<PAGE> 1
As filed with the Securities and Exchange Commission on March 14, 1996
Registration No. 33-64905
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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<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)
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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:
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<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>
Proposed
Proposed Maximum Maximum Amount of
Title of Each Class of Securities Amount to be Regis- Aggregate Price Per Aggregate Registration
to be Registered tered (1) Unit (2) Offering Price (1)(2) Fee
<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 $1,150,000,000 100% $1,150,000,000 $396,551.72(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 obligations of Kmart Corporation on the Debt Securities and under the
Declarations of Trust 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 $1,150,000,000 of previously unregistered securities
registered hereby. A filing fee of $344,827.59 was paid on December 11,
1995 in respect of $1,000,000,000 aggregate principal amount of the
securities registered hereby and a filing fee of $51,724.13 was paid on
March 13, 1996 in respect of $150,000,000 aggregate principal amount of
the securities registered hereby. 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 REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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.
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SUBJECT TO COMPLETION, DATED MARCH 14, 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 $1,350,000,000
($1,150,000,000 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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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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(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;
(12) Current Report on Form 8-K filed on January 22, 1996; and
(13) Current Report on Form 8-K filed on March 12, 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, Guam and Canada. In
addition, the Company has joint venture operations in Mexico and Singapore.
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. The Company also owns and operates 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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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 16, 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.
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(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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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. (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
common 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
provides 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, (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 or (iii) 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, (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 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; (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
the Debt Securities are convertible into shares of Common Stock, failure by the
Company to deliver Common Stock upon an appropriate election by the holder or
holders of the Debt Securities to convert the Debt 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), (d), (e) or (g) 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 series 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 (f) 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).
Notwithstanding anything in the Indenture to the contrary, the right of
any holder of a Debt Security to receive payment of the principal of and
interest on such Debt Security, on and after the respective due dates expressed
in such Debt Security (as the same may be extended in accordance with the terms
of such Debt Security) or to institute suit for the enforcement of any such
payment shall not be impaired or affected without the consent of such holder,
including, in the case of a Subordinated Debt Security issued to a Kmart Trust,
the holders of the Trust Preferred Securities issued by such Kmart Trust.
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,
payment of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons and, if
applicable, conversion of Debt Securities into Common Stock or other
securities) 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, and (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)
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.
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, and which will mirror the terms of
the Subordinated Debt Securities held by the Kmart Trust and described in the
Prospectus Supplement related thereto. 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.
On December 7, 1995, President Clinton proposed certain tax law changes
that would, among other things, generally deny interest deductions to corporate
issuers of debt if the debt instrument has a term exceeding 20 years and is not
reflected as indebtedness on the issuer's consolidated balance sheet. Any
effect of such proposed changes on the holder of Trust Preferred Securities
will be set forth in the Prospectus Supplement related thereto.
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 (the "Redemption Price"), and all accrued and unpaid
distributions, 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 not apply to any payment
of distributions on the Trust Preferred Securities 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, (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. The subordination provisions of the Subordinated Debt
Securities provide that in the event payment is made on the Subordinated Debt
Securities or the Trust Preferred Securities Guarantee in contravention of such
provisions, such payments shall be paid over to the holders of Senior
Indebtedness.
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
-29-
<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. . . . . $396,551.72
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). . . . . . . . . . . . . . . . . . 23,448.28
---------
Total $1,600,000
==========
</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 the Company and The Bank of New York, as trustee.
4(b)* Form of Indenture for Subordinated Debt Securities between the Company and The Bank of New York, as trustee.
4(c) The form or forms of Securities with respect to each particular series of Securities registered hereunder (except the form
of convertible Preferred Security which is included in Exhibit 4(h)) will be filed as an exhibit to a Current Report of
the Company 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.
4(i) Form of Supplemental Indenture to be used in connection with the issuance of Subordinated Debt Securities and Trust
Preferred Securities.
4(j) Form of Preferred Securities Guarantee.
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.
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 Exhibits
5(b) and 5(c)).
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Senior Indenture.
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Subordinated Indenture.
25(c) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under
the Amended and Restated Declaration of Trust of Kmart Financing I.
25(d) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing II.
25(e) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing III.
25(f) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing IV.
25(g) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of Kmart
Financing I.
25(h) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of
Kmart Financing II.
25(i) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of
Kmart Financing III.
25(j) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of Kmart
Financing IV.
</TABLE>
- ----------------
* Previously filed.
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
March 14, 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 March 14, 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 March 14, 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
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<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 the Company and The Bank of New York, as trustee.
4(b)* Form of Indenture for Subordinated Debt Securities between the Company and The Bank of New York, as trustee.
4(c) The form or forms of Securities with respect to each particular series of Securities registered hereunder (except the form
of convertible Preferred Security which is included in Exhibit 4(h)) will be filed as an exhibit to a Current Report of
the Company 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.
4(i) Form of Supplemental Indenture to be used in connection with the issuance of Subordinated Debt Securities and Trust
Preferred Securities.
4(j) Form of Preferred Securities Guarantee.
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.
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 Exhibits
5(b) and 5(c)).
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Senior Indenture.
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Subordinated Indenture.
25(c) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under
the Amended and Restated Declaration of Trust of Kmart Financing I.
25(d) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing II.
25(e) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing III.
25(f) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Amended and Restated Declaration of Trust of Kmart Financing IV.
25(g) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of Kmart
Financing I.
25(h) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of
Kmart Financing II.
25(i) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of
Kmart Financing III.
25(j) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee under the
Preferred Securities Guarantee of Kmart Corporation for the benefit of the holders of Trust Preferred Securities of Kmart
Financing IV.
</TABLE>
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* Previously filed.
<PAGE> 1
EXHIBIT 4(h)
================================
AMENDED AND RESTATED DECLARATION
OF TRUST
KMART FINANCING [I] [II] [III] [IV]
Dated as of March __, 1996
================================
<PAGE> 2
TABLE OF CONTENTS
Page
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ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . . 8
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . . 9
SECTION 2.3 Reports by the Institutional Trustee . . . . . . . . . . . . 9
SECTION 2.4 Periodic Reports to Institutional Trustee. . . . . . . . . . 9
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . . 9
SECTION 2.6 Events of Default; Waiver. . . . . . . . . . . . . . . . . . 10
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . . 12
ARTICLE III
ORGANIZATION
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.5 Title to Property of the Trust . . . . . . . . . . . . . . . 13
SECTION 3.6 Powers and Duties of the Regular Trustees. . . . . . . . . . 13
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees . . . . 17
SECTION 3.8 Powers and Duties of the Institutional Trustee . . . . . . . 17
SECTION 3.9 Certain Duties and Responsibilities of
the Institutional Trustee. . . . . . . . . . . . . . . . . . 19
SECTION 3.10 Certain Rights of Institutional Trustee. . . . . . . . . . . 22
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.12 Execution of Documents . . . . . . . . . . . . . . . . . . . 24
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities . . . 24
SECTION 3.14 Duration of Trust. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.15 Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities. . . . . . . . . . . 27
SECTION 4.2 Responsibilities of the Sponsor. . . . . . . . . . . . . . . 27
i
<PAGE> 3
Page
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ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.3 Institutional Trustee; Eligibility . . . . . . . . . . . . . 29
SECTION 5.4 Certain Qualifications of Regular Trustees
and Delaware Trustee Generally . . . . . . . . . . . . . . . 29
SECTION 5.5 Regular Trustees . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.6 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.7 Appointment, Removal and Resignation of Trustees . . . . . . 30
SECTION 5.8 Vacancies among Trustees . . . . . . . . . . . . . . . . . . 32
SECTION 5.9 Effect of Vacancies . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.10 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11 Delegation of Power. . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business. 33
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities. . . . . . . . . . . 34
SECTION 7.2 Paying Agent and Conversion Agent. . . . . . . . . . . . . . 35
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities . . . . . . . . . . . . . . . . . . . 37
SECTION 9.2 Transfer of Certificates . . . . . . . . . . . . . . . . . . 37
SECTION 9.3 Deemed Security Holders. . . . . . . . . . . . . . . . . . . 38
SECTION 9.4 Book Entry Interests . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.5 Notices to Clearing Agency . . . . . . . . . . . . . . . . . 39
SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . . . . 39
SECTION 9.7 Definitive Convertible Preferred Security Certificates . . . 39
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . 40
ii
<PAGE> 4
PAGE
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ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability. . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.2 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10.5 Outside Businesses . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11.2 Certain Accounting Matters . . . . . . . . . . . . . . . . . 47
SECTION 11.3 Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11.4 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent. . . . . . . . . . . . . . . . . . 50
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee. . . 52
SECTION 13.2 Representations and Warranties of Delaware Trustee. . . . . 53
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 14.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 14.3 Intention of the Parties. . . . . . . . . . . . . . . . . . . 55
SECTION 14.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 14.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 55
SECTION 14.6 Partial Enforceability. . . . . . . . . . . . . . . . . . . . 55
SECTION 14.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 55
iii
<PAGE> 5
PAGE
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ANNEX I TERMS OF SECURITIES . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT A-1 FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE. . . . A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE . . . . . . . . . . . A2-1
EXHIBIT B SPECIMEN OF DEBENTURE . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C UNDERWRITING AGREEMENT. . . . . . . . . . . . . . . . . . C-1
iv
<PAGE> 6
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
------------------- -----------
310(a) .......................................... 5.3(a)
310(c) .......................................... Inapplicable
311(c) .......................................... Inapplicable
312(a) .......................................... 2.2(a)
312(b) .......................................... 2.2(b)
313 ............................................. 2.3
314(a) .......................................... 2.4
314(b) .......................................... Inapplicable
314(c) .......................................... 2.5
314(d) .......................................... Inapplicable
314(f) .......................................... Inapplicable
315(a) .......................................... 3.9(b)
315(c) .......................................... 3.9(a)
315(d) .......................................... 3.9(a)
316(a) .......................................... Annex I
316(c) .......................................... 3.6(e)
_______________
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or provisions.
v
<PAGE> 7
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
KMART FINANCING [I] [II] [III] [IV]
March __, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of March __, 1996, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established Kmart Financing [I] [II]
[III] [IV] (the "Trust"), a trust under the Delaware Business Trust Act
pursuant to a Declaration of Trust dated as of February 16, 1996, (the
"Original Declaration") and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on February 16, 1996, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer;
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 8
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration
or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent or Conversion Agent.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Book Entry Interest" means a beneficial interest in a Global Certificate,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as it may be amended from time to time, or any
successor legislation.
2
<PAGE> 9
"Certificate" means a Common Security Certificate or a Convertible
Preferred Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for
the Convertible Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Convertible
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the "Closing Time" and each "Date of Delivery" under
the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.1(a).
"Common Securities Guarantee" means the guarantee agreement to be dated as
of March __, 1996 of the Sponsor in respect of the Common Securities.
"Common Security" has the meaning specified in Section 7.1.
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Conversion Agent" has the meaning specified in Section 7.2.
"Convertible Preferred Securities Guarantee" means the guarantee agreement
to be dated as of March __, 1996, of the Sponsor in respect of the Convertible
Preferred Securities.
3
<PAGE> 10
"Convertible Preferred Security" has the meaning specified in Section 7.1.
"Convertible Preferred Security Beneficial Owner" means, with respect
to a Book Entry Interest, a Person who is the beneficial owner of such Book
Entry Interest, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly as
a Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Convertible Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Convertible Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at 101 Barclay
Street, Floor 21 West, New York, New York 10286.
"Covered Person" means: (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Kmart Corporation in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Trustee" means The Bank of New York, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"Debentures" means the series of Debentures to be issued by the Debenture
Issuer under the Indenture to be held by the Institutional Trustee, a specimen
certificate for such series of Debentures being Exhibit B.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Definitive Convertible Preferred Security Certificates" has the meaning
set forth in Section 9.4.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
4
<PAGE> 11
"Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).
"Global Certificate" has the meaning set forth in Section 9.4.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" means the Indenture dated as of March __, 1996, among the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Institutional Trustee Account" has the meaning set forth in Section
3.8(c).
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means, except as
provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the
5
<PAGE> 12
stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class.
"Ministerial Action" has the meaning set forth in the terms of the
Securities as set forth in Annex I.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Securities Guarantee" means the guarantee agreement to be dated
as of __________, 1996, of the Sponsor in respect of the Preferred Securities.
"Pricing Agreement" means the pricing agreement between the Trust, the
Debenture Issuer, and the underwriters designated by the Regular Trustees with
respect to the offer and sale of the Convertible Preferred Securities.
"Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both of them.
6
<PAGE> 13
"Regular Trustee" has the meaning set forth in Section 5.1.
"Related Party" means, with respect to the Sponsor, any direct or indirect
wholly owned subsidiary of the Sponsor or any other Person that owns, directly
or indirectly, 100% of the outstanding voting securities of the Sponsor.
"Responsible Officer" means, with respect to the Institutional Trustee,
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, the treasurer, any assistant treasurer or other officer of the
Corporate Trust Office of the Institutional Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities Guarantee and the Convertible
Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to
time or any successor legislation.
"Special Event" has the meaning set forth in Annex I hereto.
"Securities Guarantees" means the Common Securities and the Preferred
Securities Guarantee.
"Sponsor" means Kmart Corporation, a Michigan corporation, or any
successor entity in a merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
"Super Majority" has the meaning set forth in SectionE2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount of the Securities" means, except as provided in
the terms of the Convertible Preferred Securities or by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Convertible Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more
7
<PAGE> 14
of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance
with the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement for the offering
and sale of Convertible Preferred Securities in the form of Exhibit C.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by Section Section 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
8
<PAGE> 15
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Institutional Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Institutional
Trustee may reasonably require, of the names and addresses of the Holders of
the Securities ("List of Holders") as of such record date, provided that
neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Institutional
Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and
(ii) at any other time, within 30 days of receipt by the Trust of a written
request for a List of Holders as of a date no more than 14 days before such
List of Holders is given to the Institutional Trustee. The Institutional
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity) provided that the
Institutional Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its obligations under
Section Section 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Institutional Trustee.
Within 60 days after May 1 of each year, the Institutional Trustee
shall provide to the Holders of the Convertible Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Institutional Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such documents, reports and information as
required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such evidence of compliance with any
conditions precedent, if any,
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provided for in this Declaration that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given in the
form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Convertible
Preferred Securities may, by vote, on behalf of the Holders of all of the
Convertible Preferred Securities, waive any past Event of Default in respect of
the Convertible Preferred Securities and its consequences, provided that, if
the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default under the
Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in principal
amount of the holders of the Debentures (a "Super Majority") to be waived
under the Indenture, the Event of Default under the Declaration may only be
waived by the vote of the Holders of at least the proportion in liquidation
amount of the Convertible Preferred Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any
such default shall cease to exist, and any Event of Default with respect to the
Convertible Preferred Securities arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend
to any subsequent or other default or an Event of Default with respect to the
Convertible Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Convertible Preferred Securities of an Event of
Default with respect to the Convertible Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of
any such Event of Default with respect to the Common Securities for all
purposes of this Declaration without any further act, vote, or consent of the
Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences,
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provided that, if the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of the
Common Securities are deemed to have waived such Event of Default under the
Declaration as provided below in this Section 2.6(b), the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived, except
where the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration may only be waived by the
vote of the Holders of at least the proportion in liquidation amount of the
Common Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Convertible Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the Holders of the Convertible Preferred Securities and
only the Holders of the Convertible Preferred Securities will have the right to
direct the Institutional Trustee in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu
of Section Section 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
and such Section Section 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture
Act are hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act. Subject to the foregoing provisions of
this Section 2.6(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising
therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Institutional Trustee at the direction of the Holders of the Convertible
Preferred Securities, constitutes a waiver of the corresponding Event of
Default under this Declaration. The foregoing provisions of this Section
2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and
such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act.
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SECTION 2.7 Event of Default; Notice.
(a) The Institutional Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities actually known to a Responsible Officer of the Institutional
Trustee, unless such defaults have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section 2.7(a) being hereby
defined to be an Event of Default as defined in the Indenture, not including
any periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures or in
the payment of any sinking fund installment established for the Debentures, the
Institutional Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Institutional Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
(b) The Institutional Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections ____ and ____ of the Indenture; or
(ii) any default as to which the Institutional Trustee shall have received
written notice or of which a Responsible Officer of the Institutional Trustee
charged with the administration of the Declaration shall have actual
knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Kmart Financing [I] [II] [III] [IV]" as such name may
be modified from time to time by the Regular Trustees following written notice
to the Holders of Securities. The Trust's activities may be conducted under
the name of the Trust or any other name deemed advisable by the Regular
Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Kmart Corporation,
3100 West Big Beaver Road, Troy, Michigan 48084. On ten Business Days written
notice to the Holders of
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Securities, the Regular Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities and use the proceeds from such sale to acquire the Debentures,
and (b) except as otherwise limited herein, to engage in only those other
activities necessary, or incidental thereto. The Trust shall not borrow money,
issue debt or reinvest proceeds derived from investments, pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Institutional Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures and the
Institutional Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. The
Holders shall not have legal title to any part of the assets of the Trust, but
shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and authority to
cause the Trust to engage in the following activities:
(a) to issue and sell the Convertible Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Convertible Preferred Securities
and no more than one series of Common Securities, and, provided
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further, that there shall be no interests in the Trust other than the
Securities, and the issuance of Securities shall be limited to a
simultaneous issuance of both Convertible Preferred Securities and
Common Securities on each Closing Date;
(b) in connection with the issue and sale of the Convertible Preferred
Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission the registration statement
on Form S-3 prepared by the Sponsor, including any amendments thereto,
pertaining to the Convertible Preferred Securities;
(ii) execute and file any documents prepared by the Sponsor, or take
any acts as determined by the Sponsor to be necessary in order to qualify
or register all or part of the Convertible Preferred Securities in any
State in which the Sponsor has determined to qualify or register such
Convertible Preferred Securities for sale;
(iii) execute and file an application, prepared by the Sponsor, to
the New York Stock Exchange, Inc. or any other national stock exchange or
the Nasdaq Stock Market's National Market for listing upon notice of
issuance of any Convertible Preferred Securities;
(iv) execute and file with the Commission a registration statement
on Form 8-A, including any amendments thereto, prepared by the Sponsor,
relating to the registration of the Convertible Preferred Securities
under Section 12(b) of the Exchange Act; and
(v) execute and enter into the Underwriting Agreement and Pricing
Agreement providing for the sale of the Convertible Preferred Securities;
(c) to acquire the Debentures with the proceeds of the sale of the
Convertible Preferred Securities and the Common Securities; provided,
however, that the Regular Trustees shall cause legal title to the
Debentures to be held of record in the name of the Institutional Trustee for
the benefit of the Holders of the Convertible Preferred Securities and the
Holders of Common Securities;
(d) to give the Sponsor and the Institutional Trustee prompt written
notice of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Institutional Trustee
before taking or
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refraining from taking any Ministerial Action in relation to a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture
Act, Distributions, voting rights, redemptions and exchanges, and to issue
relevant notices to the Holders of Convertible Preferred Securities and
Holders of Common Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Institutional
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Institutional Trustee, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out any of
the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and transfer
agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of any
notice received from the Debenture Issuer of its election to defer payments
of interest on the Debentures by extending the interest payment period
under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
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(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Convertible
Preferred Securities or to enable the Trust to effect the purposes for which
the Trust was created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set out
in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes,
provided that such action does not adversely affect the interests of Holders;
and
(q) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust.
