<PAGE> 1
As filed with the Securities and Exchange Commission on February 16, 1996
Registration No. 33-64905
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C>
KMART CORPORATION Michigan 38-0729500
Kmart Financing I Delaware To Be Applied For
Kmart Financing II Delaware To Be Applied For
Kmart Financing III Delaware To Be Applied For
Kmart Financing IV Delaware To Be Applied For
(Exact Name of Registrant (State or Other Jurisdiction of (IRS Employer
as Specified in Its Charter) Incorporation or Organization) Identification No.)
</TABLE>
3100 West Big Beaver Road
Troy, Michigan 48084
(810) 643-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------
A. N. Palizzi, Esq.
Executive Vice President and
General Counsel
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(810) 643-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copy to:
<TABLE>
<S> <C>
Verne C. Hampton, II, Esq. Peter A. Atkins, Esq.
Dickinson, Wright, Moon, Van Dusen & Freeman Skadden, Arps, Slate, Meagher & Flom
500 Woodward Avenue, Suite 4000 919 Third Avenue
Detroit, Michigan 48226 New York, New York 10022
(313) 223-3500 (212) 735-3000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Securities Amount to be Regis- Proposed Maximum Proposed Amount of
to be Registered tered (1) Aggregate Price Per Maximum Registration
Unit (2) Aggregate Fee
Offering Price (1)(2)
<S> <C> <C> <C> <C>
Trust Preferred Securities of
Kmart Financing I, II, III and IV
Debt Securities of Kmart Corporation (3)
Guarantees of Trust Preferred Securities of
Kmart Financing I, II, III and IV
by Kmart Corporation and certain back-up
undertakings (4)
Preferred Stock, no par value of
Kmart Corporation (3)
Depositary Shares of Kmart Corporation
Common Stock, $1.00 par value of
Kmart Corporation (3)(5)
Warrants of Kmart Corporation
Total $1,000,000,000 100% $1,000,000,000 $344,827.59(6)
</TABLE>
(1) In United States dollars or the equivalent thereof in any other
currency, currency unit or units, or composite currency or currencies.
Such amount represents the aggregate offering price of the Trust Preferred
Securities of Kmart Financing I, II, III, and IV and the Debt Securities,
Preferred Stock, Depositary Shares, Common Stock, Warrants to Purchase Debt
Securities and Warrants to Purchase Equity Securities of Kmart Corporation
and the exercise price of any Securities issuable upon exercise of Warrants
of Kmart Corporation. Subordinated Debt Securities of Kmart Corporation may
be issued and sold to Kmart Financing I, II, III and IV, in which event
such Subordinated Debt Securities may later be distributed to the holders
of Trust Preferred Securities.
(2) Estimated for the sole purpose of computing the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
(3) Also includes such indeterminate number of shares of Preferred Stock,
Depositary Shares, and Common Stock as may be issued upon conversion of or
exchange for any Debt Securities, Preferred Stock or Depositary Shares that
provide for conversion or exchange into other securities and such
indeterminate number of shares of Common Stock as may be issued upon
conversion of Trust Preferred Securities. No separate consideration will
be received for the Debt Securities, Preferred Stock, Common Stock or
Depositary Shares issuable upon conversion of or in exchange for such other
securities.
(4) No separate consideration will be received for any Guarantees.
The Guarantees include the rights of holders of the Trust Preferred
Securities under the Guarantees and certain back up undertakings, comprised
of the obligations of Kmart Corporation to provide certain indemnities in
respect of, and be responsible for certain costs, expenses, debts and
liabilities of each of Kmart Financing I, II, III and IV, each as
described in the Registration Statement.
(5) The number of shares of Common Stock registered hereunder is limited to
that which is permissible under Rule 415(a)(4) of the Securities Act.
(6) Calculated pursuant to Rule 457(o) under the Securities Act of 1933 in
respect of the $1,000,000,000 of previously unregistered securities
registered hereby. This filing fee was paid on December 11, 1995. An
additional filing fee of $62,500.00 was previously paid for $200,000,000
aggregate principal amount of unsold securities registered under
Registration Statement No. 33-47583.
__________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
__________________
Pursuant to Rule 429 under the Securities Act, this Registration
Statement contains a combined Prospectus that also relates to $200,000,000
principal amount of the debt securities previously registered pursuant to the
Company's Registration Statement on Form S-3 (File No. 33-47583) and not
issued. This Registration Statement constitutes Post-Effective Amendment No. 1
to Registration Statement on Form S-3 (File No. 33-47583) pursuant to which the
total amount of unsold debt securities previously registered under Registration
Statement on Form S-3 (File No. 33-47583) may be offered and sold as Debt
Securities, Preferred Stock, Depositary Shares, Common Stock and Warrants,
without limitation as to class of securities, together with the securities
registered hereunder, through the use of the combined Prospectus included
herein. In the event any such previously registered debt securities are offered
prior to the effective date of this Registration Statement, they will not be
included in any Prospectus hereunder.
<PAGE> 2
SUBJECT TO COMPLETION, DATED FEBRUARY 16, 1996
PROSPECTUS
__________________
KMART CORPORATION
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
COMMON STOCK AND WARRANTS
__________________
KMART FINANCING I
KMART FINANCING II
KMART FINANCING III
KMART FINANCING IV
Trust Preferred Securities
guaranteed to the extent set forth herein by
KMART CORPORATION
__________________
Kmart Corporation (the "Company") may offer from time to time, together or
separately, (i) its debt securities (the "Debt Securities"), which may be
either senior debt securities (the "Senior Debt Securities") or subordinated
debt securities (the "Subordinated Debt Securities"), consisting of notes,
debentures or other secured or unsecured evidences of indebtedness in one or
more series, (ii) shares of its preferred stock, no par value (the "Preferred
Stock"), which may be issued in the form of depositary shares evidenced by
depositary receipts (the "Depositary Shares"), (iii) shares of its common
stock, par value $1.00 per share (the "Common Stock"), and (iv) warrants to
purchase Debt Securities, Preferred Stock, Depositary Shares, or Common Stock
or any combination thereof, as shall be designated by the Company at the time
of the offering (the "Warrants") in amounts, at prices and on terms to be
determined at the time of the offering.
Kmart Financing I, Kmart Financing II, Kmart Financing III and Kmart
Financing IV (each, a "Kmart Trust"), each a statutory business trust formed
under the laws of the State of Delaware, may offer, from time to time,
preferred securities, representing undivided beneficial interests in the assets
of the respective Kmart Trust ("Trust Preferred Securities"). The payment of
periodic cash distributions ("distributions") with respect to Trust Preferred
Securities of each of the Kmart Trusts out of moneys held by each of the Kmart
Trusts, and payment on liquidation, redemption or otherwise with respect to
such Trust Preferred Securities, will be guaranteed by the Company to the
extent described herein (each a "Trust Preferred Securities Guarantee"). See
"Description of Trust Preferred Securities Guarantees." The Company's
obligations under the Trust Preferred Securities Guarantees will be subordinate
and junior in right of payment to all other liabilities of the Company and rank
pari passu with the most senior preferred stock, if any, issued from time to
time by the Company. Subordinated Debt Securities may be issued and sold from
time to time in one or more series to a Kmart Trust, or a trustee of such Kmart
Trust, in connection with the investment of the proceeds from the offering of
Trust Preferred Securities and Trust Common Securities (as defined herein,
together the "Trust Securities") of such Kmart Trust. The Subordinated Debt
Securities purchased by a Kmart Trust may be subsequently distributed pro rata
to holders of Trust Preferred Securities and Trust Common Securities in
connection with the dissolution of such Kmart Trust upon the occurrence of
certain events as may be described in an accompanying Prospectus Supplement.
The Trust Preferred Securities Guarantees, when taken together with the
Company's obligations under the Subordinated Debt Securities, the Indenture
related thereto and the Declaration of Trust, including its obligations to pay
costs, expenses, debts and liabilities of the Kmart Trusts (other than with
respect to the Trust Securities), will provide a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the Trust
Preferred Securities. The Debt Securities, Preferred Stock, Depositary Shares,
Common Stock, Warrants and the Trust Preferred Securities and the related Trust
Preferred Securities Guarantees are collectively called the "Securities."
The Securities may be offered as separate series or issuances at an
aggregate initial public offering price not to exceed $1,200,000,000
($1,000,000,000 in the case of the Trust Preferred Securities) or, if
applicable, the equivalent thereof in one or more foreign currencies, currency
units, composite currencies or in amounts determined by reference to an index
as shall be designated by the Company, in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale and set forth in
the applicable Prospectus Supplement. The Prospectus Supplement relating to
any series of Securities will contain information concerning United States
federal income tax considerations, if applicable.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities, when issued, will be subordinated in right of
payment to all Senior Debt (as hereinafter defined) of the Company. If the
Debt Securities are secured, the security, which may consist of real estate
properties or other assets owned by the Company, and any related mortgage will
be described in the Prospectus Supplement.
Certain specific terms of the particular Securities in respect of which
this Prospectus is being delivered will be set forth in the applicable
Prospectus Supplement, including, where applicable, (i) in the case of Debt
Securities, the title, aggregate principal amount, denominations, maturity,
subordination terms, if any, any interest rate (which may be fixed or variable)
and time of payment of any interest, the right of the Company, if any, to
defer payment of interest on the Debt Securities and the maximum length of
such deferral period, any terms for redemption at the option of the Company or
the holder, any terms for sinking fund payments, any terms for conversion or
exchange into other Securities, currency or currencies of denomination and
payment, if other than U.S. dollars, any security applicable to Debt Securities
which are secured, any listing on a securities exchange and any other terms in
connection with the offering and sale of the Debt Securities in respect of
which this Prospectus is delivered, as well as the initial public offering
price; (ii) in the case of Trust Preferred Securities, the designation and
number, liquidation preference per Trust Preferred Security, initial public
offering price, any listing on a securities exchange, distribution rate (or
method of calculation thereof), dates on which distributions shall be payable
and dates from which distributions shall accrue, any voting rights, terms for
any conversion or exchange into other Securities, any redemption, exchange or
sinking fund provisions, any other rights, preferences, privileges, limitations
or restrictions relating to the Trust Preferred Securities and the terms upon
which the proceeds of the sale of the Trust Preferred Securities shall be used
to purchase a specific series of Subordinated Debt Securities of the Company;
(iii) in the case of Preferred Stock and Depositary Shares, the specific title,
the aggregate amount, any dividend (including the method of calculating
payment of dividends), seniority, liquidation, redemption, voting and other
rights, any terms for any conversion or exchange into other Securities, any
listing on a securities exchange, the initial public offering price and any
other terms; (iv) in the case of Common Stock, the number of shares of Common
Stock and the terms of offering thereof; and (v) in the case of Warrants, the
designation and number, the exercise price, any listing of the Warrants or the
underlying Securities on a securities exchange and any other terms in
connection with the offering, sale and exercise of the Warrants.
The Company's Common Stock is listed on the New York Stock Exchange, the
Chicago Stock Exchange and the Pacific Stock Exchange under the trading symbol
"KM." Any Common Stock sold pursuant to a Prospectus Supplement will be listed
on such exchange, subject to official notice of issuance.
The Company and/or each of the Kmart Trusts may sell the Securities
directly, through agents, underwriters or dealers as designated from time to
time, or through a combination of such methods. See "Plan of Distribution."
If agents of the Company and/or any Kmart Trust or any dealers or underwriters
are involved in the sale of the Securities in respect of which this Prospectus
is being delivered, the names of such agents, dealers or underwriters and any
applicable commissions or discounts will be set forth in or may be calculated
from the Prospectus Supplement with respect to such Securities. The net
proceeds to the Company from such sale also will be set forth in the
applicable Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
__________________
The date of this Prospectus is __________, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN
OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
This Prospectus constitutes part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the Kmart Trusts with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus and any accompanying Prospectus Supplement do not contain all
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is made to the Registration Statement and to the exhibits relating
thereto for further information with respect to the Company, the Kmart Trusts
and the Securities offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Commission. Such reports, proxy
statements, and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: 7 World Trade Center, 13th Floor,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
listed on the New York Stock Exchange, the Chicago Stock Exchange and the
Pacific Stock Exchange. Reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of The New
York Stock Exchange, Inc. ("New York Stock Exchange"), 20 Broad Street, New
York, New York 10005 and at the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California 94104.
No separate financial statements of any of the Kmart Trusts have been
included herein. The Company does not consider that such financial statements
would be material to holders of the Trust Preferred Securities because (i) all
of the voting securities of each of the Kmart Trusts will be owned, directly or
indirectly, by the Company, a reporting company under the Exchange Act, (ii)
each of the Kmart Trusts has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in
the assets of such Kmart Trust and investing the proceeds thereof in
Subordinated Debt Securities issued by the Company, and (iii) the Company's
obligations described herein and in any accompanying Prospectus Supplement
under the Declarations of each Trust, the guarantee issued with respect to Trust
Preferred Securities issued by that Trust, the Subordinated Debt Securities
purchased by that Trust and the related Indenture, taken together, constitute a
full and unconditional guarantee of payments due on the Trust Preferred
Securities. See "Description of Debt Securities" and "Description of Trust
Preferred Securities Guarantees."
The Kmart Trusts are not currently subject to the information reporting
requirements of the Exchange Act. The Kmart Trusts will become subject to such
requirements upon the effectiveness of the Registration Statement, although
they intend to seek and expect to receive exemptions therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (File No. 1-327) are incorporated herein by reference:
(1) Annual Report on Form 10-K for the fiscal year ended January 25, 1995;
(2) Quarterly Report on Form 10-Q for the quarter ended April 26, 1995;
(3) Quarterly Report on Form 10-Q for the quarter ended July 26, 1995;
(4) Quarterly Report on Form 10-Q for the quarter ended October 25, 1995;
(5) Current Report on Form 8-K filed on April 11, 1995;
(6) Current Report on Form 8-K filed on April 27, 1995;
(7) Current Report on Form 8-K filed on June 4, 1995;
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<PAGE> 4
(8) Current Report on Form 8-K filed on June 26, 1995;
(9) Current Report on Form 8-K filed on November 6, 1995;
(10) Current Report on Form 8-K filed on November 14, 1995;
(11) Current Report on Form 8-K filed on December 20, 1995; and
(12) Current Report on Form 8-K filed on January 22, 1996.
The consolidated financial statements included in the Annual Report and
Form 10-K filed for the fiscal year ended January 25, 1995 should be read in
connection with the discussion of the Company's current liquidity and financial
condition included in the Management's Discussion and Analysis included in Form
10-Q for the quarter ended October 25, 1995.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which
indicates the termination of the offering of the Securities made by this
Prospectus shall be deemed to be incorporated by reference in this Prospectus
and to be a part of this Prospectus from the date of filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
referred to above which have been or may be incorporated by reference in this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). Such written or oral request
should be directed to the Corporate Reporting Department, Kmart Corporation,
3100 West Big Beaver Road, Troy, Michigan 48084 (telephone number (810)
643-1093).
THE COMPANY
The Company is one of the world's largest mass merchandise retailers. The
dominant portion of the Company's business consists of the operation of a chain
of more than 2,100 Kmart discount stores with locations in each of the 50
United States, Puerto Rico, the U.S. Virgin Islands and Guam. Internationally,
the Company has operations in Canada, the Czech Republic and Slovakia and has
formed joint ventures in Mexico and Singapore, which as of October 25, 1995 had
opened seven stores, four in Mexico and three in Singapore. The Company's
Central European stores were acquired in mid-1992 and represent the Company's
entry into that market. The Company also holds significant equity interests in
substantially all of the Meldisco subsidiaries of Melville Corporation, which
operate the footwear departments in Kmart stores in the United States, and in
Thrifty PayLess Holdings Inc. and owns Builders Square, Inc., a home
improvement and home decor superstore retailer.
The Company was incorporated under the laws of the State of Michigan on
March 9, 1916. The principal executive offices of the Company are located at
3100 West Big Beaver Road, Troy, Michigan 48084, and its telephone number is
(810) 643-1000.
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<PAGE> 5
THE TRUSTS
Each of Kmart Financing I, Kmart Financing II, Kmart Financing III and
Kmart Financing IV is a statutory business trust formed under Delaware law
pursuant to (i) a separate declaration of trust (each a "Declaration") executed
by the Company, as sponsor for such trust (the "Sponsor") and the Kmart
Trustees (as defined herein) for such trust and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on February __, 1996.
