<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-34321
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 11, 1997.
$300,000,000
Federated Department Stores, Inc.
7% Senior Debentures Due 2028
Interest payable February 15 and August 15 Due February 15, 2028
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The Debentures are redeemable in whole or in part, at the option of the Company
at any time and from time to time, at a redemption price equal to the greater
of (i) 100% of the principal amount of such Debentures and (ii) the sum of
the present values of the Remaining Scheduled Payments (as defined
herein) discounted to the redemption date on a semiannual basis at the
Treasury Rate (as defined herein) plus 20 basis points, together in
either case with accrued interest to the date of redemption. See
"Description of the Debentures--Redemption." The Debentures are
not subject to a sinking fund and 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 Debentures will be represented by one or more Global Securities (as defined
herein) registered in the name of the nominee of The Depository Trust
Company. Except as provided herein and in the accompanying Prospectus,
Debentures in definitive form will not be issued. See "Description
of the Debentures--Book-Entry System." Application will be made
to list the Debentures on The New York Stock
Exchange.
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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE .
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Company(1)(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Per Debenture........................... 98.639% .875% 97.764%
Total................................... $295,917,000 $2,625,000 $293,292,000
</TABLE>
(1) Plus accrued interest, if any, from February 6, 1998.
(2) Before deduction of expenses payable by the Company, estimated at $200,000.
The Debentures are offered by the several Underwriters when, as and if
issued by the Company, delivered to and accepted by the Underwriters and subject
to their right to reject orders, in whole or in part. It is expected that
delivery of the Debentures in book-entry form will be made through the
facilities of The Depository Trust Company ("DTC") on or about February 6, 1998,
against payment in immediately available funds.
Credit Suisse First Boston
Goldman, Sachs & Co.
Chase Securities Inc.
<PAGE>
Prospectus Supplement dated February 2, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SHORT-COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
------------------------
USE OF PROCEEDS
The net proceeds from the offering of the Debentures (the "Offering") are
estimated to be approximately $293.1 million. Such amount is expected to be used
by the Company to reduce bank borrowings and commercial paper outstandings,
which currently bear interest at rates ranging from 5.75% to 5.79% and 5.98% to
6.03%, respectively. The proceeds of the bank borrowings and commercial paper
outstandings to be repaid were used by the Company for working capital purposes.
Any remaining proceeds are expected to be used by the Company for general
corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for the 39
weeks ended November 1, 1997, computed in the manner described under "Ratio of
Earnings to Fixed Charges" in the accompanying Prospectus, was 1.81:1.
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TERMS OF OTHER INDEBTEDNESS OF THE COMPANY
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: (a) $55.0 million in aggregate principal amount of 8.05% Class C-1
Asset-Backed Certificates, Series 1992-1 due February 15, 1998; and (b) $55.0
million in aggregate principal amount of 8.45% Class C-2 Asset-Backed
Certificates, Series 1992-2 due February 15, 2000. The Series 1992 Class A and B
Certificates referred to in clauses (i) and (iii) above were repaid at their
respective maturities and, upon the repayment of such Series 1992 Class A and B
Certificates, the Series 1992 Class C Certificates referred to in clause (a)
above were deemed to have been repaid.
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.
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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 that 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 November 1, 1997, the outstanding amount of the
Series 1997 Class A and Class B Certificates was $215.2 million and the
outstanding amount of the Series 1997 Class C Certificates was $23.9 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 November 1, 1997, Seven Hills had $167.0 million of commercial paper
outstanding and there were no borrowings outstanding under the liquidity
facility.
BANK FACILITIES
GENERAL. The Company and certain financial institutions are parties to (i)
the Five-Year Credit Agreement, pursuant to which such financial institutions
have provided the Company with a $1,500.0 million revolving loan facility (the
"Five-Year Facility") and (ii) the 364-Day Credit Agreement, pursuant to which
such financial institutions have provided the Company with a $500.0 million
revolving loan facility (the "364-Day Facility" and, together with the Five-Year
Facility, the "Revolving Loan Facilities"). Citibank, N.A. ("Citibank") is the
administrative agent and paying agent, The Chase Manhattan Bank is the
administrative agent, BankBoston, N.A. is the syndication agent, and The Bank of
America National Trust & Savings Association is the documentation agent under
each of the Revolving Loan Facilities.
