<PAGE>
Filed pursuant to
Rule 424(b)(2)
File No. 33-64973
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 22, 1996
$550,000,000
FEDERATED DEPARTMENT STORES, INC.
$300,000,000 7.45% SENIOR DEBENTURES DUE 2017
$250,000,000 6.79% SENIOR DEBENTURES DUE 2027
------------------
Interest on the 7.45% Senior Debentures Due 2017 (the "2017 Debentures") and
the 6.79% Senior Debentures Due 2027 (the "2027 Debentures" and, together with
the 2017 Debentures, the "Debentures") is payable on January 15 and July 15 of
each year, commencing January 15, 1998. The Debentures are not redeemable prior
to maturity and are not subject to a sinking fund; provided, however, if
$25,000,000 or less of the aggregate principal amount of the 2027 Debentures are
outstanding, such 2027 Debentures may be redeemed by the Company at any time on
or after July 15, 2004, in whole but not in part, on at least 30 days prior
written notice to the holders thereof, at a redemption price of 100% of their
principal amount, together with accrued and unpaid interest, if any, to the date
of redemption. See "Description of the Debentures--Redemption." The Debentures
are not redeemable by the holders thereof upon the occurrence of a change in
control or the Company's completion of a highly leveraged transaction,
regardless of whether a rating decline results therefrom. See "Description of
the Debentures--Absence of Event Risk Protections." The holders of each 2027
Debenture may elect to have such 2027 Debenture, or any portion of the principal
amount thereof that is an integral multiple of $1,000, repaid on July 15, 2004
at 100% of the principal amount thereof, together with accrued and unpaid
interest to the date of repayment. Such election, which is irrevocable when
made, must be made within the period commencing on May 15, 2004 and ending at
5:00 p.m. (New York City time) on June 15, 2004. See "Description of the
Debentures--Optional Repayment."
The Debentures are general unsecured obligations of the Company and rank on
parity in right of payment with all other Senior Indebtedness of the Company.
The Debentures will be effectively subordinated to all existing and future
indebtedness of the Company's subsidiaries. As of May 3, 1997, as adjusted for
the offering of the Debentures (the "Offering") and the expected application of
the net proceeds therefrom, the Company's subsidiaries had $2,311.4 million of
pro forma Indebtedness (excluding guarantees of Company indebtedness) and the
Company had $1,109.9 million of pro forma secured Indebtedness. See "Terms of
Other Indebtedness of the Company."
Each tranche of the Debentures will be represented by a Global Security
registered in the name of the nominee of DTC, which will act as Depository.
Beneficial interests in the Global Security will be shown on, and transfers
thereof will be effected only through, records maintained by DTC (with respect
to participants' interest) and its participants. Except as described herein,
Debentures in definitive form will not be issued. Beneficial interests in the
Debentures may be purchased in denominations of $1,000 or any integral multiple
thereof. Payments of the principal of and premium, if any, and interest on the
Debentures will be made directly to DTC for subsequent disbursement to DTC
participants, who are to remit such payments to the beneficial owners of the
Debentures. See "Description of the Debentures--Book-Entry System."
The Company has applied to list the Debentures on the New York Stock
Exchange.
SEE "RISK FACTORS" BEGINNING AT PAGE 3 IN THE ACCOMPANYING PROSPECTUS FOR A
DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE DEBENTURES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT (2) COMPANY (1)(3)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per 7.45% Senior Debenture Due 2017............. 99.650% .875% 98.775%
Total........................................... $298,950,000 $2,625,000 $296,325,000
Per 6.79% Senior Debenture Due 2027............. 99.961% .650% 99.311%
Total........................................... $249,902,500 $1,625,000 $248,277,500
</TABLE>
- -------------
(1) Plus accrued interest, if any, from July 14, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $200,000 payable by the Company.
--------------------------
Each tranche of the Debentures offered hereby is offered by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Debentures will be ready for delivery in book-entry form only through
the facilities of DTC in New York, New York, on or about July 14, 1997, against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL SECURITIES INCORPORATED
----------------
The date of this Prospectus Supplement is July 9, 1997.
<PAGE>
USE OF PROCEEDS
The net proceeds of the Offering are estimated to be approximately $544.4
million. Such amount will be used by the Company to repay all outstanding
indebtedness (including any penalties or premiums payable in connection
therewith) under the ASGREC Mortgage Loan Facility and the Secured Promissory
Note, which are described in "Terms of Other Indebtedness of the
Company--Mortgage Loans" in this Prospectus Supplement (collectively, "Secured
Indebtedness"). The remaining net proceeds will be used by the Company for
general corporate purposes, including, without limitation, the reduction of
revolving credit loans outstanding under the Company's bank facilities. The
aggregate principal amount of such Secured Indebtedness was $498.4 million as of
the date of this Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for the fiscal
years ended February 3, 1996 and February 1, 1997 and the fiscal quarter ended
May 3, 1997, and deficiency of earnings to fixed charges for the fiscal quarter
ended May 4, 1996, computed in each case in the manner described under "Ratio of
Earnings to Fixed Charges" in the accompanying Prospectus, were 1.31:1, 1.71:1,
1.30:1, and $57.1 million, respectively.
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<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
DEBENTURES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
TERMS OF OTHER INDEBTEDNESS OF THE COMPANY
MORTGAGE LOANS
Allied Stores General Real Estate Company, a wholly owned subsidiary of the
Company ("ASGREC"), and certain of ASGREC's subsidiaries are parties to a
mortgage loan facility agreement (the "ASGREC Mortgage Loan Facility"). As of
May 3, 1997, $293.6 million was outstanding under the ASGREC Mortgage Loan
Facility. Borrowings under the ASGREC Mortgage Loan Facility bear interest at
9.99% per annum and mature by their terms in 2002. Borrowings under the ASGREC
Mortgage Loan Facility are secured by liens on certain real property of such
subsidiaries.
Federated Noteholding Corporation II, a wholly owned subsidiary of the
Company ("FNC II"), had $214.2 million outstanding as of May 3, 1997 under a
promissory note (the "Secured Promissory Note"). The Secured Promissory Note
bears interest at 8.2% per annum and matures in 2000. The Secured Promissory
Note is secured by liens on certain real property of a subsidiary and by a
pledge of the capital stock of FNC II.
In addition to the mortgage indebtedness described above and certain
intercompany debt, the Company and certain of its subsidiaries are obligated
under various mortgage notes in an aggregate principal amount of $85.9 million
as of May 3, 1997. These mortgage notes are secured by liens on certain real
property of the Company's subsidiaries.
RECEIVABLES ASSET-BACKED CERTIFICATES
In 1992, the Company formed Prime Receivables Corporation ("Prime"), an
indirect wholly owned special purpose finance subsidiary of the Company, to
issue from time to time certificates backed by private-label consumer credit
card receivables generated in certain of the Company's department store
businesses. These certificates represent undivided interests in the assets of a
master trust established by Prime (the "Master Trust"). These assets consist
primarily of such private-label consumer credit card receivables, all of which
receivables have been (or, with respect to future receivables generated by such
operations, will be) purchased by Prime and thereafter transferred to the Master
Trust. Subject to the ability of Prime, at its option, to make funds available
to the Master Trust in certain circumstances, payments of principal and interest
on the certificates are funded solely from collections of the receivables held
by the Master Trust.
In 1992, Prime issued to third parties a total of $981.0 million ($979.1
million discounted amount) of asset-backed securities in four separate classes
(collectively, the "Series 1992 Class A and B Certificates") as follows: (i)
$450.0 million in aggregate principal amount of 7.05% Class A-1 Asset-Backed
Certificates, Series 1992-1 due December 15, 1997; (ii) $450.0 million in
aggregate principal amount of 7.45% Class A-2 Asset-Backed Certificates, Series
1992-2 due December 15, 1999; (iii) $40.5 million in aggregate principal amount
of 7.55% Class B-1 Asset-Backed Certificates, Series 1992-1 due January 15,
1998; and (iv) $40.5 million in aggregate principal amount of 7.95% Class B-2
Asset-Backed Certificates, Series 1992-2 due January 18, 2000. Concurrently
therewith, the Master Trust issued to Prime two additional classes of
asset-backed securities (collectively, the "Series 1992 Class C Certificates")
as follows: (i) $55.0 million in aggregate principal amount of 8.05% Class C-1
Asset-Backed Certificates, Series 1992-1 due February 15, 1998 and (ii) $55.0
million in aggregate principal amount of 8.45% Class C-2 Asset-Backed
Certificates, Series 1992-2 due February 15, 2000. As of May 3, 1997, the
aggregate principal amount of the Class A and B Certificates was $981.0 million
and the aggregate principal amount of Class C Certificates was $110.0 million.
In January 1995, Prime sold the Series 1992 Class C Certificates to a third
party for an aggregate sale price of $77.0 million. The agreement pursuant to
which the Series 1992 Class C Certificates were sold provided for the allocation
of payments received by the third party purchaser on account of the Series 1992
Class C Certificates as though such third party owned $77.0 million in principal
amount thereof and Prime owned $33.0 million in principal amount
S-4
<PAGE>
thereof (with Prime's entitlement to such payments being subordinated to such
third party's entitlement to such payments).
In 1995, the Master Trust issued to third parties a total of $598.0 million
($597.1 million discounted amount) of asset-backed securities in two separate
classes (collectively, the "Series 1995 Class A and B Certificates") as follows:
(i) $546.0 million in aggregate principal amount of 6.75% Class A Asset-Backed
Certificates, Series 1995-1 due August 15, 2002 and (ii) $52.0 million in
aggregate principal amount of 6.90% Class B Asset-Backed Certificates, Series
1995-1 due September 15, 2002. Concurrently therewith, the Master Trust issued
to Prime $52.0 million in aggregate principal amount of 9.0% Class C Asset-
Backed Certificates, Series 1995-1 due October 15, 2002 (the "Series 1995 Class
C Certificates"). Subject to certain conditions, Prime may sell the Series 1995
Class C Certificates to a third party on terms similar or dissimilar to those
upon which the Series 1992 Class C Certificates were sold or may continue to
hold the Series 1995 Class C Certificates indefinitely.
In 1996, the Master Trust issued to third parties a total of $238.8 million
($237.9 million discounted amount) of asset-backed securities in two separate
classes (collectively, the "Series 1996 Class A and B Certificates") as follows:
(i) $218.0 million in aggregate principal amount of 6.70% Class A Asset-Backed
Certificates, Series 1996-1 due May 15, 2001 and (ii) $20.8 million in aggregate
principal amount of 6.85% Class B Asset-Backed Certificates, Series 1996-1 due
June 15, 2001. Concurrently therewith, the Master Trust issued to Prime $20.8
million in aggregate principal amount of 9.0% Class C Asset-Backed Certificates,
Series 1996-1 due July 15, 2001 (the "Series 1996 Class C Certificates").
Subject to certain conditions, Prime may sell the Series 1996 Class C
Certificates to a third party on terms similar or dissimilar to those upon which
the Series 1992 Class C Certificates were sold or may continue to hold the
Series 1996 Class C Certificates indefinitely.
In 1997, the Company formed Prime II Receivables Corporation ("Prime II"),
an indirect wholly owned special purpose finance subsidiary of the Company, to
issue from time to time certificates backed by receivables guaranteed under
"co-branded" VISA-Registered Trademark- charge cards issued by FDS National
Bank, a wholly owned subsidiary of the Company. These certificates represent
undivided interests in the assets of a master trust established by Prime II (the
"Prime Master Trust II"). These assets consist primarily of such
Visa-Registered Trademark- receivables. Although the structure and operation of
the Prime Master Trust II are similar to those of the Master Trust, neither the
financings effected in Prime II through the Prime Master Trust II nor the assets
of the Prime Master Trust II are reflected on the Company's balance sheet.
In 1997, the Prime Master Trust II issued to third parties two separate
classes (collectively, the "Series 1997 Class A and B Certificates") of variable
funding asset-backed securities. Concurrently therewith, the Prime Master Trust
II issued to Prime II a third class of variable funding asset-backed securities
(the "Series 1997 Class C Certificates"). Subject to certain conditions, Prime
II may sell the Series 1997 Series C Certificates to a third party or may
continue to hold them. As of April 30, 1997, the outstanding amount of the
Series 1997 Class A and Class B Certificates was $125.0 million and the
outstanding amount of the Series 1997 Class C Certificates was $14.1 million.
RECEIVABLES-BACKED COMMERCIAL PAPER
Seven Hills Funding Corporation, an indirect wholly owned special purpose
finance subsidiary of the Company ("Seven Hills"), is a party to a liquidity
facility with a syndicate of banks providing support for the issuance by Seven
Hills from time to time of up to $375.0 million of receivables backed commercial
paper. The borrowings under the liquidity facility are secured by a pledge of
Seven Hills' variable funding certificate representing an undivided interest in
the Master Trust, and are entitled to the benefit of interest rate caps of 10%.
As of May 3, 1997, Seven Hills had no commercial paper outstanding and there
were no borrowings outstanding under the liquidity facility.
S-5
<PAGE>
BANK FACILITIES
GENERAL. The Company and certain financial institutions are parties to the
Credit Agreement, pursuant to which such financial institutions have provided
the Company with (i) a $2,000.0 million revolving loan facility (the "Revolving
Loan Facility") and (ii) an $800.0 million term loan facility (the "Term Loan
Facility" and, together with the Revolving Loan Facility, the "Bank
Facilities"). Citibank, N.A. ("Citibank") is the administrative agent under the
Credit Agreement and The Chase Manhattan Bank (successor to Chemical Bank)
("Chase") is the agent under the Credit Agreement.
REVOLVING LOAN FACILITY. The Revolving Loan Facility provides for revolving
credit loans ("Revolving Loans" and, together with the loans under the Term Loan
Facility, the "Loans") of up to $2,000.0 million, of which an aggregate of
$1,100.0 million is available for working capital purposes (including a letter
of credit subfacility). The Revolving Loan Facility includes a swingline
subfacility pursuant to which certain of the lenders have agreed to advance up
to $50.0 million to the Company on a same-day notice basis. For 30 consecutive
calendar days during the period from December 1 to March 1 of each year, total
borrowings plus the aggregate stated amounts of stand-by letters of credit under
the Revolving Loan Facility may not exceed $1,000.0 million. The Company's
ability to effect borrowings under the Revolving Loan Facility is not subject to
any borrowing base requirements or limitations. The Revolving Loan Facility
matures on March 31, 2000, with the Revolving Loans then outstanding to be
repaid in full on such date. As of May 3, 1997, $398.2 million (including $148.2
million of letters of credit) was outstanding under the Revolving Loan Facility.
