
and Security Agreement is hereby deleted.
ARTICLE IV
Representations and Warranties
In order to induce Agent and Banks to enter into this
First Amendment, Company hereby represents and warrants to Bank
as follows, which representations and warranties shall be true
and correct as of the date hereof and as of the Effective Date,
after giving effect to the Merger Transactions:
4.1 Authorization. The execution, delivery and
performance of this First Amendment and the consummation of the
Merger Transactions have been duly authorized by all necessary
action of Company, Federated and Merger Sub.
4.2 No Conflict. The execution, delivery and
performance by Company of this First Amendment and consummation
of the Merger Transactions do not and will not (a) violate any
Legal Requirements applicable to Company, Federated or Merger Sub
or their respective organizational documents, (b) conflict with,
result in a breach of or constitute (with due notice or lapse of
time or both) a default under any contractual obligation or
indebtedness of the Company, or (c) result in or require the
creation or imposition of any lien upon any of the properties of
Company other than those created or permitted by the Restructured
Loan Documents, as amended pursuant hereto.
4.3 Consents. The execution, delivery and performance
by Company of this First Amendment and the consummation of the
Merger Transactions do not and will not require any registration
with, consent or approval of, or notice to, or other action by,
any governmental authority, or any trustee or holder of any
indebtedness or obligation of Company, Federated or Merger Sub,
or other Person, or if required, such registration has been made,
such consent or approval given, such notice given or such other
appropriate action taken, and certified copies of the same have
been delivered to Agent.
4.4 Binding Obligation. This First Amendment is the
legal, valid and binding obligation of Company, enforceable
against it in accordance with its terms.
4.5 Representations and Warranties in Loan Documents.
The representations and warranties of Company contained in the
Restructured Loan Documents, as amended pursuant hereto, are true
and correct on and as of the date hereof as though made on and as
of the date hereof, and will be true and correct on and as of the
Effective Date as though made on and as of that date and no
Default or Event of Default has occurred and is continuing as of
the date hereof or will have occurred and be continuing as of the
Effective Date or has resulted or will result herefrom or, upon
the Effective Date, from consummation of the Merger Transactions
(assuming the effectiveness of the amendments to the Amended and
Restated Term Loan Agreement contained herein).
4.6 No Offset. Company has no claims, offsets or
defenses with respect to the payment of any sums or performance
of any obligations due under the Restructured Loan Documents.
ARTICLE V
Miscellaneous
5.1 Ratification of Loan Documents. Except as
expressly amended or terminated hereby or pursuant hereto, the
Amended and Restated Term Loan Agreement and the other
Restructured Loan Documents shall remain in full force and effect
in accordance with their terms, and hereby in all respects
ratified and confirmed. Nothing in this First Amendment shall
impair the first priority liens of the Mortgages on any
unreleased collateral. The consent and waiver set forth in the
Merger Consent Letter apply and are effective only with respect
to any Default or Event of Default that arises or could arise
solely as a result of a violation of Section 8.03 of the Amended
and Restated Term Loan Agreement and analogous provisions of the
other Restructured Loan Documents as a result of the Company,
Merger Sub and Federated entering into and consummating each of
the Merger Transactions. The Agent and Banks hereby reserve all
rights provided under the Restructured Loan Documents, as amended
hereby, with respect to any other or future transactions and with
respect to any other existing Defaults or Events of Default, if
any. The Company affirms and agrees that the Security Documents,
as amended hereby, secure the full performance of each and every
obligation under the Master Principal Note, the Master
Capitalized Interest Note, the Amended and Restated Term Loan
Agreement and the Obligations as defined therein, and that the
Security Documents continue to be effective as, and to
constitute, first and prior liens and charges on the Stores to
the full extent of all obligations secured thereby.
5.2 Waiver of One Form of Action and Anti-Deficiency
Rules. In consideration of the Agent's and Banks' entering into
this First Amendment, the Company hereby expressly and
irrevocably waives all rights, privileges, benefits and defenses
that the Company may have under, arising out of, or based on
California Code of Civil Procedure Sections 580a, 580d and 726.
Without limiting the foregoing, the Company agrees not to plead
or assert California Code of Civil Procedure Section 580a, 580d
or 726 as an affirmative claim or a defense to, or in connection
with, any action or other proceeding (including, but not limited
to, any judicial or nonjudicial foreclosure under any of the
Mortgages). The Company hereby represents, warrants, and
acknowledges that (a) the modifications of the Amended and
Restated Term Loan herein constitute a revision or modification
and do not constitute a renewal of the Amended and Restated Term
Loan; and (b) the Agent and Banks are relying upon such waivers
and the foregoing representations, warranties and acknowledgments
in entering into this First Amendment, and without such waivers,
representations, warranties and acknowledgments, the Agent and
Banks would not do so.
5.3 Counterparts. This First Amendment may be
executed in any number of counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to
be an original, and all such counterparts together shall
constitute but one and the same instrument.
5.4 Fees and Expenses. Whether or not the
transactions contemplated hereby are consummated, Company shall
pay promptly upon demand all reasonable fees, expenses and
disbursements of counsel (including reasonably allocated costs of
in-house counsel), and other out-of-pocket costs incurred by the
Agent and any Bank in connection with the negotiation,
documentation and closing of the transactions contemplated
hereby.
5.5 Integration. The Restructured Loan Documents,
including this First Amendment: (a) integrate all the terms and
conditions mentioned in or incidental to the Restructured Loan
Documents, (b) supersede all oral negotiations and prior and
other writings with respect to their subject matter, and (c) are
intended by the parties as the final expression of their
agreement with respect to the terms and conditions set forth in
the Restructured Loan Documents and as the complete and exclusive
statement of the terms agreed to by the parties. If there is any
conflict between the terms, conditions and provisions of this
First Amendment and those of any other Restructured Loan
Documents, the terms, conditions and provisions of this First
Amendment shall prevail.
5.6 Separability. If any court of competent
jurisdiction determines any provision of this First Amendment or
any of the other Restructured Loan Documents to be invalid,
illegal or unenforceable, that portion shall be deemed severed
from the rest, which shall remain in full force and effect as
though the invalid, illegal or unenforceable portion had never
been a part of the Restructured Loan Documents. This First
Amendment shall be governed by California law. This First
Amendment is a Restructured Loan Document.
WITNESS the due execution of this First Amendment by
the respective duly authorized officers of the undersigned as of
the date first written above.
Company/CHH: BROADWAY STORES, INC. (formerly
known as CARTER HAWLEY HALE STORES,
INC.), a Delaware corporation
By: \s\ Karen M. Hoguet
Name: Karen M. Hoguet
Title: Treasurer
Agent and Banks: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national
banking association, as Agent
By: \s\ Charles D. Graber
Name: Charles D. Graber
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national
banking association, as a Bank
By: \s\ Clara Yang Strand
Name: Clara Yang Strand
Title: Vice President
BARCLAYS BANK PLC, as a Bank
By: \s\ Diane R. Bargas
Name: Diane R. Bargas
Title: Vice President
THE TOKAI BANK LIMITED, as a Bank
By: \s\ Mosahiko Saito
Name: Mosahiko Saito
Title: Assistant General Manager
Exhibit A
CERTIFICATE OF BROADWAY STORES, INC.
