<PAGE>
Filed Pursuant to Rule 424(b)(5)
File Number 333-50269
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 29, 1998
$200,000,000
THE KROGER CO.
PUTTABLE RESET SECURITIES PURSSM DUE JULY 1, 2010
Interest on the Puttable Reset Securities PURSSM due July 1, 2010 (the
"Bonds") of The Kroger Co. (the "Company") is payable semiannually on January
1 and July 1 of each year, commencing January 1, 1999. From and including June
26, 1998 to but excluding July 1, 2000, interest on the Bonds will accrue at
an annual rate equal to 6%. On July 1, 2000 (the "Reset Date"), the interest
rate may be reset at a fixed rate determined by the Calculation Agent on the
basis of certain bids to be requested from reference dealers, as described
below. See "Description of Bonds--Interest" and "--Reset of Interest Rate."
On the Reset Date, J.P. Morgan Securities Inc. (the "Call Option Holder")
will have the right to purchase all of the outstanding Bonds (in whole and not
in part) from the holders, at a price equal to 100% of the principal amount of
the Bonds purchased. If the Call Option Holder does not exercise its Call
Option, then the Company will repurchase from each holder on the Reset Date
all of the holder's Bonds, at a price equal to 100% of the principal amount of
the Bonds repurchased, unless the holder elects to retain them by notifying
the Trustee in the required manner. In all cases, the Company will remain
obligated to pay accrued and unpaid interest on the Bonds on the Reset Date.
These purchase rights and obligations are subject to the requirements and
exceptions described in this document. See "Description of Bonds--Call Option"
and "--Put Option." The Bonds will not be entitled to any sinking fund, but
they will be redeemable at the option of the Company at any time after the
Reset Date as more particularly described in this Prospectus Supplement.
The Bonds will be represented by one or more global Bonds registered in the
name of a nominee of The Depository Trust Company ("DTC" or the "Depositary").
Beneficial interests in the global Bonds will be shown on, and transfers will
be effected only through, records maintained by DTC and its participants.
Except as described in this document, Bonds in definitive form will not be
issued. See "Description of Bonds--Global Securities."
Settlement for the Bonds will be made in immediately available funds. The
Bonds will trade in DTC's settlement system until maturity and secondary
market trading activity in the Bonds therefore will settle in immediately
available funds.
----------------
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 SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Bond........................... 99.868% 0.250% 102.309%
Total.............................. $199,736,000 $500,000 $204,618,000
</TABLE>
- --------
(1) Plus accrued interest, if any, from June 26, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $175,000 payable by the Company.
The proceeds to the Company include an amount equal to 2.691% of the
Bonds, which will be paid by the Call Option Holder in consideration of
the Call Option it will have with respect to the Bonds.
----------------
The Bonds are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. The Bonds are expected to be ready for delivery
in book-entry form only through the facilities of DTC in New York, New York on
or about June 26, 1998, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
The date of this Prospectus Supplement is June 23, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE BONDS, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH BONDS, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus Supplement:
1. Annual Report on Form 10-K for the fiscal year ended December 27,
1997;
2. Quarterly Report on Form 10-Q for the quarter ended March 21, 1998;
and
3. Reports on Form 8-K dated January 22, 1998, February 25, 1998, April
15, 1998, May 6, 1998, and May 11, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
after the date of the Registration Statement on Form S-3 relating to the
offering of the Bonds (the "Registration Statement") and prior to the
termination of the offering of the Bonds 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 Supplement and the accompanying Prospectus and the
Registration Statement of which it is 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 Supplement or such Prospectus and Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus Supplement and
accompanying 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.
USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Bonds and Call
Option, estimated to be approximately $204.4 million, plus accrued interest,
if any, from June 26, 1998, to repay amounts outstanding under the Five-Year
Credit Agreement and the 364-Day Credit Agreement, both dated as of May 28,
1997, and among the Company and the banks party thereto (collectively, the
"Credit Agreement"). From time to time, the Company expects to use borrowings
under the Credit Agreement to repurchase or redeem outstanding indebtedness of
the Company, or for other general corporate purposes. Amounts borrowed under
the Credit Agreement bear interest as described in the Credit Agreement, a
copy of which is filed with the Company's Report on Form 8-K dated June 2,
1997, incorporated by reference in the Prospectus. Borrowings under the Credit
Agreement were used for general corporate purposes, including the repurchase
of outstanding indebtedness. See "Underwriting."
PURSSM IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
S-2
<PAGE>
DESCRIPTION OF BONDS
The Bonds constitute a separate series of the Debt Securities described in
the accompanying Prospectus. Reference should be made to the Prospectus for a
detailed summary of certain additional provisions of the Bonds. The
description of the Bonds in this Prospectus Supplement supplements the
description of the Debt Securities contained in the Prospectus. If the
descriptions contained in these documents are inconsistent, this Prospectus
Supplement controls. The Bonds will be issued under an Indenture dated as of
May 1, 1998 as amended by the First Supplemental Indenture dated as of May 11,
1998 and the Second Supplemental Indenture dated as of June 26, 1998 (the
"Indenture") between the Company and Star Bank, National Association as
Trustee (the "Trustee"). Certain defined terms in the Indenture are
capitalized herein. Whenever a defined term is referred to and not herein
defined, the definition thereof is contained in the Indenture.
GENERAL
The Bonds will mature on July 1, 2010 (the "Final Maturity") but are subject
to earlier repurchase by the Company as described in "--Put Option" below. The
Bonds also will be redeemable, in whole or in part, at the option of the
Company at any time after the Reset Date as described in "--Optional
Redemption" below. The Bonds are not otherwise subject to redemption and are
not entitled to the benefit of any sinking fund. The Bonds are also subject to
purchase by the Call Option Holder as described in "--Call Option" below. The
aggregate principal amount of the Bonds is limited to $200,000,000, but the
Indenture does not limit the amount of other Debt Securities that may be
issued by the Company. The Bonds will be unsecured, general obligations of the
Company and will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company.
If any interest, principal or other payment to be made in respect of the
Bonds (including any payment pursuant to the Call Option or any Put Option
described below) would otherwise be due on a day that is not a Business Day
(as defined below), payment may be made on the next succeeding day that is a
Business Day, with the same effect as if payment were made on the due date.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in New York City or Cincinnati, Ohio are authorized
or obligated by law to close. "Market Day," as used below, means a Business
Day other than a day on which dealings in the U.S. Treasury bond market are
generally not being conducted.
The Company has agreed with the Call Option Holder, as holder of the Call
Option (as defined below), that, notwithstanding any provision to the contrary
set forth in the Indenture, the Company will not cause or permit the terms or
provisions of the Bonds (or the Indenture, as it relates to the Bonds) to be
modified in any way, and may not make open market or other purchases of the
Bonds except pursuant to the Put Option or in certain limited circumstances,
without the prior written consent of the Call Option Holder.
The Bonds will be issued in fully registered form in denominations of, and
integral multiples of, $1,000. The Bonds will initially be issued in global
form. See "--Global Securities."