TERM LOAN FACILITY. The Term Loan Facility matures on January 28, 2000.
Commencing May 3, 1996, the Company is required to make quarterly amortization
payments totaling, on an annual basis: $100.0 million in the first year
thereafter; $150.0 million in the second year thereafter; $200.0 million in the
third year thereafter; and $350.0 million in the fourth year thereafter, in each
case subject to adjustment as hereinafter provided for mandatory or voluntary
prepayments. The Company may make voluntary prepayments of amounts outstanding
under the Term Loan Facility at any time without penalty or premium. Mandatory
repayment of amounts outstanding under the Term Loan Facility are required (i)
upon the occurrence of certain events, such as the issuance of certain debt
securities (excluding the Debentures) or certain asset sales and (ii) in the
amount of a specified percentage of excess cash flow (as defined in the Credit
Agreement), until such time as the Company has obtained an investment grade
rating with respect to its long-term senior unsecured debt. Mandatory repayments
of the Term Loan Facility are to be applied 50% to installments pro rata and 50%
to installments in inverse order of maturity, and, to the extent in excess
thereof, would next apply permanently to reduce the Revolving Loan Facility to a
specified minimum level. As of May 3, 1997, $502.6 million was outstanding under
the Term Loan Facility.
INTEREST RATE. Loans under the Bank Facilities (other than Competitive Bid
Loans (as defined below)) bear interest at a rate equal to, at the Company's
option, (i) the administrative agent's Base Rate (as defined below) in effect
from time to time plus the Applicable Margin (as defined below) ("Base Rate
Loans") or (ii) the administrative agent's Eurodollar rate (adjusted for
reserves) plus the Applicable Margin ("Eurodollar Loans"). "Applicable Margin"
means 0.0% for Base Rate Loans and currently 0.625% (and, as a result of the
Company obtaining investment grade status, 0.5% as of July 15, 1997) for
Eurodollar Loans, subject to adjustment based on the Company's long-term debt
rating and interest coverage ratio. "Base Rate" is a fluctuating interest rate
equal to the highest from time to time of (a) the rate of interest announced
publicly by the administrative agent in New York as its base rate; (b) 1/2 of 1%
per annum above the latest three-week moving average of secondary market morning
offering rates for three-month certificates of deposit of major United States
money market banks, as determined weekly by the administrative agent and
adjusted for the cost of reserves and estimated insurance assessments from the
Federal Deposit Insurance Corporation; and (c) a rate equal to 1/2 of 1% per
annum above the weighted average of the rates on overnight federal funds
transactions with members of the Federal
S-6
<PAGE>
Reserve System arranged by federal funds brokers, as determined for any day by
the administrative agent. The Company has purchased interest rate caps covering
an aggregate notional amount of $1,400.0 million for a period of three years
from December 15, 1994. Pursuant to such caps, the Eurodollar rate with
reference to which interest on $500.0 million of the Company's variable rate
indebtedness is determined is effectively limited to a maximum rate of 8% per
annum throughout such three-year period and the Eurodollar rate with reference
to which interest on $900.0 million of the Company's variable rate indebtedness
is determined is effectively limited to a maximum rate of 7% per annum in the
first year of such three-year period, 8% per annum in the second year of such
three-year period, and 9% per annum thereafter. The Company has also entered
into interest rate swap agreements covering an aggregate notional amount of
$400.0 million. Pursuant to such swaps, the Eurodollar rate with reference to
which interest on the Company's variable rate indebtedness is determined is
effectively converted to a fixed rate of 5.3275% on $100.0 million of borrowings
from January 9, 1996 to January 9, 1998, 5.2625% on $100.00 million of
borrowings from January 23, 1996 to January 25, 1999, 5.2250% on $100.0 million
of borrowings from January 18, 1996 to January 18, 1998, and 5.0100% on $100.0
million of borrowings from February 12, 1996 to February 12, 1998.
In addition to Base Rate Loans and Eurodollar Loans, the Revolving Loan
Facility includes a competitive bid component that enables the Company to invite
the lenders or specified designees under the Revolving Loan Facility to bid for
loans having maturities of six months or less and consisting of either fixed
rate loans or Eurodollar Loans ("Competitive Bid Loans"). Each such lender would
have the opportunity to bid for Competitive Bid Loans at its discretion. The
Competitive Bid Loans would bear interest at the rate set forth in the bids
accepted by the Company. The competitive bid component of the Revolving Loan
Facility may result in additional interest expense savings to the Company.
FEES. The lenders participating in the Bank Facilities are entitled to
customary fees in connection therewith.
SECURITY AND GUARANTEES. The Company's obligations under the Bank
Facilities are secured by a pledge of the capital stock of certain of the
Company's subsidiaries, including all of the Company's retail operating
subsidiaries, and certain intercompany indebtedness. Such obligations also are
guaranteed by certain subsidiaries of the Company, including all of the
Company's retail operating subsidiaries. In May 1997 and July 1997, the Company
obtained an investment grade rating for its long-term senior unsecured debt from
Moody's Investors Service, Inc. and Standard & Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc., respectively, and, as a result, the
foregoing pledges and guarantees will be released in October 1997.
COVENANTS. The Credit Agreement includes customary affirmative and negative
covenants, including covenants requiring the Company, subject to certain
exceptions, to (i) comply with laws, pay taxes, maintain insurance, preserve its
corporate existence, and permit the lenders to inspect the Company's properties,
books, and records; (ii) perform under its material agreements; (iii) conduct
transactions with affiliates at arm's length; (iv) not create certain additional
liens on the Company's assets; (v) not incur any material debt, other than as
permitted by the Credit Agreement; (vi) not prepay, redeem, or otherwise satisfy
prior to maturity any material debt, other than as permitted by the Credit
Agreement; (vii) not pay any dividends or make any other distributions to
stockholders, other than as permitted by the Credit Agreement; and (viii) not
amend or otherwise alter the terms of any material debt instruments, related
agreements, or material contracts.
The Credit Agreement also requires the Company to satisfy certain financial
covenants and ratios. In general, these covenants become more restrictive over
time. The financial covenants under the Credit Agreement require the maintenance
of a specified EBITDA to net interest ratio and an adjusted debt to total
capital ratio. The EBITDA to net interest ratio is as follows as of the end of
each of the fiscal quarters ending in the month indicated (with EBITDA to
exclude unusual and extraordinary items only and net interest defined for this
purpose as total interest expense less interest income): July, 1997: 3.00:1;
S-7
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October, 1997: 3.00:1; January, 1998: 3.50:1; April, 1998: 3.50:1; July, 1998:
3.50:1; October, 1998: 3.50:1; January, 1999: 3.75:1; April, 1999: 3.75:1; July,
1999: 3.75:1; October, 1999: 3.75:1; and thereafter: 4.00:1. The adjusted debt
to total capital ratio is as follows as of the end of each of the fiscal
quarters ending in the month indicated (with adjusted debt defined for this
purpose as total debt excluding certain nonrecourse debt and commercial paper
and total capital defined for this purpose as adjusted debt plus total
stockholders' equity): July, 1997: 48%; October, 1997: 49%; January, 1998: 44%;
April, 1998: 44%; July, 1998: 44%; October, 1998: 45%; and thereafter: 40%.
EVENTS OF DEFAULT. The Credit Agreement contains customary events of
default, including: (i) the nonpayment of principal and amounts in reimbursement
of letters of credit when due and the nonpayment of interest, fees, or other
amounts within a specified number of days after the due date; (ii) the
nonpayment of principal or interest on certain material indebtedness; (iii) the
occurrence of certain events of bankruptcy or insolvency; (iv) the failure to
observe certain covenants under the Credit Agreement, subject to applicable
grace periods; (v) the occurrence of certain ERISA events; and (vi) certain
transactions resulting in a change in control of the Company.
REPLACEMENT BANK FACILITIES. The Company has received commitments from four
financial institutions for, and is engaged in discussions with representatives
of various other financial institutions relating to the syndication of, new
revolving credit facilities (the "Replacement Bank Credit Facilities") to
replace the Bank Credit Facilities. The Company contemplates that the
Replacement Bank Credit Facilities would provide for a $1,500.0 million
five-year revolving credit facility and a $500.0 million 364-day revolving
credit facility. Borrowings under the Replacement Bank Credit Facilities would
be unsecured and would bear interest at variable rates determined by reference
to an interest coverage ratio and debt ratings for the Company's long-term
senior unsecured debt.
As of the date of this Prospectus Supplement, the Company has not entered
into any agreements providing for the Replacement Bank Credit Facilities.
Accordingly, there can be no assurance that the Company will obtain the
Replacement Bank Credit Facilities or as to the terms thereof. The Company
believes that, in the event the Company does not enter into an agreement
providing for the Replacement Bank Credit Facilities, the Bank Credit Facilities
and other capital resources available to the Company will provide the Company
with sufficient liquidity to meet its needs through the maturity of the Bank
Credit Facilities in 2000, although there necessarily can be no assurance with
respect thereto.
SENIOR NOTES DUE 2001
The Company's Senior Notes due 2001 are unsecured obligations of the Company
that mature on February 15, 2001 and bear interest at the rate of 10% per annum.
The outstanding aggregate principal amount of such notes was $450.0 million as
of May 3, 1997.
SENIOR NOTES DUE 2002
The Company's Senior Notes due 2002 are unsecured obligations of the Company
that mature on October 15, 2002 and bear interest at the rate of 8.125% per
annum. The outstanding aggregate principal amount of such notes was $400.0
million as of May 3, 1997.
SENIOR NOTES DUE 2003
The Company's Senior Notes due 2003 are unsecured obligations of the Company
that mature on June 15, 2003 and bear interest at the rate of 8.5% per annum.
The outstanding aggregate principal amount of such notes was $450.0 million as
of May 3, 1997.
S-8
<PAGE>
CONVERTIBLE SUBORDINATED NOTES
The Company's Convertible Subordinated Notes Due 2003 (the "Subordinated
Notes") are unsecured obligations of the Company that mature on October 1, 2003
and bear interest at the rate of 5% per annum. The outstanding aggregate
principal amount of such notes was $350.0 million as of May 3, 1997. Subject to
limitations contained in its other debt instruments, at any time on or after
October 1, 1998, the Company may make optional redemptions of the Subordinated
Notes in whole or in part.
Each holder of Subordinated Notes has the right, subject to certain
limitations, to convert the principal of any such Subordinated Notes into fully
paid and nonassessable shares of Common Stock at the rate of 29.2547 shares of
Common Stock for each $1,000 principal amount of Subordinates Notes (subject to
adjustment in certain circumstances).
NON-RECOURSE NOTE MONETIZATION FACILITY
On May 3, 1988, the Company sold its Filene's and Foley's divisions to May
Department Stores for consideration consisting in part of a $400.0 million
fixed-rate promissory note (the "May Note"). The Company subsequently
transferred the May Note to a grantor trust of which the Company is the
beneficiary. Using the May Note as collateral, the trust borrowed $352.0 million
under a note monetization facility and distributed the proceeds of such
borrowing to the Company. The trust's borrowing under the note monetization
facility bears interest at fluctuating interest rates based on the London
Interbank Offered Rate, subject to certain adjustments, and matures in two equal
installments on May 3, 1997 (which installment was paid in full) and May 3,
1998. An interest rate swap agreement was entered into for the note monetization
facility which, in effect, converted the variable interest rate to a fixed rate
of 10.344%. Neither the Company nor any subsidiary of the Company is an obligor
on the borrowing under the note monetization facility, and the lender's recourse
thereunder is limited to the trust's assets and the Company's interest in the
trust.
COMMERCIAL PAPER
The Company has a commercial paper program under which it may issue up to
$400.0 million of senior unsecured commercial paper. As of May 3, 1997, the
Company had $160.0 million of such commercial paper outstanding.
OTHER INDEBTEDNESS
Pursuant to the Company's plan of reorganization, which became effective on
February 4, 1992, and the plan of reorganization of Macy's (the "Macy's POR"),
each of the Company and Macy's were allowed to make disbursements on account of
certain federal, state, and local tax claims over a period of up to six years.
As of May 3, 1997, $94.7 million of such obligations remained outstanding. Such
obligations are several obligations of the Company and/or various of its
subsidiaries.
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DESCRIPTION OF THE DEBENTURES
The Debentures will be issued under the Indenture as supplemented by an
Eighth Supplemental Indenture, in the case of the 2017 Debentures, and the Ninth
Supplemental Indenture, in the case of the 2027 Debentures (each a "Supplemental
Indenture"). The following discussion includes a summary description of material
terms of the Supplemental Indentures and the Debentures (each tranche of which
represents a separate series of, and is referred to in the accompanying
Prospectus as, "Debt Securities"). The following description of the terms of the
Debentures offered hereby supplements, and should be read in conjunction with,
the statements under "Description of Debt Securities" in the accompanying
Prospectus. The following summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all of the provisions of
the Indenture and the applicable Supplemental Indenture. Capitalized terms not
defined herein have the meanings given to them in the Indenture and the
applicable Supplemental Indenture. Certain defined terms used in the following
discussion are set forth below in "-- Certain Defined Terms."
GENERAL
The Debentures will be unsecured obligations of the Company, will rank
equally with all other unsecured and unsubordinated indebtedness of the Company.
The 2017 Debentures will be limited to $300,000,000 aggregate principal amount
and the 2027 Debentures will be limited to $250,000,000 aggregate principal
amount. The 2017 Debentures will mature on July 15, 2017 and the 2027 Debentures
will mature on July 15, 2027. Each tranche of the Debentures will bear interest
at the rate per annum shown on the front cover of this Prospectus Supplement
from July 14, 1997, payable semiannually on January 15 and July 15 of each year,
commencing on January 15, 1998, to the Persons in whose names the Debentures are
registered at the close of business on the preceding January 1 or July 1, as the
case may be. Interest on the Debentures will be calculated on the basis of a
360-day year consisting of 12 months of 30 days each.
