0000898430-95-001713.txt : 19950829 0000898430-95-001713.hdr.sgml : 19950829 ACCESSION NUMBER: 0000898430-95-001713 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950814 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950828 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADWAY STORES INC CENTRAL INDEX KEY: 0000750217 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 940457907 STATE OF INCORPORATION: DE FISCAL YEAR END: 0202 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08765 FILM NUMBER: 95567331 BUSINESS ADDRESS: STREET 1: 3880 N MISSION RD CITY: LOS ANGELES STATE: CA ZIP: 90031 BUSINESS PHONE: 2132272000 FORMER COMPANY: FORMER CONFORMED NAME: CARTER HAWLEY HALE STORES INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EMPORIUM CAPEWELL CO DATE OF NAME CHANGE: 19910827 FORMER COMPANY: FORMER CONFORMED NAME: BROADWAY HALE STORES INC DATE OF NAME CHANGE: 19910827 8-K 1 FORM 8-K 08/14/95 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________________________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 14, 1995 BROADWAY STORES, INC. ------------------------------------------------------------------------------- Exact name of registrant as specified in its charter DELAWARE 1-8765 94-0457907 ------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 3880 NORTH MISSION ROAD LOS ANGELES, CA 90031 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 213/227-2000 N/A ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) The Exhibit Index is located on Page 5. ITEM 5. OTHER EVENTS On August 17, 1995, Broadway Stores, Inc. ("Broadway") and General Electrical Capital Corporation ("GE Capital") entered into an amendment (the"Broadway Working Capital Amendment") to Broadway's working capital credit facility (the "Broadway Working Capital Facility"). Pursuant to the Broadway Working Capital Amendment, the size of the Broadway Working Capital Facility was increased to $250.0 million from $225.0 million, and the percentage of the value of "Eligible Inventory" that constitutes the "Borrowing Base" under the Broadway Working Capital Facility was increased to 55% from 50%. In addition, the minimum inventory balance requirements under the Broadway Working Capital Facility were relaxed and various financial covenants previously contained therein were eliminated. A copy of the Broadway Working Capital Amendment is filed as Exhibit 4.1 hereto and incorporated herein by this reference. As a condition to GE Capital's entering into the Broadway Working Capital Amendment, GE Capital and Federated Department Stores, Inc. ("Federated") entered into a Put Agreement (the "Put Agreement"), and a Last-Out Participation Agreement (the "Participation Agreement"). Under the Put Agreement, Federated will be required to purchase from GE Capital for $30.0 million a last-out participation in the Broadway Working Capital Facility upon the earlier to occur of (i) the commitment termination date under the Broadway Working Capital Facility (unless all of Broadway's obligations under the Broadway Working Capital Facility are repaid or otherwise satisfied in accordance with the terms of such facility on or prior to such date) and (ii) the tenth banking day prior to the then-current expiration date of the letter of credit that Federated provided to GE Capital to secure the performance of Federated's contingent purchase obligation thereunder. The Participation Agreement provides for a $30.0 million last-out participation in the Broadway Working Capital Facility, under the terms of which Federated would not be entitled to receive any payments of principal until Broadway's obligations to GE Capital and any other members of the lender syndicate under the Broadway Working Capital Facility are fully repaid or otherwise satisfied. In addition, Federated's right to receive payments of interest in respect of the last-out participation would be subordinated in certain circumstances. In connection with the Broadway Working Capital Amendment, GE Capital consented to the merger described in the joint press release of Broadway and Federated dated August 14, 1995, a copy of which is filed as Exhibit 20.1 hereto and incorporated herein by this reference. 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits See Exhibit Index on Page 5. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BROADWAY STORES, INC., a Delaware corporation By: /s/ JOHN C. HAECKEL ------------------------------------------ JOHN C. HAECKEL, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Date: August 24, 1995 4 EX-4.1 2 CREDIT AGREEMENT 9TH AMENDMENT EXHIBIT 4.1 [EXECUTION COPY 8/16/95] TENTH AMENDMENT TO CREDIT AGREEMENT THIS TENTH AMENDMENT (the "Tenth Amendment"), dated as of August 17, 1995, --------------- is entered into by and among BROADWAY STORES, INC., a Delaware corporation previously known as Carter Hawley Hale Stores, Inc. (the "Borrower"), the -------- financial institutions parties hereto (the "Lenders") and GENERAL ELECTRIC ------- CAPITAL CORPORATION, a New York corporation, as agent (the "Agent") for the ----- Lenders. R E C I T A L S --------------- WHEREAS, the parties hereto have entered into that certain Credit Agreement dated as of October 8, 1992 and amended by the letter