INTEREST
Interest will accrue on the principal amount of each Bond at the applicable
rate described below, from and including June 26, 1998 (the "Original Issue
Date") to but excluding the date on which the principal amount is paid in
full. Interest accrued on each Bond will be payable in arrears on January 1
and July 1 of each year, commencing on January 1, 1999, in each case to the
holder of record of the Bond on the December 15 or June 15 next preceding the
interest payment date (each an "Interest Payment Record Date"). The Interest
Payment Record Date will differ from the record date for the exercise of the
Call Option and Put Option described below.
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<PAGE>
From and including the Original Issue Date to but excluding July 1, 2000,
interest will accrue at an annual rate equal to 6%.
On the Reset Date the interest rate on the Bonds will be reset so as to
equal a fixed rate determined as described under "--Reset of Interest Rate"
below. Notwithstanding the foregoing, the interest rate on a particular Bond
will not be reset on the Reset Date if the Company is obligated to repurchase
such Bond on such date, and a reset scheduled to occur on the Reset Date may
not occur because of a Market Disruption Event or a Failed Remarketing. See
"--Reset of Interest Rate" below.
CALL OPTION
The Call Option Holder (or any successor firm) may purchase all of the
outstanding Bonds (in whole and not in part) from the holders on the Reset
Date (such right, the "Call Option") at a price equal to 100% of the principal
amount of Bonds purchased (the "Face Value") and subject to the Call Option
Holder giving notice of its intention to purchase the outstanding Bonds as
described below (a "Call Notice"). In addition, the Company will remain
obligated to pay all accrued and unpaid interest on the Bonds. Interest that
becomes payable on the Reset Date will be payable by the Company to the
holders of record on the corresponding Interest Payment Record Date, as
provided in the Bonds and the Indenture.
To exercise the Call Option, the Call Option Holder must give a Call Notice
to the holders of outstanding Bonds no later than the tenth Market Day prior
to the Reset Date, in the manner described under "--Certain Notices" below. In
the event a Call Notice is duly given, each holder will be obligated to sell
to the Call Option Holder, and the Call Option Holder will be obligated to
purchase from each holder, at the Face Value on the Reset Date, the Bonds held
by the holder on the Reset Date. Such sale and purchase will be effected
through the facilities of DTC, with each holder being deemed to have
automatically tendered its Bonds for sale to the Call Option Holder on the
Reset Date in accordance with applicable DTC procedures. Each holder's
automatic tender of Bonds will be subject to the holder's receipt of payment
of the Face Value of the Bonds from the Call Option Holder on the Reset Date.
Until purchased or paid by the Company, the Bonds will remain outstanding
notwithstanding any exercise of the Call Option by the Call Option Holder. See
"--Settlement on Exercise of Put and Call Options."
If the Call Option is exercised, all Bonds outstanding on the Reset Date
will be subject to purchase by the Call Option Holder as described above. This
will be the case for every holder (and every beneficial owner) of Bonds
outstanding on the Reset Date, including those who acquire an interest in the
Bonds after the Call Notice is given or who are otherwise unaware that the
Call Notice has been given.
Upon the occurrence of an Event of Default (as defined in the Indenture) and
in certain other circumstances, the Call Option Holder shall be entitled to
demand that the Company pay to the Call Option Holder an amount equal to the
fair market value of the Call Option (the "Termination Amount").
PUT OPTION
If the Call Option Holder does not exercise the Call Option, each holder of
outstanding Bonds may require the Company to repurchase all of the holder's
Bonds (in whole and not in part) on the Reset Date (such right, its "Put
Option") at a price equal to 100% of the principal amount of the Bonds
repurchased (the "Put Price"), in the circumstances described in the next
paragraph. The accrued and unpaid interest on the repurchased Bonds that
becomes payable on the Reset Date will be payable by the Company to the
holders of record on the corresponding Interest Payment Record Date, as
provided in the Bonds and the Indenture. If for any reason payment of the Put
Price is not made when due, the accrued interest from the Reset Date to the
date payment is made would be payable by the Company as part of the Put Price.
S-4
<PAGE>
On the Reset Date, each holder will be deemed to have exercised its Put
Option automatically for the full principal amount of the Bonds held by such
holder on the Reset Date unless either (x) the Call Option Holder has duly
given a Call Notice or (y) if the Call Option Holder does not exercise the
Call Option, (i) no later than 10:00 A.M. (New York City time) on the seventh
Market Day prior to the Reset Date, the holder gives notice to the Trustee
that the holder elects not to sell any of its Bonds to the Company on the
Reset Date (a "Hold Notice") and (ii) the notice is effective under the 10%
Requirement described in the next paragraph. A Hold Notice must be given in
the manner described under "Certain Notices" below. Consequently, with respect
to each holder, if a Call Notice is not duly given by the Call Option Holder
and an effective Hold Notice is not duly given by the holder, the Company will
be obligated to repurchase from the holder, and the holder will be obligated
to sell to the Company, at the Put Price on the Reset Date, the Bonds held by
the holder on the Reset Date. Such sale and purchase will be effected through
the facilities of DTC, with each holder who has not given an effective Hold
Notice being deemed to have automatically tendered its Bonds for sale to the
Company on the Reset Date in accordance with applicable DTC procedures.
Notwithstanding the foregoing, all holders will be deemed to have exercised
their Put Options and may not continue to hold the Bonds by giving a Hold
Notice if (i) the Company is required to pay the Call Option Holder the
Termination Amount, (ii) the Company is obligated to repurchase the Bonds in
connection with the failure of the Call Option Holder to pay the Face Value of
the Bonds on the Reset Date as described under "--Settlement on Exercise of
the Put and Call Options" below, or (iii) the Calculation Agent determines
that a Market Disruption Event and/or a Failed Remarketing has occurred or is
continuing for at least four consecutive Market Days starting on the
Calculation Date. See "--Call Option" above and "--Settlement on Excercise of
the Put and Call Options" and "--Reset of Interest Rate" below. If the Company
is obligated to purchase any Bonds pursuant to the Put Option, the Bonds
subject to purchase will remain outstanding until the Put Price (and accrued
interest) in respect thereof has been paid. See "--Settlement on Exercise of
Put and Call Options."
Notwithstanding the foregoing, no Hold Notice will be effective unless Hold
Notices are duly given with respect to at least 10% of the principal amount of
the Bonds outstanding. The provision described in this paragraph is called the
"10% Requirement." If any holder gives a Hold Notice to the Trustee when the
10% Requirement has not been satisfied, the Trustee will give written notice
of that fact (a "10% Requirement Notice") to the holder and the Company not
later than the close of business on the seventh Market Day before the Reset
Date, in the manner described under "--Certain Notices" below.
