VARIABLE TERM ACCELERATED SHARE REPURCHASE TRANSACTION

FEBRUARY 26, 2007
VARIABLE TERM ACCELERATED SHARE REPURCHASE TRANSACTION

To:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH   45202

From:
Credit Suisse, New York Branch
Eleven Madison Avenue
New York, NY  10010

________________________________________________________________________________

Dear Sirs:

This letter agreement (this " Confirmation ") confirms the terms and conditions of the accelerated share repurchase transaction (the " Transaction ") to be entered into between Federated Department Stores, Inc. (" Counterparty ") and Credit Suisse, New York Branch (" CSNY ") on the Trade Date specified below.  This Confirmation constitutes a "Confirmation" under the Agreement specified below.

1.     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the " Definitions ") (as published by the International Swaps and Derivatives Association, Inc.) are incorporated into this Confirmation.  References herein to a "Transaction" shall be deemed to be references to a "Share Forward Transaction" for purposes of the Definitions.  This Confirmation evidences a complete binding agreement between Counterparty and CSNY as to the terms of the Transaction to which this Confirmation relates.

        This Confirmation shall supplement, form a part of, and be subject to an agreement (the " Agreement ") in the form of the 1992 ISDA Master Agreement (Multicurrency - Cross Border), as if, on the date hereof, CSNY and Counterparty had executed that agreement (but without any Schedule other than the provisions in Section 15 of this Confirmation).  In the event of any inconsistency between the Definitions and the Agreement, the Definitions will govern.  In the event of any inconsistency between this Confirmation, on the one hand, and the Definitions or the Agreement, on the other hand, this Confirmation will govern.

2.     The following terms and conditions shall govern the Transaction:

General Terms:

               Trade Date:                           February 27, 2007

               Buyer:                                   Counterparty.

               Seller:                                    CSNY.

            Shares:                                  The common stock, par value $0.01 of Counterparty (sometimes also referred to as the " Issuer ").

               Price Adjustment Period

               Termination Date:                  The earlier of:

                                                            (i)         the Scheduled Termination Date; and

                                                            (ii)        the Scheduled Trading Day immediately preceding the Accelerated Termination Date.

               Scheduled Termination

               Date:                                     July 26, 2007; subject to adjustment as provided in "Market Disruption Event" below.

               Accelerated Termination

               Date:                                     Any Exchange Business Day after April 23, 2007 and prior to the Scheduled Termination Date that is so designated by CSNY by written notice to Counterparty of its intention to terminate the Price Adjustment Period (it being understood that such notice may be given on the Accelerated Termination Date).

               Price Adjustment Period:       The period commencing on and including the Scheduled Trading Day immediately following the Initial Share Delivery Date and ending on and including the Price Adjustment Period Termination Date.

Initial Settlement:

               Prepayment:                          Applicable.

               Prepayment Amount:             USD 994,500,000

               Prepayment Date:                  Counterparty will pay to CSNY the Prepayment Amount on the Initial Share Delivery Date.

               Initial Share Price:                  USD 44.20

               Number of Shares:                 22,500,000

               Initial Share Delivery:             CSNY shall deliver a number of shares equal to the Number of Shares to Counterparty on the Initial Share Delivery Date in accordance with Section 9.4 of the Definitions (with the Initial Share Delivery Date deemed to be a "Settlement Date" for purposes of such Section 9.4), against payment by Counterparty of the Prepayment Amount.

               Initial Share Delivery

               Date:                                     The day that is three (3) Clearance System Business Days after the date hereof.

               Exchange:                              New York Stock Exchange

               Related Exchange(s):             All Exchanges

Final Settlement:

               Net Share Settlement:            Subject to the "Cash Settlement" provisions hereof, and notwithstanding anything to the contrary in the Definitions, (i) if the Average Reference Price is less than the Initial Share Price, CSNY shall deliver to Counterparty the CSNY Share Delivery Amount, and (ii) if the Average Reference Price is greater than the Initial Share Price, Counterparty shall deliver to CSNY the Counterparty Share Delivery Amount, in either case on the Settlement Date.