(Pursuant to Section 1.1(a) of the
First Amendment of the Amended and Restated Term Loan Agreement )
Pursuant to Section 1.1(a) of that certain First
Amendment to Amended and Restated Term Loan Agreement, dated as
of October 11, 1995 among BROADWAY STORES, INC., formerly known
as CARTER HAWLEY HALE STORES, INC., a Delaware corporation (the
"Company" or "CHH"), BARCLAYS BANK PLC, a bank organized under
the laws of the United Kingdom, THE TOKAI BANK LIMITED, a bank
organized under the laws of Japan, acting through its Los Angeles
Agency, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association (collectively,
"Banks," and individually, a "Bank"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as agent for Banks (in such capacity, "Agent") (the
"First Amendment") which First Amendment amends the Amended and
Restated Term Loan Agreement, dated as of October 8, 1992, among
Company, Agent and Banks (the "Amended and Restated Term Loan
Agreement"; all capitalized terms used but not defined herein
having the meanings set forth in the Amended and Restated Term
Loan Agreement), Company represents, warrants, certifies and
covenants in favor of Agent and Banks as follows:
1. The Merger Transactions (as defined in the First
Amendment) have been consummated in accordance with the terms
previously disclosed in writing to Agent and Bank.
2. The representations and warranties of Company
contained in the First Amendment are true and correct as of the
date hereof and after giving effect to the Merger Transactions
(assuming the effectiveness of the First Amendment).
3. No Default or Event of Default has occurred and is
continuing on the date hereof after giving effect to the Merger
Transactions (assuming the effectiveness of the First Amendment).
4. Attached hereto are true and correct copies of:
(i) any modifications of the organizational documents of the
Company, any Subsidiary entered into in connection with the
Merger Transactions and (ii) all instruments, contracts,
agreements and documents entered into by the Company, Federated
or any Affiliate of the Company or Federated with Prudential or
GE Capital in connection with the Merger Transactions.
5. All conditions precedent set forth in Section 1.1
of the First Amendment have been satisfied.
IN WITNESS WHEREOF, the undersigned, being duly
authorized, have executed this Certificate on behalf of Company
as of this 11th day of October, 1995.
BROADWAY STORES, INC., formerly
known as CARTER HAWLEY HALE STORES,
INC.,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
Exhibit B
OPINIONS TO BE RENDERED IN THE LEGAL
OPINIONS TO BE DELIVERED PURSUANT TO SECTION 1.1(j)
1. That the execution, delivery, and performance of this First
Amendment have been duly authorized by all necessary corporate
action on the part of the Company.
2. That this First Amendment has been duly executed and
delivered by the Company.
3. That this First Amendment is a valid and binding obligation
of the Company, enforceable in accordance with its terms.
4. That the execution, delivery, and performance of this First
Amendment do not (a) violate the organizational documents of the
Company, or (b) violate, or require any consents, approvals,
authorizations, registrations, declarations or filings by the
Company under, any federal statute or the corporate or
partnership laws of the state under which the Company is
organized.
Exhibit C
Form of Federated License Agreement
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and dated
as of _________, by and between _________ ("Licensor"), Bank of
America National Trust and Savings Association, a national
banking association as agent (in such capacity, "Agent") for the
ratable benefit of Agent and Barclays Bank, P.L.C., The Tokai
Bank Limited, Bank of America National Trust and Savings
Association and the banks ("Banks") that are from time to time
party to the Loan Agreement (as defined below).
RECITALS
A. Broadway Stores, Inc. (formerly known as Carter Hawley
Hales Stores, Inc.), a Delaware corporation ("CHH"), Banks and
Agent are parties to that certain Amended and Restated Term Loan
Agreement dated as of October 8, 1992 (as amended, the "Loan
Agreement"), as amended by that certain First Amendment to
Amended and Restated Term Loan Agreement dated as of _________
(the "First Amendment to the Loan Agreement"). Capitalized terms
not otherwise defined herein have the defined meanings given in
the Loan Agreement as amended. The Obligations under the Loan
Agreement are secured primarily by first mortgage liens in favor
of Agent (for the ratable benefit of Agent and Banks) on a total
of nine (9) retail department stores[, as to certain of which
Licensor may be granting to CHH a license to use certain names
and marks described below] (collectively, "Stores," and
individually, a "Store"). As hereinafter used in this Agreement,
the terms "Agent" and "Banks" shall mean and include Agent or
such Bank, any subsidiary or affiliate of Agent or such Bank
designated by Agent or such Bank to hold title to or possession
or control of any Store in connection with the exercise of
Agent's or such Bank's rights and remedies under the Restructured
Loan Documents, any assignee (to the extent permitted under the
Loan Agreement, as amended) of, or successor to, Agent's or such
Bank's right, title and interest in or under the Loan Agreement,
as amended, or any Mortgage, and any subsidiary or affiliate of
such assignee or successor designated by Agent or such Bank to
hold title to or possession or control of any Store in connection
with the exercise of Agent's or such Bank's rights and remedies
under the Restructured Loan Documents.
B. Pursuant to the First Amendment to the Loan Agreement,
Licensor has agreed to grant to Agent (for the ratable benefit of
Agent and Banks) the right under certain circumstances
hereinafter described to use the "Bullock's" and "Macy's" names
and certain other names, marks and other rights relating to the
operation of the Stores, subject in all respects to the terms and
conditions set forth below.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
AGREEMENT
Grant of License.
Licensor hereby grants to Agent (for the ratable
benefit of Agent and Banks) and Agent (for the ratable benefit of
Agent and Banks) hereby accepts from Licensor a non-exclusive
right, privilege and license (the "License") to adopt and use,
with respect to each Store during the License Term (as
hereinafter defined), if any, applicable thereto, the names which
are used by Licensor in connection with the operation of such
Store at the time it becomes a Non-Performing Store (as such term
is hereinafter defined), and all other names, logos, marks and
derivations thereof used by Licensor at the time each such Store
becomes a Non-Performing Store to identify its goods sold in such
Non-Performing Stores (including all departments thereof),
including, without limitation, the state and federally registered
trademarks and service marks listed in Schedule A attached hereto
(collectively called the "Marks") then so used, for the sole
purpose of operating each Non-Performing Store as a retail
department store. Agent and Banks shall have no obligation to
pay any royalty, fee or other monetary consideration to Licensor
or any other person or entity for or in connection with the
rights granted to it under this Agreement, except as provided in
Paragraph 7. Licensor shall also take all such action as may be
reasonably necessary to permit its licensed manufacturers and
distributors of goods sold under any label or house brand name
belonging to the Licensor to sell to Agent (for the ratable
benefit of Agent and Banks) and their Permitted Assignees (as
hereinafter defined) such goods as would be regularly sold by
Licensor under private labels or brand names to retail customers
of any Non-Performing Stores during the respective License Terms
pertaining thereto.
