Document:

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                                                                   Exhibit 10.46

                        FEDERATED DEPARTMENT STORES, INC.

                            1992 INCENTIVE BONUS PLAN

                (AS AMENDED AND RESTATED AS OF DECEMBER 10, 1999)

         Federated Department Stores, Inc., a Delaware corporation (the
"Company"), hereby amends and restates this 1992 Incentive Bonus Plan (this
"Bonus Plan") effective, subject to the provisions of Section 14, as of December
10, 1999.

         1. PURPOSE. The purpose of this Bonus Plan is to promote the attainment
of the Company's performance goals by providing incentive compensation for
certain designated key executives and employees of the Company and its
Subsidiaries.

         2. DEFINITIONS. As used in this Bonus Plan, the following terms have
the following meanings when used herein with initial capital letters:

         (a) "Annual Incentive Award" means the incentive bonus earned by a
Participant pursuant to Section 5.

         (b) "Board" means the Board of Directors of the Company or, pursuant to
any delegation by the Board to the Compensation Committee pursuant to Section
12, the Compensation Committee.

         (c) "Chief Executive Officer" means the Chief Executive Officer of the
Company.

         (d) "Chief Operating Officer" means the Chief Operating Officer of the
Company.

         (e) "Chief Merchandising Officer" means the Chief Merchandising Officer
of the Company.

         (f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

         (g) "Compensation Committee" means a committee appointed by the Board
in accordance with the By-Laws of the Company consisting of at least three
Non-Employee Directors.

         (h) "Covered Employee" means a Participant who is, or is determined by
the Board to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).

         (i) "Long-Term Incentive Award" means the incentive bonus, if any,
earned by a Participant pursuant to Section 6.

         (j) "Non-Employee Director" means a Director of the Company who is not
a full-time employee of the Company or any Subsidiary.

         (k) "Operating Unit" means the Company as a whole and each other
individual subsidiary, division, store, or other business unit of the Company in
which individuals employed thereby or therein have been approved to participate
in this Bonus Plan by the Board.

         (l) "Participant" means a person who is designated by the Chief
Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer, with the approval of the Board, to receive benefits under this Bonus
Plan and who is at the time an officer, executive, or other employee of the
Company or any one or more of its Subsidiaries, or who has agreed to commence
serving in any of such capacities.

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         (m) "Performance Goal" means the target level of performance for each
Performance Period for the Company as a whole and for each Operating Unit of the
Company and, where applicable, for an individual Participant, in each case as
established by the Board pursuant to Section 4. The Performance Goals applicable
to any Annual Incentive Award or Long-Term Incentive Award made to a Covered
Employee will be based solely upon one or more of the following measures of
performance:

                  (1)      total sales;

                  (2)      comparable store sales;

                  (3)      gross margin;

                  (4)      operating or other expenses;

                  (5)      earnings before interest and taxes ("EBIT");

                  (6)      earnings before interest, taxes, depreciation and
                           amortization;

                  (7)      net income;

                  (8)      earnings per share;

                  (9)      cash flow;

                  (10)     return on investment (determined with reference to
                           one or more categories of income or cash flow and one
                           or more categories of assets, capital or equity); and

                  (11)     stock price appreciation.

Such Performance Goals may be expressed with respect to the Company or one or
more other Operating Units and may be expressed in terms of absolute levels or
percentages or ratios expressing relationships between two or more of the
foregoing measures of performance (e.g., EBIT as a percentage of total sales),
period-to-period changes, relative to business plans or budgets, or relative to
one or more other companies or one or more indices. The two immediately
preceding sentences are intended to comply with the exception from Section
162(m) of the Code for qualified performance-based compensation, and will be
construed, applied, and administered accordingly.

         (n) "Performance Period" means, in the case of determining Annual
Incentive Awards pursuant to Section 5, one fiscal year of the Company, and in
the case of determining Long-Term Incentive Awards pursuant to Section 6, a
period determined by the Board not longer than five consecutive fiscal years of
the Company. The initial Performance Period under this Bonus Plan in either case
will commence on February 2, 1992 and terminate, in the case of Annual Incentive
Awards and Long-Term Incentive Awards, on such date or dates as the Board may
determine. Any new Performance Period in each case would commence on the first
day of each fiscal year of the Company.

         (o) "Retirement" means a Participant's voluntary termination of
employment with the Company on or after attainment of age 65, or such other age
as may from time to time be established as the normal retirement date under the
Company's principal retirement benefit plan in which the Participant is a
participant, and before being informed by the Company that his or her employment
will be terminated.

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         (p) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (or any successor rule substantially to the
same effect), as in effect from time to time.

         (q) "Subsidiary" has the meaning specified in Rule 405 promulgated
under the Securities Act of 1933, as amended (or under any successor rule
substantially to the same effect).

         3. ELIGIBILITY. (a) Except as otherwise provided in this Section 3, an
employee of the Company or one of its Subsidiaries will become a Participant for
a particular Performance Period (i) in respect of Annual Incentive Awards if
such employee (x) is an executive of the Company (including without limitation a
store principal, general merchandise manager, divisional merchandise manager,
store manager, senior vice president, or other vice president or elected officer
of the Company or another Operating Unit) on or as of the first day of the
Performance Period, (y) is recommended for participation by the Chief Executive
Officer, the Chief Operating Officer, or the Chief Merchandising Officer or any
designee thereof, and (z) is approved as a Participant by the Board, and (ii) in
respect of Long-Term Incentive Awards if such employee has overall
responsibility for day-to-day and long-term achievement of results of the
Company or is in a key broad-based strategy formulation and decision-making
position of the Company or another Operating Unit selected by the Board to
participate in this Bonus Plan, in each case as specifically determined by the
Chief Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer and approved by the Board on or as of the first day of the Performance
Period.