Each Kmart Trust exists for the exclusive purposes of (i) issuing the Trust
Preferred Securities and common securities representing undivided beneficial
interests in the assets of such Trust (the "Trust Common Securities" and,
together with the Trust Preferred Securities, the "Trust Securities"), (ii)
investing the gross proceeds of the Trust Securities in a specific series of
Subordinated Debt Securities and (iii) engaging in only those other activities
necessary or incidental thereto. All of the Trust Common Securities will be
directly or indirectly owned by the Company. The Trust Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Trust
Preferred Securities except that upon an event of default under the
Declaration, the rights of the holders of the Trust Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. The Company will, directly or indirectly, acquire Trust
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of each Kmart Trust. Each Kmart Trust has a term of approximately 55
years, but may earlier terminate as provided in the Declaration. Each Kmart
Trust's business and affairs will be conducted by the trustees (the "Kmart
Trustees") appointed by the Company, as the direct or indirect holder of all
the Trust Common Securities. The holder of the Trust Common Securities will be
entitled to appoint, remove or replace any of, or increase or reduce the number
of, the Kmart Trustees of a Kmart Trust. The duties and obligations of the
Kmart Trustees shall be governed by the Declaration of such Kmart Trust. A
majority of the Kmart Trustees (the "Regular Trustees") of each Kmart Trust
will be persons who are employees or officers of or affiliated with the
Company. One Kmart Trustee of each Kmart Trust will be a financial institution
which will be unaffiliated with the Company and which shall act as property
trustee and as indenture trustee for purposes of the Trust Indenture Act of
1939 (the "Trust Indenture Act"), pursuant to the terms set forth in a
Prospectus Supplement (the "Property Trustee"). In addition, unless the
Property Trustee maintains a principal place of business in the State of
Delaware, and otherwise meets the requirements of applicable law, one Kmart
Trustee of each Kmart Trust will have its principal place of business or reside
in the State of Delaware (the "Delaware Trustee"). The Company will pay all
fees and expenses related to the Kmart Trusts and the offering of Trust
Securities, the payment of which will be guaranteed by the Company. The office
of the Delaware Trustee for each Kmart Trust in the State of Delaware is
[Address of Delaware Trustee]. The principal place of business of each Kmart
Trust shall be c/o Kmart Corporation, 3100 West Big Beaver Road, Troy, Michigan
48084.
RATIOS OF EARNINGS TO FIXED CHARGES AND OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS (UNAUDITED)
<TABLE>
<CAPTION>
Trailing 52
Weeks Ended(a) Fiscal Year Ended
----------------- ---------------------------------------------------------------
October 25, October 26, January 25, January 26, January 27, January 29, January 30,
1995 1994 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges --(b) --(c) 1.2 --(d) 3.0 3.0 2.9
Ratio of earnings to combined fixed
charges and preferred stock dividends --(b) --(c) 1.1 --(d) 2.5 2.7 2.9
</TABLE>
In computing the ratios, earnings consist of pre-tax income from
continuing retail operations before extraordinary item and the effect of
accounting changes, less undistributed equity income of unconsolidated
affiliated retail companies, plus fixed charges (excluding capitalized
interest). Fixed charges represent total interest charges, a portion of
operating rentals representative of the interest factor, and amortization of
debt discount and expense. Certain prior year amounts have been restated for
the effect of discontinued operations.
- ---------------
(a) Due to the seasonality of the Company's business, the ratio of earnings to
fixed charges is computed on a trailing 52-week basis.
(b) The deficiency of earnings from continuing retail operations versus fixed
charges was $256 million for the trailing 52 weeks ended October 25, 1995.
The deficiency of earnings from continuing retail operations versus
combined fixed charges and preferred dividends was $265 million for the
trailing 52 weeks ended October 25, 1995.
(c) The deficiency of earnings from continuing retail operations versus fixed
charges was $706 million for the trailing 52 weeks ended October 26, 1994.
Excluding the pre-tax provision of $1,130 million for store restructuring
and other charges, the ratio of earnings to fixed charges was 1.6 for the
trailing 52 weeks ended October 26, 1994. The deficiency of earnings from
continuing retail operations versus combined fixed charges and preferred
dividends was $774 million for the trailing 52 weeks ended October 26,
1994.
(d) The deficiency of earnings from continuing retail operations versus fixed
charges was $426 million for the fiscal year ended January 26, 1994.
Excluding the pre-tax provision of $1,130 million for store restructuring
and other charges, the ratio of earnings to fixed charges was 2.0 for the
fiscal year ended January 26, 1994. The deficiency of earnings from
continuing retail operations versus combined fixed charges and preferred
dividends was $514 million for the fiscal year ended January 26, 1994.
USE OF PROCEEDS
Unless otherwise specified in the attached Prospectus Supplement, the
Company will apply the net proceeds from the sale of its Securities to general
corporate purposes. The Kmart Trusts will invest all proceeds received from the
sale of its Trust Securities in a particular series of Subordinated Debt
Securities.
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<PAGE> 6
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may not apply to the
Debt Securities so offered will be described in the Prospectus Supplement
relating to such Debt Securities.
The Senior Debt Securities will be issued under an Indenture (the
"Senior Indenture"), to be entered into between the Company and the trustee
named in the Indenture. The Subordinated Debt Securities will be issued under
a separate Indenture (the "Subordinated Indenture"), to be entered into between
the Company and the trustee named in the Indenture. The Senior Indenture and
the Subordinated Indenture are sometimes referred to collectively as the
"Indentures." Copies of the forms of the Senior Indenture and the Subordinated
Indenture have been filed as exhibits to the Registration Statement. The
trustees under the Senior Indenture and under the Subordinated Indenture are
referred to herein as the "Debt Trustees."
The following summaries of certain material provisions of the Senior
Debt Securities, the Subordinated Debt Securities and the Indentures are
subject to, and qualified in their entirety by reference to, all the provisions
of the Indenture applicable to a particular series of Debt Securities,
including the definitions therein of certain terms. Wherever particular
Sections, Articles or defined terms of the Indentures are referred to herein or
in a Prospectus Supplement, it is intended that such Sections, Articles or
defined terms shall be incorporated by reference herein or therein, as the case
may be. Section and Article references used herein are references to the
applicable Indenture. Except as otherwise indicated, the terms of the Senior
Indenture and the Subordinated Indenture are identical. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the
applicable Indenture.
GENERAL
The Indentures will not limit the aggregate principal amount of Debt
Securities which may be issued thereunder, and each Indenture provides that
Debt Securities may be issued thereunder from time to time in one or more
series up to the aggregate amount from time to time authorized by the Company
for each series. (Section 3.1) Unless otherwise specified in the Prospectus
Supplement, the Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Company and will rank equally and ratably
with all other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise specified in the Prospectus Supplement, the Subordinated Debt
Securities when issued will be unsecured obligations of the Company,
subordinated in right of payment to the prior payment in full of all Senior
Debt (as defined in the Subordinated Indenture) of the Company as described in
the applicable Prospectus Supplement. (Section 15.1 of the Subordinated
Indenture) If the Debt Securities are secured, the security, which may consist
of real estate properties or other assets owned by the Company, and any related
mortgage will be described in the Prospectus Supplement.
In the event Subordinated Debt Securities are issued to a Kmart Trust
or a trustee of such trust in connection with the issuance of Trust Securities
by such Kmart Trust, such Subordinated Debt Securities subsequently may be
distributed pro rata to the holders of such Trust Securities in connection with
the dissolution of such Kmart Trust upon the occurrence of certain events
described in the Prospectus Supplement relating to such Trust Securities. Only
one series of Subordinated Debt Securities will be issued to a Kmart Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Kmart Trust.
Reference is made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for a description of the
following terms or additional provisions of the Debt Securities: (1) the title
of the Debt Securities; (2) whether the Debt Securities are Senior Debt
Securities or Subordinated Debt Securities and the terms of subordination; (3)
any limit on the aggregate principal amount of the Debt Securities; (4) whether
the Debt Securities are to be issuable as Registered Securities or Bearer
Securities or both, whether any of the Debt Securities shall be issuable in
whole or in part in temporary or permanent global form or in the form of
Book-Entry Securities and, if so, the circumstances under which any such global
securities or Book-Entry Securities may be exchanged for Debt Securities
registered in the name of, and any transfer of such global or Book-Entry
Securities may be registered to, a Person other than the depository for such
temporary or permanent global securities or Book-Entry Securities or its
nominee; (5) the price or prices (expressed as a percentage of the aggregate
principal amount thereof) at which the Debt Securities will be issued; (6) the
date or dates on which the Debt Securities will mature and the right, if any,
to extend such date or dates; (7) the rate or rates per annum at which the Debt
Securities will bear
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interest, if any, and the date from which any such interest will accrue; (8)
the Interest Payment Dates on which any such interest on the Debt Securities
will be payable, the Regular Record Date for any interest payable on any Debt
Securities which are Registered Securities on any Interest Payment Date and the
extent to which, or the manner in which, any interest payable on a temporary
global Security on an Interest Payment Date will be paid; (9) the right, if
any, to extend the interest payment periods and the duration of such extension;
(10) any mandatory or optional sinking fund or analogous provisions; (11) each
office or agency where, subject to the terms of the applicable Indenture as
described below under "Payment and Paying Agents," the principal of and any
premium and interest on the Debt Securities will be payable and each office or
agency where, subject to the terms of the applicable Indenture as described
below under "Form, Exchange, Registration and Transfer," the Debt Securities
may be presented for registration of transfer or exchange; (12) the date, if
any, after which and the price or prices at which the Debt Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed, in
whole or in part, and the other detailed terms and provisions of any such
optional or mandatory redemption provisions, which may include with respect to
a particular series or particular Debt Securities within a series, a redemption
option of Holders upon certain conditions, as defined in the applicable
Indenture; (13) the denominations in which any Debt Securities which are
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or denominations in
which any Debt Securities which are Bearer Securities will be issuable, if
other than the denomination of $5,000; (14) the currency or currency units of
payment of the principal of (and premium, if any) and interest on the Debt
Securities; (15) any index used to determine the amount of payments of the
principal of (and premium, if any) and interest on the Debt Securities and the
manner in which such amounts shall be determined; (16) the terms and
conditions, if any, pursuant to which such Debt Securities are convertible or
exchangeable into a security or securities of the Company; (17) the terms
pursuant to which such Debt Securities are subject to defeasance; (18) the
terms and conditions, if any, pursuant to which such Debt Securities are
secured; and (19) any other terms of the Debt Securities not inconsistent with
the provisions of the applicable Indenture. Any such Prospectus Supplement
will also describe any special provisions for the payment of additional amounts
with respect to the Debt Securities. Debt Securities may also be issued under
the Indenture upon the exercise of Warrants. See "Description of Warrants."
Debt Securities may be issued as Original Issue Discount Securities.
An Original Issue Discount Security is a Debt Security, including any
Zero-Coupon Security, which is issued at a price lower than the amount payable
upon the Stated Maturity thereof and which provides that upon redemption or
acceleration of the maturity, an amount less than the amount payable upon the
Stated Maturity, determined in accordance with the terms of such Debt Security,
shall become due and payable. (Sections 3.1 and 5.2) Certain special United
States federal income tax considerations applicable to Debt Securities sold at
an original issue discount will be described in the Prospectus Supplement
relating thereto. In addition, certain special United States federal income tax
or other considerations applicable to any Debt Securities which are denominated
in a currency or currency unit other than United States dollars may be
described in the applicable Prospectus Supplement relating thereto.
Under the Indentures, the Company will have the ability, in addition to
the ability to issue Debt Securities with terms different from those of Debt
Securities previously issued, without the consent of the holders, to reopen a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series (unless such reopening was restricted when such
series was created), in an aggregate principal amount determined by the
Company. (Section 3.1)
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. (Section 3.1) Unless otherwise indicated in
an applicable Prospectus Supplement, Bearer Securities will have interest
coupons attached. (Section 2.1) The Indentures also will provide that Debt
Securities of a series may be issuable in temporary or permanent global form
and may be issued as Book-Entry Securities that will be deposited with, or on
behalf of, The Depository Trust Company (the "Depository") or another
depository named by the Company and identified in a Prospectus Supplement with
respect to such series. See "Global and Book-Entry Debt Securities."
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In connection with its original issuance, no Bearer Security (including a
Debt Security exchangeable for a Bearer Security or a Debt Security in global
form that is either a Bearer Security or exchangeable for Bearer Securities)
shall be mailed or otherwise delivered to any location in the United States (as
defined under "Limitations on Issuance of Bearer Securities") and a Bearer
Security may be delivered in connection with its original issuance only if the
Person entitled to receive such Bearer Security furnishes written certification
of the beneficial ownership of the Bearer Security as required by Treasury
Regulation Section 1.163-5(c)(2)(i)(D)(3) (or any comparable successor
provisions). In the case of a Bearer Security in permanent global form, such
certification must be given in connection with notation of a beneficial owner's
interest therein in connection with the original issuance of such Debt
Security. See "Global and Book-Entry Debt Securities" and "Limitations on
Issuance of Bearer Securities."
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities
of any series are issuable as both Registered Securities and Bearer Securities,
at the option of the Holder upon request confirmed in writing, and subject to
the terms of the applicable Indenture, Bearer Securities (with all unmatured
coupons, except as provided below, and all matured coupons in default) of such
series will be exchangeable into Registered Securities of the same series of
any authorized denominations and of a like aggregate principal amount and
tenor. Bearer Securities surrendered in exchange for Registered Securities
between a Regular Record Date or a Special Record Date and the relevant date
for payment of interest shall be surrendered without the coupon relating to
such date for payment of interest and interest accrued as of such date will not
be payable in respect of the Registered Security issued in exchange for such
Bearer Security, but will be payable only to the Holder of such coupon when due
in accordance with the terms of the applicable Indenture. Registered
Securities will not be issued in exchange for Bearer Securities (Section 3.5).
Each Bearer Security, and any coupon attached thereto, other than a temporary
global Bearer Security will bear the following legend: "Any United States
person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the United States Internal Revenue Code." A Book-Entry
Security may not be registered for transfer or exchange (other than as a whole
by the Depository to a nominee or by such nominee to such Depository) unless
the Depository or such nominee notifies the Company that it is unwilling or
unable to continue as Depository or the Depository ceases to be qualified as
required by the applicable Indenture or the Company instructs the Trustee in
accordance with the applicable Indenture that such Book-Entry Securities shall
be so registrable and exchangeable or there shall have occurred and be
continuing an Event of Default or an event which after notice or lapse of time
would be an Event of Default with respect to the Debt Securities evidenced by
such Book-Entry Securities or there shall exist such other circumstances if
any, as may be specified in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented or surrendered for registration of
transfer or for exchange (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the applicable Indenture. Such transfer
or exchange will be effected upon the Security Registrar or such transfer
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request. If a Prospectus Supplement refers
to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that, if Debt Securities of a series are issuable solely as Registered
Securities, the Company will be required to maintain a transfer agent in each
Place of Payment for such series and, if Debt Securities of a series are
issuable as Bearer Securities, the Company will be required to maintain (in
addition to the Security Registrar) a transfer agent in a Place of Payment for
such series located outside the United States.