The Regular Trustees must exercise the powers set forth in this Section
3.6 in a manner that is consistent with the purposes and functions of the Trust
set out in Section 3.3, and the Regular Trustees shall not take any action that
is inconsistent with the purposes and functions of the Trust set forth in
Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Institutional Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this Section 3.6
shall be reimbursed by the Debenture Issuer.
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SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the Institutional
Trustee) shall not, engage in any activity other than as required or authorized
by this Declaration. In particular, the Trust shall not and the Trustees
(including the Institutional Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the Debentures,
but shall distribute all such proceeds to Holders of Securities pursuant to
the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans represented
by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the Trust
assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial ownership of,
or beneficial interest in, the Trust other than the Securities; or
(vii) other than as provided in this Amended and Restated Declaration
or Annex I, (A) direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the Debentures, (B)
waive any past default that is waivable under the Indenture, (C) exercise any
right to rescind or annul any declaration that the principal of all the
Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received an opinion of
counsel to the effect that such modification will not cause more than an
insubstantial risk that for United States federal income tax purposes the Trust
will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Institutional Trustee.
(a) The legal title to the Debentures shall be owned by and held of record
in the name of the Institutional Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Institutional
Trustee to the Debentures shall vest automatically in each Person who may
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hereafter be appointed as Institutional Trustee in accordance with Section 5.7.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Institutional Trustee does not also act as Delaware Trustee).
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust account
(the "Institutional Trustee Account") in the name of and under the exclusive
control of the Institutional Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of the
Debentures held by the Institutional Trustee, deposit such funds into the
Institutional Trustee Account and make payments to the Holders of the
Convertible Preferred Securities and Holders of the Common Securities from
the Institutional Trustee Account in accordance with Section 6.1. Funds in
the Institutional Trustee Account shall be held uninvested until disbursed in
accordance with this Declaration. The Institutional Trustee Account shall be
an account that is maintained with a banking institution the rating on whose
long-term unsecured indebtedness is at least equal to the rating assigned to
the Convertible Preferred Securities by a "nationally recognized statistical
rating organization", as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Convertible Preferred Securities
and the Common Securities to the extent the Debentures are redeemed or
mature;and
(iii) upon written notice of distribution issued by the Regular Trustees in
accordance with the terms of the Securities, engage in such ministerial
activities as shall be necessary or appropriate to effect the distribution of
the Debentures to Holders of Securities upon the occurrence of certain
special events (as may be defined in the terms of the Securities) arising
from a change in law or a change in legal interpretation or other specified
circumstances pursuant to the terms of the Securities.
(d) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities.
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(e) The Institutional Trustee shall take any Legal Action which arises out
of or in connection with an Event of Default of which a Responsible Officer of
the Institutional Trustee has actual knowledge or the Institutional Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided however, that if a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture
Issuer to pay interest or principal on the Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Preferred Securities may directly institute
a proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder (a "Direct
Action") on or after the respective due date specified in the Debentures. In
connection with such Direct Action, the rights of the Holders of the Common
Securities Holder will be subrogated to the rights of such Holder of Preferred
Securities to the extent of any payment made by the Issuer to such Holder of
Preferred Securities in such Direct Action. Except as provided in the
preceding sentences, the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
(f) The Institutional Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of Securities pursuant to the terms of
the Securities; or
(ii) a Successor Institutional Trustee has been appointed and has accepted
that appointment in accordance with Section 5.7.
(g) The Institutional Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer
of the Institutional Trustee occurs and is continuing, the Institutional
Trustee shall, for the benefit of Holders of the Securities, enforce its rights
as holder of the Debentures subject to the rights of the Holders pursuant to
the terms of such Securities.
(h) The Institutional Trustee may authorize one or more Persons (each, a
"Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act.
Any Paying Agent may be removed by the Institutional Trustee at any
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time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Institutional Trustee.
(i) Subject to this Section 3.8, the Institutional Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.
The Institutional Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust
set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Institutional Trustee.
(a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the curing or
waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Institutional Trustee shall be
determined solely by the express provisions of this Declaration and the
Institutional Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Declaration, and no implied covenants or obligations shall be read into
this Declaration against the Institutional Trustee; and
(B) in the absence of bad faith on the part of the Institutional
Trustee, the Institutional Trustee may conclusively rely, as to the truth
of the state-
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ments and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Institutional Trustee and
conforming to the requirements of this Declaration; but in the case of
any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Institutional Trustee, the
Institutional Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Declaration;
(ii) the Institutional Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Institutional Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under this Declaration;
(iv) no provision of this Declaration shall require the Institutional
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to it
under the terms of this Declaration or indemnity reasonably satisfactory to
the Institutional Trustee against such risk or liability is not reasonably
assured to it;
(v) the Institutional Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the
Institutional Trustee Account shall be to deal with such property in a
similar manner as the Institutional Trustee deals with similar property for
its own account, subject to the protections and limitations on liability
afforded to the Institutional Trustee under this Declaration and the Trust
Indenture Act;
(vi) the Institutional Trustee shall have no duty or liability for or with
respect to the value, genuineness, existence or sufficiency of the Debentures
or the payment of any taxes or assessments levied thereon or in connection
therewith;
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(vii) the Institutional Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the Sponsor.
Money held by the Institutional Trustee need not be segregated from other
funds held by it except in relation to the Institutional Trustee Account
maintained by the Institutional Trustee pursuant to Section 3.8(c)(i) and
except to the extent otherwise required by law; and
(viii) the Institutional Trustee shall not be responsible for monitoring
the compliance by the Regular Trustees or the Sponsor with their respective
duties under this Declaration, nor shall the Institutional Trustee be liable
for any default or misconduct of the Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Institutional Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Institutional Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced by a
Direction or an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Sponsor or the Regular Trustees;
(iv) the Institutional Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(v) the Institutional Trustee may consult with counsel or other experts
and the advice or opinion of such
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counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or
opinion, such counsel may be counsel to the Sponsor or any of its Affiliates,
and may include any of its employees. The Institutional Trustee shall have
the right at any time to seek instructions concerning the administration of
this Declaration from any court of competent jurisdiction;
(vi) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request
or direction of any Holder, unless such Holder shall have provided to the
Institutional Trustee security and indemnity, reasonably satisfactory to the
Institutional Trustee, against the costs, expenses (including attorneys' fees
and expenses and the expenses of the Institutional Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in complying with
such request or direction, including such reasonable advances as may be
requested by the Institutional Trustee provided, that, nothing contained in
this Section 3.10(a)(vi) shall be taken to relieve the Institutional Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Declaration;
(vii) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Institutional Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit;
(viii) the Institutional Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, custodians, nominees or attorneys and the Institutional Trustee shall
not be responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder;
(ix) any action taken by the Institutional Trustee or its agents hereunder
shall bind the Trust and the Holders of the Securities, and the signature of
the Institutional Trustee or its agents alone shall be sufficient and
effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to
its compliance with any of the
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terms and provisions of this Declaration, both of which shall be conclusively
evidenced by the Institutional Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the Institutional
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Institutional Trustee (i) may request instructions from the Holders of the
Securities which instructions may only be given by the Holders of the same
proportion in liquidation amount of the Securities as would be entitled to
direct the Institutional Trustee under the terms of the Securities in respect
of such remedy, right or action, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are received,
and (iii) shall be protected in conclusively relying on or acting in or
accordance with such instructions; and
(xi) except as otherwise expressly provided by this Declaration, the
Institutional Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than Section
5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor
shall the Delaware Trustee have any of the duties and responsibilities of the
Regular Trustees or the Institutional Trustee described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Business Trust Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act, a majority of or, if there are
only two, any Regular Trustee or, if there is only one, such Regular Trustee is
authorized to execute
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on behalf of the Trust any documents that the Regular Trustees have the power
and authority to execute pursuant to Section 3.6; provided that, the
registration statement referred to in Section 3.6(b)(i), including any
amendments thereto, shall be signed by all of the Regular Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of Article VIII
hereof, shall have existence for fifty-five (55) years from the Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees and without the consent
of the Holders of the Securities, the Delaware Trustee or the Institutional
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Convertible Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same
as the Convertible Preferred Securities rank with respect to Distributions
and payments upon liquidation, redemption and otherwise;
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(ii) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) the Convertible Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Convertible Preferred Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or replacement does not
cause the Convertible Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical
rating organization;
(v) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders of the
Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of such Holders' interests in the
Convertible Preferred Securities as a result of such merger, consolidation,
amalgamation or replacement);
(vi) such Successor Entity has a purpose identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation or replacement,
the Sponsor has received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the Holders' interest
in the new entity); and
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be required
to register as an Investment Company;
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will continue to be
classified as a grantor trust for United States federal income tax
purposes; and
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(viii) the Sponsor guarantees the obligations of such Successor Entity
under the Successor Securities at least to the extent provided by the
Convertible Preferred Securities Guarantees.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date the Sponsor will purchase all of the Common Securities
issued by the Trust, in an amount at least equal to 3% of the capital of the
Trust, at the same time as the Convertible Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Convertible Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare for filing by the Trust with the Commission a registration
statement on Form S-3 in relation to the Convertible Preferred Securities,
including any amendments thereto;
(b) to determine the States in which to take appropriate action to qualify
or register for sale all or part of the Convertible Preferred Securities and
to do any and all such acts, other than actions which must be taken by the
Trust, and advise the Trust of actions it must take, and prepare for
execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(c) to prepare for filing by the Trust an application to the New York
Stock Exchange or any other national stock exchange or the Nasdaq National
Market for listing upon notice of issuance of any Convertible Preferred
Securities;
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(d) to prepare for filing by the Trust with the Commission a registration
statement on Form 8-A relating to the registration of the Convertible
Preferred Securities under Section 12(b) of the Exchange Act, including
any amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and Pricing
Agreement providing for the sale of the Convertible Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees initially shall be four (4), and:
(a) at any time before the issuance of any Securities, the Sponsor may, by
written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a majority in liquidation
amount of the Common Securities voting as a class at a meeting of the
Holders of the Common Securities; provided, however, that the number of
Trustees shall in no event be less than two (2); provided further that (1)
one Trustee, in the case of a natural person, shall be a person who is a
resident of the State of Delaware or that, if not a natural person, is an
entity which has its principal place of business in the State of Delaware
(the "Delaware Trustee"); (2) there shall be at least one Trustee who is an
employee or officer of, or is affiliated with the Parent (a "Regular
Trustee"); and (3) one Trustee shall be the Institutional Trustee for so
long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if
it meets the applicable requirements.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
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(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Institutional Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable
law, then the Institutional Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
SECTION 5.3 Institutional Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Commission
to act as an institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars ($50,000,000), and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes
of this Section 5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
(b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 5.3(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 5.7(c).
(c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holder of the Common Securities (as if it were
the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in
all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
(d) The Convertible Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
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(e) The initial Institutional Trustee shall be:
The Bank of New York
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the Institutional
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 Regular Trustees.
The initial Regular Trustees shall be:
Marvin P. Rich
James P. Churilla
(a) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over
which the Regular Trustees have power to act, any power of the Regular Trustees
may be exercised by, or with the consent of, any one such Regular Trustee.
(b) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.6, provided, that, the registration statement referred to
in Section 3.6, including any amendments thereto, shall be signed by all of the
Regular Trustees; and
(c) a Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purposes of signing any documents which the Regular Trustees have power
and authority to cause the Trust to execute pursuant to Section 3.6.
SECTION 5.6 Delaware Trustee.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
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(a) Subject to Section 5.7(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument executed
by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a class at
a meeting of the Holders of the Common Securities.
(b)(i) The Trustee that acts as Institutional Trustee shall not be removed
in accordance with Section 5.7(a) until a Successor Institutional Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Institutional Trustee and delivered to the Regular Trustees
and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with this Section 5.7(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as the Institutional
Trustee shall be effective:
(A) until a Successor Institutional Trustee has been appointed and
has accepted such appointment by instrument executed by such Successor
Institutional Trustee and delivered to the Trust, the Sponsor and the
resigning Institutional Trustee; or
(B) until the assets of the Trust have been completely liquidated
and the proceeds thereof distributed to the holders of the Securities;
and
(ii) no such resignation of the Trustee that acts as the Delaware Trustee
shall be effective until a Successor Delaware Trustee has been appointed and
has accepted such
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appointment by instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts to
promptly appoint a Successor Delaware Trustee or Successor Institutional
Trustee as the case may be if the Institutional Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.7.
(e) If no Successor Institutional Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.7 within 60 days after delivery to the Sponsor and the Trust of an instrument
of resignation, the resigning Institutional Trustee or Delaware Trustee, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Institutional Trustee or Successor Delaware Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Institutional Trustee or Successor Delaware
Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or successor
Delaware Trustee, as the case may be.
SECTION 5.8 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee
shall not operate to annul the Trust. Whenever a vacancy in the number of
Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with Section 5.7, the Regular Trustees in
office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.10 Meetings.
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If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than
48 hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a
brief statement of the time, place and anticipated purposes of the meeting.
The presence (whether in person or by telephone) of a Regular Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Regular Trustees may be taken at a meeting by vote of a
majority of the Regular Trustees present (whether in person or by telephone)
and eligible to vote with respect to such matter, provided that a Quorum is
present, or without a meeting by the unanimous written consent of the Regular
Trustees. In the event there is only one Regular Trustee, any and all action
of such Regular Trustee shall be evidenced by a written consent of such Regular
Trustee.
SECTION 5.11 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
Section 5.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either
may be consolidated, or any corporation
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resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee, as the case may be, shall
be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Institutional Trustee or the Delaware Trustee,
as the case may be, shall be the successor of the Institutional Trustee or the
Delaware Trustee, as the case may be, hereunder, provided such corporation
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined herein) in accordance with
the applicable terms of the relevant Holder's Securities. Distributions shall
be made on the Convertible Preferred Securities and the Common Securities in
accordance with the preferences set forth in their respective terms. If and to
the extent that the Debenture Issuer makes a payment of interest (including
Compounded Interest (as defined in the Indenture) and Additional Interest (as
defined in the Indenture)), premium and/or principal on the Debentures held by
the Institutional Trustee (the amount of any such payment being a "Payment
Amount"), the Institutional Trustee shall and is directed, to the extent funds
are available for that purpose, to make a distribution (a "Distribution") of
the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue one class of
convertible preferred securities representing undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Annex I (the
"Convertible Preferred Securities") and one class of convertible common
securities, representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities.")
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Convertible Preferred Securities and the Common
Securities.
(b) The Certificates shall be signed on behalf of the Trust by a Regular
Trustee. Such signature shall be the manual signature of any present or any
future Regular Trustee. In case any Regular Trustee of the Trust who shall
have signed
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any of the Securities shall cease to be such Regular Trustee before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Regular Trustee; and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of
such Security, shall be the Regular Trustees of the Trust, although at the date
of the execution and delivery of the Declaration any such person was not such a
Regular Trustee. Certificates shall be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof, and may have such letters,
numbers or other marks of identification or designation and such legends or
endorsements as the Regular Trustees may deem appropriate, or as may be
required to comply with any law or with any rule or regulation of any stock
exchange on which Securities may be listed, or to conform to usage.
(c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(e) Every Person, by virtue of having become a Holder or a Convertible
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Paying Agent.
In the event that the Convertible Preferred Securities are not in
book-entry only form, the Trust shall maintain in the Borough of Manhattan,
City of New York, State of New York, an office or agency where the Convertible
Preferred Securities may be presented for payment ("Paying Agent). The Trust
shall maintain an office or agency where Securities may be presented for
conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and
the Conversion Agent and may appoint one or more additional paying agents and
one or more additional conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent and
the term "Conversion Agent" includes any additional conversion agent. The
Trust may change any Paying Agent or Conversion Agent without prior notice to
any Holder. The Trust shall notify the Institutional Trustee of the name and
address of any Agent not a party to this Declaration. If the Trust fails to
appoint or maintain another entity as Paying Agent or Conversion Agent, the
Institu-
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tional Trustee shall act as such. The Trust or any of its Affiliates
may act as Paying Agent or Conversion Agent. The Trust shall act as Paying
Agent and Conversion Agent for the Common Securities.
The Trust initially appoints the Institutional Trustee as Conversion Agent
for the Convertible Preferred Securities.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its equivalent
with respect to the Sponsor; the filing of a certificate of cancellation with
respect to the Trust or the revocation of the Holder of the Common Securities
or the Sponsor's charter and the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the Holder of
the Common Securities, the Sponsor or the Trust;
(iv) when all of the Securities shall have been called for redemption and
the amounts necessary for redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securities;
(v) upon the occurrence and continuation of a Special Event pursuant to
which the Trust shall have been dissolved in accordance with the terms of the
Securities and all of the Debentures endorsed thereon shall have been
distributed to the Holders of Securities in exchange for all of the
Securities;
(vi) upon the distribution of the Guarantor's common stock to all
Securities Holders upon conversion of all outstanding Convertible Preferred
Securities; or
(vii) before the issuance of any Securities, with the consent of all of
the Regular Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), the Trustees shall file a certificate of cancellation with
the Secretary of State of the State of Delaware.
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(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms of
the Securities. Any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Convertible Preferred Securities shall be
freely transferable.
(c) Subject to this Article IX, the Sponsor and any Related Party may only
transfer Common Securities to the Sponsor or a Related Party of the Sponsor;
provided that, any such transfer is subject to the condition precedent that the
transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more
than an insubstantial risk that:
(i) the Trust would not be classified for United States federal income tax
purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the transferee would
become an Investment Company.
SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration of Certificates
and of transfers of Certificates, which will be effected without charge but
only upon payment (with such indemnity as the Regular Trustees may require) in
respect of any tax or other government charges that may be imposed in relation
to it. Upon surrender for registration of transfer of any Certificate, the
Regular Trustees shall cause one or more new Certificates to be issued in the
name of the designated transferee or transferees. Every Certificate
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the Regular Trustees duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Certificate surrendered for registration of transfer shall be canceled by
the Regular Trustees. A transferee of a Certificate shall be entitled to the
rights and subject to the obligations of a Holder hereunder upon the receipt by
such transferee of a Certificate. By acceptance of a Certificate, each
trans-
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feree shall be deemed to have agreed to be bound by this Declaration.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Convertible Preferred
Securities, the Convertible Preferred Securities Certificates, on original
issuance, will be issued in the form of one or more, fully registered, global
Convertible Preferred Security Certificates (each a "Global Certificate"), to
be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Trust. Such Global Certificates shall initially be registered on the books and
records of the Trust in the name of Cede & Co., the nominee of DTC, and no
Convertible Preferred Security Beneficial Owner will receive a definitive
Convertible Preferred Security Certificate representing such Convertible
Preferred Security Beneficial Owner's interests in such Global Certificates,
except as provided in Section 9.7. Unless and until definitive, fully
registered Convertible Preferred Security Certificates (the "Definitive
Convertible Preferred Security Certificates") have been issued to the
Convertible Preferred Security Beneficial Owners pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in full force and effect;
(b) the Trust and the Trustees shall be entitled to deal with the Clearing
Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder of the Convertible Preferred Securities and
the sole holder of the Global Certificates and shall have no obligation to
the Convertible Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict with
any other provisions of this Declaration, the provisions of this Section 9.4
shall control; and
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(d) the rights of the Convertible Preferred Security Beneficial Owners
shall be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Convertible Preferred
Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants and receive and transmit payments of Distributions on the Global
Certificates to such Clearing Agency Participants. DTC will make book entry
transfers among the Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Convertible Preferred
Security Holders is required under this Declaration, unless and until
Definitive Convertible Preferred Security Certificates shall have been issued
to the Convertible Preferred Security Beneficial Owners pursuant to Section
9.7, the Regular Trustees shall give all such notices and communications
specified herein to be given to the Convertible Preferred Security Holders to
the Clearing Agency, and shall have no notice obligations to the Convertible
Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Convertible Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Convertible Preferred Securities.