License Term.
The term "License Term" shall mean the following with
respect to each Store:
(i)In the case of each Store which is subject to one
or more Operating Covenants, the License Term with
respect to that Store shall commence at the time
such Store becomes a Non-Performing Store and
shall continue, notwithstanding one or more
subsequent sales or transfers of the Store, until
the earlier of (i) the date the Operating Covenant
expires or sooner terminates and (ii) the date
Agent receives a fully executed amendment to the
applicable Shopping Center Document (satisfactory
in form and substance to Agent), which either
effects a deletion of the applicable Operating
Covenant or renders the applicable Operating
Covenant inapplicable to Agent and Banks and their
designees, successors and assigns.
(ii) In the case of any Store not subject to an
Operating Covenant, and in the case of a Store
subject to an Operating Covenant which expires or
terminates on or prior to the date such Store
becomes a Non-Performing Store, the License Term
of that Store shall commence at the time such
Store becomes a Non-Performing Store and shall
expire upon the sale or transfer by Agent (for the
ratable benefit of Agent and Banks) of any
interest in such Store which includes the right to
operate such Store.
As used herein, the term "Non-Performing Store" means
any Store which (i) has been acquired by Agent (for the ratable
benefit of Agent and Banks) or its designee through foreclosure,
deed (or other transfer) in lieu of foreclosure, sale pursuant to
a power of sale, or any other sale or transfer in connection with
Agent's and Banks' exercise of their rights and/or pursuit of
their remedies under the Restructured Loan Documents or (ii) as
to which Agent (for the ratable benefit of Agent and Banks) or a
receiver appointed under the Security Documents has gained lawful
possession through foreclosure proceedings or otherwise in
connection with Agent's and Banks' exercise of their rights
and/or pursuit of their remedies under the Restructured Loan
Documents.
Term of Agreement.
This Agreement shall become effective on the date
hereof and shall continue in effect until such time as both of
the following shall have occurred:
A. Agent and Banks shall cease to have any lien,
mortgage, encumbrance or security interest of any kind or
nature in or with respect to any of the Stores; and
B. The License Terms with respect to all Non-
Performing Stores have expired.
Nonexclusive License.
During the License Term with respect to each Store,
Agent (for the ratable benefit of Agent and Banks) (or, if such
Store shall have been sold or transferred to a Permitted Assignee
(as hereinafter defined), then that Permitted Assignee) shall
have an exclusive License to use the Marks, with respect to that
Store, in connection with the operation of that Store. Except as
provided in the foregoing sentence, this License shall be
nonexclusive.
Representations, Warranties and Covenants.
A. Licensor represents and warrants that it has, and
will have at all times during any License Term, the right to
use the Marks with respect to the Stores; that Licensor
owns, and will own at all times during any License Term, the
Marks free and clear of all liens and encumbrances of every
kind and nature, except (i) liens and security interests
securing obligations of CHH or its affiliates pursuant to
that certain Working Capital Facility by and among CHH and
GE Capital and that certain Trademark Security Agreement,
executed and delivered in connection therewith; (ii) that
certain License Agreement, dated as of August 27, 1987, by
and among CHH, Thalhimer Brothers, Inc. and The Prudential
Insurance Company of America ("Prudential"), as amended,
modified or restated from time to time; (iii) liens,
encumbrances and licenses in respect of the use of the Marks
on property other than the Stores; and (iv) licenses, liens
and security interests securing obligations of CHH or its
Affiliates pursuant to any and all refinancings,
replacements and/or substitutions of the Working Capital
Facility, the Accounts Receivable Facility, or of the loans
evidenced by the Prudential Loan Documents (provided,
however, that any agent, lender or lenders under any such
refinancing, replacement or substitution acquiring such a
lien or security interest shall execute and deliver to Agent
the Non-Disturbance Letter as provided in Section 3.01E(a)
of the Loan Agreement); that there are no claims, actions or
suits pending or, to the best of Licensor's knowledge,
threatened which challenge Licensor's rights in and to the
Marks; that no infringement action has been brought or, to
the best of Licensor's knowledge, threatened, with respect
to Licensor's use of the Marks, or any of them; that
Licensor does not know or have reason to know of any fact
which could give rise to a claim of infringement by any
person or entity relating to Licensor's ownership, licensing
(including, without limitation, this License, the rights of
the lenders under the Working Capital Facility or the rights
of Prudential under the Prudential License) or use of the
Marks; that there are no presently effective determinations
of the U.S. Trademark Administrator or the administrator of
any state or court and there are no pending interference,
opposition or cancellation proceedings or any pending
litigation that could adversely affect Agent's and Bank's
use of the Marks as provided herein; that there is not, and
will not be at any time during any License Term, any
agreement to which Licensor is a party which prohibits or
limits (other than in connection with a reasonable
settlement of an infringement contest) the rights of
Licensor to use or license the use of the Marks in respect
of the Stores as provided herein; and that the registered
trademarks and service marks listed on Schedule A hereto,
constitute all of the trademarks and service marks material
to the operation of any Store.
B. Licensor covenants and agrees that at all times
during the term of this Agreement, it shall use reasonable
efforts to protect each and every right which Agent and
Banks have under this Agreement, at Licensor's sole cost and
expense. Without limiting the foregoing, Licensor shall use
reasonable efforts to pursue any infringement (except for a
trivial or insignificant infringement) of the Marks of which
Licensor has knowledge; provided, however, that if Licensor
fails to pursue any such infringement which affects Agent's
and Banks' rights hereunder in any material respect, then,
in addition to any right or remedy which Agent and Banks may
have against Licensor, Agent and Banks shall have the right
to bring suit, or to commence other legal proceedings, on
behalf of Agent and Banks and Licensor, to enjoin any such
infringement, to seek damages on account thereof, and to
obtain any other remedy available at law or in equity.
Protection of Marks.
A. Agent and Banks hereby agree that (i) if Agent
(for the ratable benefit of Agent and Banks) operates any
Non-Performing Store under the applicable licensed name
pursuant to the terms of this License, Agent and Banks shall
use reasonable efforts to cause such Store to be operated in
such manner (x) as is consistent with the quality of other
stores then bearing such name, and (y) as will not
materially adversely affect the reputation of any other
stores then bearing such name, and (ii) if Agent (for the
ratable benefit of Agent and Banks) operates any Non-
Performing Store as anything other than a retail department
store which, after a reasonable start-up time, is of a
quality reasonably consistent with the quality of other
stores then bearing such licensed name, Agent and Banks
shall, after written notice from Licensor and continued
failure within the next sixty (60) days to commence to
operate the Store at the required level of quality, cease to
operate such Store under the applicable licensed name, and
the License Term applicable to such Store shall terminate;
provided, however, that (i) Agent and Banks shall not be
entitled to an additional thirty (30) day cure period under
paragraph 9, after the expiration of said sixty (60) days
period, and (ii) Agent and Banks shall not be responsible or
liable under any circumstances whatsoever for or on account
of any act or omission of Licensor or any of its
Subsidiaries or Affiliates, or of any employee, officer, or
agent of any thereof.
