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Terry J. Lundgren Chairman, President and Chief Executive Officer Federated Department Stores, Inc.		John L. Dunham Chairman, President and Chief Executive Officer The May Department Stores Company

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	1. To approve and adopt the Agreement and Plan of Merger, dated as of February 27, 2005, by and among May, Federated Department Stores, Inc. and Milan Acquisition LLC, a wholly owned subsidiary of Federated, and the transactions contemplated by the merger agreement, including the merger, pursuant to which May will merge with Milan Acquisition LLC, on the terms and subject to the conditions contained in the merger agreement, and each outstanding share of May common stock would be converted into the right to receive $17.75 in cash and 0.3115 shares of Federated common stock. A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/ prospectus;
	2. To elect four members of May’s board of directors;
	3. To adopt an amendment to May’s amended and restated certificate of incorporation to provide for the annual election of directors;
	4. To ratify the appointment of Deloitte & Touche LLP as May’s independent registered public accounting firm for the fiscal year ending January 28, 2006;
	5. To approve adjournments or postponements of the May annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the May annual meeting to approve the above proposals; and
	6. To consider and take action upon any other business that may properly come before the May annual meeting or any reconvened meeting following an adjournment or postponement of the May annual meeting.

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	By order of the board of directors,
	Richard A. Brickson
	Secretary and Senior Counsel

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	1. To authorize the issuance of Federated common stock pursuant to the terms of the Agreement and Plan of Merger, dated as of February 27, 2005, by and among The May Department Stores Company, Federated and Milan Acquisition LLC, a wholly owned subsidiary of Federated, pursuant to which May will merge with Milan Acquisition LLC on the terms and subject to the conditions contained in the merger agreement. A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/ prospectus;
	2. To elect three Class II members of Federated’s board of directors;
	3. To adopt an amendment to Federated’s certificate of incorporation to provide for the annual election of directors;
	4. To ratify the appointment of KPMG LLP as Federated’s independent registered public accounting firm for the fiscal year ending January 28, 2006;
	5. To approve adjournments or postponements of the Federated annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Federated annual meeting to approve the above proposals; and
	6. To consider and take action upon any other business that may properly come before the Federated annual meeting or any reconvened meeting following an adjournment or postponement of the Federated annual meeting.

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	By order of the board of directors,
	Dennis J. Broderick
	Senior Vice President, General Counsel and Secretary

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			Page
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETINGS AND THE MERGER				1
	The Merger			1
	Other Federated Annual Meeting Proposals			3
	Other May Annual Meeting Proposals			3
	Procedures			4
SUMMARY				6
	Information about Federated			6
	Information about May			6
	The Merger			6
	Opinions of our Financial Advisors			8
	Record Date; Outstanding Shares; Shares Entitled to Vote			9
	Voting; Proxies			9
	Stock Ownership of Directors and Executive Officers			10
	Ownership of Federated After the Merger			10
	Interests of May Directors and Executive Officers in the Merger			11
	Federated Board of Directors After the Merger			11
	Listing of Federated Common Stock and Delisting of May Common Stock			11
	Appraisal Rights			11
	Conditions to Completion of the Merger			12
	Termination of the Merger Agreement and Termination Fees			12
	No Solicitation by May			12
	Material United States Federal Income Tax Consequences			13
	Accounting Treatment			13
	Risks			13
	Litigation Related to the Merger			13
	Transition Leadership Team			14
	Comparison of Rights of Stockholders			14
FINANCIAL SUMMARY				15
	Federated Market Price Data and Dividends			15
	May Market Price Data and Dividends			16
	Selected Historical Financial Data of Federated			17
	Selected Historical Financial Data of May			18
	Selected Unaudited Pro Forma Financial Data of Federated			19
COMPARATIVE PER SHARE INFORMATION				20
COMPARATIVE MARKET VALUE INFORMATION				21
RISK FACTORS				22
	Risks Relating to the Merger			22
	Risks Relating to Federated’s Operations After the Consummation of the Merger			25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS				27
THE MAY ANNUAL MEETING				28
	General			28

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	Date, Time and Place of the May Annual Meeting			28
	Purposes of the May Annual Meeting			29
	Record Date; Outstanding Shares; Shares Entitled to Vote			29
	Quorum and Voting Rights			29
	Recommendation of the Board of Directors			30
	Voting by May’s Directors and Executive Officers			32
	Voting; Proxies			32
	How to Vote			34
	Revoking Your Proxy			35
	Other Voting Matters			35
	Proxy Solicitations			35
	Other Business; Adjournment and Postponements			36
	Assistance			36
THE FEDERATED ANNUAL MEETING				36
	General			36
	Date, Time and Place of the Federated Annual Meeting			36
	Purposes of the Federated Annual Meeting			36
	Record Date; Outstanding Shares; Shares Entitled to Vote			37
	Quorum and Voting Rights			37
	Recommendation of the Board of Directors			38
	Voting by Federated’s Directors and Executive Officers			41
	Voting; Proxies			41
	How to Vote			42
	Revoking Your Proxy			43
	Other Voting Matters			43
	Proxy Solicitations			43
	Other Business; Adjournments or Postponements			44
	Assistance			44
THE MERGER				44
	Background of the Merger			44
	May’s Reasons for the Merger and Recommendation of May’s Board of Directors			51
	Federated’s Reasons for the Merger and Recommendation of Federated’s Board of Directors			55
	Opinions of May’s Financial Advisors			57
	Opinion of Federated’s Financial Advisor			75
	Interests of May Directors and Executive Officers in the Merger			83
	Accounting Treatment			88
	Appraisal Rights of May Stockholders			88
	Delisting and Deregistration of May Common Stock			91
	Federal Securities Laws Consequences; Resale Restrictions			92
	Certain Events			92
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES				92
THE MERGER AGREEMENT				95
	The Merger; Closing			96
	Directors and Officers			96

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			Page
	Merger Consideration			97
	Exchange Procedures			99
	Exchange of Shares			99
	Transfers of Ownership and Lost Stock Certificates			100
	Termination of Exchange Fund			100
	No Liability			100
	Representations and Warranties			100
	Covenants and Agreements			102
	Conditions to Completion of the Merger			111
	Termination of the Merger Agreement			113
	Termination Fees			114
	Amendments, Extensions and Waivers			116
INFORMATION ABOUT FEDERATED				117
	Business			117
	Directors of Federated			119
	Compliance with Section 16(a) of the Exchange Act			126
	Executive Officers of Federated			127
	Executive Compensation			128
	Report of the Compensation and Management Development Committee			133
	Report of the Audit Committee			138
	Stock Performance Graph			140
	Beneficial Ownership of Federated Common Stock			140
	Stock Ownership of Directors and Executive Officers			142
	Securities Authorized for Issuance Under Equity Compensation Plans			143
INFORMATION ABOUT MAY				144
	Business			144
	Directors of May			145
	Compliance with Section 16(a) of the Exchange Act			153
	Executive Officers of May			153
	Executive Compensation			155
	Report of the Executive Compensation and Development Committee			161
	Report of the Audit Committee			165
	Stock Performance Graph			167
	Beneficial Ownership of May Common Stock			167
	Stock Ownership of Directors and Executive Officers			168
PRO FORMA FINANCIAL DATA UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF FEDERATED				169
FEDERATED UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET				170
FEDERATED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED JANUARY 29, 2005				174
MAY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED JANUARY 29, 2005				176
DESCRIPTION OF FEDERATED CAPITAL STOCK				177
	Common Stock			177
	Preferred Stock			177

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COMPARISON OF RIGHTS OF STOCKHOLDERS				177
	Authorized Capital Stock			178
	Voting Rights			178
	Cumulative Voting			178
	Stockholders Meetings			178
	Matters Relating to the Board of Directors			180
	Preemptive Rights			181
	Dividends			182
	Limitation of Personal Liability of Directors			182
	Indemnification of Directors and Officers			182
	Anti-Takeover Matters			183
	Certain Business Combination Restrictions			183
	Vote on Certain Fundamental Issues			183
	Amendments to Constituent Documents			184
LEGAL MATTERS				184
EXPERTS				184
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS				185
WHERE YOU CAN FIND MORE INFORMATION				185
	Federated SEC Filings			186
	May SEC Filings			187
ANNEXES
Agreement and Plan of Merger				A
Opinion of Morgan Stanley & Co. Incorporated				B
Opinion of Peter J. Solomon Company, L.P.				C
Opinion of Goldman, Sachs & Co.				D
Section 262 of the General Corporation Law of the State of Delaware				E
Proposed Amendment to Article Seventh of Federated’s Certificate of Incorporation				F
Proposed Amendment to Article Thirteenth of May’s Certificate of Incorporation				G
Federated’s Standards for Director Independence				H
Federated’s Policy and Procedures for Pre-Approval of Non-Audit Services by Outside Auditor				I
Form of Proxy Card and Voting Instruction Card for May Annual Meeting				J
Form of Proxy Card and Voting Instruction Card for Federated Annual Meeting				K

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	The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the market price of Federated common stock or May common stock to decline.

	Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of Federated and May, which could have an adverse effect on their business and financial results.

	•	current and prospective employees may experience uncertainty about their future roles with the combined company, which might adversely affect Federated and May’s ability to retain key managers and other employees; and
	•	the attention of management of each of Federated and May may be directed toward the completion of the merger.

	Certain directors and executive officers of May have interests and arrangements that are different from, or in addition to, May stockholders.