SECTION 9.7 Definitive Convertible Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Convertible Preferred Securities and a
successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with the Sponsor to
terminate the book entry system through the Clearing Agency with respect to
the Convertible Preferred Securities,
then:
(c) Definitive Convertible Preferred Security Certificates shall be
prepared by the Regular Trustees on
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behalf of the Trust with respect to such Convertible Preferred Securities;
and
(d) upon surrender of the Global Certificates by the Clearing Agency,
accompanied by registration instructions, the Regular Trustees shall cause
Definitive Certificates to be delivered to Convertible Preferred Security
Beneficial Owners in accordance with the instructions of the Clearing
Agency. Neither the Trustees nor the Trust shall be liable for any delay in
delivery of such instructions and each of them may conclusively rely on and
shall be protected in relying on, said instructions of the Clearing Agency.
The Definitive Convertible Preferred Security Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Regular Trustees may deem appropriate, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Convertible Preferred
Securities may be listed, or to conform to usage.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees such security or
indemnity as may be required by them to keep each of them harmless.
then, in the absence of notice that such Certificate shall have been acquired
by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 9.8,
the Regular Trustees may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
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ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Securities which
shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of Securities any
deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Convertible Preferred Securities shall be entitled to the same limitation
of personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the as-
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sets, liabilities, profits,losses, or any other facts pertinent to the
existence and amount of as-sets from which Distributions to Holders of
Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions
of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Institutional Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any Covered
Persons; or
(ii) whenever this Declaration or any other agreement contemplated herein
or therein provides that an Indemnified Person shall act in a manner that is,
or provides terms that are, fair and reasonable to the Trust or any Holder of
Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
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(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Company Indemnified Person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or
in the right of the Trust to procure a judgment in its favor by reason of the
fact that he is or was a Company Indemnified Person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust and except that no such indemnification
shall be made in respect of any claim, issue or matter as to which such
Company Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
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entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be successful
on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter
therein, he shall be indemnified, to the full extent permitted by law,
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this Section
10.4(a) (unless ordered by a court) shall be made by the Debenture Issuer
only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set forth
in paragraphs (i) and (ii). Such determination shall be made (1) by the
Regular Trustees by a majority vote of a quorum consisting of such Regular
Trustees who were not parties to such action, suit or proceeding, (2) if such
a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees) incurred by a Company Indemnified
Person in defending a civil, criminal, administrative or investigative
action, suit or proceeding referred to in paragraphs (i) and (ii) of this
Section 10.4(a) shall be paid by the Debenture Issuer in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by
the Debenture Issuer as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Debenture
Issuer if a determination is reasonably and promptly made (i) by the Regular
Trustees by a majority vote of a quorum of disinterested Regular Trustees,
(ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested Regular Trustees so directs, by independent legal counsel in
a written opinion or (iii) the Common Security Holder of the Trust, that,
based upon the facts known to the Regular Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such person did not
believe to be in or not opposed to the best interests of the Trust, or, with
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respect to any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Regular Trustees,
independent legal counsel or Common Security Holder reasonably determine that
such person deliberately breached his duty to the Trust or its Common or
Convertible Preferred Security Holders.
(vi) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the
Debenture Issuer or Convertible Preferred Security Holders of the Trust or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. All rights to indemnification
under this Section 10.4(a) shall be deemed to be provided by a contract
between the Debenture Issuer and each Company Indemnified Person who serves
in such capacity at any time while this Section 10.4(a) is in effect. Any
repeal or modification of this Section 10.4(a) shall not affect any rights or
obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Debenture
Issuer would have the power to indemnify him against such liability under the
provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to such
constituent entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
Company
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Indemnified Person and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Institutional
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Institutional Trustee and the Delaware Trustee (each
of the Persons in (i) through (iv) being referred to as a "Fiduciary
Indemnified Person") for, and to hold each Fiduciary Indemnified Person
harmless against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance or
administration or the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated
to present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Institutional Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person, the Delaware
Trustee and the Institutional Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the Sponsor
or its Affiliates.
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ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year,
or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail, each transaction of the
Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the
records of the Trust shall be examined by and reported upon as of the end of
each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to each
of the Holders of Securities, within 90 days after the end of each Fiscal Year
of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related
statements of income or loss;
(c) The Regular Trustees shall cause to be duly prepared and delivered to
each of the Holders of Securities, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed with
the appropriate taxing authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, howev-
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er, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Institutional Trustee
Account and no other funds of the Trust shall be deposited in the Institutional
Trustee Account. The sole signatories for such accounts shall be designated by
the Regular Trustees; provided, however, that the Institutional Trustee shall
designate the signatories for the Institutional Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to
each Holder, and any representations and forms as shall reasonably be requested
by the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Regular Trustees shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the
Holder to applicable jurisdictions. To the extent that the Trust is required
to withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Holder, the amount withheld shall be deemed
to be a distribution in the amount of the withholding to the Holder. In the
event of any claimed over withholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount required to be withheld was
not withheld from actual Distributions made, the Trust may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two Regular Trustees
a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Institutional Trustee, the Institutional Trustee; and
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(iii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such purported amendment shall be
void and ineffective:
(i) unless, in the case of any proposed amendment, the Institutional
Trustee shall have first received an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which affects the
rights, powers, duties, obligations or immunities of the Institutional
Trustee, the Institutional Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the Sponsor
that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the Sponsor or the
Trust) that such amendment is permitted by, and conforms to, the terms of
this Declaration (including the terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the powers of the
Institutional Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(c) at such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges
or preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
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(d) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities and;
(f) the rights of the holders of the Common Securities under Article V to
increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that may be
defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the Sponsor;
(iv) to conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the right, preferences or privileges of the
Holders; and
(v) to modify, eliminate and add to any provision of the Amended
Declaration to such extent as may be necessary.
SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms
of the Securities or the rules of any stock exchange on which the Convertible
Preferred Securities are listed or admitted for trading. The Regular Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in liquidation amount of such class of Securities.
Such direction shall be given by delivering to the Regular Trustees one or more
calls in a writing stating that the signing Holders of Securities
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wish to call a meeting and indicating the general or specific purpose for which
the meeting is to be called. Any Holders of Securities calling a meeting
shall specify in writing the Security Certificates held by the Holders of
Securities exercising the right to call a meeting and only those Securities
specified shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the Holders of
Securities having a right to vote thereat at least 7 days and not more than
60 days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of Securities is permitted or required under this
Declaration or the rules of any stock exchange on which the
Convertible Preferred Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the Holders of
Securities. Any action that may be taken at a meeting of the Holders of
Securities may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders of Securities owning not
less than the minimum amount of Securities in liquidation amount that would
be necessary to authorize or take such action at a meeting at which all
Holders of Securities having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot submitted to the
Security Holder for the purpose of taking any action without a meeting shall
be returned to the Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to act for it by
proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and
the Holders of the Securities were stockholders of a Delaware corporation;
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(iii) each meeting of the Holders of the Securities shall be conducted by
the Regular Trustees or by such other Person that the Regular Trustees may
designate; and
(iv) unless the Business Trust Act, this Declaration, the terms of the
Securities, the Trust Indenture Act or the listing rules of any stock
exchange on which the Convertible Preferred Securities are then listed
or trading, otherwise provides, the Regular Trustees, in their sole
discretion, shall establish all other provisions relating to meetings of
Holders of Securities, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Holders of Securities,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee.
The Trustee that acts as initial Institutional Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Institutional Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Institutional Trustee's acceptance of
its appointment as Institutional Trustee that:
(a) the Institutional Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing under the laws
of the United States, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration;
(b) the execution, delivery and performance by the Institutional Trustee
of the Declaration has been duly authorized by all necessary corporate action
on the part of the Institutional Trustee. The Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a
legal, valid and binding obligation of the Institutional Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless
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of whether the enforcement of such remedies is considered in a proceeding in
equity or at law);
(c) the execution, delivery and performance of the Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
Articles of Organization or By-laws of the Institutional Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Institutional Trustee, of the
Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is a Delaware banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws
of the State of Delaware, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration.
(b) The Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and the Declaration. The Declaration under
Delaware law constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency, and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of whether
the enforcement of such remedies is considered in a proceeding in equity or
at law).
(c) No consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the
Declaration.
(d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
Kmart Financing [I] [II] [III] [IV]
c/o Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention:__________________
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Institutional Trustee, at its Corporate Trust Office
to the attention of ______________ (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities).
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder
of the Common Securities may give notice to the Trust):
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention:________________
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or
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mailed by first class mail, postage prepaid except that if a notice or
other document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be classified for
United States federal income tax purposes as a grantor trust. The provisions
of this Declaration shall be interpreted to further this intention of the
parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the Trustees to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have
the same
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<PAGE> 62
force and effect as though all of the signers had signed a single signature
page.
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<PAGE> 63
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
_______________________________
Marvin P. Rich, as Regular
Trustee
_______________________________
James P. Churilla, as Regular
Trustee
The Bank of New York (Delaware)
as Delaware Trustee
By:____________________________
Name:
Title:
The Bank of New York, as
Institutional Trustee
By:____________________________
Name:
Title:
Kmart Corporation, as Sponsor
By:____________________________
Name:
Title:
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<PAGE> 64
ANNEX I
TERMS OF
___% CONVERTIBLE PREFERRED SECURITIES
___% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of March __, 1996 (as amended from time to time, the "Declaration"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Convertible Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Prospectus referred to below):
1. Designation and Number.
(a) Convertible Preferred Securities. [ ] Convertible
Preferred Securities of the Trust with an aggregate liquidation amount with
respect to the assets of the Trust of [ ] dollars ($[ ])
and a liquidation amount with respect to the assets of the Trust of $__ per
convertible preferred security, are hereby designated for the purposes of
identification only as "_____% Convertible Trust Preferred Securities" (the
"Convertible Preferred Securities"). The Convertible Preferred Security
Certificates evidencing the Convertible Preferred Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice or to conform to the rules of any stock exchange on
which the Convertible Preferred Securities are listed.
(b) Common Securities. [ ] Common Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the Trust of
[ ] dollars ($[ ]) and a liquidation amount with
respect to the assets of the Trust of $__ per common security, are hereby
designated for the purposes of identification only as "______% Convertible
Trust Common Securities" (the "Common Securities"). The Common Security
Certificates evidencing the Common Securities shall be substantially in the
form of Exhibit A-2 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or
practice.
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2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate per
annum of ______% (the "Coupon Rate") of the stated liquidation amount of $25
per Security, such rate being the rate of interest payable on the Debentures to
be held by the Institutional Trustee. Distributions in arrears for more than
one quarter will bear interest thereon compounded quarterly at the Coupon Rate
(to the extent permitted by applicable law). The term "Distributions" as used
herein includes such cash distributions and any such interest payable unless
otherwise stated. A Distribution is payable only to the extent that payments
are made in respect of the Debentures held by the Institutional Trustee and to
the extent the Institutional Trustee has funds available therefor. The amount
of Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 90-day quarter.
(b) Distributions on the Securities will be cumulative, will accrue from
March __, 1996, and will be payable quarterly in arrears, on April 1, July 1,
October 1 and January 1 of each year, commencing on July 1, 1996, except as
otherwise described below. The Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment
period from time to time on the Debentures for a period not exceeding 20
consecutive quarters or extend beyond the maturity date of the Debentures (each
an "Extension Period"), during which Extension Period no interest shall be due
and payable on the Debentures, provided that no Extension Period shall last
beyond the date of maturity of the Debentures. As a consequence of such
deferral, Distributions will also be deferred. Despite such deferral,
quarterly Distributions will continue to accrue with interest thereon (to the
extent permitted by applicable law) at the Coupon Rate compounded quarterly
during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such Extension
Period; provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters or extend
beyond the maturity of the Debentures. Payments of accrued Distributions will
be payable to Holders as they appear on the books and records of the Trust on
the first record date after the end of the Extension Period. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Debenture Issuer may commence a new Extension Period, subject to the above
requirements.
(c) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of
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the Trust on the relevant record dates. While the Convertible Preferred
Securities remain in book-entry only form, the relevant record dates shall be
one Business Day prior to the relevant payment dates which payment dates
correspond to the interest payment dates on the Debentures. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
such payment in respect of the Convertible Preferred Securities will be made as
described under the heading "Description of the Convertible Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the
Prospectus Supplement dated______, 1996, to the Prospectus dated ______, 1996
(together, the "Prospectus"), of the Trust included in the Registration
Statement on Form S-3 of the Sponsor, the Trust and certain other business
trusts. The relevant record dates for the Common Securities shall be the same
record date as for the Convertible Preferred Securities. If the Convertible
Preferred Securities shall not continue to remain in book-entry only form, the
relevant record dates for the Convertible Preferred Securities, shall conform
to the rules of any securities exchange on which the securities are listed and,
if none, shall be selected by the Regular Trustees, which dates shall be at
least one Business Day but less than 60 Business Days before the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Debentures. Distributions payable on any Securities that are not
punctually paid on any Distribution payment date, as a result of the Debenture
Issuer having failed to make a payment under the Debentures, will cease to be
payable to the Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead be payable
to the Person in whose name such Securities are registered on the special
record date or other specified date determined in accordance with the
Indenture. If any date on which Distributions are payable on the Securities is
not a Business Day, then payment of the Distribution payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Kmart's Common Stock pursuant to the terms of
the Securities as set forth in this Annex I to the Declaration, no payment,
allowance or adjustment shall be made with respect to accumulated and unpaid
Distributions on such Securities, or be required to be made; provided that
Holders of Securities at the close of business on any record date for the
payment of Distributions will be entitled to receive the Distributions payable
on such Securities on the corresponding payment date notwithstanding the
conversion of such Securities into Kmart's Common Stock following such record
date.
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(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the Holders of the Securities on the date of the
dissolution, winding-up or termination, as the case may be, will be entitled to
receive out of the assets of the Trust available for distribution to Holders of
Securities after satisfaction of liabilities of creditors an amount equal to
the aggregate of the stated liquidation amount of $25 per Security plus accrued
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"), unless, in connection with such dissolution,
winding-up or termination, Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of such Securities, with an
interest rate equal to the Coupon Rate of, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on, such
Securities, shall be distributed on a Pro Rata basis to the Holders of the
Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
the Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, whether at
maturity or upon redemption (either at the option of the Debenture Issuer or
pursuant to a Special Event as described below), the proceeds from such
repayment or payment shall be simultaneously applied to redeem Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Debentures so repaid or redeemed at a redemption price of $25 per
Security plus an amount equal to accrued and unpaid Distributions thereon at
the date of the redemption, payable in cash as set forth below (the "Redemption
Price"). Holders will be given not less than 30 nor more than 60 days notice
of such redemption.
Except in connection with a Special Event, the Securities may not be
redeemed by the Trust prior to April 1, 1999. On or after such date, the
Trust may, at its option, upon not less than 30 or more than 60 days notice,
redeem the Securities, in whole or in part, out of the proceeds received by
the Trust from the prepayment or repayment by Kmart of the principal on the
Debentures, at any time or from time to time during the twelve month periods
beginning on April 1 in each of the following years at the following redemption
prices, plus accumulated and unpaid distributions to, but excluding, the
redemption date:
<TABLE>
<CAPTION>
Year Redemption Price
<S> <C>
1999
2000
2001
2002
2003
2004
2005
2006 and thereafter
</TABLE>
If a partial redemption of the Securities resulting from a partial redemption
of the Debentures would result in the delisitng of the Securities, Kmart may
only redeem the Debentures in whole.
(b) If fewer than all the outstanding Securities are to be so redeemed,
the Common Securities and the Convertible Preferred Securities will be redeemed
Pro Rata and the Convertible Preferred Securities to be redeemed will be as
described in Section 4(f)(ii) below.
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(c) If, at any time, a Tax Event or an Investment Company Event (each, as
defined below, a "Special Event") shall occur and be continuing the Regular
Trustees shall, except in certain limited circumstances in relation to a Tax
Event described in this Section 4(c), dissolve the Trust and, after satisfaction
of creditors, cause Debentures held by the Institutional Trustee, having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the Coupon Rate of, and accrued and unpaid
interest equal to accrued and unpaid Distributions on, and having the same
record date for payment as the Securities, to be distributed to the Holders of
the Securities in liquidation of such Holders' interests in the Trust on a Pro
Rata basis, within 90 days following the occurrence of such Special Event (the
"90 Day Period"); provided, however, that, as a condition of such dissolution
and distribution, the Regular Trustees shall have received an opinion of a
nationally recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the Holders of the Securities
will not recognize any gain or loss for United States federal income tax
purposes as a result of the dissolution of the Trust and the distribution of
Debentures, and provided, further, that, if at the time there is available to
the Debenture Issuer the opportunity to eliminate, within the 90 Day Period, the
Tax Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure that has no adverse
effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the
Securities ("Ministerial Action"), the Debenture Issuer will pursue such
Ministerial Action in lieu of dissolution.
If in the event of a Tax Event (i) after receipt of a Tax Event Opinion
(as defined hereinafter) by the Regular Trustees, the Debenture Issuer has
received an opinion (a "Redemption Tax Opinion") of a nationally recognized
independent tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the Debenture Issuer would
be precluded from deducting the interest on the Debentures for United States
federal income tax purposes even after the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interests in the Trust as
described in this Section 4(c), or (ii) the Regular Trustees shall have been
informed by such tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, the Debenture Issuer shall have the right at any time, upon not
less than 30 nor more than 60 days notice, to redeem the Debentures in whole or
in part for cash within 90 days following the occurrence of such Tax Event,
and, following such redemption, Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Debentures so redeemed shall be
redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided,
however, that, if at the time there is available to the Debenture
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Issuer or the Trust the opportunity to eliminate, within such 90 day period,
the Tax Event by taking some Ministerial Action, the Trust or the Debenture
Issuer will pursue such Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that on or after the date of the
Prospectus Supplement, as a result of (a) any amendment to, clarification of, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority therefor or therein affecting taxation, (b) any judicial
decision, official administrative pronouncement, ruling, regulatory procedure,
notice or announcement, including any notice or announcement of intent to adopt
such procedures or regulations (an "Administrative Action") or (c) any amendment
to, clarification of, or change in the official position or the interpretation
of such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification, or change is effective or such pronouncement or decision is
announced, in each case, on or after, the first date of issuance of the
Securities, there is more than an insubstantial risk that (i) the Trust is or
will be within 90 days of the date thereof, subject to United States federal
income tax with respect to interest accrued or received on the Debentures,
(ii) the Trust is, or will be within 90 days of the date thereof, subject to
more than a de minimis amount of taxes, duties or other governmental charges, or
(iii) interest payable in cash by the Debenture Issuer to the Trust on the
Debentures is not, or within 90 days of the date thereof will not be,
deductible, in whole or in part, by the Debenture Issuer for United States
federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulations by any
legislative body, court, governmental agency or regulatory authority on or after
the first date of the Prospectus Supplement pursuant to which the Securities are
offered (a "Change in 1940 Act Law"), there is more than an insubstantial risk
that the Trust is or will be considered an "investment company" which is
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act").