B. Agent and Banks acknowledge and agree that any
goodwill arising from the use of the Marks by Agent (for the
ratable benefit of Agent and Banks) belongs solely to
Licensor and that Agent and Banks have no rights therein or
thereto either during or after the License Terms. Agent and
Banks shall not, either during or after any License Term,
directly or indirectly do or assist any person or entity to
do anything which would in any material respect infringe
upon, harm, or contest the rights of Licensor in the Marks.
C. Agent (for the ratable benefit of Agent and
Banks) shall use the Marks only in conjunction with the
operation of the Non-Performing Stores and only in the form
and manner previously used at such Stores by Licensor.
Agent (for the ratable benefit of Agent and Banks) shall not
(i) add any other names, words or marks to the Marks; (ii)
make any variations in the use of the Marks; or (iii) use
the Marks to create new "private label" goods unless
approved first, in writing, by Licensor.
Licensor's Agreement to Operate.
If, at any time during one or more of the License
Terms, Licensor is then engaged in the business of owning and
operating retail department stores, and Agent (for the ratable
benefit of Agent and Banks) or any Permitted Assignee is then
operating one or more Stores under the "Bullock's" or "Macy's"
names, then, for the balance of the applicable License Terms (or
such shorter period as Agent may designate), Licensor shall, upon
the written request of Agent, (a) manage the applicable Store or
Stores, using all of its know-how, expertise and best efforts,
and (b) in connection therewith use reasonable efforts to make
available to Agent (for the ratable benefit of Agent and Banks)
Licensor's private labels and other products then sold in
Bullock's or Macy's stores, all upon terms and conditions
reasonably satisfactory to Licensor, Agent and Banks. The
foregoing notwithstanding, the referenced terms and conditions
shall not be more onerous to Agent and Banks than they would be
to other third parties for whom Licensor would provide similar
services and make such products available, and with respect to
the management fee and other associated costs payable to Licensor
by Agent and Banks, shall be comparable to the fees and costs
other third parties with experience and expertise comparable to
that of Licensor would reasonably be expected to charge therefor.
In no event shall the lenders under the Working Capital Credit
Facility be obligated to undertake any of the obligations of CHH
under this Paragraph 7.
Post-Term Obligations.
Upon termination of the License Term for any Store,
Agent and Banks shall:
A. Immediately and permanently cease to use, directly
or indirectly, any of the Marks (and anything confusingly
similar) at that Store; and
B. Promptly remove from such Store all stationery,
letterheads, forms, printed matter, promotional displays, signs
and advertising containing any of the Marks.
Remedies.
In the event Agent or Banks breach any covenant of this
Agreement, Licensor shall provide Agent with written notice
thereof, specifying therein the nature of such breach and the
manner in which such breach may be cured. If Banks fail to
commence to cure such breach within thirty (30) days of its
receipt of Licensor's written notice, Licensor shall have the
right to terminate Banks' use of the Marks only in connection
with the operation of the Store or Stores with respect to which
such breach occurred, and shall not have the right to terminate
this Agreement or Agent's use of the Marks in connection with the
operation of any other Store. Licensor agrees that it shall not
be entitled to pursue any legal or equitable remedy against Agent
and Bank other than the enforcement of the agreement of Banks to
cease use of the Marks as described above upon the breach of any
covenant of this Agreement by Agent and Bank.
Assignment.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective legal
representatives, successors and permitted assigns. Except as may
be permitted by the Loan Agreement, CHH shall be prohibited from
assigning this Agreement or any of its rights hereunder and from
delegating any of its obligations under this Agreement without
the prior written consent of Agent and Majority Banks, which may
be withheld in Agent's and Majority Banks' sole discretion except
that Licensor's rights and obligations under Paragraph 7 hereof
may not be assigned or delegated under any circumstances. A
"Permitted Assignee" shall mean any person or entity who acquires
title to or possession or control from Agent (for the ratable
benefit of Agent and Banks) directly or indirectly through one or
more Permitted Assignees of one or more Stores which are then
subject to Operating Covenants. Except in the case of the rights
and obligations described or referred to in Paragraph 7 of this
Agreement, Agent (for the ratable benefit of Agent and Banks) and
any Permitted Assignee may assign this Agreement and any or all
of their respective rights hereunder (other than the rights
granted in paragraph 2(ii) hereof, which may not be assigned to a
Permitted Assignee), and may delegate any or all of the
respective obligations under this Agreement to one or more
Permitted Assignees, but only to the extent that such rights and
obligations pertain to the Stores respectively sold or
transferred to such Permitted Assignees; provided that each such
Permitted Assignee shall execute and deliver to Licensor a
written agreement to be bound by the provisions hereof (except
the provisions of Paragraph 7). Upon any sale or transfer of a
Store or Stores by Agent (for the ratable benefit of Agent and
Banks) or a Permitted Assignee to any Permitted Assignee, the
selling or transferring party shall thereupon be relieved of any
obligation hereunder to Licensor relating to the Store or Stores
so sold or transferred, except for obligations relating to
periods prior to such sale or transfer, if any. Except as
provided in this Paragraph 10, and except in connection with (i)
a sale or transfer of Agent's (for the ratable benefit of Agent
and Banks) interest as mortgagee of a Store in accordance with
the terms and provisions of the Loan Agreement, or (ii) a
transfer by Agent (for the ratable benefit of Agent and Banks) to
one of its affiliates, Agent may not assign this Agreement or its
rights hereunder or delegate its obligations hereunder without
the prior written consent of Licensor.
Terminology.
All terms and words used in this Agreement, regardless
of the number and gender in which they are used, shall be deemed
and construed to include any other number and any other gender as
the context of this Agreement requires.
Enforcement.
The rights granted to Agent and Banks under this
Agreement are part of the essential basis of the bargain in
connection with the First Amendment to the Loan Agreement, and
Agent and Banks would not have made the First Amendment to the
Loan Agreement without this Agreement. Accordingly, the terms of
this Agreement shall be strictly enforced.
Miscellaneous.
A. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of
California.
B. The paragraph captions appearing herein are solely
for convenience of reference and shall not affect the
interpretation or application of any of the provisions
hereof.
C. This Agreement may be executed in any number of
counterparts and by the respective parties hereto in
separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together
shall be constitute one and the same agreement.
D. This Agreement, together with the provisions of
Section 3.01E of the Loan Agreement, is intended by the
parties as a final expression and a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter hereof. There are
no agreements, promises, understandings, representations,
warranties, undertakings or restrictions with respect to
such subject matter except those set forth herein. This
Agreement supersedes all contemporary and prior oral and
written agreements and understandings among the parties with
respect to such subject matter.
E. This Agreement may be amended, modified or
supplemented only by a subsequent written agreement executed
by all of the parties hereto.