agreement dated April 29, 1993, the Amended and Restated Second Amendment dated as of August 20, 1993, the Third Amendment dated as of September 30, 1993, the Fourth Amendment dated as of October 31, 1993, the Fifth Amendment dated as of December 10, 1993, the Sixth Amendment dated as of February 26, 1994, the Seventh Amendment dated as of September 13, 1994, the Eighth Amendment dated as of March 3, 1995 and the Ninth Amendment dated as of June 28, 1995 (as so amended, the "Credit Agreement"), and ---------------- now desire to amend the Credit Agreement in certain respects; NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto agree as follows: 1. Definitions. Unless otherwise defined herein, terms defined in the ----------- Credit Agreement are used herein with the same meanings ascribed to them therein. 2. Amendments to the Credit Agreement: Upon the Effective Date (as ---------------------------------- defined herein), the Credit Agreement is hereby amended as follows: 2.1 Amendment to Article 1. Article 1 of the Credit Agreement is hereby ---------------------- amended as follows: (a) The definition of "Borrowing Base" is amended in its entirety to read as follows: "Borrowing Base" shall mean, at any time, the lesser of (i) the -------------- Commitment or (ii) up to 55% of Eligible Inventory (valued on a first-in, first-out basis, at the lower of cost or market), less such reserves as the Required [EXECUTION COPY 8/16/95] Lenders may deem necessary from time to time. The Agent shall promptly inform the Borrower of the establishment of any such other reserve (together with a statement in reasonable detail of the reasons therefor), but failure to do so shall not impair the effectiveness of any such reserve for purposes of this Agreement. (b) The definition of "Commitment Termination Date" is amended in its entirety to read as follows: "Commitment Termination Date" shall mean the earliest of: (i) --------------------------- February 29, 1996, if the Federated Merger shall not have become effective on or prior to such date; (ii) October 8, 1996, (iii) the date that the Borrower prepays the Loan in accordance with Section 2.3(e), (iv) the date -------------- on which any Event of Default specified in Section 9.1(g), 9.1(h) or 9.1(i) ---------------------- ------ occurs and (iv) the date that the Required Lenders elect to terminate the Borrower's right to receive Advances or accommodations for Letters of Credit pursuant to Section 9.2. The Borrower shall have no right to ----------- terminate the Commitments unless simultaneously therewith all commitments of the Receivables Lender under the Accounts Receivable Facility are terminated. (c) The definition of "Total Commitment Amount" is amended in its entirety to read as follows: "Total Commitment Amount" shall mean $250,000,000. ----------------------- (d) The following new definitions are added to Article 1 of the Credit Agreement in alphabetical order: "Federated" shall mean Federated Department Stores, Inc., a --------- Delaware corporation. "Federated Merger" shall mean the merger of Nomo Company, Inc., a ---------------- wholly owned subsidiary of Federated, with and into the Borrower (with the Borrower as the surviving corporation) pursuant to the terms of the Federated Merger Agreement. "Federated Merger Agreement" shall mean the Agreement and Plan of -------------------------- Merger dated as of August 14, 1995 by and among the Borrower, Federated and Nomo Company, Inc., as such agreement may be amended, modified or supplemented from time to time. "Federated Merger Termination Date" shall mean the date on which --------------------------------- the Federated Merger Agreement is terminated -2- [EXECUTION COPY 8/16/95] by the parties thereto or is terminated in accordance with its terms or, if earlier, the date on which any condition precedent to the effectiveness of the Federated Merger becomes incapable of being met prior to February 29, 1996. 2.2 Amendment to Section 5.1. The following new Section 5.1(k) shall ------------------------ be added to the end of Section 5.1 of the Credit Agreement: (k) At any time after the Federated Merger Termination Date, promptly upon the request of the Agent, but in any event no later than the date (during the fiscal week following such request) on which the next Borrowing Base Certificate is required to be delivered pursuant to Section ------- 5.4, a certificate of the chief executive officer or chief financial --- officer of the Borrower setting forth in reasonable detail calculations indicating compliance with the financial covenant contained in Section ------- 7.1(d)(ii) for each period requested by the Agent. ---------- 2.3 Amendment to Section 7.1. ------------------------ (a) Sections 7.1(a), 7.1(b), 7.1(c) and 7.1(f) of the Credit Agreement are hereby deleted in their entirety and replaced with the following: (a) [INTENTIONALLY OMITTED]. (b) [INTENTIONALLY OMITTED]. (c) [INTENTIONALLY OMITTED]. (f) [INTENTIONALLY OMITTED]. (b) Section 7.1(d) of the Credit Agreement is hereby amended in its entirety to read as follows: (d) Consolidated Minimum Inventory Balance. (i) The Borrower -------------------------------------- will not permit the aggregate amount of all inventory of the Borrower and its Subsidiaries (determined on the lower of a first-in, first-out or market basis) on the last day of any Fiscal Month set forth below to be less than the minimum amount set forth below opposite such Fiscal Month (provided that the minimum amount set forth opposite -------- January 1996 shall not include inventory-in-transit): -3- [EXECUTION COPY 8/16/95]