ABSENCE OF EVENT RISK PROTECTIONS
Neither the Indenture (as supplemented by the Supplemental Indentures) nor
the Debentures contain provisions permitting the holders of the Debentures to
require prepayment in the event of a change in the management or control of the
Company, or in the event the Company enters into one or more highly leveraged
transactions, regardless of whether a rating decline results therefrom, nor are
any such events deemed to be events of default under the terms of the Indenture,
the Supplemental Indentures or the Debentures. The terms of the Bank Credit
Facilities, however, designate certain changes in management or control of the
Company as events of default.
OPTIONAL REPAYMENT
The 2027 Debentures may be repaid at the option of the registered holders
thereof, on July 15, 2004, as a whole or in part, at 100% of the principal
amount to be repaid thereof, together with the accrued and unpaid interest, if
any, to the date of such repayment. In order for the holders to exercise this
option, the Company must receive at its office or agency in New York, New York,
during the period beginning on May 15, 2004 and ending at 5:00 p.m. (New York
City time) on June 15, 2004 (or, if June 15, 2004 is not a business day, the
next succeeding business day), the 2027 Debentures to be repaid with the form
entitled "Option to Elect Repayment on July 15, 2004" on the reverse of such
2027 Debentures duly completed. Any such notice received by the Company during
the period beginning on May 15, 2004 and ending at 5:00 p.m. (New York City
time) on June 15, 2004 will be irrevocable. The repayment option may be
exercised by a holder of the 2027 Debentures for less than the entire principal
amount of such 2027 Debentures held by such holder, so long as the principal
amount to be repaid is equal to $1,000 or an integral multiple of $1,000.
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Failure by the Company to repay the 2027 Debentures when required as
described in the preceding paragraph will result in an Event of Default under
the Indenture as supplemented by the Ninth Supplemental Indenture.
As long as the 2027 Debentures are represented by a Global Security, notice
of exercise of the right of repayment will have to be given in accordance with
the policies and procedures of DTC in effect at the time. See "Description of
Debt Securities--Book Entry Debt Securities" in the accompanying Prospectus.
REDEMPTION
The Debentures are not redeemable at the option of the Company prior to
maturity and are not subject to a sinking fund; provided, however, if at any
time on or after July 15, 2004 the aggregate principal amount of the 2027
Debentures outstanding is $25,000,000 or less, the Company may elect to redeem
the 2027 Debentures at any time thereafter, in whole and not in part, on at
least 30 days prior written notice to the holders thereof, at a redemption price
of 100% of their principal amount, together with accrued and unpaid interest to
the date of redemption.
BOOK-ENTRY SYSTEM
Each tranche of the Debentures will initially be issued in the form of a
Global Security held in book-entry form. Accordingly, The Depository Trust
Company ("DTC") or its nominee will be the sole registered holder of the
Debentures for all purposes under the applicable Supplemental Indenture. DTC has
advised the Company that DTC is a limited-purpose trust company organized under
the Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered under the Exchange Act. DTC
was created to hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations, and
certain other organizations some of whom (and/or their representatives) own DTC.
Access to DTC's book-entry system is also available to others, such as banks,
brokers, dealers, and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. See "Description
of Debt Securities--Book Entry Debt Securities" in the accompanying Prospectus.
CERTAIN RESTRICTIVE COVENANTS
Each Supplemental Indenture will provide that the following restrictive
covenants will be applicable to the Company.
LIMITATION ON LIENS. The Company and the Restricted Subsidiaries will not
be permitted to create, incur, assume, or suffer to exist any liens upon any of
their respective assets, other than Permitted Liens, unless the Debentures are
secured by an equal and ratable lien on the same assets.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company and the
Restricted Subsidiaries may not enter into any sale and leaseback transaction
unless the net cash proceeds therefrom are applied as follows: to the extent
that the aggregate amount of net cash proceeds (net of all fees and expenses
incurred and all taxes and reserves required to be accrued as a liability as a
consequence of such sale and leaseback transaction, net of all payments made on
any Indebtedness that is secured by assets subject to a sale and leaseback
transaction, and net of all distributions and other payments made to minority
interest holders in Subsidiaries of the Company or joint ventures as a result of
such sale and leaseback transaction) from such sale and leaseback transaction
that have not been reinvested in the business of the Company or its Subsidiaries
or used to reduce Senior Indebtedness of the Company or
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its Subsidiaries within 12 months of the receipt of such proceeds (with Cash
Equivalents being deemed to be proceeds upon receipt of such Cash Equivalents
and cash payments under promissory notes secured by letters of credit or similar
assurances of payment issued by commercial banks of recognized standing being
deemed to be proceeds upon receipt of such payments) exceed $100.0 million
("Excess Sale Proceeds") from time to time, such Excess Sale Proceeds will be
used to offer to repurchase the Debentures (on a pro rata basis with any other
Senior Indebtedness of the Company or its Subsidiaries required by the terms of
such Indebtedness to be repurchased with such Excess Sale Proceeds, based on the
principal amount of such Senior Indebtedness required to be repurchased) at 100%
of principal amount, plus accrued interest, and to pay related costs and
expenses. To the extent that the aggregate purchase price for the Debentures or
other Senior Indebtedness tendered pursuant to such an offer to purchase is less
than the aggregate purchase price offered in such offer, an amount of Excess
Sale Proceeds equal to such shortfall will cease to be Excess Sale Proceeds and
may thereafter be used for general corporate purposes. If the aggregate purchase
price for the Debentures or other Senior Indebtedness tendered pursuant to such
an offer to purchase exceeds the amount of such Excess Sale Proceeds, the
Trustee will select the Debentures or other Senior Indebtedness to be purchased
by such method as the Trustee deems fair and appropriate.
If an offer to purchase the Debentures is made, the Company shall comply
with all tender offer rules, including but not limited to Section 14(e) under
the Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such
offer to purchase.
LIMITATION ON MERGER AND CERTAIN OTHER TRANSACTIONS. The Company, in a
single transaction or through a series of related transactions, will not be
permitted to consolidate with or merge with or into any other Person, or
transfer (by lease, assignment, sale, or otherwise) all or substantially all of
its properties and assets to another Person unless: (i) either (a) the Company
is the continuing Person in such a consolidation or merger or (b) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or to which all or substantially all of the properties and assets of
the Company are transferred (the Company or such other Person being referred to
as the "Surviving Person") is a corporation organized and validly existing under
the laws of the United States, any state thereof, or the District of Columbia,
and expressly assumes, by an indenture supplement, all the obligations of the
Company under the Debentures, the Indenture, and the Supplemental Indentures and
the Trustee receives a favorable written opinion of counsel with respect to
satisfaction of the foregoing conditions; and (ii) immediately before and
immediately after and giving effect to such transaction and the assumption of
the obligations as set forth in clause (i) above and the incurrence or
anticipated incurrence of any Indebtedness to be incurred in connection
therewith, no Event of Default has occurred and is continuing.
EVENTS OF DEFAULT
The following are "Events of Default" with respect to each tranche of the
Debentures: (i) failure to pay principal of or premium, if any, on any Debenture
of such tranche when due; (ii) the failure to repurchase the Debentures of such
tranche when required pursuant to the Indenture or the applicable Supplemental
Indenture; (iii) failure to pay any interest on any Debenture of such tranche
when due, which failure continues for 30 calendar days; (iv) failure to perform
any other covenant of the Company in the Indenture or the applicable
Supplemental Indenture (other than a covenant included therein solely for the
benefit of a series of senior debt securities other than the Debentures of such
tranche), which failure continues for 60 calendar days after written notice as
provided in the Indenture or the applicable Supplemental Indenture; (v) any
nonpayment at maturity or other default (beyond any applicable grace period)
under any agreement or instrument relating to any other Indebtedness of the
Company or any Restricted Subsidiary (the unpaid principal amount of which is
not less than $100.0 million), which default results in the acceleration of the
maturity of such Indebtedness prior to its stated maturity or occurs at the
final maturity thereof; (vi) certain events of bankruptcy, insolvency, or
reorganization of the
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Company or any Significant Subsidiary or any group of Subsidiaries of the
Company that, if considered in the aggregate, would be a Significant Subsidiary;
and (vii) the entry of any final judgments or orders against the Company or any
of its Subsidiaries in excess of $100.0 million individually or in the aggregate
(not covered in full by insurance) that is not paid, discharged, or otherwise
stayed (by appeal or otherwise) for 60 calendar days after the entry of such
judgments or orders. The Company will be required to provide the Trustee with
notice of any uncured Event of Default within 10 calendar days after any
responsible officer of the Company becomes aware of or receives actual notice of
the occurrence thereof. The Trustee will be required, within 90 calendar days
after the occurrence of a default in respect of the Debentures of either
tranche, to give to the holders of the Debentures of such tranche notice of all
such uncured defaults known to it (except that, in the case of a default in the
performance of any covenant of the character contemplated in clause (iii) of the
preceding sentence, no such notice to holders of the Debentures of such tranche
will be given until at least 30 calendar days after the occurrence thereof);
provided, however, that, except in the case of a default of the character
contemplated in clause (i) or (ii) of the preceding sentence, the Trustee may
withhold such notice if and so long as it in good faith determines that the
withholding of such notice is in the interests of the holders of the Debentures
of such tranche.
If an Event of Default with respect to either tranche of Debentures occurs
and is continuing, either the Trustee or the holders of at least 25% in
principal amount of the Debentures of such tranche, by notice as provided in the
Indenture, may declare the principal amount of the Debentures of such tranche to
be due and payable immediately. However, at any time after a declaration of
acceleration with respect to the Debentures of any tranche has been made, but
before a judgment or decree based on such acceleration has been obtained, the
holders of a majority in principal amount of the Debentures of such tranche may,
under certain circumstances, rescind and annul such acceleration. See "--
Modification and Waiver" in the accompanying Prospectus. If an Event of Default
under clause (vi) above occurs with respect to the Company, the principal of,
premium on, if any, and accrued interest on the Debentures of such tranche will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any holder of the Debentures of such tranche.
DEFEASANCE
The Company, at its option, (i) will be deemed to have been discharged from
its obligations with respect to a tranche of Debentures (except for certain
obligations, including obligations to register the transfer or exchange of such
tranche of Debentures, to replace destroyed, stolen, lost, or mutilated
Debentures, and to maintain an office or agency in respect of the Debentures of
such tranche and hold moneys for payment in trust) or (ii) will be released from
its obligations to comply with the restrictive covenants described above with
respect to the Debentures of such tranche, and the occurrence of an event
described in clause (iv) under "Events of Default" above with respect to any
defeased covenant will no longer be an Event of Default if, in either case, the
Company irrevocably deposits with the Trustee, in trust, (a) money or (b) (1)
direct obligations of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or obligations
of an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, that, in either case, are not callable at the issuer's
option or (2) certain depositary receipts with respect to any obligation of the
type specified in the preceding clause (1) ("U.S. Government Obligations") that
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay all the principal
of and any interest on the Debentures of such tranche on the dates such payments
are due and the Company shall have given the Trustee irrevocable instructions
satisfactory to the Trustee to give notice to holders of the Debentures of such
tranche of the defeasance of the Debentures of such tranche, all in accordance
with the terms of the Debentures of such tranche. Such defeasance may be
effected only if, among other things: (A) no Event of Default or event that,
with the giving of notice or lapse of time, or both, would become an Event of
Default under the Indenture or the applicable
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Supplemental Indenture has occurred and is continuing on the date of such
deposit; (B) no Event of Default described under clause (vi) under "Events of
Default" above or event that with the giving of notice or lapse of time, or
both, would become an Event of Default described under such clause (vi) has
occurred and is continuing at any time on or prior to the 124th calendar day
following such date of deposit; (C) in the event of defeasance under clause (i)
above, the Company has delivered an opinion of counsel stating that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service ("IRS") a ruling or (y) since the date of the Indenture there has been a
change in applicable federal law, in either case to the effect that, among other
things, the holders of the applicable Debentures will not recognize gain or loss
for United States federal income tax purposes as a result of such deposit or
defeasance and will be subject to United States federal income tax in the same
manner as if such defeasance had not occurred; (D) in the event of defeasance
under clause (ii) above, the Company has delivered an opinion of counsel to the
effect that, among other things, the holders of the applicable Debentures should
not recognize gain or loss for United States federal income tax purposes as a
result of such deposit or defeasance and will be subject to United States
federal income tax in the same manner as if such defeasance had not occurred;
(E) the Company has delivered to the Trustee an opinion of a nationally
recognized independent public accounting firm certifying the sufficiency of the
amount of any U.S. Government Obligations placed on deposit to pay, without
regard to any reinvestment of any accrued interest, principal, interest, and
premium, if any, on the Debentures no later than one day prior to when due; and
(F) such defeasance will not result in a breach or violation of, or constitute a
default under, any other agreement to which the Company is a party or violate
any law to which the Company is subject. In the event the Company fails to
comply with its remaining obligations under the Indenture and the applicable
Supplemental Indenture after a defeasance of the Indenture and the applicable
Supplemental Indenture with respect to the Debentures as described under clause
(ii) of the first sentence of this paragraph and the Debentures are declared due
and payable because of the occurrence of any undefeased Event of Default, the
amount of money and U.S. Government Obligations on deposit with the Trustee may
be insufficient to pay amounts due on the Debentures at the time of the
acceleration resulting from such Event of Default. The Company, however, will
remain liable in respect of such payments.
CERTAIN DEFINED TERMS
Capitalized terms used but not defined herein have the meanings given to
such terms in the Indenture and the applicable Supplemental Indenture. In
addition, for purposes of the Indenture and the Supplemental Indentures, the
following definitions apply:
"Bank Facilities" means the financing provided for by the Credit Agreement,
dated as of December 19, 1994, among the Company, certain financial
institutions, Citibank, N.A., as administrative agent, and Chase, as agent, as
the same may be amended, supplemented, or otherwise modified from time to time.