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The Company may at any time designate additional transfer agents with respect
to any series of Debt Securities. (Section 10.2)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any
series during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Securities and there
is no publication, the mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Registered Security being redeemed in
part, except the unredeemed portion of any Registered Security being redeemed
in part; or (iii) exchange any Bearer Security so selected for redemption,
except that such Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption. (Section 3.5)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of the principal of (and premium, if any) and interest on Bearer Securities
will be made, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as the Company may designate from
time to time, at the option of the Holder, by check or by transfer to an
account maintained by the payee with a bank located outside the United States.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on Bearer Securities on any Interest Payment Date will be made only
against surrender to the Paying Agent of such coupon relating to such Interest
Payment Date. (Section 10.1) No payment with respect to any Bearer Security
will be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of the principal of (and premium, if any) and interest on
Bearer Securities denominated and payable in U.S. dollars will be made at the
office of the Company's Paying Agent in the Borough of Manhattan, The City of
New York, if (but only if) payment of the full amount thereof in U.S. dollars
at all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions. (Section 10.2)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of the principal of (and premium, if any) and interest on Registered Securities
will be made at the office of such Paying Agent or Paying Agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
any installment of interest on Registered Securities will be made to the Person
in whose name such Registered Security is registered at the close of business
on the Regular Record Date for such interest. (Section 3.7)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Debt Trustee in The City of New York will be
designated as a Paying Agent for the Company for payments with respect to Debt
Securities which are issuable solely as Registered Securities and the Company
will maintain a Paying Agent outside of the United States for payments with
respect to Debt Securities (subject to the limitations described above in the
case of Bearer Securities) which are issuable solely as Bearer Securities or
both Registered Securities and Bearer Securities. (Section 10.2) Any Paying
Agents outside the United States and any other Paying Agent in the United
States initially designated by the Company for the Debt Securities will be
named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if Debt Securities of a series are issuable solely as Registered
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Debt
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Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain (i) a Paying Agent in the Borough of Manhattan, The City
of New York for payments with respect to any Registered Securities of the
series (and for payments with respect to Bearer Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in a
Place of Payment located outside the United States where Debt Securities of
such series and any coupons appertaining thereto may be presented and
surrendered for payment; provided that if the Debt Securities of such series
are listed on The Stock Exchange of the United Kingdom and the Republic of
Ireland or the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent in London or Luxembourg or any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series. (Section 10.2)
Payments of the principal of (and premium, if any) and interest on
Book-Entry Securities registered in the name of any Depository or its nominee
will be made to the Depository or its nominee, as the case may be, as the
registered owner of the global security representing such Book-Entry
Securities. The Company expects that the Depository, upon receipt of any
payment of the principal of (and premium, if any) or interest, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests as shown on the records of such
Depository or its nominee. Neither the Company, the Debt Trustee, any Paying
Agent nor the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspects of the records relating to, or
payments made on account of, such beneficial ownership interests in the
Book-Entry Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of (and premium, if any) or interest on any Debt Securities which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and
the Holder of such Debt Security or any coupon will thereafter, as an unsecured
general creditor, look only to the Company for payment thereof. (Section 10.3)
GLOBAL AND BOOK-ENTRY DEBT SECURITIES
If so specified in an applicable Prospectus Supplement, the portion of the
Debt Securities of a series which are issuable as Bearer Securities will
initially be represented by one or more temporary or permanent global Debt
Securities, without interest coupons, to be deposited with a common depositary
in London for the benefit of Euro-clear System ("Euro-clear") and Cedel Bank,
Societe Anonyme ("Cedel") for credit to the respective accounts of the
beneficial owners of such Debt Securities (or to such other accounts as they
may direct). (Section 3.4) Unless otherwise indicated by an applicable
Prospectus Supplement, on or after 40 days following its issuance, each such
temporary global Debt Security will be exchangeable for definitive Bearer
Securities, definitive Registered Securities or all or a portion of a permanent
global Debt Security, or any combination thereof, as specified in an applicable
Prospectus Supplement, only upon written certification in the form and to the
effect described under "Form, Exchange, Registration and Transfer." No Bearer
Security (including a Debt Security in permanent global form) delivered in
exchange for a portion of a temporary or permanent global Debt Security shall
be mailed or otherwise delivered to any location in the United States in
connection with such exchange. (Section 3.5)
A person having a beneficial interest in a permanent global Debt Security
will, except with respect to payment of the principal of (and premium, if any)
and interest on such permanent global Debt Security, be treated as a Holder of
such principal amount of Outstanding Debt Securities represented by such
permanent global Debt Security as shall be specified in a written statement of
the Holder of such permanent global Debt Security or, in the case of a
permanent global Debt Security in bearer form, of the operator of Euro-clear or
Cedel which is provided to the Trustee by such Person. (Section 2.3)
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If Debt Securities to be sold in the United States are designated by the
Company in a Prospectus Supplement as Book-Entry Securities, a global security
representing the Book-Entry Securities will be deposited in the name of Cede &
Co., as nominee for the Depository representing the securities to be sold in
the United States. Upon such deposit of the Book-Entry Securities, the
Depository shall credit an account maintained or designated by an institution
to be named by the Company or any purchaser of the Debt Securities represented
by the Book-Entry Securities with an aggregate amount of Debt Securities equal
to the total number of Debt Securities that have been so purchased. The
specific terms of any depository arrangement with respect to any portion of a
series of Debt Securities to be represented by one or more global securities
will be described in the applicable Prospectus Supplement. Beneficial interests
in such Debt Securities will only be evidenced by, and transfers thereof will
only be effected through, records maintained by the Depository and the
institutions that are Depository participants.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt. (Section 15.1 of the Subordinated Indenture) In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, or (b) any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event the holders of Senior Debt shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior Debt,
or provision shall be made for such payment in cash, before the Holders of
Subordinated Debt Securities are entitled to receive any payment on account of
principal of (or premium, if any) or interest on Subordinated Debt Securities,
and to that end the holders of Senior Debt shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of
Subordinated Debt Securities, which may be payable or deliverable in respect of
the Subordinated Debt Securities in any such case, proceeding, dissolution,
liquidation or other winding up event. (Section 15.2 of the Subordinated
Indenture)
By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Company may recover less, ratably, than Holders of
Senior Debt and may recover more, ratably, than the Holders of the Subordinated
Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the Holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (and premium, if any) or
interest on, the Subordinated Debt Securities. (Section 15.3 of the
Subordinated Indenture)
No payments on account of the principal of (and premium, if any) or
interest in respect of the Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting
in the acceleration of the maturity thereof, or if any judicial proceeding
shall be pending with respect to any such default. (Section 15.4 of the
Subordinated Indenture) For purposes of the subordination provisions, the
payment, issuance and delivery of cash, property or securities (other than
stock and certain subordinated securities of the
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Company) upon conversion of a Subordinated Debt Security will be deemed to
constitute payment on account of the principal of such Subordinated Debt
Security. (Section 15.15 of the Subordinated Indenture)
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities constitute Senior Debt under the
Subordinated Indenture.
"Senior Debt" is defined to include the principal of (and premium, if any)
and interest (including interest accrued on or after the filing of any petition
in bankruptcy or for reorganization relating to the Company to the extent that
such claim for post-petition interest is allowed in such proceeding) on all
indebtedness of the Company (including indebtedness of others guaranteed by the
Company), other than the Subordinated Debt Securities, whether outstanding on
the date of the Subordinated Indenture or thereafter created, incurred or
assumed, which is (i) for money borrowed, (ii) evidenced by a note or similar
instrument given in connection with the acquisition by the Company or any
subsidiary of the Company of any businesses, properties or assets of any kind,
(iii) obligations of the Company as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles or leases of property or assets made as part of any sale
and leaseback transaction to which the Company is a party, and (iv) amendments,
renewals, extensions, modifications and refundings of any such indebtedness or
obligation, unless in any case the instrument creating or evidencing any such
indebtedness or obligation or pursuant to which the same is outstanding is
provided that such indebtedness or obligation is not superior in right of
payment to the Subordinated Debt Securities. (Section 1.1 of the Subordinated
Indenture)
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CERTAIN COVENANTS OF THE COMPANY
If Subordinated Debt Securities are issued to a Kmart Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Kmart Trust and (i) there shall have occurred any event that would
constitute an Event of Default or (ii) the Company shall be in default with
respect to its payment of any obligations under the related Trust Preferred
Securities Guarantee or Trust Common Securities Guarantee, then (a) the Company
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its capital stock (other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any then outstanding contract or security requiring
the Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged) or make any guarantee payments with respect to
the foregoing and (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to such Subordinated Debt Securities.
If Subordinated Debt Securities are issued to a Kmart Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Kmart Trust and the Company shall have given notice of its election to
defer payments of interest on such Subordinated Debt Securities by extending
the interest payment period as provided in the Indenture and such period, or
any extension thereof, shall be continuing, then (a) the Company shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any then outstanding contract or security requiring
the Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged) or make any guarantee payments with respect to
the foregoing and (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to such Subordinated Debt Securities.
In the event Subordinated Debt Securities are issued to a Kmart Trust
or a trustee of such trust in connection with the issuance of Trust Securities
of such Kmart Trust, for so long as such Trust Securities remain outstanding,
the Company will covenant (i) to directly or indirectly maintain 100% ownership
of the Trust Common Securities of such Kmart Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Trust Common Securities, (ii) to use its reasonable
efforts to cause such Kmart Trust (a) to remain a statutory business trust,
except in connection with the distribution of Subordinated Debt Securities to
the holders of Trust Securities in liquidation of such Kmart Trust, the
redemption of all of the Trust Securities of such Kmart Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the Declaration
of such Kmart Trust, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes and (iii) to use
its reasonable efforts to cause each holder of Trust Securities to be treated
as owning an undivided beneficial interest in the Subordinated Debt Securities.
(Section ___)
CONVERSION OR EXCHANGE RIGHTS
The terms on which Debt Securities of any series are convertible into or
exchangeable for Common Stock or other securities of the Company will be set
forth in the Prospectus Supplement relating thereto. Such terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the Holder or at the option of the Company, and may include provisions pursuant
to which the number of shares of Common Stock or other securities of the
Company to be received by the Holders of Debt Securities would be subject to
adjustment. (Section 3.1 and Article XIV)
SECURITY FOR SECURED DEBT SECURITIES
The terms and conditions pursuant to which the Debt Securities of any
series are secured, a description of the security, which may consist of real
estate properties or other assets owned by the Company, and the related
mortgage will be set forth in the Prospectus Supplement relating thereto.
(Section 3.1)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not merge or consolidate or sell or convey all or
substantially all of its assets unless the successor corporation (if other than
the Company) is a domestic corporation and assumes the Company's obligations on
the Debt Securities and under the applicable Indenture, and unless after giving
effect to such transaction the Company or the successor corporation would not
be in default under the applicable Indenture. (Section 8.1)
Unless otherwise specified in the Prospectus Supplement, the Indentures
contain no restrictive covenant that would afford holders of the Debt
Securities protection in the event of a change in control or a highly leveraged
transaction involving the Company or any of its affiliates.
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EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the applicable Indenture with respect to Debt Securities of any series: (a)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days (in the case of the Subordinated Indenture, whether or
not such payment is prohibited by the subordination provisions) provided,
however, that a valid extension of the interest payment period shall not
constitute a default in the payment of interest for this purpose; (b) failure to
pay the principal of (or premium, if any) on any Debt Security of that series
when due (in the case of the Subordinated Indenture, whether or not such
payment is prohibited by the subordination provisions) provided, however, that a
valid extension of the maturity of such Debt Securities shall not constitute a
default for this purpose. If a Kmart Trust or the Property Trustee of a Kmart
Trust holds a series of Subordinated Debt Securities, no such supplemental
indenture which requires the approval of the holders of a certain percentage in
aggregate principal amount of Subordinated Debt Securities shall be effective
without the approval of the holders of the same percentage of aggregate
liquidation preference of Preferred Securities; (c) failure to deposit
any sinking fund payment, when due, in respect of any Debt Security of that
series (in the case of the Subordinated Indenture, whether or not such deposit
is prohibited by the subordination provisions); (d) failure to perform any
other covenant of the Company in the applicable Indenture or such Debt Security
(other than a covenant included in the applicable Indenture solely for the
benefit of a series of Debt Securities other than that series), continued for
90 days after written notice has been given as provided in the applicable
Indenture; (e) if applicable, failure by the Company to deliver Common Stock
upon an appropriate election by the holder or holders of Trust Preferred
Securities to convert the Trust Preferred Securities into shares of Common
Stock; (f) certain events in bankruptcy, insolvency or reorganization
involving the Company; (g) in the event Subordinated Debt Securities are issued
to a Kmart Trust or a trustee of such trust in connection with the issuance of
Trust Securities by such Kmart Trust, the voluntary or involuntary dissolution,
winding-up or termination of such Kmart Trust, except in connection with the
distribution of Subordinated Debt Securities to the holders of Trust Securities
in liquidation of such Kmart Trust, the redemption of all of the Trust
Securities of such Kmart Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Kmart Trust;
or (h) any other Event of Default provided with respect to the Debt Securities
of that series. (Section 5.1) No event of default described in clause (a),
(b), (c) or (d) above with respect to a particular series of Debt Securities
necessarily constitutes an Event of Default with respect to any other series
of Debt Securities.
The Indentures provide that if an Event of Default under clauses (a), (b),
(c) or (d) above shall have occurred and be continuing (but in the case of
clause (d), only if the Event of Default is with respect to less than all
series of Debt Securities then outstanding), either the Trustee or the holders
of not less than 25% in aggregate principal amount of the then outstanding Debt
Securities of the series affected by such Event of Default (each such monies
voting as a separate class) may declare the principal (or portion thereof
specified in the terms of any series) of all the Debt Securities of such
series, together with any accrued interest, to be due and payable immediately.
If an Event of Default under clause (d) (if the Event of Default under clause
(d) is with respect to all of the series of Debt Securities then outstanding),
or (e) above shall have occurred and be continuing, either the Trustee or the
holders of not less than 25% in aggregate principal amount of all the Debt
Securities then outstanding (voting as one class) may declare the principal (or
portion thereof specified in the terms of the series) of all the Debt
Securities, together with any accrued interest, to be due and payable
immediately. Upon certain conditions such declaration (including a declaration
caused by a default in the payment of principal or interest, the payment for
which has subsequently been provided) may be annulled by the holders of a
majority in principal amount of the Debt Securities of each series as was
entitled to declare such default (each such series voting as a separate class)
or of all the Debt Securities voting as one class, as the case may be. In
addition, past defaults may be waived by the holders of a majority in principal
amount of the Debt Securities of each series as was entitled to declare such
default (each such series voting as a separate class) or of all the Debt
Securities voting as one class, as the case may be, except a default in the
payment of principal or interest on the Debt Securities or in respect of a
covenant or provision of the Indenture which cannot be modified or amended
without the approval of the holder of each Debt Security affected (Section
5.2).
The Indentures will provide that, subject to the duty of the Debt Trustee
during default to act with the required standard of care, the Debt Trustee will
be under no obligation to exercise any of its rights or powers under the
applicable Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Debt Trustee reasonable indemnity.
(Section 6.1) Subject to such provisions for the indemnification of the
Debt Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Debt Trustees or exercising any trust or power conferred on the Debt
Trustee, with respect to the Debt Securities of that series. (Section 5.12)
The Company will be required to furnish to the applicable Debt Trustee
annually a statement as to the performance of certain of its obligations under
the applicable Indenture and as to any default in such performance.
(Section 10.7)
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DEFEASANCE AND DISCHARGE
If so specified with respect to any particular series of Debt Securities,
the Company may discharge its indebtedness and its obligations or certain of
its obligations under the applicable Indenture with respect to such series by
depositing funds or obligations issued or guaranteed by the United States of
America with the Trustee. (Section 4.3)
The Indentures will provide that, if so specified with respect to the Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series (including, in the
case of Subordinated Debt Securities, the subordination provisions described
under "Subordination of Subordinated Debt Securities" herein and, except for
certain obligations relating to temporary Debt Securities and exchange of Debt
Securities, registration of transfer or exchange of Debt Securities of such
series, replacement of stolen, lost or mutilated Debt Securities of such
series, maintenance of paying agencies, to hold monies for payment in trust and
payment of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the Debt Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), each installment of
interest on, and any sinking fund payments on, the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the applicable Indenture and the Debt Securities of such series. (Section 4.6)
Such a trust may only be established if, among other things, (a) the Company
has delivered to the applicable Debt Trustee an Opinion of Counsel to the
effect that (i) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or (ii) since the date of the applicable
Indenture there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge, and will be subject to federal income tax on
the same amounts and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred; (b)
the Debt Securities of such series, if then listed on any domestic or foreign
securities exchange, will not be delisted as a result of such deposit,
defeasance and discharge; and (c) in the case of the Subordinated Debt
Securities, (x) no default in the payment of the principal of (and premium, if
any) or any interest on any Senior Debt beyond any applicable grace period
shall have occurred and be continuing, or (y) no other default with respect to
any Senior Debt shall have occurred and be continuing and shall have resulted
in the acceleration of such Senior Debt. In the event of any such defeasance
and discharge of Debt Securities of such series, Holders of Debt Securities of
such series would be able to look only to such trust fund for payment of
principal of and any premium and any interest on their Debt Securities until
Maturity. (Section 4.6)
DEFEASANCE OF CERTAIN OBLIGATIONS
The Indentures will provide that, if so specified with respect to the Debt
Securities of any series, the Company may omit to comply with any covenants
applicable to such Debt Securities which are subject to covenant defeasance and
any such omission shall not be an Event of Default with respect to the Debt
Securities of such series, upon the irrevocable deposit with the Debt Trustee,
in trust, of money and/or U.S. Government Obligations which through the payment
of interest and principal in respect thereof in accordance with their terms
will provide money in an amount sufficient to pay the principal of (and
premium, if any), each installment of interest on and any sinking fund payments
thereof and in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), and each installment
of principal (and premium, if any) and interest on the Debt Securities of such
series on the Stated Maturity of such payments or upon optional redemption and
any mandatory sinking fund payments or analogous payments on the Debt
Securities of such series on the day on which such payments are due and payable
in accordance with the terms of the applicable Indenture and the Debt
Securities of such series. (Sections 4.5 and 4.6) The obligations of the
Company under the applicable Indenture and the Debt Securities of such series
other than with respect to such covenants shall remain in full force and
effect. (Section 4.5) Such a trust may be established only if, among
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other things, the Company has delivered to the Debt Trustee an Opinion of
Counsel to the effect that (i) the Holders of the Debt Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge of certain obligations
and will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred and (ii) the Debt Securities of such
series, if then listed on any domestic or foreign securities exchange, will not
be delisted as a result of such deposit, defeasance and discharge. (Section
4.6)
In the event the Company exercises its option to omit compliance with the
covenants described in any Prospectus Supplement with respect to the Debt
Securities of such series and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default, then the amount of money and
U.S. Government Obligations on deposit with the Debt Trustee will be sufficient
to pay amounts due on the Debt Securities of such series at the time of their
Stated Maturity but may not be sufficient to pay amounts due on the Debt
Securities of such series at the time of the acceleration resulting from such
Default. The Company shall in any event remain liable for such payments as
provided in the Indentures.