Fiscal Month Minimum Amount -------------- ----------------- August 1995 -0- September 1995 $333,000,000 October 1995 $421,000,000 November 1995 $478,000,000 December 1995 $354,000,000 January 1996 $360,000,000 February 1996 $418,900,000 March 1996 $409,700,000 April 1996 $404,700,000 May 1996 $415,700,000 June 1996 $382,100,000 July 1996 $386,100,000 August 1996 $426,600,000 September 1996 $443,700,000; and
(ii) if the Federated Merger Termination Date has occurred at any time prior to the Commitment Termination Date, the Borrower will not permit the aggregate amount of all inventory of the Borrower and its Subsidiaries (determined on the lower of a first-in, first-out or market basis) at any time during each period or on any date set forth below to be less than the minimum amount set forth below opposite such period or date (provided that the minimum amount set -------- forth opposite the period ending February 28, 1996 shall not include inventory-in-transit) for a period of more than five consecutive days:
Period Minimum Amount ------ -------------- September 1, 1995 through October 30, 1995 $333,000,000 October 31, 1995 through November 29, 1995 $421,000,000 November 30, 1995 $478,000,000 December 1, 1995 through January 30, 1996 $354,000,000 January 31, 1996 through February 28, 1996 $360,000,000 February 29, 1996 $418,900,000
2.4 Amendment to Section 7.13. Sections 7.13 of the Credit Agreement ------------------------- is amended in its entirety to read as follows: 7.13 Restricted Payments. The Borrower shall not make any ------------------- Restricted Payments; provided, however, after the consummation of the -------- ------- Federated Merger, the Borrower may -4- [EXECUTION COPY 8/16/95] repurchase the Convertible Subordinated Notes to the extent such repurchase is required to be made under the terms of the Convertible Subordinated Notes as a result of the Federated Merger but only from the proceeds of (i) a contribution made by Federated to the common equity of the Borrower or (ii) intercompany loans made by Federated to the Borrower which have been subordinated to the Obligations on terms and conditions satisfactory to the Required Lenders. 2.5 Amendment to Section 9.1(m). Section 9.1(m) of the Credit --------------------------- Agreement is amended in its entirety to read as follows: (m) Any Change in Control shall occur (other than a Change in Control resulting from the consummation of the Federated Merger). 3. Consents. The Lenders hereby consent, pursuant to Sections 7.2, -------- 7.4 and 7.6 of the Credit Agreement, to the Federated Merger. The Lenders hereby consent, pursuant to Section 7.14 of the Credit Agreement, to any intercompany Indebtedness to be incurred by the Borrower pursuant to, and used for the purpose specified in, Section 7.13 of the Credit Agreement. 4. Effective Date. This Tenth Amendment shall become effective as of -------------- the date hereof (the "Effective Date") when all of the following conditions have -------------- been satisfied: (a) The Agent has received each of the following in form and substance satisfactory to it: (i) counterparts hereof signed by the Borrower, the Lenders and the Agent, together with an Amended and Restated Note in the form of Exhibit A hereto; --------- (ii) one or more certificates, dated the Effective Date and in form and substance satisfactory to the Agent, of the Secretary or any Assistant Secretary of the Borrower certifying (A) as to resolutions of the Board of Directors of the Borrower authorizing this Tenth Amendment and the transactions contemplated hereby and thereby, (B) that the resolutions described in clause (A) have not been amended ---------- and remain in full force and effect, (C) as to the incumbency and signatures of each officer of the Borrower executing this Tenth Amendment or any of the Loan Documents delivered in connection therewith, (D) -5- [EXECUTION COPY 8/16/95] as to the matters set forth in Section 4 of this Tenth Amendment, and --------- (E) as to such other matters as shall be reasonably requested by Agent; and (iii) opinions, dated the Effective Date and addressed to the Agent and each Lender, of (A) George Touras, general counsel of the Borrower and (B) of Milbank, Tweed, Hadley & McCloy, counsel to the Borrower. (b) The Borrower shall have paid to the Agent for the account of the Lenders an amendment fee in the amount of $1,125,000 in same day funds. 