<PAGE>
As filed with the Securities and Exchange Commission on August 4, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE KROGER CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
OHIO 31-0345740
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1014 VINE STREET
CINCINNATI, OHIO 45202
(513) 762-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
PAUL W. HELDMAN, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
THE KROGER CO.
1014 VINE STREET
CINCINNATI, OHIO 45202
(513) 762-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
Copies of all communications, including communications sent to the agent for
service, should be sent to:
ROBERT W. REEDER, ESQ.
SULLIVAN & CROMWELL
250 PARK AVENUE
NEW YORK, NEW YORK 10177
(212) 558-4000
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, please 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 10,706,638
$1 per share........... shares $31.9375(1) $341,943,251(1) $117,911.47
- ------------------------------------------------------------------------------------
Common Stock Purchase
Rights................. (2) (2) (2) (2)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(c), estimated solely for the purpose of calculating
the registration fee, and based on the average high and low sales prices
reported on the New York Stock Exchange on August 3, 1995.
(2) Common Stock Purchase Rights will be issued in a number equal to the shares
of Common Stock to be issued for no additional consideration and therefore
no registration fee is required. Prior to the occurrence of certain events,
the Common Stock Purchase Rights will not be exercisable or evidenced
separately from the Common Stock.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 4, 1995
10,706,638 SHARES
THE KROGER CO.
COMMON STOCK
(PAR VALUE $1 PER SHARE)
-----------
This Prospectus covers the issuance of a maximum of 10,706,638 shares of
common stock, par value $1.00 per share (the "Common Stock"), of The Kroger Co.
(the "Company") under the standby arrangements described under "Standby
Arrangements" and the reoffering of any Common Stock issued upon conversion of
the Company's outstanding 6 3/8% Convertible Junior Subordinated Notes due 1999
(the "Notes") into Common Stock by Goldman, Sachs & Co. (the "Purchaser") or
pursuant to such standby arrangements.
On August 4, 1995, the Company called for redemption on September 5, 1995
(the "Redemption Date") all of its outstanding Notes at a redemption price of
104.554% of the principal amount of Notes, plus accrued interest thereon from
June 1, 1995 to the Redemption Date (the "Redemption Price"). The Notes (or any
portion thereof which is $1,000 or an integral multiple thereof) may be
converted into the Common Stock of the Company at a conversion price of $18.68
of principal amount of Notes per share of Common Stock or approximately 53.5
shares of Common Stock for each $1,000 principal amount of Notes at any time
prior to 5:00 p.m. Eastern Daylight Time on September 5, 1995 (the "Expiration
Time"). Cash will be paid in lieu of any fractional shares of Common Stock
issuable upon conversion of the Notes. No payment or adjustment to the
conversion price will be made on account of accrued interest on the Notes. ANY
NOTES NOT SO SURRENDERED FOR CONVERSION PRIOR TO THE EXPIRATION TIME WILL BE
REDEEMED FOR CASH ON THE REDEMPTION DATE.
The Company has made arrangements with the Purchaser pursuant to which the
Purchaser has agreed to purchase from the Company, at the option of the
Company, up to the number of shares (the "Shares") of Common Stock equal to the
positive difference, if any, between (i) the number of shares (the "Redemption
Shares") of Common Stock that would have been issuable upon conversion of the
Notes that are not surrendered for conversion on or prior to the Expiration
Time, minus (ii) (A) if on the Expiration Time the closing price of the Common
Stock is greater than $19.84, 535,332 shares of Common Stock or (B) if such
closing price is not greater than $19.84, zero, at a price per share of $19.34,
if there are fewer than 2,675,000 Redemption Shares, and $19.10 per share if
there are 2,675,000 or more Redemption Shares. The Purchaser has agreed to
remit to the Company not less than 50% of the amount, if any, by which the
aggregate net proceeds received by the Purchaser from sales of the Shares
exceeds the purchase price of the Shares. The Purchaser may also purchase Notes
in the open market or otherwise prior to the Expiration Time and has agreed to
convert into Common Stock all Notes which it so purchases. See "Standby
Arrangements" for a description of the Purchaser's compensation and
indemnification arrangements with the Company.
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS
RELEVANT TO AN INVESTMENT IN THE SHARES OF COMMON STOCK. SO LONG AS THE MARKET
PRICE OF THE COMMON STOCK IS GREATER THAN $19.84 PER SHARE AT THE TIME OF
CONVERSION, A HOLDER OF NOTES WHO EXERCISES SUCH HOLDER'S CONVERSION RIGHTS
WILL RECEIVE COMMON STOCK WITH A MARKET VALUE, PLUS CASH IN LIEU OF ANY
FRACTIONAL SHARE, GREATER THAN THE AMOUNT OF CASH THE HOLDER WOULD OTHERWISE BE
ENTITLED TO RECEIVE UPON THE REDEMPTION OF THE NOTES, BEFORE DEDUCTING ANY
APPLICABLE TRANSFER TAXES.
-----------
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.
-----------
GOLDMAN, SACHS & CO.
-----------
The date of this Prospectus is August , 1995.
<PAGE>
On August 3, 1995, the closing price of the Common Stock as reported on the
New York Stock Exchange Composite Tape was $32 per share. If a holder of $1,000
principal amount of Notes on that date had converted such principal amount,
such holder would have received Common Stock (and cash in lieu of a fractional
share) having a market value equal to $1,713, based on the closing price of
$32. The market price of the Common Stock received upon conversion is subject
to fluctuation, and the holder may incur various transaction costs if the
Common Stock is sold. So long as the market price of the Common Stock is
greater than $19.84 per share at the time of conversion, a holder of Notes who
exercises such holder's conversion rights will receive Common Stock with a
market value, plus cash in lieu of any fractional share, greater than the
amount of cash the holder would otherwise be entitled to receive upon the
redemption of the Notes, before deducting any applicable transfer taxes. See
"Redemption of the Notes and Alternatives to Redemption".
Prior to, on or after the Redemption Date, the Purchaser may offer shares of
Common Stock pursuant to this Prospectus directly to the public, at prices set
from time to time by it, including shares acquired through conversion of Notes
acquired by the Purchaser. Each such price when set will not exceed the greater
of the last sale or current offering price of the Common Stock on the New York
Stock Exchange plus the amounts of any concession to dealers, and an offering
price on any calendar day will not be increased more than once during such day.
In effecting such transactions, the Purchaser may realize profits or losses
independent of the compensation referred to under "Standby Arrangements". The
Purchaser may also make sales to dealers at prices which represent concessions
from the prices at which such shares are then being offered to the public. The
amount of such concessions will be determined from time to time by the
Purchaser. Any Common Stock so offered is offered subject to prior sale, when,
as and if received by the Purchaser, and subject to its right to reject orders
in whole or in part. This Prospectus does not constitute an offer to sell any
securities other than the Common Stock offered by the Purchaser.
The outstanding shares of Common Stock and any shares acquired through
conversion of Notes are listed, and the Shares will be listed, on the New York
Stock Exchange.
----------------
IN CONNECTION WITH THIS OFFERING, THE PURCHASER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OR THE
COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
The Kroger Co. (together with its consolidated subsidiaries, the "Company")
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed with the Commission can be inspected and copied at the
Commission's public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7
World Trade Center, New York, New York 10048. Copies of such material can be
obtained by mail from the Commission's Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information also can be inspected at the offices of the
New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York
10005.
The Company has filed a registration statement on Form S-3 (herein, together
with all amendments and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and the exhibits filed as a part thereof. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such references.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1994, as amended.
2. Quarterly Reports on Form 10-Q for the quarters ended March 25, 1995
and June 17, 1995.
3. Reports on Form 8-K dated January 31, 1995, April 18, 1995 and July
18, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the shares of Common Stock hereby shall be
deemed to be incorporated herein by reference and to be a part hereof from the
respective dates of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the Registration Statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to The Kroger Co., 1014 Vine
Street, Cincinnati, Ohio 45202, Attention: Paul W. Heldman, (513) 762-4000.
3
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
The following factors, in addition to other information set forth in this
Prospectus, should be considered carefully in evaluating the Company and its
business before acquiring any Common Stock offered by this Prospectus.
SUBSTANTIAL INDEBTEDNESS
At June 17, 1995, the Company had $3.7 billion of indebtedness outstanding,
including $999.5 million outstanding under the Senior Competitive Advance and
Revolving Credit Facility Agreement (the "Credit Agreement"), dated as of July
19, 1994, among the Company and Chemical Bank and Citibank, N.A., as
administrative agents, and the lenders named therein (collectively, the
"Senior Lenders") (with an additional $626.9 million available for borrowing
under the Working Capital Facility thereof). This degree of leverage has
important consequences to investors in the Common Stock. The Company has
significant interest payment and principal repayment obligations and the
ability of the Company to satisfy such interest and principal obligations is
subject to prevailing economic, financial and business conditions and to other
factors beyond the Company's control. A significant portion of the Company's
indebtedness bears interest at floating rates causing the Company's results of
operations to be sensitive to prevailing interest rates.
RESTRICTIONS IMPOSED BY THE CREDIT AGREEMENT AND OTHER AGREEMENTS
The Credit Agreement contains numerous restrictive covenants which, among
other things, restrict the ability of the Company to dispose of assets, incur
debt, pay dividends, make capital expenditures and make certain investments or
acquisitions and which otherwise restrict corporate activities. In addition,
the Company is required to maintain specified financial ratios and levels,
including fixed charge coverage and total debt ratios. The ability of the
Company to comply with such provisions depends on its future performance,
which is subject to prevailing economic, financial and business conditions and
to other factors beyond the Company's control.
The indentures relating to the Company's outstanding public debt securities
place limitations on, among other things, the Company's ability to incur
indebtedness, pay dividends, acquire assets and enter into leases and sale and
leaseback transactions. The indentures, however, do not contain any covenant
requiring the Company to meet or maintain on a day-to-day basis any specific
financial test or ratio.
RESTRICTION ON PAYMENT OF DIVIDENDS
As long as any amount remains outstanding under the Credit Agreement, the
Company may not (i) make or declare, or permit any subsidiary to make or
declare, any dividend or other distribution on account of any shares of any
class of capital stock, including the Common Stock, of the Company or (ii)
purchase, redeem or otherwise acquire, or permit any subsidiary to purchase,
redeem or otherwise acquire, any shares of capital stock, including the Common
Stock, of the Company, except for dividends on the Common Stock payable in
shares of Common Stock and the repurchase of odd-lot shares of Common Stock in
an amount not exceeding $10 million in aggregate and $2 million in any one
fiscal year. The indentures relating to the Company's outstanding public debt
securities also contain restrictions on the payment of dividends and the
repurchase of Common Stock. See "Dividends." Until the amounts outstanding
under the Credit Agreement are paid, and subject to the restrictions contained
in the indentures, the Company will not be able to pay a dividend on the
Common Stock.
NOTEHOLDER CONSIDERATIONS ON CONVERSION OR REDEMPTION
On August 3, 1995, the closing price of the Common Stock as reported on the
New York Stock Exchange Composite Tape was $32 per share. If a holder of
$1,000 principal amount of Notes on that date had converted such principal
amount, such holder would have received Common Stock (and cash in lieu of a
fractional share) having a market value equal to $1,713, based on the closing
price of $32. The market price of the Common Stock received upon conversion is
subject to fluctuation, and the holder may incur various transaction costs if
the Common Stock is sold. So long as the market price of the Common Stock is
greater than $19.84 per share at the time of conversion, a holder of Notes who
4
<PAGE>
exercises such holder's conversion rights will receive Common Stock with a
market value, plus cash in lieu of any fractional share, greater than the
amount of cash the holder would otherwise be entitled to receive upon the
redemption of the Notes, before deducting any applicable transfer taxes. See
"Redemption of the Notes and Alternatives to Redemption".
LABOR AGREEMENTS
The Company is party to more than 200 collective bargaining agreements with
local unions representing approximately 150,000 of the Company's employees.
Among the contracts that have expired or will expire in 1995 are those covering
food clerks in Memphis, Houston, Indianapolis and Columbus. Typical agreements
are 3 to 5 years in duration, and as such agreements expire, the Company
expects to negotiate with the unions and to enter into new collective
bargaining agreements. There can be no assurance, however, that such agreements
will be reached without work stoppage. A prolonged work stoppage affecting a
substantial number of stores could have a material adverse effect on the
Company's results of operations or financial position.
LEGAL PROCEEDINGS
There are pending against the Company various claims and lawsuits arising in
the normal course of business, including suits charging violations of certain
antitrust and civil rights laws. Some of these suits purport or have been
determined to be class actions and/or seek substantial damages. Any damages
that may be awarded in antitrust cases will be automatically trebled. Although
it is not possible at this time to evaluate the merits of these claims and
lawsuits, nor their likelihood of success, the Company is of the opinion that
any resulting liability will not have a material adverse effect on the
Company's results of operations or financial position.