F. Whenever and so often as requested by Agent or a
Permitted Assignee, Borrower will (i) promptly execute and
deliver or cause to be executed and delivered all such other
and further instruments, documents or assurances (including,
without limitation, Uniform Commercial Code financing
statements evidencing the rights and interests created
hereunder), and (ii) promptly do or cause to be done all
such other and further things (in the case of both (i) and
(ii) above) as may be necessary and reasonably required in
order to give public notice of, or to further and more fully
vest in Agent for the ratable benefit of Agent and Banks, or
such Permitted Assignee, all rights, interests, powers,
benefits, privileges and advantages conferred or intended to
be conferred by this Agreement.
G. Licensor hereby waives any right to require Agent
or Banks to (i) proceed against CHH, (ii) proceed against or
exhaust any security held from CHH, or (iii) pursue any
other remedy in Agent's or Banks' power whatsoever.
Licensor waives any defense because of any disability, any
modification of the Obligations under the Loan Agreement or
other defense or cessation of liability of CHH or any other
person and waives any right of subrogation or any right to
participate in any security for the Obligations under the
Loan Agreement. Agent and Banks may, at their election and
in their sole discretion, exercise any right or remedy they
may have against CHH or any security held by them.
IN WITNESS WHEREOF, the parties have executed this
License Agreement on the date first above written.
LICENSOR
,
a
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national
banking association, as Agent
By:
Name:
Title:
BARCLAYS BANK, P.L.C.,
as a Bank
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
a national banking association,
as a Bank
By:
Name:
Title:
THE TOKAI BANK LIMITED,
as a Bank
By:
Name:
Title:
SCHEDULE A
TO
LICENSE AGREEMENT
Federal Registration
Registration
Mark Number Date Issued
BULLOCK'S
MACY'S
[List private label names]
Federal Applications
Arizona Registrations
California Registrations
Nevada Registrations
August 18, 1995
To: Credit Agreement Lenders
Re: Request for Amendment #2 and Waiver
Please refer to the Credit Agreement dated as of December 19,
1994 (as heretofore amended, the "Credit Agreement") among
Federated Department Stores, Inc. ("Federated"), the Lenders
parties thereto, Citibank, N.A. as Administrative Agent, Chemical
Bank as Agent, Citicorp Securities, Inc. as Arranger and Chemical
Securities Inc. as Co-Arranger. Capitalized terms used in this
letter and not otherwise defined have the meanings assigned such
terms in the Credit Agreement. We remind you that the contents
of this letter are covered by the confidentiality requirements of
the above referenced Credit Agreement.
One component of Federated's growth strategy is to take advantage
of the consolidating nature of the industry by acquiring
department stores particularly in markets that could be folded
into existing Federated divisions. In furtherance of this growth
strategy, Federated has signed a merger agreement to acquire
Broadway Stores, Inc. ("Broadway"), which operates in California
and the Southwest. This acquisition is expected to provide sales
and earnings growth by enabling us to both enhance and protect
Macy's/Bullock's current competitive positioning and also
facilitate the expansion of Bloomingdale's into California. In
so doing, we will be able to better leverage our costs in a
highly competitive market. Federated requires this Amendment #2
and Waiver from the Required Lenders in order to effect the
merger.
Summary of Key Financial Considerations
o Net purchase price after giving effect to anticipated asset
sales and repayment of certain assumed debt is approximately $990
million. (see Chart 3)
o Approximately 58% of the net purchase price is equity
financed, thereby minimizing the impact to total leverage.
o 45 new Federated Stores projected to generate EBITDA of $176
million in first full year of operation (1997).
o Up to $500 million in new financing will be required for:
i) Refinancing $143 million of Broadway's Convertible
Notes
ii) One time costs and initial conversion capital
expenditures
o This amendment requests changes to the Capital Expenditure,
Fixed Charge Coverage and Leverage Ratio financial covenants. No
change is required for the Interest Coverage covenant.
The changes in the Fixed Charge Coverage and Leverage Ratio are
required through the second quarter of 1997; they then revert
back to the current levels. these changes are primarily due to
the capital expenditures, and the associated one-time costs and
non-operating expenses, required to convert the stores and to
bring them up to the Federated standard.
OVERVIEW
Broadway operates 82 department stores in California and the
Southwest under the names Broadway, Emporium and Weinstocks.
While the Broadway currently operates below department store
standards for sales productivity and profitability, much of their
real estate is not only valuable but fits well with the needs of
our Macy's West operation. The Broadway store breakdown is shown
below.
Total 1994
Sq. Sales
Ft.
# Stores (000) (000)
Southern 41 7,105 $1,107
California .6
Northern 30 6,217 742.8
California
Southwest 11 1,751 243.0
Total 82 15,073 $2,093.4
While store specific decisions are not all final, we are assuming
for purposes of our analysis that we will retain 45 of the 82
Broadway store locations (the "Retained Stores") -- 41 for
Macy's/Bullock's and 4 for Bloomingdale's as shown below.
This acquisition is important strategically to Federated in that
it will enable Bullock's to significantly improve its Southern
California position which would be difficult to accomplish in any
other way. In addition, it will allow Bloomingdale's to enter
the California market with better locations faster and in a more
cost efficient manner than it could without the acquisition. It
will also enhance Macy's position in Northern California and the
Southwest.
Total
Retained Southern Northern Southwest
Calif. Calif.
Macy's/Bullock's 41 23 11 7
Bloomingdale's 4 1 3 0
Total 45 24 14 7
OPERATING FORECAST
Our current plans include operating between closing and the end
of 1995 under the current Broadway nameplates and using our best
efforts to maximize the Christmas selling season. Starting early
in 1996 we will begin to convert stores to Macy's and Bullock's
while most likely closing for remodeling the stores which are to
become Bloomingdale's. By November 1996 it would be our goal to
have converted most of the stores to be retained and to have sold
the remaining stores.
In fiscal 1997, the first full year of operations under the
revised structure, these 45 Retained Stores are projected to
produce $1,369 million in sales. The incremental EBITDA in 1997
is expected to be $176 million, growing to $257 million by 2000.
By 1997 the Debt to EBITDA ratio on a combined basis is expected
to be approximately 2.3x. This acquisition is expected to
produce an internal rate of return of 14%. We currently expect
there to be non-operating expense resulting from the capital
expenditures as well as the store conversions. All capital
expenditure projects include some non-operating expense, but
because of the conversions it is higher than normal in this
circumstance. (see Chart 1)
ONE-TIME COSTS
One-time costs are expected to be approximately $175 million over
1995 and 1996 to cover the shutdown of the central organization,
store closings, going dark periods during the Bloomingdale's
conversions, and transitional costs.
CAPITAL EXPENDITURES
We expect that it will require approximately $525MM of capital to
convert and remodel these Retained Stores. We expect to spend on
average $60 per gross square foot (estimated $75 per selling
square foot) for the Macy's and Bullock's stores and $117 per
gross square foot (estimated $145 per selling square foot) for
the Bloomingdale's stores. Accordingly, the capital expenditure
covenant in the Credit Agreement will need to be increased to
cover this amount plus the portion of the purchase price
allocated to PP&E.