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	•	payments under employment agreements and severance agreements which, in either case, may be triggered if the executive officer’s employment is terminated under certain circumstances following the merger — for May’s 13 current executive officers, the aggregate of these payments could be up to approximately $46.8 million;
	•	potential appointment of two members of May’s board of directors to the Federated board of directors following the merger;
	•	potentially becoming executive officers, employees or consultants of Federated after the transaction;
	•	accelerated vesting and exercisability of May stock options and restricted stock issued under May’s equity compensation plans — May’s 13 current executive officers and 8 current non-management directors currently hold, in the aggregate, 511,805 and 49,990 shares of restricted stock, respectively, and May’s 13 current executive officers hold 828,450 unvested stock options with a weighted average exercise price of $30.988 per share;
	•	continued benefits under May plans for one year following the effective date of the merger, as well as continued compensation and benefits from one year following the effective date of the merger through the third year following the effective date of the merger that are in the aggregate substantially comparable to that provided by May immediately prior to the effective time of the merger;
	•	accelerated payment of previously vested amounts credited under May’s deferred compensation programs — May’s 13 current executive officers currently have credited to their accounts an aggregate of approximately $5.82 million and 217,055 stock units and May’s 8 non-management directors currently have credited to their accounts an aggregate of approximately $300,000 and 187,965 stock units; and
	•	Federated’s agreement to indemnify each present and former May officer and director against liabilities arising out of that person’s services as an officer or director, and maintain directors’ and officers’ liability insurance for a period of six years after closing to cover May directors and officers, subject to certain limitations.

	The unaudited pro forma financial data included in this joint proxy statement/ prospectus are preliminary and Federated’s actual financial position and results of operations may differ materially from the unaudited pro forma financial data included in this joint proxy statement/ prospectus.

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	The value of the Federated common stock that May stockholders receive in the merger may be less than the value of such Federated common stock when the merger was publicly announced. Further, at the May annual meeting, May stockholders will not know the exact value of Federated common stock that will be issued in the merger.

	If the total value of the Federated common stock to be received falls below 40% of the total consideration, May stockholders could be required to accept $18.75 per share in cash and 0.3115 shares of Federated common stock in a transaction that is currently taxable to such May stockholders.

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	Federated may be required under the merger agreement to dispose of assets that account for up to $4 billion in annual net sales if required by governmental entities to obtain antitrust clearance for the merger.

	Federated’s failure to integrate May successfully and on a timely basis into Federated’s operations could reduce Federated’s profitability.

	The results of Federated’s operations after the merger may be affected by factors different from, or in addition to, those currently affecting the results of May’s operations, and the market value of Federated common stock may decrease after the closing date of the merger.

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	The price of Federated common stock has been volatile and may continue to fluctuate significantly, which may cause you to lose a significant portion of your investment.

	•	competitive conditions in retail and related services industries;
	•	changes in consumer confidence, tastes, preferences, fashion trends and spending;
	•	the availability and level of consumer debt;
	•	anticipated cash flow and the ability of Federated to maintain sufficient operating cash flow and liquidity;
	•	the possibility that new business and strategic options for one or more business segments will be identified, potentially including selective acquisitions, dispositions, restructurings, joint ventures and partnerships;
	•	trade restrictions, tariffs and other factors potentially affecting the ability to find qualified vendors and access products in an efficient manner;
	•	the ability to successfully implement initiatives to improve inventory management capabilities;
	•	changes in interest rates;
	•	social and political conditions such as war, political unrest and terrorism or natural disasters;
	•	volatility in financial markets;
	•	changes in debt ratings, credit spreads and cost of funds;
	•	the possibility of interruptions in systematically accessing the public debt markets;
	•	the impact of seasonal buying patterns, which are difficult to forecast with certainty; and
	•	general economic conditions and normal business uncertainty.

	Anti-takeover provisions could delay, deter or prevent a change in control of Federated even if the change in control would be beneficial to Federated stockholders.

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	Federated faces significant competition in the retail industry.

	Federated’s sales and operating results depend on consumer preferences and fashion trends.

	Federated is subject to global economic and political conditions.

	Federated depends upon the success of its advertising and marketing programs.

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	•	the ability of Federated to integrate the May businesses with Federated’s businesses and achieve the expected synergies from the merger;
	•	the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, at the May annual meeting;
	•	the approval of the issuance of Federated common stock in connection with the merger at the Federated annual meeting;
	•	the timing of the completion of the merger;
	•	the actual financial position and results of operations of Federated following the merger, which may differ significantly from the pro forma financial data contained in this joint proxy statement/ prospectus;
	•	the impact of competitive products and pricing;
	•	general market conditions in the retail industry;
	•	the level of capital resources required for future acquisitions and operations; and
	•	changes in laws and regulations.

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	•	To approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger;
	•	To elect four members of May’s board of directors;
	•	To adopt an amendment to May’s amended and restated certificate of incorporation to provide for the annual election of directors;
	•	To ratify the appointment of Deloitte & Touche LLP as May’s independent registered public accounting firm for the fiscal year ending January 28, 2006;
	•	To approve adjournments or postponements of the May annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the May annual meeting to approve the above proposals; and
	•	To consider and take action upon any other business that may properly come before the May annual meeting, or any reconvened meeting, following an adjournment or postponement of the May annual meeting.

	•	Approval and adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, requires the approval of a majority of the outstanding shares of May common stock and ESOP preference shares entitled to vote, voting together as one class.

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	•	The election of four members of May’s board of directors requires the affirmative vote of a plurality of the shares of May common stock and ESOP preference shares, voting together as one class, present in person or represented by proxy at the May annual meeting and entitled to vote.
	•	Approval of the amendment to May’s amended and restated certificate of incorporation to provide for the annual election of directors requires the affirmative vote of a majority of the outstanding shares of May common stock and ESOP preference shares, voting together as one class.
	•	Ratification of the appointment of Deloitte & Touche LLP as May’s independent registered public accounting firm for fiscal year ending January 28, 2006, requires the affirmative vote of the holders of a majority of the shares of May common stock and ESOP preference shares, voting together as one class, present in person or represented by proxy and entitled to vote at the May annual meeting.
	•	Approval of adjournments or postponements of the May annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the May annual meeting to approve the above proposals, requires the affirmative vote of a majority of the shares of May common stock and ESOP preference shares, voting together as one class, present in person or represented by proxy and entitled to vote at the May annual meeting.

	•	FOR the proposal to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger, at the May annual meeting. See “May’s Reasons for the Merger and Recommendation of May’s Board of Directors” beginning on page 51; and
	•	FOR each of the other proposals presented at the May annual meeting.

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	•	All directors elected at the 2005 annual meeting or thereafter would be elected for one-year terms;
	•	Directors assigned to the class of 2006, who were previously elected at earlier annual meetings, would stand for election in 2006 and would be elected for one-year terms thereafter;
	•	Directors assigned to the class of 2007, who were previously elected at an earlier annual meeting, would stand for election in 2007 and would be elected for one-year terms thereafter; and
	•	Vacancies that occur during the year would continue to be filled by the board of directors to serve only until the next annual meeting.

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		2004				2003
Audit Fees		$	4.3			$	2.6
Audit-Related Fees(1)			0.3				0.3
Tax Fees(2)			0.2				0.2
All Other Fees(3)			0.3				0.0
Total fees		$	5.1			$	3.1

(1)	Audit-Related Fees include fees related to benefit plans, foundation and trust audits.
(2)	Tax Fees consist of tax compliance services.
(3)	All Other Fees include acquisition financial due diligence and purchase accounting services.

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	Voting Shares Held in Street Name

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	Abstaining from Voting

	•	Abstentions will have the same effect as a vote against the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger.
	•	Abstentions will have the same effect as a vote against the approval of the amendment to May’s amended and restated certificate of incorporation.
	•	Abstentions will not be counted for determining the election of the board of directors. As a result, abstentions will not have an effect on the outcome of the election of the board of directors.
	•	Abstentions will have the same effect as a vote against the ratification of the appointment of the independent registered public accounting firm.
	•	Abstentions will have the same effect as a vote against the approval of adjournments or postponements of the May annual meeting.

	•	Internet: You can vote over the Internet at the Web address shown on your proxy card or voting instruction card (www.proxyvote.com). Internet voting is available 24 hours a day. If you vote over the Internet, do not return your proxy card(s) or voting instruction card(s).
	•	Telephone: You can vote by telephone by calling the toll-free number on your proxy card(s) or voting instruction card(s). Telephone voting is available 24 hours a day. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, do not return your proxy card(s) or voting instruction card(s).
	•	Mail: You can vote by mail by simply signing, dating and mailing your proxy card(s) or voting instruction card(s) in the postage-paid envelope included with this joint proxy statement/ prospectus.

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	•	sending a written notice to the Corporate Secretary of May, at 611 Olive Street, St. Louis, Missouri 63101, bearing a date later than the date of the proxy, that is received prior to the May annual meeting and states that you revoke your proxy;
	•	voting again over the Internet or by telephone;
	•	signing another proxy card(s) or voting instruction card(s) bearing a later date and mailing it so that it is received prior to the annual meeting; or
	•	attending the annual meeting and voting in person, although attendance at the annual meeting will not, by itself, revoke a proxy.

	Voting in Person

	Electronic Access to Proxy Materials

	People with Disabilities

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	•	to authorize the issuance of Federated common stock pursuant to the terms of the merger agreement;
	•	to elect three Class II members of Federated’s board of directors;
	•	to amend Federated’s certificate of incorporation to adopt a system for the annual election of all of Federated’s directors;
	•	to ratify the appointment of KPMG LLP as Federated’s independent registered public accounting firm for the fiscal year ending January 28, 2006;

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	•	to approve adjournments or postponements of the Federated annual meeting, if necessary to permit further solicitation of proxies if at the time of the Federated annual meeting to approve the above proposals; and
	•	to consider and take action upon any other business that may properly come before the Federated annual meeting or any reconvened meeting following an adjournment or postponement of the Federated annual meeting.

	•	if required by applicable law;
	•	to persons engaged in the receipt, counting, tabulation or solicitation of proxies who have agreed to maintain stockholder confidentiality as provided in the policy;
	•	in those instances in which stockholders write comments on their proxy cards or otherwise consent to the disclosure of their vote to Federated’s management;
	•	in the event of a proxy contest or a solicitation of proxies in opposition to the voting recommendations of the board;
	•	in respect of a stockholder proposal that Federated’s Nominating and Corporate Governance Committee, after having allowed the proponent of the proposal an opportunity to present its views, determines is not in the best interests of Federated and its stockholders; and
	•	in the event that representatives of Federated determine in good faith that a bona fide dispute exists as to the authenticity or tabulation of voting materials.