5. Representations and Warranties. The Borrower hereby represents ------------------------------ and warrants that, as of the date hereof and as of the Effective Date, after giving effect to this Tenth Amendment: (a) The execution, delivery and performance by the Borrower of this Tenth Amendment have been duly authorized by all necessary corporate action; (b) Each of the Loan Documents constitutes (and, after giving effect to the Federated Merger, will constitute) the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms; (c) After giving effect to the Federated Merger, the Borrower will be a wholly owned subsidiary of Federated; (d) No Default or Event of Default has occurred or is continuing; and (e) The representations and warranties of the Borrower contained in Article 4 of the Credit Agreement and any other Loan Document (other --------- than representations and warranties which expressly speak as of a different date) are true, correct and complete in all material respects, except that such representations and warranties need not be true, correct and complete to the extent that changes in the facts and conditions on which such representations and warranties are based are required or permitted under the Credit Agreement. 6. Limitation on Amendment. This Tenth Amendment shall be limited ----------------------- solely to the matters expressly set forth herein and shall not (a) constitute a waiver or amendment of any other -6- [EXECUTION COPY 8/16/95] term or condition of the Credit Agreement, or of any instruments or agreements referred to therein, (b) prejudice any right or rights which the Agent or any of the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any instruments or agreements referred to therein, or (c) require the Agent or the Lenders to agree to a similar waiver or amendment or grant a similar waiver or amendment for a similar transaction or on a future occasion. Except to the extent specifically waived herein, the provisions of the Credit Agreement shall not be amended, modified, impaired or otherwise affected hereby, and the Credit Agreement and all of the Obligations are hereby confirmed in full force and effect. 7. Confirmation of Obligations and Liens. In consideration for the ------------------------------------- Lenders agreement to enter into this Tenth Amendment, the Borrower hereby (i) confirms that as of August 15, 1995 the outstanding principal amount of the Advances was $25,551,000.00 and the outstanding amount of Letter of Credit Obligations was $58,494,429.96 and that such amounts are payable pursuant to the Credit Agreement, as amended hereby, without offset, withholding, counterclaim or deduction of any kind and (ii) confirms and agrees that all Liens granted to the Agent or any Lender under the Collateral Documents and the other Loan Documents are valid and fully perfected and remain in full force and effect. 8. Release of Lender Parties. The Borrower, for itself and on ------------------------- behalf of each of its Subsidiaries and Affiliates and each of its employees, officers and directors, and each of their respective predecessors, successors and assigns (collectively, the "Releasors"), does hereby forever and unconditionally (i) release, discharge and acquit the Agent and each of the Lenders, and each of their respective parent corporations, Subsidiaries and Affiliates, and each of their respective officers, directors, shareholders, employees, attorneys, agents, accountants, consultants, servants and representatives, and each their respective predecessors, successors, heirs and assigns (collectively, the "Lender Parties"), of and from any and all claims of every type, kind, nature, description or character, known and unknown, whensoever arising out of any actions or omissions of the Lender Parties, or any of them, occurring at any time up to and through the date hereof, which in any way arise out of, are connected with or relate to the Loan Documents (collectively, "Claims"), and (ii) agree not to bring any action in any judicial, administrative or other proceeding against the Lender Parties, or any of them, alleging any such Claim or otherwise arising in connection with any such Claim, or support any shareholder of the Borrower or any -7- [EXECUTION COPY 8/16/95] of the respective Releasors in any such action brought by such shareholder. 9. Miscellaneous. This Tenth Amendment is a Loan Document and, ------------- together with the Credit Agreement and the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof. The headings herein are for convenience of reference only and shall not alter or otherwise affect the meaning hereof. 10. Severability. Whenever possible, each provision of this Tenth ------------ Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Tenth Amendment be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Tenth Amendment. 11. Governing Law. This Tenth Amendment shall be governed by, and ------------- shall be construed and enforced in accordance with, the laws of the State of New York. 12. Costs and Expenses; Indemnity. ----------------------------- (a) The Borrower agrees to reimburse GE Capital and its affiliates as parties to both the Credit Agreement and the Accounts Receivable Facility for all costs and expenses incurred by GE Capital and its affiliates in connection with the preparation, reproduction, execution and delivery of this Tenth Amendment and all other agreements entered into in connection herewith. (b) The Borrower agrees that its obligation to indemnify each Indemnified Person under the terms of Article 10 of the Credit Agreement shall include an obligation to indemnify and hold each such Indemnified Person