CLEAN-DOWN
In order to insure that Federated can fund these one-time costs,
conversion capital expenditures and non-operating expenses,
Federated is requesting an amendment of the Clean-Down provision
for this fiscal year. We are committing to a Clean-Down Amount
equal to the amount by which the Working Capital Commitments
exceed $650 million, or, in effect, the amount of cash borrowings
and stand-by letters of credit to be no more than $1,350 million
for the 30 day period.
FINANCING
(I) INITIAL PURCHASE
We are acquiring the common stock of Broadway with Federated
common stock valued at $375 million. We have agreed to a .27
to 1 conversion, which equates to 12.7 million shares of FD
stock. The Bank of America and other miscellaneous mortgage
debt and the GECC receivables facility are expected to remain
outstanding and are non-recourse to Federated. Federated
Noteholding Corporation II, a newly formed wholly owned
subsidiary of Federated ("FNC II"), will buy the Prudential
Mortgage Note for $200 million in equity and a new note of
$221.1 million, which note will have a subordinated guaranty
from Federated and will be secured by a pledge of the stock
of FNC II. The total value of equity being utilized for the
acquisition is therefore $575 million. The Convertible Note
has a change of control par put so that it is assumed that we
will need to refinance this at the time of the acquisition.
(see Charts 2, 3 and 4)
(II) REQUIRED FINANCING
Federated presently intends to finance the Convertible Note
refinancing ($143 million), the one time costs and conversion
capital expenditures primarily by issuing $300-500 million of
new senior unsecured notes. (see Chart 4)
WAIVER REQUEST
To consummate the transaction outlined above, we request a waiver
of, and each Lender, by its execution of a counterpart hereof
agrees to waive to the extent requested (subject to the
conditions of effectiveness referred to below), the following
sections of the Credit Agreement:
A. Section 5.01(l) of the Credit Agreement so that, due to
charter and Broadway Debt restrictions, (i) Merger Sub will
not be required to guaranty the obligations of Federated
under the Credit Agreement, (ii) Broadway will not be
required to guaranty the obligations of Federated under the
Credit Agreement so long as Broadway is restricted from
effecting such guaranty by the terms of the assumed debt at
Broadway, and (iii) the stock of FNC II will not have to be
pledged to the Lenders under the Credit Agreement since
Prudential required that it be pledged to them as security
for their new note;
B. Section 5.02(b)(i)(C) of the Credit Agreement so that,
notwithstanding the provisions thereof, which restrict
Federated's ability to issue unsecured Debt and require any
Net Cash Proceeds be applied to prepay Advances, Federated
can (i) issue up to $500 million of unsecured notes not
amortizing earlier than six months after the Termination Date
and (ii) apply the Net Cash Proceeds thereof to refinance the
Convertible Notes and to pay transaction costs, including the
one-time costs and conversion capital expenditures,
associated therewith;
C. Section 5.02(b)(iii) of the Credit Agreement to permit FNC II
to issue a new promissory note in an aggregate principal
amount not to exceed $221.5 million in exchange for the
existing Prudential Mortgage Note;
D. Section 5.02(c) of the Credit Agreement so that Nomo Company,
Inc., a newly formed wholly owned Subsidiary of Federated
("Merger Sub"), may merge with and into Broadway, with
Broadway being the surviving wholly owned subsidiary of
Federated;
E. Section 5.02(d) of the Credit Agreement to the extent it may
be deemed to restrict Federated's ability to sell the stores
bought as part of this acquisition so long as they are sold
for cash or promissory notes and for fair value in accordance
with the requirements of Section 5.02(d) of the Credit
Agreement and to pay down the Debt at Broadway as required by
the Debt at Broadway, provided that any Net Cash Proceeds
from such asset sales not required to repay outstanding Debt
of Broadway pursuant to the terms of the relevant Debt
instrument shall be applied to prepay the Advances in the
amount and in the order of priority set forth in Section 2.06
(b)(ii) of the Credit Agreement;
F. Section 5.02(e)(i) of the Credit Agreement to the extent it
may be deemed to restrict the ability of Federated to make an
equity infusion into Broadway to fund the refinancing of the
Convertible Notes and to fund the one time costs and
conversion capital;
G. Section 5.02(e)(xii) of the Credit Agreement solely to the
extent it restricts the making of the proposed acquisition,
including the acquisition of the common stock of Broadway,
the acquisition of the Prudential Note by FNC II and
assumption of the other Debt of Broadway as described herein;
H. Section 5.02(f) of the Credit Agreement to the extent that it
may be deemed to restrict the ability of (i) Broadway to issue
shares of its new Series A Preferred Stock upon the
consummation of the merger in exchange for the shares of its
existing Series A Preferred Stock and (ii) Federated to issue
warrants to the holders of Broadway's Series A Preferred Stock
entitling such holders to acquire shares of Federated's common
stock;
I. Section 5.02(j) of the Credit Agreement solely to the extent
necessary to permit Broadway to prepay the Convertible Notes
if such notes are put back to Broadway upon the change of
control.
J. Section 5.02(a) of the Credit Agreement solely to the extent
necessary to permit Federated to pledge the stock of FNC II to
secure Federated's obligations under its subordinated guaranty
in favor of Prudential.
K. Section 5.02(b) of the Credit Agreement solely to the extent
necessary to permit Federated to issue to Prudential its
subordinated guaranty of FNC II's obligations under FNC II's new
promissory note payable to Prudential.
AMENDMENTS
In addition to the foregoing accommodation, we request the
following amendments to the Credit Agreement:
A. Section 1.01 of the Credit Agreement be amended to restate in
their entirety the following two definitions:
"Clean-Down Amount" means (a) for the first Clean-Down
Period occurring after the date hereof, the amount by
which the aggregate amount of the Working Capital
Commitments on the first day of such Clean-Down Period
exceeds $650,000,000 and (b) for each Clean-Down Period
occurring thereafter, the amount by which the
aggregate amount of the Working Capital Commitments on
the first day of such Clean-Down Period exceeds
$1,000,000,000."
"Receivables Financing Facility" means the
receivables financing facility established by the
Borrower in 1992 and any replacement thereof that is
on terms no less favorable, taken as a whole, to the
Borrower and its Subsidiaries, pursuant to which
certain Subsidiaries of the Borrower issue non-
recourse public term Debt and commercial paper
secured by certain receivables of the Borrower and
its Subsidiaries, and the receivables financing
facility established by Broadway Receivables, Inc. as
of October 8, 1992 and the Subordinated Credit Card
Notes in the aggregate principal amount of $64
million issued by Broadway Receivables, Inc. pursuant
to an Indenture dated as of September 1, 1994 with
Bankers Trust Company, as trustee, together with any
replacement or replacements of either thereof
pursuant to which Broadway Receivables, Inc. finances
receivables it acquired from Broadway Stores, Inc."