               CSNY Share Delivery

               Amount:                                A number of Shares, rounded down to the nearest whole Share, equal to (a) the Prepayment Amount divided by the Average Reference Price minus (b) the Number of Shares, provided that in no event shall CSNY be required to deliver more than 45,000,000 Shares (as such number may be adjusted for stock splits or similar events) or as otherwise agreed by the parties.

               Counterparty Share

               Delivery Amount:                   A number of Shares, rounded down to the nearest whole Share, equal to (a) the Number of Shares minus (b) the Prepayment Amount divided by the Average Reference Price, provided that that if Counterparty delivers Unregistered Shares, Counterparty shall deliver a number of Shares, rounded down to the nearest whole Share, equal to the product of the Counterparty Share Delivery Amount and 1.0075; provided further , in no event shall Counterparty be required to deliver more than 45,000,000 Shares (as such number may be adjusted for stock splits or similar events) or as otherwise agreed by the parties.

               Settlement Date:                    The day that is three Exchange Business Days following the Price Adjustment Period Termination Date.

               Daily Share Reference

               Price:                                     For each Valuation Date, (a) the 10b-18 volume-weighted average price per Share on the Exchange on such day as published on Bloomberg Page "FD.N <Equity> AQR SEC" (the " Daily 10b-18 VWAP Price ") or any successor page thereto, minus (b) the Daily Reference Price Adjustment specified in Schedule I.

               Average Reference Price:       The arithmetic average of the Daily Share Reference Prices for each Valuation Date during the Price Adjustment Period.

               Valuation Date:                      Any Scheduled Trading Day in the Price Adjustment Period or the Cash Settlement Pricing Period, as the case may be, that is not a Valuation Disruption Day.

               Valuation Disruption Day:      A Scheduled Trading Day designated as such pursuant to the provisions of Market Disruption Event .

               Market Disruption Event:       Section 6.3(a) of the Definitions is hereby amended by replacing clause (ii) thereof in its entirety with the following: "(ii) an Exchange Disruption at any time prior to the relevant Valuation Time on the relevant Valuation Date, or" and inserting immediately following clause (iii) thereof the following: "; in each case that the Calculation Agent determines is material."

Notwithstanding anything to the contrary in the Definitions, for each Scheduled Trading Day in the Price Adjustment Period or the Cash Settlement Pricing Period (i) that is a Disrupted Day or a day designated as a Disrupted Day pursuant to Section 5.6 or Section 7 hereof or (ii) on which CSNY or its affiliates (collectively, " CS ") reasonably determine that it would be appropriate, in light of any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by CS), for CS to refrain from purchasing Shares in connection with this Transaction or to purchase fewer than the number of Shares that it would otherwise purchase in connection with this Transaction on such day, CSNY may, by written notice to Counterparty at any time on or prior to the Price Adjustment Period Termination Date or the final Scheduled Trading Day of the Cash Settlement Pricing Period, as the case may be, in its good faith sole discretion, elect to designate such day a Valuation Disruption Day and extend the Price Adjustment Period or the Cash Settlement Pricing Period, as applicable, by an additional Valuation Date.

               Cash Settlement:                    Counterparty may, in lieu of its obligation to deliver Shares in accordance with the "Net Share Settlement" provisions hereof, by written notice to CSNY at any time no later than the opening of trading on the fifth Scheduled Trading Day prior to the Scheduled Termination Date (or, in the case of an Accelerated Termination Date, immediately following receipt of notice from CSNY of the designation of such Accelerated Termination Date), elect to pay to CSNY on the Cash Settlement Date an amount in cash equal to the Cash Settlement Amount.

               Cash Settlement Date:            The Exchange Business Day immediately following the last day of the Cash Settlement Pricing Period.

               Cash Settlement Amount:       The Counterparty Share Delivery Amount multiplied by the arithmetic average of the Daily 10b-18 VWAP Prices for each Valuation Date during the Cash Settlement Pricing Period.

               Cash Settlement Pricing

               Period:                                  The number of Valuation Dates so specified by CSNY following receipt by CSNY of the notice described in the Cash Settlement provision hereof, commencing on the Scheduled Trading Day immediately following the Price Adjustment Period Termination Date.

               Calculation Agent:                  CSNY.

               Credit Support Documents:    None

            Share Adjustments:

                 Potential Adjustment

                 Events:                                 Section 11.2(e)(iii) of the Definitions shall be deleted in its entirety.        