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	•	The authorization of the issuance of Federated common stock pursuant to the terms of the merger agreement requires the approval of at least a majority of the votes cast by the holders of outstanding shares of Federated common stock present (in person or by proxy) at the Federated annual meeting, where the holders of at least a majority of all outstanding shares of Federated common stock vote on the proposal.
	•	The election of three Class II members of Federated’s board of directors requires the affirmative vote of a plurality of the shares of Federated common stock present in person or represented by proxy at the Federated annual meeting and entitled to vote.
	•	In order to take effect in accordance with the schedule more fully described in the proposal, the proposal to amend Federated’s certificate of incorporation to adopt a system for the annual election of all Federated directors requires the affirmative vote of a majority of all outstanding shares of Federated common stock.
	•	Ratification of the appointment of KPMG LLP as Federated’s independent registered public accounting firm for the fiscal year ending January 28, 2006, requires the affirmative vote of the holders of a majority of Federated common stock present in person or represented by proxy entitled to vote and actually voted at the Federated annual meeting.
	•	Approval of adjournments or postponements of the Federated annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Federated annual meeting to approve the above proposals, requires the affirmative vote of the holders of a majority of Federated common stock present in person or represented by proxy entitled to vote and actually voted at the Federated annual meeting.

	•	FOR the issuance of Federated common stock pursuant to the merger agreement.
	•	FOR the other proposals presented at the Federated annual meeting.

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	Fees Paid to Independent Registered Public Accounting Firm

Year		Audit ($)				Audit-Related ($)				Tax ($)				All Other ($)				Total ($)
2004			3,723,000				830,500				309,747				0				4,863,247
2003			2,325,650				787,400				162,000				69,000				3,344,050

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	Voting Shares Held in Street Name

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	Abstaining from Voting

	•	Abstentions will not be counted for determining whether the share issuance proposal has been approved. However, an abstention can negatively affect the vote on the Federated share issuance proposal if their failure to be counted results in less than a majority of all outstanding shares of Federated common stock being voted.
	•	Abstentions will have the same effect as a vote against the approval of the amendment to Federated’s certificate of incorporation.
	•	Abstentions will not be counted for determining the election of the board of directors. As a result, abstentions will not have an effect on the outcome of the election of the board of directors.
	•	Abstentions will not be counted for the ratification of the appointment of the independent registered public accounting firm.
	•	Abstentions will not be counted for the approval of adjournments or postponements of the Federated annual meeting.

	•	Internet: You can vote over the Internet at the Web address shown on your proxy card(s). Internet voting is available 24 hours a day. If you vote over the Internet, do not return your proxy card(s) or voting instruction card(s).
	•	Telephone: You can vote by telephone by calling the toll-free number on your proxy card(s) or voting instruction card(s). Telephone voting is available 24 hours a day. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, do not return your proxy card(s) or voting instruction card(s).
	•	Mail: You can vote by mail by simply signing, dating and mailing your proxy card(s) or voting instruction card(s) in the postage-paid envelope included with this joint proxy statement/ prospectus.

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	•	sending a written notice to the Corporate Secretary of Federated, at 7 West Seventh Street, Cincinnati, Ohio 45202, bearing a date later than the date of the proxy that is received prior to the Federated annual meeting and states that you revoke your proxy;
	•	voting again over the Internet or by telephone;
	•	signing another proxy card(s) or voting instruction card(s) bearing a later date and mailing it so that it is received prior to the annual meeting; or
	•	attending the annual meeting and voting in person, although attendance at the annual meeting will not, by itself, revoke a proxy.

	Voting in Person

	Electronic Access to Proxy Material

	People with Disabilities

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	Based on the information currently available to us, Federated is prepared to offer $33.25 per share for all the outstanding common stock of May. This price represents a premium of approximately 20% to both the closing price of May’s stock on January 13, 2005 and to the 3-year average price prior to that date. We are contemplating a cash and stock transaction involving 40% cash and 60% stock, assuming a fixed number of Federated shares.
	Our projected financial plan anticipates raising the current Federated dividend significantly to $1.00 per share after closing.
	The capital structure of the new company contemplates that there will be significant share repurchases in the future, while at the same time preserving the company’s investment grade rating.
	In order to ensure that there is some continuity of the May perspective in the boardroom, we are willing to discuss adding two existing May directors to the Federated Board should there be an interest in doing so.
	The Federated Board of Directors has been fully briefed on this proposal and is very excited about the prospect of putting our two companies together. We are prepared to act quickly to execute a definitive agreement and consummate a transaction as soon as possible. Our team and advisors are available to complete our due diligence immediately. As we explained to [Mr. Dunham and Mr. McNamara] last week, we do not anticipate any delays in our ability to expeditiously complete a transaction and we are prepared to provide your Board with a strong contractual commitment to close the acquisition.
	This proposal should be considered non-binding and is subject to, among other things, the satisfactory completion of our due diligence and the negotiation and execution of a mutually satisfactory merger agreement. We would expect the definitive documentation to contain customary representations and warranties, closing conditions and no-shop and deal protection provisions.

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	Federated is prepared to increase its offer by $1.00 to $34.25 per share. In an effort to pay our best price, we are also shifting the mix of consideration to 50% cash and 50% stock. In light of Morgan Stanley’s clear guidance that the upfront purchase price is a priority for May directors, this change was necessary to deliver maximum value to your shareholders. As we indicated in our letter of January 31, 2005, we are contemplating offering a unit to May’s shareholders made up of cash and stock and the number of Federated shares will be fixed upon acceptance of this proposal.
	I want to emphasize to you that in formulating this revised offer we are “putting our best foot forward.” The price of 34.25 per share represents a premium in excess of 23% to the closing price of May’s stock on January 13, 2005 and it represents an attractive premium to May’s one, three and five year average stock price. In addition, I want to reiterate that we are prepared to enter into a definitive merger agreement quickly, and we are willing to provide your Board with a strong contractual commitment to close.

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	I am writing to convey the terms of a revised and final proposal whereby Federated would acquire all of the common stock of May.
	Federated is prepared to increase its offer by $1.00 to $35.25 per share in a transaction comprised of 50% cash and 50% stock. As indicated in our letter of February 7, 2005, we are offering May shareholders consideration in the form of a unit made up of cash and stock where the number of Federated shares will be fixed based on our closing price of $57.39 on February 16, 2005.(1)
	I believe both our companies need to promptly resolve the matter of the potential merger. The leaks and rumors about a possible transaction have been damaging to both Federated and May. Under the circumstances, we are prepared to immediately commence our due diligence and simultaneously negotiate a definitive merger agreement. If at all possible, it would be our intention to announce a transaction concurrent with the release of our year end financials on Tuesday, February 22, 2005. Therefore, in the spirit of trying to bring our respective efforts to negotiate a transaction to a swift conclusion, this proposal will remain open until 12:00 noon (EST) on Friday, February 18, 2005.
	I look forward to hearing back from you as soon as possible.

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	•	the strategic nature of the transaction, which will combine May’s and Federated’s respective businesses to create one of the largest national retail store chains in the United States, with pro forma combined sales expected to exceed $30 billion, all of which should provide the combined company with a strong foundation for improved performance;
	•	the May board of directors’ analysis and understanding of management’s “stand-alone” plans for May in the context of the increasingly competitive conditions in the retail industry generally, including pressures from both discount and high-end retailers, and the board’s analysis of the business, operations, financial performance, financial condition, earnings and prospects of May on a stand-alone basis, particularly in view of May’s recent financial performance in comparison to May’s peers, and the board’s belief, based on its analysis and understanding, that the combined company, with its greater size and scale, would be better positioned to succeed in light of the risks and potential rewards associated with May continuing to operate on a stand-alone basis and other alternatives reasonably available to May, including growth through acquisition of assets or other companies and disposition of non-strategic assets;
	•	the value to be received by holders of May common stock in the merger, including the fact that, based on the closing price of May’s common stock on January 14, 2005 (the last full trading day before the announcement of the resignation of Chairman and CEO Gene Kahn and rumors of a possible business combination transaction between May and Federated were reported by several national news organizations), the value of the merger consideration represented:

	•	a premium of approximately 27.5% over the closing price of May common stock on the NYSE on January 14, 2005;
	•	a premium of approximately 23.7%, 35.5% and 24.3% over the median closing price of May common stock on the NYSE for the thirty-day, six-month and twelve-month trading periods, respectively, ending with January 14, 2005;

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	•	the fact that the initial 50/50 split of stock and cash in the merger consideration affords May stockholders both the opportunity to participate in the growth and opportunities of the combined company through the stock component of the merger consideration and to receive cash for the value of their shares through the cash component of the merger consideration;
	•	the fact that May stockholders as a group will own, on a fully-diluted basis, approximately 35% of the outstanding Federated common stock immediately following the merger;
	•	because the stock portion of the merger consideration is a fixed number of shares of Federated common stock, the opportunity for May stockholders to benefit from any increase in the trading price of Federated common stock between the announcement of the merger and the completion of the merger, as well as any increase after completion of the merger;
	•	the fact the Federated agreed to increase its quarterly dividend to $0.25 following completion of the merger;
	•	the May board of directors’ understanding of the historical information concerning May’s and Federated’s respective businesses, financial performance and condition, operations, management, competitive positions, prospects and stock performance, including the report of May’s management on the results of May’s due diligence review of Federated and its assets, liabilities, financial condition, business and prospects, which confirmed the otherwise publicly available information regarding Federated, confirmed the positive view of Federated’s business, was consistent with the board’s expectations regarding potential operating efficiencies and cost savings reasonably available as a result of the merger and supported the board’s determination that the combined company should have a strong foundation for growth and improved performance;
	•	anticipated cost savings and operating synergies available to the combined company from the merger through consolidation of central functions, division integrations and the continuation across the combined company of the best practices and traditions of May and Federated following completion of the merger which is expected to positively enhance the combined company’s earnings and create value for stockholders;
	•	the potential ability of the combined company to maintain and strengthen relationships with a broader base of suppliers and mall operators through improved operational efficiencies in such areas as marketing and supply chain management;
	•	the fact that the business combination with Federated provides the combined company with additional unique and differentiated products that should enable the combined company to better differentiate itself from other retailers and expand the points of distribution for its private labels in key geographic areas;
	•	Morgan Stanley’s opinion described in the section entitled “— Opinions of May’s Financial Advisors” beginning on page 57, including its analysis rendered orally on and confirmed in writing as of February 27, 2005, to the effect that, as of February 27, 2005, and based on and subject to various assumptions made, matters considered and limitations described in its written opinion, the consideration proposed to be received by holders of May common stock in the merger agreement was fair, from a financial point of view, to such holders;
	•	Peter J. Solomon Company’s opinion described in the section entitled “— Opinions of May’s Financial Advisors” beginning on page 57, including its analysis rendered orally on and confirmed in writing as of February 27, 2005, to the effect that, as of February 27, 2005, and based on and subject to various assumptions made, matters considered and limitations described in its written opinion, the consideration proposed to be received by holders of May common stock in the merger was fair, from a financial point of view, to such holders;
	•	the fact that the May board of directors had not received any indications of interest from other parties regarding a potential business combination despite public speculation and commentary regarding a potential business combination transaction involving May;