Fry's Food Stores of Arizona, Inc. ("Fry's"), a subsidiary of the Company, is
currently a defendant and cross-defendant in actions pending in the U.S.
District Court for the Southern District of Florida entitled Harley S. Tropin
v. Kenneth Thenen, et. al., No. 93-2502-CIV-MORENO and Walco Investments, Inc.,
et al. v. Kenneth Thenen, et. al., No. 93-2534-CIV-MORENO. The plaintiff and
cross-claimants in these actions seek unspecified damages against numerous
defendants and cross-defendants, including Fry's. Plaintiffs and cross-
claimants allege that a former employee of Fry's supplied false information to
third parties in connection with purported sales transactions between Fry's and
affiliates of Premium Sales Corporation or certain limited partnerships. Claims
have been alleged against Fry's for breach of implied contract, aiding and
abetting conspiracy, conversion and civil theft, negligent supervision, fraud,
and violations of 18 U.S.C. (S)(S) 1961 and 1962(d) and Chapter 895, Florida
Statutes. Fry's believes that it has substantial meritorious defenses to the
claims alleged against it, and Fry's intends to defend the litigation
vigorously.
THE COMPANY
The Company was founded in 1883, incorporated in 1902, and maintains its
principal executive offices in Cincinnati, Ohio. The Company is the nation's
largest supermarket operator measured by total sales for 1994. At December 31,
1994, the Company operated 1,301 supermarkets in 24 states and 932 convenience
stores in 16 states. The Company also operates food processing facilities which
enable the Company's stores to offer quality, low-cost private label perishable
and non-perishable products, and an efficient warehouse and distribution system
which supplies products to its stores.
The Company's principal executive offices are located at 1014 Vine Street,
Cincinnati, Ohio 45202, and its telephone number at that address is (513) 762-
4000.
REDEMPTION OF NOTES AND ALTERNATIVES TO REDEMPTION
The Company has called for redemption at 5:00 p.m., Eastern Daylight time, on
September 5, 1995 (the "Redemption Date"), all of the Company's outstanding
Notes. As of August 3, 1995, $199,843,000 principal amount of Notes was
outstanding.
The following alternatives are available to holders of Notes:
1. Conversion into Common Stock. Convert the Notes (or any portion thereof
which is $1,000 or an integral multiple thereof) into the Common Stock of the
Company at a conversion price of $18.68 of principal amount of Notes per share
of Common Stock or approximately 53.5 shares of Common Stock
5
<PAGE>
for each $1,000 principal amount of Notes. Cash will be paid in lieu of any
fractional share in an amount equal to such fraction multiplied by the last
reported sale price per share of Common Stock, regular way, on the day prior to
the day of conversion or, if no such sale takes place on such day, the average
of the reported closing bid and asked prices, regular way, on the NYSE. No
payment or adjustment to the conversion price will be made on account of
accrued interest on the Notes. On August 3, 1995, the last reported sale price
of the Common Stock on the NYSE Composite Tape was $32 per share. On the basis
of such last reported sale price of the Common Stock, 53.5 shares of the Common
Stock had a value (including cash in lieu of any fractional share, determined
as set forth above) of $1,713. THE CONVERSION RIGHT EXPIRES AT 5:00 P.M.,
EASTERN DAYLIGHT TIME, ON SEPTEMBER 5, 1995.
The Notes are currently held in book-entry form through the facilities of The
Depository Trust Company (the "Depository"). Accordingly, in order for a
beneficial owner of an interest in a Note to exercise such person's conversion
rights, such person must comply with the procedures of the Depository, if a
participant in the Depository (a "participant"), or if such person is not a
participant in the Depository, through the procedures of the participant
through which such person owns its interest in the Notes, to effect a
conversion.
The Company will decide, in its sole discretion, all questions as to the form
of documents and the validity, eligibility (including time of receipt) and
acceptance for conversion by the Company of any Notes. Any defect or
irregularity in the surrender or delivery of any document in connection with
the conversion of Notes may result in such Notes not being converted into
Common Stock and, therefore, being redeemed on the Redemption Date.
SINCE IT IS THE TIME OF ACTUAL RECEIPT THAT DETERMINES WHETHER NOTES HAVE
BEEN PROPERLY PRESENTED FOR CONVERSION, SUFFICIENT TIME SHOULD BE ALLOWED FOR A
BOOK-ENTRY TRANSFER TO BE MADE, PRIOR TO 5:00 P.M., EASTERN DAYLIGHT TIME, ON
SEPTEMBER 5, 1995. NOTES NOT ACTUALLY RECEIVED FOR CONVERSION BY A BOOK-ENTRY
TRANSFER PRIOR TO SUCH TIME WILL BE REDEEMED AS SET FORTH BELOW.
2. Sale in Open Market. Sell the Notes in the open market. Holders of Notes
who wish to sell their Notes in the open market should consult with their own
advisors regarding if and when they should sell their Notes and the tax
consequences thereof. Holders may incur various fees and expenses in connection
with any such sale.
3. Redemption. Allow the Notes to be redeemed. Pursuant to the terms of the
Indenture between the Company and Chemical Bank, as Trustee, dated December 1,
1992, holders of the Notes will be entitled to receive upon redemption 104.554%
of the principal amount of Notes, plus accrued interest thereon from June 1,
1995 to the Redemption Date (the "Redemption Price"). The holder of $1,000
principal amount of Notes redeemed at the Redemption Price would receive $1,062
in cash. Payment of the Redemption Price will be made by Chemical Bank, as
Trustee as redemption agent (the "Redemption Agent"), on the Redemption Date.
On and after the Redemption Date, interest will cease to accrue and holders of
Notes will not have any rights as such holders other than the right to receive
the Redemption Price upon such surrender for redemption.
NOTES NOT ACTUALLY RECEIVED FOR CONVERSION BY BOOK-ENTRY TRANSFER PRIOR TO
5:00 P.M., EASTERN DAYLIGHT TIME, ON SEPTEMBER 5, 1995, WILL BE REDEEMED AS SET
FORTH ABOVE ON THE REDEMPTION DATE.
6
<PAGE>
Based on the above-stated last reported sale price of the Common Stock on
August 3, 1995, the market value of the Common Stock into which $1,000
principal amount of Notes is convertible (including cash in lieu of any
fractional share, determined as set forth above) would be $1,713, which amount
is higher than the amount ($1,062) to be received upon redemption. The market
price of the Common Stock received upon conversion, however, is subject to
fluctuation, and the holder may incur various transaction costs if such Common
Stock is sold. Holders of Notes are urged to obtain current market quotations
for the Common Stock.
SO LONG AS THE MARKET PRICE OF THE COMMON STOCK IS GREATER THAN $19.84 PER
SHARE AT THE TIME OF CONVERSION, A HOLDER WHO CONVERTS HIS OR HER NOTES WILL
RECEIVE COMMON STOCK AND CASH IN LIEU OF ANY FRACTIONAL SHARE (DETERMINED AS
SET FORTH ABOVE) WITH A MARKET VALUE GREATER THAN THE AMOUNT OF CASH RECEIVABLE
UPON THE REDEMPTION OF THE NOTES.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock to the Purchaser pursuant
to the arrangements described under "Standby Arrangements" will be used to
redeem any Notes not surrendered for conversion.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the NYSE. The following table sets
forth, for each period shown, the range of high and low sale prices of the
Common Stock on the NYSE:
<TABLE>
<CAPTION>
COMMON STOCK
PRICE RANGE
---------------
HIGH LOW
------- -------
<S> <C> <C>
1993
1st Quarter............................................... $19 1/2 $14
2nd Quarter............................................... 19 5/8 16 5/8
3rd Quarter............................................... 21 3/4 16 1/4
4th Quarter............................................... 20 7/8 17 1/2
1994
1st Quarter............................................... 25 7/8 19 3/8
2nd Quarter............................................... 25 3/8 21 1/8
3rd Quarter............................................... 26 7/8 23
4th Quarter............................................... 26 7/8 21 3/4
1995
1st Quarter............................................... 27 7/8 23 3/8
2nd Quarter............................................... 28 25
3rd Quarter (through August 3, 1995)...................... 33 26 1/2
</TABLE>
On August 3, 1995, the last reported sale price for the Company's Common
Stock on the NYSE was $32 per share.
7
<PAGE>
DIVIDENDS
As long as any amount remains outstanding under the Credit Agreement, the
Company may not (i) declare or make, or permit any subsidiary to declare or
make, any dividend or other distribution on account of any class of shares of
its capital stock, including the Common Stock, or (ii) purchase, redeem or
otherwise acquire, or permit any subsidiary to purchase, redeem or otherwise
acquire, shares of its capital stock, including the Common Stock, except for
dividends of Common Stock on its outstanding shares of Common Stock and
repurchases of odd-lot shares of its Common Stock for a maximum aggregate value
of $10 million, not to exceed $2 million in any fiscal year.
The indentures for the Company's outstanding public debt contain covenants
restricting the payment of dividends on, or the redemption or repurchase of,
capital stock by the Company or any subsidiary.
DESCRIPTION OF THE CREDIT AGREEMENT
GENERAL
The following constitutes only a summary of the principal terms and
conditions of the Credit Agreement, and is qualified in its entirety by the
actual terms of the Credit Agreement, which was filed as an exhibit to the
Company's Form 8-K, dated July 20, 1994 and thereafter was amended on July 20,
1995. Whenever particular provisions or defined terms of the Credit Agreement
are referred to, such provisions or defined terms are incorporated herein by
reference as part of the statements made herein. For purposes of this
description of the Credit Agreement, the term "Company" refers only to The
Kroger Co. and does not include The Kroger Co.'s consolidated subsidiaries.
The Credit Agreement provides for a seven-year $1.750 billion Senior
Competitive Advance and Revolving Credit Facility Agreement (the "Facility").
COMMITMENT REDUCTIONS
The Credit Agreement expires on July 20, 2002 and is not otherwise subject to
amortization.
INTEREST RATES
Borrowings under the Facility bear interest at the option of the Company at a
rate equal to either (i) the highest, from time to time, of (A) the average of
publicly announced prime rate of Chemical Bank and Citibank, N.A., (B) 1/2%
over a moving average of secondary market morning offering rates for 3 month
certificates of deposit adjusted for reserve requirements, and (C) 1/2% over
the federal funds rate (the "Base Rate") plus the Applicable Percentage or (ii)
an adjusted Eurodollar rate based upon the London Interbank Offered Rate
("Eurodollar Rate") plus the Applicable Percentage. The Applicable Percentage
is zero for the Base Rate. The Applicable Percentage for Eurodollar Rate
advances is 0.3125% as of July 21, 1995.
COLLATERAL
The Company's obligations under the Facility are collateralized by a pledge
of a substantial portion of the Company's and certain of its Subsidiaries'
assets, including substantially all of the Company's and such Subsidiaries'
inventory and equipment and the stock of all Subsidiaries. Such collateral also
secures the Company's obligations under its Secured Debentures and also may
serve as security for other Senior Secured Debt.
PREPAYMENT
The Company may prepay the Facility, in whole or in part, at any time,
without a prepayment penalty.
8
<PAGE>
CERTAIN COVENANTS
The Credit Agreement contains covenants which, among other things, (i)
restrict investments, capital expenditures, and other material outlays and
commitments relating thereto, (ii) restrict the incurrence of debt, including
the incurrence of debt by subsidiaries, (iii) restrict dividends and payments,
prepayments, and repurchases of capital stock, (iv) restrict mergers and
acquisitions and changes of business or conduct of business, (v) restrict
transactions with affiliates, (vi) restrict certain sales of assets, (vii)
restrict changes in accounting treatment and reporting practices except as
permitted under generally accepted accounting principles, (viii) require the
maintenance of certain financial ratios and levels, including fixed charge
coverage ratios and total debt ratios and (ix) require the Company to maintain
interest rate protection providing that at least 50% of the Company's
indebtedness for borrowed money is maintained at a fixed rate of interest. See
"Certain Investment Considerations -- Restrictions Imposed by the Credit
Agreement and Other Agreements."
The following is a summary of certain of the covenants contained in the
Credit Agreement.
Maintenance of Fixed Charge Coverage Ratio. The Company is required to
maintain a ratio, for the Rolling Period in respect of each Fiscal Quarter,
determined as of the last day of each Fiscal Quarter of (i) the sum of (a)
Consolidated EBITDA for such Rolling Period and (b) Consolidated Rental Expense
for such Rolling Period to (ii) the sum of (a) Consolidated Cash Interest
Expense for such Rolling Period and (b) Consolidated Rental Expense for such
Rolling Period of not less than 1.7:1.