RESET OF INTEREST RATE
The interest rate on each Bond will be reset on the Reset Date, unless the
Company is obligated to repurchase the Bond on such date pursuant to the
holder's Put Option or in connection with the failure of the Call Option
Holder to pay the Face Value of the Bonds on the Reset Date as described under
"--Settlement on Exercise of the Put and Call Options" below. Consequently,
the interest rate on an outstanding Bond will be reset on the Reset Date if
either of the following occurs: (x) the Call Option Holder elects to purchase
all of the outstanding Bonds on the Reset Date pursuant to the Call Option and
so purchases the outstanding Bonds or (y) the Call Option Holder does not
elect to do so, the holder elects not to exercise its Put Option by giving the
Trustee a Hold Notice and the Hold Notice is effective under the 10%
Requirement. Notwithstanding the foregoing, reset of the interest rate is
subject to the occurrence of a Market Disruption Event or a Failed Remarketing
as described below and the termination of the Call Option at the election of
the Call Option Holder as described under
"--Call Option" above.
The Company has initially appointed the Call Option Holder as its agent for
the purpose of resetting the interest rate (such agent or any successor agent,
the "Calculation Agent"). If the interest rate is to be reset on the Reset
Date, the Calculation Agent will effect the reset as follows.
Between the tenth Market Day prior to the Reset Date and 11:00 A.M., New
York City time, on the Calculation Date (as defined below), the Calculation
Agent will request each of the following
S-5
<PAGE>
financial institutions to participate as a reference dealer in accordance with
the terms described below: Goldman, Sachs & Co., Citicorp Securities, Inc.,
and J.P. Morgan Securities Inc., or their respective successors; provided,
however, that if any of the foregoing cease to be a leading dealer of
publicly-traded debt securities of the Company in New York City (a "Primary
Dealer") or are unwilling to act as a reference dealer, the Calculation Agent
shall substitute therefor another Primary Dealer (the "Reference Dealers"). If
the Call Option Holder has exercised the Call Option and so requests, each
Reference Dealer must include in its participation agreement a written
commitment (satisfactory to the Call Option Holder) that, if it is selected as
the Final Dealer (as defined below), it will purchase from the Call Option
Holder on the Calculation Date for settlement on the Reset Date and at the
Final Offer Price (as defined below), its Pro Rata (as defined below) portion
of the Bonds that the Call Option Holder purchases pursuant to the Call Option
and tenders for resale to the Final Dealer on the Reset Date as described
below. For each Reference Dealer, the Calculation Agent will request the name
of and telephone and facsimile numbers for one individual to represent such
Reference Dealer.
On the sixth Market Day prior to the Reset Date (the "Calculation Date"),
the Calculation Agent will undertake the following actions to calculate a
fixed rate at which interest will accrue on the Bonds from and including the
Reset Date to but excluding the Final Maturity (such period, the "Reset
Period"). In paragraphs (a) and (b) below, all references to specific hours
are references to prevailing New York City time, and each notice will be given
telephonically and will be confirmed as soon as possible by facsimile to each
of the Calculation Agent and the Company. The times set forth below are
guidelines for action, and the Calculation Agent will use reasonable efforts
to adhere to these times.
(a) At 12:00 P.M., the Calculation Agent will:
(i) determine (or obtain from the Call Option Holder, if the Call
Option Holder has exercised the Call Option) the approximate ten-
year U.S. Treasury bond yield at or about such time, which will be
expressed as a percentage (the "Designated Treasury Yield") and
will be based on the then-current, ten-year U.S. Treasury bond (the
"Designated Treasury Bond");
(ii) calculate and provide to the Reference Dealers, on a preliminary
basis, a hypothetical price at which the Bonds might be offered
for sale to a Reference Dealer on the applicable Reset Date (the
"Offer Price"). The Offer Price will be expressed as a percentage
of the principal amount of the Bonds and will equal 100% plus the
Margin (as defined below), if the Treasury Rate Difference (as
defined below) is positive, or 100% minus the Margin, if the
Treasury Rate Difference is negative. The Margin will also be
expressed as a percentage of the principal amount of the Bonds
outstanding and will equal the present value of the absolute value
of the Treasury Rate Difference applied to twenty semi-annual
periods (i.e., ten years), discounted at the Designated Treasury
Yield divided by two. The "Treasury Rate Difference" means the
percentage (which may be positive or negative) equal to (x) 5.50%
(the "Initial Treasury Yield") minus (y) the Designated Treasury
Yield; and
(iii) request each Reference Dealer to provide to the Calculation
Agent, when notified of the Final Offer Price as described in
paragraph (b) below, a firm bid, expressed as a percentage
representing an interest rate spread over the Designated Treasury
Yield (the "Spread"), at which such Reference Dealer would be
willing to purchase on the Calculation Date for settlement on the
Reset Date, at the Final Offer Price, all of the Bonds then
outstanding. Each such firm bid is to be given on an "all-in"
basis and is to remain open for at least 30 minutes after it is
given.
(b) At 12:30 P.M., the Calculation Agent will determine (or obtain from the
Call Option Holder, if the Call Option Holder has exercised the Call
Option) the Designated Treasury Yield on a final basis, and calculate
and provide to the Reference Dealers the Offer Price on a final basis
(the "Final Offer Price") and request each Reference Dealer to submit
its bid immediately as
S-6
<PAGE>
described in clause (a)(iii) above. If the Calculation Agent receives at
least two bids, the following will occur:
(i) the Reference Dealer providing the bid representing the lowest all-
in Spread (the "Final Spread") will be the "Final Dealer"; provided
that if more than one Reference Dealer has provided a bid
representing the lowest all-in Spread (a "Qualifying Reference
Dealer"), the Calculation Agent will so notify each Qualifying
Reference Dealer and each Qualifying Reference Dealer will have the
opportunity immediately thereafter to submit a second firm bid in
the manner and on the terms specified in clause (a)(iii) above, and
the Qualifying Reference Dealer providing the bid representing the
lowest all-in Spread will be the Final Dealer and if more than one
Qualifying Reference Dealer has provided a bid representing the
lowest all-in Spread, each of such Qualifying Reference Dealers will
be a Final Dealer;
(ii) if the Call Option Holder has exercised the Call Option, each Final
Dealer will be obligated to purchase from the Call Option Holder at
the Final Offer Price, for settlement on the Reset Date, its Pro
Rata portion of the Bonds that the Call Option Holder purchases
pursuant to the Call Option and tenders for resale to the Final
Dealer on the Reset Date (assuming that the interest rate on the
Bonds will be reset so as to equal the Adjusted Rate (as defined
below) during the Reset Period) (as used herein "Pro Rata" shall
mean the amount equal to the outstanding principal amount of the
Bonds that the Call Option Holder purchases pursuant to the Call
Option divided by the number of Final Dealers); as described below,
no Final Dealer will be obligated to purchase any Bonds if the Call
Option Holder has not exercised the Call Option;
(iii) the Calculation Agent will calculate and provide to the Company
the "Adjusted Rate," which will be the semi-annual, bond-
equivalent, fixed interest rate on the Bonds required to produce,
during the Reset Period, a semi-annual, bond-equivalent yield on
the Bonds that equals the sum of the Final Spread plus the final
Designated Treasury Yield, assuming that the Bonds are purchased
on the Reset Date at the Final Offer Price; and
(iv) the interest rate on the Bonds will be adjusted so as to equal the
Adjusted Rate, effective from and including the Reset Date to but
excluding the Final Maturity. If the Call Option Holder has not
exercised the Call Option and any holder gives an effective Hold
Notice to the Trustee, the Company will promptly give written
notice of the Adjusted Rate to the holder.