         (b) An executive employee who first becomes eligible to participate
after the beginning of a particular Performance Period will become a Participant
for such Performance Period only in accordance with this Section 3(b). The Chief
Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer may, with the approval of the Board, allow participation for a portion
of such Performance Period for such employee on such terms and conditions as the
Chief Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer (with such approval) may determine. In the event that at any time during
any Performance Period with respect to Annual Incentive Awards an executive
employee is first hired by the Company or a Subsidiary, or is promoted by the
Company or any such Subsidiary to a position in a different Operating Unit and
as a result thereof becomes eligible to participate in this Bonus Plan, then,
except as otherwise determined by the Board or as otherwise provided in Section
10, such employee will be entitled to be a Participant for purposes of Annual
Incentive Awards, which will be prorated on the basis of the number of months of
such employee's participation during such Performance Period to the aggregate
number of months in such Performance Period. In the event that within the first
thirty months of any Performance Period with respect to Long-Term Incentive
Awards an executive employee is first hired by the Company or a Subsidiary, or
is promoted by the Company or any such Subsidiary to a position in a different
Operating Unit and as a result thereof becomes eligible to participate in this
Bonus Plan, then, except as otherwise determined by the Board or as otherwise
provided in Section 10, such employee will be entitled to be a Participant for
purposes of Long-Term Incentive Awards, which will be prorated on the basis of
the ratio of the number of months of such employee's participation during such
Performance Period to the aggregate number of months in such Performance Period.

         (c) The Board may, in its discretion, allow an executive employee who
is not otherwise eligible to participate in this Bonus Plan to be treated as a
Participant for all or a portion of any Performance Period on such basis as the
Board may determine.

         4. PERFORMANCE GOALS. (a) The Board will approve for each Performance
Period the applicable Performance Goals for the Company and each other Operating
Unit, as well as for individual Participants in this Bonus Plan, where
appropriate, based upon the consolidated business plan of the Company. Such
Performance Goals will not be adjusted during a Performance Period, except that
such Performance Goals may be so adjusted to prevent dilution or enlargement of
any

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Annual Incentive Award or Long-Term Incentive Award as a result of extraordinary
events or circumstances as determined by the Board or to exclude the effects of
extraordinary, unusual or nonrecurring events, changes in accounting principles,
discontinued operations, acquisitions, divestitures and material restructuring
charges; provided, however, in the case of a Covered Employee, that no such
adjustment will be made if the effect of such adjustment would be to cause the
related compensation to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.

         (b) Prior to the beginning of each Performance Period, the Chief
Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer or any designee thereof will (i) notify each eligible employee who has
been selected to participate in this Bonus Plan that he or she is a Participant
under this Bonus Plan for such Performance Period and (ii) communicate in
writing to each Participant the minimum, maximum, and target Performance Goals
applicable to such Participant for the Company and each other Operating Unit for
such Performance Period, and the corresponding minimum, maximum, and target
levels of Annual Incentive Awards and Long-Term Incentive Awards for performance
by the Participant with respect to such Performance Goals.

         5. ANNUAL INCENTIVE AWARDS. (a) Subject to Section 4, unless changed by
the Board, each eligible Participant may earn Annual Incentive Awards as
hereinafter provided. Each Operating Unit's actual performance during a
particular Performance Period will be measured against the Performance Goals
established therefor by the Board in accordance with Section 4. In the event
such Operating Unit's performance for the Performance Period (A) is below the
minimum Performance Goal established therefor, no Annual Incentive Awards will
be paid to Participants in respect thereof, (B) is equal to the minimum
Performance Goal established therefor, the minimum level of Annual Incentive
Awards will be paid to Participants in respect thereof, (C) is equal to the
target Performance Goal established therefor, the target level of Annual
Incentive Awards will be paid to Participants in respect thereof, (D) is equal
to or greater than the maximum Performance Goal established therefor, the
maximum level of Annual Incentive Awards will be paid to Participants in respect
thereof, and (E) is between any two of the Performance Goal levels described in
the immediately preceding clauses (B), (C), and (D), the level of Annual
Incentive Awards to be paid to Participants in respect thereof will be a level
interpolated by the Board between the corresponding levels of Annual Incentive
Awards paid in respect of such Performance Goal levels.

         (b) Except in the case of a Covered Employee, the Annual Incentive
Award determined pursuant to Section 5(a) may be modified by the Board to
recognize a Participant's individual performance or in other circumstances
deemed appropriate by the Board.

         (c) Notwithstanding any other provision of this Bonus Plan to the
contrary, in no event will an Annual Incentive Award paid to any Participant for
a fiscal year exceed $2.0 million.

         6. LONG-TERM INCENTIVE AWARDS. (a) Unless changed by the Board, each
eligible Participant may earn Long-Term Incentive Awards as hereinafter
provided. Each Operating Unit's actual performance during a particular
Performance Period will be measured against the Performance Goals established
therefor by the Board in accordance with Section 4. In the event such Operating
Unit's performance for such Performance Period (A) is below the minimum
Performance Goal established therefor, no Long-Term Incentive Awards will be
paid to Participants in respect thereof, (B) is equal to the minimum Performance
Goal established therefor, the minimum level of Long-Term Incentive Awards will
be paid to Participants in respect thereof, (C) is equal to the target
Performance Goal established therefor, the target level of Long-Term Incentive
Awards will be paid to Participants in respect thereof, (D) is equal to or
greater than the maximum Performance Goal established therefor, the maximum
level of Long-Term Incentive Awards will be paid to Participants in respect
thereof, and (E) is between any two of the Performance Goal levels described in
the immediately preceding clauses (B), (C), and (D), the level of Long-Term
Incentive Awards to be paid to Participants in respect thereof will be a level
interpolated by the Board

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between the corresponding levels of Long-Term Incentive Awards paid in respect
of such Performance Goal levels.

         (b) Except in the case of a Covered Employee, the Long-Term Incentive
Award determined pursuant to Section 6(a) may be modified by the Board to
recognize a Participant's individual performance or in other circumstances
deemed appropriate by the Board.

         (c) Notwithstanding any other provision of this Bonus Plan to the
contrary, in no event will a Long-Term Incentive Award paid to any Participant
for a Performance Period exceed $3.0 million.