On and from the date fixed by the Regular Trustees for any distribution of
Debentures upon dissolution of the Trust: (i) the Securities will no longer be
deemed to be outstanding, (ii) The Depository Trust Company (the "Depository")
or its nominee (or any successor Clearing Agency or its nominee), as the record
Holder of the Convertible Preferred Securities, will receive a registered
global certificate or certificates representing the Debentures to be delivered
upon such distribution, and (iii) any certificates representing Securities,
except for certificates representing Convertible Preferred Securities held by
the Depository or its nominee (or any successor Clearing Agency or its
nominee), will be deemed to represent Debentures having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the Coupon Rate of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on such Convertible Preferred Securities until
such certificates are presented to the Debenture Issuer or its agent for
transfer or reissue.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions
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have been paid on all Securities for all quarterly Distribution periods
terminating on or before the date of redemption.
(e) If the Debentures are distributed to holders of the Securities,
pursuant to the terms of the Indenture, the Debenture Issuer will use its best
efforts to have the Debentures listed on the New York Stock Exchange or on such
other exchange as the Convertible Preferred Securities were listed immediately
prior to the distribution of the Debentures.
(f) "Redemption or Distribution Procedures for Redemption by the Trust."
(i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for the Securities (a "Redemption/Distribution Notice") will be
given by the Trust by mail to each Holder of Securities to be redeemed or
exchanged not fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be
the date fixed for redemption of the Debentures. For purposes of the
calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this Section 4(f)(i), a Redemption/
Distribution Notice shall be deemed to be given on the day such notice is
first mailed by first-class mail, postage prepaid, to Holders of Securities.
Each Redemption/Distribution Notice shall be addressed to the Holders of
Securities at the address of each such Holder appearing in the books and
records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding Securities are to be
redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each
Holder of Convertible Preferred Securities, it being understood that, in
respect of Convertible Preferred Securities registered in the name of and
held of record by the Depository or its nominee (or any successor Clearing
Agency or its nominee) or any nominee, the distribution of the proceeds of
such redemption will be made to each Clearing Agency Participant (or Person
on whose behalf such nominee holds such securities) in accordance with the
procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
irrevocable), then (A) while the Convertible Preferred Securities are in
book-entry only form, with respect to the Convertible Preferred
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Securities, by 12:00 noon, New York City time, on the redemption date,
provided that the Debenture Issuer has paid the Institutional Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Institutional Trustee will deposit
irrevocably with the Depository or its nominee (or successor Clearing Agency
or its nominee) funds sufficient to pay the applicable Redemption Price with
respect to the Convertible Preferred Securities and will give the Depository
irrevocable instructions and authority to pay the Redemption Price to the
Holders of the Convertible Preferred Securities, and (B) with respect to
Convertible Preferred Securities issued in definitive form and Common
Securities, provided that the Debenture Issuer has paid the Institutional
Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Institutional Trustee will pay
the relevant Redemption Price to the Holders of such Securities by check
mailed to the address of the relevant Holder appearing on the books and
records of the Trust on the redemption date. If a Redemption/Distribution
Notice shall have been given and funds deposited as required, if applicable,
then immediately prior to the close of business on the date of such deposit,
or on the redemption date, as applicable, distributions will cease to accrue
on the Securities so called for redemption and all rights of Holders of such
Securities so called for redemption will cease, except the right of the
Holders of such Securities to receive the Redemption Price, but without
interest on such Redemption Price. Neither the Regular Trustees nor the
Trust shall be required to register or cause to be registered the transfer
of any Securities that have been so called for redemption. If any date
fixed for redemption of Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Institutional Trustee or by the Sponsor
as guarantor pursuant to the relevant Securities Guarantee, Distributions
on such Securities will continue to accrue from the original redemption date
to the actual date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees
on behalf of the Trust to (A) in respect of the Convertible Preferred
Securities, the Deposito-
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ry or its nominee (or any successor Clearing Agency or its nominee) if
the Global Certificates have been issued or, if Definitive Convertible
Preferred Security Certificates have been issued, to the Holder thereof, and
(B) in respect of the Common Securities to the Holder thereof.
(v) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), provided the acquiror is
not the Holder of the Common Securities or the obligor under the Indenture,
the Sponsor or any of its subsidiaries may at any time and from time to time
purchase outstanding Convertible Preferred Securities by tender, in the open
market or by private agreement.
(g) If at any time there occurs a Fundamental Change (as defined
below), each Holder of the Securities shall have the right, at the Holder's
option, to require the Trust to redeem all (and not less than all) of such
Holder's Securities in cash on the date (the "Repurchase Date") that is 45 days
after the date of Kmart's notice of such Fundamental Change referred to below.
In such event, the Trust shall redeem the Securities at a price per
Security equal to (i) $____ if the Repurchase Date is during the 12-month period
beginning April 1, 1996, (ii) $____ if the Repurchase Date is during the
12-month period beginning April 1, 1997, (iii) $______ if the Repurchase Date is
during the 12-month period beginning April 1, 1998, and (iv) thereafter at the
redemption price which would be applicable to a redemption at the option of the
Trust on the Repurchase Date; provided that if the Applicable Price (as defined
below) is less than the Reference Market Price (as defined below), the Trust
shall redeem such Convertible Preferred Securities at a price equal to the
foregoing redemption price multiplied by the fraction obtained by dividing the
Applicable Price by the Reference Market Price. In each case, the Trust shall
also pay accrued distributions on the Securities to, but excluding, the
Repurchase Date; provided that, if such Repurchase Date is a distribution
payment date, then the distribution payable on such date shall be paid to the
Holder of record on the relevant record date. The Trust will have corresponding
rights to redeem the Debentures.
The term "Fundamental Change" means the occurrence of any transaction or
events in connection with which all or substantially all of the Kmart Common
Stock shall be exchanged for, converted into, acquired for or constitute the
right to receive consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock which is (or, upon consummation of or immediately following such
transaction or event, will be) listed on a United States national securities
exchange or approved for quotation on Nasdaq National Market or any similar
United States system of automated dissemination of quotations of securities
prices. The term "Applicable Price" means (i) in the event of a Fundamental
Change in which the Holders of Kmart Common Stock receive only cash, the amount
of cash received by the Holder of one share of Kmart Common Stock and (ii) in
the event of any other Fundamental Change, the average of the last reported
executed trade price (regular way) for the Kmart Common stock during the ten
trading days prior to the record date for the determination of the Holders of
Kmart Common Stock entitled to receive cash, securities, property or other
assets in connection with such Fundamental Change, or, if no such record date
exists, the date upon which the Holders of the Kmart Common Stock shall have the
right to receive such cash, securities, property or other assets in connection
with the Fundamental Change. The term "Reference Market Price" shall initially
mean $ which is equal to 66 2/3% of the price of Kmart Common Stock as of the
date hereof. In the event of any adjustment to the conversion rate, the
Reference Market Price shall also be adjusted so that the Reference Market
Price, after giving effect to any such adjustment, shall equal the Market
Reference Price multiplied by a fraction, the numerator of which is the
conversion rate prior to such adjustment and the denominator of which is the
conversion rate after such adjustment.
On or before the 10th day after the occurrence of a Fundamental Change, the
Trust shall mail to all Holders of record of the Securities a notice of the
occurrence of such Fundamental Change and of the redemption rights arising as a
result thereof. The Trust shall deliver a copy of such notice to the
Institutional Trustee. To exercise the redemption right, on or before the
Repurchase Date Holders of the Securities must deliver written notice to the
Institutional Trustee, as Conversion Agent, of the Holders' exercise of such
right. Payment for Securities surrendered for redemption (and not withdrawn)
prior to the Repurchase Date will be made promptly following the Repurchase
Date. Subject to the requirements of DTC, the redemption rights associated with
Securities may be exercised by the presentation to the Institutional Trustee of
one or more redemption notices duly completed by or on behalf of the participant
of DTC or any clearing system in which the relevant Convertible Preferred
Security is held at such time with an interest in such Security and, if
required, payment of any transfer or similar taxes (other than those described
above). Surrender of any global certificate to the Institutional Trustee shall
not be required.
5. Conversion Rights.
The Holders of Securities shall have the right at any time, at their
option, to cause the Conversion Agent to convert Securities, on behalf of the
converting Holders, into shares of Kmart's Common Stock in the manner described
herein on and subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Kmart Common Stock pursuant
to the Holder's direction to the Conversion Agent to exchange such Securities
for a portion of the Debentures theretofore held by the Trust on the basis of
one Security per $__ principal amount of Debentures, and immediately convert
such amount of Debentures into fully paid and nonassessable shares of Kmart
Common Stock at an initial rate of ________ shares of Kmart Common Stock per
$__ principal amount of Debentures (which is equivalent to a conversion price
of $______ per share of Kmart Common Stock, subject to certain adjustments set
forth in the terms of the Debentures (as so adjusted, "Conversion Price")).
(b) In order to convert Securities into Kmart's Common Stock the Holder
shall submit to the Conversion Agent at the office referred to above an
irrevocable request to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are in certificated form,
with such certificates. The Conversion Request shall (i) set forth the number
of Securities to be converted and the name or names, if other than the Holder,
in which the shares of Kmart's Common Stock should be issued and (ii) direct
the Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the
preceding paragraph) and (b) to immediately convert such Debentures on behalf
of such Holder, into Kmart's Common Stock (at the conversion rate specified in
the preceding paragraph). The Conversion Agent shall notify the Trust of the
Holder's election to exchange
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Securities for a portion of the Debentures held by the Trust and the Trust
shall, upon receipt of such notice, deliver to the Conversion Agent the
appropriate principal amount of Debentures for exchange in accordance with
this Section. The Conversion Agent shall thereupon notify Kmart of the
Holder's election to convert such Debentures into shares of Kmart's Common
Stock. Holders of Securities at the close of business on a Distribution record
date will be entitled to receive the Distribution payable on such securities on
the corresponding Distribution payment date notwithstanding the conversion of
such Securities following such record date but prior to such distribution
payment date. Except as provided above, neither the Trust nor the Sponsor will
make, or be required to make, any payment, allowance or adjustment upon any
conversion on account of any accumulated and unpaid Distributions accrued on
the Securities (including any Additional Amounts accrued thereon) surrendered
for conversion, or on account of any accumulated and unpaid dividends on the
shares of Kmart's Common Stock issued upon such conversion. Securities shall
be deemed to have been converted immediately prior to the close of business on
the day on which a Notice of Conversion relating to such Securities is received
the Trust in accordance with the foregoing provision (the "Conversion Date").
The Person or Persons entitled to receive Kmart's Common Stock issuable upon
conversion of the Debentures shall be treated for all purposes as the record
holder or holders of such Kmart's Common Stock at such time. As promptly as
practicable on or after the Conversion Date, Kmart shall issue and deliver at
the office of the Conversion Agent a certificate or certificates for the number
of full shares of Kmart's Common Stock issuable upon such conversion, together
with the cash payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the notice of conversion and the Conversion Agent shall
distribute such certificate or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints The Bank
of New York "Conversion Agent" for the purpose of effecting the conversion of
Securities in accordance with this Section. In effecting the conversion and
transactions described in this Section, the Conversion Agent shall be acting as
agent of the Holders of Securities directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Securities from time to time for Debentures held by the Trust in connection
with the conversion of such Securities in accordance with this Section and (ii)
to convert all or a portion of the Debentures into Kmart's Common Stock and
thereupon to deliver such shares of Kmart's Common Stock in accordance with the
provisions of this Section and to deliver to the Trust a new Debenture or
Debentures for any resulting unconverted principal amount.
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(d) No fractional shares of Kmart's Common Stock will be issued as a
result of conversion, but in lieu thereof, such fractional interest will be in
cash by Kmart to the Trust, which in turn will make such payment to the Holder
or Holders of Securities so converted.
(e) Kmart shall at all times reserve and keep available out of its
authorized and unissued Kmart Common Stock, solely for issuance upon the
conversion of the Debentures, free from any preemptive or other similar rights,
such number of shares of Kmart Common Stock as shall from time to time be
issuable upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, Kmart shall be entitled to deliver upon
conversion of Debentures, shares of Kmart Common Stock reacquired and held in
the treasury of Kmart (in lieu of the issuance of authorized and unissued
shares of Kmart Common Stock), so long as any such treasury shares are free and
clear of all liens, charges, security interests or encumbrances. Any shares of
Kmart Common Stock issued upon conversion of the Debentures shall be duly
authorized, validly issued and fully paid and nonassessable. The Trust shall
deliver the shares of Kmart Common Stock received upon conversion of the
Debentures to the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United States withholding
taxes. Each of Kmart and the Trust shall prepare and shall use its best
efforts to obtain and keep in force such governmental or regulatory permits or
other authorizations as may be required by law, and shall comply with all
applicable requirements as to registration or qualification of Kmart Common
Stock (and all requirements to list Kmart Common Stock issuable upon conversion
of Debentures that are at the time applicable), in order to enable Kmart to
lawfully issue Kmart Common Stock to the Trust upon conversion of the
Debentures and the Trust to lawfully deliver Kmart Common Stock to each Holder
upon conversion of the Securities.
(f) Kmart will pay any and all taxes that may be payable in respect of
the issue or delivery of shares of Kmart Common Stock on conversion of
Debentures and the delivery of the shares of Kmart Common Stock by the Trust
upon conversion of the Securities. Kmart Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Kmart Common Stock in a name
other than that in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Trust the amount of any such tax, or has established
to the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities or set
forth in this Annex I to the
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Declaration or to the Declaration itself or otherwise require the
Institutional Trustee or the Trust to pay any amounts on account of such
withholdings.
6. Voting Rights - Convertible Preferred Securities.
(a) Except as provided under Sections 5(b) and 7 and as otherwise required
by law and the Declaration, the Holders of the Convertible Preferred Securities
will have no voting rights.
(b) Subject to the requirements set forth in this paragraph, the Holders
of a majority in aggregate liquidation amount of the Convertible Preferred
Securities, voting separately as a class, may direct the time, method, and
place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the
remedies available under the Indenture with respect to the Debentures, (ii)
waive any past default and its consequences that is waivable under Section ___
of the Indenture, or (iii) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable, provided,
however, that, where a consent under the Indenture would require the consent or
act of the Holders of greater than a majority of the Holders in principal
amount of Debentures affected thereby, (a "Super Majority"), the Institutional
Trustee may only give such consent or take such action at the written direction
of the Holders of at least the proportion in liquidation amount of the
Convertible Preferred Securities which the relevant Super Majority represents
of the aggregate principal amount of the Debentures outstanding. The
Institutional Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Convertible Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any remedy available to the Institutional Trustee or the Debenture Trustee as
set forth above, the Institutional Trustee shall not take any action in
accordance with the directions of the Holders of the Convertible Preferred
Securities under this paragraph unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action. If a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay interest or principal on the Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
on the redemption date), then a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the Debentures having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of such
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holder (a "Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the holders
of the Common Securities Holder will be subrogated to the rights of such holder
of Preferred Securities to the extent of any payment made by the Issuer to such
holder of Preferred Securities in such Direct Action. Except as provided in
the preceding sentences, the Holders of Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the
Debentures.
Any approval or direction of Holders of Convertible Preferred Securities
may be given at a separate meeting of Holders of Convertible Preferred
Securities convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The Regular Trustees
will cause a notice of any meeting at which Holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to each Holder of record
of Convertible Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Convertible Preferred Securities
will be required for the Trust to redeem and cancel Convertible Preferred
Securities or to distribute the Debentures in accordance with the Declaration
and the terms of the Securities.
Notwithstanding that Holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under Sections 7(b), (c) and 8 and as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any Trustee
or to increase or decrease the number of Trustees.
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(c) Subject to Section 2.6 of the Declaration and only after the Event of
Default with respect to the Convertible Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second
to last sentence of this paragraph, the Holders of a Majority in liquidation
amount of the Common Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy available
to the Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under the Declaration, including (i) directing the
time, method, place of conducting any proceeding for any remedy available to
the Debenture Trustee, or exercising any trust or power conferred on the
Debenture Trustee with respect to the Debentures, (ii) waive any past default
and its consequences that is waivable under Section ____ of the Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal
of all the Debentures shall be due and payable, provided that, where a consent
or action under the Indenture would require the consent or act of the Holders
of greater than a majority in principal amount of Debentures affected thereby
(a "Super Majority"), the Institutional Trustee may only give such consent or
take such action at the written direction of the Holders of at least the
proportion in liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of the Debentures
outstanding. Pursuant to this Section 6(c), the Institutional Trustee shall
not revoke any action previously authorized or approved by a vote of the
Holders of the Convertible Preferred Securities. Other than with respect to
directing the time, method and place of conducting any remedy available to the
Institutional Trustee or the Debenture Trustee as set forth above, the
Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Common Securities under this paragraph unless
the Institutional Trustee has obtained an opinion of tax counsel to the effect
that for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration, any
Holder of Common Securities may institute a legal proceeding directly against
any Person to enforce the Institutional Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Institutional Trustee
or any other Person.
Any approval or direction of Holders of Common Securities may be given at
a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such notice will include a
statement setting
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forth (i) the date of such meeting or the date by which such action is to be
taken, (ii) a description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote or of such matter upon
which written consent is sought and (iii) instructions for the delivery of
proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section 8.1
of the Declaration, then the Holders of outstanding Securities voting together
as a single class, will be entitled to vote on such amendment or proposal (but
not on any other amendment or proposal) and such amendment or proposal shall
not be effective except with the approval of the Holders of at least a Majority
in liquidation amount of the Securities affected thereby; provided,
however, if any amendment or proposal referred to in clause (i) above would
adversely affect only the Convertible Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination on the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a Majority in liquidation amount of the Securities voting together
as a single class; provided, however, that where a consent under the Indenture
would require the consent of the holders of greater than a majority in
aggregate principal amount of the Debentures (a "Super Majority"), the
Institutional Trustee may only give such consent at the direction of the
Holders of at least the proportion in liquidation amount of the Securities
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding; provided, further, that the Institutional
Trustee
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shall not take any action in accordance with the directions of the
Holders of the Securities under this Section 7(b) unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Convertible Preferred Securities pro rata according to the aggregate
liquidation amount of Convertible Preferred Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Convertible
Preferred Securities outstanding, and only after satisfaction of all amounts
owed to the Holders of the Convertible Preferred Securities, to each Holder of
Common Securities pro rata according to the aggregate liquidation amount of
Common Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Common Securities outstanding.
10. Ranking.
The Convertible Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where a
Declaration Event of Default occurs and is continuing, the rights of Holders of
the Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Convertible Preferred Securities.
11. Listing.
The Regular Trustees shall use their best efforts to cause the Convertible
Preferred Securities to be listed for quotation on the New York Stock Exchange,
Inc.