The Debt Trustee must deliver or pay to the Company from time to time, upon
request of the Company, any amounts held by it with respect to any Securities
which, in the opinion of a nationally recognized firm of independent public
accountants, are in excess of the amount which would then be required to be
deposited to effect a satisfaction, discharge or defeasance, as the case may
be, with respect to such Securities.
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Debt Trustee under the applicable Indenture with the consent of the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities issued under the applicable Indenture and affected by such
modification or amendment unless a greater percentage of such principal amount
is specified in the applicable Prospectus Supplement; provided, however, that
no such modification or amendment may, without the consent of each Holder of
each Outstanding Debt Security affected thereby, (a) change the Stated Maturity
of the principal of, or any installment of principal of or interest on, any
such Debt Security, (b) reduce the principal amount of (and premium, if any) or
interest on, any such Debt Security, (c) change any obligation of the Company
to pay additional amounts, (d) reduce the amount of principal of an Original
Issue Discount Security or any other Debt Security payable upon acceleration of
the maturity thereof, (e) change the coin or currency in which any Debt
Security or any premium or interest thereon is payable, (f) impair the right to
institute suit for the enforcement of any payment on or with respect to any
such Debt Security, (g) adversely change the right to convert or exchange,
including decreasing the conversion rate or increasing the conversion price of,
such Debt Security (if applicable), (h) in the case of the Subordinated
Indenture, modify the subordination provisions in a manner adverse to the
Holders of the Subordinated Debt Securities, (i) if the Debt Securities are
secured, change the terms and conditions pursuant to which the Debt Securities
are secured in a manner adverse to the Holders of the secured Debt Securities,
(j) reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of whose Holders is required for modification or
amendment of the applicable Indenture or for waiver of compliance with certain
provisions of the applicable Indenture or for waiver of certain defaults, (k)
reduce the requirements contained in the applicable Indenture for quorum or
voting, (l) change any obligations of the Company to maintain an office or
agency in the places and for the purposes required by the Indentures, or (m)
modify any of the above provisions. (Section 9.2)
Modifications and amendments of the Indentures may be made by the Company
and the Debt Trustee under the applicable Indenture without the consent of any
Holder to evidence a successor to the Company, to add to the Company's
covenants or Events of Default, to permit or facilitate Debt Securities to be
issued by book entry or in bearer form or relating to the place of payment
thereof, to provide for a successor trustee, to establish forms or terms of
Debt Securities, to change or eliminate any provisions not adversely affecting
any interests of Holders of Outstanding Debt Securities in any material respect
or to cure any ambiguity or inconsistency.
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The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of each series may, on behalf of the Holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the applicable
Indenture and, if applicable, such Debt Securities, unless a greater percentage
of such principal amount is specified in the applicable Prospectus Supplement.
(Section 5.13)
The applicable Indenture will provide that in determining whether the
Holders of the requisite principal amount of the Outstanding Debt Securities
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or are present at a meeting of Holders of Debt Securities for
quorum purposes, (i) the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, and (ii) the principal
amount of a Debt Security denominated in a foreign currency or currency units
shall be the U.S. dollar equivalent, determined on the date of original
issuance of such Debt Security, of the principal amount of such Debt Security
or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent, determined on the date of original issuance of such Debt Security,
of the amount determined as provided in (i) above.
The applicable Indenture will contain provisions for convening meetings of
the Holders of Debt Securities of a series if Debt Securities of that series
are issuable as Bearer Securities. A meeting may be called at any time by the
Debt Trustee, and also, upon request, by the Company or the Holders of at least
25% in principal amount of the Outstanding Debt Securities of such series, in
any such case upon notice given in accordance with "Notices" below. (Sections
13.1 and 13.2) Except for any consent which must be given by the Holder of each
Outstanding Debt Security affected thereby, as described above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may be
adopted by the affirmative vote of the Holders of a majority in principal
amount of the Outstanding Debt Securities of that series; provided, however,
that, except for any consent which must be given by the Holder of each
Outstanding Debt Security affected thereby, as described above, any resolution
with respect to any consent or waiver which may be given by the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
a series may be adopted at a meeting or an adjourned meeting at which a quorum
is present only by the affirmative vote of a majority in principal amount of
the Outstanding Debt Securities of that series; and provided, further, that,
except for any consent which must be given by the Holder of each Outstanding
Debt Security affected thereby, as described above, any resolution with respect
to any request, demand, authorization, direction, notice, consent, waiver or
other action which may be made, given or taken by the Holders of a specified
percentage, which is less than a majority in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in the principal
amount of the Outstanding Debt Securities of that series. Any resolution passed
or decision taken at any meeting of Holders of Debt Securities of any series
duly held in accordance with the applicable Indenture will be binding on all
Holders of Debt Securities of that series and the related coupons. The quorum
at any meeting called to adopt a resolution or with respect to a consent or a
waiver which may be given by the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of a series, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than a majority
in principal amount of the Outstanding Debt Securities of a series then, with
respect to such action (and only such action) the Holders entitled to vote such
lesser or greater percentage in principal amount of the Outstanding Securities
of such series shall constitute a quorum. (Section 13.4)
NOTICES
Except as otherwise provided in the applicable Indenture, notices to
Holders of Bearer Securities will be given by publication at least twice in a
daily newspaper in The City of New York and in such other city or cities as may
be specified in such Debt Securities. Notices to Holders of Registered
Securities will be given by mail to the address of such Holders as they appear
in the Security Register. (Section 1.6)
TITLE
Title to any temporary global Debt Security, any Bearer Securities
(including Bearer Securities in permanent global form) and any coupons
appertaining thereto will pass by delivery. The Company, the Debt Trustee and
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any agent of the Company or the Debt Trustee may treat the bearer of any Bearer
Security and the bearer of any coupon and the registered owner of any
Registered Security as the absolute owner thereof (whether or not such Debt
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes.
(Section 3.8)
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the Debt Trustee. Debt
Securities or coupons that became destroyed, stolen or lost will be replaced by
the Company at the expense of the Holder upon delivery to the Debt Trustee of
the Debt Security and coupons or evidence of the destruction, loss or theft
thereof satisfactory to the Company and the Debt Trustee; in the case of any
coupon which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Debt Trustee and the Company may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 3.6)
GOVERNING LAW
The Indentures, the Debt Securities and the coupons will be governed by,
and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of laws. (Section 1.13)
REGARDING THE DEBT TRUSTEE
The Indentures contain limitations on the right of the Debt Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security
or otherwise. (Section 6.10) In addition, the Debt Trustee may be deemed to
have a conflicting interest and may be required to resign as Debt Trustee if at
the time of a default under one of the Indentures it is a creditor of the
Company. (Section 6.8) The Company may from time to time maintain deposit
accounts and conduct its banking transactions with a Debt Trustee in the
ordinary course of business. (Section 6.3)
DESCRIPTION OF TRUST PREFERRED SECURITIES
Each Kmart Trust may issue, from time to time, only one series
of Trust Preferred Securities having terms described in the Prospectus
Supplement relating thereto. The Declaration of each Kmart Trust authorizes
the Regular Trustees of such Kmart Trust to issue on behalf of such Kmart Trust
one series of Trust Preferred Securities. The Declaration will be qualified as
an indenture under the Trust Indenture Act. The Trust Preferred Securities
will have such terms, including distributions, redemption, voting, liquidation,
conversion rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act. Reference is made to the Prospectus
Supplement relating to the Trust Preferred Securities of any Kmart Trust for
specific terms, including (i) the distinctive designation of such Trust
Preferred Securities; (ii) the number of Trust Preferred Securities issued by
such Kmart Trust; (iii) the annual distribution rate (or method of determining
such rate) for Trust Preferred Securities issued by such Kmart Trust and the
date or dates upon which such distributions shall be payable; provided,
however, that distributions on such Trust Preferred Securities shall be payable
on a quarterly basis to holders of such Trust Preferred Securities as of a
record date in each quarter during which such Trust Preferred Securities are
outstanding; (iv) whether distributions on Trust Preferred Securities issued by
such Kmart Trust shall be cumulative, and, in the case of Trust Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on Trust
Preferred Securities issued by such Kmart Trust shall be cumulative; (v) the
amount or amounts which shall be paid out of the assets of such Kmart Trust to
the holders of Trust Preferred Securities of such Kmart Trust upon voluntary or
involuntary dissolution, winding-up or termination of such Kmart Trust; (vi)
the obligation, if any, of such Kmart Trust to purchase or redeem Trust
Preferred Securities issued by such Kmart Trust and the price or prices at
which, the period or periods within which, and the terms and conditions upon
which, Trust Preferred Securities issued by such Kmart Trust shall be purchased
or redeemed, in whole or in part, pursuant to such obligation; (vii) the voting
rights, if any, of Trust Preferred Securities issued by such Kmart Trust in
addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Trust Preferred
Securities, or of Trust Preferred Securities issued by one or more Kmart
Trusts, or of both, as a condition to specified action or amendments to the
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Declaration of such Kmart Trust; (viii) the terms and conditions, if any, upon
which Trust Preferred Securities issued by such Kmart Trust may be converted
into shares of Common Stock, including the conversion price per share and the
circumstances, if any, under which any such conversion right shall expire; (ix)
the terms and conditions, if any, upon which the Subordinated Debt Securities
may be distributed to holders of Trust Preferred Securities; (x) if applicable,
any securities exchange upon which the Trust Preferred Securities shall be
listed; and (xi) any other relevant rights, preferences, privileges,
limitations or restrictions of Trust Preferred Securities issued by such Kmart
Trust not inconsistent with the Declaration of such Kmart Trust or with
applicable law. All Trust Preferred Securities offered hereby will be
guaranteed by the Company to the extent set forth below under "Description of
Trust Preferred Securities Guarantees." Certain United States federal income
tax considerations applicable to any offering of Trust Preferred Securities
will be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities,
each Kmart Trust will issue one series of Trust Common Securities. The
Declaration of each Kmart Trust authorizes the Regular Trustees of such trust
to issue on behalf of such Kmart Trust one series of Trust Common Securities
having such terms including distributions, redemption, voting and liquidation
rights or such restrictions as shall be set forth therein. The terms of the
Trust Common Securities issued by a Kmart Trust will be substantially identical
to the terms of the Trust Preferred Securities issued by such trust and the
Trust Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Trust Preferred Securities except that, upon an event of
default under the Declaration, the rights of the holders of the Trust Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Trust Preferred Securities. Except in certain limited
circumstances, the Trust Common Securities will also carry the right to vote to
appoint, remove or replace any of the Kmart Trustees of a Kmart Trust. All of
the Trust Common Securities of each Kmart Trust will be directly or indirectly
owned by the Company.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an Event of Default under the Declaration of a Kmart Trust occurs
and is continuing, then the holders of Trust Preferred Securities of such Kmart
Trust would rely on the enforcement by the Property Trustee of its rights as a
holder of the applicable series of Subordinated Debt Securities against the
Company. In addition, the holders of a majority in liquidation amount of the
Trust Preferred Securities of such Kmart Trust will have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the applicable Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Subordinated Debt Securities. If the
Property Trustee fails to enforce its rights under the applicable series of
Subordinated Debt Securities, a holder of Trust Preferred Securities of such
Kmart Trust may institute a legal proceeding directly against the Company to
enforce the Property Trustee's rights under the applicable series of
Subordinated Debt Securities without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default under the applicable Declaration has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the applicable series of Subordinated Debt
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Trust
Preferred Securities of such Kmart Trust may directly institute a proceeding
for enforcement of payment to such holder of the principal of or interest on
the applicable series of Subordinated Debt Securities having a principal amount
equal to the aggregate liquidation amount of the Trust Preferred Securities of
such holder (a "Direct Action") on or after the respective due date specified
in the applicable series of Subordinated Debt Securities. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Trust Preferred Securities under the applicable Declaration to the extent of
any payment made by the Company to such holder of Trust Preferred Securities in
such Direct Action.
DESCRIPTION OF TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Trust
Preferred Securities Guarantees which will be executed and delivered by the
Company for the benefit of the holders from time to time of Trust Preferred
Securities. Each Trust Preferred Securities Guarantee will be qualified as an
indenture under the Trust Indenture Act. The Bank of New York will act as
indenture trustee under each Trust Preferred Securities Guarantee (the
"Preferred Guarantee Trustee"). The terms of each Trust Preferred Securities
Guarantee will be those set forth in such Trust Preferred Securities Guarantee
and those made part of such Trust Preferred Securities Guarantee by the Trust
Indenture Act. The summary is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the form of Trust Preferred
Securities Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
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Each Trust Preferred Securities Guarantee will be held by the Preferred
Guarantee Trustee for the benefit of the holders of the Trust Preferred
Securities of the applicable Kmart Trust.
GENERAL
Pursuant to each Trust Preferred Securities Guarantee, the Company will
agree, to the extent set forth therein, to pay in full, to the holders of the
Trust Preferred Securities issued by a Kmart Trust, the Guarantee Payments (as
defined herein)(except to the extent paid by such Kmart Trust), as and when
due, regardless of any defense, right of set-off or counterclaim which such
Kmart Trust may have or assert. The following payments with respect to Trust
Preferred Securities issued by a Kmart Trust to the extent not paid by such
Kmart Trust (the "Guarantee Payments"), will be subject to the Trust Preferred
Securities Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Trust Preferred Securities,
to the extent such Kmart Trust shall have funds available therefor; (ii) the
redemption price, including all accrued and unpaid distributions (the
"Redemption Price"), to the extent such Kmart Trust has funds available
therefor with respect to any Trust Preferred Securities called for redemption
by such Kmart Trust and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of such Kmart Trust (other than in connection with
the distribution of Subordinated Debt Securities to the holders of Trust
Preferred Securities or the redemption of all of the Trust Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Trust Preferred Securities to the date
of payment, to the extent such Kmart Trust has funds available therefor and (b)
the amount of assets of such Kmart Trust remaining available for distribution
to holders of such Trust Preferred Securities in liquidation of such Kmart
Trust. The Company's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Company to the holders of
Trust Preferred Securities or by causing the applicable Kmart Trust to pay such
amounts to such holders.
Each Trust Preferred Securities Guarantee will be a full and
unconditional guarantee with respect to the Trust Preferred Securities issued
by the applicable Kmart Trust, but will not apply to any payment of
distributions except to the extent such Kmart Trust shall have funds available
therefor. If the Company does not make interest payments on the Subordinated
Debt Securities purchased by a Kmart Trust, such Kmart Trust will not pay
distributions on the Trust Preferred Securities issued by such Kmart Trust and
will not have funds available therefor. See "Description of Debt Securities --
Certain Covenants of the Company." The Trust Preferred Securities Guarantee,
when taken together with the Company's obligations under the Subordinated Debt
Securities, the Indenture and the Declaration, including its obligations to pay
costs, expenses, debts and liabilities of such Kmart Trust (other than with
respect to the Trust Securities); will provide a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the
Preferred Securities.
The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the Kmart Trusts with respect to
the Trust Common Securities (the "Trust Common Securities Guarantees") to the
same extent as the Trust Preferred Securities Guarantee, except that upon an
event of default under the Indenture, holders of Trust Preferred Securities
shall have priority over holders of Trust Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Trust Preferred Securities Guarantee, the Company will covenant
that, so long as any Trust Preferred Securities issued by the applicable Kmart
Trust remain outstanding, if there shall have occurred any event that would
constitute an event of default under such Trust Preferred Securities Guarantee
or the Declaration of such Kmart Trust, then (a) the Company shall not declare
or pay any dividend on, make any distributions with respect to, or redeem,
purchase or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any then outstanding contract or security requiring the Company to
purchase shares of Common Stock, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's
capital stock or, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock of the Company or the security being converted or exchanged)
or make any guarantee payments with respect to the foregoing and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including guarantees)
issued by the Company which rank pari passu with or junior to such Subordinated
Debt Securities.