REVOLVING LOAN FACILITY. The Revolving Loan Facilities provide for
revolving credit loans ("Revolving Loans") of up to (i) $1,500.0 million under
the Five-Year Facility (including a letter of credit subfacility) and (ii)
$500.0 million under the 364-Day Facility. The Five-Year Facility also 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. The
Company's ability to effect borrowings under the Revolving Loan Facilities is
not subject to any borrowing base requirements or limitations. The Revolving
Loan Facilities mature on July 28, 2002, in the case of the Five-Year Facility,
and on July 27, 1998, in the case of the 364-Day Facility (subject to additional
364-Day extensions), with the Revolving Loans then outstanding to be repaid in
full on such dates. As of November 1, 1997, $1,102.7 million (including $131.7
million of letters of credit) was outstanding under the Revolving Loan
Facilities.
INTEREST RATE. Revolving Loans under the Revolving Loan Facilities (other
than Competitive Bid Loans (as defined below)) bear interest at a rate equal to,
at the Company's option, (i) Citibank'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 rate for dollar deposits appearing on Page 3750 of the
Telerate screen (or, if unavailable, (i) appearing on such other publicly
available source as the Company and paying agent shall
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agree or (ii) quoted by certain reference banks for dollar deposits in the
London interbank market) plus the Applicable Margin ("Eurodollar Loans").
"Applicable Margin" means 0.0% for Base Rate Loans and currently 0.20%, in the
case of the Five-Year Facility, and 0.225%, in the case of the 364-Day Facility,
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 Citibank 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 Citibank 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 Reserve System arranged by federal funds brokers, as
determined for any day by Citibank. The Company has entered into interest rate
swap agreements covering an aggregate notional amount of $200.0 million,
agreements covering $100.0 million of which will expire February 12, 1998.
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 5.2625% on $100.00 million of borrowings from January 23,
1996 to January 25, 1999 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 Five-Year Facility
includes a competitive bid component that enables the Company to invite the
lenders or specified designees under the Five-Year 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 Five-Year Facility
may result in additional interest expense savings to the Company.
FEES. The lenders participating in the Revolving Loan Facilities are
entitled to customary fees in connection therewith.
ABSENCE OF SECURITY AND GUARANTEES. The Company's obligations under the
Revolving Loan Facilities are not secured or guaranteed.
COVENANTS. The credit agreements governing each of the Revolving Loan
Facilities (the "Credit Agreements") include 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) conduct transactions with affiliates at arm's length;
(iii) not create certain additional liens on the Company's assets; (iv) not
allow its subsidiaries to incur any material debt; (v) not merge or consolidate
(or permit its subsidiaries to merge or consolidate); (vi) not sell, lease,
transfer or otherwise dispose of its assets (or permit its subsidiaries to sell,
lease, transfer or otherwise dispose of their assets); and (vii) not make any
material change in the nature of its and its subsidiaries' businesses.
The Credit Agreements also require the Company to satisfy certain financial
covenants and ratios. The financial covenants under the Credit Agreement require
the maintenance of (i) an EBITDA to net interest ratio of 3.25:1 as of the end
of each fiscal quarter (with EBITDA to exclude unusual and extraordinary items
and net interest defined for this purpose as total interest expense less
interest income) and (ii) an adjusted debt to total capital ratio of 0.62:1 as
of the end of each fiscal quarter (with adjusted debt defined for this purpose
as total debt excluding certain nonrecourse debt and total capital defined for
this purpose as adjusted debt plus total stockholders' equity).
EVENTS OF DEFAULT. The Credit Agreements contain 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
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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.
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 November 1, 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 November 1, 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 November 1, 1997.
SENIOR DEBENTURES DUE 2017
The Company's Senior Debentures Due 2017 are unsecured obligations of the
Company that mature on July 15, 2017 and bear interest at the rate of 7.45% per
annum. The outstanding aggregate principal amount of such Debentures was $300.0
million as of November 1, 1997.