12. Acceptance of Securities Guarantee and Indenture.
Each Holder of Convertible Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Convertible Preferred
Securities Guarantee and the Common Securities Guarantee, respectively,
including the subordination provisions therein and to the provisions of the
Indenture.
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13. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights to subscribe
for any additional securities.
14. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Convertible
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request
to the Sponsor at its principal place of business.
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EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE
[IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE
INSERT - This Convertible Preferred Security is a Global Certificate within
the meaning of the Declaration hereinafter referred to and is registered in the
name of The Depository Trust Company (the "Depositary") or a nominee of the
Depositary. This Convertible Preferred Security is exchangeable for
Convertible Preferred Securities registered in the name of a person other than
the Depositary or its nominee only in the limited circumstances described in
the Declaration and no transfer of this Convertible Preferred Security (other
than a transfer of this Convertible Preferred Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary) may be registered except
in limited circumstances.
Unless this Convertible Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Trust or its agent for registration of transfer, exchange or
payment, and any Convertible Preferred Security issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment hereon is made
to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.]
Certificate Number Number of Convertible Preferred Securities
CUSIP NO. [ ]
Certificate Evidencing Convertible Preferred Securities
of
KMART FINANCING [I] [II] [III] [IV]
____% Convertible Preferred Securities
(liquidation amount $__ per Convertible Preferred Security)
Kmart Financing [I] [II] [III] [IV], a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of convertible preferred
securities of the Trust representing undivided beneficial interests in the
assets
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of the Trust designated the _____% Trust Originated Convertible Preferred
Securities (liquidation amount $__ per Convertible Preferred Security) (the
"Convertible Preferred Securities"). The Convertible Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of _______, 1996, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Convertible
Preferred Securities as set forth in Annex I to the Declaration. Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Convertible
Preferred Securities Guarantee to the extent provided therein. The Sponsor
will provide a copy of the Declaration, the Convertible Preferred Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Convertible
Preferred Securities as evidence of indirect beneficial ownership in the
Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day
of ___________ , 199__.
Kmart Financing [I] [II] [III] [IV]
By: _______________________________
Name:
Title: Regular Trustee
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[FORM OF REVERSE OF SECURITY]
Distributions payable on each Convertible Preferred Security will be fixed
at a rate per annum of ______% (the "Coupon Rate") of the stated liquidation
amount of $__ per Preferred Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed per 90-day quarter.
Except as otherwise described below, distributions on the Preferred
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on [March 31, June 30, September 30
and December 31 of each year, commencing on ______ __, 1996,] to [Holders of
record fifteen (15) days prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures.] The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for a
period not exceeding 20 consecutive quarters (each an "Extension Period")
provided that no Extension Period shall last beyond the date of the maturity of
the Debentures and, as a consequence of such deferral, Distributions will also
be deferred. Despite such deferral, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Coupon Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity of the Debentures. Payments of accrued
Distributions will be payable to Holders as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
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The Convertible Preferred Securities shall be redeemable as provided in
the Declaration.
The Convertible Preferred Securities shall be convertible into shares of
Kmart Common Stock, through (i) the exchange of Preferred Securities for a
portion of the Debentures and (ii) the immediate conversion of such Debentures
into Debenture Issuer Common Stock, in the manner and according to the terms
set forth in the Declaration.
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CONVERSION REQUEST
To: The Bank of New York
as Institutional Trustee of
Kmart Financing [I] [II] [III] [IV]
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Convertible Preferred Securities, or the
portion below designated, into Common Stock of Kmart Corporation (the "Kmart
Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of ________, 1996, by Marvin
P. Rich and James P. Churilla, as Regular Trustees, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Institutional
Trustee, Kmart Corporation, as Sponsor, and by the Holders, from time to time,
of individual beneficial interests in the Trust to be issued pursuant to the
Declaration. Pursuant to the aforementioned exercise of the option to convert
these Convertible Preferred Securities, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Declaration) to (i) exchange
such Convertible Preferred Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Convertible Preferred Securities set forth as
Annex I to the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Kmart Common Stock (at the conversion rate
specified in the terms of the Convertible Preferred Securities set forth as
Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
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Date: ____________, ____
in whole __ in part __
Number of Preferred Securities to be
converted: ___________________
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares of
Kmart Common Stock are to be issued, along
with the address or addresses of such person
or persons
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number
_________________________________________________
_________________________________________________
_________________________________________________
Signature Guarantee:*____________________________
______________
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A1-6
<PAGE> 87
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Preferred Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
___________________________________________________________ agent to transfer
this Convertible Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Convertible
Preferred Security Certificate)
A1-7
<PAGE> 88
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
KMART FINANCING [I] [II] [III] [IV]
______% Trust Originated Common Securities
(liquidation amount $25 per Common Security)
Kmart Financing [I] [II] [III] [IV] a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
_________________ (the "Holder") is the registered owner of common securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the ______% Trust Originated Common Securities (liquidation
amount $25 per Common Security) (the "Common Securities"). The Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of _______, 1996, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Securities
as set forth in Annex I to the Declaration. Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder
is entitled to the benefits of the Common Securities Guarantee to the extent
provided therein. The Sponsor will provide a copy of the Declaration, the
Common Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Debentures.
A2-1
<PAGE> 89
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day
of _____________, 199__.
Kmart Financing [I] [II] [III] [IV]
By:__________________________________
Name:
Title: Regular Trustee
A2-2
<PAGE> 90
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per
annum of ______% (the "Coupon Rate") of the stated liquidation amount of $__
per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
for more than one quarter will bear interest thereon compounded quarterly at
the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
Except as otherwise described below, distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on [March 31, June 30, September 30
and December 31 of each year, commencing on _______ __, 1996,] to Holders of
record fifteen (15) days prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures. The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for a
period not exceeding 20 consecutive quarters (each an "Extension Period")
provided that no Extension Period shall last beyond the date of maturity of the
Debentures and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Coupon Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the date of maturity of the Debentures. Payments of
accrued Distributions will be payable to Holders as they appear on the books
and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
A2-3
<PAGE> 91
The Common Securities shall be redeemable as provided in the Declaration.
The Common Securities shall be convertible into shares of Kmart Common
Stock, through (i) the exchange of Common Securities for a portion of the
Debentures and (ii) the immediate conversion of such Debentures into Kmart
Common Stock, in the manner and according to the terms set forth in the
Declaration.
A2-4
<PAGE> 92
CONVERSION REQUEST
To: The Bank of New York
as Institutional Trustee of
Kmart Financing [I] [II] [III] [IV]
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of Kmart Corporation (the "Kmart Common Stock")
in accordance with the terms of the Amended and Restated Declaration of Trust
(the "Declaration"), dated as of March __, 1996, by Marvin P. Rich and James P.
Churilla, as Regular Trustees, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Institutional Trustee, Kmart Corporation, as
Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to
the aforementioned exercise of the option to convert these Common Securities,
the undersigned hereby directs the Conversion Agent (as that term is defined in
the Declaration) to (i) exchange such Common Securities for a portion of the
Debentures (as that term is defined in the Declaration) held by the Trust (at
the rate of exchange specified in the terms of the Common Securities set forth
as Annex I to the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Kmart Common Stock (at the conversion rate
specified in the terms of the Common Securities set forth as Annex I to the
Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
A2-5
<PAGE> 93
Date: ____________, ____
in whole __ in part __
Number of Preferred Securities to be
converted: ___________________
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares of
Kmart Common Stock are to be issued, along
with the address or addresses of such person
or persons
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number
_________________________________________________
_________________________________________________
_________________________________________________
Signature Guarantee:*____________________________
_____________
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A2-6
<PAGE> 94
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints ______________________________________________________
_______________________________________________________________________________
______________________________________________ agent to transfer this Common
Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee**:____________________________________________________
_______________
** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program" as
may be determined by the Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A2-7
<PAGE> 95
EXHIBIT B
SPECIMEN OF DEBENTURE
B-1
<PAGE> 96
EXHIBIT C
UNDERWRITING AGREEMENT
C-1
<PAGE> 1
EXHIBIT 4(i)
====================================
FIRST SUPPLEMENTAL INDENTURE
between
Kmart Corporation
and
The Bank of New York
Dated as of _______ __, 1996
=====================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms . . . . . . . . . . . . . . . . . . 2
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.1. Designation and Principal Amount . . . . . . . . . . . . 4
SECTION 2.2. Maturity . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3. Form and Payment . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.4. Global Debenture . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.1. Special Event Redemption . . . . . . . . . . . . . . . . 9
SECTION 3.2. Optional Redemption by Company . . . . . . . . . . . . . 10
SECTION 3.3. Option to Elect Redemption Upon a
Fundamental Change . . . . . . . . . . . . . . . . . . . 10
SECTION 3.4. Deposit of Funds for Redemption . . . . . . . . . . . . . 11
SECTION 3.5. No Sinking Fund . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period . . . . . . . . . . 12
SECTION 4.2. Notice of Extension . . . . . . . . . . . . . . . . . . . 12
SECTION 4.3. Limitation of Transactions . . . . . . . . . . . . . . . 13
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses . . . . . . . . . . . . . . . . . . . 14
Section 5.2. Payment Upon Resignation or Removal . . . . . . . . . . . 14
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1. Listing on an Exchange . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 7.1. Conversion Rights . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.2. Conversion Procedures . . . . . . . . . . . . . . . . . . 15
SECTION 7.3. Conversion Price Adjustments . . . . . . . . . . . . . . . 17
SECTION 7.4. Reclassification, Consolidation, Merger
or Sale of Assets . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.5. Notice of Adjustments of Conversion
Price. . . . . . . . . . . . . . . . . . . . . . . . . . 23
i
<PAGE> 3
Page
----
SECTION 7.6. Prior Notice of Certain Events . . . . . . . . . . . . . 24
SECTION 7.7. Dividend or Interest Reinvestment
Plans . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.8. Certain Additional Rights . . . . . . . . . . . . . . . 25
SECTION 7.9. Trustee Not Responsible for Determining
Conversion Price or Adjustments . . . . . . . . . . . . 26
ARTICLE VIII
FORM OF CONVERTIBLE DEBENTURE
SECTION 8.1. Form of Convertible Debenture . . . . . . . . . . . . . 27
ARTICLE IX
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 9.1. Original Issue of Convertible Deben-
tures . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Ratification of Indenture . . . . . . . . . . . . . . . 36
SECTION 10.2. Trustee Not Responsible for Recitals . . . . . . . . . . 36
SECTION 10.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10.4. Separability . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . 37
ii
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE, dated as of ____________, 1995 (the "First
Supplemental Indenture"), between Kmart Corporation, a Michigan corporation
(the "Company"), and The Bank of New York, as trustee (the "Trustee") under the
Indenture dated as of ________, 1996 between the Company and the Trustee (the
"Indenture").
WHEREAS, the Company executed and delivered the Indenture to the Trustee
to provide for the future issuance of the Company's unsecured junior
subordinated debt securities to be issued from time to time in one or more
series as might be determined by the Company under the Indenture, in an
unlimited aggregate principal amount which may be authenticated and delivered
as provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Securities to be known as
its ___% Convertible Junior Subordinated Debentures due 20[ ] (the
"Convertible Debentures"), the form and substance of such Convertible
Debentures and the terms, provisions and conditions thereof to be set forth as
provided in the Indenture and this First Supplemental Indenture;
WHEREAS, Kmart Financing [I], [II], [III] and [IV], a Delaware statutory
business trust ( the "Trust"), has offered to the public $___ million aggregate
liquidation amount of its ___% Convertible Trust Originated Preferred
Securities (the "Convertible Preferred Securities"), representing undivided
beneficial interests in the assets of the Trust and proposes to invest the
proceeds from such offering, together with the proceeds of the issuance and
sale by the Trust to the Company of $___ million aggregate liquidation amount
of its ___% Convertible Trust Common Securities, in $____ million aggregate
principal amount of the Convertible Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms,
and to make the Convertible Debentures, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Convertible Debentures by the Holders thereof, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Convertible
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in this
First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of this
First Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Declaration: (i) Business Day; (ii) Clearing Agency; (iii) Delaware Trustee;
(iv) Depositary; (v) Dissolution Tax Opinion; (vi) No-Recognition Opinion;
(vii) Convertible Preferred Security Certificate; (viii) Pricing Agreement;
(ix) Institutional Trustee; (x) Regular Trustees; (xi) Special Event; and (xii)
Tax Event; and (xiii) Underwriting Agreement;
(g) the following terms have the meanings given to them in this Section
1.1(g):
"Additional Interest" shall have the meaning set forth in Section 2.5.
"Applicable Price" means (i) in the event of a Fundamental Change in which
the holders of the Common Stock receive only cash, the amount of cash received
by the holder of one share of Common Stock and (ii) in the event of any other
Fundamental Change, the average of the last reported executed trade price
(regular way) for the Common Stock during the ten trading days on the relevant
stock exchange prior to the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change, or, if no such record date exists, the
date upon which the holders of the Common Stock shall have the right to receive
such cash, securities, property or other assets in connection with the
Fundamental Change.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Convertible Preferred Securities" has the meaning set forth in the
recitals to this First Supplemental Indenture.
"Declaration" means the Amended and Restated Declaration of Trust of Kmart
Financing [I], [II], [III] and [IV], a Delaware statutory business trust, dated
as of _________, 1995.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Declaration, and the Conve-
2
<PAGE> 6
rtible Debentures held by the Institutional Trustee are to be distributed
to the holders of the Trust Securities issued by the Trust pro rata in
accordance with the Declaration.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
["Extended Maturity Date" means, if the Company elects to extend the
Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is after the Scheduled Maturity Date but before October __,
20 .]
"Fundamental Change" means the occurrence of any transaction or events in
connection with which all or substantially all the Common Stock shall be
exchanged for, converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) which is not all or substantially all common stock which is (or, upon
consummation of or immediately following such transaction or event, will be)
listed on a United States national securities exchange or approved for quotation
on Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices.
"Global Debenture" shall have the meaning set forth in Section 2.4.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority on or after
the first date of the Prospectus Supplement relating to the Convertible
Preferred Securities (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act").
"Maturity Date" means the date on which the Convertible Debentures mature
and on which the principal shall be due and payable together with all accrued
and unpaid interest thereon including Compounded Interest and Additional
Interest, if any.
"Non Book-Entry Convertible Preferred Securities" shall have the meaning
set forth in Section 2.4.
"Optional Redemption Price" shall have the meaning set forth in Section
3.2.
"Reference Market Price" shall initially mean $_____ which is equal to 66
2/3% of the price of the Common Stock on the date hereof initially and in the
event of any adjustment to the conversion rate, the Reference Market Price shall
be adjusted so that the Reference Market Price after giving effect to any such
adjustment shall equal the Reference Market Price multiplied by a fraction, the
numerator of which is the conversion rate prior to such adjustment and the
denominator of which is the conversion rate after such adjustment.
["Scheduled Maturity Date" means October __, 20 .]
"Senior Debt" means, with respect to the Company, (i) the principal,
premium, if any, and interest in respect of (A) indebtedness of such obligor
for money borrowed and (B) indebtedness evidenced by securities, debentures,
bonds or other similar instruments issued by such obligor; (ii) all capital
lease obligations of such obligor; (iii) all obligations of such obligor issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of such obligor and all obligations of such obligor under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such obligor for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) of other Persons for the payment of
which such obligor is responsible or liable as obligor, guarantor or otherwise;
and (vi) all obligations of the type referred to in clauses (i) through (v) of
other Persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Debentures, and (2) any debt securities and guarantees in respect
of those debt securities, issued to (y) any other Kmart Trust or (z) any other
trust, or a trustee of such trust,
3
<PAGE> 7
partnership or other entity affiliated with the Company which is a financing
vehicle of the Company (a "Financing Entity") in connection with the issuance
by such Financing Entity of preferred securities or other similar securities.
"Special Event" means a Tax Event or an Investment Company Event.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Securities designated the "___%
Convertible Junior Subordinated Debentures due 20[ ]", limited in aggregate
principal amount to $___ million, which amount shall be as set forth in any
written order of the Company for the authentication and delivery of Convertible
Debentures pursuant to Section ___ of the Indenture.
SECTION 2.2. Maturity. [Select appropriate option]
[USE OPTION 1 IF MATURITY IS FIXED -- The Maturity is ________ , 20 ___]
[USE OPTION 2 IF MATURITY MAY BE EXTENDED -- (a) The Maturity Date will be
either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity Date beyond the
Scheduled Maturity Date in accordance with Section 2.2(b), the Extended
Maturity Date;
(b) the Company may at any time before the day which is 90 days before the
Scheduled Maturity Date, elect to extend the Maturity Date only once to the
Extended Maturity Date provided that the following conditions in this Section
2.2(b) are satisfied both at the date the Company gives notice in accordance
with Section 2.2(c) of its election to extend the Maturity Date and at the
Scheduled Maturity Date:
(i) the Company is not in bankruptcy or otherwise insolvent;
(ii) the Company is not in default on any Securities issued to any
Kmart Trust or any trustee of such Kmart Trust in connection with the
issuance of Trust Securities by such Kmart Trust;
(iii) the Company has made timely payments on the Convertible
Debentures for the immediately preceding six quarters without deferrals;
4
<PAGE> 8
(iv) the Trust is not in arrears on payments of Distributions on the
Trust Securities issued by it; and
(v) the Convertible Debentures are rated Investment grade or the
equivalent by Standard & Poor's Corporation, Moody's Investors Service,
Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or
any other nationally recognized statistical rating organization; and
(c) if the Company elects to extend the Maturity Date in accordance with
Section 2.2(b), the Company shall give notice to registered holders of the
Convertible Debentures, the Institutional Trustee and the Trust of the
extension of the Maturity Date and the Extended Maturity Date at least 90 days
before the Scheduled Maturity Date.]
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Convertible Debentures shall be
issued in fully registered certificated form without interest coupons.
Principal and interest on the Convertible Debentures issued in certificated
form will be payable, the transfer of such Convertible Debentures will be
registrable and such Convertible Debentures will be exchangeable for
Convertible Debentures bearing identical terms and provisions at the office or
agency of the Trustee; provided, however, that payment of interest may be made
at the option of the Company by check mailed to the Holder at such address as
shall appear in the Security Register. Notwithstanding the foregoing, so long
as the Holder of any Convertible Debentures is the Institutional Trustee, the
payment of the principal of and interest (including Compounded Interest and
Additional Interest, if any) on such Convertible Debentures held by the
Institutional Trustee will be made at such place and to such account as may be
designated by the Institutional Trustee.
SECTION 2.4. Global Debenture.