The Company's ratio of Consolidated EBITDA Available for Fixed Charges to
Consolidated Fixed Charges for the Rolling Period ended June 17, 1995 was
2.3:1.
Maintenance of Net Total Debt/Consolidated EBITDA Ratio. The Company is
required to maintain a ratio, determined as of the last day of each Fiscal
Quarter for the Rolling Period ending on such day, of (i) Net Total Debt to
(ii) Consolidated EBITDA during such period, of not more than the ratio set
forth below opposite such Fiscal Quarter.
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- ----------
<S> <C>
2nd Fiscal Quarter 1995....................................... 4.5 to 1.0
3rd Fiscal Quarter 1995....................................... 4.5 to 1.0
4th Fiscal Quarter 1995....................................... 4.4 to 1.0
1st Fiscal Quarter 1996....................................... 4.4 to 1.0
2nd Fiscal Quarter 1996....................................... 4.4 to 1.0
3rd Fiscal Quarter 1996....................................... 4.4 to 1.0
4th Fiscal Quarter 1996....................................... 4.3 to 1.0
1st Fiscal Quarter 1997....................................... 4.3 to 1.0
2nd Fiscal Quarter 1997....................................... 4.3 to 1.0
3rd Fiscal Quarter 1997....................................... 4.3 to 1.0
4th Fiscal Quarter 1997....................................... 4.2 to 1.0
1st Fiscal Quarter 1998....................................... 4.2 to 1.0
2nd Fiscal Quarter 1998....................................... 4.2 to 1.0
3rd Fiscal Quarter 1998....................................... 4.2 to 1.0
4th Fiscal Quarter 1998....................................... 4.1 to 1.0
1st Fiscal Quarter 1999....................................... 4.1 to 1.0
2nd Fiscal Quarter 1999....................................... 4.1 to 1.0
3rd Fiscal Quarter 1999....................................... 4.1 to 1.0
4th Fiscal Quarter 1999....................................... 4.0 to 1.0
and thereafter
</TABLE>
The Ratio at June 17, 1995 was 3.32:1.
9
<PAGE>
Interest Rate Protection. The Company is required to obtain interest rate
protection providing that at least 50% of the Company's indebtedness for
borrowed money is maintained at a fixed rate of interest.
Debt. The Company may not create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist any Debt except, among other things,
(i) Debt under the Credit Agreement; (ii) certain designated Debt existing on
July 19, 1994; (iii) Debt secured by permitted liens; (iv) trade accounts
payable in the ordinary course of business and accounted for as current
accounts payable; (v) Commercial Paper issued by the Parent Borrower; (vi) Debt
of the Parent Borrower incurred to prepay, redeem, defease or repurchase
existing Debt of the Parent Borrower or any of the Subsidiaries so long as (a)
such Debt so incurred is subordinated in right of payment to, or pari passu in
right of payment with, the Debt being prepaid, redeemed, defeased or
repurchased and (b) the average life to maturity of such Debt so incurred is no
earlier than the date that is three months following the Termination Date;
provided, however, that up to $625,000,000 of such Debt so incurred may have an
average life to maturity shorter than the date that is three months following
the Termination Date so long as (A) such Debt does not mature before June 15,
1999, and (B) such Debt is incurred to prepay, redeem, defease or repurchase
Debt that matures earlier than the date that is three months following the
Termination Date; (vii) Capital Lease Obligations; (viii) Debt incurred in
connection with the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; (ix)
Debt incurred or assumed in connection with any investment or acquisition
permitted by the Credit Agreement; (x) certain debt owed to the Parent Borrower
by Subsidiaries; (xi) Debt secured by mortgages on (a) any property purchased,
acquired or developed between January 21, 1992, and the Closing Date or (b) any
property purchased, acquired or developed with Real Estate Capital
Expenditures, in each case so long as the aggregate amount of the Debt secured
by such mortgages does not exceed 100% of the Fair Market Value (determined at
the time of such transaction) of such property; (xii) Debt incurred by the
Parent Borrower or any of its Subsidiaries in connection with any Receivables
Securitization; (xiii) Debt incurred by the Parent Borrower in connection with
Interest Rate Agreements; (xiv) Debt of the Parent Borrower not referred to in
paragraphs (i) through (xiii) above or in paragraph (xv) below so long as the
average life to maturity of such Debt is no earlier than the date that is three
months following the Termination Date; and (xv) Debt of the Parent Borrower or
any Subsidiary not referred to in paragraphs (i) through (xiv) above in an
aggregate amount outstanding at any time not in excess of $100,000,000.
Capital Expenditures. The Company may not make, and will not permit any of
its Subsidiaries to make, any Capital Expenditures in excess of $450 million
for each Fiscal Year; provided, however, that if in any Fiscal Year the amount
specified exceeds the amount of Capital Expenditures actually made by the
Company and its Subsidiaries in such Fiscal Year, the Company and it
Subsidiaries shall be entitled to make additional Capital Expenditures in the
next succeeding Fiscal Year equal to 45% of the amount of such excess; provided
further, however, that (i) the Company is permitted to make additional Capital
Expenditures not to exceed $200 million per year for the development or
acquisition of real property and (ii) the Company and its Subsidiaries shall be
permitted to make additional Capital Expenditures in any Fiscal Year
("Additional Capital Expenditures") in an aggregate amount with respect to the
Parent Borrower and its Subsidiaries equal to a percentage of Consolidated Free
Cash Flow for the immediately preceding Fiscal Year, such percentage with
respect to any Fiscal Year to be equal to (a) 100% in the event that the Parent
Borrower's Consolidated Ratio of Net Total Debt to Consolidated EBITDA for the
immediately preceding Fiscal Year is 3.0 to 1 or lower; (b) 75% in the event
that the Parent Borrower's Consolidated Ratio of Net Total Debt to Consolidated
EBITDA for the immediately preceding Fiscal Year is 3.5 to 1 or lower; and (c)
50% in the event that the Parent Borrower's Consolidated Ratio of Net Total
Debt to Consolidated EBITDA for the immediately preceding Fiscal Year is lower
than the amount set forth below with respect to such preceding Fiscal Year:
10
<PAGE>
<TABLE>
<CAPTION>
PRECEDING RATIO OF NET TOTAL DEBT TO CONSOLIDATED
FISCAL YEAR EBITDA FOR IMMEDIATELY PRECEDING FISCAL YEAR
----------- --------------------------------------------
<S> <C>
1994...................... 4.30 to 1.00
1995...................... 4.20 to 1.00
1996...................... 4.10 to 1.00
1997...................... 4.00 to 1.00
1998...................... 3.90 to 1.00
1999...................... 3.80 to 1.00
2000...................... 3.80 to 1.00
</TABLE>
The entire amount of Additional Capital Expenditures that are permitted to be
made in any Fiscal Year but are not made in such Fiscal Year may be carried
forward to, and made in the two succeeding Fiscal Years.
Dividends. Under the Credit Agreement, the Company is restricted from making
or declaring cash dividends on the Common Stock. See "Certain Investment
Considerations -- Restrictions on Payment of Dividends."
CERTAIN DEFINITIONS
"Applicable Percentage" means at any time, with respect to Adjusted
Eurodollar Rate Advances, the Facility Fees, Standby Letters of Credit and
Documentary Letters of Credit, the applicable percentage set forth below based
upon (a) the Senior Debt Ratings at such time or (b) the Applicable Percentage
Ratio at such time:
<TABLE>
<CAPTION>
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 LEVEL 6
----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Moody's/S&P or.......... Baa1 or Baa2 and Baa2 or BBB Baa3 and Baa3 or Lower than
better or BBB BBB- BBB- or equal to
BBB+ or Ba1 and
better lower than
or equal to
BB+
Applicable Percentage 5.25 to 1.0 4.75 to 1.0 4.0 to 1.0 3.5 to 1.0 3.0 to 1.0 Lower than
Ratio........... or greater or greater or greater or greater or greater 3.0 to 1.0
(spreads expressed in basis points per annum)
Adjusted Eurodollar Rate
Advances............... 12.5 20.0 22.5 31.25 40.0 50.0
</TABLE>
The Applicable Percentage for Base Rate Advances is zero.
The Applicable Percentage as of July 21, 1995 is determined in accordance
with Level 4.
"Applicable Percentage Ratio" means the ratio (determined as of the last day
of each Fiscal Quarter for the Rolling Period ending on such day) of (i)
Consolidated EBITDA for such Rolling Period to (ii) Consolidated Total Interest
Expense for such Rolling Period.
"Capital Expenditures" of any Person means, for any period, all expenditures
of such Person during such period (whether paid in cash or accrued as
liabilities during such period) which, in conformity with generally accepted
accounting principles, are required to be included in or reflected by the
property, plant or equipment or similar fixed asset accounts on the balance
sheet of such Person and certain investments permitted under the Credit
Agreement, including equipment which is purchased simultaneously with the
trade-in of existing equipment owned by such Person to the extent of the gross
amount of the purchase price of such purchased equipment less the book value of
the equipment being traded in at such time, but excluding, among other things,
(i) expenditures made in connection with the
11
<PAGE>
replacement or restoration of assets, to the extent such replacement or
restoration is financed out of (a) insurance proceeds paid on account of the
loss of or damage to the assets so replaced or restored or (b) awards of
compensation arising from the taking by condemnation or eminent domain of the
assets so replaced, (ii) any portion of Capital Lease Obligations which is
capitalized on such person's balance sheet and (iii) interest capitalized
during construction.
"Consolidated Cash Interest Expense" means, for any period, interest expense
net of interest income, whether paid or accrued (including the interest
component of Capital Lease Obligations) on all debt of the Company and its
Subsidiaries on a Consolidated basis for such period, including, without
limitation (i) cash dividends paid in respect of preferred stock issued by the
Company, (ii) commissions and other fees and charges payable in connection with
Letters of Credit, (iii) net payments payable in connection with certain
interest rate protection contracts and (iv) interest capitalized during
construction, but excluding, however, (v) interest expense not payable in cash
(including amortization of discount and deferred debt expenses), all as
determined in conformity with GAAP.
"Consolidated EBITDA" means, for any period, on a Consolidated basis for the
Company and its Subsidiaries, the sum for such period of (i) Consolidated Net
Income, plus (ii) depreciation and amortization expense, plus (iii) interest
expense net of interest income, plus (iv) federal and state income taxes as
determined in accordance with GAAP, plus (v) extraordinary losses (and any
unusual losses in excess of $1 million arising in or outside of the ordinary
course of business not included in extraordinary losses determined in
accordance with GAAP which have been included in the determination of
Consolidated Net Income), plus (vi) LIFO charges included in the calculation of
Consolidated Net Income, minus (vii) extraordinary gains (and any unusual gains
in excess of $1 million arising in or outside of the ordinary course of
business not included in extraordinary losses determined in accordance with
GAAP which have been included in the determination of Consolidated Net Income),
and minus (viii) LIFO credits that have been included in the calculation of
Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period, before the payment
of dividends on all capital stock, determined in accordance with GAAP.
"Consolidated Rental Expense" means, for any period, the aggregate rental
expense (including any contingent or percentage rental expense) of the Parent
Borrower and its Subsidiaries on a Consolidated basis for such period
(excluding real estate taxes and common area maintenance charges) in respect of
all rent obligations under all operating leases for real or personal property
minus any rental income of the Parent Borrower and its Subsidiaries on a
Consolidated basis for such period, all as determined in conformity with GAAP.
"Consolidated Total Interest Expense" means, for any period, interest expense
net of interest income, whether paid or accrued (including the interest
component of Capital Lease Obligations) on all Debt of the Parent Borrower and
its Subsidiaries on a Consolidated basis for such period, including (i)
commissions and other fees and charges payable in connection with Letters of
Credit, (ii) net payments payable in connection with all Interest Rate
Agreements, (iii) interest capitalized during construction and (iv) cash
dividends paid in respect of any preferred stock issued by the Parent Borrower,
but excluding, however, amortization of deferred debt expense, all as
determined in conformity with GAAP.
"Debt" of any Person means, without duplication, (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including all obligations, contingent or otherwise, of such Person in
connection with the Letters of Credit, Auction Bid LOCs, letter of credit
facilities, acceptance facilities or other similar facilities and in connection
with any agreement to purchase, redeem, exchange into debt securities, convert
into debt securities or otherwise acquire for value (a) any capital stock of
such Person or (b) any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding), (ii) all obligations of such Person
evidenced by bonds, notes,
12
<PAGE>
debentures or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (iv) all Capital Lease
Obligations of such Person, (v) all Debt referred to in clause (i), (ii), (iii)
or (iv) above secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) any lien, security interest
or other charge or encumbrance upon or in property (including accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt, (vi) all Guaranteed Debt of such
Person and (vii) any preferred stock of such Person that is classified as a
liability on such Person's Consolidated balance sheet.