As indicated above, all determinations regarding the Designated Treasury Yield
and the Designated Treasury Bond as described in clause (a)(i) and the first
sentence of clause (b) above will be made by the Call Option Holder if another
party is acting as the Calculation Agent, unless the Call Option Holder has
elected not to exercise the Call Option in which case such determinations will
be made as necessary by the Calculation Agent.
If the Calculation Agent determines that, on the Calculation Date, (x) a
Market Disruption Event (as defined below) has occurred or is continuing or
(y) fewer than two Reference Dealers have provided firm bids in a timely
manner pursuant to participation agreements satisfactory to the Call Option
Holder substantially as described above (a "Failed Remarketing"), the steps
contemplated above will be taken on the next Market Day on which the
Calculation Agent determines that no Market Disruption Event has occurred or
is continuing and at least two Reference Dealers have provided bids pursuant
to participation agreements satisfactory to the Call Option Holder
substantially as contemplated above. If the Calculation Agent determines that
a Market Disruption Event and/or a Failed Remarketing has occurred or is
continuing for at least four consecutive Market Days starting on the
Calculation Date, then the Call Option Holder will be deemed not to have
exercised the Call Option, all holders will be deemed to have exercised their
Put Options and the Company will repurchase all the Bonds from the holders on
the Reset Date at the Put Price (and will pay the Call Option Holder an amount
equal to the Margin, if the Treasury Rate Difference is positive). In these
circumstances, the
S-7
<PAGE>
holders of the Bonds may not continue to hold the Bonds by giving a Hold
Notice. The Calculation Agent will notify the Company of such determination
promptly after the close of business on such fourth Market Day. The Company
will give notice to the holders that the Bonds will be repurchased by the
Company from the holders on the Reset Date at the Put Price, no later than the
second Market Day prior to the Reset Date in the manner described under "--
Certain Notices" below. If at any time the Call Option Holder is not acting as
Calculation Agent, then the determinations and notice to the Company described
in this paragraph will be made and given by the Call Option Holder unless the
Call Option Holder does not exercise the Call Option, in which case such
determinations and notice will be made and given by the Calculation Agent.
"Market Disruption Event" means any of the following: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange or the establishment of minimum prices on such exchange; (ii) a
general moratorium on commercial banking activities declared by either federal
or New York State authorities; (iii) any material adverse change in the
existing financial, political or economic conditions in the United States of
America; (iv) an outbreak or escalation of hostilities involving the United
States of America or the declaration of a national emergency or war by the
United States of America; or (v) any material disruption of the U.S.
government securities market, U.S. corporate bond market and/or U.S. federal
wire system.
There is no assurance that the Calculation Agent will receive at least two
qualifying bids from Reference Dealers in connection with the Reset Date. All
determinations regarding Market Disruption Events and Failed Remarketings,
including whether or not any event has occurred or is continuing, will be made
by the Calculation Agent (or the Call Option Holder, as applicable) in its
sole discretion.
If the Call Option Holder has not exercised the Call Option, the Final
Dealer will not be obligated to purchase Bonds from any holder, and no holder
will be obligated to sell Bonds to the Final Dealer. Consequently, in deciding
whether to give a Hold Notice, holders should not assume that any dealer will
be prepared to purchase their Bonds at the Final Offer Price or otherwise.
All determinations made by the Calculation Agent (or the Call Option Holder)
regarding the matters described above will be final, conclusive and binding on
all concerned absent manifest error. To the extent permitted by law, no
determination made by the Calculation Agent (or the Call Option Holder)
regarding the matters described herein shall give rise to any liability on the
part of the Calculation Agent (or the Call Option Holder), the Trustee or the
Company.
SETTLEMENT ON EXERCISE OF THE PUT AND CALL OPTIONS
If the Call Option is exercised, then, on the Reset Date, all beneficial
interests in the Bonds will be transferred to a DTC account designated by the
Call Option Holder. The transfers will be made automatically, without any
action on the part of any beneficial owner, by book entry through DTC. The
Call Option Holder will be obligated to make payment of the Face Value of the
Bonds to DTC, for credit to the accounts of the DTC participants through which
beneficial interests in the Bonds are held, by the close of business on the
Reset Date. Each transfer will be made against the corresponding payment, and
each payment will be made against the corresponding transfer, in accordance
with applicable DTC procedures. If the Call Option Holder fails to pay the
Face Value of the Bonds on the applicable Reset Date, the Call Option will be
deemed not to have been exercised and the Put Option will be deemed to have
been exercised with respect to all of the outstanding Bonds. In these
circumstances, the holders of the Bonds may not continue to hold the Bonds by
giving an effective Hold Notice, and the Company will be obligated to pay, not
later than two Business Days following the Reset Date, the Put Price for the
Bonds (plus accrued interest from the Reset Date to, but excluding, the date
payment is made), with settlement occurring as described in the next
paragraph. In any event, the Company will remain obligated to make payment of
accrued and unpaid interest due on the Bonds, with interest payable on the
Reset Date being payable to the holders of record on the corresponding
Interest Payment Record Date, as provided in the Bonds and in the Indenture.
Failure by the Call
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Option Holder to pay the Face Value of the Bonds on the Reset Date will not
constitute an Event of Default under and as defined in the Bonds or the
Indenture.
If the Put Option is exercised, then, on the Reset Date, all beneficial
interests in the Bonds to be purchased will be transferred to a DTC account
designated by the Company. The transfers will be made automatically, without
any action on the part of any beneficial owner, by book entry through DTC. The
Company will be obligated to make payment of the Put Price of the relevant
Bonds to DTC, for credit to the accounts of the DTC participants through which
beneficial interests in these Bonds are held, by the close of business on the
Reset Date. Each transfer will be made against the corresponding payment, and
each payment will be made against the corresponding transfer, in accordance
with applicable DTC procedures. If the Company fails to pay the Put Price of
the relevant Bonds on the Reset Date, accrued interest from the Reset Date to
the date the payment is made will be payable as part of the Put Price. With
respect to all the Bonds, whether or not purchased pursuant to the Put Option,
the Company will remain obligated to make payment of accrued and unpaid
interest due on the Bonds, with interest payable on the Reset Date being
payable to the holders of record on the corresponding Interest Payment Record
Date, as provided in the Bonds and in the Indenture.
The transactions described above will be executed on the Reset Date through
DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC participants will be debited and credited and the Bonds
delivered by book entry as necessary to effect the purchases and sales
thereof. The transactions will settle in immediately available funds through
DTC's Same-Day Funds Settlement System.
The settlement procedures described above, including those for payment for
and delivery of Bonds purchased by the Call Option Holder or the Company on
the Reset Date, may be modified, notwithstanding any contrary terms of the
Indenture, to the extent required by DTC or, if any Bonds are issued in non-
book-entry form, to the extent required to facilitate these transactions in
Bonds in certificated form. In addition, the Call Option Holder and the
Company may, notwithstanding any contrary terms of the Indenture, modify the
settlement procedures referred to above in order to facilitate the settlement
process.