(a) In connection with a Dissolution Event,
(i) the Convertible Debentures in certificated form may be presented
to the Trustee by the Institutional Trustee in exchange for a global
Debenture in an aggregate principal amount equal to the aggregate
principal amount of all outstanding Convertible Debentures (a "Global
Debenture"), to be registered in the name of the Depositary, or its
nominee, and delivered by the Trustee to the Depositary for crediting to
the accounts of its participants pursuant to the instructions of the
Regular Trustees. The Company upon any such presentation shall execute a
Global Debenture in such aggregate principal amount and deliver the same to
the Trustee for authentication and delivery in accordance
5
<PAGE> 9
with the Indenture and this First Supplemental Indenture. Payments on
the Convertible Debentures issued as a Global Debenture will be made to the
Depositary; and
(ii) if any Convertible Preferred Securities are held in non book-
entry certificated form, the Convertible Debentures in certificated form
may be presented to the Trustee by the Institutional Trustee and any
Convertible Preferred Security Certificate which represents Convertible
Preferred Securities other than Convertible Preferred Securities held by
the Clearing Agency or its nominee ("Non Book-Entry Convertible Preferred
Securities") will be deemed to represent beneficial interests in
Convertible Debentures presented to the Trustee by the Institutional
Trustee having an aggregate principal amount equal to the aggregate
liquidation amount of the Non Book-Entry Convertible Preferred Securities
until such Convertible Preferred Security Certificates are presented to the
Security Registrar for transfer or reissuance at which time such
Convertible Preferred Security Certificates will be cancelled and a
Debenture, registered in the name of the holder of the Convertible
Preferred Security Certificate or the transferee of the holder of such
Convertible Preferred Security Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of the
Convertible Preferred Security Certificate cancelled, will be executed by
the Company and delivered to the Trustee for authentication and delivery in
accordance with the Indenture and this First Supplemental Indenture. On
issue of such Convertible Debentures, Convertible Debentures with an
equivalent aggregate principal amount that were presented by the
Institutional Trustee to the Trustee will be deemed to have been cancelled.
(b) A Global Debenture may be transferred, in whole but not in part, only
to another nominee of the Depositary, or to a successor Depositary selected or
approved by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Securities Exchange Act of 1934, as amended, or other applicable statute or
regulation, and a successor Depositary for such series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such condition, as the case may be, the Company will execute, and, subject
to Article Three of the Indenture, the Trustee, upon written notice from the
Company, will authenticate and deliver the Convertible Debentures in definitive
registered form without coupons, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of
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<PAGE> 10
the Global Debenture in exchange for such Global Debenture. In addition, the
Company may at any time determine that the Convertible Debentures shall no
longer be represented by a Global Debenture. In such event the Company will
execute, and subject to Section 3.3 of the Indenture, the Trustee, upon receipt
of an Officers Certificate evidencing such determination by the Company, will
authenticate and deliver the Convertible Debentures in definitive registered
form without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debenture in exchange for
such Global Debenture. Upon the exchange of the Global Debenture for such
Convertible Debentures in definitive registered form without coupons, in
authorized denominations, the Global Debenture shall be cancelled by the
Trustee. Such Convertible Debentures in definitive registered form issued in
exchange for the Global Debenture shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Securities to the Depositary for delivery to the
Persons in whose names such Securities are so registered.
SECTION 2.5. Interest.
(a) Each Convertible Debenture will bear interest at the rate of ___% per
annum (the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article Four) quarterly in arrears on
January 1, April 1, July 1 and October 1 of each year (each, an "Interest
Payment Date," commencing on __________, 1996), to the Person in whose name such
Convertible Debenture or any predecessor Convertible Debenture is registered, at
the close of business on the regular record date for such interest installment,
which, in respect of (i) Convertible Debentures of which the Institutional
Trustee is the Holder and the Convertible Preferred Securities are in book-entry
only form or (ii) a Global Debenture, shall be the close of business on the
Business Day next preceding that Interest Payment Date. Notwithstanding the
foregoing sentence, if (i) the Convertible Debentures are held by the
Institutional Trustee and the Convertible Preferred Securities are no longer in
book-entry only form or (ii) the Convertible Debentures are not represented by a
Global Debenture, the Company may select a regular record date for such interest
installment which shall be any date at least one Business Day before an Interest
Payment Date.
(b) The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount
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<PAGE> 11
of interest payable for any period shorter than a full quarterly period
for which interest is computed, will be computed on the basis of the actual
number of days elapsed in such a 30-day period. In the event that any date on
which interest is payable on the Convertible Debentures is not a Business Day,
then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(c) If, at any time while the Institutional Trustee is the Holder of any
Convertible Debentures, the Trust or the Institutional Trustee is required to
pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, then, in any case, the Company will pay as additional
interest ("Additional Interest") on the Convertible Debentures held by the
Institutional Trustee, such additional amounts as shall be required so that the
net amounts received and retained by the Trust and the Institutional Trustee
after paying such taxes, duties, assessments or other governmental charges will
be equal to the amounts the Trust and the Institutional Trustee would have
received had no such taxes, duties, assessments or other government charges
been imposed.
ARTICLE III
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.1. Special Event Redemption.
If a Special Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees shall
have been informed by tax counsel rendering the Dissolution Tax Opinion that
a No-Recognition Opinion cannot be delivered to the Trust,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company
shall have the right upon not less than 30 days nor more than 60 days notice to
the Holders of the Convertible Debentures to redeem the Convertible Debentures,
in whole or in part, for cash within 90 days following the occurrence of such
Tax Event (the "90-Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest thereon to
the date of such redemption (the
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<PAGE> 12
"Redemption Price"), provided that if at the time there is available to the
Company the opportunity to eliminate, within the 90-Day Period, the Tax Event by
taking some ministerial action ("Ministerial Action"), such as filing a form or
making an election, or pursuing some other similar reasonable measure which has
no adverse effect on the Company, the Trust or the Holders of the Trust
Securities issued by the Trust, the Company shall pursue such Ministerial Action
in lieu of redemption, and, provided, further, that the Company shall have no
right to redeem the Convertible Debentures while the Trust is pursuing any
Ministerial Action pursuant to its obligations under the Declaration. The
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or such earlier time as the Company determines, provided that
the Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price
is to be paid.
SECTION 3.2. Optional Redemption by Company.
(a) Subject to the provisions of Section 3.2(b) and to the provisions of
Article XI of the Indenture, except as otherwise may be specified in this First
Supplemental Indenture, the Company shall have the right to redeem the
Convertible Debentures, in whole or in part, from time to time, on or after
April 1, 1999, or at any time in certain circumstances upon the occurrence of a
Special Event. Any redemption pursuant to this paragraph will be made upon not
less than 30 days nor more than 60 days notice to the Holder of the Convertible
Debentures, at the following prices (expressed as percentages of the principal
amount of the Convertible Debentures) (the "Optional Redemption Price") together
with accrued and unpaid interest, including Additional interest to, but
excluding, the redemption date, if redeemed during the 12-month period beginning
April 1:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1999
2000
2001
2002
2003
2004
2005
2006 and thereafter
</TABLE>
The proceeds from the redemption of any of the Convertible Debentures will
be used to redeem Convertible Preferred Securities.
If the Convertible Debentures are only partially redeemed pursuant to this
Section 3.2, the Convertible Debentures will be redeemed pro rata or by lot or
by any other method utilized by the Trustee; provided, that if at the time of
redemption the Convertible Debentures are registered as a Global Debenture, the
Depositary shall determine, in accordance with its procedures, the principal
amount of such Convertible Debentures held by each Holder of Debenture to be
redeemed. The Optional Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or at such earlier time as the Company
determines provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time, on
the date such Optional Redemption Price is to be paid.
(b) If a partial redemption of the Convertible Debentures would result in
the delisting of the Convertible Preferred Securities issued by the Trust from
any national securities exchange or other organization on which the Convertible
Preferred Securities are then listed, the Company shall not be permitted to
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<PAGE> 13
effect such partial redemption and may only redeem the Convertible Debentures
in whole.
SECTION 3.3 Option to Elect Redemption Upon a Fundamental Change.
(a) If a Fundamental Change shall occur at any time, each Holder shall
have the right, at such Holder's option, to require the Company to redeem all
(and not less than all) of such Holder's Convertible Debentures in cash on the
date (the "Repurchase Date") that is 45 days after the date of the Company's
notice of such Fundamental Change. In such event, the Kmart Trust shall redeem
the Convertible Preferred Securities at a price per Convertible Debenture
equal to (i)$____ if the Repurchase Date is during the 12-month period beginning
April 1, 1996, (ii) $ if the Repurchase Date is during the 12-month period
beginning April 1, 1997, (iii) $____ if the Repurchase Date is during the
12-month period beginning April 1, 1998 and (iv) thereafter at the redemption
price which would be applicable to a redemption at the option of the Company on
the Repurchase Date; provided that if the Applicable Price is less than the
Reference Market Price, the Company shall redeem such Convertible Debentures at
a price equal to the foregoing redemption price multiplied by the fraction
obtained by dividing the Applicable Price by the Reference Market Price. In
each case, the Company shall also pay accrued interest on the redeemed
Convertible Debentures on the Repurchase Date; provided that if such Repurchase
Date is an interest payment date, then the interest payable on such date shall
be paid to the Holder of record of the Convertible Debentures on the relevant
record date. The Company shall give ordinary notice of the occurrence of a
Fundamental Change and of the repayment right arising as a result thereof on or
before the tenth day after the occurrence of such Fundamental Change. The
Company shall promptly furnish the Trustee a copy of such notice. The Company
and the Trust will comply with the requirements to the extent applicable of Rule
13e-4 under the Exchange Act and other securities laws and regulations in
connection with the redemption rights of Holders of Convertible Preferred
Securities in the event of a Fundamental Change.
(b) For a Convertible Debenture to be so repaid at the option of the
Holder, the Company must receive at the office or agency of the Company
maintained for that purpose in New York City such Convertible Debenture with the
form entitled "Option to Elect Redemption Upon a Fundamental Change" on the
reverse thereof duly completed, together with such Convertible Debenture duly
endorsed for transfer, on or before the 43rd day after the date of such notice
(or if such 43rd day is not a New York Business Day, the immediately preceding
New York Business Day). Such form of notice duly received shall be irrevocable
and the Holder of such Convertible Debenture shall thereafter have no right to
effect a Share Exchange of such Convertible Debenture (unless the Holder
defaults in making the payment due upon the Repurchase Date). All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Convertible Debenture for redemption shall be determined by the Holder, whose
determination shall be final and binding.
SECTION 3.4 Deposit of Funds for Redemption.
No later than 10:00 a.m. New York City time on the last New York Business
Day prior to the date any Convertible Debenture is required to be paid pursuant
to Section ____, the Company will deposit with the Trustee or with one or more
Paying Agents (or, if the Company is acting as its own Paying Agent, set aside,
segregate and hold in trust as provided in Section ____) an amount of money
sufficient to repay on the applicable Repurchase Date all the Convertible
Debentures to be redeemed on such date as the appropriate repayment price,
together with accrued interest to the date fixed for repayment.
SECTION 3.5. No Sinking Fund.
The Convertible Debentures are not entitled to the benefit of any sinking
fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
The Company shall have the right, at any time and from time to time during
the term of the Convertible Debentures, to defer payments of interest by
extending the interest payment period of such Convertible Debentures for a
period not exceeding 20 consecutive quarters (the "Extended Interest Payment
Period"), during which Extended Interest Payment Period no interest shall be
due and payable; provided that no Extended Interest Payment Period may extend
beyond the Maturity Date. To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 4.1, will bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended Interest
Payment Period, the Company shall pay all interest accrued and unpaid on the
Convertible Debentures, including any Additional Interest and Compounded
Interest (together, "Deferred Interest") that shall be payable to the Holders
of the Convertible Debentures in whose names the Convertible Debentures are
registered in the Security Register on the first record date after the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the maturity date of the
Convertible Debentures. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the Company may
commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Company may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Institutional Trustee is the only registered Holder of the
Convertible Debentures at the time the Company selects an Extended Interest
Payment Period, the Company
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<PAGE> 14
shall give written notice to the Regular Trustees, the Institutional Trustee
and the Trustee of its selection of such Extended Interest Payment Period one
Business Day before the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities issued by the Trust are payable, or
(ii) the date the Trust is required to give notice of the record date, or the
date such Distributions are payable, to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Convertible
Preferred Securities issued by the Trust, but in any event at least one Business
Day before such record date.
(b) If the Institutional Trustee is not the only Holder of the Convertible
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give the Holders of the Convertible Debentures and the
Trustee written notice of its selection of such Extended Interest Payment
Period at least 10 Business Days before the earlier of (i) the next succeeding
Interest Payment Date, or (ii) the date the Company is required to give notice
of the record or payment date of such interest payment to the New York Stock
Exchange or other applicable self-regulatory organization or to Holders of the
Convertible Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs (a) or
(b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in
the maximum Extended Interest Payment Period permitted under Section 4.1.
SECTION 4.3. Limitation of Transactions.
If (i) the Company shall exercise its right to defer payment of interest
as provided in Section 4.1, or (ii) there shall have occurred any Event of
Default, as defined in the Indenture, then (a) the Company shall not declare or
pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of its 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 contract or security requiring the Company to
purchase shares of its common stock, (ii) as a result of a reclassification of
its capital stock or the exchange or conversion of one class or series of its
capital stock for another class or series of its capital stock or, (iii) the
purchase of fractional interests in shares of its capital stock pursuant to the
conversion or exchange provisions of such capital stock or security being
converted or exchanged) or make any guarantee payment with respect thereto 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 issued by the
Company which rank pari passu with or junior to the Convertible
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<PAGE> 15
Debentures; provided, however, the Company may declare and pay a stock
dividend where the dividend stock is the same stock as that on which the
dividend is being paid.
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Convertible
Debentures to the Institutional Trustee and in connection with the sale of the
Trust Securities by the Trust, the Company, in its capacity as borrower with
respect to the Convertible Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale and issuance
of the Convertible Debentures, including commissions to the underwriters
payable pursuant to the Underwriting Agreement and the Pricing Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.5 of the Indenture;
(b) pay all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust, the fees and
expenses of the Institutional Trustee and the Delaware Trustee, the costs and
expenses relating to the operation of the Trust, including without limitation,
costs and expenses of accountants, attorneys, statistical or bookkeeping
services, expenses for printing and engraving and computing or accounting
equipment, paying agent(s), registrar(s), transfer agent(s), duplicating,
travel and telephone and other telecommunications expenses and costs and
expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets);
(c) be primarily liable for any indemnification obligations arising with
respect to the Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
Section 5.2. Payment Upon Resignation or Removal.
Upon termination of this First Supplemental Indenture or the Indenture or
the removal or resignation of the Trustee pursuant to this Section 6.10, the
Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation. Upon termination of the Declaration or
the removal or resignation of the Delaware Trustee or the Institutional
Trustee, as the case may be, pursuant to Section 5.6 of
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<PAGE> 16
the Declaration, the Company shall pay to the Delaware Trustee or the
Institutional Trustee, as the case may be, all amounts accrued to the date of
such termination, removal or resignation.
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1. Listing on an Exchange.
If the Convertible Debentures are to be issued as a Global Debenture in
connection with the distribution of the Convertible Debentures to the holders
of the Convertible Preferred Securities issued by the Trust upon a Dissolution
Event, the Company will use its best efforts to list such Convertible
Debentures on the New York Stock Exchange, Inc. or on such other exchange as
the Convertible Preferred Securities are then listed.
ARTICLE VII
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 7.1. Conversion Rights.
Subject to and upon compliance with the provisions of this Article, the
Convertible Debentures are convertible, at the option of the Holder, at any
time on or before redemption as provided below or the close of business at
their [Scheduled Maturity] [Maturity Date], into fully paid and nonassessable
shares of Common Stock of the Company at an initial conversion rate of _______
shares of Common Stock for each $__ in aggregate principal amount of
Convertible Debentures (equal to a conversion price of $_____ per share of
Common Stock), subject to adjustment as described in this Article Seven. A
Holder of Convertible Debentures may convert any portion of the principal
amount of the Convertible Debentures into that number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) obtained by dividing the principal amount of the
Convertible Debentures to be converted by such conversion price. In case a
Convertible Debenture or portion thereof is called for redemption, such
conversion right in respect of the Convertible Debenture or portion so called
shall expire at the close of business on the corresponding Redemption Date,
unless the Company defaults in making the payment due upon redemption.
SECTION 7.2. Conversion Procedures.
(i) In order to convert all or a portion of the Convertible Debentures,
the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice
of Conversion setting
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<PAGE> 17
forth the principal amount of Convertible Debentures to be converted, together
with the name or names, if other than the Holder, in which the shares of Common
Stock should be issued upon conversion and, if such Convertible Debentures are
definitive Convertible Debentures, surrender to the Conversion Agent the
Convertible Debentures to be converted, duly endorsed or assigned to the Company
or in blank. In addition, a holder of Convertible Preferred Securities may
exercise its right under the Declaration to convert such Convertible Preferred
Securities into Common Stock by delivering to the Conversion Agent an
irrevocable Notice of Conversion setting forth the information called for by the
preceding sentence and directing the Conversion Agent (i) to exchange such
Convertible Preferred Security for a portion of the Convertible Debentures held
by the Trust (at an exchange rate of $__ principal amount of Convertible
Debentures for each Convertible Preferred Security) and (ii) to immediately
convert such Convertible Debentures, on behalf of such holder, into Common Stock
of the Company pursuant to this Article Seven and, if such Convertible Preferred
Securities are in definitive form, surrendering such Convertible Preferred
Securities, duly endorsed or assigned to the Company or in blank. So long as
any Convertible Preferred Securities are outstanding, the Trust shall not
convert any Convertible Debentures except pursuant to a Notice of Conversion
delivered to the Conversion Agent by a holder of Convertible Preferred
Securities.
If a Notice of Conversion is delivered on or after the Regular Record
Date and prior to the subsequent Interest Payment Date, the Holder will be
entitled to receive the interest payable on the subsequent Interest Payment Date
on the portion of Convertible Debentures to be converted notwithstanding the
conversion thereof prior to such Interest Payment Date. Except as otherwise
provided in the immediately preceding sentence, in the case of any Convertible
Debenture which is converted, interest whose [Scheduled Maturity] [Maturity
Date] is after the date of conversion of such Convertible Debenture shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest on
the Convertible Debentures being converted, which shall be deemed to be paid in
full. Each conversion shall be deemed to have been effected immediately prior
to the close of business on the day on which the Notice of Conversion was
received (the "Conversion Date") by the Conversion Agent from the Holder or from
a holder of the Convertible Preferred Securities effecting a conversion thereof
pursuant to its conversion rights under the Declaration, as the case may be.
The Person or Persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock as of the Conversion Date. As promptly as practicable on or
after the Conversion Date, the Company shall issue and deliver at the office of
the Conversion Agent, unless otherwise directed by the Holder in the Notice of
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<PAGE> 18
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.
(ii) The Company's delivery upon conversion of the fixed number of shares
of Common Stock into which the Convertible Debentures are convertible (together
with the cash payment, if any, in lieu of fractional shares) shall be deemed to
satisfy the Company's obligation to pay the principal amount at Maturity of the
portion of Convertible Debentures so converted and any unpaid interest
(including Compounded Interest and Additional Interest) accrued on such
Convertible Debentures at the time of such conversion.
(iii) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, the Company shall pay to the Conversion Agent
a cash adjustment in an amount equal to the same fraction of the current market
price of such fractional interest on the date on which the Convertible
Debentures or Convertible Preferred Securities, as the case may be, were duly
surrendered to the Conversion Agent for conversion, or, if such day is not a
Trading Day, on the next Trading Day, and the Conversion Agent in turn will
make such payment, if any, to the Holder of the Convertible Debentures or the
holder of the Convertible Preferred Securities so converted.