"Cash Equivalent" means: (i) obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America; (ii) obligations (including,
but not limited to, demand or time deposits, bankers' acceptances, and
certificates of deposit) issued by a depository institution or trust company or
a wholly owned Subsidiary or branch office of any depository institution or
trust company, provided that (a) such depository institution or trust company
has, at the time of the Company's or any Restricted Subsidiary's Investment
therein or contractual commitment providing for such Investment, capital,
surplus, or undivided profits (as of the date of such institution's most
recently published financial statements) in excess of $100.0 million and (b) the
commercial payer of such depository institution or trust company, at the time of
the Company's or any Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, is rated at least A1 by S&P or P-1 by
Moody's; (iii) debt obligations (including, but not limited to, commercial paper
and medium
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term notes) issued or unconditionally guaranteed as to principal and interest by
any corporation, state or municipal government or agency or instrumentality
thereof, or foreign sovereignty, if the commercial paper of such corporation,
state or municipal government, or foreign sovereignty, at the time of the
Company's or any Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, is rated at least A1 by S&P or P-1 by
Moody's; (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the type described above entered into with a depository
institution or trust company meeting the qualifications described in clause (ii)
above; and (v) Investments in money market or mutual funds that invest
predominantly in Cash Equivalents of the type described in clauses (i), (ii),
(iii), and (iv) above; provided, however, that, in the case of the clauses (i)
through (iii) above, each such Investment has a maturity of one year or less
from the date of acquisition thereof.
"Consolidated Net Tangible Assets" means total assets (less depreciation and
valuation reserves and other reserves and items deductible from gross book value
of specific asset accounts under GAAP) after deducting therefrom (i) all current
liabilities and (ii) all goodwill, trade names, trademarks, patents, unamortized
debt discount, organization expenses, and other like intangibles, all as set
forth on the most recent balance sheet of the Company and its consolidated
Subsidiaries and computed in accordance with GAAP.
"Existing Indebtedness" means all Indebtedness under or evidenced by: (i)
the Debentures; (ii) the Company's 10% Senior Notes Due 2001; (iii) the
Company's 8.125% Senior Notes Due 2002; (iv) the Company's 8.5% Senior Notes Due
2003; (v) the Company's 5% Convertible Subordinated Notes Due 2003; (vi) the
outstanding principal amount of notes issued pursuant to the ASGREC Mortgage
Loan Facility; (vii) the outstanding principal amount of notes issued pursuant
to the Mortgage Note Agreement between Macy's Primary Real Estate, Inc. and
Federated Noteholding Corporation; (viii) the outstanding principal amount of
notes issued pursuant to the Loan Agreement among Lazarus PA, Inc., PNC Bank
Ohio, National Association, as agent, and the financial institutions party
thereto; (ix) capital lease obligations of the Company and the Restricted
Subsidiaries existing on the date of issuance of the Debentures; (x) the
outstanding principal amount of uncertificated obligations of the Company owed
to the IRS and other taxing authorities; (xi) the existing secured mortgage debt
of the Macy's Debtors assumed pursuant to the Macy's POR; (xii) the Note
Override Agreement, dated as of December 19, 1994, by Kings Plaza Shopping
Center of Avenue U, Inc., as Issuer, and The John Hancock Mutual Life Insurance
Company ("John Hancock"), as Noteholder; (xiii) the outstanding principal amount
of the notes of Broadway Stores, Inc. ("Broadway") held by FNC II; (xiv) the
outstanding principal amount of mortgage indebtedness of Broadway held by FNC
II; (xv) the outstanding principal amount of mortgage indebtedness of Broadway
to Bank of America; and (xiii) the other secured Indebtedness of the Company or
secured or unsecured Indebtedness of the Restricted Subsidiaries existing on the
date of issuance of the Debentures.
"Indebtedness" means, as applied to any Person, without duplication: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person for the deferred purchase price of property or services (other than
property and services purchased, and expense accruals and deferred compensation
items arising, in the ordinary course of business); (iii) all obligations of
such Person evidenced by notes, bonds, debentures, redeemable preferred stock,
or other similar instruments (other than performance, surety, and appeals bonds
arising in the ordinary course of business); (iv) all payment obligations
created or arising under any conditional sale, deferred price, or other title
retention agreement with respect to property acquired by such Person (unless the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property); (v) any capital
lease obligation of such Person; (vi) all reimbursement, payment, or similar
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit, or similar facilities (other than letters of credit in support of trade
obligations or incurred in connection with public liability insurance, workers'
compensation, unemployment insurance, old-age pensions, and other
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social security benefits other than in respect of employee benefit plans subject
to ERISA); (vii) all obligations of such Person, contingent or otherwise, under
any guarantee by such Person of the obligations of another Person of the type
referred to in clauses (i) through (vi) above; and (viii) all obligations
referred to in clauses (i) through (vi) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage or security interest in property (including without
limitation accounts, contract rights, and general intangibles) owned by such
Person and as to which such Person has not assumed or become liable for the
payment of such obligations other than to the extent of the property subject to
such mortgage or security interest; provided, however, that Indebtedness of the
type referred to in clauses (vii) and (viii) above will be included within the
definition of "Indebtedness" only to the extent of the least of: (a) the amount
of the underlying Indebtedness referred to in the applicable clause (i) through
(vi) above; (b) in the case of clause (vii), the limit on recovery, if any, from
such Person under obligations of the type referred to in clause (vii) above; and
(c) in the case of clause (viii), the aggregate value (as determined in good
faith by the Board of Directors of such Person) of the security for such
Indebtedness.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any capital stock, bonds, notes, debentures, or other securities
or evidences of Indebtedness issued by any other Person. The amount of any
Investment shall be the original cost thereof, plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, write-ups,
write-downs, or write-offs with respect to such Investment.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Permitted Liens" means: (a) liens (other than liens on inventory) securing
(i) Existing Indebtedness; (ii) Indebtedness under the Bank Facilities in an
aggregate principal amount at any one time not to exceed $2,800.0 million, less
(1) principal payments actually made by the Company on any term loan facility
under such Bank Facilities (other than principal payments made in connection
with or pursuant to a refinancing of the Bank Facilities in compliance with
clause (a)(ix) below) and (2) any amounts by which any revolving credit facility
commitments under the Bank Facilities are permanently reduced (other than
permanent reductions made in connection with or pursuant to a refinancing of the
Bank Facilities in compliance with clause (a)(ix) below) except that under no
circumstances will the total allowable indebtedness under this clause (a)(ii) be
less than $1,250.0 million (subject to increase from and after the date of
issuance of the Debentures at a rate, compounded annually, equal to 3% per
annum) if incurred for the purpose of providing the Company and its Subsidiaries
with working capital including bankers' acceptances, letters of credit, and
similar assurances of payment whether as part of the Bank Facilities or
otherwise; (iii) Indebtedness existing as of the date of issuance of the
Debentures of any Subsidiary of the Company engaged primarily in the business of
owning or leasing real property; (iv) Indebtedness incurred for the purpose of
financing store construction and remodeling or other capital expenditures; (v)
Indebtedness in respect of the deferred purchase price of property or arising
under any conditional sale or other title retention agreement; (vi) Indebtedness
of a Person acquired by the Company or a Subsidiary of the Company at the time
of such acquisition; (vii) to the extent deemed to be "Indebtedness,"
obligations under swap agreements, cap agreements, collar agreements, insurance
agreements, or any other agreement or arrangement, in each case designed to
provide protection against fluctuations in interest rates, the cost of currency,
or the cost of goods (other than inventory); (viii) other Indebtedness in
outstanding amounts not to exceed the greater of $750.0 million and 12.5% of
Consolidated Net Tangible Assets in the aggregate incurred by the Company and
the Restricted Subsidiaries at any particular time; and (ix) Indebtedness
incurred in connection with any extension, renewal, refinancing, replacement, or
refunding (including successive extensions, renewals, refinancings,
replacements, or refundings), in whole or in part, of any Indebtedness of the
Company or the
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Restricted Subsidiaries; provided, however, that the principal amount of the
Indebtedness so incurred does not exceed the sum of the principal amount of the
Indebtedness so extended, renewed, refinanced, replaced, or refunded, plus all
interest accrued thereon and all related fees and expenses (including any
payments made in connection with procuring any required lender or similar
consents); (b) liens incurred and pledges and deposits made in the ordinary
course of business in connection with liability insurance, workers'
compensation, unemployment insurance, old-age pensions, and other social
security benefits other than in respect of employee benefit plans subject to
ERISA; (c) liens securing performance, surety, and appeal bonds and other
obligations of like nature incurred in the ordinary course of business; (d)
liens on goods and documents securing trade letters of credit; (e) liens imposed
by law, such as carriers', warehousemen's, mechanics', materialmen's, and
vendors' liens, incurred in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings; (f) liens securing the payment of taxes, assessments,
and governmental charges or levies (1) either (x) not delinquent or (y) being
contested in good faith by appropriate legal or administrative proceedings and
(2) as to which adequate reserves shall have been established on the books of
the relevant corporation in conformity with GAAP; (g) zoning restrictions,
easements, rights of way, reciprocal easement agreements, operating agreements,
covenants, conditions, or restrictions on the use of any parcel of property that
are routinely granted in real estate transactions or do not interfere in any
material respect with the ordinary conduct of the business of the Company and
its Subsidiaries or the value of such property for the purpose of such business;
(h) liens on property existing at the time such property is acquired; (i)
purchase money liens upon or in any property acquired or held in the ordinary
course of business to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property; (j) liens on the assets of any
Subsidiary of the Company at the time such Subsidiary is acquired; (k) liens
with respect to obligations in outstanding amounts not to exceed $100.0 million
at any particular time and that (1) are not incurred in connection with the
borrowing of money or obtaining advances or credit (other than trade credit in
the ordinary course of business) and (2) do not in the aggregate interfere in
any material respect with the ordinary conduct of the business of the Company
and its Subsidiaries; and (l) without limiting the ability of the Company or any
Restricted Subsidiary to create, incur, assume, or suffer to exist any lien
otherwise permitted under any of the foregoing clauses, any extension, renewal,
or replacement, in whole or in part, of any lien described in the foregoing
clauses; provided, however, that any such extension, renewal, or replacement
lien is limited to the property or assets covered by the lien extended, renewed,
or replaced or substitute property or assets, the value of which is determined
by the Board of Directors of the Company to be not materially greater than the
value of the property or assets for which the substitute property or assets are
substituted.
"Person" means an individual, partnership, corporation (including without
limitation a business trust), joint stock company, trust, unincorporated
association, joint venture, or other entity, or a government or any political
subdivision or agency thereof.
"Restricted Subsidiary" means any direct or indirect Subsidiary (as that
term is defined in Regulation S-X promulgated by the Commission) other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc., or any successor to the rating agency business thereof.
"Senior Indebtedness" means any Indebtedness of the Company or its
Subsidiaries other than Subordinated Indebtedness.
"Significant Subsidiary" means any Subsidiary that accounts for (i) 10% or
more of the total consolidated assets of the Company and its Subsidiaries as of
any date of determination or (ii) 10% or more of the total consolidated revenues
of the Company and its Subsidiaries for the most recently concluded fiscal
quarter.
S-17
<PAGE>
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Debentures.
"Subsidiary" means, as applied, with respect to any Person, any corporation,
partnership, or other business entity of which, in the case of a corporation,
more than 50% of the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation has or might have voting power upon the occurrence of any
contingency), or, in the case of any partnership or other legal entity, more
than 50% of the ordinary equity capital interests, is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries, or by one or more of such Person's other Subsidiaries.
"Unrestricted Subsidiary" means any entity designated as such in the
applicable Supplemental Indenture (including the Company's existing receivables
finance Subsidiaries, FDS National Bank, FACS Group, Inc., Federated Credit
Holdings Corporation, Prime Credit Card Master Trust (to the extent that it is
deemed to be a Subsidiary), Prime Credit Card Master Trust II (to the extent
that it is deemed to be a Subsidiary), Prime Receivables Corporation, Prime II
Receivables Corporation, Seven Hills Funding Corporation, Ridge Capital Trust II
(to the extent that it is deemed to be a Subsidiary), Macy Financial, Inc., R.H.
Macy Overseas Finance, N.V., Macy Credit Corp., and Macy's Data and Credit
Services Corp.) or by the Board of Directors of the Company, provided that such
entity is a special purpose entity formed for financing purposes.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Debentures set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2017 DEBENTURES OF 2027 DEBENTURES
- ------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Goldman, Sachs & Co.............................. $ 165,000,000 $ 137,500,000
Credit Suisse First Boston Corporation........... 75,000,000 62,500,000
Prudential Securities Incorporated............... 60,000,000 50,000,000
------------------- -------------------
Total........................................ $ 300,000,000 $ 250,000,000
------------------- -------------------
------------------- -------------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any are
taken. The 2017 Debentures and the 2027 Debentures are being offered separately,
and not as a unit.
The Underwriters propose to offer the Debentures in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of 0.500%, in the case of the 2017 Debentures, and 0.400%, in
the case of the 2027 Debentures, of the principal amount of the Debentures. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.250% of the principal amount of each tranche of the Debentures to certain
brokers and dealers. After the Debentures are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the representatives.
In connection with the Offering, the Underwriters may purchase and sell the
Debentures in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the Offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Debentures; and short positions created by
the Underwriters involve the sale by the
S-18
<PAGE>
Underwriters of a greater number of Debentures than they are required to
purchase from the Company in the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to broker-dealers in respect of
the securities sold in the Offering may be reclaimed by the Underwriters if such
Debentures are repurchased by the Underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Debentures, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be affected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
The Debentures are a new issue of securities with no established trading
market. Although the Company intends to cause the Debentures to be listed on the
New York Stock Exchange, there can be no assurance, even if approval for such
listing is obtained, that an active market for the Debentures will develop or,
if any such market develops, that it will continue to exist, or as to the
liquidity of such market.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Underwriters and their respective affiliates have provided investment
banking and/or commercial banking services to the Company from time to time. The
Underwriters have received customary fees in connection with providing these
services. Because all of the indebtedness outstanding under the ASGREC Mortgage
Loan Facility and the Secured Promissory Note is held by an affiliate of
Prudential Securities Incorporated, such affiliate will receive from the Company
more than 10% of the net proceeds from the Offering. Accordingly, this Offering
is being made pursuant to the provisions of Section 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements of the Company as of February 1, 1997
and February 3, 1996, and for the 52 week period ended February 1, 1997, the 53
week period ended February 3, 1996, and the 52 week period ended January 28,
1995, have been incorporated by reference in this Prospectus Supplement in
reliance upon the report, incorporated by reference herein, of KPMG Peat Marwick
LLP, independent certified public accountants, and upon the authority of that
firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Debentures offered hereby will be passed upon for the
Company by Jones, Day, Reavis & Pogue, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
S-19
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PROSPECTUS
$1,000,000,000
FEDERATED DEPARTMENT STORES, INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
WARRANTS
Federated Department Stores, Inc. (the "Company") may offer from time to
time, together or separately, (i) debt securities ("Debt Securities") consisting
of notes, debentures, or other evidences of indebtedness in one or more series,
(ii) shares of its Common Stock, par value $.01 per share (the "Common Stock"),
(iii) shares of its Preferred Stock, par value $.01 per share (the "Preferred
Stock"), and (iv) warrants to purchase Debt Securities, Common Stock, or
Preferred Stock, or any combination thereof, as may be designated by the Company
at the time of the offering (the "Warrants") in amounts, at prices, and on terms
to be determined at the time of the offering. The Debt Securities, Common Stock,
Preferred Stock, and Warrants are collectively called the "Securities".