Under the terms of the Bonds, the Company has agreed that, notwithstanding
any provision to the contrary set forth in the Indenture, (i) it will use its
best efforts to maintain the Bonds in book-entry form with DTC or any
successor thereto and to appoint a successor depositary to the extent
necessary to maintain the Bonds in book-entry form and (ii) it will waive any
discretionary right it otherwise may have under the Indenture to cause the
Bonds to be issued in certificated form.
For further information with respect to payments, transfers and settlement
through DTC, see
"--Global Securities" below.
OPTIONAL REDEMPTION
The Bonds will be redeemable, in whole or in part, at the option of the
Company at any time after the Reset Date at a redemption price equal to the
greater of (i) 100% of the principal amount of such Bonds or (ii) as
determined by a Quotation Agent (as defined below), the sum of the present
values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued as of the date
of redemption) discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined below) plus 12.5 basis points plus, in each case,
accrued interest thereon to the date of redemption.
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"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Bonds to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of such Bonds.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company.
"Reference Treasury Dealer" means (i) Goldman, Sachs & Co. and its
successors; provided, however, that if the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer, and (ii) any other Primary Treasury Dealer selected by the
Company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Bonds to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the Bonds or portions
thereof called for redemption.
COVENANTS
The Indenture provides that the following covenants will be applicable to
the Company:
Limitations on Liens. The Company covenants that, so long as any Bonds
remain outstanding, it will not, and will not permit any Restricted
Subsidiary (as defined below) to issue, assume or guarantee any
Indebtedness which is secured by a mortgage, pledge, security interest,
lien or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any of the foregoing) (each a "lien") upon any Operating
Property or Operating Asset, whether now owned or hereafter acquired, of
the Company or any Restricted Subsidiary without effectively providing that
the Bonds (together with, if the Company shall so determine, any other
Indebtedness of the Company ranking equally with the Bonds) shall be
equally and ratably secured by a lien on such assets ranking ratably with
or equal to (or at the Company's option prior to) such secured
Indebtedness, except that the foregoing restriction shall not apply to (a)
liens on any property or assets of any corporation existing at the same
time such corporation becomes a Restricted Subsidiary provided that such
lien does not extend to any other property of the Company or any of its
Restricted Subsidiaries; (b) liens on any property or assets (including
stock) existing at the time of acquisition thereof, or to secure the
payment of the purchase price of such property or assets, or to secure
indebtedness incurred, assumed or guaranteed by the Company or a Restricted
Subsidiary for the purpose of
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financing the purchase price of such property or of improvements or
construction thereon or attaching to property substituted by the Company to
obtain the release of a lien on other property of the Company on which a
lien then exists, which indebtedness is incurred, assumed or guaranteed
prior to, at the time of, or within 18 months after such acquisition (or in
the case of real property, completion of such improvement or construction
or commencement of full operations at such property, whichever is later
(which in the case of a retail store is the opening of the store for
business to the public)) provided that such lien does not extend to any
other property of the Company or any of its Restricted Subsidiaries; (c)
liens securing indebtedness owing by any Restricted Subsidiary to the
Company or another Restricted Subsidiary; (d) liens on any property or
assets of a corporation existing at the time such corporation is merged
into or consolidated with the Company or a Restricted Subsidiary or at the
time of a purchase, lease or other acquisition of the assets of a
corporation or firm as an entirety or substantially as an entirety by the
Company or a Restricted Subsidiary provided that such lien does not extend
to any other property of the Company or any of its Restricted Subsidiaries;
(e) liens on any property or assets of the Company or a Restricted
Subsidiary in favor of the United States of America or any State thereof,
or in favor of any other country or political subdivision thereof, to
secure certain payments pursuant to any contract or statute or to secure
any indebtedness incurred or guaranteed for the purpose of financing all or
any part of the purchase price (or, in the case of real property, the cost
of construction) of the property or assets subject to such liens (including
but not limited to, liens incurred in connection with pollution control,
industrial revenue or similar financing); (f) liens existing on properties
or assets of the Company or any Restricted Subsidiary existing on the date
hereof; provided that such liens shall secure only those obligations which
they secure on the date hereof or any extension, renewal or replacement
thereof; (g) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part, of any lien
referred to in the foregoing clauses (a) to (f), inclusive; (h) certain
statutory liens or other similar liens arising in the ordinary course of
business of the Company or a Restricted Subsidiary, or certain liens
arising out of governmental contracts; (i) certain pledges, deposits or
liens made or arising under worker's compensation or similar legislation or
in certain other circumstances; (j) certain liens in connection with legal
proceedings, including certain liens arising out of judgments or awards;
(k) liens for certain taxes or assessments, landlord's liens, mechanic's
liens and liens and charges incidental to the conduct of the business, or
the ownership of the property or assets of the Company or of a Restricted
Subsidiary, which were not incurred in connection with the borrowing of
money and which do not in the opinion of the Company, materially impair the
use of such property or assets in the operation of the business of the
Company or such Restricted Subsidiary or the value of such property or
assets for the purposes thereof; or (l) liens not permitted by the
foregoing clauses (a) to (k), inclusive, if at the time of and after giving
effect to, the creation or assumption of such liens, the aggregate amount
of all Indebtedness of the Company and its Restricted Subsidiaries secured
by all liens not so permitted by the foregoing clauses (a) through (k),
inclusive, together with the Attributable Debt (as defined below) in
respect of Sale and Lease-Back Transactions permitted by clause (a) under
"Limitation on Sale and Lease-Back Transactions" below, does not exceed 10%
of Consolidated Net Tangible Assets (as defined below).
Limitation on Sale and Lease-Back Transactions. So long as any Bonds
under the Indenture are outstanding, the Company will not, and will not
permit any Restricted Subsidiary to, enter into any arrangement with any
person providing for the leasing by the Company or a Restricted Subsidiary
of any Operating Property or Operating Asset (other than any such
arrangement involving a lease for a term, including renewal rights, for not
more than three years and leases between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries), whereby such Operating
Property or Operating Asset has been or is to be sold or transferred by the
Company or a Restricted Subsidiary to such person (a "Sale and Lease-Back
Transaction") unless (a) the Company or such Restricted Subsidiary would,
at the time of entering into a Sale
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and Lease-Back Transaction, be entitled to incur Indebtedness secured by a
lien on the Operating Property or Operating Asset to be leased in an amount
at least equal to the Attributable Debt in respect of such transaction
without equally and ratably securing the Bonds pursuant to the provisions
described under "Limitations on Liens" above, or (b) the proceeds of the
sale of the Operating Property or Operating Assets to be leased are at
least equal to their fair market value and an amount in cash equal to the
net proceeds is applied, within 180 days of the effective date of such
transactions to the purchase or acquisition (or, in the case of Operating
Property, the construction) of Operating Property or Operating Assets or to
the retirement, repurchase, redemption or repayment (other than at maturity
or pursuant to a mandatory sinking fund or redemption provision and other
than Indebtedness owned by the Company or any Restricted Subsidiary) of
Bonds or of Funded Indebtedness (as defined below) of the Company ranking
on a parity with or senior to the Bonds, or in the case of a Sale and
Lease-Back Transaction by a Restricted Subsidiary, of Funded Indebtedness
of such Restricted Subsidiary, provided that in connection with any such
retirement, any related loan commitment or the like shall be reduced in an
amount equal to the principal amount so retired. The foregoing restriction
shall not apply to, in the case of any Operating Property or Operating
Assets acquired or constructed subsequent to the date eighteen months prior
to the date of the Indenture, any Sale and Lease-Back Transaction with
respect to such Operating Asset or Operating Property (including presently
owned real property upon which such Operating Property is to be
constructed) if a binding commitment is entered into with respect to such
Sale and Lease-Back Transaction within 18 months after the later of the
acquisition of the Operating Property or Operating Asset or the completion
of improvements or construction thereon or commencement of full operations
at such Operating Property (which in the case of a retail store is the
opening of the store for business to the public).