         7. PAYMENT OF AWARDS. Annual Incentive Awards and Long-Term Incentive
Awards will be paid to Participants in respect of any particular Performance
Period (i) in cash and/or Company equity (including stock options, stock credits
or equity equivalents), (ii) in a lump sum and/or in deferred payments or
grants, and (iii) on the date(s) and other terms, including any premium in
respect of any non-cash payments or deferred payments or grants, in each case as
determined by the Board at the time that Performance Goals are established for a
particular Performance Period. All Annual Incentive Awards and Long-Term
Incentive Awards that are paid in cash will be paid in U.S. dollars. The Company
may deduct from any payment such amounts as may be required to be withheld under
any federal, state, or local tax laws.

         8. TERMINATION OF EMPLOYMENT. If a Participant terminates employment
with the Company and its Subsidiaries before the last day of a Performance
Period due to death, disability, or Retirement with the consent of the Company,
the Participant's Annual Incentive Awards and Long-Term Incentive Awards will be
prorated on the basis of the ratio of the number of months of participation
during the Performance Period to which the Annual Incentive Awards and Long-Term
Incentive Awards relate to the aggregate number of months in such Performance
Period. If a Participant's employment with the Company and its Subsidiaries is
terminated by the Company or any such Subsidiary before the last day of a
Performance Period for any reason other than for Cause (as hereinafter defined),
the Participant's Annual Incentive Awards and Long-Term Incentive Awards will be
prorated on the basis of the ratio of the number of months of participation
during the Performance Period to which the Annual Incentive Awards and the
Long-Term Incentive Awards relate to the aggregate number of months in such
Performance Period, unless otherwise determined by the Board. Except as
otherwise provided in this Section 8, if a Participant's employment with the
Company and its Subsidiaries is terminated before the last day of a Performance
Period for any reason, the Participant will not be entitled to any Annual
Incentive Award or Long-Term Incentive Award for such Performance Period unless
otherwise determined by the Board. For purposes of this Agreement, "Cause" means
any act of dishonesty, fraud, or willful misconduct by a Participant in the
performance of the Participant's duties as an employee of the Company, or any
conviction of a Participant for any felony involving moral turpitude.

         9. CHANGE IN CONTROL. In connection with any actual or potential change
in control of the Company, whether as a result of any stock acquisition, merger,
or other business combination transaction, or any restructuring or
recapitalization of the Company, then the Board will take all such actions
hereunder as it may determine to be necessary or appropriate to treat
Participants equitably hereunder, including without limitation the modification
or waiver of applicable Performance Goals, Performance Periods, Annual Incentive
Awards, or Long-Term Incentive Awards, notwithstanding the terms of any initial
award, and whether to establish or fund a trust or other arrangement intended to
secure the payment of such awards.

         10. TRANSFERS AND CHANGES IN RESPONSIBILITIES. (a) If a Participant's
responsibilities materially change or the Participant is transferred during a
Performance Period to another Operating Unit or to a position that is not
designated or eligible to participate in this Bonus Plan, the Company may, as
determined by the Board, either (i) continue the Participant's participation in
this Bonus Plan and, except in the case of a Covered Employee, as of the date of
such change or transfer,

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establish new performance awards (as determined pursuant to Section 10(b)) in
respect of Annual Incentive Awards and/or Long-Term Incentive Awards, as the
case may be, for the Participant with respect to his or her new position, or
(ii) terminate the Participant's participation in this Bonus Plan in respect of
Annual Incentive Awards and/or Long-Term Incentive Awards, as the case may be,
and, as of the date of such change or transfer, the Participant's Annual
Incentive Awards and/or Long-Term Incentive Awards, as the case may be, would be
prorated on the basis of the ratio of the number of months of the Participant's
participation during the Performance Period to which such Annual Incentive
Awards and/or Long-Term Incentive Awards, as the case may be, relate to the
aggregate number of months in such Performance Period.

         (b) If in the event of such a change or transfer the Participant's
participation in this Bonus Plan in respect of Annual Incentive Awards and/or
Long-Term Incentive Awards, as the case may be, is not terminated pursuant to
Section 10(a)(ii), then the Participant's Annual Incentive Awards and/or
Long-Term Incentive Awards, as the case may be, will be prorated on the basis of
the number of months of service by the Participant at each Operating Unit during
the Performance Period.

         11. SECURITY OF PAYMENT OF BENEFITS. Unless otherwise determined by the
Board, all Annual Incentive Awards and Long-Term Incentive Awards will be paid
from the Company's general assets, and nothing contained in this Bonus Plan will
require the Company to set aside or hold in trust any funds for the benefit of
any Participant, who will have the status of a general unsecured creditor of the
Company.

         12. ADMINISTRATION OF THE PLAN. (a) This Bonus Plan will be
administered by the Board, which may from time to time delegate all or any part
of its authority under this Bonus Plan to the Compensation Committee.

         (b) The Board will take such actions as are required to be taken by it
hereunder, may take the actions permitted to be taken by it hereunder, and will
have the authority from time to time to interpret this Bonus Plan and to adopt,
amend, and rescind rules and regulations for implementing and administering this
Bonus Plan. All such actions will be in the sole discretion of the Board and,
when taken, will be final, conclusive, and binding. Without limiting the
generality or effect of the foregoing, the interpretation and construction by
the Board of any provision of this Bonus Plan or of any agreement, notification,
or document evidencing the grant of benefits payable to Participants and any
determination by the Board in its sole discretion pursuant to any provision of
this Bonus Plan or any provision of such agreement, notification, or document
will be final and conclusive. Without limiting the generality or effect of any
provision of the Certificate of Incorporation of the Company, neither the Chief
Executive Officer, the Chief Operating Officer, or the Chief Merchandising
Officer nor any member of the Board will be liable for any action or
determination made in good faith.

         (c) The provisions of Sections 5 and 6 will be interpreted as
authorizing the Board, in taking any action under or pursuant to this Bonus
Plan, to take any action it determines in its sole discretion to be appropriate,
subject only to the express limitations therein contained, and no authorization
in either such Section or any other provision of this Bonus Plan is intended or
may be deemed to constitute a limitation on the authority of the Board.