B. Section 5.02(o), titled "Cash Capital Expenditures", of the
Credit Agreement be amended and restated so that it will read
in full as follows:
"During any Non-Investment Grade Period, make, or
permit any of its Subsidiaries to make, any Cash
Capital Expenditures that would cause the aggregate
of all such Cash Capital Expenditures made by the
Borrower and its Subsidiaries in any period set forth
below to exceed the amount set forth below for such
period:
Fiscal Year Amount
1995 $755,000,000
1996 $920,000,000
1997 $785,000,000
1998 and thereafter $800,000,000
provided that, commencing with the Fiscal Year ending
in January 1996, the Borrower and its Subsidiaries
shall be entitled to make additional Cash Capital
Expenditures in any Fiscal Year in an amount (the
"Carry-Over Amount") equal to the lesser of (i) 25%
of the amount set forth above for the immediately
preceding Fiscal Year and (ii) the amount by which
(A) the amount (the "Maximum Permitted Amount") of
Cash Capital Expenditures permitted under this
Section 5.02(o) for the immediately preceding Fiscal
Year (after giving effect to this proviso) exceeds
(B) the actual amount of Cash Capital Expenditures
made during the immediately preceding Fiscal Year;
provided further that if, subsequent to the making of
Cash Capital Expenditures during any Investment Grade
Period in excess of the amounts specified above, the
Debt Rating shall cease to be an Investment Grade
Rating, such Cash Capital Expenditures shall be
deemed to be permitted hereunder; provided still
further that in connection with the acquisition of
any business pursuant to an asset purchase (whether
during a Non-Investment Grade Period or an Investment
Grade Period), the applicable requirements as to
Investments contained in Section 5.02(e)(xii) shall
have been satisfied."
C. Sections 5.04 (a) and (b) of the Credit Agreement be amended
and restated so that they will read in full as follows:
(a)Leverage Ratio. Maintain at the end of each fiscal
quarter of the Borrower a Leverage Ratio of not more
than the amount set forth below for each period set
forth below:
Fiscal Quarter Ending
in the Fiscal Month of Ratio
April, 1995 0.55:1
July, 1995 0.55:1
October, 1995 0.56:1
January, 1996 0.53:1
April, 1996 0.53:1
July, 1996 0.53:1
October, 1996 0.55:1
January, 1997 0.49:1
April, 1997 0.48:1
July, 1997 0.48:1
October, 1997 0.49:1
January, 1998 0.44:1
April, 1998 0.44:1
July, 1998 0.44:1
October, 1998 0.45:1
January, 1999
and thereafter 0.40:1
(b)Fixed Charge Coverage Ratio. During each Non-Investment
Grade Period, maintain at the end of each Measurement
Period a ratio of the sum of (x) Consolidated EBITDA for
the Measurement Period then ended plus (y) in the case
of any such Measurement Period ending prior to or on
February 3, 1996, the net increase (if any) in respect
of Debt of the Borrower and its Subsidiaries under the
Receivables Financing Facility during such Measurement
Period to the sum of (i) Net Cash Interest for such
Measurement Period plus (ii) principal amounts of all
Funded Debt payable (other than (I) Debt refunded or
refinanced in accordance with the terms of the Loan
Documents and (II) Debt payable under the May Note
Monetization Facility) plus (iii) Cash Capital
Expenditures made plus (iv) cash income taxes paid plus
(v) cash dividends made, in each case by the Borrower
and its Subsidiaries during such Measurement Period
determined in accordance with GAAP of not less than the
amount set forth below for each period set forth below:
Measurement Period
Ending in the Fiscal Ratio
Month of
April, 1995 0.25:1
July, 1995 0.32:1
October, 1995 0.50:1
January, 1996 1.00:1
April, 1996 1.00:1
July, 1996 0.90:1
October, 1996 0.87:1
January, 1997 0.93:1
April, 1997 0.95:1
July, 1997 0.98:1
October, 1997 1.00:1
January, 1998
and thereafter 1.00:1
Confirmations
By its execution of this Amendment #2 and Waiver letter, the
Borrower represents and warrants that: (i) the representations
and warranties contained in each Loan Document are correct on and
as of the date hereof other than any such representations or
warranties that, by their terms, refer to a specific date other
than the date hereof, and (ii) no event has occurred and is
continuing that constitutes a Default.
Miscellaneous
This Amendment #2 and Waiver letter shall become effective as of
the date first above written when, and only when, the
Administrative Agent shall have received counterparts of this
Amendment #2 and Waiver letter executed by the undersigned and
the Required Lenders or, as to any of the Lenders, advice
satisfactory to the Administrative Agent that such Lender has
executed this Amendment #2 and Waiver letter, and the consent
attached hereto executed by each Guarantor, provided, however,
that if the transactions described in this Amendment #2 and
Waiver letter fail to occur by February 29, 1996, this Amendment
#2 and Waiver letter shall be null and void and of no force and
effect and the provisions of the Credit Agreement shall be deemed
not to have been amended or waived pursuant to this Amendment #2
and Waiver letter in any respect. The effectiveness of this
Amendment #2 and Waiver letter is conditioned upon the
substantial accuracy of the factual matters described herein.
This Amendment #2 and Waiver letter is subject to the provisions
of Section 8.01 of the Credit Agreement. Except as specifically
provided herein, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. Notwithstanding
anything in this Amendment #2 and Waiver letter to the contrary,
no waiver of any default under or breach of any provision of the
Credit Agreement shall be deemed to be a waiver of any subsequent
similar or different default under or breach of such or any other
provision of the Credit Agreement or of any election of remedies
available in connection with any of the foregoing.
On and after the effectiveness of this Amendment #2 and Waiver
letter, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the
Notes and each of the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement, as amended by this Amendment #2 and
Waiver letter.
This Amendment #2 and Waiver letter may be executed in any number
of counterparts and by different parties hereto in separate
counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute but one and the same Amendment #2 and Waiver letter.
Delivery of an executed counterpart of a signature page to this
Amendment #2 and Waiver letter by telecopier shall be effective
as delivery of a manually executed counterpart of this Amendment
#2 and Waiver letter.
This Amendment #2 and Waiver letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
If the terms of this Amendment #2 and Waiver letter are
acceptable to you, please return an executed copy of this
Amendment #2 and Waiver letter by August 30, 1995 via facsimile
to Ms. Rosemary Bell at Citibank, N.A. fax number (212) 527-3670.
Very truly yours,
FEDERATED DEPARTMENT STORES, INC.
By: \s\ Ronald W. Tysoe
Ronald W. Tysoe
Vice Chairman and Chief
Financial Officer
Accepted and Agreed to on
this 30 day of August, 1995
Name of Bank: Citibank
BY: \s\ Rachel Heisler
Name: Rachel Heisler
Title: Assistant Vice President
CONSENT
Dated as of August 18,
1995
Each of the undersigned as a Guarantor under the Guaranty dated
December 19, 1994 (the "Guaranty") in favor of the Administrative
Agent, the Agent, the Lender Parties parties to the Credit
Agreement referred to in the foregoing Amendment #2 and Waiver
letter and the Hedge Banks referred to in the Credit Agreement
and Federated Retail Holdings, Inc., as a Pledgor under the
Security Agreement dated December 19, 1994 (the "Security
Agreement") in favor of the Administrative Agent, for its benefit
and the benefit of the Secured Parties referred to therein,
hereby consents to such Amendment #2 and Waiver letter and hereby
confirms and agrees that (a) notwithstanding the effectiveness of
such Amendment #2 and Waiver letter, each of the Guaranty and the
Security Agreement is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects,
except that, on and after the effectiveness of such Amendment #2
and Waiver letter, each reference in each of the Guaranty and the
Security Agreement to the "Credit Agreement", "thereunder",
"thereof" or words of like import shall mean and be a reference
to the Credit Agreement, as amended by such Amendment #2 and
Waiver letter, and (b) the Collateral Documents to which such
Pledgor is a party and all of the Collateral described therein
do, and shall continue to, secure the payment of all the Secured
Obligations (in each case, as defined therein).