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MODIFICATION OF THE TRUST PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the
rights of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Preferred Securities Guarantee may be amended only with
the prior approval of the holders of not less than a majority in liquidation
amount of the outstanding Trust Preferred Securities issued by the applicable
Kmart Trust. The manner of obtaining any such approval of holders of such
Trust Preferred Securities will be as set forth in an accompanying Prospectus
Supplement. All guarantees and agreements contained in a Trust Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Company and shall inure to the benefit of the
holders of the Trust Preferred Securities of the applicable Kmart Trust then
outstanding.
TERMINATION
Each Trust Preferred Securities Guarantee will terminate as to the
Trust Preferred Securities issued by the applicable Kmart Trust (a) upon full
payment of the Redemption Price of all Trust Preferred Securities of such Kmart
Trust, (b) upon distribution of the Subordinated Debt Securities held by such
Kmart Trust to the holders of the Trust Preferred Securities of such Kmart
Trust or (c) upon full payment of the amounts payable in accordance with the
Declaration of such Kmart Trust upon liquidation of such Kmart Trust. Each
Trust Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Trust Preferred
Securities issued by the applicable Kmart Trust must restore payment of any
sums paid under such Trust Preferred Securities or such Trust Preferred
Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Preferred Securities Guarantee will
occur upon (a) the failure of the Company to perform any of its payment or
other obligations thereunder or (b) if applicable, the failure by the Company
to deliver Common Stock upon an appropriate election by the holder or holders
of Trust Preferred Securities to convert the Trust Preferred Securities into
shares of Common Stock.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Preferred Securities Guarantee have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Preferred Guarantee Trustee in respect of the Trust
Preferred Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Preferred Guarantee Trustee under such Trust Preferred
Securities. If the Preferred Guarantee Trustee fails to enforce such Trust
Preferred Securities Guarantee, any holder of Trust Preferred Securities
relating to such Trust Preferred Securities Guarantee may institute a legal
proceeding directly against the Company to enforce the Preferred Guarantee
Trustee's rights under such Trust Preferred Securities Guarantee, without first
instituting a legal proceeding against the relevant Kmart Trust, the Preferred
Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, if the Company has failed to make a guarantee payment, a holder of
Trust Preferred Securities may directly institute a proceeding against the
Company for enforcement of the Trust Preferred Securities Guarantee for such
payment. The Company waives any right or remedy to require that any action be
brought first against such Kmart Trust or any other person or entity before
proceeding directly against the Company.
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STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEES
The Trust Preferred Securities Guarantees will constitute unsecured
obligations of the Company and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Company, (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Company and
with any guarantee now or hereafter entered into by the Company in respect of
any preferred or preference stock of any affiliate of the Company; and (iii)
senior to Common Stock. The terms of the Trust Preferred Securities provide
that each holder of Trust Preferred Securities issued by the applicable Kmart
Trust by acceptance thereof agrees to the subordination provisions and other
terms of the Trust Preferred Securities Guarantee relating thereto.
The Trust Preferred Securities Guarantees will constitute a guarantee
of payment and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default
with respect to a Trust Preferred Securities Guarantee, undertakes to perform
only such duties as are specifically set forth in such Trust Preferred
Securities Guarantee and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Preferred Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by a Trust Preferred
Securities Guarantee at the request of any holder of Trust Preferred
Securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred thereby.
DESCRIPTION OF CAPITAL STOCK
Under the Restated Articles of Incorporation, as amended, of the
Company (the "Articles"), the authorized capital stock of the Company consists
of 1,500,000,000 shares of Common Stock, $1.00 par value, and 10,000,000 shares
of Preferred Stock, no par value ("Preferred Stock"). As of February 1, 1996,
there were outstanding (a) 480,628,478 shares of Common Stock and (b)
employee stock options to purchase an aggregate of approximately 26,926,231
shares of Common Stock.
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DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the prior rights of the holders of Preferred Stock and
except as set forth below, the holders of Common Stock are entitled to receive,
when and as declared by the board of directors, out of the assets of the
Company which by law are available therefor, dividends payable either in cash,
in property, or in Common Stock. No dividends (other than dividends payable in
Common Stock) may be paid on the Common Stock if cash dividends in full on all
outstanding Preferred Stock to which the holders thereof are entitled shall not
have been paid or declared and set apart for payment or if any sinking fund for
the Preferred Stock is in arrears.
At every meeting of stockholders, the holders of Common Stock shall have
the right with the holders of Preferred Stock, voting as a single class, to
vote in the election of directors and upon each other matter coming before any
meeting of the stockholders on the basis of one vote for each share of Common
Stock or Preferred Stock held.
In the event of any liquidation, dissolution or winding up of the business
of the Company, whether voluntary or involuntary, the holders of Common Stock
shall be entitled, after payment or provisions for payment of the debts and
other liabilities of the Company and the amounts to which the holders of
Preferred Stock are entitled, to share ratably in the remaining net assets of
the Company.
The holders of Common Stock have no preemptive rights, cumulative voting
rights or subscription rights. The Common Stock is listed on the New York
Stock Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
First National Bank of Boston, N.A. is the Transfer Agent, Registrar and
Dividend Paying Agent for the Common Stock.
CERTAIN PROVISIONS
The Articles and bylaws of the Company contain provisions, summarized
below, that could have the effect of delaying, deterring or preventing
a merger, tender offer or other takeover attempt of the Company. This summary
is subject to, and qualified in its entirety by, the provisions of the Articles
and the bylaws, as well as the provisions of any applicable laws.
The board of directors is divided into three classes of directors serving
staggered three-year terms, with a minimum of seven directors and a maximum of
21 directors constituting the entire board of directors. The directors may be
removed by the vote of the holders of a majority of the shares entitled to vote
at an election of directors only for cause or by the vote of a majority of the
directors with or without cause. The total number of directors and the number
of directors constituting each class of directors (with each of the three
classes being required to be equal as nearly as possible) can be fixed or
changed, from time to time, by the board of directors within such authorized
limits. Incumbent directors are delegated the power to fill any vacancies on
the board of directors, however occurring, whether by an increase in the number
of directors, death, resignation, retirement, disqualification, removal from
office or otherwise. In addition, provisions in the Company's bylaws require
stockholders to give advance notice of proposals to be presented at meetings of
stockholders, including director nominations.
The Company is subject to Chapter 7A of the Michigan Business Corporation
Act (the "MBCA"), which provides that business combinations subject to Chapter
7A between a Michigan corporation and a beneficial owner of shares entitled to
10% or more of the voting power of such corporation generally require the
affirmative vote of 90% of the votes of each class of stock entitled to vote,
and not less than 2/3 of each class of stock entitled to vote (excluding voting
shares owned by such 10% owner), voting as a separate class.
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Such requirements do not apply if (i) the corporation's board of directors
approves the transaction prior to the time the 10% owner becomes such or (ii)
the transaction satisfies certain fairness standards, certain other conditions
are met and the 10% owner has been such for at least five years.
Chapter 7B of the MBCA provides that, unless a corporation's articles of
incorporation or bylaws provide that Chapter 7B does not apply, "control
shares" of a corporation acquired in a control share acquisition have no voting
rights except as granted by the stockholders of the corporation. "Control
shares" are shares which, when added to shares previously owned by a
stockholder, increase such stockholder's ownership of voting stock to more than
20% but less than 33 1/3%, more than 33 1/3% but less than a majority, or more
than a majority, of the votes to which all of the capital stock of the
corporation is entitled. A control share acquisition must be approved by the
affirmative vote of a majority of all shares entitled to vote excluding voting
shares owned by the acquiror and certain officers and directors. However, no
such approval is required for gifts or other transactions not involving
consideration, for a merger to which the corporation is a party or certain
other transactions described in Chapter 7B. The bylaws of the Company
currently contain a provision pursuant to which the Company has opted not to be
subject to Chapter 7B, but the board of directors may, in its sole discretion,
elect to become subject to Chapter 7B by amending such bylaws.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of
the Preferred Stock to which any Prospectus Supplement may relate. Certain
terms of any series of Preferred Stock offered by any Prospectus Supplement
will be described in the Prospectus Supplement relating thereto. If
so indicated in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain material provisions
of the Preferred Stock is subject to and qualified in its entirety by reference
to the provisions of the Company's Articles, and the Certificate of Designation
(the "Certificate of Designation") relating to each particular series of
Preferred Stock which will be filed or incorporated by reference, as the case
may be, as an exhibit to the Registration Statement of which this Prospectus is
a part at or prior to the time of the issuance of such Preferred Stock.
GENERAL
Under the Articles, the board of directors of the Company is
authorized, without further stockholder action, to provide for the issuance of
up to 10,000,000 shares of Preferred Stock. As of February 1, 1996, no shares
of Preferred Stock were outstanding. The board of directors of the Company may
from time to time authorize the issuance of shares of Preferred Stock in
series, and each such series shall have such dividend and liquidation
preferences, redemption prices, conversion rights, and other terms and
provisions as may be contained in the resolutions of the board of directors of
the Company providing for their issuance. The shares of any series of
Preferred Stock will be, when issued, fully paid and non-assessable and holders
thereof will have no preemptive rights in connection therewith.
RANK
All series of Preferred Stock rank on a parity with each other and rank
senior to Common Stock with respect to payment of dividends and distributions
of assets upon liquidation.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the board of directors of the Company out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate
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may be fixed or variable or both. Dividends will be payable to holders of
record of Preferred Stock as they appear on the books of the Company (or, if
applicable, the records of the Depositary referred to below under "Description
of Depositary Shares") on such record dates as shall be fixed by the board of
directors. Dividends on any series of Preferred Stock will be cumulative.
Accumulations of dividends will not bear interest.
No full dividends may be declared or paid on funds set apart for the
payment of dividends on any series of Preferred Stock unless dividends shall
have been paid or set apart for such payment on the Preferred Stock of all
series. If full dividends are not so paid, all series of Preferred Stock shall
share ratably in the payment of dividends.
CONVERSION AND EXCHANGE
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of Preferred Stock or Common Stock or exchangeable for another
series of Preferred Stock, Common Stock or Debt Securities of the Company. The
Common Stock of the Company is described under "Description of Common Stock."
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Company or the holder thereof and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series. The board of directors of the Company shall not create a sinking fund
for the redemption or purchase of shares of any series of Preferred Stock
unless provision for a sinking fund at least as beneficial to all issued and
outstanding shares of Preferred Stock shall either then exist or be at the same
time created.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the board of directors of the
Company, or by any other method determined to be equitable by the board of
directors.
On and after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company, holders of each series of Preferred Stock will be entitled to
receive out of assets of the Company available for distribution to
shareholders, before any distribution is made on any Common Stock,
distributions upon liquidation in the amount set forth in the Certificate of
Designation or the Prospectus Supplement, as applicable, relating to such
series of Preferred Stock, plus an amount equal to any accrued and unpaid
dividends. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to the Preferred
Stock of any series are not paid in full, the holders of the Preferred Stock of
such series and all other series of Preferred Stock will share ratably in any
such distribution of assets of the Company in proportion to the full
liquidation preferences to which each is entitled. After payment of the full
amount of the liquidation preference to which they are entitled, the holders of
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Company.
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VOTING RIGHTS
At every meeting of stockholders, the holders of Preferred Stock shall
have the right with the holders of Common Stock, voting as a single class, to
vote in the election of directors and upon each other matter coming before any
meeting of the stockholders on the basis of one vote for each share of
Preferred Stock or Common Stock held. If at the time of any meeting of
shareholders, dividends on all series of Preferred Stock then outstanding are
in arrears in an aggregate amount equal to six quarterly dividends, then the
shares of all series of Preferred Stock then outstanding, voting separately as
a class, will have the right at each meeting of stockholders thereafter held to
elect two of the total directors to be selected at such meeting until all
arrearages of dividends accumulated on all series of Preferred Stock for all
preceding dividend periods shall have been paid or declared or set apart for
payment. While holders of Preferred Stock voting as a class are entitled to
elect two directors they are not entitled to vote on the election of any other
directors. Whenever all arrearages of dividends have been paid or declared and
set apart for payment, the tenure of all directors so elected by them will
automatically terminate.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain material provisions of the
Deposit Agreement (as defined below) and of the Depositary Shares and
Depositary Receipts (as defined below) is subject to and qualified in its
entirety by reference to the forms of Deposit Agreement and Depositary Receipt
relating to the Preferred Stock, which will be filed or incorporated by
reference, as the case may be, as exhibits to the Registration Statement of
which this Prospectus is a part.
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GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In such event,
the Company will issue receipts for Depositary Shares, each of which will
represent a fraction (to be set forth in the Prospectus Supplement relating to
a particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $60,000,000 (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion
and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Preferred Stock in accordance with the terms of the applicable Prospectus
Supplement.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Company or any holder of deposited Preferred
Stock, execute and deliver temporary Depositary Receipts which are
substantially identical to, and entitle the holders thereof to all the rights
pertaining to, the definitive Depositary Receipts. Depositary Receipts will be
prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the deposited Preferred Stock to the
record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not feasible to make
such distribution, it may, with the approval of the Company, sell such property
and distribute the net proceeds from such sale to such holders.
REDEMPTION OF STOCK
If a series of Preferred Stock represented by Depositary Shares is to be
redeemed, the Depositary Shares will be redeemed from the proceeds received by
the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The Depositary Shares will
be redeemed by the Depositary at a price per Depositary Share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of Preferred Stock so redeemed. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same date the number of Depositary Shares representing shares of Preferred
Stock so redeemed. If fewer than all the Depositary Shares are to be redeemed,
the Depositary Shares to be redeemed will be selected by the Depositary by lot
or pro rata or by any other equitable method as may be determined by the
Depositary.
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WITHDRAWAL OF STOCK
Any holder of Depositary Shares may, upon surrender of the Depositary
Receipts at the corporate trust office of the Depositary (unless the related
Depositary Shares have previously been called for redemption), receive the
number of whole shares of the related series of Preferred Stock and any money
or other property represented by such Depositary Receipts. Holders of
Depositary Shares making such withdrawals will be entitled to receive whole
shares of Preferred Stock on the basis set forth in the related Prospectus
Supplement for such series of Preferred Stock, but holders of such whole shares
of Preferred Stock will not thereafter be entitled to deposit such Preferred
Stock under the Deposit Agreement or to receive Depositary Receipts therefor.
If the Depositary Shares surrendered by the holder in connection with such
withdrawal exceed the number of Depositary Shares that represent the number of
whole shares of Preferred Stock to be withdrawn, the Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series
of deposited Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such series of Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same
date as the record date for the relevant series of Preferred Stock) will be
entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the amount of the Preferred Stock represented by such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to
vote the amount of such series of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable actions that may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holder of Depositary Shares representing
such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of the Depositary Shares
representing Preferred Stock of any series will not be effective unless such
amendment has been approved by the holders of at least the amount of the
Depositary Shares then outstanding representing the minimum amount of Preferred
Stock of such series necessary to approve any amendment that would materially
and adversely affect the rights of the holders of the Preferred Stock of such
series. Every holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective, or any transferee of such holder, shall be deemed,
by continuing to hold such Depositary Receipt, or by reason of the acquisition
thereof, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby. The Deposit Agreement automatically terminates
if (i) all outstanding Depositary Shares have been redeemed; or (ii) each share
of Preferred Stock has been converted into other Preferred Stock or Common
Stock or has been exchanged for Debt Securities; or (iii) there has been a
final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay all charges of the Depositary in connection with the initial deposit
of the relevant series of Preferred Stock and any redemption of such Preferred
Stock.
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Holders of Depositary Receipts will pay other transfer and other taxes and
governmental charges and such other charges or expenses as are expressly
provided in the Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice
of its intent to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $60,000,000.