         (d) The existence of this Bonus Plan or any right granted or other
action taken pursuant hereto will not affect the authority of the Board or the
Company to take any other action, including in respect of the grant or award of
any annual or long-term bonus or other right or benefit, whether or not
authorized by this Bonus Plan, subject only to limitations imposed by applicable
law as from time to time applicable thereto.

         13. MISCELLANEOUS. (a) This Bonus Plan will not confer upon any
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary,

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nor will it interfere in any way with any right the Company or any Subsidiary
would otherwise have to terminate or modify the terms of such Participant's
employment or other service at any time.

         (b) Except as otherwise provided in this Bonus Plan, no right or
benefit under this Bonus Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge such right or benefit will
be void. No such right or benefit will in any manner be liable for or subject to
the debts, liabilities, or torts of a Participant.

         (c) This Bonus Plan may be amended or terminated from time to time by
the Board. In the event this Bonus Plan is terminated before the last day of a
Performance Period, Annual Incentive Awards and Long-Term Incentive Awards
payable for such Performance Period will be prorated on the basis of the ratio
of the number of months in such Performance Period prior to such termination to
the aggregate number of months in such Performance Period and will be paid only
after the end of such Performance Period, which will be deemed to continue until
the expiration thereof as if this Bonus Plan had not been terminated.

         (d) If any provision in this Bonus Plan is held to be invalid or
unenforceable, no other provision of this Bonus Plan will be affected thereby.

         (e) This Bonus Plan will be governed by and construed in accordance
with applicable United States federal law and, to the extent not preempted by
such federal law, in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.

         14. EFFECTIVENESS. The amendment and restatement of this Bonus Plan set
forth herein will become effective as of December 10, 1999.

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                                                                   Exhibit 10.50

                              EMPLOYMENT AGREEMENT

                       Entered into as of August 27, 1999

                                     between

                       FEDERATED CORPORATE SERVICES, INC.

                                       and

                               JAMES M. ZIMMERMAN

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                              EMPLOYMENT AGREEMENT
                              --------------------

                  THIS AGREEMENT, made in the City of Cincinnati and State of
Ohio, as of the 27th day of August, 1999 (the "Agreement Effective Date"),
between Federated Corporate Services, Inc., a Delaware corporation (hereinafter
called the "Employer"), and James M. Zimmerman of Cincinnati, Ohio (hereinafter
called the "Employee").

                                    RECITALS
                                    --------

                  Employer and Employee are parties to an Employment Agreement
dated as of March 10, 1997.

                  Employer and Employee are desirous of entering into a new
employment agreement with a term commencing on May 1, 1999.

                  IT IS AGREED by and between the parties hereto as follows:

                                    ARTICLE I
                                    ---------

                                   EMPLOYMENT
                                   ----------

                  1.1 TERM AND DUTIES. The Employer agrees to and does employ
the Employee to perform the duties of Chairman of the Board ("Chairman") and
Chief Executive Officer of Federated Department Stores, Inc. ("Federated") in
accordance with the terms of this Agreement. The period (the "Term") of such
employment shall begin on May 1, 1999 and shall end on the later of April 30,
2003 or such later date as agreed by the Employer and Employee. The duties of
the Employee shall be those commensurate with the office of Chairman of the
Board and Chief Executive Officer of Federated. In such capacity he shall have
general charge of the business and affairs of Federated. Neither the Employee's
title nor any of his functions shall be changed without his consent. While it is
understood that the right to elect directors and officers of Federated is by law
vested in the stockholders and directors of Federated, it is nevertheless
mutually contemplated, subject to such rights, that the Employee shall, at all
times

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during his employment, be Chairman of the Board and Chief Executive Officer of
Federated and shall be a member of the Board of Directors of Federated.

                  1.2 COMPENSATION. In consideration of Employee's services
during the Term, the Employer agrees to (a) pay the Employee an annual salary in
the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) ("Base
Salary"), (b) permit the Employee to participate in Federated's annual and
long-term bonus programs as set forth on Exhibit A and (c) grant the Employee
stock options as set forth on Exhibit A. Nothing in this Agreement shall
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in such salary or any such bonuses or other forms of
additional compensation, including additional equity or equity-based awards, any
such salary and/or bonus increases and additional compensation, contingent or
otherwise, to be determined solely in the discretion of the Board of Directors
of the Employer or persons to whom such authority is delegated by such Board of
Directors. The Employee's salary shall never be reduced during the Term without
the Employee's consent.

                  1.3 PAYMENT SCHEDULE. The Base Salary specified in Section
1.2(a) hereof shall be payable as current salary, in installments not less
frequently than monthly, and at the same rate for any fraction of a month
unexpired at the end of the Term.

                  1.4 EXPENSES. During the Term the Employee shall be allowed
reasonable traveling expenses and shall be furnished office space, assistance
and accommodations suitable to the character of his position with Federated and
adequate for the performance of his duties hereunder.

                  1.5 BENEFITS. The Employee and/or the Employee's family, as
the case may be, shall be eligible for participation in and shall receive all
benefits under savings and retirement programs, welfare benefit plans, fringe
benefit programs and perquisites provided by the Employer and its affiliates
(including, for example, without limitation, medical, prescription, dental,
disability, salary continuance, executive life, group life, accidental death and
travel accident insurance plans and programs, use of an automobile, financial
counseling, and suitable

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business and country club memberships), at least as favorable as the most
favorable of such plans and programs provided to key executives of Federated in
effect from time to time.

                  1.6 TERMINATION IN CASE OF DISABILITY. The Employee shall not
be in breach of this Agreement if he shall fail to perform his duties hereunder
because of physical or mental disability. If for a continuous period of 12
months during the Term the Employee fails to render services to the Employer
because of the Employee's physical or mental disability, the Board or its
delegate may end the Term prior to its stated termination date. If there should
be any dispute between the parties as to the Employee's physical or mental
disability at any time, such question shall be settled by the opinion of an
impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within 10 days of a written request
therefor by either party to the other, then one designated by the then president
of the local Academy of Medicine. The written opinion of such physician as to
the matter in dispute shall be final and binding on the parties.