The Securities may be offered in separate series or issuances at an
aggregate initial public offering price not to exceed $1,000,000,000 or, if
applicable, the equivalent thereof in other currencies, at prices, and on terms
to be determined at the time or times of offering.
The specific terms of the Securities with respect to which this Prospectus
is being delivered are set forth in the accompanying Prospectus Supplement and
include, where applicable, (i) in the case of Debt Securities, the specific
designation, aggregate principal amount, purchase price, maturity, rate (or
method of calculation thereof) and time of payment of interest, if any, any
conversion or exchange provisions, any redemption provisions, any subordination
provisions, and any other specific terms of the Debt Securities offered hereby
not set forth herein under the caption "Description of Debt Securities" in this
Prospectus, and any listing thereof on a securities exchange; (ii) in the case
of Common Stock, the number of shares and any initial public offering price;
(iii) in the case of Preferred Stock, the number of shares, the specific title,
the aggregate amount, any dividend (including the method of calculating payment
of dividends), seniority, liquidation, redemption, voting and other rights, any
terms for any conversion or exchange into other Securities, any listing on a
securities exchange, the initial public offering price, and any other terms; and
(iv) in the case of Warrants, the designation and number, the exercise price,
any listing of the Warrants or the underlying Securities on a securities
exchange, and any other terms in connection with the offering, sale and exercise
of the Warrants.
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the trading symbol "FD." Any Common Stock sold pursuant to a
Prospectus Supplement will be listed on the NYSE, subject to official notice of
issuance.
Any statement contained in this Prospectus will be deemed to be modified or
superseded by any inconsistent statement contained in the accompanying
Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING AT PAGE 3 HEREOF FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SECURITIES.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------
The Securities will be sold either through underwriters, dealers, or agents
or directly by the Company. The accompanying Prospectus Supplement sets forth
the names of any underwriters, dealers, or agents involved in the sale of the
Securities in respect of which this Prospectus is being delivered, the proposed
amounts, if any, to be purchased by underwriters, and the compensation, if any,
of such underwriters, dealers, or agents.
------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------
THE DATE OF THIS PROSPECTUS IS JANUARY 22, 1996.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED HEREIN OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IF UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices located at 7 World Trade Center, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Common Stock and certain other securities of the
Company are listed on the NYSE. Reports and other information concerning the
Company may also be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") filed under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement, which may
be inspected and copied at, or obtained from, the Commission or the NYSE in the
manner described above.
------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended January
28, 1995 (File No. 1-3536) (the "1994 Form 10-K"), the Company's Quarterly
Reports on Form 10-Q for the fiscal quarters ended April 29, 1995 (the "First
Quarter Form 10-Q"), July 29, 1995 (the "Second Quarter Form 10-Q"), and October
28, 1995 (the "Third Quarter Form 10-Q"), the Company's Current Reports on Form
8-K dated September 21, 1995, September 22, 1995, September 26, 1995, September
27, 1995, October 4, 1995, and October 11, 1995, and all reports and other
documents filed by the Company pursuant to Sections 13(a), 13(c), 14, and 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities pursuant hereto are incorporated
herein by reference.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified will not be deemed to
constitute a part of this Prospectus, except as so modified, and any statement
so superseded will not be deemed to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Federated Department Stores, Inc., 7 West Seventh Street, Cincinnati, Ohio
45202, Attention: Investor Relations (telephone: (513) 579-7780).
2
<PAGE>
RISK FACTORS
THE SECURITIES ARE SUBJECT TO A NUMBER OF MATERIAL RISKS, INCLUDING THOSE
ENUMERATED BELOW. INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS
ENUMERATED BELOW TOGETHER WITH ALL OF THE INFORMATION SET FORTH OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN
DETERMINING WHETHER TO PURCHASE ANY OF THE SECURITIES.
BUSINESS FACTORS AND COMPETITIVE CONDITIONS
The retailing industry is and will continue to be intensely competitive. The
Company's stores will face increasing competition not only with other department
stores in the geographic areas in which they operate, but also with numerous
other types of retail outlets, including specialty stores, general merchandise
stores, off-price and discount stores, new and established forms of home
shopping (including mail order catalogs, television, and computer services), and
manufacturer outlets.
SEASONAL NATURE OF THE DEPARTMENT STORE BUSINESS
The department store business is seasonal in nature, with a high proportion
of sales and operating income generated in November and December. Working
capital requirements fluctuate during the year, increasing somewhat in
mid-Summer in anticipation of the Fall merchandising season and increasing
substantially prior to the Christmas season as significantly higher inventory
levels are necessary.
LEVERAGE; RESTRICTIVE COVENANTS
The Company's consolidated indebtedness is and will continue to be greater
than its shareholders' equity. As of October 28, 1995, the Company had a total
of $6,884.8 million of consolidated indebtedness. Certain of the debt
instruments to which the Company is a party contain a number of restrictive
covenants and events of default, including covenants limiting capital
expenditures, incurrence of debt, and sales of assets. In addition, under
certain of its debt instruments, the Company is required to achieve certain
financial ratios, some of which become more restrictive over time, and a
substantial portion of the Company's indebtedness is secured by the capital
stock or assets of various subsidiaries of the Company or has been incurred by
the Company's subsidiaries. Among other consequences, the leverage of the
Company and such restrictive covenants and other terms of the Company's debt
instruments could impair the Company's ability to obtain additional financing in
the future, to make acquisitions, and to take advantage of significant business
opportunities that may arise. In addition, the Company's leverage may increase
its vulnerability to adverse general economic and retailing industry conditions
and to increased competitive pressures.
DIVIDEND POLICIES; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company does not anticipate that it will pay any dividends on the Common
Stock in the foreseeable future. The Company's bank credit agreement includes
covenants restricting the Company's ability to pay dividends or make certain
other distributions to stockholders. In connection with the offering of any
dividend-paying Preferred Stock hereby, the applicable Prospectus Supplement
will set forth the amount available for distribution as of the end of the most
recent fiscal period under the Company's bank credit agreement.
SECURITY INTERESTS
The capital stock of the Company's principal subsidiaries and substantially
all of the receivables and certain real estate of the Company and its
subsidiaries are subject to various security interests and liens securing
certain indebtedness of the Company and its subsidiaries. As of October 28,
1995, the Company and its subsidiaries had $5,308.5 million of secured
indebtedness. If a holder of a security interest becomes entitled to exercise
its rights as a secured party, it would have the right to foreclose upon and
sell or otherwise transfer the collateral subject to its security interest, and
the collateral would be correspondingly unavailable to the Company or the
subsidiary owning such collateral and to other creditors of the
3
<PAGE>
Company or such subsidiary, except to the extent, if any, that the value of the
affected collateral exceeds the amount of the indebtedness in respect of which
such foreclosure rights are exercised.
HOLDING COMPANY STRUCTURE
The Company is a holding company, substantially all of the operations of
which are conducted through subsidiaries. Consequently, the Company relies
principally on dividends or advances from its subsidiaries for the funds
necessary for, among other things, the payment of principal of and interest on
the Debt Securities and the other indebtedness of the Company. The ability of
such subsidiaries to pay dividends is subject to applicable state law and
certain other restrictions. Any right of the holders of the Debt Securities to
participate in the assets of any of the subsidiaries upon such subsidiary's
liquidation or recapitalization will be effectively subordinated to the claims
of such subsidiary's creditors and preferred stockholders (if any), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary. In addition to their own indebtedness, certain of the Company's
subsidiaries have guaranteed the indebtedness of the Company under its bank
credit facility.
NONCOMPARABILITY OF HISTORICAL FINANCIAL INFORMATION; CONSOLIDATION OF
BUSINESSES
The Company acquired R.H. Macy & Co., Inc. ("Macy's") on December 19, 1994
and effected other acquisitions (and dispositions) during fiscal year 1994.
Under the purchase method of accounting, the assets, liabilities, and results of
operations associated with such acquisitions have been included in the Company's
financial position and results of operations since the respective dates thereof.
Accordingly, the financial position and results of operations of the Company as
of the end of and for fiscal year 1994 and subsequent dates and periods are not
directly comparable to the financial position and results of operations of the
Company as of and for prior dates and periods. Similar effects result from the
Company's recent acquisition of Broadway Stores, Inc. ("Broadway"). For
accounting purposes, the assets, liabilities, and results of operations
associated with the Broadway acquisition are included in the Company's financial
position and results of operations following July 29, 1995. Accordingly, the
financial position and results of operations for the Company for dates and
periods subsequent to July 29, 1995 are not directly comparable to the financial
position and results of operations of the Company on and prior to that date.
For the 39 weeks ended October 28, 1995, the Company incurred $211.5 million
of non-recurring charges in connection with the consolidation of the Macy's and
Broadway's businesses with the Company's other businesses and other divisional
consolidations. The Company anticipates that it will incur additional
non-recurring charges in connection with the consolidation of Broadway's
business with the Company's other businesses, as well as the ongoing
consolidations of the Macy's business and the Company's other businesses. In
addition, the Company anticipates that a number of Broadway's stores will be
sold or otherwise disposed of. The Company has entered into a definitive
agreement to sell nine stores, has identified ten additional stores to be sold,
and has yet to make a determination with respect to certain other stores.
CERTAIN CLAIMS AGAINST THE MACY'S DEBTORS
Certain claims or portions thereof (the "Cash Payment Claims") against
Macy's and certain of its subsidiaries (collectively, the "Macy's Debtors")
which, to the extent allowed by the bankruptcy court having continuing
jurisdiction over the Macy's Debtors, will be paid in cash pursuant to the plan
of reorganization of the Macy's Debtors were disputed by the Company as of the
date of this Prospectus. The aggregate amount of disputed Cash Payment Claims
ultimately allowed may be more or less than the Company's estimate of the
aggregate allowed amount thereof. As of December 5, 1995, the aggregate face
amount of disputed Cash Payment Claims was $362.5 million, while the estimated
allowed amount thereof was $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.
4
<PAGE>
MARKET RISK; CERTAIN INVESTMENT LIMITATIONS
The Common Stock is listed for trading on the NYSE.However, the prices at
which shares of Common Stock trade may depend upon many factors, including
prevailing interest rates, markets for similar securities, industry conditions,
and the performance of, and investor expectations for, the Company. No assurance
can be given that a holder of shares of Common Stock will be able to sell such
shares at any particular price.
Certain institutional investors may invest only in dividend-paying equity
securities or may operate under other restrictions that may prohibit or limit
their ability to invest in Common Stock.
ABSENCE OF PUBLIC MARKET FOR THE DEBT SECURITIES AND PREFERRED STOCK
All Debt Securities and Preferred Stock will be a new issue of securities
with no established trading market. Any underwriters to whom Debt Securities or
Preferred Stock are sold by the Company for public offering and sale may make a
market in such Debt Securities or Preferred Stock, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of the secondary
market for any Debt Securities or Preferred Stock.
CERTAIN TAXATION MATTERS
The Company is subject to audits by taxing authorities with respect to
periods both before and after the Macy's acquisition. As of the date of this
Prospectus, the Company was a party to certain disputes with the Internal
Revenue Service (the "IRS") in which the IRS was seeking to disallow certain
deductions claimed by Federated and its predecessors. Although there can be no
assurance with respect thereto, the Company does not expect the ultimate
resolution of such disputes to have a material adverse effect on the Company's
financial position or results of operations.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION, BY-LAWS, AND
OTHER AGREEMENTS
The Company's certificate of incorporation and by-laws and certain other
agreements to which the Company is a party contain provisions that may have the
effect of delaying, deferring, or preventing a change in control of the Company.
In addition, the Company's certificate of incorporation authorizes the issuance
of up to 500.0 million shares of Common Stock and 125.0 million shares of
Preferred Stock. The Company's Board of Directors will have the power to
determine the price and terms under which any additional capital stock may be
issued and to fix the terms of such Preferred Stock, and existing stockholders
of the Company will not have preemptive rights with respect thereto.
5
<PAGE>
THE COMPANY
The Company is one of the leading operators of full-line department stores
in the United States, with 414 department stores in 33 states as of the date of
this Prospectus. As of the date of this Prospectus, the Company also operates
154 specialty stores and a mail order catalog business. The Company's department
stores sell a wide range of merchandise, including men's, women's and children's
apparel and accessories, cosmetics, home furnishings, and other consumer goods,
and are diversified by size of store, merchandising character, and character of
community served. The Company's department stores are located at urban or
suburban sites, principally in densely populated areas across the United States.
The Company has announced that it intends to explore the possibility of selling
the specialty store operations that were acquired in the Company's acquisition
of Macy's in December 1994. In addition, the Company anticipates that a number
of the stores acquired in its recent acquisition of Broadway will be disposed of
and that Broadway's retained department stores will be converted into other
nameplates of the Company commencing in 1996. The Company has entered into a
definitive agreement to sell nine stores, has identified ten additional stores
to be sold, and has yet to make a determination with respect to certain other
stores.
The Company believes that the department store business will continue to
consolidate. Accordingly, the Company intends from time to time to consider
actions to increase efficiency and provide greater value to customers and to
consider the possible acquisition of department store assets and companies.
The Company's principal executive offices are located at 151 West 34th
Street, New York, New York 10001 and 7 West Seventh Street, Cincinnati, Ohio
45202. The Company's telephone numbers at such offices are (212) 695-4400 and
(513) 579-7000, respectively.