SENIOR DEBENTURES DUE 2027
The Company's Senior Debentures Due 2027 (the "2027 Debentures") are
unsecured obligations of the Company that mature on July 15, 2027 and bear
interest at the rate of 6.79% per annum. The outstanding aggregate principal
amount of such Debentures was $250.0 million as of November 1, 1997. The holder
of a 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.
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 November 1, 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 Subordinated Notes (subject to
adjustment in certain circumstances).
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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 senior unsecured commercial paper, the incurrence of which is
permitted by the Bank Credit Facilities. As of November 1, 1997, the Company had
$52.0 million of such commercial paper outstanding.
OTHER INDEBTEDNESS
As of November 1, 1997, one of the Company's subsidiaries had outstanding
mortgage debt of approximately $32.5 million and the Company had outstanding
capital lease obligations of approximately $72.9 million.
DESCRIPTION OF THE DEBENTURES
The Debentures will be issued under the Indenture as supplemented by a First
Supplemental Indenture (the "Supplemental Indenture"). The following discussion
includes a summary description of material terms of the Supplemental Indenture
and the Debentures (which represent a series of, and are 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 Supplemental Indenture. Capitalized terms
not defined herein have the meanings given to them in the Indenture and the
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 and will rank
equally with all other unsecured and unsubordinated indebtedness of the Company.
The Debentures will be limited to $300,000,000 aggregate principal amount. The
Debentures will mature on February 15, 2028. The Debentures will bear interest
at the rate per annum shown on the front cover of this Prospectus Supplement
from February 6, 1998, payable semiannually on February 15 and August 15 of each
year, commencing on August 15, 1998, to the Persons in whose names the
Debentures are registered at the close of business on the preceding February 1
or August 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.
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ABSENCE OF EVENT RISK PROTECTIONS
Neither the Indenture (as supplemented by the Supplemental Indenture) 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 Indenture or the Debentures. The terms of the Bank Credit
Facilities, however, designate certain of such events as events of default
thereunder.
REDEMPTION
The Debentures will be redeemable in whole or in part, at the option of the
Company at any time and from time to time, on not less than 30 or more than 60
days' prior notice mailed to holders thereof, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Debentures to be redeemed and
(ii) the sum of the present values of the Remaining Scheduled Payments thereon
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points,
together in either case with accrued interest on the principal amount being
redeemed to the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Debentures. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (a) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or (b) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer as of 3:30 p.m., New York City time, on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Goldman, Sachs & Co. and Chase Securities Inc. and their respective
successors and two other nationally recognized investment banking firms that are
Primary Treasury Dealers specified from time to time by the Company; PROVIDED,
HOWEVER, that if any of the foregoing ceases to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company is
required to designate as a substitute another nationally recognized investment
banking firm that is a Primary Treasury Dealer.
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"Remaining Scheduled Payments" means, with respect to each Debenture to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for such
redemption, except that, if such redemption date is not an interest payment date
with respect to such Debenture, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued
thereon to such redemption date.
On and after any redemption date, interest will cease to accrue on the
Debentures or any portion thereof called for redemption. Prior to any redemption
date, the Company is required to deposit with a paying agent money sufficient to
pay the redemption price of and accrued interest on the Debentures to be
redeemed on such date. If less than all the Debentures are to be redeemed, the
Debentures to be redeemed are required to be selected by the Trustee by such
method as the Trustee deems fair and appropriate in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
BOOK-ENTRY SYSTEM
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 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
The 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 a 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
a 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 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
S-9
<PAGE>
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 Indenture 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 the Debentures: (i)
failure to pay principal of or premium on, if any, any Debenture when due; (ii)
the failure to repurchase the Debentures when required pursuant to the Indenture
or the Supplemental Indenture; (iii) failure to pay any interest on any
Debenture when due, which failure continues for 30 calendar days; (iv) failure
to perform any other covenant of the Company in the Indenture or the
Supplemental Indenture (other than a covenant included therein solely for the
benefit of a series of senior debt securities other than the Debentures), which
failure continues for 60 calendar days after written notice as provided in the
Indenture or the 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 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
S-10
<PAGE>
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, to give to the holders of the Debentures
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 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.