                  1.7 TERMINATION OF SERVICES. If, prior to the end of the Term,
(a) the Employer shall terminate the Employee's employment other than for Cause,
or (b) the Executive shall terminate his employment for Good Reason, then the
Employer shall immediately thereupon pay the Employee in a lump sum in cash (a)
the full amount of salary that would be payable to the Employee under Section
1.2 and (b) the aggregate of the target level annual bonus for which the
Employee is eligible under the Employer's 1992 Incentive Bonus Plan as set forth
in Exhibit A for each year remaining in the Term following such termination.
Employee shall be credited with vesting and benefit service through the
remainder of the Term.

                  1.8 TERMINATION FOR CAUSE. The Employer may terminate the
employment of the Employee and this Agreement and all of its obligations
hereunder, except for obligations accrued but unpaid to the effective date of
termination, for Cause upon notice given pursuant to this Section. As used in
this Agreement, the term "Cause" shall mean (a) the willful breach of duty by
the Employee in the course of his employment, (b) the Employee's habitual
neglect of his duties, (c) a material willful breach by the Employee of his
duties under this Agreement which

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breach is not cured by the Employee within ten (10) days of receipt of written
notice thereof from the Employer to the Employee, or (d) the Employee's final
conviction of a felony, which conviction is nonappealable or for which the
period of filing an appeal has expired. "Cause" shall not include (a) bad
judgment or negligence of the Employee (other than his habitual neglect of
duty), or (b) any act or omission believed by the Employee in good faith to have
been in or not opposed to the interests of the Employer (without intent of
gaining therefrom directly or indirectly a profit to which he was not legally
entitled) and reasonably believed by the Employee not to have been improper or
unlawful, or (c) any act or omission in respect of which a determination could
properly have been made by the Board of Directors of Federated that the Employee
met the applicable standard of conduct prescribed for indemnification or
reimbursement under the bylaws of Federated or the laws of Delaware, in each
case in effect at the time of such act or omission, or (d) an act or omission
with respect to which notice of termination is given more than twelve months
after the earliest date on which any non-employee director of Federated who was
not a party to such act or omission knew or should have known of such act or
omission.

                  1.9 The term "Good Reason" means:

                      A. The assignment to the Employee of any duties materially
inconsistent with the Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
in Article I of this Agreement, or any other action by the Employer which
results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an action not taken in bad faith
and which is remedied by the Employer within ten (10) days after receipt of
written notice thereof given by the Employee, provided that repeated instances
of such action shall be evidence of the bad faith of the Employer;

                  B. any material failure by the Employer to comply with any of
the provisions of this Agreement, other than a failure not occurring in bad
faith and which is remedied by the Employer within ten (10) days after receipt
of written notice thereof given by the Employee, provided that repeated failures
shall be evidence of the bad faith of the Employer;

                                       4
<PAGE>   6

                  C. failure of the Employee to be elected or reelected Chairman
and Chief Executive Officer of the Federated or to be elected or reelected to
membership on the Federated's Board of Directors; or

                  D. any purported termination by the Employer of the Employee's
employment otherwise than as expressly permitted by this Agreement.

                  1.10 LOCATION OF EMPLOYMENT. Employer shall not require
Employee to be based in any office or location other than within the Cincinnati,
Ohio Standard Metropolitan Statistical Area without his agreement, except for
travel reasonably required in the performance of the Employee's
responsibilities.

                                   ARTICLE II
                                OTHER PROVISIONS
                                ----------------

                  2.1 PERFORMANCE OF DUTIES. The Employee agrees that during the
Term (a) he will faithfully and in conformity with the directions of the Board
of Directors of Federated, perform the duties of his employment hereunder, and
that he will devote to the performance of said duties all such time and
attention as they shall reasonably require, taking, however, from time to time
(as the Employer agrees that he may) reasonable vacations; and (b) he will not,
without the express consent of the Board of Directors of Federated, or persons
to whom such authority is delegated by such Board of Directors become actively
associated with or engaged in any competing business (as hereinafter defined)
while he is employed by Employer or within one (1) year of the first to occur of
(i) the expiration of the Term or (ii) the termination of his employment by the
Employer for Cause or by the Employee other than for Good Reason prior to or at
the end of the Term, and he will do nothing inconsistent with his duties to the
Employer.
                  Notwithstanding the foregoing, the aforesaid one (1) year
period shall be shortened to whatever shorter period, if any, is adopted at any
time subsequent to the date hereof by the Compensation Committee of the Board of
Directors of Federated as the standard period

                                       5
<PAGE>   7

during which such non-compete provisions in the Employer's standard employment
agreements shall apply.

                  In the event that (i) the Employee is advised at any time by
the Employer in writing that his services will no longer be required during the
Term or (ii) the employment of the Employee is terminated by the Employee for
Good Reason, Employee shall be free to become actively engaged with another
business regardless of whether it is a competing business.
                  Employee agrees that he will not disclose to anyone outside of
the Employer, or use in other than the Employer's business, confidential
information relating to the Employer's business, in any way obtained by him
while employed by the Employer, unless authorized by the Employer in writing. It
is understood that violation of this provision would cause irreparable harm to
the Employer and that Employer may seek to enjoin any such violation or to take
any other applicable action. The Employee also agrees that he will not engage in
any activity which would violate the Conflict of Interest or Business Ethics
Statement signed from time to time by the Employee.
                  As used in this Section 2.1 a "competing business" shall be
any business which:

                  A. at the time of determination, is substantially similar to
the whole or a substantial part of the business at the end of the period of
active employment, conducted by Employer, or any of its subsidiaries, or
subsidiaries of subsidiaries, or affiliates, or divisions, or substantially
similar to some substantial part of said business; and
                  B. at the time of determination, is operating a store or
stores which, during its or their fiscal year preceding the determination, in
the aggregate had aggregate net sales, including sales in leased and licensed
departments, in excess of $10,000,000, which store or stores is or are located
in a city or within a radius of twenty-five (25) miles from the outer limits of
a city where Employer, or any of its subsidiaries, or subsidiaries of
subsidiaries, or affiliates, or divisions is operating a store or stores which,
during its or their fiscal year preceding the determination, in the aggregate
had aggregate nets sales, including sales in leased and licensed departments, in
excess of $10,000,000; and

                                       6
<PAGE>   8

                  C. had aggregate net sales at all its locations, including
sales in leased and licensed departments and sales by its divisions,
subsidiaries and affiliates, during its fiscal year preceding that in which the
Employee made such an investment therein, or first rendered personal services
thereto, following his termination of service, in excess of $25,000,000.