6
<PAGE>
USE OF PROCEEDS
The principal reason for this offering is to make funds available for
general corporate purposes, which may include the repayment of indebtedness
outstanding from time to time, acquisitions, new store construction, store
expansions, and further investments in technology. Other reasons, if any, for
this offering are set forth in the accompanying Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods set forth
below has been computed on a consolidated basis and should be read in
conjunction with the Company's Consolidated Financial Statements (including the
notes thereto) set forth in the 1994 Form 10-K and the Third Quarter Form 10-Q.
As a result of the Company's emergence from reorganization proceedings and its
adoption of fresh-start reporting as of February 1, 1992, the Company's
financial information for periods ending after February 1, 1992 is generally not
comparable to financial information for periods ending on or before February 1,
1992 and is separated by a black line. As a result of the Company's acquisition
of Macy's and other transactions, the Company's results of operations for the
fiscal year ended January 28, 1995 and subsequent periods are not directly
comparable to its results of operations for prior fiscal years and its results
of operations for the 39 weeks ended October 28, 1995 are neither directly
comparable to its results of operations for prior periods nor indicative of the
results to be achieved for the full fiscal year. See "Risk Factors -- Certain
Effects of Acquisitions."
<TABLE>
<CAPTION>
39 WEEKS FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
OCTOBER 28, JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2,
1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed
charges (unaudited)(a)..................... -- 1.99x 2.33x 1.72x -- --
Consolidated deficiency of earnings to fixed
charges (in millions) (unaudited)(a)....... $ 214.3 -- -- -- $ 1,850.1(b) $ 548.8(c)
</TABLE>
- ------------------------
(a) For purposes of computing the ratio (or deficiency) of earnings to fixed
charges, earnings consist of income before income taxes and extraordinary
items plus fixed charges (excluding capitalized interest). Fixed charges
represent interest incurred, amortization of debt expense, and that portion
of rental expense on operating leases deemed to be the equivalent of
interest.
(b) Excludes interest on unsecured prepetition indebtedness of $301.6 million
and dividends on preferred stock of $47.4 million.
(c) Excludes interest on unsecured prepetition indebtedness of $291.0 million
and dividends on preferred stock of $47.4 million.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be issued under an Indenture, dated as of December
15, 1994 (the "Indenture"), which is incorporated by reference as an exhibit to
the Registration Statement, between the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"). The statements under this caption are brief
summaries of the material provisions of the Indenture, do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indenture. Except as otherwise defined herein,
capitalized terms used herein have the meanings given to them in the Indenture.
The Indenture does not limit the aggregate amount of Debt Securities which
may be issued thereunder. The Debt Securities may be issued from time to time in
one or more series. Reference is made to the accompanying Prospectus Supplement
for the following terms and other information with respect to the Debt
Securities being offered hereby: (i) the title of such Debt Securities; (ii) any
limit on the aggregate principal amount of such Debt Securities; (iii) the
persons to whom any interest on such Debt Securities will be payable, if other
than the registered holders thereof on the Regular Record Date therefor; (iv)
the date or dates (or manner of determining the same) on which the principal of
such Debt Securities will be payable; (v) the rate or rates (or manner of
determining the same) at which such Debt Securities will bear interest, if any,
and the date or dates from which such interest will accrue; (vi) the dates (or
manner of determining the same) on which such interest will be payable and the
Regular Record Dates for such Interest Payment Dates; (vii) the place or places
where the principal of and any premium and interest on such Debt Securities will
be payable; (viii) the period or periods, if any, within which, and the price or
prices at which, such Debt Securities may be redeemed, in whole or in part, at
the option of the Company; (ix) any mandatory or optional sinking fund or
analogous provisions; (x) the denominations in which any Debt Securities will be
issuable if other than denominations of $1,000 and any integral multiple
thereof; (xi) the currency or currencies or currency units, if other than
currency of the United States of America, in which payment of the principal of
and any premium or interest on such Debt Securities will be payable, and the
terms and conditions of any elections that may be made available with respect
thereto; (xii) any index or formula used to determine the amount of payments of
principal of and any premium or interest on such Debt Securities; (xiii) whether
the Debt Securities are to be issued in whole or in part in the form of one or
more global securities ("Global Securities"), and, if so, the identity of the
depositary, if any, for such Global Security or Securities; (xiv) the terms and
conditions, if any, pursuant to which such Debt Securities are convertible into
or exchangeable for Common Stock or other securities of the Company or other
issuers (provided, however, that any such securities issuable upon conversion or
exchange of Debt Securities will be subject to registration under the Securities
Act or an applicable exemption therefrom); (xv) the applicability of the
provisions described in "--Defeasance"; (xvi) any subordination provisions
applicable to such Debt Securities; and (xvii) any other terms of the Debt
Securities.
Debt Securities may be issued at a discount from their stated principal
amount. Certain federal income tax considerations and other special
considerations applicable to any Debt Security issued with original issue
discount (an "Original Issue Discount Security") may be described in an
applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms, and
other information with respect to such issue of Debt Securities and such foreign
currency or currencies or foreign currency unit or units will be set forth in an
applicable Prospectus Supplement.
Unless otherwise indicated in an applicable Prospectus Supplement, (i) the
Debt Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof and (ii) payment of principal, premium (if
any), and interest on the Debt Securities will be payable, and the
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<PAGE>
exchange, conversion, and transfer of Debt Securities will be registerable, at
the office or agency of the Company maintained for such purposes and at any
other office or agency maintained for such purpose. No service charge will be
made for any registration of transfer or exchange of the Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (a "Depositary") or its nominee identified in an applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of Debt Securities of the series to be represented by
such Global Security or Securities. Unless and until it is exchanged in whole or
in part for Debt Securities in registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any nominee to a successor Depositary or a nominee of such
successor Depositary and except in any other circumstances described in an
applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in an applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such depositary or its nominee
("Participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Securities will be limited to Participants or Persons
that may hold interests through Participants. Ownership of beneficial interests
by Participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through Participants will
be shown on, and the transfer of that ownership interest within such Participant
will be effected only through, records maintained by such Participants. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in an applicable Prospectus Supplement,
owners of beneficial interests in such Global Securities will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form, and will not be
considered the owners or Holders thereof for any purpose under the Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
Participant, on the procedures of the Participant through which such Person owns
its interest, to exercise any rights of a Holder under the Indenture. The
Company understands that, under existing industry practices, if the Company
requests any action of Holders or an owner of a beneficial interest in such
Global Security desires to give any notice or take any action a Holder is
entitled to give or take under Indenture, the Depositary would authorize the
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<PAGE>
Participants to give such notice or take such action, and Participants would
authorize beneficial owners owning through such Participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in an applicable Prospectus Supplement. Payment
of principal of, and any premium or interest on, Debt Securities registered in
the name of or held by a Depository or its nominee will be made to the
Depository or its nominee, as the case may be, as the registered owner or the
holder of the Global Security representing such Debt Securities. None of the
Company, the Trustee, any Paying Agent, or the Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Debt Securities or for maintaining,
supervising, or reviewing any records relating to such beneficial ownership
interests.
CERTAIN COVENANTS
MAINTENANCE OF OFFICE OR AGENCY. The Company will be required to maintain
an office or agency in each place of payment for each series of Debt Securities
for notice and demand purposes and for the purposes of presenting or
surrendering Debt Securities for payment, registration of transfer, or exchange.
PAYING AGENTS, ETC. If the Company acts as its own paying agent with
respect to any series of Debt Securities , on or before each due date of the
principal of, or interest on any of the Debt Securities of that series, it will
be required to segregate and hold in trust for the benefit of the persons
entitled thereto a sum sufficient to pay such amount due and to notify the
Trustee promptly of its action or failure so to act. If the Company has one or
more paying agents for any series of Debt Securities, prior to each due date of
the principal of or interest on any Debt Securities of that series, it will
deposit with a paying agent a sum sufficient to pay such amount, and the Company
will promptly notify the Trustee of its action or failure so to act (unless such
paying agent is the Trustee). All moneys paid by the Company to a paying agent
for the payment of principal of and interest on any Debt Securities that remain
unclaimed for two years after such principal or interest has become due and
payable may be repaid to the Company, and thereafter the holder of such Debt
Securities may look only to the Company for payment thereof.
PAYMENT OF TAXES AND OTHER CLAIMS. The Company will be required to pay and
discharge, before the same become delinquent, (i) all taxes, assessments, and
governmental charges levied or imposed upon the Company or any Subsidiary of the
Company or their properties and (ii) all claims that if unpaid would result in a
lien on their property and have a material adverse effect on the business,
assets, financial condition, or results of operations of the Company and its
Subsidiaries, taken as a whole (a "Material Adverse Effect"), unless the same is
being contested by proper proceedings.
MAINTENANCE OF PROPERTIES. The Company will be required to cause all
properties used in the business of the Company or any Subsidiary of the Company
to be maintained and kept in good condition, repair, and working order, except
to the extent that the failure to do so would not have a Material Adverse
Effect.
EXISTENCE. The Company will be required to, and also will be required to
cause its Subsidiaries to, preserve and keep in full force their existence,
charter rights, statutory rights, and franchises, except to the extent that
failure to do so would not have a Material Adverse Effect.
COMPLIANCE WITH LAWS. The Company will be required to and to cause its
Subsidiaries to comply with all applicable laws to the extent the failure to do
so would have a Material Adverse Effect.
RESTRICTIVE COVENANTS. Any restrictive covenants applicable to any series
of Debt Securities will be described in an applicable Prospectus Supplement.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (i) default in the payment of the principal of (or
premium, if any, on) any Debt Security of that series when
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<PAGE>
it becomes due and payable; (ii) default in the payment of any interest on any
Debt Security of that series when it becomes due and payable, and continuance of
such default for a period of 30 calendar days; (iii) default in the making of
any sinking fund payment as and when due by the terms of any Debt Security of
that series; (iv) default in the performance, or breach, of any other covenant
or warranty of the Company in the Indenture (other than a covenant included in
the Indenture solely for the benefit of a series of Debt Securities other than
that series) and continuance of such default for a period of 60 calendar days
after written notice thereof has been given to the Company as provided in the
Indenture; (v) any nonpayment at maturity or other default (beyond any
applicable grace period) under any agreement or instrument relating to any other
indebtedness of the Company the principal amount of which is not less than $100
million, which default results in such indebtedness becoming due prior to its
stated maturity or occurs at the final maturity thereof; (vi) certain events of
bankruptcy, insolvency, or reorganization involving the Company; and (vii) any
other Event of Default provided with respect to Debt Securities of that series.
Pursuant to the Trust Indenture Act, the Trustee is required, within 90 calendar
days after the occurrence of a default in respect of any series of Debt
Securities, to give to the Holders of the Debt Securities of such series notice
of all such uncured defaults known to it (except that, in the case of a default
in the performance of any covenant of the character contemplated in clause (iv)
of the preceding sentence, no such notice to Holders of the Debt Securities of
such series will be given until at least 30 calendar days after the occurrence
thereof), except that, other than in the case of a default of the character
contemplated in clause (i), (ii), or (iii) of the preceding sentence, the
Trustee may withhold such notice if and so long as it in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Debt Securities of such series.
If an Event of Default with respect to Debt Securities occurs and is
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the Debt Securities of that series by notice as provided in the
Indenture may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all Debt Securities
of that series to be due and payable immediately. However, at any time after a
declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on such acceleration has been
obtained, the Holders of a majority in principal amount of the Debt Securities
of that series may, under certain circumstances, rescind and annul such
acceleration. See "--Modification and Waiver" below. If an Event of Default
under clause (vi) of the immediately preceding paragraph occurs, then the
principal of, premium on, if any, and accrued interest on the Debt Securities of
that series will become immediately due and payable without any declaration or
other act on the part of the Trustee of any holder of the Debt Securities of
that series.
The Indenture provides that, subject to the duty of the Trustee thereunder
during an Event of Default to act with the required standard of care, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable security or indemnity.
Subject to certain provisions, including those requiring security or
indemnification of the Trustee, the Holders of a majority in principal amount of
the Debt Securities of any series will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Debt Securities of that series.
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless the Holders of at least 25% in aggregate
principal amount of the outstanding Debt Securities of the same series have also
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee has received from the
Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of the same series a direction inconsistent with such request and has
failed to institute such proceeding within 60 calendar days. However, such
limitations do not apply to a suit instituted by a Holder of a Debt Security for
enforcement of payment of the principal of and interest on such Debt Security on
or after the respective due dates expressed in such Debt Security.
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<PAGE>
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of its obligations under the Indenture and as to
any default in such performance.
Any additional Events of Default with respect to any series of Debt
Securities, and any variations from the foregoing Events of Default applicable
to any series of Debt Securities, will be described in an applicable Prospectus
Supplement.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series affected
thereby, except that no such modification or amendment may, without the consent
of the Holder of each Debt Security affected thereby, (i) change the Stated
Maturity of, or any installment of principal of, or interest on, any Debt
Security; (ii) reduce the principal amount of, the rate of interest on, or the
premium, if any, payable upon the redemption of, any Debt Security; (iii) reduce
the amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof; (iv) change the place or currency of
payment of principal of, or premium, if any, or interest on any Debt Security;
(v) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security on or after the Stated Maturity or Prepayment
Date thereof; or (vi) reduce the percentage in principal amount of Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
The Holders of at least a majority in aggregate principal amount of the Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive, insofar as that series is concerned, compliance by the
Company with certain covenants of the Indenture. The Holders of not less than a
majority in principal amount of the Debt Securities of any series may, on behalf
of the Holders of all Debt Securities of that series, waive any past default
under the Indenture with respect to that series, except a default in the payment
of the principal of, or premium, if any, or interest on, any Debt Security of
that series or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the Holder of each Debt Security of
that series affected thereby.