If an Event of Default with respect to the Debentures occurs and is
continuing, either the Trustee or the holders of at least 25% in principal
amount of the Debenture, by notice as provided in the Indenture, may declare the
principal amount of the Debentures to be due and payable immediately. However,
at any time after a declaration of acceleration with respect to the Debentures
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
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 will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any holder of the Debentures.
DEFEASANCE
The Company, at its option, (i) will be deemed to have been discharged from
its obligations with respect to the Debentures (except for certain obligations,
including obligations to register the transfer or exchange of the Debentures, to
replace destroyed, stolen, lost, or mutilated Debentures, and to maintain an
office or agency in respect of the Debentures 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, 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 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 the defeasance of the Debentures, all in accordance with
the terms of such the Debentures. 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 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
S-11
<PAGE>
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 Supplemental Indenture after a defeasance of the Indenture and the
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 Supplemental Indenture. In addition, for
purposes of the Indenture and the Supplemental Indenture, the following
definitions apply:
"Bank Facilities" means the financing provided for by (a) the 364-Day Credit
Agreement and (b) the Five-Year Credit Agreement, each dated as of July 28, 1997
and each by and among the Company, certain financial institutions, Citibank,
N.A., as administrative agent and paying agent, The Chase Manhattan Bank, as
administrative agent, BankBoston, N.A., as syndication agent, and The Bank of
America, National Trust & Savings Association, as documentation 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 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),
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<PAGE>
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 7.45% Senior Debentures Due 2017; (iii) the
Company's 6.79% Senior Debentures Due 2027; (iv) the Company's 10% Senior Notes
Due 2001; (v) the Company's 8.125% Senior Notes Due 2002; (vi) the Company's
8.5% Senior Notes Due 2003; (vii) the Company's 5% Convertible Subordinated
Notes Due 2003; (viii) the outstanding principal amount of notes issued pursuant
to the Mortgage Note Agreement between Macy's Primary Real Estate, Inc. and
Federated Noteholding Corporation; (ix) 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; (x) capital lease obligations of the Company and the Restricted
Subsidiaries existing on the date of issuance of the Debentures; (xi) 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; and (xii) 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 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 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
S-13
<PAGE>
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 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
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<PAGE>
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.
"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
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 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, provided that such entity is a special purpose entity
formed for financing purposes.
S-15
<PAGE>
UNDERWRITING
Under the terms and conditions contained in an Underwriting Agreement dated
February 2, 1998 (the "Underwriting Agreement"), the Underwriters named below
(the "Underwriters"), have severally but not jointly agreed to purchase from the
Company the following respective principal amounts of the Debentures:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------------------- --------------
<S> <C>
Credit Suisse First Boston Corporation................................................ $ 135,000,000
Goldman, Sachs & Co................................................................... 120,000,000
Chase Securities Inc.................................................................. 45,000,000
--------------
Total............................................................................. $ 300,000,000
--------------
--------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Debentures, if any are purchased. The Underwriting
Agreement provides that, in the event of a default by an Underwriter, in certain
circumstances, the purchase commitments of the non-defaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Debentures to the public initially at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession of .50% of the principal amount per
Debenture, and the Underwriters and such dealers may allow a discount of .25% of
such principal amount per Debenture on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities, under the Securities Act, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Debentures in the open
market. Penalty bids permit the Underwriters to reclaim a selling concession
from a syndicate member when the Debentures originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover syndicate
short positions. Such stabilizing transactions, syndicate covering transactions
and penalty bids may cause the price of the Debentures to be higher than it
would otherwise be in the absence of such transactions. These transactions may
be effected on The New York Stock Exchange or otherwise and if, commenced, may
be discontinued at any time.
The Debentures are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Debentures but are not obligated to do so and may
discontinue market molding at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures. In addition,
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 or liquid market for the Debentures will
develop or, if any such market develops, that it will continue to exist.
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.
S-16
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Debentures in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file a
prospectus with the securities' regulatory authorities in each province where
trades of Debentures are effected. Accordingly, any resale of the Debentures in
Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Debentures.