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	•	the fact that May stockholders who dissent from the merger will have appraisal rights, as described in the section entitled “— Appraisal Rights of May Stockholders” beginning on page 88;
	•	the expected qualification of the merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, resulting in the common stock portion of the merger consideration to be received by May stockholders not being subject to federal income tax, as described in the section entitled “Material United States Federal Income Tax Consequences” beginning on page 92;
	•	the May board’s belief, in light of the commitments made by Federated in the merger agreement, that, based on available information, the transaction should not present an unacceptable risk of non-consummation due to antitrust concerns; and
	•	the terms and conditions of the merger agreement, including:

	•	the fact that the terms of the merger agreement provide that, under certain circumstances, and subject to certain conditions more fully described in the section entitled “The Merger Agreement — Covenants and Agreements — No Solicitation by May” beginning on page 104, May can furnish information to and conduct negotiations with a third party in connection with an unsolicited proposal for a business combination or acquisition of May that is likely to lead to a superior proposal and the May board of directors can terminate the merger agreement for a superior proposal or change its recommendation prior to stockholder approval of the merger agreement;
	•	the fact that there are limited circumstances in which the board of directors of Federated may change or modify its recommendation to its stockholders to approve the issuance of shares of Federated common stock in the merger, and that Federated agreed to pay a termination fee of $350 million to May in the event that the board of directors of Federated changes or modifies its recommendation, as described in the section entitled “The Merger Agreement — Termination Fees” beginning on page 114;
	•	the fact that Federated agreed to pay a termination fee to May ranging from $150 million to $350 million in the event that the merger agreement is terminated due to a failure to obtain necessary antitrust clearance;
	•	the fact that the completion of the merger is not conditioned on Federated’s obtaining financing;
	•	the fact that the conditions required to be satisfied prior to completion of the merger are customary and can be expected to be fulfilled in the ordinary course and the corresponding likelihood that the merger will be consummated;
	•	the fact that two members of the May board of directors are expected to be appointed to the Federated board of directors, which is expected to provide a degree of continuity and involvement by May directors in the combined company following the merger;
	•	the fact that Federated agreed to continue all of May’s employee benefit plans in accordance with their terms in effect immediately prior to the effective time of the merger for one year after the merger and, for the second and third years after the merger, Federated agreed to provide a substantially comparable level of compensation and employee benefits (excluding equity-based awards) to all continuing May employees (other than those subject to collective bargaining obligations or agreements);
	•	the fact that Federated agreed to maintain a major division headquarters, as well as certain regional corporate support functions, in St. Louis, which the May board of directors considered important in light of May’s importance to the St. Louis area and the effect on employees; and
	•	the fact that Federated agreed to honor May’s existing charitable contribution commitments and fund future charitable contributions (subject to certain agreed parameters).

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	•	the risk that, notwithstanding the likelihood of the merger’s being completed, the merger might not be completed, including the effect of the pendency of the merger and such failure to be completed may have on:

	•	the trading price of May common stock;
	•	May’s operating results, including the costs incurred in connection with the transaction;
	•	May’s ability to attract and retain key personnel; and
	•	May’s ability to retain customers and maintain sales;

	•	the possibility of significant costs and delays resulting from seeking antitrust clearance necessary for completion of the proposed merger;
	•	because the stock portion of the merger consideration is a fixed number of shares of Federated common stock, May stockholders could be adversely affected by a decrease in the trading price of Federated common stock after the date of execution of the merger agreement, and the merger agreement does not provide May with a price-based termination right or other similar protection for May or its stockholders (other than in order to protect the tax-free nature of the transaction to the extent of the stock consideration to be received by May stockholders in the merger, as discussed in “The Merger Agreement — Merger Consideration” beginning on page 97);
	•	the limitations imposed in the merger agreement that restrict, among other things, May’s ability prior to the completion of the merger to solicit or enter into any agreement relating to an alternative business combination, or enter into any discussions of any proposals that may lead to an alternative business combination, as more fully described in the section entitled “The Merger Agreement — Covenants and Agreements — No Solicitation by May” beginning on page 104;
	•	the requirement that May must pay to Federated a termination fee of $350 million if the merger — agreement is terminated under circumstances specified in the merger agreement, as described in the section entitled “The Merger Agreement — Termination Fees” beginning on page 114;
	•	the challenges inherent in combining the businesses, operations and workforces of two large companies, including the possibility that management may be distracted from regular business concerns by (1) unforeseen difficulties in integrating operations and systems and (2) possible employee uncertainty in the face of potential workforce reductions and difficulties in assimilating employees;
	•	the likelihood of realizing and the risks of not realizing the expected operating synergies and cost savings; and
	•	the risks described in the section entitled “Risk Factors” beginning on page 22.

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	•	The merger is expected to create a more efficient, competitive national retailer, with approximately $30 billion in annual revenues and significantly broader geographic coverage, with a total of approximately 1,650 stores (including approximately 700 bridal and formalwear stores) in 49 states, Guam, Puerto Rico and the District of Columbia. The combined companies will own and operate stores in 64 of the nation’s top 65 geographic areas with relatively little overlap.
	•	The merger with May will provide the combined companies with an opportunity to compete more effectively in the highly competitive, broad-based retail environment, including with national retailers such as Sears/ K-Mart, J.C. Penney’s, Target, Wal-Mart, The Limited, Linens ‘n Things, Bed, Bath & Beyond, Nordstrom’s, Kohl’s, Neiman Marcus, Saks Fifth Avenue and others.
	•	Federated’s board of directors also considered management’s view that the combined companies should produce cost synergies of approximately $175 million in 2006 and approximately $450 million in 2007, resulting from purchasing efficiencies, the ability to advertise nationally, the consolidation of corporate services and headquarters functions, reductions in distribution and marketing costs, and the adoption of best practices across the combined companies, all of which will increase competition and benefit consumers. These benefits are expected to be realized by the end of 2007, and the merger is expected to be accretive to Federated’s per share earnings in 2007. While these synergies reflect management’s estimates, the Federated board recognized there could be no assurance that they would be achieved. In addition, the potential to realize greater synergies represents an additional factor considered by Federated’s board.
	•	Federated’s board also considered the possibility of achieving higher comparable store sales growth as a result of leveraging the combined companies’ best people, products and practices and enhanced ability to compete in the retail industry on a national scale.
	•	Federated’s board considered the opportunities and benefits of extending its business into additional geographic areas as a result of the merger. May has a strong list of retail store assets located in the midwest and elsewhere, including Famous-Barr, Filene’s, Foley’s, Hecht’s, Kaufmann’s,

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		Lord & Taylor, L.S. Ayers, Marshall Field’s, Meier & Frank, Robinsons-May, Strawbridge’s and The Jones Store, which complement Federated’s current geographic footprint.
	•	Federated’s board considered that Federated will be able to augment its talent pool with the most capable managers from May.

	•	historical information concerning May’s and Federated’s respective businesses, financial performance and condition, operations, management, competitive positions and stock performance, including the results of the due diligence review of May’s assets, liabilities, financial condition, businesses and operations, which indicated that there were no material risks associated with acquiring May, and which were consistent with the expectations of the board as to potential operating efficiencies and cost savings as well as other strategic and financial benefits reasonably anticipated as a result of the merger, and which comparisons and review generally informed the board’s determination as to the relative values of Federated, May and the combined companies, enabling Federated to increase the value of the merger consideration;
	•	management’s strategy of potentially re-branding many May stores as Macy’s, which re-branding strategy management believes will be successful based on the success of the co-branding strategy with respect to Federated’s regional stores;
	•	management’s assessment that the proposed merger was likely to meet certain criteria they deemed necessary for a successful merger — strategic fit, acceptable execution risk, and financial benefits to Federated and Federated’s stockholders;
	•	the financial analyses and presentations of Federated’s financial advisor and its opinion that, as of February 27, 2005, the consideration to be paid to the May stockholders in the merger was fair, from a financial point of view, to Federated (the written opinion of Goldman Sachs is attached as Annex D to this joint proxy statement/ prospectus and discussed in detail under “— Opinion of Federated’s Financial Advisor” beginning on page 75);
	•	the terms and conditions of the merger agreement, including:

	•	the limited number and nature of the conditions to May’s obligation to consummate the merger and the limited risk of non-satisfaction of such conditions; and
	•	that Federated may be entitled to receive a $350 million termination fee from May if the merger is not consummated for certain reasons;

	•	the determination that an exchange ratio that is fixed, subject to adjustment in certain circumstances in Federated’s discretion, is appropriate to reflect the strategic purpose of the merger and consistent with market practice for mergers of this type and that a fixed exchange ratio avoids fluctuations caused by near-term market volatility; and
	•	the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary antitrust and other regulatory approvals without unacceptable conditions on a timely basis.