                 Method of Adjustment:        Calculation Agent Adjustment.

            Extraordinary Events:

                 New Shares:                        In the definition of New Shares in Section 12.1(i) of the Definitions, the text in clause (i) shall be deleted in its entirety and replaced with "publicly quoted, traded or listed on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or their respective successors)".

                 Consequences of Merger Events:

                 (a)   Share-for-Share:           Modified Calculation Agent Adjustment; provided however , any adjustment shall not be made to account for changes in expected dividends or stock loan rate.

                 (b)   Share-for-Other:           Cancellation and Payment (Calculation Agent Determination); provided however , the calculation of Cancellation Amount shall not take into account any changes in expected dividends or stock loan rate.

                 (c)   Share-for-Combined:    Component Adjustment

                        Determining Party:        CSNY

                 Tender Offer:                       Applicable

                 Consequences of Tender Offer:

                 (a)   Share-for-Share:           Modified Calculation Agent Adjustment; provided however , any adjustment shall not be made to account for changes in expected dividends or stock loan rate.

                 (b)   Share-for-Other:           Cancellation and Payment (Calculation Agent Determination); provided however , the calculation of Cancellation Amount shall not take into account any changes in expected dividends or stock loan rate.

                 (c)   Share-for-Combined:    Component Adjustment

                         Determining Party:       CSNY

Additional Termination Event:                CSNY may designate any Scheduled Trading Day as an Early Termination Date with respect to the Transaction if at any time during the Price Adjustment Period or the Cash Settlement Pricing Period, as the case may be, Counterparty declares a cash dividend the amount per share of which differs from its Ordinary Cash Dividend Amount. In such case, this Transaction shall be the sole Affected Transaction and Counterparty shall be the sole Affected Party.  " Ordinary Cash Dividend Amount " means USD 0.1275 per Share for the first dividend or distribution, USD 0.1300 per Share or 0.1275 per Share for the second dividend or distribution, in each case, on the Shares for which the ex-dividend date falls within a regular dividend period of the Issuer, and zero for any subsequent dividend or distribution on the Shares for which the ex-dividend date falls within the same regular dividend period of the Issuer.  In calculating any payment payable by one party to the other pursuant to an Additional Termination Event, CSNY shall not take into account any expected dividends or stock loan rate.

Nationalization, Insolvency

or Delisting:                                          Cancellation and Payment (Calculation Agent Determination); provided however , the calculation of Cancellation Amount shall not take into account any changes in expected dividends or stock loan rate; provided further , in addition to the provisions of Section 12.6(a)(iii) of the Definitions, it shall also constitute a Delisting if the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange.

Additional Disruption Events:

                    (a)    Change-in-Law:            Applicable

                    (b)    Insolvency Filing:           Applicable

                    (c)     Hedging Disruption:      Applicable

Determining Party:                                      CSNY

Non-Reliance/ Agreements and
Acknowledgments Regarding
Hedging Activities/ Additional
Acknowledgments:                               Applicable

CSNY's Contact Details
for Purpose of Giving
Notice:                                                 Address for notices and communications to CSNY (other than by facsimile)(for all purposes):

                                             Credit Suisse, New York Branch

                                             Eleven Madison Avenue

                                             New York, NY 10010

                                             Attn: Senior Legal Officer

                                             Tel: (212) 538-4488

                                             Fax: (212) 325-4585

For payments and deliveries:

Attn: DSG Settlements Manager

Tel: (212) 538-9810

Fax: (212) 325-0275

For all other communications:

Attn: DSG Equities Documentation Manager

Tel: (212) 538-4437

Fax: (212) 325-8719

Counterparty's Contact
Details for Purpose of
Giving Notice:                                       Federated Department Stores, Inc.
                                                             7 West Seventh Street
                                                             Cincinnati, OH 45202
                                                             Attention:  Dennis J. Broderick,
                                                             Senior Vice President, General Counsel and Secretary
                                                             Tel:  (513) 579-7560
                                                             Fax:  (513) 579-7354

With a copy to:

Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention:  Brian Szames, Treasurer
Tel:  (513) 579-7182
Fax:  (513) 579-7393