harmless from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys', experts' and witness fees and disbursements and other costs of investigations or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by such Indemnified Person in connection with or arising out of this Tenth Amendment or any other Loan Document or the Federated Merger Agreement or any other agreement entered into in connection with the Tenth Amendment or in any way related to the Federated Merger. -8- [EXECUTION COPY 8/16/95] 13. Counterparts. This Tenth Amendment may be executed in any number ------------ of counterparts which, when taken together, shall be deemed to constitute one and the same instrument. WITNESS the due execution hereof as of the date first above written. BROADWAY STORES, INC., as the Borrower By: /s/ Ralph DeMarco _________________________________ Title: Vice President - Treasurer GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and as the Lender By: _____________________________ Title: -9- EXHIBIT A TO TENTH AMENDMENT FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE -------------------------------------------------- $250,000,000 August 17, 1995 FOR VALUE RECEIVED, the undersigned, BROADWAY STORES, INC., a Delaware corporation (previously known as Carter Hawley Hale Stores, Inc.) having an office at 3880 N. Mission Road, Los Angeles, California 90031 (the "Borrower"), -------- hereby promises to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION (the "Lender"), or its registered assigns, in lawful money of the United States of ------ America and in immediately available funds, the principal amount of TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000), or, if less, the aggregate unpaid principal amount of all Advances made by the Lender pursuant to that certain Credit Agreement, dated as of October 8, 1992 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Credit Agreement"), among the Borrower, certain commercial lending institutions ----------------- (including the Lender) as are, or may from time to time become, parties thereto, and General Electric Capital Corporation, as Agent, together with interest on the unpaid principal amount of this Note outstanding from time to time from the date of the first advance made or deemed to have been made hereunder, as hereinafter provided. This Note is issued pursuant to the Credit Agreement, is one of the Notes referred to therein, and is entitled to the benefit and security of the Loan Documents provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the Advances evidenced hereby are made. All capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to them in the Credit Agreement. The principal amount of the indebtedness from time to time evidenced hereby shall be payable in the manner specified in the Credit Agreement and, if not sooner paid in full, on October 8, 1996. The outstanding principal amount of indebtedness evidenced hereby shall bear interest, payable monthly in arrears on the tenth day of each month for the immediately preceding calendar month, as set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America in immediately available funds to the account designated by the Agent pursuant to the Credit Agreement. -10- If any payment or prepayment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and upon such declaration immediately shall become, due and payable. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by the Borrower. This Note is given in renewal of and rearrangement and substitution, but not in payment, for the "Note" referred to in the Credit Agreement (the "Prior Note"), it being acknowledged and agreed that the indebtedness evidenced ----------- by the Prior Note constitutes the same indebtedness evidenced by this Note and that this Note in no way is intended to constitute a novation of such Prior Note or the outstanding principal amount thereof. -11- This Note shall be governed by, and interpreted and construed in accordance with, the laws of the State of New York. BROADWAY STORES, INC. By /s/ Ralph DeMarco ___________________________________ Title: Vice President - Treasurer -12- EX-20.1 3 PRESS RELEASE DATED 8/13/95 EXHIBIT 20.1 Broadway Stores, Inc. The Broadway Emporium Weinstocks Contacts: Carol Sanger 513/579-7764 Bill Ihle 213/227-3884 FOR IMMEDIATE RELEASE BROADWAY AGREES TO MERGER WITH FEDERATED CINCINNATI, OH, and LOS ANGELES, CA, August 14, 1995--Federated Department Stores, Inc. and Broadway Stores, Inc. jointly announced today that the boards of directors of both companies have approved a definitive agreement providing for a stock-for-stock merger under which Broadway Stores will become a subsidiary of Federated. The merger is expected to take place by mid-to-late October. Los Angeles-based Broadway Stores, Inc. is a leading retailer in the western U.S., with annual sales of more than $2 billion. Broadway currently operates 83 department stores under the names of The Broadway, Emporium and Weinstocks; 71 of the stores operate in California, with the remainder in Arizona, Colorado, Nevada and New Mexico. "There are few deals too good to pass up because of what they can mean to a company strategically over the longer term," Allen Questrom, Federated's chairman and