Abraham & Straus, Inc.
Bloomingdale's, Inc.
Bloomingdale's By Mail Ltd.
The Bon, Inc.
Bullock's, Inc.
Burdines, Inc.
Federated Real Estate, Inc.
Federated Retail Holdings, Inc.
Jordan Marsh Stores Corporation
Lazarus, Inc.
Lazarus PA, Inc.
Macy's Close-Out, Inc.
Macy's East, Inc.
Macy's Real Estate, Inc.
Macy's Specialty Stores, Inc.
Macy's West, Inc.
Rich's Department Stores, Inc.
Stern's Department Stores, Inc.
By: \s\ Dennis J. Broderick
Title: Vice President
FIRST AMENDMENT TO LOAN AGREEMENT
This First Amendment To Loan Agreement ("First Amendment"),
dated as of December 6, 1995, is by and among Lazarus PA, Inc.,
as successor to Joseph Horne Co., Inc. (the "Borrower"), and PNC
Bank, Ohio, National Association, as the sole lender (the "Bank")
and in its capacity as agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto (or their predecessors in
interest) are party to a Loan Agreement dated as of May 26, 1994,
as amended from time to time (the "Loan Agreement");
WHEREAS, the parties hereto have agreed upon the terms and
conditions contained herein to amend the Loan Agreement by
amending Schedule 2.3(b)(ii) thereto to reflect changes in the
"Location" and the "Stipulated Amount" of the properties subject
to Section 2.3(b)(ii) of the Loan Agreement;
WHEREAS, the parties have agreed to execute and record (i) a
release of the mortgage lien and security interest (the
"Releases") granted to the Banks on the Downtown Pittsburgh store
and the Oppenheim -Collins Building (the "Downtown Pittsburgh
Locations") pursuant to that certain Mortgage and Security
Agreement dated as of May 26, 1994 and (ii) appropriate
termination statements (the "Termination Statements") for the
termination of those certain Uniform Commercial Code financing
statements, also dated as of May 26, 1994, filed with respect to
the Downtown Pittsburgh Locations.
NOW, THEREFORE, in consideration of mutual promises
contained herein and other valuable consideration and with the
intent to be legally bound hereby, the Borrower, the Banks and
the Agent hereby agree as follows:
1. Definitions: Terms defined in the Loan Agreement and
not otherwise defined herein are used herein as defined in the
Loan Agreement.
2. Amendment: Schedule 2.3(b)(ii) to the Loan Agreement
is hereby amended by deleting it in its entirety and substituting
therefor a new Schedule 2.3(b)(ii) which is attached hereto as
Exhibit A.
3. Release and Termination Statements: The Banks and
Agent shall execute contemporaneously herewith and facilitate the
recording of the Releases and Termination Statements.
4. Miscellaneous:
4.1 Except to the extent expressly amended
hereby, the Loan Agreement shall remain unchanged and in
full force and effect.
4.2 This First Amendment shall be governed by
and construed in accordance with the laws of the Commonwealth of
Pennsylvania except where such law is superseded by applicable
federal law and except only tothe extent precluded by the
mandatory application of another state's law.
4.3 This First Amendment may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have entered into this First Amendment as of the
day and year first above written.
LAZARUS PA, INC.
ATTEST:
\s\ Susan P. Storer By: \s\Karen M. Hoguet
Name: Karen M. Hoguet
Title: Treasurer
PNC BANK, OHIO, National
Association
in its capacity as the sole Bank
and Agent
By: \s\ David C. Melin
Name: David C. Melin
Title: Assistant Vice President
Property Subject to Section 2.3(b)(ii) Mandatory Prepayment
Stipulated Type of
Location Amount Interest Appraised Value
Warehouse $ 3,400,000 Real Property To be
and determined
Improvements
South Hills $ 23,000,000 Real Property To be
and determined
Improvements
Monroeville $ 15,700,000 Improvements To be
and Ground determined
Lease
EXHIBIT 11
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
EXHIBIT OF PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE
(THOUSANDS, EXCEPT PER SHARE FIGURES)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 28, 1995 October 29, 1994 October 28, 1995 October 29, 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 197,017 $ (46,395) 126,600 $ 44,343 187,508 $(170,320) 126,545 $ 80,337
Earnings (loss) per share $(.24) $.35 $(.91) $.63
PRIMARY COMPUTATION:
Average number of common
share equivalents:
Shares to be issued to the U.S.
Treasury 81 122 81 122
Deferred compensation plan 164 85 155 62
Warrants 798 - 295 -
Stock options 1,294 - 217 - 840 - 249 -
Adjusted number of common
and common equivalent
shares outstanding and
adjusted net income (loss) 199,354 (46,395) 127,024 44,343 188,879 (170,320) 126,978 80,337
Primary earnings (loss) per
share $(.23) $.35 $(.90) $.63
FULLY DILUTED COMPUTATION:
Additional adjustments to a fully
diluted basis:
Convertible notes - - 8,564 2,651 - - - -
Warrants - - - - 221 - - -
Stock options - - - - 150 - - -
Adjusted number of shares
outstanding and net income
(loss) on a fully diluted
basis 199,354 $ (46,395) 135,588 $ 46,994 189,250 $(170,320) 126,978 $ 80,337
Fully diluted earnings (loss)
per share $(.23) $.35 $(.90) $.63
</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-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 158,027
<SECURITIES> 0
<RECEIVABLES> 2,780,861
<ALLOWANCES> 0
<INVENTORY> 3,905,535
<CURRENT-ASSETS> 7,142,210<F1>
<PP&E> 6,220,895
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,354,202<F2>
<CURRENT-LIABILITIES> 3,882,341
<BONDS> 5,943,473
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,354,202<F3>
<SALES> 3,748,369
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,328,577
<OTHER-EXPENSES> 1,314,814
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,217
<INCOME-PRETAX> (25,311)<F4>
<INCOME-TAX> 21,084
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,395)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
<FN>
<F1>Includes the following:
Supplies and prepaid expenses 120,191
Deferred income tax assets 177,596
<F2>Includes the following:
Intangible assets - net 1,160,661
Notes receivable 407,209
Other assets 423,227
<F3>Includes the following:
Deferred income taxes 911,525
Other liabilities 593,023
Shareholders' equity 4,023,840
<F4>Includes the following:
Interest income 11,928
</FN>
</TABLE>