MISCELLANEOUS
The Depositary will forward all reports and communications from the
Company which are delivered to the Depositary and which the Company is required
to furnish to the holders of the deposited Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented
or delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares,
Depositary Receipts or shares of Preferred Stock unless satisfactory indemnity
is furnished. They may rely upon written advice of counsel or accountants, or
upon information provided by holders of Depositary Receipts or other persons
believed to be competent and on documents believed to be genuine.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), Preferred Stock, including Preferred Stock
represented by Depositary Shares ("Preferred Stock Warrants"), Common Stock
("Common Stock Warrants"), or any combination thereof. Warrants may be issued
independently or together with any Securities and may be attached to or
separate from such Securities. The Warrants are to be issued under warrant
agreements (each a "Warrant Agreement") to be entered into between the Company
and a bank or trust company, as warrant agent (the "Warrant Agent"), all as
shall be set forth in the Prospectus Supplement relating to Warrants being
offered pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the certificates representing such Debt Warrants, including the following:
(1) the title of such Debt Warrants; (2) the aggregate number of such Debt
Warrants; (3) the price or prices at which such Debt Warrants will be issued;
(4) the currency or currencies, including composite currencies or currency
units, in which the price of such Debt Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (6) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (7) the currency or currencies, including composite currencies or
currency units, in which the principal of or any premium or interest on the
Debt Securities purchasable upon exercise of such Debt Warrants will be
payable; (8) the date, if any, on and after which such Debt Warrants and the
related Debt Securities will be separately transferable; (9) the principal
amount of Debt
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<PAGE> 29
Securities purchasable upon exercise of each Debt Warrant, and the price at
which and the currency or currencies, including composite currencies or
currency units, in which such principal amount of Debt Securities may be
purchased upon such exercise; (10) the date on which the right to exercise such
Debt Warrants will commence, and the date on which such right will expire; (11)
the maximum or minimum number of such Debt Warrants which may be exercised at
any time; (12) a discussion of any material federal income tax considerations;
and (13) any other terms of such Debt Warrants and terms, procedures and
limitations relating to the exercise of such Debt Warrants.
Certificates representing Debt Warrants will be exchangeable for new
certificates representing Debt Warrants of different denominations, and Debt
Warrants may be exercised at the corporate trust office of the Warrant Agent or
any other office indicated in the Prospectus Supplement. Prior to the exercise
of their Debt Warrants, holders of Debt Warrants will not have any of the
rights as holders of the Debt Securities purchasable upon such exercise and
will not be entitled to payment of principal of or any premium or interest on
the Debt Securities purchasable upon such exercise.
PREFERRED STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of Preferred
Stock Warrants offered thereby, the Warrant Agreement relating to such
Preferred Stock Warrants and the certificates representing such Preferred Stock
Warrants, including the following: (1) the title of such Preferred Stock
Warrants; (2) the aggregate number of such Preferred Stock Warrants; (3) the
price or prices at which such Preferred Stock Warrants will be issued; (4) the
currency or currencies, including composite currencies or currency units, in
which the price of such Preferred Stock Warrants may be payable; (5) the
designation, number of shares and terms (including, among others, dividend,
liquidation, redemption and voting rights) of the Preferred Stock (including
Preferred Stock represented by Depositary Shares) purchasable upon exercise of
such Preferred Stock Warrants, and the procedures and conditions relating to
the exercise of such Preferred Stock Warrants; (6) the designation and terms of
any related Securities of the Company with which such Warrants are issued, and
the number of such Preferred Stock Warrants issued with each such Security; (7)
the date, if any, on and after which such Preferred Stock Warrants and the
related Securities will be separately transferable; (8) the maximum or minimum
number of Preferred Stock Warrants which may be exercised at any time; (9) if
applicable, a discussion of any material federal income tax considerations; and
(10) any other terms of such Preferred Stock Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Preferred Stock Warrants.
Certificates representing Preferred Stock Warrants will be exchangeable
for new certificates representing Preferred Stock Warrants of different
denominations, and Preferred Stock Warrants may be exercised at the corporate
trust office of the Warrant Agent or any office indicated in the Prospectus
Supplement. Prior to the exercise of their Preferred Stock Warrants, holders
of such Preferred Stock Warrants will not have any of the rights as holders of
the Preferred Stock purchasable upon such exercise and will not be entitled to
any dividend payments, liquidation premiums or voting rights of the Preferred
Stock (including Preferred Stock represented by Depositary Shares) purchasable
upon such exercise.
COMMON STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants, the Warrant Agreement relating to such Common Stock Warrants
and the certificates representing such Common Stock Warrants in respect of
which this Prospectus is being delivered which may include: (1) the title of
such Common Stock Warrants; (2) the aggregate number of such Common Stock
Warrants; (3) the price or prices at which such Common Stock Warrants will be
issued; (4) the currency or currencies, including composite currencies or
currency units, in which the price of such Common Stock Warrants may be
payable; (5) if applicable, the designation and terms of any related Security
with which such Common Stock Warrants are issued, and the number of such Common
Stock Warrants issued with each such related Security; (6) if
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<PAGE> 30
applicable, the date on and after which such Common Stock Warrants and the
related Security will be separately transferable; (7) the date on which the
right to exercise such Common Stock Warrants will commence, and the date on
which such right will expire; (8) the maximum or minimum number of such Common
Stock Warrants which may be exercised at any time; (9) if applicable, a
discussion of any material federal income tax considerations; and (10) any
other terms of such Common Stock Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Common Stock
Warrants.
Certificates representing Common Stock Warrants will be exchangeable for
new certificates representing Common Stock Warrants of different denominations,
and Common Stock Warrants may be exercised at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement.
Prior to the exercise of their Common Stock Warrants, holders of Common Stock
Warrants will not have any of the rights as holders of Common Stock purchasable
upon such exercise and will not be entitled to dividend payments, if any, or
voting rights of the Common Stock purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities or number of shares of Preferred Stock or Common
Stock at such exercise price as shall in each case be set forth in, or be
determinable as set forth in, the Prospectus Supplement relating to the
Warrants offered thereby. Warrants may be exercised as set forth in the
Prospectus Supplement relating to the Warrants offered thereby. Upon receipt
of payment and the certificate representing the Warrants properly completed and
duly executed at the corporate trust office of the Warrant Agent or any other
office indicated in the Prospectus Supplement, the Company will, as soon as
practicable, forward the Securities purchasable upon such exercise. If less
than all of the Warrants represented by such certificate are exercised, a new
certificate will be issued for the remaining Warrants. Warrants may be
exercised at any time up to the close of business on the expiration date set
forth in the Prospectus Supplement relating to the Warrants offered thereby.
After the close of business on the expiration date, unexercised Warrants will
become void.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities (including Debt Securities that are exchangeable for Bearer
Securities and Debt Securities in permanent global form that are either Bearer
Securities or exchangeable for Bearer Securities) may not be offered, sold,
resold or delivered in connection with their original issuance in the United
States or to United States persons (each as defined below) except as otherwise
permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers
and sales to offices located outside the United States of United States
financial institutions (as defined in Treasury Regulation Section
1.165-12(c)(1)(v)) which agree in writing to comply with the requirements of
Section 165(j)(3)(A),(B) or (C) of the Code, as defined below, and the
regulations thereunder, and any underwriters, agents and dealers participating
in the offering of Debt Securities must agree in writing that they will not
offer, sell or resell any Bearer Securities to persons within the United States
or to United States persons (except as described above) nor deliver Bearer
Securities within the United States. In addition, any such underwriters,
agents and dealers must represent in writing that they have in effect, in
connection with the offer and sale of the Debt Securities, procedures
reasonably designed to ensure that their employees or agents who are directly
engaged in selling the Debt Securities are aware that Bearer Securities cannot
be offered or sold to a person who is within the United States or is a United
States person except as otherwise permitted by Treasury Regulation Section
1.163-5(c)(2)(i)(D). Furthermore, the owner of the obligation (or the financial
institution or clearing organization through which the owner holds the
obligation) must certify to the Company that the owner is not a United States
Person. Bearer Securities and any coupons attached hereto will bear the
following legend: "Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the United States
Internal Revenue Code." Purchasers of Bearer Securities may be affected by
certain limitations under United States tax laws.
-30-
<PAGE> 31
As used herein, "United States person" means (i) an individual who is, for
United States Federal income tax purposes, a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof,
or (iii) an estate or trust the income of which is subject to United States
Federal income taxation regardless of its source, and "United States" means the
United States of America (including the States and the District of Columbia),
its territories and its possessions.
PLAN OF DISTRIBUTION
The Company may sell any series of Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Warrants and the Kmart Trusts may sell the
Preferred Securities being offered hereby, to or through underwriters or
dealers, directly to other purchasers, or through agents. The Prospectus
Supplement with respect to the Securities will set forth the terms of the
offering of the Securities, including the name or names of any underwriters,
dealers or agents, the price of the offered Securities and the net proceeds to
the Company from such sale, any delayed delivery arrangements, any underwriting
discounts or other items constituting underwriters' compensation, any discounts
or concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the Securities may be listed.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
price or at varying prices determined at the time of sale. The underwriter or
underwriters with respect to a particular underwritten offering of Securities
will be named in the Prospectus Supplement relating to such offering, and if an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement, the obligations of the underwriters or
agents to purchase the Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the Securities
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If a dealer is utilized in the sale of any Securities in respect of which
this Prospectus is delivered, the Company and/or, if applicable, any Kmart
Trust will sell such Securities to the dealer, as principal. The dealer may
then resell such Securities to the public at varying prices to be determined by
such dealer at the time of resale. The name of the dealer and the terms of the
transaction will be set forth in the Prospectus Supplement relating thereto.
Securities may be sold directly by the Company and/or, if applicable, any
Kmart Trust to one or more institutional purchasers, or through agents
designated by the Company and/or, if applicable, any Kmart Trust from time
to time, at a fixed price, or prices, which may be changed, or at varying
prices determined at time of sale. Any agent involved in the offer or sale of
the Securities will be named, and any commissions payable by the Company
and/or, if applicable, any Kmart Trust to such agent will be set forth, in the
Prospectus Supplement relating thereto. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
In connection with the sale of the Securities, underwriters or agents may
receive compensation from the Company and/or, if applicable, any Kmart Trust or
from purchasers or Securities for whom they may act as agents in the form of
discounts, concessions, or commissions. Underwriters, agents, and dealers
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts or commissions received by them from the
Company and/or, if applicable, any Kmart Trust and any profit on the resale of
the Securities by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company and/or, if
applicable, any Kmart Trust will authorize agents, underwriters or dealers to
solicit offers by certain specified institutions to purchase Securities from
the Company and/or, if applicable, any Kmart Trust at the public offering price
set forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions
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<PAGE> 32
set forth in the Prospectus Supplement, and the Prospectus Supplement will set
forth the commission payable for solicitation of such contracts.
Each underwriter, dealer and agent participating in the distribution of
any Debt Securities which are issuable in bearer form will agree that it will
not offer, sell or deliver, directly or indirectly, Debt Securities in bearer
form in the United States or to United States persons except as otherwise
permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D). See "Limitations
on Issuance of Bearer Securities."
Each series of Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange. Any
Common Stock sold pursuant to a Prospectus Supplement will be listed on the New
York Stock Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange,
subject to official notice of issuance. Any underwriters to whom Securities
are sold by the Company or the Kmart Trusts for public offering and sale may
make a market in such Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any
Securities.
Agents, dealers, and underwriters may be entitled under agreements entered
into with the Company and/or any Kmart Trust to indemnification by the Company
and/or any Kmart Trust against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments that such
agents, dealers, or underwriters may be required to make with respect thereto.
Underwriters, dealers, or agents and their associates may be customers of,
engage in transactions with and perform services for, the Company in the
ordinary course of business.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for the
Company by Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Michigan, and
Skadden, Arps, Slate, Meagher & Flom, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended January 25,
1995, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
accounting and auditing.
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<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be borne by the Company in
connection with the offerings described in this Registration Statement. All
such expenses other than the Securities and Exchange Commission registration
fee are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee. . . . . $344,827.59
Transfer Agents, Trustees and Depositary's
Fees and Expenses . . . . . . . . . . . . . . . . . . . 80,000.00
Printing and Engraving Fees and Expenses . . . . . . . . . . 100,000.00
Accounting Fees and Expenses . . . . . . . . . . . . . . . . 255,000.00
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . 25,000.00
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . 450,000.00
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . 270,000.00
Miscellaneous (including Listing
Fees, if applicable). . . . . . . . . . . . . . . . . . 25,172.41
---------
Total $1,550,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's By-Laws and the Michigan Business Corporation Act permit
the Registrant's officers and directors to be indemnified under certain
circumstances for expenses and, in some instances, for judgments, fines or
amounts paid in settlement of civil, criminal, administrative and investigative
suits or proceedings, including those involving alleged violations of the
Securities Act of 1933 (the "Act"). In addition, the Registrant maintains
directors' and officers' liability insurance which, under certain
circumstances, would cover alleged violations of the Act. Insofar as
indemnification for liabilities arising under the Act may be permitted to
officers and directors pursuant to the foregoing provisions, the Registrant has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. Therefore, in the event that a claim for such
indemnification is asserted by any officer or director the Registrant (except
insofar as such claim seeks reimbursement by the Registrant of expenses paid or
incurred by an officer or director in the successful defense of any action,
suit or proceeding ) will, unless the matter has theretofore been adjudicated
by precedent deemed by the Registrant to be controlling, submit to a court of
appropriate jurisdiction the question of whether or not indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
II-1
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
1 The form of Underwriting Agreement will be filed as an exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(a)* Form of Indenture for Senior Debt Securities between Registrant and Trustee, to be named.
4(b)* Form of Indenture for Subordinated Debt Securities between Registrant and Trustee, to be named.
4(c) The form or forms of Securities with respect to each particular series of Securities registered hereunder will be filed
as an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
4(d) Certificate of Trust of Kmart Financing I.
4(e) Certificate of Trust of Kmart Financing II.
4(f) Certificate of Trust of Kmart Financing III.
4(g) Certificate of Trust of Kmart Financing IV.
4(h) Form of Amended and Restated Declaration of Trust of Kmart Financing I, II, III and IV. To be filed by amendment or as
an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
4(i) Form of Supplemental Indenture to be used in connection with the issuance of Subordinated Debt Securities and Trust
Preferred Securities. To be filed by amendment or as an exhibit to a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
5(a) Opinion of Dickinson, Wright, Moon, Van Dusen and Freeman.
5(b) Opinion of Skadden, Arps, Slate, Meagher & Flom.
5(c) Opinion of Skadden, Arps, Slate, Meagher & Flom regarding the legality of the trust issued securities. To be filed by
amendment or as an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
12* Statement re: Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
23(a) Consent of Price Waterhouse LLP, Independent Accountants.
23(b) Consent of Dickinson, Wright, Moon, Van Dusen and Freeman (included
in Exhibit 5(a)).
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit
5(b)).
25(a) Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee for the Senior
Indenture. To be filed in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2)
of the Trust Indenture Act of 1939.
25(b) Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee for the
Subordinated Indenture. To be filed in accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act of 1939.
</TABLE>
- ----------------
* Filed on December 11, 1995, with the initial filing of this Registration
Statement.
ITEM 17 UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; (iii) To include any material
information with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such information in the
registration statement, provided, however, that paragraphs (1)(i) and 1(ii) do
not apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
II-2
<PAGE> 35
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Troy and State of Michigan on
February 16, 1996.
KMART CORPORATION
By /s/ Floyd Hall
-----------------------------------------------
(Floyd Hall)
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities indicated on February 16, 1996.
<TABLE>
<CAPTION>
Signatures Title Signatures Title
---------- ----- ---------- -----
<S> <C> <C> <C>
/s/ Floyd Hall Chairman of the /s/ Joseph P. Flannery
- ------------------------------ Board, President ------------------------------ Director
(Floyd Hall) (Principal Executive (Joseph P. Flannery)
Officer) and Director
/s/ Marvin P. Rich Executive Vice President, /s/ David B. Harper
- ------------------------------ Strategic Planning, Finance ---------------------------- Director
(Marvin P. Rich) and Administration (David B. Harper)
Senior Vice President and
/s/ Martin E. Welch III Chief Financial Officer
- ------------------------------ (Duly authorized officer, ---------------------------- Director
Principal Financial and (F. James McDonald)
Accounting Officer)
/s/ Lilyan H. Affinito /s/ J. Richard Munro
- ------------------------------ Director ---------------------------- Director
(Lilyan H. Affinito) (J. Richard Munro)
/s/ Joseph A. Califano, Jr. /s/ Lawrence Perlman
- ------------------------------ Director ---------------------------- Director
(Joseph A. Califano, Jr.) (Lawrence Perlman)
/s/ Richard G. Cline /s/ Gloria M. Shatto
- ------------------------------ Director ---------------------------- Director
(Richard G. Cline) (Gloria M. Shatto)
/s/ Willie D. Davis /s/ James O. Welch, Jr.
- ------------------------------ Director ---------------------------- Director
(Willie D. Davis) (James O. Welch, Jr.)
/s/ Enrique C. Falla
- ------------------------------ Director
(Enrique C. Falla)
</TABLE>
II-4
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Kmart
Financing I, Kmart Financing II, Kmart Financing III and Kmart Financing IV
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and that they have duly caused this
Registration Statement or amendment thereto to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Troy and State of
Michigan on February 16, 1996.