"Funded Debt" means the Debt resulting from the Advances under the Credit
Agreement and all other Debt of the Parent Borrower or its Subsidiaries that
(on the date of its incurrence or issuance) matures more than one year from the
date of determination or matures within one year from such date but is
renewable or extendible, at the option of the debtor, to a date more than one
year from such date or arises under a revolving credit or similar agreement
that obligates the lender or lenders to extend credit during a period of more
than one year from such date (in each case including amounts of Funded Debt
required to be paid or prepaid within one year from the date of calculation).
"Guaranteed Debt" of any Person means all Debt referred to in clause (i),
(ii), (iii), (iv) or (v) of the definition of the term "Debt" in this Section
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to
pay or purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of
such Debt against loss, (iii) to supply funds to, or in any other manner invest
in, the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, but excluding
leases at a rental at least as favorable to the Parent Borrower as could be
obtained in an arm's-length transaction with a party that is not an Affiliate.
"Net Total Debt" means, on a Consolidated basis for the Parent Borrower and
its Subsidiaries as of any date, (i) the sum as of such date of (a) the
aggregate outstanding amount of Funded Debt including current maturities
thereof, (b) the aggregate outstanding amount of Commercial Paper and (c) the
aggregate outstanding amount of Subsidiary Commercial Paper minus (ii) the sum
as of such date of (a) the aggregate outstanding face amount of letters of
credit included in Funded Debt, (b) the aggregate outstanding amount of Debt
represented by certain investments made by the Parent Borrower and (c) the
aggregate amount of Permitted Investments in excess of $100 million.
"Rolling Period" means, in respect of any Fiscal Quarter, such Fiscal Quarter
and the three preceding Fiscal Quarters.
"Subordinated Debt" means any Indebtedness which is subordinate to the
Obligations under the Credit Agreement.
EVENTS OF DEFAULT
The Credit Agreement provides that various events shall be "Events of
Default," upon the occurrence of which the Senior Lenders may suspend or cease
making loans or terminate the Facility and declare all amounts outstanding
under the Credit Agreement immediately due and payable, as described below.
Events of Default include, among other things, (i) failure to pay, when due,
any principal payable under the Credit Agreement or the failure to pay any
interest or other amount under
13
<PAGE>
the Credit Agreement after the same becomes due and such default continues
unremedied for three business days after written notice from either
Administrative Agent, (ii) material breach of any representation or warranty in
the Credit Agreement or related documents, (iii) failure to comply with any of
the covenants of the Credit Agreement or related documents after specified
grace periods, (iv) failure to pay, or default in performance permitting
acceleration under, certain of the Company's other indebtedness, (v) bankruptcy
or insolvency of the Company or a Subsidiary or failure to discharge certain
judgments of the Company or any Subsidiary, (vi) the Credit Agreement or
security interests thereunder in Collateral with a value in excess,
individually or in the aggregate, of $30,000,000 ceasing to be in full force
and effect, (vii) certain events occurring with respect to the Company's
pension plans potentially giving rise to liability under ERISA, and (viii) the
occurrence of a "Change of Control" of the Company. A "Change of Control" is
defined in the Credit Agreement as (A) the acquisition by any Person or group
(other than the trusts for the Company's employee benefit plans) of securities
representing 20% or more of the voting Power of the Company or (B) during any
24-month period, individuals who were directors of the Company at the beginning
of such period (together with new directors approved by such directors) ceasing
to constitute at least 75% of the Board of Directors of the Company.
The Credit Agreement provides that upon the occurrence of an Event of
Default, the Administrative Agents (i) shall at the request, or may with the
consent, of the Majority Lenders by notice to the Company declare the
obligations of each Lender to make Advances to be terminated, whereupon the
same shall forthwith terminate, (ii) shall at the request, or may with the
consent, of any Issuing Bank or of the Majority Lenders by notice to the
Company declare the obligation of any Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (iii) shall
at the request, or may with the consent, of the Majority Lenders declare the
Advances, all interest thereon and all other amounts payable under the Credit
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, prior notice of intention to accelerate
or any other notice, all of which are expressly waived by the Company.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain anticipated United States
federal income tax consequences to a holder of Notes of the conversion,
redemption or sale of the Notes. It deals only with Notes held as capital
assets and not with special classes of holders, such as dealers in securities
or currencies, banks, tax-exempt organizations, life insurance companies,
persons that hold Notes that are a hedge or that are hedged against currency
risks or that are part of a straddle or conversion transaction, persons that
are not United States holders or persons whose functional currency is not the
U.S. dollar. A United States holder is a beneficial owner that is (i) a citizen
or resident of the United States, (ii) a domestic corporation or (iii)
otherwise subject to United States federal income taxation on a net income
basis in respect of a Note. The summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), its legislative history, existing and
proposed regulations thereunder, published rulings and court decisions, all as
currently in effect and all subject to change at any time, perhaps with
retroactive effect. The Company has not requested a ruling from the Internal
Revenue Service (the "Service") with respect to the matters discussed herein.
HOLDERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER THE CODE AND THE LAWS OF
ANY OTHER TAXING JURISDICTION, OF THE CONVERSION, SALE OR REDEMPTION OF THE
NOTES.
CONVERSION
In general, no gain or loss should be recognized by a holder upon the
conversion of a Note into Common Stock of the Company, except to the extent of
any gain realized upon the receipt of cash in
14
<PAGE>
lieu of fractional shares. A holder's basis in the Common Stock received on
conversion (including any fractional shares, which are deemed received and
immediately disposed of) generally will equal the holder's basis at the time of
conversion in the Note converted. A holder's holding period for the Common
Stock received on conversion will include the holder's holding period of the
Note converted.
SALE OR REDEMPTION
In general, the sale or redemption of a Note will result in the recognition
of gain or loss to a holder in an amount equal to the difference between (i)
the cash received in exchange for the Note less the amount attributable to
accrued interest not previously included in income (which amount is taxable as
ordinary income) and (ii) the holder's adjusted tax basis in the Notes. Except
as discussed below under "Market Discount," such gain or loss will be capital
gain or loss and will be long term gain or loss if, at the time of such
disposition, the Notes had been held for more than one year.
MARKET DISCOUNT
Special rules will apply to Notes acquired with market discount. A market
discount note is, generally, a note the stated redemption price at maturity of
which exceeds the holder's basis in the note immediately after acquisition.
Generally, any gain recognized on the sale or redemption of a market discount
note will be treated as ordinary income to the extent of the accrued market
discount on such note not previously included in income. Market discount
accrues either ratably or at a constant yield to maturity, at the election of
the holder. A holder of a market discount note also may elect to take market
discount into income as it accrues.
Although the matter is not free from doubt, a holder of a Note with market
discount should not have to recognize income on the conversion of the Note,
even with respect to market discount that has accrued but has not been taken
into account. Market discount not recognized on conversion will carry over to
the Common Stock acquired upon conversion thereof and will be recognized as
ordinary income to the extent of gain recognized upon the disposition of such
Common Stock, including any deemed disposition of fractional shares of Common
Stock for cash at the time of conversion.
BACKUP WITHHOLDING
In general, backup withholding at a rate of 31% will apply to payments of the
proceeds of a sale, redemption or conversion of a Note if the holder is not an
"exempt recipient" and fails to provide an accurate taxpayer identification
number or to report all interest and dividends required to be shown on its
federal income tax returns. Individuals generally are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 350,000,000 shares of
Common Stock, par value $1 per share, and 5,000,000 shares of cumulative
preferred stock, par value $100 per share. As of July 15, 1995, 111,645,443
shares of Common Stock were issued and outstanding. No shares of preferred
stock are outstanding.
COMMON STOCK
All of the outstanding shares of Common Stock are, and the shares of Common
Stock issuable hereunder will be when issued, fully paid and nonassessable.
Subject to the rights of the holders of any
15
<PAGE>
shares of preferred stock that may be issued in the future, the holders of
Common Stock (i) are entitled to such dividends as the Board of Directors in
its discretion may validly declare, (ii) in the event of liquidation, will
share ratably in the net assets of the Company, and (iii) are entitled to cast
one vote per share except that they are entitled to cumulative votes for the
election of directors. The Common Stock has no conversion rights, nor are there
any preemptive, subscription, redemption or call provisions applicable to the
Common Stock.
COMMON STOCK PURCHASE RIGHTS
The Company has adopted a warrant dividend plan in which each holder of
Common Stock is entitled to one common stock purchase right for each share of
Common Stock owned. When exercisable, the nonvoting rights entitle the
registered holder to purchase one share of Common Stock at a price of $60 per
share. The rights will become exercisable, and separately tradeable, ten days
after a person or group acquires 20% or more of the Company's Common Stock. In
the event the rights become exercisable and thereafter the Company is acquired
in a merger or other business combination, each right will entitle the holder
to purchase common stock of the surviving corporation, for the exercise price,
having a market value of twice the exercise price of the right. Under certain
circumstances, including the acquisition of 25% or more of the Company's Common
Stock, each right will entitle the holder to receive upon payment of the
exercise price, shares of Common Stock with a market value of two times the
exercise price. At the Company's option, the rights, prior to becoming
exercisable, are redeemable in their entirety at a price of $.025 per right.
The rights are subject to adjustment and expire March 19, 1996.
PREFERRED STOCK
No shares of preferred stock are currently outstanding. If issued, such
shares could affect the rights of the holders of shares of Common Stock. Shares
of preferred stock may be issued in one or more series. Each share is entitled
to one vote. Holders of preferred stock shall have no preemptive rights to
subscribe for or purchase any shares of any class of stock.
The Board of Directors may fix by resolution the designations and the powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions of any series of shares of
preferred stock, including without limitation, the dividend rate, redemption
rights and price, liquidation price, sinking fund requirements, conversion
rights and restrictions on the issuance of shares of the same series or of any
other class or series. The Board of Directors may also fix the number of shares
constituting any such series and increase or decrease the number of shares of
any such series (but not below the number of shares thereof then outstanding).
TRANSFER AGENT
The First Chicago Trust Company of New York, New York, is the transfer agent
and registrar for the Company's Common Stock.
STANDBY ARRANGEMENTS
Under the terms and subject to the conditions of a Standby Agreement (the
"Standby Agreement"), Goldman, Sachs & Co. (the "Purchaser") has agreed to
purchase from the Company, at the option of the Company, up to the number of
shares (the "Shares") of Common Stock equal to the positive difference, if any,
between (i) the number of shares (the "Redemption Shares") of Common Stock that
would have been issuable upon conversion of the Notes that are not surrendered
for conversion on or prior to the Expiration Time, minus (ii) (A) if on the
Expiration Time the closing price of the Common Stock is greater than $19.84,
535,332 shares of Common Stock or (B) if such closing price is not greater than
$19.84, zero, at a price per share of $19.34, if there are fewer than 2,675,000
Redemption Shares, and $19.10 per share if there are 2,675,000 or more
Redemption Shares.
The Purchaser may purchase Notes in the market or otherwise prior to the
Expiration Date and has agreed to convert into Common Stock all of the Notes
which it so purchases.
16
<PAGE>
The Company has been advised that the Purchaser proposes to offer any Common
Stock purchased from the Company or acquired on conversion by the Purchaser of
Notes for resale as set forth on the cover page of this Prospectus. The
Purchaser may also make sales to certain securities dealers at prices which may
reflect concessions from the prices at which the shares are then being offered
to the public. The amount of such concessions will be determined from time to
time by the Purchaser. The sales of Common Stock so offered are offered by the
Purchaser subject to prior sale, when, as, and if received by the Purchaser,
and subject to its right to reject orders in whole or in part. The Purchaser
has agreed to remit to the Company not less than 50% of the amount, if any, by
which the aggregate net proceeds received by the Purchaser from sales of the
Shares exceeds the purchase price of the Shares.
Pursuant to the Standby Agreement, the Company has agreed to pay to the
Purchaser for the commitments undertaken by it under the Standby Agreement an
amount equal to $250,000. If the Purchaser does not purchase any Shares, the
Company has agreed to reimburse the Purchaser for the fees and disbursements of
its counsel.
During the period beginning from the date of this Prospectus and continuing
to and including the Redemption Date, and, if the Purchaser purchases any
Shares, further continuing and including the date ending 180 days after the
Redemption Date, the Company has agreed not to offer, sell, contract to sell or
otherwise dispose of, any shares of Common Stock of the Company, any securities
of the Company substantially similar to the Common Stock or any securities
convertible into or exchangeable for shares of Common Stock or any such
substantially similar security (except for any securities, issued, offered,
sold or disposed of by the Company to its stock option and other benefit plans
maintained for its officers, directors and employees or Common Stock issued or
distributed in connection with the conversion of any security of the Company
outstanding on the date of the Prospectus) without the Purchaser's prior
written consent.