chief executive officer, said in making today's announcement. "Because this merger will enable us to broaden our base of store operations in this important area of the country, we think this is one of those deals for Federated." While the company has not yet finalized its plans, Federated anticipates retaining and operating a significant number of the stores acquired in the merger with Broadway, and divesting the remainder over the next year or so. Most of the retained stores will be converted to Macy's/Bullock's or, in the case of a few of the acquired stores, to Bloomingdale's, marking that prestigious chain's first entry into California. An operational conversion of the retained Broadway stores into Macy's/Bullock's or Bloomingdale's is expected to be initiated early in 1996; in the interim, Broadway, Emporium and Weinstocks stores will continue operating as they are now until after the first of the year. Federated said it is too early in the process to provide any additional information (more) -2- on specific store sale, retention or conversion plans; those decisions and subsequent announcements will not be forthcoming until after the merger is completed this fall. "We expect that most of Broadway's stores that we retain will be converted to Macy's/Bullock's after the merger, and a few will become Bloomingdale's," Questrom said. "We are delighted at the opportunity to acquire these fine stores, because it represents a singularly unique opportunity to significantly expand Federated's presence on the West Coast, and to enhance the company's competitive position for the benefit of consumers in those communities." In the merger, each of Broadway's approximately 46.9 million outstanding shares of common stock will be converted into 0.27 shares of Federated common stock; accordingly, Federated will issue approximately 12.7 million shares of new Federated common stock in the merger transaction. In connection with the merger, Federated also agreed to acquire Broadway's existing mortgage loan of approximately $422 million from Prudential Insurance Company of America, in exchange for additional Federated common stock to be valued at $200.0 million at the time of acquisition, plus approximately $222 million of new indebtedness. In addition, as a result of the transaction, Broadway's working capital lender has undertaken to liberalize the financial covenants on that facility, and to increase the size of the facility. "With Federated as an industry partner, we expect that we will be able to reassure our trade resources and our people immediately and dramatically, and we expect an immediate return to a normal trade situation," said David L. Dworkin, president and chief executive officer of Broadway. Zell/Chilmark L.P., which presently owns approximately 54 percent of Broadway's outstanding common stock, has agreed to vote those shares in favor of the merger and has granted Federated an option to buy those shares at the merger exchange ratio. A meeting of Broadway shareholders for the purpose of voting on the merger is expected to take place in October. In addition to customary conditions, the merger is conditioned on both parties' receipt of certain bank consents and waivers. "Broadway always has had an amazing collection of assets. With this transaction, the prospect for superior utilization of those assets has increased," said Sam Zell, general (more) -3- partner of Zell/Chilmark. "This deal is good for The Broadway, its employees and vendors. Shareholders will have a continuing interest in a well managed retail company, with lots of growth potential and benefits of enhanced economies of scale." James M. Zimmerman, Federated's president and chief operating officer, noted that in recent years, Federated has "acquired a tremendous amount of experience in merging divisional operations and converting store nameplates. Because of this, we believe we will be able to effect a smooth transition of Broadway Stores into Federated, and to effectively convert these stores into Macy's/Bullock's or Bloomingdale's with a minimum of disruption to our existing business." Zimmerman said Federated currently expects to invest approximately $525 million in capital for conversions and major remodels of stores acquired and retained from the Broadway merger over the period from 1996-1999. Sales generated by retained stores are expected to add approximately $1.4 billion annually to Federated's annual sales totals in their first full year, which would be beginning in Fiscal 1997. These numbers are subject to change as plans are finalized. As a result of the merger, Federated will take one-time charges against earnings in the current and possibly the next fiscal year; the actual amount of these charges cannot yet be determined. Federated, with corporate offices in Cincinnati and New York, is one of the nation's leading retailers, with annual sales before the merger of more than $14 billion. Federated currently operates 354 department stores and more than 100 specialty and clearance stores in 35 states under the names of Bloomingdale's, The Bon Marche, Bullock's, Burdines, Goldsmith's, Jordan Marsh, Lazarus, Macy's, Rich's and Stern's, as well as Aeropostale, Charter Club and Macy's Close Out. ###