(iv) In the event of the conversion of any Convertible Debenture in part
only, a new Convertible Debenture or Convertible Debentures for the unconverted
portion thereof will be issued in the name of the Holder thereof upon the
cancellation thereof [in accordance with Section ___ of the Indenture].
(v) In effecting the conversion transactions described in this Section,
the Conversion Agent is acting as agent of the holders of Convertible Preferred
Securities (in the exchange of Convertible Preferred Securities for Convertible
Debentures) and as agent of the Holders of Convertible Debentures (in the
conversion of Convertible Debentures into Common Stock), as the case may be,
directing it to effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Convertible Debentures held by the Trust from
time to time for Convertible Preferred Securities in connection with the
conversion of such Convertible Preferred Securities in accordance with this
Article Seven and (ii) to convert all or a portion of the Convertible Debentures
into Common Stock and thereupon to deliver such shares of Common Stock in
accordance with the provisions of this Article Seven and to deliver to the Trust
a new Convertible Debenture or Convertible Debentures for any resulting
unconverted principal amount.
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<PAGE> 19
SECTION 7.3. Conversion Price Adjustments.
The Conversion Price shall be adjusted from time to time as follows:
(a) In case the Company shall, while any of the Convertible Debentures are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the conversion
privilege and the Conversion Price for each series of Convertible Debentures in
effect immediately prior to such action shall be adjusted so that the Holder of
any Convertible Debenture thereafter surrendered for conversion shall be
entitled to receive the number of shares of capital stock of the Company which
he would have owned immediately following such action had such Convertible
Debenture been converted immediately prior thereto. An adjustment made
pursuant to this subsection (a) shall become effective immediately after the
record date in the case of a dividend or other distribution and shall become
effective immediately after the effective date in case of a subdivision,
combination or reclassification (or immediately after the record date if a
record date shall have been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of any Convertible
Debenture thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes or series of capital stock of the
Company, the Board of Directors (whose determination shall be conclusive and
shall be described in a Board Resolution file with the Trustee) shall determine
the allocation of the adjusted Conversion Price for each series of Convertible
Debentures between or among shares of such classes or series of capital stock.
(b) In case the Company shall, while any of the Convertible Debentures are
outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (f) below) on the record date mentioned
below, the Conversion Price for the Convertible Debentures shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of issuance of such rights or
warrants by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered [for subscription or purchase] would purchase at
such
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<PAGE> 20
current market price, and of which the denominator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are not so
delivered after the expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect if
such date fixed for the determination of stockholders entitled to receive such
rights or warrants had not been fixed. For the purposes of this subsection, the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company shall not issue any
rights or warrants in respect of shares of Common Stock held in the treasury of
the Company. In case any rights or warrants referred to in this subsection in
respect of which an adjustment shall have been made shall expire unexercised
within 45 days after the same shall have been distributed or issued by the
Company, the Conversion Price shall be readjusted at the time of such expiration
to the Conversion Price that would have been in effect if no adjustment had been
made on account of the distribution or issuance of such expired rights or
warrants.
(c) Subject to the last sentence of this subparagraph, in case the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class or series of capital stock,
cash or assets (including securities, but excluding any rights or warrants
referred to in subparagraph (b), any dividend or distribution paid exclusively
in cash and any dividend or distribution referred to in subparagraph (a) of
this Section 7.3), the conversion price shall be reduced so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (c) by a fraction of which the numerator
shall be the current market price per share (determined as provided in
subparagraph (f)) of the Common Stock on the date fixed for the payment of such
distribution (the "Reference Date") less the fair market value (as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), on the
Reference Date, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share of Common
Stock and the denominator shall be such current market price per share of the
Common Stock, such reduction to become effective immediately prior to the
opening of business on the day following the Reference Date. In the event that
such dividend or distribution is not so paid or made, the conversion price
shall again be adjusted to be the conversion price which would then be in
effect if such
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<PAGE> 21
dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of this
subparagraph (c) by reference to the actual or when issued trading market for
any securities comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the current market
price per share of Common Stock (determined as provided in subparagraph (f)).
For purposes of this subparagraph (c), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, shares of capital stock, cash or
assets other than such shares of Common Stock or such rights or warrants (making
any conversion price reduction required by this subparagraph (c)) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (making any further conversion price reduction required
by subparagraph (a) or (b)), except (A) the Reference Date of such dividend or
distribution as defined in this subparagraph shall be substituted as (a) "the
record date in the case of a dividend or other distribution," and (b) "the
record date for the determination of stockholders entitled to receive such
rights or warrants" and (c) "the date fixed for such determination" within the
meaning of subparagraphs (a) and (b) and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed outstanding for purposes of
computing any adjustment of the conversion price in subparagraph (a).
(d) In case the Company shall pay or make a dividend or other distribution
on its Common Stock exclusively in cash (excluding all regular cash dividend if
the annualized amount thereof per share of Common Stock does not exceed 15% of
the current market price per share determined as provided in subparagraph (f))
of the Common Stock on the Trading Day next preceding the date of declaration
of such dividend, the conversion price shall be reduced so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph by a fraction of which the numerator shall be
the current market price per share (determined as provided in subparagraph (f))
of the Common Stock on the date fixed for the payment of such distribution less
the amount of cash so distributed and not excluded as provided applicable to
one share of Common Stock and the denominator shall be such current market
price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for the payment of such distribution; provided, however, that in the
event the portion of the cash so distributed applicable to one share of Common
Stock is equal to or greater than the current market price per share (as
defined in subparagraph (f)) of the Common Stock on the record date mentioned
above, in lieu of the foregoing adjust-
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<PAGE> 22
ment, adequate provision shall be made so that each Holder of shares of
Convertible Debentures shall have the right to receive upon conversion the
amount of cash such Holder would have received had such Holder converted each
share of the Convertible Debentures immediately prior to the record date for the
distribution of the cash. In the event that such dividend or distribution is
not so paid or made, the conversion price shall again be adjusted to be the
conversion price which would then be in effect if such record date had not been
fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or any portion of
the Company's Common Stock shall expire and such tender or exchange offer shall
involve the payment by the Company or such Subsidiary of consideration per share
of Common Stock having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds 110% of the current market price per
share (determined as provided in subparagraph (f)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, the conversion price shall be
reduced so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subparagraph (e) by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the current market price per share (determined as provided in subparagraph
(f)) of the Common Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the current market price per share (determined as provided in
subparagraph (f)) of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time.
(f) For the purpose of any computation under subparagraphs (b), (c), (d)
or (e), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
five consecutive Trading Days selected by the Company commencing not more than
20
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<PAGE> 23
Trading Days before, and ending not later than, the earlier of the day in
question and, if applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; provided, however, that if
another event occurs that would require an adjustment pursuant to subparagraph
(a) through (e), inclusive, the Board of Directors may make such adjustments to
the Closing Prices during such five Trading Day period as it deems appropriate
to effectuate the intent of the adjustments in this Section 7.3, in which case
any such determination by the Board of Directors shall be set forth in a Board
Resolution and shall be conclusive. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the New York
Stock Exchange or on such successor securities exchange as the Common Stock may
be listed or in the relevant market from which the Closing Prices were obtained
without the right to receive such issuance or distribution, and (2) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such securities exchange or in such market
after the Expiration Time of such offer.
(g) The Company may make such reductions in the conversion price, in
addition to those required by subparagraphs (a) through (e), as it considers to
be advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. The Company from time to time may reduce the conversion price by
any amount for any period of time if the period is at least twenty (20) days,
the reduction is irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such reduction would be in the
best interest of the Company, which determination shall be conclusive.
Whenever the conversion price is reduced pursuant to the preceding sentence,
the Company shall mail to holders of record of the Convertible Debentures a
notice of the reduction at least fifteen (15) days prior to the date the
reduced conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
(h) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason of
this subparagraph are not required to be made shall be carried forward and taken
into account in determining whether any subsequent adjustment shall be required.
(i) If any action would require adjustment of the conversion price
pursuant to more than one of the provisions described above, only one
adjustment shall be made and such
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<PAGE> 24
adjustment shall be the amount of adjustment that has the highest absolute
value to the Holder of the Convertible Debentures.
SECTION 7.4. Reclassification, Consolidation, Merger or Sale of Assets.
In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale or transfer of all or substantially all of the
assets of the Company or (d) any compulsory share exchange) pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms of
such transaction whereby the Holder of each Convertible Debenture then
outstanding shall have the right thereafter to convert such Convertible
Debenture only into the kind and amount of securities, cash and other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock of the Company into which such Convertible Debenture
could have been converted immediately prior to such transaction.
The Company or the Person formed by such consolidation or resulting from
such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article Seven. The above provisions shall similarly apply to
successive transactions of the foregoing type.
SECTION 7.5. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(i) the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted conversion price and showing in
reasonable detail the
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<PAGE> 25
facts upon which such adjustment is based, and such certificate shall forthwith
be filed with the Trustee and the transfer agent for the Convertible Preferred
Securities and the Convertible Debentures; and
(ii) a notice stating the conversion price has been adjusted and setting
forth the adjusted conversion price shall as soon as practicable be mailed by
the Company to all record holders of Convertible Preferred Securities and the
Convertible Debentures at their last addresses as they appear upon the stock
transfer books of the Company and the Trust.
SECTION 7.6. Prior Notice of Certain Events.
In case:
(a) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 7.3(c) or (d) or (2) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 7.3(e);
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a subdivision or
combination of the outstanding Common Stock, or a change in par value, or from
par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall (a) if any Convertible Preferred Securities are
outstanding, cause to be filed with the transfer agent for the Convertible
Preferred Securities, and shall cause to be mailed to the holders of record of
the Convertible Preferred Securities, at their last addresses as they shall
appear upon the stock transfer books the Trust or (b) shall cause to be mailed
to all Holders at their last addresses as they shall appear in the Security
Register, at least fifteen days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record (if
any) is to be taken for the
22
<PAGE> 26
purpose of such dividend, distribution, rights or warrants or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
SECTION 7.7. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan, and
the issuance of any shares of Common Stock or options or rights to purchase
such shares pursuant to any employee benefit plan or program of the Company or
pursuant to any option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of the date the Convertible Debentures were
first issued, shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the Company to which any
of the adjustment provisions described above applies. There shall also be no
adjustment of the conversion price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Company except as
specifically described in this Article Seven.
SECTION 7.8. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section 7.3 (c) or 7.3(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 7.3(e)), the Holder of the Convertible Debentures,
upon the conversion thereof subsequent to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of Common Stock into which the Convertible Debentures are converted, the
portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock; provided,
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<PAGE> 27
however, that, at the election of the Company (whose election shall be
evidenced by a resolution of the Board of Directors) with respect to all Holders
so converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of Convertible Debentures described in the
immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Common Stock which the Holder of Convertible
Debentures so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled, provided, that such due bill (i) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
SECTION 7.9. Trustee Not Responsible for Determining Conversion Price or
Adjustments.
Neither the Trustee nor any Conversion Agent shall at any time be under
any duty or responsibility to any Holder of any Convertible Debenture to
determine whether any facts exist which may require any adjustment of the
conversion price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any Conversion Agent shall be accountable with respect
to the validity or value (or the kind of account) of any shares of Common Stock
or of any securities or property, which may at any time be issued or delivered
upon the conversion of any Convertible Debenture; and neither the Trustee nor
any Conversion Agent makes any representation with respect thereto. Neither
the Trustee nor any Conversion Agent shall be responsible for any failure of
the Company to make any cash payment or to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Convertible Debenture for the purpose of conversion.
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<PAGE> 28
ARTICLE VIII
FORM OF CONVERTIBLE DEBENTURE
SECTION 8.1. Form of Convertible Debenture.
The Convertible Debentures and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the following forms:
[(FORM OF FACE OF Convertible Debenture)]
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING - -
This Debenture is a Global Debenture within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Debenture is exchangeable for Convertible
Debentures registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and no
transfer of this Debenture (other than a transfer of this Debenture as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
issuer or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.]
No. ______________
KMART CORPORATION
___% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE
DUE 20[ ]
Kmart Corporation, a Michigan corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to, ______________ or
registered assigns, the principal sum of _____________ Dollars ($___________)
on _________, ____, and to pay interest on said principal sum from
____________, 1995, or from the most recent interest payment date
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<PAGE> 29
(each such date, an "Interest Payment Date") to which interest has been paid
or duly provided for, quarterly (subject to deferral as set forth herein)
in arrears on [March 31, June 30, September 30 and December 31] of each year
commencing ___________, 1995, at the rate of ___% per annum until the principal
hereof shall have become due and payable, and on any overdue principal and
premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment
of interest at the same rate per annum compounded quarterly. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Convertible Debenture is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Convertible Debenture (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the
close of business on the regular record date for such interest installment.
[which shall be the close of business on the business day next preceding such
Interest Payment Date unless otherwise provided in the Indenture] [IF
PURSUANT TO THE PROVISIONS OF THE INDENTURE THE CONVERTIBLE DEBENTURES ARE NO
LONGER REPRESENTED BY A GLOBAL DEBENTURE -- which shall be the close of
business on the ____ business day next preceding such Interest Payment Date].
Any such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such regular record
date and may be paid to the Person in whose name this Convertible Debenture (or
one or more Predecessor Securities) is registered at the close of business on a
special record date to be fixed by the Trustee for the payment of such
defaulted interest, notice whereof shall be given to the registered Holders of
this series of Convertible Debentures not less than 10 days prior to such
special record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Convertible Debentures may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. The principal
of (and premium, if any) and the interest on this Convertible Debenture shall
be payable at the office or agency of the Trustee maintained for that purpose
in any coin or currency of the United States of America that at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered Holder at such address as shall
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<PAGE> 30
appear in the Security Register. Notwithstanding the foregoing, so long as the
Holder of this Convertible Debenture is the Institutional Trustee, the payment
of the principal of (and premium, if any) and interest on this Convertible
Debenture will be made at such place and to such account as may be designated
by the Institutional Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Convertible Debenture, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Each Holder hereof, by his or her acceptance hereof, hereby waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
This Convertible Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
The provisions of this Convertible Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated __________________
KMART CORPORATION
By: ________________________________
Name:
Title
Attest:
By: ____________________
Name:
Title:
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<PAGE> 31
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures of the series of Convertible
Debentures described in the within-mentioned Indenture.
[ ]
or as Authentication Agent
By ______________________ By _______________________
Authorized Signatory Authorized Signatory
[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Convertible Debentures of the Company (herein sometimes referred to as the
"Convertible Debentures"), specified in the Indenture, all issued or to be
issued in one or more series under and pursuant to an Indenture dated as of
_______, 1995, duly executed and delivered between the Company and
_________________, as Trustee (the "Trustee"), as supplemented by the First
Supplemented Indenture dated as of _______, 1995, between the Company and the
Trustee (the Indenture as so supplemented, the "Indenture"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Convertible Debentures. By the terms of the Indenture, the Convertible
Debentures are issuable in series that may vary as to amount, date of maturity,
rate of interest and in other respects as provided in the Indenture. This
series of Convertible Debentures is limited in aggregate principal amount as
specified in said First Supplemental Indenture.
Because of the occurrence and continuation of a Tax Event, in certain
circumstances, this Convertible Debenture may become due and payable at the
principal amount together with any interest accrued thereon (the "Redemption
Price"). The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or at such earlier time as the Company
determines. The Company shall have the right to redeem this Convertible
Debenture at the option of the Company, without premium or penalty, in whole or
in part at any time on or after ________, 2000 (an "Optional Redemption"), or
at any time in certain circumstances upon the occurrence of a Tax Event, at a
redemption price equal to 100% of the principal amount plus any
28
<PAGE> 32
accrued but unpaid interest, to the date of such redemption (the "Optional
Redemption Price"). Any redemption pursuant to this paragraph will be made
upon not less than 30 days nor more than 60 days notice, at the Optional
Redemption Price. If the Convertible Debentures are only partially redeemed by
the Company pursuant to an Optional Redemption, the Convertible Debentures will
be redeemed pro rata or by lot or by any other method utilized by the Trustee;
provided that if, at the time of redemption, the Convertible Debentures are
registered as a Global Debenture, the Depositary shall determine the principal
amount of such Convertible Debentures held by each Debentureholder to be
redeemed in accordance with its procedures.
In the event of redemption of this Convertible Debenture in part only, a
new Convertible Debenture or Convertible Debentures of this series for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Convertible Debentures of each series affected at the
time outstanding, as defined in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Convertible Debentures; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Convertible Debentures of
any series, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any premium payable
upon the redemption thereof, without the consent of the Holder of each
Convertible Debenture so affected, or (ii) reduce the aforesaid percentage of
Convertible Debentures, the Holders of which are required to consent to any
such supplemental indenture, without the consent of the Holders of each
Convertible Debenture then outstanding and affected thereby. The Indenture
also contains provisions permitting the Holders of a majority in aggregate
principal amount of the Convertible Debentures of any series at the time
outstanding affected thereby, on behalf of all of the Holders of the
Convertible Debentures of such series, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture with respect to such series, and its consequences,
except a default in the payment of the principal of or premium,
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<PAGE> 33
if any, or interest on any of the Convertible Debentures of such series.
Any such consent or waiver by the registered Holder of this Convertible
Debenture (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such Holder and upon all future Holders and owners of this
Convertible Debenture and of any Convertible Debenture issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Convertible Debenture.
No reference herein to the Indenture and no provision of this Convertible
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Convertible Debenture at the time and
place and at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the Convertible
Debentures and from time to time to extend the interest payment period of such
Convertible Debentures for up to 20 consecutive quarters (an "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Convertible Debentures to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such Extended
Interest Payment Period, the Company may further extend such Extended Interest
Payment Period, provided that such Extended Interest Payment Period together
with all such further extensions thereof shall not exceed 20 consecutive
quarters. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any additional amounts
then due, the Company may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Convertible Debenture is transferable by the registered Holder
hereof on the Security Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or
the Trustee duly executed by the registered Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Convertible Debentures of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
relation thereto.
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<PAGE> 34
Prior to due presentment for registration of transfer of this Convertible
Debenture, the Company, the Trustee, any paying agent and the Security
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Convertible Debenture shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and interest due hereon
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Security Registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture,
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
The Holder of any Convertible Debenture has the right, exercisable at any
time prior to the close of business (New York time) on the date of the
Convertible Debenture's maturity, to convert the principal amount thereof (or
any portion thereof that is an integral multiple of $__) into shares of Common
Stock at the initial conversion price _______ shares of Common Stock for each
Convertible Debenture (equivalent to a conversion price of $______ per share of
Common Stock of the Company), subject to adjustment under certain
circumstances, except that if a Convertible Debenture is called for redemption,
the conversion right will terminate at the close of business on the Redemption
Date.