The Company has agreed to indemnify the Purchaser against certain
liabilities, including liabilities under the Securities Act.
The Purchaser may assist in the solicitation of conversions by holders of
Notes but will receive no commission therefor.
Purchaser performs investment banking services for the Company from time to
time.
VALIDITY OF THE COMMON STOCK
The validity of the Common Stock will be passed upon for the Company by Paul
W. Heldman, Esq., Vice President, Secretary and General Counsel of the Company
and for the Purchaser by Sullivan & Cromwell, New York, New York. Sullivan &
Cromwell may rely as to matters of Ohio law upon the opinion of Mr. Heldman. As
of July 7, 1995, Mr. Heldman owned approximately 10,486 shares of the Company's
Common Stock and had options to acquire an additional 113,352 shares.
EXPERTS
The consolidated balance sheet as of December 31, 1994 and January 1, 1994
and the consolidated statements of operations and accumulated deficit, and cash
flows for the years ended December 31, 1994, January 1, 1994 and January 2,
1993, incorporated by reference in this Prospectus, have been incorporated
herein in reliance on the report, which includes an explanatory paragraph
regarding the Company's change in method of accounting for postretirement
benefit costs other than pensions as of January 3, 1993, of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SO-
LICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Certain Investment Considerations.......................................... 4
The Company................................................................ 5
Redemption of Notes and Alternatives to Redemption......................... 5
Use of Proceeds............................................................ 7
Price Range of Common Stock................................................ 7
Dividends.................................................................. 8
Description of the Credit Agreement........................................ 8
Certain Federal Income Tax Considerations.................................. 14
Description of Capital Stock............................................... 15
Standby Arrangements....................................................... 16
Validity of the Common Stock............................................... 17
Experts.................................................................... 17
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10,706,638 SHARES
THE KROGER CO.
COMMON STOCK
(PAR VALUE $1 PER SHARE)
----------------
[LOGO OF KROGER]
----------------
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the sale of the Common Stock being registered
hereby, other than underwriting discounts and commissions, are estimated as
follows:
<TABLE>
<S> <C>
Registration Fee*................................................ $117,911
Printing and engraving........................................... 50,000
Listing Fees..................................................... 50,000
Legal fees and expenses.......................................... 100,000
Accounting fees and expenses..................................... 15,000
Blue Sky qualifications and related legal fees and expenses...... 10,000
Miscellaneous.................................................... 30,000
--------
Total.......................................................... $372,911
========
</TABLE>
- --------
* Actual Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Company's Regulations (by-laws) each present or former director,
officer or employee of the Company and each person who is serving or shall have
served at the request of the Company as a director, officer or employee of
another corporation (and his heirs, executors and administrators) shall be
indemnified by the Company against expenses actually and necessarily incurred
by him, and also against expenses, judgments, decrees, fines, penalties or
amounts paid in settlement, in connection with the defense of any pending or
threatened action, suit, or proceeding, criminal or civil, to which he is or
may be made a party by reason of being or having been such director, officer or
employee, provided (1) he is adjudicated or determined not to have been
negligent or guilty of misconduct in the performance of his duty to the Company
or such other corporation, (2) he is determined to have acted in good faith in
what he reasonably believed to be the best interest of the Company or of such
other corporation, and (3) in any matter the subject of a criminal action,
suit, or proceeding, he is determined to have had no reasonable cause to
believe that his conduct was unlawful. See also Ohio Revised Code, Section
1701.13.
The Company also maintains directors' and officers' reimbursement and
liability insurance pursuant to policies with aggregate limits of $100 million.
Reference is made to Section 8 of the Standby Agreement, filed herewith as
Exhibit 1.1 for provisions regarding the indemnification of the Company, its
directors and officers, and its controlling persons against certain
liabilities, including liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS:
<TABLE>
<C> <S>
1.1 Form of Standby Agreement.
4.1 Amended Articles of Incorporation and Regulations of the Company are
hereby incorporated by reference to Exhibits 4.1 and 4.2 of the
Company's Registration Statement on Form S-3 as filed with the Secu-
rities and Exchange Commission on January 28, 1993, and bearing Reg-
istration No. 33-57552.
4.2 Rights Agreement, including form of Rights Certificate incorporated
by reference to the Company's Registration Statement on Form 8-A
dated March 6, 1986.
5.1 Opinion of Paul W. Heldman, Esq., including his consent.
10.1 Competitive Advance and Revolving Credit Facility, dated as of July
19, 1994, among the Company and Chemical Bank and Citibank, N.A., as
administrative agents, and the lenders named therein is hereby incor-
porated by reference to Exhibit 99.1 of the Company's Form 8-K, dated
July 20, 1994.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Paul W. Heldman, Esq., included in Exhibit 5.1 filed herewith.
24.1 Powers of Attorney.
99.1 Notice of Redemption of Notes.
</TABLE>
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 this
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 and 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 20 percent 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 this registration statement or any
material change to such information in this registration statement;
Provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports filed
by the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this 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.
(4) That, for purposes of determining 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions referred to in Item 15 or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company 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 Company 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-2
<PAGE>
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
STATMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CINCINNATI, STATE OF OHIO, ON AUGUST 4, 1995.
The Kroger Co.
/s/ Bruce M. Gack
By____________________________________
BRUCE M. GACK
ASSISTANT SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
SIGNATURES TITLE
---------- -----
*/s/ Reuben V. Anderson Director
- -------------------------------------
REUBEN V. ANDERSON
*/s/ Raymond B. Carey, Jr. Director
- -------------------------------------
RAYMOND B. CAREY, JR.
*/s/ John L. Clendenin Director
- -------------------------------------
JOHN L. CLENDENIN
*/s/ David B. Dillon Director, President
- ------------------------------------- and Chief Operating
DAVID B. DILLON Officer
*/s/ Richard W. Dillon Director
- -------------------------------------
RICHARD W. DILLON
*/s/ Lyle Everingham Director
- -------------------------------------
LYLE EVERINGHAM
*/s/ John T. LaMacchia Director
- -------------------------------------
JOHN T. LAMACCHIA
*/s/ Patricia Shontz Longe Director
- -------------------------------------
PATRICIA SHONTZ LONGE
II-3
<PAGE>
SIGNATURES TITLE
---------- -----
*/s/ W. Rodney McMullen Group Vice President
- ------------------------------------- and Chief Financial
W. RODNEY MCMULLEN Officer
*/s/ T. Ballard Morton, Jr. Director
- -------------------------------------
T. BALLARD MORTON, JR.
*/s/ Thomas H. O'Leary Director
- -------------------------------------
THOMAS H. O'LEARY
*/s/ John D. Ong Director
- -------------------------------------
JOHN D. ONG
*/s/ Katherine D. Ortega Director
- -------------------------------------
KATHERINE D. ORTEGA
*/s/ Joseph A. Pichler Chairman of the
- ------------------------------------- Board of Directors,
JOSEPH A. PICHLER Chief Executive
Officer, and
Director
*/s/ J. Michael Schlotman Vice President and
- ------------------------------------- Corporate
J. MICHAEL SCHLOTMAN Controller--
Principal
Accounting Officer
*/s/ Martha Romayne Seger Director
- -------------------------------------
MARTHA ROMAYNE SEGER
*/s/ James D. Woods Director
- -------------------------------------
JAMES D. WOODS
/s/ Bruce M. Gack August 4, 1995
*By _________________________________
BRUCE M. GACK
AS ATTORNEY-IN-FACT
II-4
<PAGE>
Draft of 7/31/95
EXHIBIT 1.1
THE KROGER CO.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
__________
STANDBY AGREEMENT
________________, 1995
Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
The Kroger Co., an Ohio corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to redeem on __________, 1995 (the
"Redemption Date") all of its outstanding 6-3/8% Convertible Junior Subordinated
Notes due 1999 (the "Securities"), which are convertible into shares (the
"Conversion Shares") of Common Stock, par value $1.00 per share (the "Common
Stock"), of the Company, at a redemption price of 104.554% of the principal
amount of Securities plus accrued interest thereon from June 1, 1995 to the
Redemption Date (the "Redemption Price"). The right to convert such Securities
into Common Stock will expire at the close of business on ____________, 1995
(the "Expiration Date").
The Company desires to make arrangements pursuant to which the Company
will have the option to sell directly to Goldman, Sachs & Co. (the "Purchaser")
up to the number of shares of Common Stock (the "Shares") equal to the positive
difference, if any, between (i) the number of shares (the "Redemption Shares")
of Common Stock that would have been issuable upon conversion of the Securities
that are not surrendered for conversion on or prior to the close of business on
the Expiration Date, minus (ii) (A) if on the close of business on the
Expiration Date the Closing Price (as defined in Section 10) of the Common Stock
is greater than $19.84 per share, 535,332 shares of Common Stock or (B) if such
Closing Price is not greater than $19.84 per share, zero.
1. The Company represents and warrants to, and agrees with, the Purchaser
that:
(a) A registration statement in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto but
including all documents incorporated by reference in the prospectus
contained therein, to you have been declared effective by the Commission in
such form; no other document with respect to such registration statement or
document incorporated by reference therein has heretofore been filed or
transmitted for filing with the Commission; no stop orders suspending the
effectiveness of such registration statement has been issued and no
proceeding for that
<PAGE>
purpose has been initiated or threatened by the Commission; the various
parts of such registration statement, including all exhibits thereto, and
including the documents incorporated by reference in the prospectus
contained in the registration statement at the time such registration
statement became effective, each as amended at the time such registration
statement became effective, being hereinafter called the "Registration
Statement"; and the prospectus on file with the Commission at the time the
Registration Statement became effective being hereinafter called the
"Prospectus;" and any reference herein to the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act; any reference to any
amendment or supplement to the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Prospectus, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Prospectus; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration Statement;
(b) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents at such filing date contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Purchaser expressly
for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus did or will, at the time of effectiveness or filing with the
Commission, as the case may be, conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by the Purchaser expressly for use therein;
-2-
<PAGE>
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its businesses from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any material labor
dispute or court or governmental action, order or decree, otherwise than as
set forth or contemplated in the Prospectus; and, since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, there has not been any material change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(e) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Ohio, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation and is in good standing under the laws of its
jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description of the Common Stock contained in
the Prospectus; the Conversion Shares have been duly and validly authorized
and reserved for issuance; the Conversion Shares, when issued and delivered
in accordance with the provisions of the Securities and the Indenture dated
as of December 1, 1992 (the "Indenture") between the Company and Chemical
Bank, as Trustee (the "Trustee"), and the Shares, when issued and delivered
upon sale by the Company to the Purchaser as herein provided, will be duly
and validly issued, fully paid and non-assessable and will conform to the
description of the Common Stock contained in the Prospectus; the Company's
stockholders have no preemptive rights with respect to the Common Stock;
and all of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and (except for
-3-
<PAGE>
directors' qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims,
other than liens arising under the Senior Competitive Advance and Revolving
Credit Facility Agreement, dated as of July 19, 1994, among the Company
and the financial institutions named therein, the Indenture, dated as of
January 1, 1993 between the Company and IBJ Schroder Bank & Trust Company
and the Indenture, dated as of July 1, 1993 between the Company and Star
Bank, National Association, as Trustee;
(h) At the close of business on _________, 1995, $___________
principal amount of the Securities was outstanding; the Company has duly
authorized the redemption of all outstanding Securities on the Redemption
Date at the Redemption Price and the Company has taken all action required
to be taken through the date hereof under the terms of the Securities, the
Indenture and otherwise to effect such redemption; the Securities are, and
will continue to be, convertible into the Conversion Shares at the
conversion price of $18.68 per share of Common Stock by surrender of
Securities to the Trustee prior to the close of business on the Expiration
Date, at which time the conversion right will expire;
(i) The redemption of the Securities, the issuance and sale of the
Conversion Shares upon conversion of the Securities and the Shares upon the
sale by the Company to the Purchaser as herein provided, and the compliance
by the Company with all of the provisions of this Agreement and the
consummation of the transactions contemplated herein will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject; nor will such actions result
in any violation of the provisions of the Articles of Incorporation, as
amended, or the Regulations of the Company; nor will such actions result in
a violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the redemption of the
Securities, the issuance of the Conversion Shares upon conversion of the
Securities or the Shares upon the sale by the Company to the Purchaser as
herein provided, or the consummation by the Company of the transactions
contemplated by this Agreement except registration of the Shares under the
Act, which will have been completed on the date hereof, listing of the
Shares on the New York Stock Exchange ("NYSE"), which will be completed
prior to the Time of Delivery (as defined in Section 3), and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Purchaser as herein
provided;
(j) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject with respect to which there is a
reasonable likelihood of a determination which would individually or in the
aggregate have a material adverse effect on the consolidated financial
position, stockholders' equity or results of operations of the
-4-
<PAGE>
Company and its subsidiaries; and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(k) The Company is not subject to regulation under the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(l) Coopers & Lybrand L.L.P., who have audited certain consolidated
financial statements of the Company and its subsidiaries, are independent
public accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(m) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Shares) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System;
(n) The Company will apply the net proceeds from the sale of Shares
for the purpose set forth in the Prospectus under the caption "Use of
Proceeds";
(o) No person has any right to request or demand to have any shares
of Common Stock or other securities of the Company registered pursuant to
the Registration Statement or another registration statement pursuant to
the Act;
(p) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the capital stock of the Company and under the
captions "Standby Arrangements" and "Redemption of Notes and Alternatives
to Redemption", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate, complete and fair;
and
(q) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes.