DEFINITIONS
"Attributable Debt" means in connection with a Sale and Lease-Back
Transaction the total net amount of rent required to be paid during the
remaining primary term of such lease, discounted at a rate per annum equal to
the interest rate on the Bonds, calculated in accordance with generally
accepted accounting principles. The net amount of rent required to be paid
under any such lease for any such period shall be the aggregate amount of rent
payable by the lessee with respect to such period after excluding amounts
required to be paid on account of maintenance, repairs, insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Capital Lease" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's balance sheet or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet; and "Capitalized Lease Obligation" means the amount of the liability
which should be so capitalized or disclosed.
"Consolidated Net Tangible Assets" means, for the Company and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles, the aggregate amounts of assets (less
depreciation and valuation reserves and other reserves and items deductible
from gross book value of specific asset accounts under generally accepted
accounting principles) which under generally accepted accounting principles
would be included on a balance sheet after deducting therefrom (a) all
liability items except deferred income taxes, commercial paper, short-term
bank Indebtedness, Funded Indebtedness, other long-term liabilities and
shareholders' equity and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles.
"Funded Indebtedness" means any Indebtedness maturing by its terms more than
one year from the date as of which the determination is made, including (i)
any Indebtedness having a maturity of 12 months or less but by its terms being
renewable or extendible at the option of the borrower beyond 12
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months from such date of determination and (ii) rental obligations payable
more than 12 months from such date under Capital Leases (such rental
obligations to be included as Funded Indebtedness at the amount so capitalized
at the date of such computation and to be included for the purposes of the
definition of Consolidated Net Tangible Assets both as an asset and as Funded
Indebtedness at the amount so capitalized).
"Operating Assets" means all merchandise inventories, furniture, fixtures
and equipment (including all transportation and warehousing equipment but
excluding office equipment and data processing equipment) owned or leased
pursuant to Capital Leases by the Company or a Restricted Subsidiary.
"Operating Property" means all real property and improvements thereon owned
or leased pursuant to Capital Leases by the Company or a Restricted Subsidiary
and constituting, without limitation, any store, warehouse, service center or
distribution center wherever located, provided that such term shall not
include any store, warehouse, service center or distribution center which the
Company's Board of Directors declares by written resolution not to be of
material importance to the business of the Company and its Restricted
Subsidiaries.
"Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted
Subsidiaries. "Non-Restricted Subsidiary" means any Subsidiary that the
Company's Board of Directors has in good faith declared pursuant to a written
resolution not to be of material importance, either singly or together with
all other Non-Restricted Subsidiaries, to the business of the Company and its
consolidated Subsidiaries taken as a whole.
"Subsidiary" means (i) any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at
the time directly or indirectly owned by the Company and/or one or more
Subsidiaries or (ii) any partnership of which more than 50% of the partnership
interest is owned by the Company or any Subsidiary.
The covenants applicable to the Bonds would not necessarily afford holders
protection in the event of a highly leveraged or other transaction involving
the Company or in the event of a material adverse change in the Company's
financial condition or results of operation, and the Bonds do not contain any
other provisions that are designed to afford protection in the event of a
highly leveraged transaction involving the Company.
MERGER AND CONSOLIDATION
The Indenture provides that the Company will not merge or consolidate with
any corporation, partnership or other entity and will not sell, lease or
convey all or substantially all its assets to any entity, unless the Company
shall be the surviving entity, or the surviving entity or the successor entity
that acquires all or substantially all the assets of the Company shall be a
corporation or partnership organized under the laws of the United States or a
State thereof or the District of Columbia and shall expressly assume all
obligations of the Company under the Indenture and the Bonds issued
thereunder, and immediately after such merger, consolidation, sale, lease or
conveyance, the Company or such successor entity shall not be in default in
the performance of the covenants and conditions of the Indenture to be
performed or observed by the Company.
EVENTS OF DEFAULT
The "Events of Default" with respect to the Bonds will consist of the events
set forth in clauses (a) through (e) as described in the first paragraph under
"Description of Debt Securities--Events of Default and Notice Thereof" in the
Prospectus, except that the dollar amount in clause (d) thereof is increased
to $50,000,000.
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DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to holders of the Bonds which have not already been delivered to
the Trustee for cancellation and which have either become due and payable or
are by their terms due and payable within one year (or scheduled for
redemption within one year) by irrevocably depositing with the Trustee cash or
U.S. Government Obligations (as defined in the Indenture) as trust funds in an
amount certified to be sufficient to pay at maturity (or upon redemption) the
principal of and interest on the Bonds.
The Indenture provides that, if applicable, the Company shall be released
from its obligations under Section 501(4) (in respect of the covenants in
Sections 1008 through 1010), Section 801 and Sections 1008 through 1010, upon
the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and premium, if any, and each installment of interest on the
Bonds on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Bonds. The obligations of the Company under the
Indenture and the Bonds other than with respect to the covenants referred to
above and the Events of Default other than the Event of Default for which
defeasance has occurred shall remain in full force and effect. Such a trust
may only be established if, among other things, the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel to the effect
that all conditions precedent for such action have been complied with (Section
1303).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Bonds will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next day funds. In contrast, the Bonds
will trade in the Depositary's same-day funds settlement system until
maturity, and secondary market trading activity in the Bonds will therefore be
required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Bonds.
THE TRUSTEE
Star Bank, National Association, is the Trustee under the Indenture. In the
performance of its duties, the Trustee is entitled to indemnification for any
act which would involve it in expense or liability and will not be liable as a
result of any action taken in connection with the performance of its duties
except for its own gross negligence or default. The Trustee is protected in
acting upon any direction or document reasonably believed by it to be genuine
and to be signed by the proper party or parties or upon the opinion or advice
of counsel. The Trustee may resign upon written notice to the Company as
provided in the Indenture. The Trustee may acquire obligations of the Company
for its own account. The Trustee performs certain banking and other services
for the Company, and is a Lender under the Credit Agreement.