DEFEASANCE
Unless otherwise specified in a Prospectus Supplement applicable to a
particular series of Debt Securities, the Company, at its option, (i) will be
deemed to have been discharged from its obligations with respect to the Debt
Securities of such series (except for certain obligations, including obligations
to register the transfer or exchange of Debt Securities of such series, to
replace destroyed, stolen, lost, or mutilated Debt Securities of such series,
and to maintain an office or agency in respect of the Debt Securities and hold
moneys for payment in trust) or (ii) will be released from its obligations to
comply with the covenants that are under "Certain Covenants" above with respect
to the Debt Securities of such series, and the occurrence of an event described
in clause (iv) under "Events of Default" above with respect to any defeased
covenant and clauses (iii), (v), and (vii) of the "Events of Default" above will
no longer be an Event of Default if, in either case, the Company irrevocably
deposits with the Trustee, in trust, money or direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged or obligations of an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable at the issuer's
option ("U.S. Government Obligations") or certain depositary receipts therefor
that through the payment of interest thereon and principal thereof in accordance
with their terms will provide money in an amount sufficient to pay all the
principal of (and premium, if any) and any interest on the Debt Securities of
such series on the dates such payments are due in accordance with the terms of
such Debt Securities. Such defeasance may be effected only if, among other
things, (a) no Event of Default or event which with the giving of notice or
lapse or time, or both, would become an Event of Default under the Indenture
shall have occurred and be continuing on the date of such deposit, (b) no Event
of Default described under clause (vi) under "--
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Events of Default" above or event that with the giving of notice or lapse of
time, or both, would become an Event of Default described under such clause (vi)
shall have occurred and be continuing at any time on or prior to the 90th
calendar day following such date of deposit, (c) in the event of defeasance
under clause (i) above, the Company has delivered an Opinion of Counsel, stating
that (1) the Company has received from, or there has been published by, the IRS
a ruling or (2) since the date of the Indenture there has been a change in
applicable federal law, in either case to the effect that, among other things,
the holders of the Debt Securities of such series will not recognize gain or
loss for United States federal income tax purposes as a result of such deposit
or defeasance and will be subject to United States federal income tax in the
same manner as if such defeasance had not occurred, and (d) in the event of
defeasance under clause (ii) above, the Company has delivered an Opinion of
Counsel to the effect that, among other things, the Holders of the Debt
Securities of such series will not recognize gain or loss for United States
federal income tax purposes as a result of such deposit or defeasance and will
be subject to United States federal income tax in the same manner as if such
defeasance had not occurred. In the event the Company fails to comply with its
remaining obligations under the applicable Indenture after a defeasance of such
Indenture with respect to the Debt Securities of any series as described under
clause (ii) above and the Debt Securities of such series are declared due and
payable because of the occurrence of any undefeased Event of Default, the amount
of money and U.S. Government Obligations on deposit with the Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments.
SATISFACTION AND DISCHARGE
The Company, at its option, may satisfy and discharge the Indenture (except
for certain obligations of the Company and the Trustee, including, among others,
the obligations to apply money held in trust) when (i) either (a) all Debt
Securities previously authenticated and delivered (other than (1) Debt
Securities that were destroyed, lost, or stolen and that have been replaced or
paid and (2) Debt Securities for the payment of which money has been deposited
in trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all such Debt Securities not theretofore delivered to
the Trustee for cancellation (1) have become due and payable, (2) will become
due and payable at their Stated Maturity within one year, or (3) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name and at
the expense of the Company, and the Company has deposited or caused to be
deposited with the Trustee as trust funds in trust for such purpose an amount
sufficient to pay and discharge the entire indebtedness on such Debt Securities
not previously delivered to the Trustee for cancellation, for principal and any
premium and interest to the date of such deposit (in the case of Debt Securities
which have become due and payable) or to the stated maturity or redemption date,
as the case may be, (ii) the Company has paid or caused to be paid all other
sums payable under the Indenture by the Company, and (iii) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each to the effect that all conditions precedent relating to the satisfaction
and discharge of the Indenture have been satisfied.
LIMITATIONS ON MERGER AND CERTAIN OTHER TRANSACTIONS
Prior to the satisfaction and discharge of the Indenture, the Company may
not consolidate with or merge with or into any other person, or transfer all or
substantially all of its properties and assets to another person unless (i)
either (a) the Company is the continuing or surviving person in such a
consolidation or merger or (b) the person (if other than the Company) formed by
such consolidation or into which the Company is merged or to which all or
substantially all of the properties and assets of the Company are transferred
(the Company or such other person being referred to as the "Surviving Person")
is a corporation organized and validly existing under the laws of the United
States, any state thereof, or the District of Columbia, and expressly assumes,
by an indenture supplement, all the obligations of the Company under the Debt
Securities and the Indenture, (ii) immediately after the transaction and the
incurrence or anticipated incurrence of any indebtedness to be incurred in
connection therewith, no Event
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of Default exists, and (iii) an officer's certificate is delivered to the
Trustee to the effect that the conditions set forth in the preceding clauses (i)
and (ii) have been satisfied and an opinion of counsel has been delivered to the
Trustee to the effect that the conditions set forth in the preceding clause (i)
have been satisfied. The Surviving Person will succeed to and be substituted for
the Company with the same effect as if it has been named in the Indenture as a
party thereto, and thereafter the predecessor corporation will be relieved of
all obligations and covenants under the Indenture and the Debt Securities.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company within three months of, or subsequent
to, a default by the Company to make payment in full of principal of or interest
on any series of Debt Securities when and as the same becomes due and payable,
to obtain payment of claims, or to realize for its own account on property
received in respect of any such claim as security or otherwise, unless and until
such default is cured. However, the Trustee's rights as a creditor of the
Company will not be limited if the creditor relationship arises from, among
other things, the ownership or acquisition of securities issued under any
indenture or having a maturity of one year or more at the time of acquisition by
the Trustee; certain advances authorized by a receivership or bankruptcy court
of competent jurisdiction or by the Indenture; disbursements made in the
ordinary course of business in its capacity as indenture trustee, transfer
agent, registrar, custodian, or paying agent or in any other similar capacity;
indebtedness created as a result of goods or securities sold in a cash
transaction or services rendered or premises rented; or the acquisition,
ownership, acceptance, or negotiation of certain drafts, bills of exchange,
acceptances, or other obligations. The Indenture does not prohibit the Trustee
from serving as trustee under any other indenture to which the Company may be a
party from time to time or from engaging in other transactions with the Company.
If the Trustee acquires any conflicting interest and there is an Event of
Default with respect to any series of Debt Securities, it must eliminate such
conflict or resign.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's Certificate of Incorporation provides that the authorized
capital stock of the Company consists of 500 million shares of Common Stock and
125 million shares of Preferred Stock.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Subject to
preferential rights that may be applicable to any Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors of the Company out of funds legally available
therefor. In the event of a liquidation, dissolution, or winding up of the
Company, holders of Common Stock will be entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
Preferred Stock. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities, and there are no
redemption provisions with respect to such shares. The Common Stock is listed on
the NYSE. The transfer agent and registrar for the Common Stock is The Bank of
New York.
PREFERRED STOCK
The Board of Directors of the Company has the authority to issue 125 million
shares of Preferred Stock in one or more series and to fix the designations,
relative powers, preferences, limitations, and restrictions of all shares of
each such series, including without limitation dividend rates, conversion
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, and the number of shares constituting each such series, without any
further vote or action by the stockholders. The issuance of the Preferred Stock
could decrease the amount of earnings and assets available for distribution to
holders of Common Stock or adversely affect the rights and powers, including
voting rights, of the holders of Common Stock. The issuance of the Preferred
Stock could have the effect of delaying, deferring, or preventing a change in
control of the Company without further action by the stockholders.
The Board of Directors of the Company has not taken any action to designate
or issue any series of Preferred Stock, other than the Series A Junior
Participating Preferred Stock described below. The terms of any Preferred Stock
offered and the applicable Certificate of Designation, as well as the transfer
agent and registrar therefor, will be set forth in the applicable Prospectus
Supplement.
PREFERRED SHARE PURCHASE RIGHTS
Each outstanding share of Common Stock issued is accompanied by one right (a
"Right") issued pursuant to a share purchase rights agreement between the
Company and The Bank of New York, as rights agent (the "Share Purchase Rights
Agreement"). Each Right entitles the registered holder thereof to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $0.01 per share (the "Series A Preferred Shares"), of
the Company at a price (the "Purchase Price") of $62.50 per one one-hundredth of
a Series A Preferred Share, subject to adjustment.
Until the earliest to occur of the following dates (the earliest of such
dates being hereinafter called the "Rights Distribution Date"), the Rights will
be evidenced by the certificates evidencing shares of Common Stock: (i) the
close of business on the tenth business day (or such later date as may be
specified by the Board of Directors of the Company) following the first date of
public announcement by the Company that a person (other than the Company or a
subsidiary or employee benefit or stock ownership plan of the Company), together
with its affiliates and associates, has acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding Common Stock
(any such person being hereinafter called an "Acquiring Person"), (ii) the close
of business on the tenth business day (or such later date as may be specified by
the Board of Directors of the Company) following the commencement of a tender
offer or exchange offer by a person (other than the Company or a subsidiary or
employee benefit or stock ownership plan of the Company), the consummation of
which would result in beneficial ownership by such
15
<PAGE>
person of 20% or more of the outstanding Common Stock, and (iii) the close of
business on the tenth business day following the first date of public
announcement by the Company that a Flip-in Event or a Flip-over Event (as such
terms are hereinafter defined) has occurred.
The Share Purchase Rights Agreement provides that, until the Rights
Distribution Date, the Rights may be transferred with and only with the Common
Stock. Until the Rights Distribution Date (or earlier redemption or expiration
of the Rights), any certificate evidencing shares of Common Stock issued upon
transfer or new issuance of Common Stock will contain a notation incorporating
the Share Purchase Rights Agreement by reference. Until the Rights Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates evidencing Common Stock will also constitute the
transfer of the Rights associated with such certificates. As soon as practicable
following the Rights Distribution Date, separate certificates evidencing the
Rights ("Rights Certificates") will be mailed to holders of record of Common
Stock as of the close of business on the Rights Distribution Date and such
separate Rights Certificates alone will evidence the Rights. No Right is
exercisable at any time prior to the Rights Distribution Date. The Rights will
expire on December 19, 2004 (the "Final Expiration Date") unless earlier
redeemed or exchanged by the Company as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a stockholder of
the Company, including without limitation the right to vote or to receive
dividends.
The Purchase Price payable, and the number of Series A Preferred Shares or
other securities issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination, or reclassification of, the Series A Preferred
Shares, (ii) upon the grant to holders of the Series A Preferred Shares of
certain rights or warrants to subscribe for or purchase Series A Preferred
Shares at a price, or securities convertible into Series A Preferred Shares with
a conversion price, less than the then-current market price of the Series A
Preferred Shares, or (iii) upon the distribution to holders of the Series A
Preferred Shares of evidences of indebtedness or cash (excluding regular
periodic cash dividends), assets, or stock (excluding dividends payable in
Series A Preferred Shares) or of subscription rights or warrants (other than
those referred to above). The number of outstanding Rights and the number of one
one-hundredths of a Series A Preferred Share issuable upon exercise of each
Right also is subject to adjustment in the event of a stock dividend on the
Common Stock payable in shares of Common Stock or a subdivision, combination, or
reclassification of the Common Stock occurring, in any such case, prior to the
Rights Distribution Date.
The Series A Preferred Shares issuable upon exercise of the Rights will not
be redeemable. Each Series A Preferred Share will be entitled to a minimum
preferential quarterly dividend payment equal to the greater of (i) $1.00 per
share and (ii) an amount equal to 100 times the aggregate dividends declared per
share of Common Stock during the related quarter. In the event of liquidation,
the holders of the Series A Preferred Shares will be entitled to a preferential
liquidation payment equal to the greater of (a) $100 per share and (b) an amount
equal to 100 times the liquidation payment made per share of Common Stock. Each
Series A Preferred Share will have 100 votes, voting together with the Common
Stock. In the event of any merger, consolidation, or other transaction in which
shares of Common Stock are exchanged, each Series A Preferred Share will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights will be protected by customary antidilution provisions. Because of
the nature of the Series A Preferred Shares' dividend, voting and liquidation
rights, the value of the one one-hundredth interest in a Series A Preferred
Share purchasable upon exercise of each Right should approximate the value of
one share of Common Stock.
Rights may be exercised to purchase Series A Preferred Shares only after the
Rights Distribution Date occurs and prior to the occurrence of a Flip-in Event
or Flip-over Event. A Rights Distribution Date resulting from the commencement
of a tender offer or exchange offer described in clause (ii) of the definition
of "Rights Distribution Date" could precede the occurrence of a Flip-in Event or
Flip-over Event and thus result in the Rights being exercisable to purchase
Series A Preferred Shares. A Rights Distribution Date resulting from any
occurrence described in clause (i) or clause (iii) of the definition of "Rights
Distribution Date" would necessarily follow the occurrence of a Flip-in Event or
Flip-over Event
16
<PAGE>
and thus result in the Rights being exercisable to purchase shares of Common
Stock or other securities as described below.
In the event (a "Flip-in Event") that (i) any person, together with its
affiliates and associates, becomes the beneficial owner of 20% or more of the
outstanding Common Stock, (ii) any Acquiring Person merges into or combines with
the Company and the Company is the surviving corporation or any Acquiring Person
effects certain other transactions with the Company, as described in the Share
Purchase Rights Agreement, or (iii) during such time as there is an Acquiring
Person, there is any reclassification of securities or recapitalization or
reorganization of the Company which has the effect of increasing by more than 1%
the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its subsidiaries beneficially owned by the
Acquiring Person, proper provision will be made so that each holder of a Right,
other than Rights that are or were owned beneficially by the Acquiring Person
(which, from and after the later of the Rights Distribution Date and the date of
the earliest of any such events, will be void), will thereafter have the right
to receive upon exercise thereof at the then-current exercise price of the
Right, that number of shares of Common Stock (or, under certain circumstances,
an economically equivalent security or securities of the Company) that have a
market value of two times the exercise price of the Right.
In the event (a "Flip-over Event") that, following the first date of public
announcement by the Company that a person has become an Acquiring Person, (i)
the Company merges with or into any person and the Company is not the surviving
corporation, (ii) any person merges with or into the Company and the Company is
the surviving corporation, but all or part of the Common Stock is changed or
exchanged, or (iii) 50% or more of the company's assets or earning power,
including without limitation securities creating obligations of the Company, are
sold, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
(or, under certain circumstances, an economically equivalent security or
securities) of such other person which at the time of such transaction would
have a market value of two times the exercise price of the Right.