                                   ARTICLE III
                                  MISCELLANEOUS
                                  -------------

                  3.1 ASSIGNMENT. This Agreement shall not be assignable by the
Employer without the written consent of the Employee. The Employee may not
assign, pledge, or encumber his interest in this Agreement, or any part thereof,
without the written consent of the Employer.
                  3.2 GOVERNING LAW. This Agreement has been executed on behalf
of the Employer by an officer of the Employer located in the City of Cincinnati,
Ohio. This Agreement and all questions arising in connection herewith shall be
governed by the internal substantive laws of the State of Ohio. The Employer and
the Employee each consent to the jurisdiction of, and agree that any controversy
between them arising out of this Agreement shall be brought in, the United
States District Court for the Southern District of Ohio, Western Division; the
Court of Common Pleas for Hamilton County, Ohio; or such other court venued
within Hamilton County, Ohio as may have subject matter jurisdiction over the
controversy.
                  3.3 SEVERABILITY. If any portion of this Agreement is held to
be invalid or unenforceable, such holding shall not affect any other portion of
this Agreement.
                  3.4 ENTIRE AGREEMENT. This Agreement comprises the entire
agreement between the parties hereto and as of the date hereof, supersedes,
cancels and annuls any and all prior agreements between the parties hereto. This
Agreement may not be modified, renewed or extended orally, but only by a written
instrument referring to this Agreement and executed by the parties hereto.

                                       7
<PAGE>   9

                  3.5 GENDER AND NUMBER. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and vice
versa, where the sense requires.
                  3.6 NOTICES. Any notice or consent required or permitted to be
given under this Agreement shall be in writing and shall be effective when given
by personal delivery or five business days after being sent by certified US
mail, return receipt requested, to the Secretary of Federated Department Stores,
Inc. at its principal place of business in the City of Cincinnati or to the
Employee at his last known address as shown on the records of the Employer.
                  3.7 WITHHOLDING TAXES. The Employer may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
                  3.8 WAIVER AND RELEASE. In consideration of the Employer's
entering into this Agreement, and the receipt of other good and valuable
consideration, the sufficiency of which is expressly acknowledged, the Employee,
for himself and his successors, assigns, heirs, executors and administrators,
hereby waives and releases and forever discharges the Employer and its
affiliates and their officers, directors, agents, employees, shareholders,
successors and assigns from all claims, demands, damages, actions and causes of
action whatsoever which he now has on account of any matter, whether known or
unknown to him and whether or not previously disclosed to the Employee or the
Employer, that relates to or arises out of (a) any existing or former employment
agreement (written or oral) entered into between the Employee and the Employer
or any of its affiliates (or any amendment or supplement to any such agreement),
(b) any agreement providing for a payment or payments or extension of the
employment relationship triggered by a merger or sale or other disposition of
the stock or assets or restructuring of the Employer or any affiliate of the
Employer, or (c) any applicable severance plan.
                  3.9 ENFORCEMENT OF AGREEMENT. If the Employee incurs legal or
other fees and expenses in an effort to establish entitlement to benefits under
this Agreement, regardless of whether the Employee ultimately prevails, the
Employer shall reimburse him for such fees and

                                       8
<PAGE>   10

expenses, unless a court of competent jurisdiction determines that the Employee
made such effort in bad faith.

                  Reimbursement of fees and expenses described in the preceding
paragraph shall be made monthly during the course of any action upon the written
submission of a request for reimbursement together with proof that the fees and
expenses were incurred

                  3.10 MISCELLANEOUS. Except as specifically provided herein,
all accounts payable pursuant to this Agreement shall be paid without reduction
regardless of any amounts of salary, compensation or other amounts which may be
paid or payable to Employee from any source or which Employee could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings. Employee shall not be required to seek other
employment, and there shall be no offset to amounts due hereunder as a result of
any salary, compensation or other amounts Employee may be paid from other
sources.
                  IN WITNESS WHEREOF, the parties hereto have hereunto and to a
duplicate hereof set their signatures as of August 27, 1999.

                                         FEDERATED CORPORATE SERVICES, INC.

                                         By:   /s/  DENNIS J. BRODERICK
                                               ---------------------------------
                                               Dennis J. Broderick
                                         Title: President

                                         JAMES M. ZIMMERMAN

                                               /s/  JAMES M. ZIMMERMAN
                                               ---------------------------------

                                       9
<PAGE>   11

                                    EXHIBIT A

                                       to
                              EMPLOYMENT AGREEMENT

                   Entered into as of August 27, 1999 between

                       FEDERATED CORPORATE SERVICES, INC.