GLOBAL SECURITIES
Upon original issuance, the Bonds will be represented by one or more global
securities (the "Global Securities") having an aggregate principal amount
equal to that of the Bonds represented thereby. Each Global Security will be
deposited with, or on behalf of, the Depositary, and registered in the name of
Cede & Co., a nominee of the Depositary. The Global Securities will bear
legends regarding the restrictions on exchanges and registration of transfer
thereof referred to below and any other matters as may be provided for by the
Indenture.
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The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of section 17A of the Exchange
Act. The Depositary was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly.
Notwithstanding any provision of the Indenture or the Bonds described
herein, no Global Security may be exchanged in whole or in part for Bonds
registered, and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary for such
Global Security or any nominee of the Depositary unless (i) the Depositary has
notified the Company that it is unwilling or unable to continue as Depositary
for the Global Security or has ceased to be qualified to act as such as
required pursuant to the Indenture or (ii) there shall have occurred and be
continuing an Event of Default with respect to the Bonds, or except as the
Company may request in order to facilitate the purchase of the Bonds or any
portion thereof by the Call Option Holder pursuant to the Call Option or by
the Company pursuant to the Put Option (provided that, after consummation of
any such purchase pursuant to the Call Option, the Bond or portion so
purchased may be reissued in the form of a Global Security). All Bonds issued
in exchange for a Global Security or any portion thereof will be registered in
such names as the Depositary may direct.
As long as the Depositary, or its nominee, is the registered holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and holder of such Global Security and the Bonds
represented thereby for all purposes under the Bonds and the Indenture. Except
in the limited circumstances referred to above, owners of beneficial interests
in a Global Security will not be entitled to have such Global Security or any
Bonds represented thereby registered in their names, will not receive or be
entitled to receive physical delivery of certificated Bonds in exchange
therefor and will not be considered to be the owners or holders of such Global
Security or any Bonds represented thereby for any purpose under the Bonds or
the Indenture. All payments of principal of and interest on a Global Security
will be made to the Depositary or its nominee, as the case may be, as the
holder thereof. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form.
These laws may impair the ability to transfer beneficial interests in a Global
Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of Bonds represented by the Global Security
to the accounts of its participants. Ownership of beneficial interests in a
Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) or any such participant (with
respect to interests of persons held by such participants on their behalf).
The Company expects that the Depositary, upon receipt of any payments of
principal or interest in respect of a Global Security, will credit immediately
the accounts of the related participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security as shown on the records of the Depositary. The Company
also expects that payments by
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participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name", and will be the
responsibility of such participants. Payments, transfers, exchanges, notices
and others matters relating to beneficial interests in a Global Security may
be subject to various policies and procedures adopted by the Depositary from
time to time. None of the Company, the Trustee, the Calculation Agent (or the
Call Option Holder) or any of their respective agents will have any
responsibility or liability for any aspect of the Depositary's or any
participant's records relating to, or for payments or notices on account of,
beneficial interests in a Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
CERTAIN NOTICES
With respect to any Bonds represented by a Global Security, Call Notices,
10% Requirement Notices and any other notices to be given to the holders of
the Bonds will be deemed to have been duly given to the holders when given to
DTC, or its nominee, in accordance with DTC's policies and procedures. The
Company believes that DTC's practice is to inform its participants of any such
notice it receives, in accordance with its policies and procedures. Persons
who hold beneficial interests in the Bonds through DTC or its direct or
indirect participants may wish to consult with them about the manner in which
notices and other communications relating to the Bonds may be given and
received through the facilities of DTC. Neither the Company, the Calculation
Agent (nor the Call Option Holder) nor the Trustee will have any
responsibility with respect to those policies and procedures or for any
notices or other communications among DTC, its direct and indirect
participants and the beneficial owners of the Bonds in global form.
With respect to any Bonds not represented by a Global Security, Call
Notices, 10% Requirement Notices and any other notices to be given to the
holders of the Bonds will be deemed to have been duly given to the holders
upon the mailing of such notices to the holders at their respective addresses
as they appear on the Bond register maintained by the Company or its agent as
of the close of business preceding the day notice is given.
Neither the failure to give any notice nor any defect in any notice given to
a particular holder will affect the sufficiency of any notice given to another
holder.
Hold Notices may be given by a holder to the Trustee only by facsimile
transmission or by mail and MUST ACTUALLY BE RECEIVED by the Trustee at the
following address no later than 10:00 A.M., Cincinnati, Ohio time, on the
seventh Market Day prior to the Reset Date:
Star Bank, National Association
425 Walnut Street, P.O. Box 1118
Cincinnati, Ohio 45201-1118
Attention: Corporate Trust Administration
Facsimile no.: (513) 632-5511
Hold Notices may be given with respect to a Bond only by the registered holder
of the Bond. Therefore, in the case of any beneficial interest in a Bond
represented by a Global Security, a Hold Notice must be given by DTC or its
agent, and any owner of a beneficial interest that wants a Hold Notice to be
given with respect to the interest will need to make arrangements with DTC
and/or the applicable direct or indirect participants for the notice to be
given in a timely manner.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain of the U.S. federal income
tax consequences of ownership of a Bond by a Holder (as defined below). It
does not deal with all aspects of the tax consequences of ownership of Bonds,
however, or with special classes of holders (including, but not limited to,
financial institutions, dealers in securities or currencies, traders in
securities which elect mark-to-market accounting, insurance companies, tax-
exempt investors, U.S. expatriates, non-U.S. persons, persons who hold Bonds
as part of a "straddle," "hedge," "conversion" or other "integrated"
transaction other than by reason of the Put Option or the Call Option, and
persons whose functional currency is not the U.S. dollar). Further, this
discussion applies only to Bonds purchased by a Holder directly from the
Company on original issue for an amount equal to the "issue price" of the
Bonds (i.e., the first price at which a substantial amount of the Bonds are
sold, excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity as underwriters, placement agents or
wholesalers) and which are held as "capital assets" within the meaning of
Section 1221 of the Code. This discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations promulgated thereunder, current administrative pronouncements of
the Internal Revenue Service and judicial decisions now in effect, all of
which are subject to change or differing interpretation at any time, possibly
with retroactive effect.
As used herein, the term "Holder" means a beneficial owner of a Bond that
is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a partnership or corporation created or organized in or
under the laws of the United States or any state thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, or (iv) a trust if, in general, a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons has authority to control all substantial
decisions of the trust.
The U.S. federal income tax treatment of the Bonds is uncertain. No debt
instrument closely comparable to the Bonds has been the subject of any
Treasury regulation, ruling or judicial decision. No ruling has been or will
be requested from the Internal Revenue Service ("IRS") with respect to the
treatment of the Bonds, and no assurance can be given that the IRS or a court
will agree with the discussion herein of the tax consequences of a Holder's
ownership of Bonds.
ACCORDINGLY, PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME AND OTHER TAX CONSEQUENCES, IN THEIR
PARTICULAR CIRCUMSTANCES, OF PURCHASING, OWNING AND SELLING BONDS, AND ANY
UNCERTAINTIES CONCERNING THESE CONSEQUENCES.