Following the occurrence of any Flip-in Event or Flip-over Event, Rights
(other than any Rights which have become void) may be exercised as described
above, upon payment of the exercise price or, at the option of the holder
thereof, without the payment of the exercise price that would otherwise be
payable. If a holder of Rights elects to exercise Rights without the payment of
the exercise price that would otherwise be payable, such holder will be entitled
to receive upon the exercise of such Rights securities having a market value
equal to the exercise price of the Rights. In addition, at any time after the
later of the Rights Distribution Date and the first occurrence of a Flip-in
Event or a Flip-over Event and prior to the acquisition by any person or group
of affiliated or associated persons of 50% or more of the outstanding Common
Stock, the Company may exchange the Rights (other than any Rights which have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock per Right (subject to adjustment).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company is not required to issue fractional Series A
Preferred Shares (other than fractions that are integral multiples of one one-
hundredth of a Series A Preferred Share, which may, at the option of the
Company, be evidenced by depositary receipts) or fractional shares of Common
Stock or other securities issuable upon the exercise of Rights. In lieu of
issuing such securities, the Company may make a cash payment, as provided in the
Share Purchase Rights Agreement.
The Company may redeem the Rights in whole, but not in part, at a price of
$0.03 per Right, subject to adjustment and, in the event that the payment of
such amount would be prohibited by loan agreements or indentures to which the
Company is a party, deferral (the "Redemption Price"), at any time prior to the
close of business on the later of (i) the Rights Distribution Date and (ii) the
first date of public announcement that a person has become an Acquiring Person.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the holders will have only the right to receive the
Redemption Price.
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<PAGE>
The Share Purchase Rights Agreement may be amended by the Company without
the approval of any holders of Rights, including amendments which add other
events requiring adjustment to the Purchase Price payable and the number of
Series A Preferred Shares or other securities issuable upon the exercise of the
Rights which modify procedures relating to the redemption of the Rights,
provided that no amendment may be made which decreases the stated Redemption
Price to an amount less than $0.01 per Right, decreases the period of time
remaining until the Final Expiration Date, or modifies a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable.
CERTAIN CORPORATE GOVERNANCE MATTERS
The Company's Certificate of Incorporation and By-Laws provide that the
directors of the Company are to be classified into three classes, with the
directors in each class serving for three-year terms and until their successors
are elected. Any additional person elected to the Board of Directors of the
Company will be added to a particular class of directors to be determined at the
time of such election, although in accordance with the Company's Certificate of
Incorporation and By-Laws, the number of directors in each class will be
identical or as nearly as practicable thereto based on the total number of
directors then serving as such.
The Company's By-Laws provide that nominations for election of directors by
the stockholders will be made by the Board of Directors of the Company or by any
stockholder entitled to vote in the election of directors generally. The
Company's By-Laws require that stockholders intending to nominate candidates for
election as directors deliver written notice thereof to the Secretary of the
Company not later than 60 calendar days in advance of the meeting of
stockholders; provided, however, that in the event that the date of the meeting
is not publicly announced by the Company by inclusion in a report filed with the
Commission or furnished to stockholders, or by mail, press release, or otherwise
more than 75 calendar days prior to the meeting, notice by the stockholder to be
timely must be delivered to the Secretary of the Company not later than the
close of business on the tenth day following the date on which such announcement
of the date of the meeting was so communicated. The Company's By-Laws further
require that the notice by the stockholder set forth certain information
concerning such stockholder and the stockholder's nominees, including their
names and addresses, a representation that the stockholder is entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, a description of all
arrangements or understandings between the stockholders and each nominee, such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of the nominees of such stockholder, and the
consent of each nominee to serve as a director of the Company if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with these requirements.
In addition to the provisions relating to the classification of the Board of
Directors and the director nomination procedures described above, the Company's
Certificate of Incorporation and By-Laws provide, in general, that (i) the
number of directors of the Company will be fixed, within a specified range, by a
majority of the total number of the Company's directors (assuming no vacancies)
or by the holders of at least 80% of the Company's voting stock, (ii) the
directors of the Company in office from time to time will fill any vacancy or
newly created directorship on the Board of Directors of the Company with any new
director to serve in the class of directors to which he or she is so elected,
(iii) directors of the Company may be removed only for cause by the holders of
at least 80% of the Company's voting stock, (iv) stockholder action can be taken
only at an annual or special meeting of stockholders and not by written consent
in lieu of a meeting, (v) except as described below, special meetings of
stockholders may be called only by the Company's Chief Executive Officer or by a
majority of the total number of directors of the Company (assuming no vacancies)
and the business permitted to be conducted at any such meeting is limited to
that brought before the meeting by the Company's Chief Executive Officer or by a
majority of the total number of directors of the Company (assuming no
vacancies), and (vi) subject to certain exceptions, the Board of Directors of
the Company may postpone and reschedule any previously scheduled annual or
special meeting of stockholders. The Company's By-Laws also require that
stockholders desiring to bring any business before an annual meeting of
stockholders deliver written notice thereof to the
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<PAGE>
Secretary of the Company not later than 60 calendar days in advance of the
meeting of stockholders; provided, however, that in the event that the date of
the meeting is not publicly announced by the Company by press release or
inclusion in a report filed with the Commission or furnished to stockholders
more than 75 calendar days prior to the meeting, notice by the stockholders to
be timely must be delivered to the Secretary of the Company not later than the
close of business on the tenth calendar day following the day on which such
announcement of the date of the meeting was so communicated. The Company's
By-Laws further require that the notice by the stockholder set forth a
description of the business to be brought before the meeting and the reasons for
conducting such business at the meeting and certain information concerning the
stockholder proposing such business and the beneficial owner, if any, on whose
behalf the proposal is made including their names and addresses, the class and
number of shares of the Company, that are owned beneficially and of record by
each of them, and any material interest of either of them in the business
proposed to be brought before the meeting. Upon the written request of the
holders of not less than 15% of the Company's voting stock, the Board of
Directors of the Company will be required to call a meeting of stockholders for
the purpose specified in such written request and fix a record date for the
determination of stockholders entitled to notice of and to vote at such meeting
(which record date may not be later than 60 calendar days after the date of
receipt of notice of such meeting), provided that in the event that the Board of
Directors of the Company calls an annual or special meeting of stockholders to
be held not later than 90 calendar days after receipt of any such written
request, no separate special meeting of stockholders as so requested will be
required to be convened provided that the purposes of such annual or special
meeting called by the Board of Directors of the Company include (among others)
the purposes specified in such written request of the stockholders.
Under applicable provisions of Delaware law, the approval of a Delaware
company's board of directors, in addition to stockholder approval, is required
to adopt any amendment to the company's certificate of incorporation, but a
company's by-laws may be amended either by action of its stockholders or, if the
company's certificate of incorporation so provides, its board of directors. The
Company's Certificate of Incorporation and By-Laws provide that (i) except as
described below, the provisions summarized above and the provisions relating to
the classification of the Company's Board of Directors and nominating procedures
may not be amended by the stockholders, nor may any provision inconsistent
therewith be adopted by the stockholders, without the affirmative vote of the
holders of at least 80% of the Company's voting stock, voting together as single
class, except that if any such action (other than any direct or indirect
amendments to the provision requiring that stockholder action be taken at a
meeting of stockholders rather than by written consent in lieu of a meeting) is
approved by the holders of a majority, but less than 80%, of the
then-outstanding voting stock (in addition to any other approvals require by
law, including approval by the Board of Directors of the Company with respect to
any amendment to the Company's Certificate of Incorporation), such action will
be effective as of one year from the date of adoption, or (ii) the Company's
By-Law provisions relating to the right of stockholders to cause special
meetings of stockholders to be called and to the composition of certain
directorate committees may not be amended by the Company's Board of Directors
without stockholder approval.
The Company is subject to Section 203 of the General Corporation Law of the
State of Delaware (the "DGCL"), which restricts the consummation of certain
business combination transactions in certain circumstances. In addition, the
Company's certificate of incorporation contains provisions that are
substantially similar to those contained in Section 203 of the DGCL that
restrict business combination transactions with (i) any person or group that
became or is deemed to have become the beneficial owner of 15% or more of the
voting stock of the Company as a result of its receipt of Common Stock or
warrants pursuant to Macy's plan of reorganization that thereafter becomes the
beneficial owner of an additional 1% or more of the voting stock of the Company
and (ii) any other person or group that becomes the beneficial owner of 15% more
of the voting stock of the Company.
The foregoing provisions of the Company's Certificate of Incorporation, the
provisions of its By-Laws relating to advance notice of stockholder nominations,
and the provisions of the Share Purchase Rights Agreement (see "--Preferred
Share Purchase Rights") may discourage or make more difficult the acquisition of
control of the Company by means of a tender offer, open market purchase, proxy
contest, or
19
<PAGE>
otherwise. These provisions are intended to discourage or may have the effect of
discouraging certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the Company
first to negotiate with the Company. The Company's management believes that the
foregoing measures, many of which are substantially similar to the
takeover-related measures in effect for many other publicly held companies,
provide benefits by enhancing the Company's potential ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to take over or
restructure the Company that outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities, Common
Stock, Preferred Stock, Depositary Shares, or any combination thereof. Warrants
may be issued independently, together with any other Securities offered by a
Prospectus Supplement, and may be attached to or separate from such Securities.
Warrants may be issued under warrant agreements (each, a "Warrant Agreement") to
be entered into between the Company and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of a
particular series and will not assume any obligation or relationship of agency
or trust for or with any holders or beneficial owners of Warrants. The following
sets forth certain general terms and provisions of the Warrants offered hereby.
Further terms of the Warrants and the applicable Warrant Agreement will be set
forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Warrants
in respect of which this Prospectus is being delivered, including, where
applicable, the following: (i) the title of such Warrants; (ii) the aggregate
number of such Warrants; (iii) the price or prices at which such Warrants will
be issued; (iv) the designation, number and terms of the Debt Securities, Common
Stock, Preferred Stock, Depositary Shares, or combination thereof, purchasable
upon exercise of such Warrants; (v) the designation and terms of the other
Securities, if any, with which such Warrants are issued and the number of such
Warrants issued with each such Security; (vi) the date, if any, on and after
which such Warrants and the related underlying Securities will be separately
transferable; (vii) the price at which each underlying Security purchasable upon
exercise of such Warrants may be purchased; (viii) the date on which the right
to exercise such Warrants shall commence and the date on which such right shall
expire; (ix) the minimum amount of such Warrants which may be exercised at any
one time; (x) information with respect to book-entry procedures, if any; (xi) a
discussion of any applicable federal income tax considerations; and (xii) any
other terms of such Warrants, including terms, procedures and limitations
relating to the transferability, exchange and exercise of such Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any one or more of the following
ways: (i) through one or more underwriters, (ii) through one or more dealers or
agents (which may include one or more underwriters), or (iii) directly to one or
more purchasers.
The distribution of the Securities may be effected from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. In
connection with the sale of the Securities, underwriters, dealers, and agents
may receive compensation from the Company or from purchasers of the Securities
in the form of discounts, concessions, or commissions. Underwriters, dealers,
and agents who participate in the distribution of the Securities may be deemed
to be underwriters, and any discounts or commissions received by them from the
Company and any profit on the resale of Securities by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Any such
underwriter, dealer, or agent will be identified and any such compensation
received from the Company will be described in an applicable Prospectus
Supplement. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
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<PAGE>
Under agreements which may be entered into by the Company, underwriters,
dealers, and agents who participate in the distribution of the Securities may be
entitled to indemnification by the Company against certain liabilities,
including under the Securities Act, or contribution from the Company to payments
which the underwriters, dealers, or agents may be required to make in respect
thereof. The underwriters, dealers, and agents may engage in transactions with,
or perform services for, the Company in the ordinary course of business.
All Securities will be a new issue of securities with no established trading
market, other than the Common Stock, which is listed on the NYSE. Any Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. Any underwriters to whom Securities are
sold by the Company for public offering and sale may make a market in such
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the secondary market for any Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in an applicable Prospectus Supplement relating
to the Securities, the validity of the Securities offered hereby will be passed
upon for the Company by Jones, Day, Reavis & Pogue, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of January 28, 1995
and January 29, 1994, and for each of the fifty-two week periods ended January
28, 1995, January 29, 1994, and January 30, 1993, have been incorporated by
reference in this Prospectus in reliance upon the report, incorporated by
reference herein, of KPMG Peat Marwick LLP, independent certified public
accountants and upon the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Macy's as of July 30, 1994 and July
31, 1993 and for each of the fiscal years in the three-year period ended July
30, 1994 incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Broadway as of January 28, 1995 and
January 29, 1994 and for each of the fiscal years ended January 28, 1995 and
January 29, 1994, the 17 weeks ended January 30, 1993, and the 35 weeks ended
October 3, 1992 incorporated by reference in this Prospectus have been so
incorporated in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements incorporated herein by reference to reports and
documents subsequently filed by the Company pursuant to Sections 13(a), 13(c),
14, and 15(d) of the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold, or
which deregisters all securities then remaining unsold, are or will be so
incorporated in reliance upon the reports of KPMG Peat Marwick LLP, or any other
independent public accountants, relating to such financial statements and upon
the authority of such independent public accountants as experts in accounting
and auditing in giving such reports to the extent that the particular firm has
audited such financial statements and consented to the use of their reports
thereon.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds...................... S-3
Ratio of Earnings to Fixed Charges... S-3
Terms of Other Indebtedness of the
Company............................. S-4
Description of the Debentures........ S-10
Underwriting......................... S-18
Experts.............................. S-19
Legal Matters........................ S-19
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors......................... 3
The Company.......................... 6
Use of Proceeds...................... 7
Ratio of Earnings to Fixed Charges... 7
Description of Debt Securities....... 8
Description of Capital Stock......... 15
Description of Warrants.............. 20
Plan of Distribution................. 20
Validity of Securities............... 21
Experts.............................. 21
</TABLE>
$550,000,000
FEDERATED DEPARTMENT STORES, INC.
$300,000,000
7.45% SENIOR DEBENTURES
DUE 2017
$250,000,000
6.79% SENIOR DEBENTURES
DUE 2027
---------------------
PROSPECTUS SUPPLEMENT
---------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL SECURITIES INCORPORATED
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