                                       And

                               JAMES M. ZIMMERMAN

(All capitalized terms used in this Exhibit are defined as set forth in
Agreement)

ANNUAL BONUS:              In respect of fiscal 1999, the annual bonus payable
                           (if any) under the terms of the 1992 Incentive Bonus
                           Plan (as such may be amended from time to time) of
                           Federated Department Stores, Inc. (Federated) will be
                           based on performance goals established for the senior
                           executives of the Employer on an annual basis by the
                           Board of Directors of Federated or a Committee
                           thereof, with the amount of bonus equal to a sliding
                           percent of Employee's annual base salary in effect as
                           of the last day of the performance period based on
                           performance against the targeted annual goals, as
                           follows:

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (a)   CORPORATE EBIT $
                           Below 95% of Target                     0.0%
                           95% of Target                          24.0%
                           Target                                 50.0%
                           110% of Target                         90.0%

                     (b)   CORPORATE SALES $
                           Below Target                            0.0%
                           Target                                 10.0%
                           101% of Target                         34.0%

                                       1
<PAGE>   12

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (c)   CORPORATE ROGI  %
                           Below Target                            0.0%
                           Target                                 10.0%
                           1.0 ppt. above Target                  34.0%

                           For each year during the Term beginning with and
                           including fiscal 2000, the annual bonus payable (if
                           any) under the terms of the 1992 Incentive Bonus Plan
                           (as such may be amended from time to time) of
                           Federated Department Stores, Inc. (Federated) will be
                           based on performance goals established for the senior
                           executives of the employer on an annual basis by the
                           Board of Directors of Federated or a Committee
                           thereof, with the amount of bonus equal to a sliding
                           percent of Employee's annual base salary in effect as
                           of the last day of the performance period based on
                           performance against the targeted annual goals, as
                           follows:

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (a)   CORPORATE EBIT $
                           Below 95% of Target                     0.0%
                           95% of Target                          34.0%
                           Target                                 70.0%
                           110% of Target                        126.0%

                     (b)   CORPORATE SALES $
                           Below Target                            0.0%
                           Target                                 15.0%
                           101% of Target                         51.0%

                     (c)   CORPORATE ROGI  %
                           Below Target                            0.0%
                           Target                                 15.0%
                           1.0 ppt. above Target                  51.0%

                           The percent of base salary payable as the annual
                           bonus is the aggregate of the above designated payout
                           based on performance achieved under each of the
                           performance components described

                                       2
<PAGE>   13

                           in (a), (b) and (c), above, except that if Corporate
                           EBIT $ falls below 95% of Target, no bonus is payable
                           for any component of the annual bonus plan, and
                           failure to achieve the annual EBIT percent to target
                           reduces the bonus otherwise payable in respect only
                           of the above corporate EBIT $ performance component
                           per the approved applicable executive compensation
                           plan description.

                           Any annual bonus payable hereunder shall be paid in
                           the fiscal year following the annual performance
                           period in respect of which the bonus is payable in
                           accordance with Federated's 1992 Incentive Bonus Plan
                           (as such may be amended from time to time).

                           By operation of Federated's Supplementary Executive
                           Retirement Plan, annual bonuses paid to Employee
                           under Federated's 1992 Incentive Bonus Plan are
                           included as eligible compensation under Federated's
                           Pension Plan.

LONG TERM PLAN:            For the 1997 - 1999 three year performance period,
                           the bonus payable (if any) under the terms of
                           Federated's 1992 Incentive Bonus Plan (as such may be
                           amended from time to time) will be based on
                           performance goals established for the senior
                           executives of Federated in respect of each such
                           three-year performance period by the Board of
                           Directors of Federated or a Committee thereof, with
                           the amount of bonus equal to a sliding percent of
                           Employee's annual base salary (prorated on an annual
                           basis for any change in Employee's base salary
                           occurring at any time during any such three-year
                           period and determined for any such year in the
                           three-year period based on the annual base salary in
                           effect as of the last day of the fiscal year) based
                           on performance against the targeted three-year goals,
                           as follows:

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (a)   CORPORATE EBIT $
                           Below 95% of Target                     0.0%
                           95 % of Target                         14.0%
                           Target                                 30.0%
                           110% of Target                         42.0%
                           120% of Target                         54.0%

                                       3
<PAGE>   14

                     (b)   PERFORMANCE VS PEERS RANKING
                           #1 Ranking                             36%
                           #2 Ranking                             31%
                           #3 Ranking                             25%
                           #4 Ranking                             20%
                           #5 Ranking                             10%
                           #6 Ranking                              0%

                           The percent of base salary payable as the long term
                           bonus in respect of the 1997-1999 performance period
                           is the aggregate of the above designated payout based
                           on performance achieved in respect of the performance
                           components described in (a) and (b), above, except
                           that if the three year Corporate EBIT $ falls below
                           95% of Target, no bonus is payable for any component
                           of the long-term bonus, and failure to achieve the
                           EBIT percent to target in year three reduces the
                           bonus otherwise payable in respect only of the above
                           corporate EBIT $ performance component per the
                           approved applicable executive compensation plan
                           description.

                           For each three year performance period beginning with
                           and including the 1998 - 2000 performance period, the
                           bonus payable (if any) under the terms of Federated's
                           1992 Incentive Bonus Plan (as such may be amended
                           from time to time) will be based on performance goals
                           established for the senior executives of Federated in
                           respect of each such three-year performance period by
                           the Board of Directors of Federated or a Committee
                           thereof, with the amount of bonus equal to a sliding
                           percent of Employee's annual base salary (prorated on
                           an annual basis for any change in Employee's base
                           salary occurring at any time during any such
                           three-year period and determined for any such year in
                           the three-year period based on the annual base salary
                           in effect as of the last day of the fiscal year)
                           based on performance against the targeted three-year
                           goals, as follows:

                                       4
<PAGE>   15

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (a)   CORPORATE EBIT $
                           Below 95% of Target                     0.0%
                           95% of  Target                         24.0%
                           Target                                 34.0%
                           110% of Target                         75.0%

                           PERFORMANCE AGAINST TARGET        PAYOUT AS PERCENT
                                                             OF ANNUAL SALARY
                     (b)   CORPORATE AVG. ROGI  %
                           Below Target                            0.0%
                           Target                                 16.0%
                           1.0 ppt. above target                  37.0%

                           The percent of base salary payable as the long-term
                           bonus in respect of each three year performance
                           period beginning and including the 1998-2000
                           performance period is the aggregate of the above
                           designated payout based on performance achieved in
                           respect of the performance components described in
                           (a) and (b) above, except that if the three year
                           Corporate EBIT $ falls below 95% of Target, no bonus
                           is payable for any component of the long-term bonus,
                           and failure to achieve the EBIT percent to target in
                           year three reduces the bonus otherwise payable in
                           respect only of the above corporate EBIT $
                           performance component per the approved applicable
                           executive compensation description.