2. (a) Subject to the terms and conditions herein set forth, the
Purchaser agrees, at the option of the Company, exercisable by giving
notice to the Purchaser not later than 5:00 p.m., New York City time, on
the Expiration Date, to purchase from the Company at the Time of Delivery
at a price per share of $19.34, if there are fewer than 2,675,000
Redemption Shares, and $19.10 per share if there are 2,675,000 or more
Redemption Shares, such number of Shares as shall be specified in such
notice but not in excess of the total number of Shares; and
(b) Certificates in definitive form for the Shares to be purchased by
the Purchaser hereunder shall be delivered by or on behalf of the Company
against payment by Purchaser of the purchase price therefor at the office
of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004.
-5-
<PAGE>
3. As compensation to the Purchaser for its commitment hereunder, the
Company agrees to pay to the Purchaser, no later than 2:00 pm, (New York City
time) on ________, 1995 (such time and date being hereinafter referred to as the
"Time of Delivery") at the offices of Sullivan & Cromwell, 250 Park Avenue, New
York, New York 10177, in immediately available funds, payable by wire
transferred to an account designated by the Purchaser, the sum of $250,000.
4. The Company agrees with the Purchaser:
(a) To make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the Time of Delivery which
shall be disapproved by you in good faith promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the
time when the Registration Statement, or any amendment thereto, has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof;
to timely file all reports and any definitive proxy or information
statements required to be 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 the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of the Prospectus, of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of the
Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish the Purchaser with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with
the offering or sale of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act or the Exchange
Act, to notify you and upon your request to file such document and to
-6-
<PAGE>
prepare and furnish without charge to the Purchaser and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
the Purchaser is required to deliver a prospectus in connection with sales
of any of the Shares at any time nine months or more after the time of
issue of the Prospectus, upon request of the Purchaser but at the expense
of the Purchaser, to prepare and deliver to the Purchaser as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)),
an earnings statement of the Company and its subsidiaries (which need not
be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including at the option of the Company Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the Time of Delivery and, if the Purchaser purchases any
Shares hereunder, further continuing to and including the date 180 days
after the Redemption Date, not to offer, sell, contract to sell or
otherwise dispose of, any shares of Common Stock of the Company, any
securities of the Company substantially similar to the Common Stock or any
securities convertible into or exchangeable for Common Stock or any
substantially similar security (except for any securities, issued, offered,
sold or disposed of by the Company to its stock option and other benefit
plans maintained for its officers, directors and employees or Common Stock
issued or distributed in connection with the conversion of any security of
the Company outstanding on the date of the Prospectus) without your prior
written consent;
(f) To use its best efforts to list, subject to notice of issuance,
the Shares on the NYSE; and
(g) To cause to be given notice of redemption on the date hereof (the
"Effective Date"), such notice to be in the form submitted to and approved
by you and to be in accordance with the requirements of Article Eleven of
the Indenture, and to contain the information called for thereby, and to
furnish such copies of such notice to you as you may request; and, in
addition, to cause to be given notice of redemption by press release at
such times as you and the Company may mutually agree;
(h) To advise you or to cause you to be advised on each business day
prior to the Time of Delivery of the principal amount of the Securities
surrendered on the preceding business day for conversion into shares of
Common Stock or for redemption; and
(i) To supplement the Prospectus, or file a post-effective amendment
to the Registration Statement, after the Redemption Date to set forth the
results of the call for redemption and other information that may be
required to comply with the rules of the Commission, if applicable, and, if
the Purchaser purchases any Shares hereunder, not later than 15 days after
the Redemption Date, to file a post-effective amendment
-7-
<PAGE>
to the Registration Statement or to take such other steps as may be
necessary to remove from registration all shares of Common Stock which have
not been issued to the Purchaser pursuant to Section 2 hereof.
5. The Company covenants and agrees with the Purchaser that the Company
will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act, the redemption of the Securities, the
issuance of the Conversion Shares upon conversion of the Securities or the
Shares upon the sale by the Company to the Purchaser as herein provided, and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Purchaser and
dealers; (ii) the cost of printing, producing this Agreement, the Blue Sky
survey or publishing the notice of redemption of the Securities and related
letters of transmittal, notice of guaranteed delivery and any other documents
(including newspaper notices or advertisements) in connection with the
redemption or conversion of the Securities and the offering, purchase, sale and
delivery of the Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 4(b) hereof, including the fees and disbursements of counsel for the
Purchaser in connection with such qualification and in connection with the Blue
Sky surveys; (iv) the filing fees incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms of the
issuance or sale of the Shares; (v) the cost of preparing stock certificates;
(vi) the cost and charges of any transfer agent or registrar for the Securities
and the Common Stock and any fees and expenses incurred under the Indenture;
(vii) the fees and expenses of the Trustee and any agent of the Trustee, and the
fees and disbursements of counsel for the Trustee in connection with the
redemption of the Securities; (viii) the fees incurred in connection with
listing the Shares on the NYSE; (ix) if the Purchaser does not purchase any
Shares hereunder the reasonable fees and disbursements of counsel to the
Purchaser; and (x) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section. Except as otherwise provided by this Section, Section 8 and
Section 11, Purchaser shall pay all of its own costs and expenses, including any
advertising expenses connected with any offer it may make.
6. (a) Until the close of business on the Expiration Date, the Purchaser
may conduct a trading account to purchase Securities in such amount and at such
prices as the Purchaser may deem advisable. All Securities so purchased will be
converted into shares of Common Stock. The shares of Common Stock acquired by
the Purchaser pursuant to the provisions of this Section may be sold at any time
or from time to time by the Purchaser. It is also understood that, for the
purpose of stabilizing the price of the Common Stock or otherwise, the Purchaser
may purchase and sell shares of Common Stock or other securities of the Company
and over-allot in effecting sales of Common Stock, all in such amounts and at
such prices as the Purchaser may deem advisable.
(b) The Purchaser agrees to remit to the Company an amount equal to not
less than 50% of the excess, if any, of (i) the total proceeds received on the
sale of the Shares, less any selling concessions, transfer taxes and other
direct out-of-pocket selling expenses, over (ii) the purchase price for the
Shares hereunder. On completion of the sale of all of the Shares, the Purchaser
will furnish the Company a statement setting forth the total proceeds received
on the sale of the Shares and the applicable selling concessions, transfer taxes
and other direct, out-of-pocket selling expenses. Payment of any amount due
under this paragraph will be made by the Purchaser on the second business day
following the sale by the Purchaser of all the Shares in New York Clearing
House (next day) funds drawn to the order of the Company.
7. The obligations of the Purchaser hereunder, shall be subject, in its
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Effective Date and are
at, and as of the Time of Delivery (other than Section 1(d)) true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions
(other than, in the case of the Time of Delivery, paragraphs (e), (f), and, to
the extent related to paragraph (e), paragraph (i)):
-8-
<PAGE>
(a) The Registration Statement shall have become effective, and you
shall have received prompt notice thereof; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been compiled with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Purchaser, shall have
furnished to you such opinion or opinions, dated the Effective Date and the
Time of Delivery, with respect to the incorporation of the Company, this
Agreement, the validity of the Shares, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Paul W. Heldman, Vice President, Secretary and General Counsel of
the Company, shall have furnished to you his written opinion, dated the
Effective Date and Time of Delivery, in form and substance satisfactory to
you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Ohio, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable; the Conversion Shares and the
Shares have been duly and validly authorized for issuance; the
Conversion Shares, when issued and delivered in accordance with the
Securities and the Indenture, and the Shares, when issued and
delivered upon the sale by the Company to the Purchaser as herein
provided, will be duly and validly issued and fully paid and non-
assessable and will conform to the description of the Common Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
(iv) Each subsidiary of the Company, with respect to which
the Company owns, directly or indirectly, a 50% or greater equity
interest (each a "subsidiary"), has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and all of
-9-
<PAGE>
the issued shares of capital stock of each such subsidiary have been
duly and validly authorized and issued, are fully paid and non-
assessable, and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, other than liens arising under the
Senior Competitive Advance and Revolving Credit Facility Agreement,
dated as of July 19, 1994, among the Company and the financial
institutions named therein, the Indenture, dated as of January 1, 1993
between the Company and IBJ Schroder Bank & Trust Company and the
Indenture, dated as of July 1, 1993 between the Company and Star, Bank
National Association, as Trustee, (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such
counsel shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by them, in
each case free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such counsel may
state that no examination of record titles for the purpose of such
opinion has been made, and that he is relying upon a general review of
the titles of the Company and its subsidiaries, upon opinions of local
counsel and abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of counsel
to the lessors of such property and, in respect of matters of fact,
upon certificates and statements of officers of the Company or its
subsidiaries, provided that such counsel shall state that he believes
that both you and he are justified in relying upon such opinions,
abstracts, reports, policies and certificates);
(vi) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject with respect to which there is a
reasonable likelihood of determinations which would individually or in
the aggregate have a material adverse effect on the consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
-10-
<PAGE>
(viii) The Securities are convertible in accordance with
their terms and pursuant to the Indenture in the manner and upon the
terms described in the Prospectus;
(ix) The redemption by the Company on the Redemption Date
of all the outstanding Securities in the manner and upon the terms
described in the Prospectus has been duly authorized by all required
corporate action and is in compliance with the terms of the Indenture
and the Securities;
(x) The redemption of the Securities, the issuance and
sale of the Conversion Shares upon conversion of the Securities or the
Shares upon the sale by the Company to the Purchaser as herein
provided, the compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated, to the best of such counsel's knowledge, will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject; nor will such actions result in any violation
of the provisions of the Articles of Incorporation, as amended, or the
Regulations of the Company or any statute of the United States of
America or of Ohio or any other statute known to such counsel or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(xi) To the best of such counsel's knowledge, no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required by or
on behalf of the Company for the redemption of the Securities, the
issuance of the Conversion Shares upon conversion of the Securities or
the Shares upon the sale by the Company to the Purchaser as herein
provided or the consummation by the Company of the other transactions
contemplated by this Agreement, except such as have been obtained
under the Act, the listing of the Shares on the NYSE, which will occur
prior to the Time of Delivery, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Purchaser;
(xii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than (a) the financial
statements, notes and schedules thereto included or incorporated by
reference therein and (b) other financial and statistical information
included or incorporated by reference therein, as to all of which such
counsel need express no opinion), when they became effective or were
filed with the Commission, as the case may be, complied as to form in
all material respects with the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the
-11-
<PAGE>
Commission thereunder; and such counsel has no reason to believe that
any of such documents, when such documents became effective or were so
filed, as the case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue statement of
a material fact, or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed under
the Act or the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading;
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to the Time of Delivery (other than (a) the financial statements,
notes and schedules thereto included or incorporated by reference
therein and (b) other financial and statistical information included
or incorporated by reference therein, as to all of which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder; such counsel has no reason to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to the Time of Delivery (other than
(a) the financial statements, notes and schedules thereto included or
incorporated by reference therein and (b) other financial and
statistical information included or incorporated by reference therein,
as to all of which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
the Time of Delivery (other than (a) the financial statements, notes
and schedules thereto included or incorporated by reference therein
and (b) other financial or statistical information included or
incorporated by reference therein, as to all of which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading or that, as of the Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to the Time of Delivery
(other than (a) the financial statements, notes and schedules thereto
included or incorporated by reference therein and (b) other financial
or statistical information included or incorporated by reference
therein, as to all of which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; and such
counsel does not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference into the
Prospectus or required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated by reference or
described as required;
-12-
<PAGE>
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States;
(d) At 10:00 a.m., New York City time, on the Effective Date and the
date of the most recently filed post-effective amendment to the
Registration Statement and also at the Time of Delivery, Coopers & Lybrand
L.L.P. shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto;
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the transactions contemplated
by this Agreement on the terms and in the manner contemplated in the
Prospectus;
(f) There shall not have occurred (i) a downgrading in the rating
accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization," as that term is
defined by the Commission for purposes of Rule 436(g) (2) under the Act or
(ii) a public announcement by any such organization that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities or preferred stock;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in your judgment makes it impracticable or
inadvisable to proceed with the transactions contemplated by this Agreement
on the terms and in the manner contemplated by the Prospectus;
(h) The Conversion Shares are listed, and the Shares to be sold by
the Company at the Time of Delivery shall have been duly listed, subject to
notice of issuance, on the NYSE; and
(i) The Company shall have furnished or caused to be furnished to you
on the Effective Date and at Time of Delivery certificates of officers of
the Company satisfactory to you as to the accuracy of the representations
and warranties of the
-13-
<PAGE>
Company herein at and as of the Effective Date or the Time of Delivery
(other than, in the case of the Time of Delivery, Section 1(d)),
respectively, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to the Effective Date or
the Time of Delivery, as the case may be, as to the matters set forth in
subsections (a) and (e) of this Section and as to such other matters as you
may reasonably request.