	•	the challenges of combining the operations of two major retail businesses and effecting certain cultural changes;
	•	the possible disruptions from certain anticipated workforce reductions to be implemented as part of the merger integration plan;

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	•	the risk that anticipated operating profit synergies and cost savings will not be achieved (or the risk that certain cost savings will adversely affect operating profits);
	•	the one-time costs of the acquisition and integration, which management estimated at approximately $1 billion spread over a three-year period;
	•	the risk that Federated may be required under the merger agreement to commit to dispose of assets of the combined companies valued at up to $4 billion if required by any governmental entity in order to obtain antitrust clearance for the merger;
	•	the risk that Federated will have to pay May a fee of up to $350 million if the merger agreement is terminated under certain circumstances;
	•	the potential dilution to Federated’s stockholders; and
	•	the risk of diverting management’s attention from other strategic priorities to implement merger integration efforts.

	Morgan Stanley

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	•	reviewed certain publicly available financial statements and other business and financial information of May and Federated, respectively;
	•	reviewed certain internal financial statements and other financial and operating data concerning May prepared by the management of May;
	•	reviewed certain financial projections prepared by the management of May;
	•	discussed the past and current operations and financial condition and the prospects of May, with senior executives of May;
	•	discussed the past and current operations and financial condition and the prospects of Federated, with senior executives of Federated;
	•	discussed certain limited financial projections for Federated with the management of Federated;
	•	discussed limited pro forma financial projections, including information relating to strategic, financial and operational benefits and issues anticipated from the merger, with senior executives of Federated;
	•	discussed the strategic rationale of the merger with the management of May and Federated;
	•	reviewed the pro forma impact of the merger on Federated’s publicly available operating statistics, consolidated capitalization and financial ratios;
	•	reviewed the reported prices and trading activity for May common stock and Federated common stock;
	•	compared the financial performance of May and Federated and the prices and trading activity of May common stock and Federated common stock with that of certain other comparable publicly-traded companies and their securities;
	•	reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
	•	participated in discussions and negotiations among representatives of May, Federated and their financial and legal advisors;
	•	reviewed the draft merger agreement, dated February 27, 2005 and certain related documents; and
	•	considered such other factors and performed such other analyses as Morgan Stanley deemed appropriate.

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	Historical Common Stock Performance

	May

		Average
May Common Stock Average Share Price(1)(2)		per Share
for Period Ending February 25, 2005		Price ($)
6 Months			28.31
1 Year			28.94
2 Years			27.22
3 Years			27.68
5 Years			29.05
10 Years			31.38

(1)	Represents unweighted average
(2)	Represents split-adjusted prices

May Common Stock — Historical Trading Range		Low				High
for Period Ending February 25, 2005		($)				($)
6 Months			24				35
1 Year			24				36
3 Years			18				38

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	Federated

Federated Common Stock — Historical Trading Range		Low				High
for Period Ending February 25, 2005		($)				($)
6 Months			43				59
1 Year			43				59
3 Years			24				59

	Historical Relative Stock Price Analysis

						Implied
		Historical				May Common
		Relative Stock				Stock Price
Period Ending February 25, 2005		Price (x)				per Share ($)(2)
February 25, 2005			0.622				35.35
January 14, 2005(1)			0.477				27.84
Last 6 Months			0.541				30.72
Last 1 Year			0.571				32.43
Last 2 Years			0.607				34.47
Last 3 Years			0.675				38.36
Last 5 Years			0.749				42.53

(1)	Last trading day prior to reports appearing in the popular press regarding a potential transaction
(2)	Calculated by multiplying the historical relative stock price for a given period by Federated’s closing share price of $56.79 as of February 25, 2005, with the exception of the January 14, 2005 implied price which was based on Federated’s closing share price of $58.37 as of that date

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	Historical Forward P/ E Ratio Analysis

P/E Ratios

May

Period Ending February 25, 2005

May

Federated

Premium

February 25, 2005

15.6x

12.4x

26.4

%

January 14, 2005

12.2x

12.7x

(4.2

)%

Last 6 Months

12.1x

11.8x

3.0

%

Last 1 Year

12.4x

11.9x

4.1

%

Last 2 Years

12.7x

11.7x

8.6

%

Last 3 Years

12.2x

10.9x

11.5

%

Last 5 Years

11.6x

10.3x

13.6

%

All-Time High (during the last 5 years)

16.9x

(1)

14.1x

(2)

19.9

%

(1)	As of February 18, 2004
(2)	As of March 4, 2004

	Selected Precedent Transaction Analysis

	•	GPU Inc./ FirstEnergy
	•	Banacci/ Citigroup
	•	Sears Roebuck/ KMart Holding Corp
	•	Guidant/ Johnson & Johnson
	•	Times Mirror/ Tribune
	•	Aventis/ Sanofi-Synthelabo
	•	Caesars Entertainment/ Harrah’s Entertainment
	•	Credit Commercial de France/ HSBC

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	Present Value of Equity Research Analyst Targets

	May

	Federated

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	Future Stock Price Present Value

	May

		Implied per Share
		Value of May
		Common Stock
Research Case		$	22 - $31
Management Case A(1)		$	25 - $34
Management Case B(2)		$	26 - $35
Management Case C(3)		$	28 - $38
Management Case D(4)		$	29 - $40

(1)	May management internal five-year projections
(2)	May management internal five-year projections including share repurchases and debt refinancing
(3)	May management internal five-year projections including share repurchases and debt refinancing and the benefits of divisional consolidation
(4)	May management internal five-year projections including share repurchases and debt refinancing, the benefits of divisional consolidations and sale of the credit card receivables

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	Federated

		Implied per Share
		Value of Federated
		Common Stock
2005E EPS of $4.60		$	55 - $60
2006E EPS of $4.98		$	45 - $63
2007E EPS of $5.43		$	45 - $63

	Discounted Cash Flow Analysis

	May

	•	Research Case: $22 – $27 per share
	•	Management Case A: $29 – $35 per share
	•	Management Case C: $33 – $39 per share

	Federated

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	Present Value Analysis of the Merger

	•	Pro Forma Scenario A: no sale of Federated’s credit card receivables.
	•	Pro Forma Scenario B: sale of Federated’s credit card receivables at par, with Federated retaining 75% of the operating income of the portfolio and using the proceeds from the receivables sale over two years to pay down debt and buy back shares.

	•	Pro Forma Scenario A: $38 – $41 per share
	•	Pro Forma Scenario B: $42 – $46 per share

	•	Pro Forma Scenario A: $38 – $40 per share
	•	Pro Forma Scenario B: $45 – $47 per share

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	Peter J. Solomon Company

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	(i) Reviewed certain publicly available financial statements and other information of May and Federated;
	(ii) Reviewed certain internal financial statements and other financial and operating data concerning May prepared by the management of May;
	(iii) Reviewed certain financial projections for May prepared by the management of May;
	(iv) Reviewed financial forecasts and estimates for Federated prepared by independent research analysts contained in publicly available research reports regarding the future financial performance of Federated and discussed such forecasts and estimates with the management of Federated;
	(v) Discussed the past and current operations, financial condition and prospects of May with the management of May;
	(vi) Discussed the past and current operations, financial condition and prospects of Federated, including information relating to certain strategic, financial and operational benefits anticipated from the merger, with the management of Federated;
	(vii) Reviewed the reported prices and trading activity of May common stock and Federated common stock;
	(viii) Compared the financial performance and condition of May and Federated and the reported prices and trading activity of May common stock and Federated common stock with that of certain other comparable publicly traded companies;
	(ix) Reviewed publicly available information regarding the financial terms of certain transactions comparable, in whole or in part, to the merger;
	(x) Reviewed the draft merger agreement dated as of February 25, 2005; and
	(xi) Performed such other analyses as PJSC deemed appropriate.

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	Historical Share Price Analysis — May

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		Offer Price
		Premium to Median
Time Periods Prior to Jan. 14, 2005:
7 Days Prior			27.6	%
30 Days Prior			23.7
60 Days Prior			23.6
90 Days Prior			24.6
180 Days Prior			35.5
Last 1 Year Prior			24.3
Last 3 Years Prior			28.9
Last 5 Years Prior			23.9
Time Periods Prior to Feb. 25, 2005:
7 Days Prior			4.3
30 Days Prior			6.3
60 Days Prior			11.0
90 Days Prior			20.9
180 Days Prior			25.6
Last 1 Year Prior			24.3
Last 3 Years Prior			28.9
Last 5 Years Prior			23.5

	Analysis of Selected Publicly Traded Comparable Companies

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	•	Federated,
	•	Dillard’s, Inc.,
	•	J.C. Penney Company, Inc.,
	•	Kohl’s Corporation,
	•	Nordstrom, Inc.,
	•	The Neiman Marcus Group, Inc. and
	•	Saks Incorporated.

			Range of
			Trading
			Multiples
Trailing Data for Last Twelve Months ended January 31, 2005
Enterprise Value as a Ratio of:
	Net Sales			60.0	%			-				115.0	%
	EBITDA			6.0	x			-				8.0	x
	EBIT			9.0	x			-				14.0	x
Equity Value as a Ratio of:
	Net Income			22.0	x			-				14.0	x
Projected Data
Equity Value as a Ratio of:
	2005 Net Income			12.0	x			-				20.0	x
	2006 Net Income			11.0	x			-				16.0	x

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	Analysis of Selected Comparable Transactions

	(i) Kmart Holding Corporation/ Sears Roebuck & Co.
	(ii) Jones Apparel Group/ Barneys, Inc.
	(iii) May/ Marshall Field’s and nine Mervyn’s stores
	(iv) Proffitt’s Inc./ Saks Holdings, Inc.
	(v) Dillard’s Inc./ Mercantile Stores Co. Inc.
	(vi) Proffitt’s Inc./ Carson Pirie Scott & Co.
	(vii) Proffitt’s Inc./ Parisian, Inc.
	(viii) May/ Strawbridge & Clothier
	(ix) Federated/ Broadway Stores Inc.
	(x) Federated/ R.H. Macy & Co., Inc.