                           Illustratively, in respect of the fiscal 1997 - 1999
                           performance period, assuming achievement of the 1997
                           -1999 goal at the 50% target level (i.e., Corporate
                           EBIT $ achieved at target and #4 ranking versus
                           peers), the long-term incentive payout in 2000 in
                           respect of such three-year period would be $625,000
                           (50% (30% payout re corporate EBIT $ + 20% payout re
                           peer performance) x $1,250,000 (the base salary in
                           effect at the end of 1997 fiscal year).

                           Employee shall be entitled to a pro rata portion of a
                           long-term bonus, if any is payable under the terms of
                           Federated's 1992 Incentive Bonus Plan (as such may be
                           amended from time to time), for any three-year
                           performance period commencing on or after fiscal 1997

                                       5
<PAGE>   16

                           but which performance period has not ended as of the
                           end of Term. The pro rata payment is based on the
                           length of Employee's service of employment within
                           such three-year performance period. Illustratively,
                           if the performance period covers the 1999-2001 fiscal
                           years and the employment terminates on the last day
                           of the 2000 fiscal year, Employee would have been
                           employed for sixty-seven percent (67%) of the
                           performance period and would be eligible for sixty-
                           seven percent (67%) of any long-term bonus payable as
                           provided above if and when any bonus is paid in
                           respect of that period under the terms of Federated's
                           1992 Incentive Plan (as may be amended) based upon
                           the performance goals established for the senior
                           executives of the Employer for that period by the
                           Board of Directors of Federated or a Committee
                           thereof.

                           Any long-term bonus payable hereunder shall be paid
                           in the fiscal year following the three-year
                           performance period in respect of which the bonus is
                           payable in accordance with Federated's 1992 Incentive
                           Bonus Plan. Any long-term bonus payable for any
                           three-year performance period beginning with and
                           including the 1998 - 2000 performance period will be
                           paid 50% in cash and 50% in deferred stock credits in
                           accordance with the approved applicable executive
                           compensation plan description, subject, as provided
                           in such plan, to Executive's election to allocate a
                           portion or all of any cash payout to deferred stock
                           credits. Any amounts deferred, including the required
                           50% deferral and any optional deferral above 50%,
                           will include a 20% premium, also to be paid in
                           deferred stock credits.

STOCK OPTIONS:             Federated shall grant, to Employee, effective August
                           27, 1999 (the "Grant Date"), options for 450,000
                           shares, with vesting of 112,500 shares on May 1, 2000
                           (the "Option Vesting Date"), 112,500 shares on the
                           first anniversary of the Option Vesting Date, 112,500
                           shares on the second anniversary of the Option
                           Vesting Date, and 112,500 shares on the third
                           anniversary of the Option Vesting Date, except that
                           100%

                                       6
<PAGE>   17

                           vesting shall occur immediately upon the effective
                           date of the termination of the employment of Employee
                           (a) by Employer other than for Cause, (b) by Employee
                           for Good Reason or (c) by Employer and Employee by
                           mutual consent; the options will be issued at one
                           hundred percent of the closing market price of
                           Federated's common stock on the New York Stock
                           Exchange as listed in THE WALL STREET JOURNAL on the
                           trading day immediately preceding the Grant Date; the
                           term of the grant shall expire ten years from the
                           Grant Date; any options that are unvested as of the
                           time Employee discontinues his employment with
                           Employer shall continue to vest in accordance with
                           the vesting schedule described above unless the
                           Employee's employment is terminated for cause (as
                           defined in the Non-Qualified Stock Option Agreement),
                           except that if the Employee at any time prior to the
                           third anniversary of the Option Vesting Date renders
                           personal services to The May Department Stores
                           Company, Dillard's, Inc., Saks, Inc., or Nordstrom,
                           Inc., the grant of options, and all rights of the
                           Employee with regard to any vested but unexercised
                           options and any unvested options, shall terminate on
                           the commencement of such engagement; the grant is
                           subject to the terms of the attached form of
                           Non-Qualified Stock Option Agreement with Federated.

RESTRICTED STOCK AWARD:    Federated shall grant to Employee, effective August
                           27, 1999 (the "Grant Date"), 100,000 restricted
                           shares of Federated's Common Stock, with restrictions
                           as to 25,000 shares lapsing on May 1, 2000 (the
                           "Lapse Date") and as to 25,000 shares on each of the
                           first, second and third anniversaries of the Lapse
                           Date, except that 100% lapsing shall occur
                           immediately upon the effective date of the
                           termination of the employment of Employee (a) by
                           Employer other than for Cause, (b) the Employee for
                           Good Reason or (c) by Employer and Employee by mutual
                           consent; the restrictions on any shares that have not
                           lapsed as of the time the Employee discontinues his
                           employment with Employer shall continue to lapse in
                           accordance with the lapsing schedule described above
                           unless the Employee's employment is terminated for
                           cause (as defined in the Restricted Stock Agreement),
                           except that if Employee at any time prior to the
                           third anniversary of the Lapse Date renders personal
                           services to The May Department Stores Company,
                           Dillard's, Inc., Saks, Inc., or Nordstrom's, Inc.,
                           all shares of

                                       7
<PAGE>   18

                           restricted stock on which the restrictions have not
                           lapsed shall be forfeited on the commencement of such
                           engagement; the grant is subject to the terms of the
                           attached form of Restricted Stock Agreement.

JAMES M. ZIMMERMAN                                FEDERATED CORPORTE
                                                  SERVICES, INC.

/s/  James M. Zimmerman                           /s/  Dennis J. Broderick
----------------------------------                ------------------------------
                                                  DENNIS J. BRODERICK
                                                  PRESIDENT

                                       8

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