KMART FINANCING I
By /s/ Marvin P. Rich
------------------------------
Marvin P. Rich, Trustee
By /s/ James P. Churilla
------------------------------
James P. Churilla, Trustee
KMART FINANCING II
By /s/ Marvin P. Rich
------------------------------
Marvin P. Rich, Truste
By /s/ James P. Churilla
------------------------------
James P. Churilla, Trustee
KMART FINANCING III
By /s/ Marvin P. Rich
------------------------------
Marvin P. Rich, Trustee
By /s/ James P. Churilla
------------------------------
James P. Churilla, Trustee
KMART FINANCING IV
By /s/ Marvin P. Rich
------------------------------
Marvin P. Rich, Trustee
By /s/ James P. Churilla
------------------------------
James P. Churilla, Trustee
II-5
<PAGE> 38
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------- -----------------------
<S> <C>
1 The form of Underwriting Agreement will be filed as an exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(a)* Form of Indenture for Senior Debt Securities between Registrant and Trustee, to be named.
4(b)* Form of Indenture for Subordinated Debt Securities between Registrant and Trustee, to be named.
4(c) The form or forms of Securities with respect to each particular series of Securities registered hereunder will be filed
as an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
4(d) Certificate of Trust of Kmart Financing I.
4(e) Certificate of Trust of Kmart Financing II.
4(f) Certificate of Trust of Kmart Financing III.
4(g) Certificate of Trust of Kmart Financing IV.
4(h) Form of Amended and Restated Declaration of Trust of Kmart Financing I, II, III and IV. To be filed by amendment or as
an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
4(i) Form of Supplemental Indenture to be used in connection with the issuance of Subordinated Debt Securities and Trust
Preferred Securities. To be filed by amendment or as an exhibit to a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
5(a) Opinion of Dickinson, Wright, Moon, Van Dusen and Freeman.
5(b) Opinion of Skadden, Arps, Slate, Meagher & Flom.
5(c) Opinion of Skadden, Arps, Slate, Meagher & Flom regarding the legality of the trust issued securities. To be filed by
amendment or as an exhibit to a Current Report of the Registrant on Form 8-K and incorporated herein by reference.
12* Statement re: Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
23(a) Consent of Price Waterhouse LLP, Independent Accountants.
23(b) Consent of Dickinson, Wright, Moon, Van Dusen and Freeman (included in Exhibit 5(a)).
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 5(b)).
25(a) Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee for the Senior
Indenture. To be filed in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2)
of the Trust Indenture Act of 1939.
25(b) Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee for the
Subordinated Indenture. To be filed in accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act of 1939.
</TABLE>
- ----------------
* Filed on December 11, 1995, with the initial filing of this
registration statement.
<PAGE> 1
EXHIBIT 4(d)
CERTIFICATE OF TRUST
The undersigned, the trustees of Kmart Financing I, desiring to form a
business trust pursuant to Delaware Business Trust Act, 12 Del.
C. Section 3810, hereby certify as follows:
1. The name of the business trust being formed hereby (the
"Trust") is "Kmart Financing I."
2. The name and business address of the trustee of the Trust
which has its principal place of business in the State of
Delaware is as follows:
Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of the date of
filing.
Dated: February 16, 1996
/s/ Marvin P. Rich
-----------------------------------
Name: Marvin P. Rich
Title: Trustee
/s/ James P. Churilla
-----------------------------------
Name: James P. Churilla
Title: Trustee
Bank of New York, Delaware, as
Trustee
By: /s/ Walter Douglas
-----------------------------
Name: Walter Douglas
Title: CFO and Vice President
<PAGE> 1
EXHIBIT 4(e)
CERTIFICATE OF TRUST
The undersigned, the trustees of Kmart Financing II, desiring to form a
business trust pursuant to Delaware Business Trust Act, 12 Del. C. Section
3810, hereby certify as follows:
4. The name of the business trust being formed hereby (the "Trust") is
"Kmart Financing II."
5. The name and business address of the trustee of the Trust which has
its principal place of business in the State of Delaware is as
follows:
Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
6. This Certificate of Trust shall be effective as of the date of
filing.
Dated: February 16, 1996
/s/ Marvin P. Rich
-----------------------------------
Name: Marvin P. Rich
Title: Trustee
/s/ James P. Churilla
-----------------------------------
Name: James P. Churilla
Title: Trustee
Bank of New York, Delaware, as
Trustee
By: /s/ Walter Douglas
-----------------------------------
Name: Walter Douglas
Title: CFO and Vice President
<PAGE> 1
EXHIBIT 4(f)
CERTIFICATE OF TRUST
The undersigned, the trustees of Kmart Financing III, desiring to form a
business trust pursuant to Delaware Business Trust Act, 12 Del. C. Section
3810, hereby certify as follows:
7. The name of the business trust being formed hereby (the "Trust") is
"Kmart Financing III."
8. The name and business address of the trustee of the Trust which has
its principal place of business in the State of Delaware is as
follows:
Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
9. This Certificate of Trust shall be effective as of the date of
filing.
Dated: February 16, 1996
/s/ Marvin P. Rich
-----------------------------------
Name: Marvin P. Rich
Title: Trustee
/s/ James P. Churilla
-----------------------------------
Name: James P. Churilla
Title: Trustee
Bank of New York, Delaware, as
Trustee
By: /s/ Walter Douglas
-----------------------------------
Name: Walter Douglas
Title: CFO and Vice President
<PAGE> 1
EXHIBIT 4(g)
CERTIFICATE OF TRUST
The undersigned, the trustees of Kmart Financing IV, desiring to form a
business trust pursuant to Delaware Business Trust Act, 12 Del. C. Section
3810, hereby certify as follows:
10. The name of the business trust being formed hereby (the "Trust") is
"Kmart Financing IV."
11. The name and business address of the trustee of the Trust which has
its principal place of business in the State of Delaware is as
follows:
Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
12. This Certificate of Trust shall be effective as of the date of
filing.
Dated: February 16, 1996
/s/ Marvin P. Rich
-----------------------------------
Name: Marvin P. Rich
Title: Trustee
/s/ James P. Churilla
-----------------------------------
Name: James P. Churilla
Title: Trustee
Bank of New York, Delaware, as
Trustee
By: /s/ Walter Douglas
-----------------------------------
Name: Walter Douglas
Title: CFO and Vice President
<PAGE> 1
EXHIBIT 5(a)
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226
February 16, 1996
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Re: Kmart Corporation
Registration Statement on Form S-3
Gentlemen:
This opinion is furnished by us as counsel for Kmart
Corporation, a Michigan corporation (the "Company"), in connection with the
Registration Statement on Form S-3 (the "Registration Statement") to be filed
by the Company with the Securities and Exchange Commission (the "Commission").
The Registration Statement relates to the issuance and sale from time to time,
pursuant to Rule 415 of the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), of the following
securities of the Company with an aggregate initial public offering price of up
to $1,200,000,000 or the equivalent thereof, based on the applicable exchange
rate at the time of sale, in one or more foreign currencies, currency units or
composite currencies as shall be designated by the Company: (i) senior or
subordinated debt securities, which may be secured or unsecured, in one or more
series (the "Debt Securities"), which may be issued under Indentures (the
"Indenture" or "Indentures") proposed to be entered into between the Company
and trustees to be named (the "Trustee" or "Trustees"); (ii) shares of
preferred stock, no par value (the "Preferred Stock"), in one or more series,
which may also be issued in the form of depositary shares (the "Depositary
Shares") evidenced by depositary receipts (the "Receipts") pursuant to one or
more deposit agreements (each a "Deposit Agreement") proposed to be entered
into between the Company and a depositary to be named (the "Depositary"); (iii)
shares of common stock, $1.00 par value per share, of the Company ("Common
<PAGE> 2
Page 2
Stock"); (iv) warrants ("Warrants") to purchase Debt Securities, Preferred
Stock, Depositary Shares, Common Stock or other securities of the Company as
shall be designated by the Company at the time of offering issued pursuant to
one or more warrant agreements (each a "Warrant Agreement") proposed to be
entered into between the Company and a warrant agent to be named (the "Warrant
Agent"); and (v) such indeterminate amount of Debt Securities and number of
shares of Preferred Stock or Common Stock, as may be issued upon conversion,
exchange or exercise of any Debt Securities, Preferred Stock or Warrants,
including such shares of Preferred Stock or Common Stock as may be issued
pursuant to anti-dilution adjustments, in amounts, at prices and on terms to
be determined at the time of offering (the "Indeterminate Stock"). The Debt
Securities, the Preferred Stock, the Depositary Shares, the Common Stock, the
Warrants, and the Indeterminate Stock are collectively referred to herein as
the "Offered Securities."
This opinion is delivered in accordance with the requirements
of Items 601(b)(5) of Regulation S-K under the Securities Act.
We have examined and are familiar with originals or copies of
such documents, corporate records and other instruments as we have deemed
necessary or appropriate in connection with this opinion, including (i) the
form of Registration Statement relating to the Offered Securities; (ii) the
forms of Indentures; (iii) the Restated Articles of Incorporation of the
Company, as amended; (iv) the By-laws of the Company as currently in effect;
and (v) resolutions adopted to date by the Board of Directors of the Company
(the "Board of Directors") relating to the registration of the Offered
Securities.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
<PAGE> 3
Page 3
of all documents submitted to us as certified, conformed or photostatic copies
and the authenticity of the originals of such latter documents. As to any
facts material to the opinions expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers and other representatives of the Company and
others. We have assumed that the Indentures, the Deposit Agreement and the
Warrant Agreement will be duly authorized, executed and delivered by the
Trustees, the Depositary and the Warrant Agent, respectively, and that any Debt
Securities, Receipts or Warrants that may be issued will be manually signed or
countersigned, as the case may be, by duly authorized officers of the Trustees,
the Depositary or the Warrant Agent, respectively.
We are members of the Bar in the State of Michigan and we do
not express any opinion as to the laws of any other jurisdiction other than the
laws of the United States of America to the extent referred to specifically
herein. Insofar as the opinions set forth below relate to the Debt Securities
and the Warrants as valid, binding and enforceable obligations of the Company,
we have relied solely upon an opinion letter of even date herewith from
Skadden, Arps, Slate, Meagher & Flom, New York, New York, with respect to all
matters of New York law related thereto. The Offered Securities may be issued
from time to time on a delayed or continuous basis, and this opinion is limited
to the laws, including the rules and regulations, as in effect on the date
hereof.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Michigan.
<PAGE> 4
Page 4
2. With respect to any series of Debt Securities (the
"Offered Debt Securities"), when (i) the Registration Statement, as finally
amended (including all necessary post-effective amendments), has become
effective and the applicable Indenture has been qualified under the Trust
Indenture Act of 1939, as amended; (ii) an appropriate prospectus supplement or
term sheet with respect to the Offered Debt Securities has been prepared,
delivered and filed in compliance with the Securities Act and the applicable
rules and regulations thereunder; (iii) if the Offered Debt Securities are to
be sold pursuant to a firm commitment underwritten offering, the underwriting
agreement with respect to the Offered Debt Securities has been duly authorized,
executed and delivered by the Company and the other parties thereto; (iv) the
Board of Directors, including any appropriate committee appointed thereby, and
appropriate officers of the Company have taken all necessary corporate action
to approve the issuance and terms of the Offered Debt Securities and related
matters; (v) the terms of the Offered Debt Securities and of their issuance and
sale have been duly established in conformity with the applicable Indenture so
as not to violate any applicable law, the Restated Articles of Incorporation or
By-laws of the Company or result in a default under or breach of any agreement
or instrument binding upon the Company and so as to comply with any requirement
or restriction imposed by any court or governmental body having jurisdiction
over the Company; (vi) the applicable Indenture has been duly authorized,
executed and delivered by the Company to the applicable Trustee; and (vii) the
Offered Debt Securities have been duly executed and authenticated in accordance
with the provisions of the applicable Indenture and duly delivered to the
purchasers thereof upon payment of the agreed-upon consideration therefor, (1)
the Offered Debt Securities (including any Debt Securities duly issued upon
exercise of any Warrants), when issued and sold in accordance with the
applicable Indenture and the applicable underwriting agreement, if any, or any
other duly authorized, executed and delivered valid and binding pur-
<PAGE> 5
Page 5
chase or agency agreement, will be valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity), (c) public
policy considerations which may limit the rights of parties to obtain further
remedies, (d) the waiver contained in section 5.15 of the applicable Indenture
may be unenforceable, (e) requirements that a claim with respect to any Offered
Debt Securities denominated other than in United States dollars (or a judgment
denominated other than in United States dollars in respect of such claim) be
converted into United States dollars at a rate of exchange prevailing on a date
determined pursuant to applicable law, and (f) governmental authority to limit,
delay or prohibit the making of payments outside the United States or in
foreign currencies, currency units or composite currencies; and (2) if
Preferred Stock or Common Stock is issuable upon conversion or exchange of any
convertible Offered Debt Securities, the Preferred Stock or Common Stock
issuable upon conversion or exchange of such Offered Debt Securities will be
validly issued, fully paid and nonassessable, assuming the execution,
authentication, issuance and delivery of the Offered Debt Securities and
conversion or exchange of the Offered Debt Securities in accordance with the
terms of the applicable Indenture.
3. With respect to the shares of any series of Preferred
Stock, including, if applicable, Depositary Shares representing fractional
interests in any Preferred Stock (together, the "Offered Preferred Stock"),
when (i) the Registration Statement, as finally amended (including all
necessary post-effective amendments), has become effective; (ii) an appropriate
prospectus supplement or term sheet with respect to the shares of the Offered
<PAGE> 6
Page 6
Preferred Stock has been prepared, delivered and filed in compliance with the
Securities Act and the applicable rules and regulations thereunder; (iii) if
the Offered Preferred Stock is to be sold pursuant to a firm commitment
underwritten offering, the underwriting agreement with respect to the shares of
the Offered Preferred Stock has been duly authorized, executed and delivered by
the Company and the other parties thereto; (iv) the Board of Directors,
including any appropriate committee appointed thereby, and appropriate officers
of the Company have taken all necessary corporate action to approve the
issuance and terms of the shares of the Offered Preferred Stock and related
matters, including the adoption of a Certificate of Designation for the Offered
Preferred Stock in accordance with the applicable provisions of Michigan law
(the "Certificate of Designation") in the form to be filed as an exhibit to the
Registration Statement; any amendment thereto or any document incorporated by
reference therein; (v) the filing of the Certificate of Designation with the
Michigan Department of Commerce has duly occurred; (vi) the terms of the
Offered Preferred Stock and of their issuance and sale have been duly
established in conformity with the Company's Restated Articles of Incorporation
including the Certificate of Designation relating to the Offered Preferred
Stock and the By-laws of the Company so as not to violate any applicable law,
the Restated Articles of Incorporation or By-laws of the Company or result in a
default under or breach of any agreement or instrument binding upon the Company
and so as to comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over the Company; (vii) in the case of
Depositary Shares, the Deposit Agreement in the form to be filed as an exhibit
to the Registration Statement, any amendment thereto or any document
incorporated by reference therein has been duly authorized, executed and
delivered; and (viii) certificates representing the shares of the Offered
Preferred Stock are duly executed, countersigned, registered and delivered upon
payment of the agreed-upon consideration therefor (and, in the case
<PAGE> 7
Page 7
of Depositary Shares, such Preferred Stock certificates are delivered to the
Depositary for deposit in accordance with the laws of the States of Michigan
and New York against issuance of the Receipts in accordance with the terms of
the Deposit Agreement), (1) the shares of the Offered Preferred Stock
(including any Preferred Stock duly issued upon exercise of any Warrants), when
issued and sold in accordance with the applicable underwriting agreement or any
other duly authorized, executed and delivered valid and binding purchase or
agency agreement, will be duly authorized, validly issued, fully paid and
nonassessable; and (2) if the Offered Preferred Stock is convertible or
exchangeable into Common Stock, the Common Stock issuable upon conversion or
exchange of the Offered Preferred Stock will be duly authorized, validly
issued, fully paid and nonassessable, assuming the execution, authentication,
issuance and delivery of the Offered Preferred Stock and the conversion or
exchange of the Offered Preferred Stock in accordance with the terms of the
Certificate of Designation.