			Range of
			Multiples
Enterprise Value as a Ratio of:
	Net Sales			65.0	%			-				125.0	%
	EBITDA			8.0	x			-				14.5	x
	EBIT			11.0	x			-				19.0	x

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	Discounted Cash Flow Analysis

	Historical Share Price Analysis — Federated

	Relative Contribution Analysis

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	Historical Exchange Ratio Analysis

	Pro Forma Merger Analysis

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	Miscellaneous

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	•	the merger agreement;
	•	annual reports to stockholders and Annual Reports on Form 10-K of Federated and May for the five fiscal years ended January 31, 2004;
	•	certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Federated and May;
	•	certain other communications from Federated and May to their respective stockholders;
	•	certain internal financial analyses and forecasts for Federated prepared by its management; and
	•	certain financial analyses and forecasts for May prepared by the management of Federated which are referred to as the Forecasts, including certain cost savings and operating synergies projected by the management of Federated to result from the merger, which are referred to as the synergies.

	•	reviewed the reported price and trading activity for the shares of Federated common stock and the shares of May common stock;
	•	compared certain financial and stock market information for Federated and May with similar information for certain other companies the securities of which are publicly traded;
	•	reviewed the financial terms of certain recent business combinations in the department store and retail industry specifically and in other industries generally; and
	•	performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.

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	Transaction Premium Analysis

	•	the closing price of $27.73 on January 13, 2005 (the last full trading day prior to any speculation regarding the resignation of May’s chief executive officer and a potential transaction between Federated and May);
	•	the average trading price of $29.03 over the one-year period prior to January 13, 2005; and
	•	the twelve-month high trading price of $36.31.

		Implied Premium Based
		on Implied Transaction
May Stock Price on:		Price per Share of $35.50
January 13, 2005			28.0	%
One-year average			22.3	%
Twelve-month High			(2.2	)%

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	Implied Transaction Multiples

	•	2004 net sales based on publicly available information;
	•	Federated management’s estimates of May net sales for 2005 and 2006;
	•	2004 EBITDA based on publicly available information;
	•	Federated management’s estimates of May EBITDA for 2005 and 2006;
	•	2004 earnings before interest and taxation, or EBIT, based on publicly available information; and
	•	Federated management’s estimates of May EBIT for 2005 and 2006.

		Implied Transaction
Fully Diluted Equity Consideration as a Multiple of:		Price per Share:
2005 estimated net income			17.4x
2006 estimated net income			15.0x
Enterprise Value as a Multiple of:
2004 net sales			1.1x
2005 estimated net sales			1.1x
2006 estimated net sales			1.0x
2004 EBITDA			8.5x
2005 estimated EBITDA			7.9x
2006 estimated EBITDA			7.5x
2004 EBIT			13.1x
2005 estimated EBIT			11.8x
2006 estimated EBIT			10.9x

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	Discounted Cash Flow Analysis

	Pro Forma EPS Analysis

	Unlevered Internal Rate of Return Analysis

	Selected Companies Analysis

	•	Dillard’s, Inc.
	•	Federated Department Stores, Inc.

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	•	Nordstrom, Inc.
	•	The Neiman Marcus Group, Inc.
	•	J.C. Penney Company, Inc.
	•	Saks Incorporated

	•	the February 25, 2005, closing stock price as a percentage of the 52-week high stock price;
	•	enterprise value as a multiple of (1) sales for the twelve-month period completed as of the end of the quarter most recently completed prior to the announcement of the transaction, referred to as the LTM Period, (2) EBITDA for the LTM Period, (3) EBITDA for 2005, (4) EBITDA for 2006, and (5) EBIT for the LTM Period;
	•	the February 25, 2005, closing stock price as a multiple of estimated 2005 and 2006 EPS, referred to as the 2005 and 2006 P/ E;
	•	five-year EPS compounded annual growth rate, referred to as the 5-Year EPS CAGR, based on IBES median estimates;
	•	the 2006 P/ E multiple as a multiple of 5-Year EPS CAGR;
	•	EBITDA and EBIT margins for the LTM Period; and
	•	dividend yield.

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																		May
		Selected Companies																Based on Implied
																		Transaction Price per
		High				Low				Mean				Median				Share of $35.50
February 25, 2005 closing stock price as a percentage of the 52-week high stock price (except as noted for May)			100	%			87	%			95	%			97	%			98	%
Enterprise value to LTM Period Sales			1.2	x			0.5	x			0.8	x			0.8	x			1.1	x
Enterprise value to LTM Period EBITDA			9.5	x			5.9	x			7.8	x			7.9	x			8.6	x
Enterprise value to 2005 EBITDA			8.6	x			5.9	x			7.3	x			7.1	x			8.1	x
Enterprise value to 2006 EBITDA			8.1	x			5.9	x			6.8	x			6.5	x			7.4	x
Enterprise value to LTM Period EBIT			16.2	x			8.7	x			12.3	x			11.5	x			13.2	x
2005 P/ E			24.5	x			12.3	x			17.0	x			15.2	x			17.3	x
2006 P/ E			20.2	x			11.4	x			14.7	x			13.5	x			15.4	x
5-Year EPS CAGR			13.0	%			5.0	%			9.3	%			9.6	%			7.0	%
2006 P/ E to 5-Year EPS CAGR			4.0	x			1.1	x			1.8	x			1.2	x			2.2	x
LTM Period EBITDA margin			14.3	%			7.2	%			10.5	%			10.7	%			12.6	%
LTM Period EBIT margin			10.4	%			3.2	%			7.2	%			8.1	%			8.2	%
Dividend yield			1.1	%			0.0	%			0.8	%			0.9	%			2.8	%

	Exchange Ratio Analysis

		Exchange Ratio
May Stock Price Over or on:		100% Stock				50% Stock
3 Year Average			0.68x				0.34x
1 Year Average			0.57x				0.29x
January 13, 2005			0.48x				0.24x

	Selected Transactions Analysis

	•	Jones Apparel Group, Inc./ Barney’s New York, Inc. (November 2004)
	•	K-Mart Holding Corporation/ Sears, Roebuck and Co. (November 2004)

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	•	Investor Group consisting of Sun Capital Partners, Inc., Cerberus Capital Management, L.P., Lubert-Adler Real Estate Fund IV, L.P. and Klaff Partners, L.P./ Mervyn’s LLC (July 2004)
	•	The May Department Stores Company/ Marshall Field’s division of Target Corporation (June 2004)
	•	Proffitt’s, Inc./ Saks Holdings, Inc. (July 1998)
	•	Dillard’s, Inc./ Mercantile Stores Company, Inc. (May 1998)
	•	Proffitt’s, Inc./ Carson Pirie Scott & Co. (October 1997)
	•	Proffitt’s, Inc./ G.R. Herberger’s, Inc. (November 1996)
	•	Proffitt’s, Inc./ Parisian, Inc. (July 1996)
	•	Proffitt’s, Inc./ Younkers, Inc. (October 1995)
	•	Federated Department Stores, Inc./ Broadway Stores, Inc. (August 1995)
	•	Federated Department Stores, Inc./ R.H. Macy’s & Co., Inc. (December 1994)

	(1) an implied transaction price of $35.25 per share of May common stock, derived from (i) the closing price of $57.39 of Federated common shares on February 16, 2005; (ii) a fixed exchange ratio of 0.3070 Federated shares for each share of May common stock; and (iii) fixed cash consideration of $17.63 per share of May common stock;
	(2) a number of fully diluted outstanding May common shares, which takes into account the number of outstanding common shares issuable upon conversion of all May ESOP preference shares and upon the exercise of all in-the-money May options; and
	(3) net debt of May equal to approximately $5,925 million as of July 31, 2005, the expected closing date of the proposed merger, as estimated by Federated management.

Selected Transactions

Enterprise Value as a Multiple of:

High

Low

Mean

Median

Proposed Transaction

EBITDA

20.1x

5.9x

10.7x

9.4x

8.5x

Sales

1.5x

0.4x

0.8x

0.7x

1.1x

	Premium Analysis of Selected Transactions

	•	The Procter & Gamble Company/ The Gillette Company (January 28, 2005)
	•	Johnson & Johnson/ Guidant Corporation (December 15, 2004)
	•	Sanofi-Synthelabo/ Aventis (January 26, 2004)

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	•	Anthem Inc./ WellPoint Health Networks Inc. (October 27, 2003)
	•	Allianz Aktiengesellschaft/ Dresdner Bank AG (April 1, 2001)
	•	DB Investments consisting of Anglo American, the Oppenheimer Family and the Botswana Government/ De Beers Consolidated Mines (February 15, 2001)
	•	Deutsche Telekom AG/ VoiceStream Wireless Corporation (July 24, 2000)
	•	HSBC Holdings PLC/ Credit Commercial de France (April 1, 2000)
	•	Tribune Company/ The Times Mirror Company (March 13, 2000)

										Selected Transaction
		Transaction				Percent				1 Day Prior to				1 Week Prior to				4 Weeks Prior to
		Value				Cash				Announcement				Announcement				Announcement
		(In millions)
High		$	65,657				40.0	%			98.2	%			84.2	%			68.9	%
Low		$	10,984				25.9	%			0.3	%			3.1	%			13.1	%
Mean		$	28,007				32.9	%			23.7	%			26.3	%			35.1	%
Median		$	19,656				33.7	%			17.6	%			21.3	%			32.4	%

										Proposed Transaction
		Transaction				Percent
		Value				Cash				1 Day Prior to:				1 Week Prior to:				4 Weeks Prior to:
		(In millions)
Undisturbed Price		$	16,821				50.0	%			27.1	%			24.9	%			24.7	%
Market Price		$	16,821				50.0	%			3.4	%			11.8	%			6.3	%

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	Federated Board of Directors After the Merger

	Executive Employment and Severance Agreements

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		Cash Severance
		and Non-Compete
Name		Payment
Mr. Dunham		$	9,372,500
Mr. Wolfe		$	6,120,000
Mr. McNamara		$	5,678,000
Mr. Fingleton		$	5,202,000
Mr. Levitt		$	4,726,000
All executive officers as a group (13 persons)		$	46,806,300