To convert a Convertible Debenture, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Convertible Debenture to a Conversion Agent, (3) furnish appropriate
endorsements or transfer documents if required by the Conversion Agent and (4)
pay any transfer or similar tax, if required. Upon conversion, no adjustment
or payment will be made for interest or dividends, but if any Holder surrenders
a Convertible Debenture for conversion after the close of business on the
Regular Record Date for the payment of an installment of interest and prior to
the opening of business on the next Interest Payment Date, then,
notwithstanding such conversion, the interest payable on such Interest Payment
Date will be paid to the registered Holder of such Convertible Debenture on
such Regular Record Date. In such event, such Convertible Debenture, when
surrendered for conversion, need not be
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accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares
issuable upon conversion of a Convertible Debenture is determined by dividing
the principal amount of the Convertible Debenture converted by the conversion
price in effect on the Conversion Date. No fractional shares will be issued
upon conversion but a cash adjustment will be made for any fractional interest.
The outstanding principal amount of any Security shall be reduced by the
portion of the principal amount thereof converted into shares of Common Stock.
[The Convertible Debentures of this series are issuable only in registered
form without coupons in denominations of $__ and any integral multiple
thereof.] [This Global Debenture is exchangeable for Convertible Debentures in
definitive form only under certain limited circumstances set forth in the
Indenture. Convertible Debentures of this series so issued are issuable only
in registered form without coupons in denominations of $25 and any integral
multiple thereof.] As provided in the Indenture and subject to certain
limitations [herein and] therein set forth, Convertible Debentures of this
series [so issued] are exchangeable for a like aggregate principal amount of
Convertible Debentures of this series of a different authorized denomination,
as requested by the Holder surrendering the same.
All terms used in this Convertible Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
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<PAGE> 36
[FORM OF ELECTION TO CONVERT]
ELECTION TO CONVERT
To: Kmart Corporation
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion
below designated, into Common Stock of KMART CORPORATION in accordance with the
terms of the Indenture referred to in this Convertible Debenture, and directs
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Date: ____________, ____
in whole __
Portions of Security to be converted ($25
or integral multiples-thereof):
$_________________
____________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number
____________________________________________
____________________________________________
____________________________________________
Signature Guarantee:1 ______________________
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<PAGE> 37
ARTICLE IX
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 9.1. Original Issue of Convertible Debentures.
Convertible Debentures in the aggregate principal amount of $___________
may, upon execution of this First Supplemental Indenture, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Convertible Debentures to or upon the
written order of the Company, signed by its Chairman, its Vice Chairman, its
President, or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein
and therein provided.
SECTION 10.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 10.3. Governing Law.
This First Supplemental Indenture and each Debenture shall be deemed to be
a contract made under the internal laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.
SECTION 10.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Convertible Debentures shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
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<PAGE> 38
First Supplemental Indenture or of the Convertible Debentures, but this First
Supplemental Indenture and the Convertible Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 10.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, on the date or dates indicated in the
acknowledgements and as of the day and year first above written.
KMART CORPORATION
By ______________________________
Name:
Title:
[Seal]
Attest:
By:______________________
The Bank of New York
as Trustee
By ______________________________
Name:
Title:
Attest:
By:___________________
1. Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
36
<PAGE> 1
EXHIBIT 4(j)
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
Kmart Financing [I] [II] [III] [IV]
Dated as of March __, 1996
====================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation................................. 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application............................... 5
SECTION 2.2 Lists of Holders of Securities................................. 5
SECTION 2.3 Reports by the Preferred Guarantee Trustee..................... 6
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee................ 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent............... 6
SECTION 2.6 Events of Default; Waiver...................................... 6
SECTION 2.7 Event of Default; Notice....................................... 7
SECTION 2.8 Conflicting Interests.......................................... 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee .......... 7
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.................. 9
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee.......... 11
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility....................... 12
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees............................................. 12
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee ..................................................... 13
SECTION 5.2 Waiver of Notice and Demand.................................... 13
SECTION 5.3 Obligations Not Affected....................................... 14
SECTION 5.4 Rights of Holders.............................................. 15
SECTION 5.5 Guarantee of Payment........................................... 15
SECTION 5.6 Subrogation.................................................... 15
SECTION 5.7 Independent Obligations........................................ 15
<PAGE> 3
Page
----
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.................................... 16
SECTION 6.2 Ranking ...................................................... 16
ARTICLE VII
TERMINATION
SECTION 7.1 Termination................................................... 16
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation................................................... 17
SECTION 8.2 Indemnification............................................... 17
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns....................................... 18
SECTION 9.2 Amendments................................................... 18
SECTION 9.3 Notices...................................................... 18
SECTION 9.4 Benefit...................................................... 19
SECTION 9.5 Governing Law................................................ 19
ii
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of March __, 1996, is executed and delivered by Kmart Corporation, a Michigan
corporation (the "Guarantor"), and The Bank of New York, as trustee (the
"Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
Kmart Financing [I] [II] [III] [IV], a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of ________, 1996, among the trustees of the Issuer
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof [ ] preferred securities, having an
aggregate liquidation amount of $[ ], designated the _____%
Convertible Trust Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein.
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Indenture), has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments under this Preferred Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
<PAGE> 5
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from
time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless other
wise defined in this Preferred Securities Guarantee or unless
the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in the City of New York, New York are authorized or required by
any applicable law to close.
"Common Securities" means the convertible common securities representing
common undivided beneficial interests in the assets of the Issuer.
"Preferred Guarantee Trustee" means The Bank of New York, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms
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<PAGE> 6
of this Preferred Securities Guarantee and thereafter means each such
Successor Preferred Guarantee Trustee.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at 101 Barclay
Street, Floor 21 West, New York, New York 10286.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the series of convertible junior subordinated debt
securities of the Guarantor designated the ___% Junior Subordinated Debentures
due [ ] held by the Institutional Trustee (as defined in the Declaration)
of the Issuer.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Preferred
Securities to the extent the Issuer shall have funds available therefor, (ii)
the redemption price (the "Redemption Price"), and all accrued and unpaid
Distributions to the date of redemption to the extent the Issuer has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the conversion of all of the Trust Securities into the Guarantor's common
stock or the distribution of Debentures to the Holders in exchange for
Preferred Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid Distributions on
the Preferred Securities to the date of payment, to the extent the Issuer shall
have funds available therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
(in either case, the "Liquidation Distribution"). If an event of default under
the Indenture has occurred and is continuing, the rights of holders of the
Common Securities to receive payments under the Common Securities Guarantee
Agreement are subordinated to the rights of Holders of Preferred Securities to
receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and records of
the Issuer of any Preferred Securities; provided, however, that, in determining
whether the holders of
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<PAGE> 7
the requisite percentage of Preferred Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor
or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents
of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of ________, 1996, among the
Guarantor (the "Debenture Issuer") and The Bank of New York, N.A., as trustee,
and any indenture supplemental thereto pursuant to which certain subordinated
debt securities of the Debenture Issuer are to be issued to the Property
Trustee of the Issuer.
"Majority in liquidation amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association,
4
<PAGE> 8
joint stock company, limited liability company, trust, unincorporated
association, or government or any agency or political subdivision thereof, or
any other entity of whatever nature.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Preferred Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Securities" means the Common Securities and the Preferred
Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and
(b) if and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require,
of the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within 1 Business Day after January 1 and June
30 of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Guarantee Trustee
provided, that the
5
<PAGE> 9
Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities,
waive any past Event of Default and its consequences. Upon such waiver, any
such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
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<PAGE> 10
SECTION 2.7 Event of Default; Notice
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred
Securities Guarantee to any Person except a Holder of Preferred Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor
Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee
Trustee of its appointment to act as Successor Preferred Guarantee Trustee.
The right, title and interest of the Preferred Guarantee Trustee shall
automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and
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<PAGE> 11
is continuing, the Preferred Guarantee Trustee shall enforce this Preferred
Securities Guarantee for the benefit of the Holders of the Preferred
Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read
into this Preferred Securities Guarantee against the Preferred Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6) and is actually known to a Responsible Officer
of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee
shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the requirements of this
Preferred Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically required to be
furnished to the Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be under a duty to examine the same to determine
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<PAGE> 12
whether or not they conform to the requirements of this Preferred
Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Preferred
Guarantee Trustee, unless it shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
liquidation amount of the Preferred Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power conferred upon
the Preferred Guarantee Trustee under this Preferred Securities Guarantee;
and
(iv) no provision of this Preferred Securities Guarantee shall require the
Preferred Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the Preferred
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it under
the terms of this Preferred Securities Guarantee or indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this Preferred
Securities Guarantee shall be sufficiently evidenced by an Officers'
Certificate.
(iii) Whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable that
a matter be proved or established
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<PAGE> 13
before taking, suffering or omitting any action hereunder, the Preferred
Guarantee Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel, and the
written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its employees. The
Preferred Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder, unless such
Holder shall have provided to the Preferred Guarantee Trustee such security
and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses and the
expenses of the Preferred Guarantee Trustee's agents, nominees or custodians)
and liabilities that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be requested by the
Preferred Guarantee Trustee; provided that, nothing contained in this Section
3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon
the occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
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<PAGE> 14
(viii) The Preferred Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the Preferred
Guarantee Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or its agents
hereunder shall bind the Holders of the Preferred Securities, and the
signature of the Preferred Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party shall be
required to inquire as to the authority of the Preferred Guarantee Trustee to
so act or as to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be conclusively evidenced
by the Preferred Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred Securities Guarantee
the Preferred Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation amount of the
Preferred Securities, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (iii)
shall be protected in conclusively relying on or acting in accordance with
such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available
to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Preferred Securities
Guarantee
The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
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<PAGE> 15
ARTICLE IV
Preferred Guarantee TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities
and Exchange Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then, for the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustee
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
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<PAGE> 16
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or
until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Preferred Guarantee Trustee may petition any court of competent jurisdiction
for appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any
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right to require a proceeding first against the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or
in connection with, the Preferred Securities (other than an extension of time
for payment of Distributions, Redemption Price, Liquidation Distribution or
other sum payable that results from the extension of any interest payment
period on the Debentures or any extension of the maturity date of the
Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of
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<PAGE> 18
a guarantor, it being the intent of this Section 5.3 that the obligations of
the Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce such Preferred
Securities Guarantee, any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce the Preferred Guarantee
Trustee's rights under this Preferred Securities Guarantee, without first
instituting a legal proceeding against the Issuer, the Preferred Guarantee
Trustee or any other person or entity. The Guarantor waives any right or
remedy to require that any action be brought first against the Issuer or any
other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 5.7 Independent Obligations
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The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default or an event of default under the Declaration,
then (a) the Guarantor shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire 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 Guarantor of its obligations under any employee benefit
plans or the satisfaction by the Guarantor of its obligations pursuant to any
contract or security requiring the Guarantor to purchase shares of Common
Stock, (ii) as a result of a reclassification of the Guarantor's capital stock
or the exchange or conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock or, (iii)
the purchase of fractional interests in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock of the
Guarantor or the security being converted or exchanged) or make any guarantee
payments with respect to the foregoing and (b) the Guarantor 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 Guarantor which
rank pari passu with or junior to the Debentures.
SECTION 6.2 Ranking
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right
of payment to all other liabilities of the Guarantor, (ii) pari passu with the
most senior Preferred or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect of any Preferred or preference stock of any Affiliate of the
Guarantor, and (iii) senior to the Guarantor's common stock.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Preferred Securities Guarantee shall terminate upon (i) full payment
of the Redemption Price of all Preferred Securities, (ii) upon the distribution
of the Guarantor's common stock to all of the Holders in respect of the
conversion of the Preferred Securities into the Guarantor's common stock or
upon the distribution of the Debentures to the Holders of all of the Preferred
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing,
this Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters
the Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Guarantor, including information, opinions, reports
or statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 Indemnification
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The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligation to indemnify as set forth in this Section
8.2 shall survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely affect the rights
of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all the outstanding Preferred Securities. The provisions of
Section 12.2 of the Declaration with respect to meetings of Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Preferred Securities Guarantee shall be
in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The Bank of New York
101 Barclay Street
Floor 21 West
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<PAGE> 22
New York, New York 10286
Attention:
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention:__________
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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<PAGE> 23
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
Kmart Corporation, as Guarantor
By:__________________________________
Name:
Title:
The Bank of New York, as Preferred Guarantee
Trustee
By:__________________________________
Name:
Title:
20
<PAGE> 1
EXHIBIT 5(c)
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
March 14, 1996
Kmart Corporation
Kmart Financing I
Kmart Financing II
Kmart Financing III
Kmart Financing IV
c/o Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Re: Kmart Corporation;
Kmart Financing I, II, III and IV;
Registration Statement on Form S-3
(Registration No. 33-64905)
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to (1) Kmart Financing I, Kmart Financing
II, Kmart Financing III and Kmart Financing IV (each, a "Kmart Trust"
and, together, the "Kmart Trusts"), each a statutory business trust formed under
the laws of the State of Delaware, and (2) Kmart Corporation (the "Company"), a
corporation organized under the laws of the State of Michigan, in connection
with the preparation of a Registration Statement on Form S-3 (Registration No.
33-64905), filed by the Company and the Kmart Trusts with the Securities and
Exchange Commission (the "Commission") on December 11, 1995 under the
Securities Act of 1933, as amended (the "Act"), Amendment No. 1 thereto, filed
with the Commission on February 16, 1996 and Amendment No. 2 thereto, filed
with the Commission on March 14, 1996 (such Registration Statement, as so
amended, being hereinafter referred to as the "Registration Statement"), in
connection with the
<PAGE> 2
Kmart Financing I, II, III and IV
Kmart Corporation
Page 2
public offering of preferred securities (the "Trust Preferred Securities")
of each of the Kmart Trusts, and certain other securities.
The Trust Preferred Securities of each Kmart Trust are to be issued
pursuant to the Amended and Restated Declaration of Trust of such Kmart Trust
(each, a "Declaration" and, collectively, the "Declarations"), each such
Declaration being among the Company, as sponsor and as the issuer of certain
debentures to be held by the Institutional Trustee (as defined below) of such
Kmart Trust, The Bank of New York (Delaware), as Delaware trustee (the
"Delaware Trustee"), The Bank of New York, as institutional trustee (the
"Institutional Trustee"), and Marvin P. Rich and James P. Churilla, as trustees
(together, the "Regular Trustees").
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act. Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in the Registration
Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the certificate
of trust of each of the Kmart Trusts (the "Certificates of Trust") in each case
filed with the Secretary of State of the State of Delaware on February 16,
1996; (ii) the form of the Declaration of each of the Kmart Trusts (including
the designations of the terms of the Trust Preferred Securities of such Kmart
Trust annexed thereto); (iii) the form of the Trust Preferred Securities of
each of the Kmart Trusts; (iv) the form of the preferred securities guarantee
agreement (the "Trust Preferred Securities Guarantee"), between the Company and
The Bank of New York, as guarantee trustee (the "Trust Preferred Securities
Guarantee Trustee"); (v) the form of the Debentures; (vi) the form of the
subordinated indenture (the "Indenture"), between the Company and The Bank of
New York, as debt trustee (the "Debt Trustee"); and (vii) the form of the
supplemental inden-
<PAGE> 3
Kmart Financing I, II, III and IV
Kmart Corporation
Page 3
ture, between the Company and the Debt Trustee, in each case in the form
filed as an exhibit to the Registration Statement. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
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 of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than the Kmart Trusts, we have assumed that
such parties had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such parties
of such documents and that, except as set forth in paragraphs (2) and (3) below,
such documents constitute valid and binding obligations of such parties. In
addition, we have assumed that the Declaration of each Kmart Trust, the Trust
Preferred Securities of each Kmart Trust, the Trust Preferred Securities
Guarantee, the Debentures and the Indenture when executed, will be executed in
substantially the forms reviewed by us and that the terms of the Debentures when
established in conformity with the Indenture will not violate any applicable
law. 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, trustees and other representatives
of the Company, the Kmart Trusts and others.
Members of our firm are admitted to the bar in the States of Delaware and
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 herein. We have further assumed that no other law
would affect any of the conclusions set forth herein.
<PAGE> 4
Kmart Financing I, II, III and IV
Kmart Corporation
Page 4
Based on and subject to the foregoing and to the other qualifications and
limitations set forth herein, we are of the opinion that:
1. The Trust Preferred Securities of each Kmart Trust, when the Declaration
of such Kmart Trust is duly executed and delivered by the parties thereto, will
be duly authorized for issuance and, when issued and executed in accordance with
such Declaration and delivered and paid for as contemplated by the Registration
Statement, will be validly issued, fully paid and nonassessable, representing
undivided beneficial interests in the assets of such Kmart Trust; and the
holders of such Trust Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We bring to your attention, however, that the holders of Trust
Preferred Securities of each Kmart Trust may be obligated, pursuant to the
Declaration of such Kmart Trust, to (i) provide indemnity and/or security in
connection with and pay taxes or governmental charges arising from transfers of
such Trust Preferred Securities and (ii) provide security and indemnity in
connection with the requests of or directions to the Institutional Trustee of
such Kmart Trust to exercise its rights and powers under the Declaration of such
Kmart Trust.
2. The Trust Preferred Securities Guarantee, when duly executed and
delivered by the parties thereto, will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that (a) enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
<PAGE> 5
Kmart Financing I, II, III and IV
Kmart Corporation
Page 5
3. The Debentures, when the Indenture has been duly authorized, executed
and delivered and when the terms of the Debentures have been established in
conformity with the Indenture, when duly executed, delivered, authenticated and
issued in accordance with the Indenture and delivered and paid for as
contemplated in the Registration Statement, will be valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
This opinion is furnished to you solely for your benefit in connection
with the filing of the Registration Statement and, except as set forth below,
is not to be used, circulated, quoted or otherwise referred to for any other
purpose or relied upon by any other person for any purpose without our prior
written consent. We hereby consent to the use of our name under the heading
"Legal Matters" in the prospectus which forms a part of the Registration
Statement. We also hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder. This opinion is
expressed as of the date hereof unless otherwise expressly stated and we
disclaim any undertaking to advise you of the facts stated or assumed herein or
any subsequent changes in applicable law.
Very truly yours,
/s/ 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
March 13, 1996
<PAGE> 1
EXHIBIT 25(a)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Senior Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF
THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Walter N. Gitlin
------------------------
Name: Walter N. Gitlin
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(b)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Subordinated Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24
OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Walter N. Gitlin
------------------------
Name: Walter N. Gitlin
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(c)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART FINANCING I
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24
OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Walter N. Gitlin
------------------------
Name: Walter N. Gitlin
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(d)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART FINANCING II
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Mary Jane Morrissey
--------------------------
Name: Mary Jane Morrissey
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(e)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART FINANCING III
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.E1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Mary Jane Morrissey
--------------------------
Name: Mary Jane Morrissey
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(f)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART FINANCING IV
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Mary Jane Morrissey
--------------------------
Name: Mary Jane Morrissey
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(g)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Guarantees of Preferred Securities of Kmart Financing I
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Robert F. McIntyre
-------------------------
Name: Robert F. McIntyre
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(h)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Guarantees of Preferred Securities of Kmart Financing II
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 Filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Robert F. McIntyre
-------------------------
Name: Robert F. McIntyre
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(i)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Guarantees of Preferred Securities of Kmart Financing III
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.E1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Robert F. McIntyre
-------------------------
Name: Robert F. McIntyre
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25(j)
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
________________________
Guarantees of Preferred Securities of Kmart Financing IV
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of February, 1996.
THE BANK OF NEW YORK
By: /S/Robert F. McIntyre
-------------------------
Name: Robert F. McIntyre
Title: Vice President
4
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
