AGREEMENT AND RELEASE OF CLAIMS

Exhibit 10.1

AGREEMENT AND RELEASE OF CLAIMS

    THIS AGREEMENT AND RELEASE OF CLAIMS (this "Agreement") is effective as of October 2, 2006 (the "Effective Date"), by and between Federated Corporate Services, Inc., a Delaware corporation (the "Company") and a subsidiary of Federated Department Stores, Inc. ("Federated"), and RONALD W. TYSOE ("Tysoe").

WITNESSETH:

    WHEREAS, Tysoe is currently employed by the Company pursuant to the terms of that certain Employment Agreement, dated as of July 1, 2005 by and between Tysoe and the Company (the "Employment Agreement"); and

    WHEREAS, the Company has given notice to Tysoe, pursuant to Section 1.6 of the Employment Agreement, that the services that he currently performs will no longer be required by the Company after October 5, 2006 (the "Separation Date") but that limited services may be required as set forth herein until the date of expiration of the Employment Agreement on June 30, 2007 (the "Retirement Date"); and

    WHEREAS, the parties desire to resolve and effect a final settlement of all claims and all issues related to Tysoe's employment and his separation from employment with the Company, and any and all claims against the Company, Federated and their predecessors, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel; and

    WHEREAS, Tysoe and the Company are parties to that certain Severance Agreement (the "Severance Agreement") providing for benefits upon a termination of employment following a change in control of Federated, and this Agreement is intended to supersede and replace in every respect the Severance Agreement.

    NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Company and Tysoe hereby agree as follows:

1.    Resignation. Tysoe hereby resigns, effective on the Separation Date, his position as Vice Chair of Federated. Tysoe further resigns, effective on the Separation Date: (a) from all other offices of the Company or Federated to which he has been elected by the Board of Directors of the Company or Federated (or to which he has otherwise been appointed), (b) from all directorships or offices of any entity that is a subsidiary of, or is otherwise related to or affiliated with, the Company or Federated, and (c) from all administrative, fiduciary or other positions he may hold with respect to arrangements or plans for, of or relating to the Company or Federated. The Company and Federated hereby consent to and accept said resignations.

2.    Compensation and Benefits. In consideration of the promises made in this Agreement and subject to the conditions hereof, the Company and Tysoe agree to the following:

1. Salary Payments. Tysoe will be entitled to continue to receive his base salary through the Retirement Date as follows: (i) Tysoe will receive $69,166.67 per month (payable in semi-monthly installments in accordance with the Company's regular payroll practices) until May 15, 2007; and (ii) Tysoe will receive a lump sum payment equal to $103,750, payable on or before May 15, 2007.
2. Annual Incentive Plan. Tysoe will receive his annual bonus for the 2006 fiscal year, as earned, in accordance with the terms and conditions of the applicable plan, which bonus will be payable when payments under such plan are made to other Federated executives in March 2007. Tysoe will not be eligible for annual bonus participation after the fiscal year 2006 bonus period.
3. Stock Credits. Tysoe will receive the earned stock credits for the 2004-2005 performance period, payable as soon as practicable on or after February 4, 2008 and February 2, 2009, but in no event later than December 31 of each such year. Tysoe will be also eligible to earn stock credits for the 2006-2007 performance period, as determined by Federated's Compensation and Management Development Committee, payable as soon as practicable on or after February 4, 2008, but in no event later than December 31 of such year. The number of stock credits earned for both the 2004-2005 performance period and the 2006-2007 performance period will be calculated in accordance with the applicable stock credit plan, without taking into account any forfeiture provisions relating to, or any reduction as a result of, Tysoe's retirement.
4. Equity Awards. Tysoe will not be eligible for any additional grants of equity awards after the Effective Date. Tysoe will continue to vest in his outstanding stock options through the Retirement Date and he will be permitted to exercise any such vested options until September 28, 2007. Tysoe acknowledges that all unvested options cease to vest and are forfeited as of the Retirement Date.
5. Medical Coverage. Tysoe will be allowed to continue as a plan participant in the Company's medical and dental plans (the "Health Plans") until May 15, 2007 subject to the terms and conditions of the Health Plans, including, but not limited to, timely payment of any employee contributions necessary to maintain participation. Following May 15, 2007, Tysoe will be eligible to continue such medical and dental coverage under the Health Plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended ("COBRA"); provided; however, that Tysoe will be subject to all COBRA eligibility requirements and will be responsible for applying for COBRA coverage and paying the applicable premiums and, to the extent required by Section 409A of the Internal Revenue Code of 1986, as amended, all coverage will be concluded and all payments relating thereto will be made no later than December 31, 2008.
6. Life Insurance; AD&D. Tysoe will be entitled to continuation of life and accidental death and dismemberment insurance benefits through the Retirement Date. After the Retirement Date, the Company will have no further obligations to Tysoe relating to life or accidental death and dismemberment insurance coverage.
7. Retirement Benefits. Tysoe will receive a lump sum cash payment, payable by May 15, 2007, equal to $101,500, which the parties agree is the estimated difference between (i) the benefits Mr. Tysoe would have received under Federated's Cash Account Pension Plan and Supplementary Executive Retirement Plan (the "Retirement Plans") had he received service credit under such plans through June 30, 2007 and (ii) the retirement benefits Mr. Tysoe will actually be entitled to receive under such Retirement Plans.
8. Financial Counseling. Tysoe will be entitled to continuation of financial counseling benefits through May 15, 2007.
9. Other Benefits. Tysoe will be entitled to continuation of his executive discount (and gross up payments related thereto), continued participation in the Company's executive car program, and continued use of a Company-paid cellular phone through May 15, 2007. Except as authorized by the Company in connection with its business needs, following the Separation Date, Tysoe will no longer be entitled to use of Federated's corporate aircraft for any purpose.
10. Professional Fees. The Company and Tysoe acknowledge and agree that each will be responsible for the payment of their respective legal fees and costs (and related disbursements) incurred in connection with Tysoe's retirement and all matters relating to the negotiation and execution of the releases and all other matters covered by this Agreement.
11. Long Term Disability. Tysoe expressly acknowledges that he has been informed that the Company's Long Term Disability coverage plan requires as a condition of participation that the employee be "actively at work" and that he will not, therefore, be eligible to continue to participate in such plan after the Separation Date, except as a result of exercise of any conversion rights as contained in the plan.
12. Business Expenses. Tysoe will be responsible for any personal charges incurred on any Company credit card or other account used by him and Tysoe agrees to pay all such charges when due. The Company will reimburse Tysoe for any pending, reasonable business-related credit card charges for which Tysoe has not already been reimbursed provided Tysoe files a proper travel and expense report. Further, Tysoe will be entitled to reimbursement for reasonable travel and business-related expenses in connection with the performance of the duties contemplated by Paragraph 6(a).
13. Withholding. The Company will withhold such amounts from the payments described in this Paragraph 2 as are required by applicable tax or other law.
14. Other Rights and Obligations.
1. Nothing in this Agreement