	Equity-Based Awards

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		Number of Shares				Weighted Average
		Subject to				Exercise Price of				Number of
Name		Unvested Options				Unvested Options				Restricted Shares
Mr. Dunham			236,250			$	30.428				100,000
Mr. Wolfe			90,000			$	31.185				65,000
Mr. McNamara			108,750			$	31.151				100,000
Mr. Fingleton			90,000			$	31.185				80,000
Mr. Levitt			87,500			$	30.985				45,000
All executive officers as a group (13 persons)			828,450			$	30.988				511,805
All non-management directors as a group (8 persons)			N/A				N/A				49,990

	Bonuses; Profit Sharing Plan

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	Other Severance Arrangements

	Retirement Benefits

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Name		Cash Account				Stock Units
Mr. Dunham		$	366,839				70,978
Mr. Wolfe		$	0				0
Mr. McNamara		$	1,895,970				43,092
Mr. Fingleton		$	1,046,540				18,109
Mr. Levitt		$	1,409,311				52,423
All executive officers as a group (13 persons)		$	5,819,901				217,055
All non-management directors as a group (8 persons)		$	298,325				187,965

	•	a “change in control” under the plan will occur at the effective time of the merger, rather than at the time May’s stockholders approve the merger agreement;
	•	any plan participant who is employed with May or one of its subsidiaries immediately prior to the effective time of the merger, who has completed five or more years of service and who is more than five years away from qualifying for benefits will be fully vested in the Annual Minimum Benefit that the participant has accrued as of the effective time of the merger;
	•	eligibility for change in control-related benefits under the plan will be extended to plan participants who (i) as of the effective time of the merger have attained age 50 with five or more years of service, (ii) otherwise qualify for change in control related benefits, but whose employment terminates after the effective time of the merger because of death, or (iii) otherwise qualify for change in control-related benefits, but whose employment terminates because of death between the date on which May’s stockholders approve the merger agreement and the closing date of the merger, provided that the merger is consummated;
	•	as of the effective time of the merger, any plan participant who has not then completed five years of service will become vested in the participant’s Annual Minimum Benefit accrued as of the effective time of the merger, which vesting will occur upon the completion of five years of service or upon the participant’s termination of employment within 18 months following the effective time of the merger, if the termination of employment is at the initiative of Federated or an affiliate of Federated (including May and its subsidiaries) other than for “cause”; and

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	•	benefits under the plan may commence on an actuarially reduced basis prior to the date currently provided under the plan, but in no event prior to age 55 (except in the case of survivor benefits payable in respect of a deceased participant).

	•	Federated and its affiliates (including May and its subsidiaries) will continue to provide to each May employee who is currently retired and each May employee who retires on or before the closing date of the merger (and eligible dependents), all benefits to which the individual (and eligible dependents) is entitled under May’s retiree welfare benefit plans (e.g., post-retirement medical and life), without adverse modifications, in each case for the life of the retiree and the retiree’s spouse;
	•	specified active May employees (including each of the May named executive officers, two other executive officers and an additional 18 executives) who, immediately prior to the effective time of the merger, are eligible for retiree welfare benefits under a May retiree welfare benefit plan will qualify for retiree welfare benefits upon termination of employment for any reason following the effective time of the merger, provided that these benefits will generally not commence until the employee reaches age 55, and Federated and its affiliates (including May and its subsidiaries) will not adversely alter or modify the requirement that May’s retiree welfare benefits be provided for the life of any such retired May employee and any such employee’s spouse, or require any premium payments by any such retired May employee or any such employee’s eligible dependents; and
	•	the level of excess medical benefits to be provided to or on behalf of the active May employees described above will not be reduced from that currently provided under the applicable May plan, and the level of medical benefits to which these May employees become entitled will be no less favorable than is provided from time to time to similarly situated employees of Federated and its affiliates.

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	•	an order declaring that the action is properly maintainable as a class action;
	•	an order declaring that the merger agreement was entered into in breach of the fiduciary duties of the defendants;
	•	an order enjoining the defendants from consummating the merger as planned;
	•	an order directing that the defendants exercise their fiduciary duties to obtain a transaction which is in the best interests of May stockholders;
	•	an order rescinding the merger to the extent already implemented;
	•	an award of costs and disbursements, including reasonable attorneys’ and experts’ fees; and
	•	such other and further equitable relief as the court may deem just and proper.

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	•	a citizen or resident of the United States;
	•	a corporation created or organized under the laws of the United States or any of its political subdivisions;
	•	a trust that (i) is subject to the supervision of a court within the United States and the control of one or more United States persons or (ii) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or
	•	an estate that is subject to United States federal income tax on its income regardless of its source.

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	Federal income tax consequences to Federated stockholders who do not hold any May common stock

	Federal income tax consequences to May stockholders if the merger is consummated as currently anticipated

	Federal income tax consequences to May stockholders if the transaction is restructured because tax deferred exchange treatment cannot be obtained

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	Backup withholding

	•	is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or
	•	provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and that such holder is a U.S. person (including a U.S. resident alien) and otherwise complies with applicable requirements of the backup withholding rules.

	Reporting requirements

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	•	First, all of the representations and warranties that deal with the business and operations of Federated and May are qualified to the extent that any inaccuracy would not reasonably be expected to have or result in, individually or in the aggregate, a material adverse effect on the party making the representation and warranty.
	•	Second, none of the representations or warranties will survive the closing of the merger and they will therefore have no legal effect among the parties to the merger agreement after the closing, nor will the parties be able to assert the inaccuracy of the representations and warranties as a basis for refusing to close unless all such inaccuracies as a whole would reasonably be expected to have or result in, individually or in the aggregate, a material adverse effect on the party that made the representations and warranties. Otherwise, for purposes of the merger agreement, the representations and warranties will be deemed to have been sufficiently accurate to require a closing.

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	•	$17.75 in cash, without interest; and
	•	0.3115 fully paid, nonassessable shares of Federated common stock.

				Corresponding Value
Hypothetical Trading				of 0.3115 Shares of								Corresponding
Price of Federated’s				Federated’s Common								Value of Merger
Common Stock				Stock				Cash Consideration				Consideration
$	70.98			$	22.11			$	17.75			$	39.86
$	69.98			$	21.80			$	17.75			$	39.55
$	68.98			$	21.49			$	17.75			$	39.24
$	67.98			$	21.18			$	17.75			$	38.93
$	66.98			$	20.86			$	17.75			$	38.61
$	65.98			$	20.55			$	17.75			$	38.30
$	64.98			$	20.24			$	17.75			$	37.99
$	63.98			$	19.93			$	17.75			$	37.68
$	62.98			$	19.62			$	17.75			$	37.37
$	61.98			$	19.31			$	17.75			$	37.06
$	60.98			$	19.00			$	17.75			$	36.75
$	59.98			$	18.68			$	17.75			$	36.43
$	58.98			$	18.37			$	17.75			$	36.12
$	57.98			$	18.06			$	17.75			$	35.81

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				Corresponding Value
Hypothetical Trading				of 0.3115 Shares of								Corresponding
Price of Federated’s				Federated’s Common								Value of Merger
Common Stock				Stock				Cash Consideration				Consideration
$	56.98			$	17.75			$	17.75			$	35.50
$	55.98			$	17.44			$	17.75			$	35.19
$	54.98			$	17.13			$	17.75			$	34.88
$	53.98			$	16.81			$	17.75			$	34.56
$	52.98			$	16.50			$	17.75			$	34.25
$	51.98			$	16.19			$	17.75			$	33.94
$	50.98			$	15.88			$	17.75			$	33.63
$	49.98			$	15.57			$	17.75			$	33.32
$	48.98			$	15.26			$	17.75			$	33.01
$	47.98			$	14.95			$	17.75			$	32.70
$	46.98			$	14.63			$	17.75			$	32.38
$	45.98			$	14.32			$	17.75			$	32.07
$	44.98			$	14.01			$	17.75			$	31.76
$	43.98			$	13.70			$	17.75			$	31.45
$	42.98			$	13.39			$	17.75			$	31.14

	Treatment of ESOP Preference Shares

	Fractional Shares

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	Dissenters’ Shares

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	•	pays any transfer or other taxes required because the payment is made to a person other than the registered holder of the May stock certificate; or
	•	establishes to the satisfaction of the exchange agent that any transfer or other taxes described above have been paid or are not applicable.

	•	due organization, good standing and the requisite corporate power and authority to carry on their respective businesses;
	•	ownership of subsidiaries;
	•	capital structure and equity securities;

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	•	corporate power and authority to enter into the merger agreement and due execution, delivery and enforceability of the merger agreement;
	•	board of directors approval;
	•	absence of conflicts with charter documents, breaches of contracts and agreements, liens upon assets and violations of applicable law resulting from the execution and delivery of the merger agreement and consummation of the transactions contemplated by the merger agreement;
	•	absence of required governmental or other third party consents in connection with execution and delivery of the merger agreement and consummation of the transactions contemplated by the merger agreement other than governmental filings specified in the merger agreement, such as filing premerger notification under the HSR Act;
	•	timely filing of required documents with the SEC, material compliance with the requirements of the Securities Act and the Exchange Act and the absence of untrue statements of material facts or omissions of material facts in those documents;
	•	material compliance of financial statements as to form with applicable accounting requirements and SEC rules and regulations and preparation in accordance with U.S. generally accepted accounting principles;
	•	absence of misleading information contained or incorporated into this joint proxy statement/ prospectus or the registration statement of which this joint proxy statement/ prospectus forms a part;
	•	absence of specified changes or events and that the conduct of its business has been in the ordinary course since January 31, 2004;
	•	compliance with applicable laws and holding of all necessary permits;
	•	employee benefits matters and ERISA compliance;
	•	tax matters;
	•	environmental matters and compliance with environmental laws;
	•	the stockholder votes required to approve and adopt the merger agreement and authorize the issuance of Federated common stock;
	•	receipt of a fairness opinion from each company’s financial advisors; and
	•	brokers’ or finders’ fees.