8. (a) The Company will indemnify and hold harmless the Purchaser against
any losses, claims, damages or liabilities, to which the Purchaser may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Purchaser for any
legal or other expenses reasonably incurred by the Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein.
(b) The Purchaser will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein;
and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party
-14-
<PAGE>
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation;
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchaser on the other from the
transactions contemplated by this Agreement. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Purchaser on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Purchaser on the other with respect to the
transactions contemplated by this Agreement shall be deemed to be in the same
proportion as the market value of the Common Stock issuable upon conversion of
the Securities on the last Trading Day (as defined in Section 10) immediately
preceding the date of this Agreement (calculated based on the Closing Price of
the Common Stock) bears to the compensation received by the Purchaser pursuant
to Section 3. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Purchaser on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchaser agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price at which the Shares purchased by it and distributed to
the public were offered to the public exceeds the amount of any damages which
the Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Purchaser within the meaning of the Act; and the obligations of the Purchaser
under this Section 8 shall be in addition to any liability
-15-
<PAGE>
which the Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the Purchaser as set forth in this Agreement
or made by them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of the Purchaser or any controlling person
of the Purchaser or the Company, or any officer or director or controlling
person of the Company, and shall survive delivery of the Conversion Shares and
the Shares and payment for the Shares.
10. For purposes of this Agreement, "Trading Day" means a day on which the
Common Stock is traded on the NYSE, and "Closing Price" means the reported last
sale price regular way per share of the Common Stock, or in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case on the NYSE.
11. If for any reason after the notice pursuant to Section 2(a) has been
delivered, Shares included in such notice are not delivered by or on behalf of
the Company as provided herein, the Company will reimburse the Purchaser for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Purchaser in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall then be under no
further liability to the Purchasers in respect of the Shares not so delivered
except as provided in Section 5 and Section 8 hereof.
12. All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchaser shall be delivered or sent by mail, telex or
facsimile transmission to Goldman, Sachs & Co., at 85 Broad Street, New York,
New York 10004, Attention: Registration Department; and if to the Company shall
be delivered or sent by mail, telex or facsimile transmission to the address of
the Company set forth in the Registration Statement, Attention: General Counsel.
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchaser, the Company and, to the extent provided in Section 8 and
Section 9 hereof, the officers and directors of the Company and each person who
controls the Company or the Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Purchaser shall be deemed a successor or assign by reason merely
of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
-16-
<PAGE>
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you
this letter and such acceptance hereof shall constitute a binding agreement
between you and the Company.
Very truly yours,
The Kroger Co.
By:
__________________________________
Name:
Title:
Accepted as of the date hereof:
__________________________________
(Goldman, Sachs & Co.)
-17-
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Standby Agreement, the accountants
shall furnish letters to the Purchaser to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statement and any supplementary
financial information and schedules (and, if applicable, prospective
financial statements and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects with
the applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations thereunder,
and, if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the consolidated interim financial statements, selected financial data, pro
forma financial information, prospective financial statements and/or
condensed financial statements derived from audited financial statements of
the Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished to the Purchaser;
(iii) They have made a review in accordance with the standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have been
separately furnished to the Purchaser and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years incorporated by reference in the
Prospectus and included in Item 6 of the Company's Annual Report on Form
10-K for the most recent fiscal year agrees with the corresponding amounts
(after restatements where applicable) in the audited consolidated financial
statements for such five fiscal years which were included or incorporated
by reference in the Company's Annual Reports on Form 10-K for such fiscal
years;
A-1
<PAGE>
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301 and 302 of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted accounting standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies
to Form 10-Q and the related published rules and regulations
thereunder, or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in
the Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year,
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro form
adjustments have not
A-2
<PAGE>
been properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
net assets or other items specified by the Purchaser, or any increases
in any items specified by the Purchaser, in each case as compared with
amounts shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Purchaser, or any increases in any items specified by the
Purchaser, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length
specified by the Purchaser, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter, and
(vii) In addition to the audit referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Purchaser, which are
derived from the general accounting records of the Company and its
subsidiaries, which appear in the Prospectus (excluding documents
incorporated by reference), or in Part II, or in exhibits and schedules to,
the Registration Statement specified by the Purchaser or in documents
incorporated by reference in the Prospectus specified by the Purchaser, and
have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its subsidiaries
and have found them to be in agreement.
A-3
<PAGE>
Exhibit 5.1
The Kroger Co.
1014 Vine Street
Cincinnati, OH 45202-1100
August 4, 1995
Board of Directors
The Kroger Co.
1014 Vine Street
Cincinnati, OH 45202
Ladies and Gentlemen:
I am familiar with the proceedings taken and proposed to be taken by The Kroger
Co., an Ohio corporation (the "Company"), in connection with the issuance of up
to 10,706,638 shares of the Company's Common Stock, par value $1 per share, and
up to 10,706,638 Common Stock Purchase Rights pursuant to the Company's Warrant
Dividend Plan in connection with such issuance of Common Stock (the
"Securities"). I have acted as counsel to the Company in connection with its
preparation of (1) a Registration Statement relating to such issuance of the
Securities and the public sale thereof on Form S-3 filed by the Company with the
Securities and Exchange Commission (the "Registration Statement") for the
registration of the Securities under the Securities Act of 1933, as amended (the
"Act"); and (2) the form of Standby Agreement filed as an exhibit to the
Registration Statement (the "Standby Agreement"). I have examined the
aforementioned documents; the Amended Articles of Incorporation and Regulations
of the Company; the corporate minutes of the proceedings of the directors and
shareholders of the Company; and, such other records and documents of the
Company and such questions of law as I have deemed necessary in order to express
the opinions hereinafter set forth.
Based upon the foregoing, when the Registration Statement becomes effective
<PAGE>
under the Act, I am of the opinion that the Securities, when executed,
countersigned by the transfer agent, and delivered and paid for in accordance
with the terms of the Standby Agreement, will be duly authorized, validly
issued, fully paid, and non-assessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me in the Registration Statement as having
passed upon the validity of the Securities offered thereby on behalf of the
Company. In giving such consent, I do not admit that I am in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
(Paul W. Heldman)
Paul W. Heldman
Vice President, Secretary
and General Counsel
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
The Kroger Co. (the "Company") on Form S-3 of our report, which includes an
explanatory paragraph regarding the Company's change in its method of accounting
for postretirement benefit costs other than pensions as of January 3, 1993,
dated January 31, 1995, on our audits of the consolidated financial statements
and financial statement schedules of the Company as of December 31, 1994 and
January 1, 1994, and for the years ended December 31, 1994, January 1, 1994 and
January 2, 1993, which report is included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994. We also consent to the
reference to our Firm under the caption "Experts."
(Coopers & Lybrand L.L.P.)
Coopers & Lybrand L.L.P.
Cincinnati, Ohio
August 2, 1995
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, That the undersigned directors of THE KROGER
CO. (the "Company") hereby make, constitute and appoint Paul W. Heldman and
Bruce M. Gack, or either one of them, his or her true and lawful attorneys-in-
fact to sign and execute for and on his or her behalf, a registration statement
and any and all amendments thereto with respect to the issuance and sale by the
Company of up to 10,706,638 shares of Common Stock, par value $1, and a like
number of Common Stock Purchase Rights pursuant to the Company's Warrant
Dividend Program to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, in such form as they, or
either of them, may approve and to do any and all other acts which said
attorneys-in-fact, or either one of them, may deem necessary or desirable to
enable The Kroger Co. to comply with said Act and the rules and regulations
thereunder in connection with such sale.
IN WITNESS WHEREOF, the undersigned directors have hereunto set their hands and
seal, as of the 20th day of July 1995.
( Reuben V. Anderson) ( T. Ballard Morton, Jr.)
- --------------------- -------------------------
Reuben V. Anderson T. Ballard Morton, Jr.
( Raymond B. Carey, Jr.) ( Thomas H. O'Leary)
- ------------------------ -------------------
Raymond B. Carey, Jr. Thomas H. O'Leary
( John L. Clendenin) ( John D. Ong)
- -------------------- --------------
John L. Clendenin John D. Ong
( David B. Dillon) ( Katherine D. Ortega)
- ------------------ ---------------------
David B. Dillon Katherine D. Ortega
( Richard W. Dillon) ( Joseph A. Pichler)
- -------------------- --------------------
Richard W. Dillon Joseph A. Pichler
( Lyle Everingham) ( Martha Romayne Seger)
- ------------------ ----------------------
Lyle Everingham Martha Romayne Seger
( John T. LaMacchia) ( James D. Woods)
- -------------------- -----------------
John T. LaMacchia James D. Woods
( Patricia Shontz Longe)
- ------------------------
Patricia Shontz Longe
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, That the undersigned officer of THE KROGER
CO. (the "Company") hereby makes, constitutes and appoints Paul W. Heldman and
Bruce M. Gack, or either one of them, his true and lawful attorneys-in-fact to
sign and execute for and on his behalf, a registration statement and any and all
amendments thereto with respect to the issuance and sale by the Company of up to
10,706,638 shares of Common Stock, par value $1, and a like number of Common
Stock Purchase Rights pursuant to the Company's Warrant Dividend Program to be
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, in such form as they, or either of them, may approve and to
do any and all other acts which said attorneys-in-fact, or either one of them,
may deem necessary or desirable to enable The Kroger Co. to comply with said Act
and the rules and regulations thereunder in connection with such sale.
IN WITNESS WHEREOF, I have hereunto set my hand.
( W. Rodney McMullen) July 20, 1995
- ---------------------
W. Rodney McMullen
Group Vice President and
Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, That the undersigned officer of THE KROGER
CO. (the "Company") hereby makes, constitutes and appoints Paul W. Heldman and
Bruce M. Gack, or either one of them, his true and lawful attorneys-in-fact to
sign and execute for and on his behalf, a registration statement and any and all
amendments thereto with respect to the issuance and sale by the Company of up to
10,706,638 shares of Common Stock, par value $1, and a like number of Common
Stock Purchase Rights pursuant to the Company's Warrant Dividend Program to be
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, in such form as they, or either of them, may approve and to
do any and all other acts which said attorneys-in-fact, or either one of them,
may deem necessary or desirable to enable The Kroger Co. to comply with said Act
and the rules and regulations thereunder in connection with such sale.
IN WITNESS WHEREOF, I have hereunto set my hand.
( Joseph A. Pichler) July 20, 1995
- --------------------
Joseph A. Pichler
Chairman of the Board,
Chief Executive Officer and
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, That the undersigned officer of THE KROGER
CO. (the "Company") hereby makes, constitutes and appoints Paul W. Heldman and
Bruce M. Gack, or either one of them, his true and lawful attorneys-in-fact to
sign and execute for and on his behalf, a registration statement and any and all
amendments thereto with respect to the issuance and sale by the Company of up to
10,706,638 shares of Common Stock, par value $1, and a like number of Common
Stock Purchase Rights pursuant to the Company's Warrant Dividend Program to be
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, in such form as they, or either of them, may approve and to
do any and all other acts which said attorneys-in-fact, or either one of them,
may deem necessary or desirable to enable The Kroger Co. to comply with said Act
and the rules and regulations thereunder in connection with such sale.
IN WITNESS WHEREOF, I have hereunto set my hand.
(J. Michael Schlotman) July 20, 1995
- ----------------------
J. Michael Schlotman
Vice President and Corporate Controller
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, That the undersigned officer of THE KROGER
CO. (the "Company") hereby makes, constitutes and appoints Paul W. Heldman and
Bruce M. Gack, or either one of them, his true and lawful attorneys-in-fact to
sign and execute for and on his behalf, a registration statement and any and all
amendments thereto with respect to the issuance and sale by the Company of up to
10,706,638 shares of Common Stock, par value $1, and a like number of Common
Stock Purchase Rights pursuant to the Company's Warrant Dividend Program to be
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, in such form as they, or either of them, may approve and to
do any and all other acts which said attorneys-in-fact, or either one of them,
may deem necessary or desirable to enable The Kroger Co. to comply with said Act
and the rules and regulations thereunder in connection with such sale.