3.     Share Settlement :

3.1   Upon (x) the occurrence or effective designation of an Early Termination Date in respect of the Transaction or (y) the occurrence of an Extraordinary Event that results in the cancellation or termination of the Transaction pursuant to Section 12.2, 12.3, 12.6 or 12.9 of the 2002 Definitions (any such event as described in clause (x) or (y) above, an " Early Termination Event ") (except, in the case of clause (y), an Extraordinary Event that is a Nationalization, Insolvency, a Merger Event or a Tender Offer, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash), if one party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Section 12.2, 12.3, 12.6 or 12.9 of the 2002 Definitions (any such amount, a " Payment Amount "), then on the date on which any Payment Amount is due, in lieu of any payment or delivery of such Payment Amount, Buyer may elect, by prior written notice to Seller, that the party owing such amount shall deliver to the other party a number of Shares (or, in the case of a Merger Event, Tender Offer, Nationalization or Insolvency, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Extraordinary Event (each such unit, an " Alternative Termination Delivery Unit " and, the securities or property comprising such unit, " Alternative Termination Property ")) with a value equal to the Payment Amount based on the market value of the Shares (or such Alternative Termination Property) as of the Early Termination Date or the date as of which the Cancellation Amount is determined, as the case may be, as determined by the Calculation Agent; provided that, notwithstanding anything to the contrary in the Definitions or the Agreement, any Payment Amount shall be determined without taking into account any expected dividend, interest rate, stock loan rate or liquidity relevant to the Shares; provided further that in determining the composition of any Alternative Termination Delivery Unit, if the relevant Extraordinary Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.

3.2   Notwithstanding anything to the contrary in this Confirmation, Counterparty acknowledges and agrees that CSNY's right to receive or CSNY's obligation to deliver, as the case may be, any  Shares (or any other class of voting securities of Counterparty) shall be suspended, in whole or in part, if such delivery or receipt would result in the ultimate parent entity of CSNY directly or indirectly beneficially owning  (as such term is defined for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the " Exchange Act ")) in excess of 9.0% of the outstanding Shares or any other class of voting securities of Counterparty.   

        If, on any day, any delivery or receipt of Shares by CSNY is suspended, in whole or in part, as a result of this provision, (i) any purported receipt or delivery of Shares shall be void and have no effect; and (ii) the respective obligations of Counterparty and CSNY to make or accept such receipt or delivery shall not be extinguished and such receipt or delivery shall be effected over time as promptly as practicable after CSNY determines, in a commercially reasonable manner, that such receipt or delivery would not result in its ultimate parent entity directly or indirectly beneficially owning in excess of 9.0% of the outstanding Shares or any other class of voting securities of Counterparty.   

3.3   Notwithstanding Section 9.11 of the Definitions, but subject to the last paragraph of this Section 3.3, the parties acknowledge that Shares delivered as part of Counterparty Share Delivery Amount or pursuant to this Section 3 may be Unregistered Shares.  For the purposes hereof, " Unregistered Shares " means Shares that have not been registered pursuant to an effective registration statement under the Securities Act of 1933, as amended (the " Securities Act ") or any state securities laws (" Blue Sky Laws ") or Shares that cannot otherwise be freely sold, transferred, pledged or otherwise disposed of without registration under the Securities Act unless such sale, transfer, pledge or other disposition is made in a transaction exempt from or not subject to registration thereunder.

        Upon request by CS, Counterparty agrees to promptly remove, or cause to be removed, any legends referring to any transfer restrictions from such Unregistered Shares upon delivery by CS to Counterparty of a seller's representation letter in the form customarily delivered by CS in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act in order to substantiate the legality of such sale, each without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by CS; provided that at the time of such request, CS has satisfied all holding period and other requirements of Rule 144 applicable to CS.

Notwithstanding anything to the contrary in this Confirmation, at the election of CS by notice to Counterparty no later than two Exchange Business Days prior to the Scheduled Termination Date (or in the case of an Accelerated Termination Date, no later than the time of designation thereof), any delivery of Shares by Counterparty as part of the Counterparty Share Delivery Amount or pursuant to this Section 3 shall comply with the terms of Annex A hereof.

4.     Additional Agr