4. With respect to any Receipts (the "Offered Receipts"),
when (i) the Registration Statement, as finally amended (including all
necessary post-effective amendments), has become effective; (ii) an appropriate
prospectus supplement or term sheet with respect to the Offered Receipts has
been prepared, delivered and filed in compliance with the Securities Act and
the applicable rules and regulations thereunder; (iii) if the Offered Receipts
are to be sold pursuant to a firm commitment underwritten offering, the
underwriting agreement with respect to the Offered Receipts has been duly
authorized, executed and delivered by the Company and the other parties
thereto; (iv) the Board of Directors, including any appropriate committee
appointed thereby, and appropriate officers of the Company have taken all
necessary corporate action to approve the issuance and terms of the Offered
Receipts and related matters; (v) the terms of the Offered Receipts and of
their issuance and sale have been duly established in conformity with the
Deposit
<PAGE> 8
Page 8
Agreement so as not to violate any applicable law, the Restated Articles of
Incorporation or By-laws of the Company or result in a default under or breach
of any agreement or instrument binding upon the Company and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over the Company; (vi) the Deposit Agreement relating to
the Offered Receipts in the form to be filed as an exhibit to the Registration
Statement, any amendment thereto or any document incorporated by reference
therein has been duly authorized, executed and delivered by the Company; and
(vii) the Offered Receipts have been duly executed, delivered and countersigned
in accordance with the provisions of the Deposit Agreement and duly issued and
sold in the applicable form to be filed as an exhibit to the Registration
Statement or any amendment thereto and in the manner contemplated in the
Registration Statement or any prospectus supplement or term sheet relating
thereto, the Offered Receipts, when issued and sold in accordance with the
applicable Deposit Agreement and the applicable underwriting agreement or any
other duly authorized, executed and delivered valid and binding purchase or
agency agreement, will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); and (c) public policy
considerations which may limit the rights of parties to obtain further
remedies.
5. With respect to any offering of Common Stock, when (i) the
Registration Statement, as finally amended (including all necessary
post-effective amendments), has become effective; (ii) an appropriate
prospectus supplement or term sheet with respect to the Common Stock has been
prepared, delivered and filed in
<PAGE> 9
Page 9
compliance with the Securities Act and the applicable rules and regulations
thereunder; (iii) if the Common Stock is to be sold pursuant to a firm
commitment underwritten offering, the underwriting agreement with respect to
the Common Stock has been duly authorized, executed and delivered by the
Company and the other parties thereto; (iv) the Board of Directors, including
any appropriate committee appointed thereby, and appropriate officers of the
Company have taken all necessary corporate action to approve the issuance of
the Common Stock and related matters; (v) the terms of the issuance and sale of
the Common Stock have been duly established in conformity with the Restated
Articles of Incorporation and By-laws of the Company so as not to violate any
applicable law, the Restated Articles of Incorporation or By-laws of the
Company or result in a default under or breach of any agreement or instrument
binding upon the Company and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction over
the Company; and (vi) certificates representing the shares of Common Stock are
duly executed, countersigned, registered and delivered upon payment of the
agreed upon consideration therefor, the shares of Common Stock (including any
duly issued upon exercise of any Warrants), when issued and sold in accordance
with the applicable underwriting agreement with respect to the Common Stock or
any other duly authorized, executed and delivered valid and binding purchase or
agency agreement, will be duly authorized, validly issued, fully paid and
nonassessable, provided that the consideration therefor is not less than the
par value thereof.
6. With respect to any series of Warrants (the "Offered
Warrants"), when (i) the Registration Statement, as finally amended (including
all necessary post-effective amendments), has become effective; (ii) an
appropriate prospectus supplement or term sheet with respect to the Offered
Warrants has been prepared, delivered and filed in compliance with the
Securities Act and the applicable rules and regulations thereunder; (iii) if
the
<PAGE> 10
Page 10
Offered Warrants are to be sold pursuant to a firm commitment underwritten
offering, the underwriting agreement with respect to the Offered Warrants has
been duly authorized, executed and delivered by the Company and the other
parties thereto; (iv) the Board of Directors, including any appropriate
committee appointed thereby, and appropriate officers of the Company have taken
all necessary corporate action to approve the issuance and terms of the Offered
Warrants and related matters; (v) the terms of the Offered Warrants and of
their issuance and sale have been duly established in conformity with the
Warrant Agreement so as not to violate any applicable law, the Restated
Articles of Incorporation or By-laws of the Company or result in a default
under or breach of any agreement or instrument binding upon the Company and so
as to comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over the Company; (vi) the Warrant
Agreement relating to the Offered Warrants in the form to be filed as an
exhibit to the Registration Statement, any amendment thereto or any document
incorporated by reference therein has been duly authorized, executed and
delivered by the Company; and (vii) the Offered Warrants have been duly
executed, delivered and countersigned in accordance with the provisions of the
Warrant Agreement and duly issued and sold in the applicable form to be filed
as an exhibit to the Registration Statement or any amendment thereto and in the
manner contemplated in the Registration Statement or any prospectus supplement
or term sheet relating thereto, the Offered Warrants, when issued and sold in
accordance with the applicable Warrant Agreement and the applicable
underwriting agreement or any other duly authorized, executed and delivered
valid and binding purchase or agency agreement, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except to the extent that enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights
<PAGE> 11
Page 11
generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); and (c)
public policy considerations which may limit the rights of parties to obtain
further remedies.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5(a) to the Registration Statement. We also consent to
the reference to our firm under the heading "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act or the Rules and Regulations of the Commission.
Very truly yours,
/s/ Dickinson, Wright,
Moon, Van Dusen & Freeman
<PAGE> 1
EXHIBIT 5(b)
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
February 16, 1996
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Re: Kmart Corporation
Registration Statement on Form S-3
Gentlemen:
This opinion is furnished by us as special counsel for Kmart Corporation,
a Michigan corporation (the "Company"), in connection with the Registration
Statement on Form S-3 (the "Registration Statement") to be filed by the Company
with the Securities and Exchange Commission (the "Commission"). The
Registration Statement relates to the issuance and sale from time to time,
pursuant to Rule 415 of the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), of the following
securities of the Company with an aggregate initial public offering price of up
to $1,200,000,000 or the equivalent thereof, based on the applicable exchange
rate at the time of sale, in one or more foreign currencies, currency units or
composite currencies as shall be designated by the Company: (i) senior or
subordinated debt securities, which may be secured or unsecured, in one
or more series (the "Debt Securities"), which may be issued under one or more
indentures relating to either senior debt securities or subordinated debt
securities, as applicable (the "Indenture" or "Indentures"), proposed to be
entered into between the Company and trustees to be named (the "Trustee" or
"Trustees"); (ii) shares of preferred stock, no par value (the "Preferred
Stock"), in one or more series, which may also be issued in the form of
depositary shares (the "Depositary Shares") evidenced by depositary receipts
(the "Receipts") pursuant to one or more deposit agreements (each a "Deposit
Agreement") proposed to be entered into between the Company and a depos-
<PAGE> 2
Page 2
itary to be named (the "Depositary"); (iii) shares of common stock, $1.00 par
value per share, of the Company ("Common Stock"); (iv) warrants ("Warrants") to
purchase Debt Securities, Preferred Stock, Depositary Shares, Common Stock or
other securities of the Company as shall be designated by the Company at the
time of offering issued pursuant to one or more warrant agreements (each a
"Warrant Agreement") proposed to be entered into between the Company and a
warrant agent to be named (the "Warrant Agent"); and (v) such indeterminate
amount of Debt Securities and number of shares of Preferred Stock or Common
Stock, as may be issued upon conversion, exchange or exercise of any Debt
Securities, Preferred Stock or Warrants, including such shares of Preferred
Stock or Common Stock as may be issued pursuant to anti-dilution adjustments,
in amounts, at prices and on terms to be determined at the time of offering
(the "Indeterminate Stock"). The Debt Securities, the Preferred Stock, the
Depositary Shares, the Common Stock, the Warrants, and the Indeterminate Stock
are collectively referred to herein as the "Offered Securities."
This opinion is delivered in accordance with the requirements of
Items 601(b)(5) of Regulation S-K under the Securities Act.
We have examined and are familiar with originals or copies of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate in connection with this opinion, including (i) the form of
Registration Statement relating to the Offered Securities; (ii) the forms of
Indentures; (iii) the Restated Articles of Incorporation of the Company, as
amended to the date hereof; (iv) the By-laws of the Company as currently in
effect; and (v) resolutions adopted to date by the Board of Directors of the
Company (the "Board of Directors") relating to the registration of the Offered
Securities.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all
<PAGE> 3
Page 3
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
conformed or photostatic copies and the authenticity of the originals of such
latter documents. As to any facts material to the opinions expressed herein
which were not independently established or verified, we have relied upon oral
or written statements and representations of officers and other representatives
of the Company and others. We have assumed that the Indentures, the Deposit
Agreement and the Warrant Agreement will be duly authorized, executed and
delivered by the Trustees, the Depositary and the Warrant Agent, respectively,
and that any Debt Securities, Receipts or Warrants that may be issued will be
manually signed or countersigned, as the case may be, by duly authorized
officers of the Trustees, the Depositary or the Warrant Agent, respectively.
We are members of the Bar in the State of New York and we do not
express any opinion as to the laws of any other jurisdiction other than the
laws of the United States of America to the extent referred to specifically
<PAGE> 4
Page 4
herein. The Offered Securities may be issued from time to time on a delayed or
continuous basis, and this opinion is limited to the laws, including the rules
and regulations, as in effect on the date hereof.
We have assumed that (i) the Company has duly authorized the issuance
of the Offered Securities and the filing of the Registration Statement under
Michigan law; (ii) the Indentures, the Deposit Agreement and the Warrant
Agreement will be duly authorized, executed and delivered by the Company under
Michigan law; (iii) the choice of New York law in the Indentures, the Deposit
Agreement and the Warrant Agreement is legal and valid under the laws of other
applicable jurisdictions; and (iv) the execution by the Company of the
Indentures, the Deposit Agreement and the Warrant Agreement and the performance
by the Company of its obligations thereunder will not violate or conflict with
any laws of the State of Michigan. Reference is made to the opinion of
Dickinson, Wright, Moon, Van Dusen & Freeman filed as Exhibit 5(a) to the
Registration Statement with respect to matters under the laws of the State of
Michigan and our opinions set forth herein are subject to the same limitations,
qualifications and assumptions set forth in such opinion.
Based upon and subject to the foregoing, we are of the opinion that:
1. With respect to any series of Debt Securities (the "Offered Debt
Securities"), when (i) the Registration Statement, as finally amended
(including all necessary post-effective amendments), has become effective and
the applicable Indenture has been qualified under the Trust Indenture Act of
1939, as amended; (ii) an appropriate prospectus supplement or term sheet with
respect to the Offered Debt Securities has been prepared, delivered and filed
in compliance with the Securities Act and the applicable rules and regulations
thereunder; (iii) if the Offered Debt Securities are to be sold pursuant to a
firm commitment underwritten offering, the underwriting agreement with respect
to the Offered Debt Securities has been duly authorized, executed and delivered
by the Company and the other parties thereto; (iv) the Board of Directors,
including any appropriate committee appointed thereby, and appropriate officers
of the Company have taken all necessary corporate action to approve the
issuance and terms of the Offered Debt Securities and related matters; (v) the
terms of the Offered Debt Securities and of their issuance and sale have been
duly established in conformity with the applicable Indenture so as not to
violate any applicable law, the Restated Articles of Incorporation or By-laws
of the Company or result in a default under or breach of any agreement or
instrument binding upon the Company and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction over
the Company; and (vi) the Offered Debt Securities have been duly executed and
authenticated in accordance with the provisions of the applicable Indenture and
duly delivered to the purchasers thereof upon payment of the agreed-upon
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Page 5
consideration therefor, the Offered Debt Securities (including any Debt
Securities duly issued upon exercise of any Warrants), when issued and sold in
accordance with the applicable Indenture and the applicable underwriting
agreement, if any, or any other duly authorized, executed and delivered valid
and binding purchase or agency agreement, will be valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except to the extent that enforcement thereof may be limited
by (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity), (c)
public policy considerations which may limit the rights of parties to obtain
further remedies, (d) the waiver contained in Section 5.15 of the applicable
Indenture may be unenforceable, (e) requirements that a claim with respect to
any Offered Debt Securities denominated other than in United States dollars (or
a judgment denominated other than in United States dollars in respect of such
claim) be converted into United States dollars at a rate of exchange prevailing
on a date determined pursuant to applicable law, and (f) governmental authority
to limit, delay or prohibit the making of payments outside the United States or
in foreign currencies, currency units or composite currencies.
2. With respect to any Receipts (the "Offered Receipts"), when (i)
the Registration Statement, as finally amended (including all necessary
post-effective amendments), has become effective; (ii) an appropriate
prospectus supplement or term sheet with respect to the Offered Receipts has
been prepared, delivered and filed in compliance with the Securities Act and
the applicable rules and regulations thereunder; (iii) if the Offered Receipts
are to be sold pursuant to a firm commitment underwritten offering, the
underwriting agreement with respect to the Offered Receipts has been duly
authorized,
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Page 6
executed and delivered by the Company and the other parties thereto; (iv) the
Board of Directors, including any appropriate committee appointed thereby, and
appropriate officers of the Company have taken all necessary corporate action
to approve the issuance and terms of the Offered Receipts and related matters;
(v) the terms of the Offered Receipts and of their issuance and sale have been
duly established in conformity with the Deposit Agreement so as not to violate
any applicable law, the Restated Articles of Incorporation or By-laws of the
Company or result in a default under or breach of any agreement or instrument
binding upon the Company and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction over
the Company; and (vi) the Offered Receipts have been duly executed, delivered
and countersigned in accordance with the provisions of the Deposit Agreement
and duly issued and sold in the applicable form to be filed as an exhibit to
the Registration Statement or any amendment thereto and in the manner
contemplated in the Registration Statement or any prospectus supplement or term
sheet relating thereto, the Offered Receipts, when issued and sold in
accordance with the applicable Deposit Agreement and the applicable
underwriting agreement or any other duly authorized, executed and delivered
valid and binding purchase or agency agreement, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except to the extent that enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity); and
(c) public policy considerations which may limit the rights of parties to
obtain further remedies.
3. With respect to any series of Warrants (the "Offered Warrants"),
when (i) the Registration Statement, as finally amended (including all
necessary post-effec-
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Page 7
tive amendments), has become effective; (ii) an appropriate prospectus
supplement or term sheet with respect to the Offered Warrants has been
prepared, delivered and filed in compliance with the Securities Act and the
applicable rules and regulations thereunder; (iii) if the Offered Warrants are
to be sold pursuant to a firm commitment underwritten offering, the
underwriting agreement with respect to the Offered Warrants has been duly
authorized, executed and delivered by the Company and the other parties
thereto; (iv) the Board of Directors, including any appropriate committee
appointed thereby, and appropriate officers of the Company have taken all
necessary corporate action to approve the issuance and terms of the Offered
Warrants and related matters; (v) the terms of the Offered Warrants and of
their issuance and sale have been duly established in conformity with the
Warrant Agreement so as not to violate any applicable law, the Restated
Articles of Incorporation or By-laws of the Company or result in a default
under or breach of any agreement or instrument binding upon the Company and so
as to comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over the Company by the Company and the
applicable Warrant Agent; and (vi) the Offered Warrants have been duly
executed, delivered and countersigned in accordance with the provisions of the
Warrant Agreement and duly issued and sold in the applicable form to be filed
as an exhibit to the Registration Statement or any amendment thereto and in the
manner contemplated in the Registration Statement or any prospectus supplement
or term sheet relating thereto, the Offered Warrants, when issued and sold in
accordance with the applicable Warrant Agreement and the applicable
underwriting agreement or any other duly authorized, executed and delivered
valid and binding purchase or agency agreement, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except to the extent that enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or
<PAGE> 8
Page 8
other similar laws now or hereafter in effect relating to creditors' rights
generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); and (c)
public policy considerations which may limit the rights of parties to obtain
further remedies.
Dickinson, Wright, Moon, Van Dusen & Freeman is permitted to rely
upon this opinion for the purpose of delivering its opinion to the Company in
its capacity as counsel to the Company in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act. We hereby consent
to the filing of this opinion with the Commission as Exhibit 5(b) to the
Registration Statement. We also consent to the reference to us under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the Rules and Regulations of
the Commission.
Very truly yours,
Skadden, Arps, Slate, Meagher & Flom
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated February 27, 1995, which appears on page 30 of the 1994 Annual Report to
Shareholders of Kmart Corporation and its subsidiary companies, which is
incorporated by reference in Kmart Corporation's Annual Report on Form 10-K for
the year ended January 25, 1995. We also consent to the incorporation by
reference of our report on the Financial Statement Schedules, which appears on
page 11 of such Annual Report on Form 10-K. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
200 Renaissance Center
Detroit, Michigan
February 16, 1996