REPRESENTATIONS OF PURCHASER
Each purchaser of the Debentures in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Debentures without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Debentures to whom the SECURITIES ACT (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Debentures acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Debentures acquired on the same date and
under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Debentures should consult their own legal and tax
advisors with respect to the tax consequence of an investment in the Debentures
in their particular circumstances and with respect to the eligibility of the
Debentures for investment by the purchaser under relevant Canadian legislation.
S-17
<PAGE>
EXPERTS
The consolidated financial statements of Federated 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-18
<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.
------------------------
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 SEPTEMBER 11, 1997.
<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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), ARE
CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS OR THE
ACCOMPANYING PROSPECTUS SUPPLEMENT. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO A NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE COMPANY'S
CONTROL. FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE WORDS
"BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "ESTIMATE," AND SIMILAR
EXPRESSIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING
GENERAL ECONOMIC CONDITIONS AND CONDITIONS IN THE RETAIL INDUSTRY, COMPETITIVE
CONSIDERATIONS, AND OTHER FACTORS. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THE RESULTS AND EVENTS CONTEMPLATED BY SUCH FORWARD-LOOKING INFORMATION WILL IN
FACT OCCUR, AND READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of 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") under 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.
------------------------
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended February
1, 1997 (File No. 1-13536) (the "1996 Form 10-K"), the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 3, 1997 (the "First Quarter
Form 10-Q"), the Company's Current Report on Form 8-K dated July 15, 1997, 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 will 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).
3
<PAGE>
THE COMPANY
The Company is one of the leading operators of full-line department stores
in the United States with over 400 department stores in 36 states. 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. As of the date of this Prospectus, the Company also operates
approximately 150 specialty stores under the names "Aeropostale" and "Charter
Club," and a mail order catalog business under the name "Bloomingdale's By
Mail."
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.
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 1996 Form 10-K and the First Quarter Form 10-Q.
As a result of substantial acquisition transactions, the Company's results of
operations for its fiscal year ended January 28, 1995 and subsequent periods are
not directly comparable to its results of operations for prior periods.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
13 WEEKS ENDED ENDED ENDED ENDED
ENDED FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29,
MAY 3, 1997 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed
charges (unaudited)(1).................... 1.30x 1.71x 1.31x 1.99x 2.33x
<CAPTION>
FISCAL YEAR
ENDED
JANUARY 30,
1993
-------------
<S> <C>
Consolidated ratio of earnings to fixed
charges (unaudited)(1).................... 1.72x
</TABLE>
- ------------------------
(1) For purposes of computing the ratio 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.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be issued under an Indenture, dated as of September
10, 1997 (the "Indenture"), between the Company and Citibank, N.A., 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
5
<PAGE>
(ii) payment of principal, premium (if any), and interest on the Debt Securities
will be payable, and the 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
6
<PAGE>
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
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.
7
<PAGE>
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 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
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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.
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
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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 "-- 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
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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 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 500.0 million shares of Common Stock
and 125.0 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
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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 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
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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 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
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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.
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
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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 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
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<PAGE>
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 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.
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<PAGE>
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.
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 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 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 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 dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the
Prospectus and, if given or made, such
information or representation must not be
relied upon as having been authorized by the Company or any Underwriter. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. 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 the information herein or therein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Supplement
Use of Proceeds............................... S-2
Ratio of Earnings to Fixed Charges............ S-2
Terms of Other Indebtedness of the Company.... S-3
Description of the Debentures................. S-7
Underwriting.................................. S-16
Notice to Canadian Residents.................. S-17
Experts....................................... S-18
Legal Matters................................. S-18
Prospectus
Available Information......................... 2
Incorporation of Certain Documents by
Reference................................... 3
The Company................................... 4
Use of Procceeds.............................. 4
Ratio of Earnings to Fixed Charges............ 4
Description of Debt Securities................ 5
Description of Capital Stock.................. 12
Description of Warrants....................... 17
Plan of Distribution.......................... 17
Validity of Securities........................ 18
Experts....................................... 18
</TABLE>
Federated Department
Stores, Inc.
$300,000,000
7% Senior Debentures
Due 2028
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
Goldman, Sachs & Co.
Chase Securities Inc.
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