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	Operating Covenants

	•	declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, except, among other things, for quarterly cash dividends not in excess of $0.245 per share, and any dividends required under the terms of the ESOP preference shares;
	•	split, combine or reclassify any of its capital stock;
	•	except as required in connection with the ESOP preference shares or May’s stock plans, purchase, redeem or otherwise acquire any shares of its or its subsidiaries’ capital stock or any other securities of May or any of its subsidiaries or any rights, warrants or options to acquire any of those shares or other securities;
	•	issue or authorize the issuance of, deliver or sell any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than in connection with May’s stock plans or the ESOP preference shares;
	•	amend its certificate of incorporation or by-laws, other than amendments or changes to any such documents of May’s subsidiaries in the ordinary course of business;
	•	sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its material properties or assets, other than in the ordinary course of business;
	•	incur any material long or short-term indebtedness other than in the ordinary course of business or under existing lines of credit;
	•	other than in the ordinary course of business, grant any increase in the compensation or benefits payable or to become payable by May or any of its subsidiaries to any current or former director, officer, employee or consultant;
	•	other than in the ordinary course of business, adopt, enter into, amend or otherwise increase, reprice or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under any of May’s or its subsidiaries’ employee benefit plans;
	•	other than in the ordinary course of business, enter into or amend any employment, bonus, severance, change-in-control, retention agreement or any similar agreement or any collective bargaining agreement, or grant any severance, bonus, termination or retention pay to any officer, director, employee or consultant;
	•	other than in the ordinary course of business, pay or award any pension, retirement, allowance or other non-equity incentive awards, or other employee or director benefit not required by any outstanding May employee benefit plans;
	•	change the accounting principles used by it unless required by applicable generally accepted accounting principles or by any government entity;
	•	acquire by merging or consolidating with, by purchasing any substantial equity interest in or a substantial portion of the assets of, or by any other manner, any significant business or any corporation, partnership, association or other business organization or division of that entity, or otherwise acquire any assets that are material to May and its subsidiaries, taken as a whole, other than; (i) the purchase of assets from suppliers or vendors in the ordinary course of business, (ii) items reflected in the capital plan of May previously made available to Federated, or (iii) acquisitions of businesses or assets involving consideration up to an aggregate amount not to exceed $50 million;

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	•	except in the ordinary course of business, make or rescind any material express or deemed election or settle or compromise any material claim or action relating to taxes, or materially change any of its methods of accounting or of reporting income or deductions for tax purposes;
	•	satisfy any material claims or liabilities, other than satisfaction in the ordinary course of business or in accordance with their terms;
	•	make any loans, advances or capital contributions to, or investments in, any other person in excess of $25 million in the aggregate, except for (i) loans, advances, capital contributions or investments between any wholly owned May subsidiary and May or another wholly owned May subsidiary, (ii) employee advances for expenses in the ordinary course of business or (iii) ordinary course proprietary credit card transactions;
	•	other than in the ordinary course of business and other than contracts that may be terminated within one year or amendments renewing, on substantially similar terms, any contract existing on the date of the merger agreement, terminate or adversely modify or amend any contract having a duration of more than one year and total payment obligations of May in excess of $25 million;
	•	other than in the ordinary course of business, waive, release, relinquish or assign any right or claim of material value to May;
	•	other than in the ordinary course of business, cancel or forgive any material indebtedness owed to May or any of its subsidiaries; or
	•	authorize, or commit or agree to take, any of the foregoing actions.

	•	declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, except, among other things, for quarterly cash dividends of $0.14 per share;
	•	split, combine or reclassify any of its capital stock;
	•	except pursuant to agreements entered into with respect to Federated stock plans that are in effect as of the close of business on the date of the merger agreement, purchase, redeem or otherwise acquire any shares of capital stock of Federated or any of its subsidiaries or any other securities of Federated or any of its subsidiaries or any rights, warrants or options to acquire any of those shares or other securities;
	•	issue or authorize the issuance of, deliver, or sell any shares of its capital stock, or any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any of such shares, voting securities or convertible securities, other than in connection with Federated’s stock plans;
	•	amend its certificate of incorporation or by-laws, other than amendments or changes to any such documents of Federated’s subsidiaries in the ordinary course of business;
	•	sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its material properties or assets other than in the ordinary course of business;
	•	change the accounting principles used by it unless required by applicable generally accepted accounting principles or by any government entity;
	•	acquire by merging or consolidating with, by purchasing any substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division of that entity, or otherwise acquire assets that are material to Federated and its subsidiaries, taken as a whole, other than; (i) the purchase of assets from suppliers or vendors in the ordinary course of business, (ii) items reflected in the capital

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		plan of Federated previously made available to May, or (iii) acquisitions of businesses or assets involving consideration up to an aggregate amount not to exceed $50 million;
	•	except in the ordinary course of business, make or rescind any material express or deemed election or settle or compromise any material claim or action relating to taxes, or materially change any of its methods of accounting or of reporting income or deductions for tax purposes;
	•	satisfy any material claims or liabilities, other than in the ordinary course of business or in accordance with their terms;
	•	other than in the ordinary course of business and other than contracts that may be terminated within one year or amendments renewing, on substantially similar terms, any contract existing on the date of the merger agreement, terminate or adversely modify or amend any contract having a duration of more than one year and total payment obligations of Federated in excess of $25 million;
	•	other than in the ordinary course of business, waive, release, relinquish or assign any right or claim of material value to Federated;
	•	other than in the ordinary course of business, cancel or forgive any material indebtedness owed to Federated or any of its subsidiaries; or
	•	authorize, or commit or agree to take, any of the foregoing actions.

	No Solicitation by May

	•	direct or indirect acquisition or purchase of a business that constitutes 50% or more of the net revenues, net income or the assets of May and its subsidiaries, taken as a whole;
	•	direct or indirect acquisition or purchase of 50% or more of the combined voting power of May;
	•	any tender offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of the combined voting power of May; or
	•	any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving May, other than the transactions contemplated by the merger agreement.

	•	solicit, initiate or knowingly encourage the making of a company takeover proposal;
	•	enter into any agreement, arrangement or understanding with respect to any company takeover proposal; or
	•	other than informing persons of the existence of the non-solicitation provision, participate in any discussions or negotiations regarding, or furnish or disclose to any person (other than to Federated) any non-public information with respect to May in connection with any inquiries or the making of any proposal that constitutes, or would reasonably be expected to lead to, any company takeover proposal.

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	•	furnish information with respect to May to the person making the company takeover proposal (and its representatives) pursuant to a customary confidentiality agreement not less restrictive of the person than the existing confidentiality agreement between May and Federated, provided that all the information is, in substance, simultaneously provided to Federated; and
	•	participate in discussions or negotiations with the person making the company takeover proposal (and its representatives) regarding the company takeover proposal.

	•	would be more favorable from a financial point of view to the stockholders of May than the transactions contemplated by the merger agreement (including any adjustment to the terms and conditions proposed by Federated in response to such company takeover proposal), and
	•	for which financing, to the extent required, is then committed or may reasonably be expected to be committed.

	•	cause a “company adverse recommendation change” (as defined below); or
	•	approve or recommend, or allow May or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement constituting or related to any company takeover proposal.

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	Federated Annual Meeting

	Access to Information; Confidentiality

	Regulatory and Antitrust Approvals and Clearances

	•	obtaining all necessary actions or nonactions, waivers, consents and approvals from governmental entities and making all necessary registrations and filings and taking all reasonable steps as may be

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		necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity;
	•	the avoidance of impediments under any antitrust, merger control, competition or trade regulation law that may be asserted by any governmental entity;
	•	obtaining all necessary consents, approvals or waivers from third parties;
	•	defending any lawsuits or other legal proceedings challenging the merger agreement or the transactions contemplated by the merger agreement, including seeking to have any stay or temporary restraining order vacated or reversed; and
	•	executing and delivering any additional instruments necessary to complete the merger and the other transactions contemplated by the merger agreement and to fully carry out the purposes of the merger agreement.

	•	no requirement for non-action, a waiver, consent or approval of the FTC, the Antitrust Division, any State Attorney General or other governmental entity;
	•	no decree, judgment, injunction, temporary restraining order or any other order in any suit or proceeding; and
	•	no other matter relating to any antitrust or competition law or regulation;

	•	file as soon as practicable (after the execution and delivery of the merger agreement) a Notification and Report Form under the HSR Act with the FTC and the Antitrust Division, which Notification and Report Form was filed on March 8, 2005;
	•	respond as promptly as practicable under the circumstances to any inquiries received from the FTC or the Antitrust Division for additional information or documentation and to all inquiries and requests received from any State Attorney General or other governmental entity in connection with antitrust matters;
	•	not extend any waiting period under the HSR Act or enter into any agreement with the FTC or the Antitrust Division not to complete the transactions contemplated by the merger agreement;
	•	subject to applicable laws and except as may be prohibited by any representative of any governmental entity, promptly notify the other party of any written communication to that party from the FTC, the Antitrust Division, any State Attorney General or any other governmental entity, and permit the other party to review in advance any proposed written communication to any of the foregoing;
	•	subject to applicable laws and except as may be prohibited by any representative of any governmental entity, not agree to participate in any substantive meeting or discussion with any governmental entity regarding any filings, investigation or inquiry concerning the merger agreement or the merger unless it consults with the other party in advance and, to the extent permitted by the governmental entity, gives the other party the opportunity to attend and participate in the meeting; and

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	•	subject to applicable laws and except as may be prohibited by any representative of any governmental entity, furnish the other party with copies of all correspondence, filings, and written communications, including summary memoranda, between it and its affiliates and their respective representatives on the one hand, and any governmental entity or members or their respective staffs on the other hand, with respect to the merger agreement and the merger.

	May Stock Options

May Options

Conversion Calculation

Federated Options

Options

1,000

×

.3115 + ($17.75/$60) = .3115 + .2958 = .6073

=

607 options

Exercise price per share

$

20 per share

÷

.6073

=

$

32.9326 per share

Aggregate exercise price

$

20,000.00

$

19,990.09*

*	Aggregate exercise values fluctuate due to fractional share rounding and rounding of exercise price.

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	Indemnification and Insurance

	Employee Benefits Matters

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