IN WITNESS WHEREOF, I have hereunto set my hand.
( David B. Dillon) July 20, 1995
- ------------------
David B. Dillon
President, Chief Operating Officer, and
Director
<PAGE>
RESOLUTION
----------
WHEREAS, This Board previously has authorized the Company to redeem its 6-3/8%
Convertible Junior Subordinated Notes due 1999 (the "Notes"); and
WHEREAS, The Company deems it advantageous upon issuance of the redemption
notice for the Notes that the Notes be converted into approximately 10,706,638
shares of the Company's Common Stock; and
WHEREAS, Management is determining the advisability of entering into one or more
agreements (the "Underwritten Call") to hedge against the risk that some or all
of the holders of the Notes will not convert their Notes to shares of Common
Stock; and
WHEREAS, The Underwritten Call would provide that, following the issuance of the
redemption notice for the Notes, and at the Company's option, the Company sell
to the underwriters shares of Common Stock, par value $1, of the Company (the
"Securities") at a price equal to the conversion price of the Notes plus a
premium and interest on the Notes (the "Issue Price"), in an amount equal to
that number of shares which, when added to the total number of shares issued
upon conversion of the Notes, does not exceed 10,706,638; now therefore,
RESOLVED, That, in connection with the proposed Underwritten Call and issuance
of the Securities in connection therewith, the members of the Financial Policy
Committee are hereby appointed as the Securities Committee, and that any three
of them, at least two of whom shall not have served as employees of the Company
or its subsidiaries, shall be empowered to act as and for the Securities
Committee; and that the Securities Committee shall have all the authority to act
as and for the Board of Directors in the determination of whether to consummate
the Underwritten Call and the issuance of the Securities; and the elected
officers of the Company or any one of them hereby are authorized to enter into
agreements for an Underwritten Call; and further
RESOLVED, That the Securities Committee may designate one or more persons, who
may or may not be a member of the Securities Committee, to act as and for such
Committee in such capacity as the Committee may direct; and further
RESOLVED, That the Securities Committee may, at any time prior to December 31,
1996, authorize one or more issuances and sales of the Securities by the Company
and the Underwritten Call for so long as, or at such times as, economically
advantageous to
<PAGE>
the Company, and, in connection with any such authorization, issue, determine,
approve, or appoint, as the case may be:
(a) the aggregate principal amount, and terms, of the Securities, not to exceed
10,706,638 shares;
(b) the Issue Price at which such Securities are to be sold;
(c) the form of Registration Statement on Form S-3, or such other form as the
Securities Committee shall determine (the "Registration Statement"), for
the purpose of registering the Securities, if so required, under the
Securities Act of 1933, as amended, and any amendments thereto;
(d) the form of contracts or other agreements for the Underwritten Call;
(e) any underwriting, standby, or similar agreement between the Company and an
underwriter or underwriters;
(f) the underwriting discount or spread to be received by the underwriters;
(g) the use, form, execution, and delivery of the Securities, distribution
agreement, or such other contracts or agreements, including listing
applications, as the Securities Committee shall deem necessary or
appropriate;
(h) any transfer, authenticating, placement, exchange, distribution, or paying
agent, or registrar, trustee or underwriter, or any other person or entity
to act in connection with the Securities; including the selection of a
financial institution or institutions, whether foreign or domestic, to
advise the Company;
(i) such other terms, conditions, and provisions as the Securities Committee
shall deem necessary or appropriate; and further
RESOLVED, That the elected officers of the Company be, and each of them hereby
is, authorized, in the name and on behalf of the Company, to execute the
Registration Statement with such changes therein as the officer executing the
same may approve, such execution to be conclusive evidence of such approval, and
to execute any and all amendments thereto as deemed necessary or desirable; and
further
RESOLVED, That upon the execution of the Registration Statement or any
amendments thereto, including post-effective amendments, by directors and
officers of the Company, as required by law, either in person or by a duly
authorized attorney or attorneys, the elected officers of the Company be, and
each of them hereby is, authorized to cause the Registration Statement and any
amendments thereto to be filed with the Securities and Exchange Commission (the
"Commission") and to execute and file all such instruments, make all such
payments, and to do such other acts and things as, in their opinion or in the
opinion of any them, may be necessary or desirable in order to effect such
filing, to
<PAGE>
cause the Registration Statement to become effective, and to maintain the
Registration Statement in effect for as long as they deem it to be in the best
interests of the Company; and further
RESOLVED, That Paul W. Heldman and Bruce M. Gack, or either one of them, be, and
each of them hereby is, made, constituted, and appointed the true and lawful
attorneys-in-fact, with authority to sign and execute on behalf of this Company,
and on behalf of the directors and officers thereof in their official
capacities, the Registration Statement and any and all amendments thereto, which
either of them, in their discretion, deem necessary or advisable to be filed
with the Commission; and further
RESOLVED, That Paul W. Heldman, Vice President, Secretary and General Counsel of
the Company, whose address is 1014 Vine Street, Cincinnati, Ohio, be, and he
hereby is, designated as the Agent for Service to be named in the Registration
Statement, with authority to receive notices and communications with respect to
such Registration Statement and with all powers consequent upon such designation
under the rules and regulations of the Commission; and further
RESOLVED, That subject to the limitations set forth in these resolutions, the
Securities Committee may approve the form of the Securities; that the elected
officers of the Company be, and each of them hereby is, authorized to execute,
in the name and on behalf of the Company, the Securities; that the signature of
each of such officers on the Securities may be manual or by facsimile; that
Securities bearing the manual or facsimile signatures of individuals who were at
any time the elected officers of the Company shall bind the Company
notwithstanding that such individuals or any of them cease to hold such offices;
that the elected officers of the Company be, and each of them hereby is,
authorized to deliver or cause to be delivered the Securities for authentication
and delivery in the principal amount thereof as shall have been determined by
the Securities Committee; and further
RESOLVED, That the elected officers of the Company be, and each of them hereby
is, authorized in the name and on behalf of this Company to take any and all
action which they deem necessary or advisable to effect the registration or
qualification (or exemptions therefrom) of the Securities for issue, offer,
sale, or trade under the Blue Sky or securities laws of any State of the United
States of America, any Province of Canada, or of any other country and in
connection therewith to sign, execute, acknowledge, verify, deliver, file, and
publish all such applications, issuer's covenants, consents to service of
process, resolutions, and other papers and documents as may be required under
such laws, and to take any and all further action which they deem necessary or
advisable in order to maintain such registration or qualification of the
Securities for as long as they may deem necessary or as required by law; and
further
RESOLVED, That the elected officers of the Company be, and each of them hereby
is, authorized in the name and on behalf of this Company to execute and file an
application or applications for the listing of the Securities on the New York
Stock Exchange, to
<PAGE>
appear before officials of the New York Stock Exchange and to take any and all
action, and prepare, execute, and file any and all other applications and
agreements, including an indemnity agreement relating to the use of facsimile
signatures in the execution of the Securities, necessary, incidental, or
convenient to effectuate such listing; and further
RESOLVED, That the elected officers of the Company be, and each of them hereby
is, authorized in the name and on behalf of this Company to execute and cause to
be filed with the Commission and the New York Stock Exchange an application on
Form 8-A, or such other form as may be required for the purpose of registering
the Securities on a national securities exchange, pursuant to the Securities
Exchange Act of 1934; and further
RESOLVED, That the elected officers of the Company be, and each of them hereby
is, authorized and directed to advise the Company's senior lenders and the
trustees under the Indentures of the issuance of Securities, as any such office
shall deem necessary or appropriate; and further
RESOLVED, That the Securities Committee and each of the elected officers of the
Company be, and each of them hereby is, authorized and directed to do and
perform, or cause to be done and performed, all such acts, deeds, and things and
to make, execute, and deliver, or cause to be made, executed, and delivered, all
such agreements, undertakings, documents, instruments, or certificates, in the
name and on behalf of the Company or otherwise, including, without limitation,
indentures, loan agreements, underwriting, placement, exchange or agency
agreements, and trust agreements, all as the Securities Committee or any of the
elected officers deem necessary or appropriate to effect the purposes and intent
of the foregoing resolutions.
<PAGE>
*CUSIP 501044BE0
NOTICE OF REDEMPTION
TO THE HOLDERS OF
THE KROGER CO.
6 3/8% CONVERTIBLE JUNIOR SUBORDINATED NOTES DUE 1999
NOTICE IS HEREBY GIVEN THAT, pursuant to the provisions of Section 1101 of
the Indenture Dated as of December 1, 1992 between The Kroger Co. and Chemical
Bank, as Trustee, that the Company has elected to redeem and will redeem on
September 5, 1995, (the "Redemption Date") at a redemption price of 104.554%
of the principal amount thereof, plus accrued interest thereon from June 1,
1995 to the Redemption Date (the "Redemption Price"), all of the above-
captioned Notes.
ALTERNATIVES AVAILABLE TO HOLDERS OF NOTES
Holders of the Notes have the following alternatives (in addition to any
other disposition of the Notes):
1. CONVERSION. Prior to the close of business on September 5, 1995,
holders may convert their Notes into the Company's Common Stock, par value
$1.00 per share, at the rate of $18.68 per share of Common Stock.
2. REDEMPTION. Holders may surrender their Notes for redemption for the
Redemption Price.
UNDER THE FOREGOING ALTERNATIVES, BASED UPON THE CLOSING PRICE OF THE COMMON
STOCK AS REPORTED ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON AUGUST 3,
1995, OF $32, A HOLDER WHO CONVERTED $1,000 PRINCIPAL AMOUNT OF NOTES ON THAT
DATE WOULD HAVE RECEIVED COMMON STOCK (AND CASH IN LIEU OF ANY FRACTIONAL
SHARE) HAVING A MARKET VALUE OF $1,713. SO LONG AS THE MARKET PRICE OF THE
COMMON STOCK IS GREATER THAN $19.84 PER SHARE AT THE TIME OF CONVERSION, A
HOLDER WHO CONVERTS HIS OR HER NOTES WILL RECEIVE COMMON STOCK AND CASH IN
LIEU OF ANY FRACTIONAL SHARE WITH A MARKET VALUE GREATER THAN THE AMOUNT OF
CASH RECEIVABLE UPON REDEMPTION OF THE NOTES. THE PRICE OF THE COMMON STOCK
RECEIVED UPON CONVERSION, HOWEVER, IS SUBJECT TO FLUCTUATION AND THE HOLDER
MAY INCUR VARIOUS TRANSACTION COSTS IF SUCH COMMON STOCK IS SOLD IN THE
MARKET. HOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON
STOCK.
CONVERSION OF THE NOTES
At the option of the Holder, the Notes (or any portion thereof which is
$1,000 or an integral multiple thereof) may be converted into the Common Stock
of the Company at a conversion price of $18.68 per share of Common Stock or
approximately 53.5 shares of Common Stock for each $1,000 principal amount of
Notes.
The Notes are currently held in book-entry form through the facilities of
The Depository Trust Company (the "Depository"). Accordingly, in order for a
beneficial owner of an interest in a Note to exercise such person's conversion
rights, such person must comply with the procedures of the Depository, if a
participant in the Depository (a "Participant"), or if such person is not a
participant in the Depository, through the procedures of the participant
through which such person owns its interest in the Notes to effect a
conversion. The Indenture requires that this notice contain an address for
surrender of Notes for redemption or conversion, which address is Chemical
Bank, Room 234-North Building, Corporate Trust Securities Window, 55 Water
Street, New York, New York 10041; however since the Depository is the only
holder of a physical Note, this address is for use by the Depository only.
Any portion of a Note that is not converted will be redeemed as described
below. The right to convert the Notes shall expire at the close of business on
September 5, 1995.
REDEMPTION OF THE NOTES
Any Notes not converted on or before 5:00 P.M., Eastern Daylight Time, on
September 5, 1995 will be redeemed on such date.
On the Redemption Date, the Notes will become and be due and payable.
- -------
* This CUSIP number has been assigned to this issue by an organization not
affiliated with the Trustee or the Company and is included solely for the
convenience of the Noteholders. Neither the Company, nor the Trustee shall
be responsible for the selection or use of this CUSIP number, nor is any
representation made as to its correctness on the Notes or as indicated in
any redemption notice.
From and after the Redemption Date, interest on the Notes shall cease to
accrue.
FOR INFORMATION CALL
HILL & KNOWLTON, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: 212--885-0555
THE KROGER CO.
By: Chemical Bank, as Trustee
Dated: August 4, 1995