Although there is no specific authority concerning the U.S. federal income
tax treatment of the Bonds, and the matter is not free from doubt, it would be
reasonable for a Holder to account for interest income and gain from ownership
of a Bond as if the Holder had purchased, for an amount equal to the issue
price of the Bonds, a debt obligation that pays interest at a single fixed
rate equal to the fixed rate set forth on the cover page and that matures on
the Reset Date. Under this approach, a Holder would only include in income, in
accordance with the Holder's usual method of tax accounting, the interest
actually received on a Bond. Upon the sale, retirement or other taxable
disposition of a Bond, the Holder would recognize capital gain or loss (which
would be long-term capital gain or loss if the holding period for the Bond was
more than one year as of the time of disposition) equal to the difference
between the amount realized from the disposition of the Bond (excluding any
amounts attributable to accrued, but unpaid interest, which would be taxable
as such) and the Holder's adjusted tax basis for the Bond (generally, the
Holder's purchase price therefor). In the case of certain non-corporate
Holders, long-term capital gain generally would be taxed at a maximum rate of
28% if the
S-17
<PAGE>
holding period for the Bond was more than one year but not more than 18
months, and a maximum tax rate of 20% if the holding period for the Bond was
more than 18 months, in each case as of the time of disposition of the Bond.
A U.S Holder might also be treated as having (i) purchased a Bond for an
amount equal to its fair market value on the Original Issue Date and (ii)
effectively sold the Call Option to the Call Option Holder for an amount equal
to the excess of such fair market value over the issue price of the Bonds (the
"Premium"). This characterization of the Bonds would not cause a Holder to
recognize additional net gain or loss upon the exercise of the Put Option or
the Call Option, assuming that the Holder had not made an election to amortize
premium at which debt obligations are purchased. However, this
characterization of the Bonds would likely cause a Holder (i) to include the
Premium in income, as short-term capital gain, if the Call Option is not
exercised and the Holder gives an effective Hold Notice, and (ii) upon a
disposition of the Bond prior to exercise of the Put Option or Call Option, to
include as short-term capital gain, with a corresponding capital loss, an
amount equal to the positive difference (if any) between the fair market value
of the Call Option upon issuance of the Bonds and its value as of the time of
the disposition. If the Holder had made an election to amortize premium at
which debt obligations are purchased, the Holder might effectively be able to
reduce interest included in income over the term of the Bonds by an amount not
in excess of the Premium. Such "amortization" of the Premium would reduce the
Holder's basis in the Bond, however, and the Holder would therefore recognize
an offsetting capital gain equal to the amount of such amortization when the
Holder disposed of the Bond pursuant to exercise of the Put Option or the Call
Option or otherwise. Finally, under this characterization of the Bonds, gain
recognized from the disposition of a Bond also could be treated as ordinary
income under certain rules relating to "conversion transactions," or as short-
term capital gain by operation of certain rules relating to "straddles."
However, it is possible that the Bonds would be treated as maturing on the
Final Maturity Date, rather than the Reset Date, with the result that the
Bonds would be governed by Treasury regulations relating to contingent payment
debt obligations. In that case, each Holder would be required (regardless of
the Holder's usual method of tax accounting) to accrue annually interest on
the Bonds, as "original issue discount," at the "comparable yield" (i.e., the
yield at which the Company would issue a fixed rate debt instrument maturing
on the Final Maturity Date, with terms and conditions otherwise similar to
those of the Bonds), subject to the adjustments described below, determined in
accordance with a projected payment schedule. In this case, the amount of
original issue discount required to be accrued by Holders could be greater
than the actual cash payments received on the Bonds in a taxable year. In
addition, adjustments to income accruals would be required to be made to
account for the differences between actual payments and projected payments.
Further, a Holder would be required to treat gain from the disposition of a
Bond (other than a Bond held pursuant to an effective Hold Notice) as ordinary
income, and would be permitted to treat loss from the disposition of a Bond as
ordinary loss, to the extent not in excess of previously accrued interest
income from the Bond (with any remaining loss being treated as capital loss).
Finally, upon a disposition of a Bond (other than pursuant to exercise of the
Put Option or the Call Option), a Holder might be required to include as
ordinary income, with a corresponding capital loss, an amount equal to the
positive difference, if any, between the fair market value of the Call Option
as of the time of the disposition and its value upon issuance of the Bonds.
Treasury regulation section 1.1275-6 provides "integration" rules which, in
general, permit a taxpayer to elect to treat a "qualifying debt instrument"
and certain hedges with respect to the qualifying debt instrument as a
"synthetic debt instrument" for federal income tax purposes if the combined
cash flows of the qualifying debt instrument and the hedge are substantially
equivalent to the cash flows on a fixed or variable rate debt instrument. If
integration treatment were available with respect to a Bond and the Call
Option, a Holder might be able to avoid the treatment described in the two
preceding paragraphs. Integration treatment will generally only be available
if the resulting
S-18
<PAGE>
synthetic debt instrument has the same term as the remaining term of the
qualifying debt instrument. Holders should consult their own tax advisors
concerning the possible application of these rules to a Bond and the Call
Option and the tax consequences thereof, and satisfaction of the
identification requirements for electing integration treatment (which
requirements must be satisfied on or before the date on which the Holder
acquires a Bond).
UNDERWRITING
Subject to the terms and conditions set forth in the Pricing Agreement
(which incorporates by reference the terms of the Underwriting Agreement), the
Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Bonds set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF BONDS
----------- ------------
<S> <C>
Goldman, Sachs & Co......................................... $ 66,700,000
Citicorp Securities, Inc.................................... 66,650,000
J.P. Morgan Securities Inc.................................. 66,650,000
------------
Total................................................... $200,000,000
============
</TABLE>
Under the terms and conditions of the Pricing Agreement, the Underwriters
are committed to take and pay for all of the Bonds, if any are taken.
The Underwriters propose to offer the Bonds in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of 0.150% of the principal amount of the Bonds. The
Underwriters may allow, and such dealers may reallow, a concession not to
exceed 0.125% of the principal amount of the Bonds to certain brokers and
dealers. After the Bonds are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Bonds are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend
to make a market in the Bonds but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Bonds.
From time to time, certain of the Underwriters or certain of their
affiliates have provided various commercial or investment banking services and
other services to the Company and its affiliates. In addition, Citicorp
Securities, Inc. is an affiliate of both an administrative agent and a lender
under, and J.P. Morgan Securities Inc. is an affiliate of a lender under, the
Credit Agreement.
Affiliates of the Underwriters will in aggregate receive more than 10% of
the proceeds of this offering as a result of the repayment of borrowings under
the Credit Agreement. Accordingly, this offering is being conducted in
accordance with Rule 2710(c)(8) of the National Association of Securities
Dealers, Inc.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
In consideration of the Call Option it will receive with respect to the
Bonds as described herein, the Call Option Holder will pay the Company 2.691%
of the aggregate principal amount of the Bonds.
S-19
<PAGE>
In connection with the offering, the Underwriters may purchase and sell the
Bonds in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Bonds; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Bonds
than they are required to purchase from the Company in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to broker-dealers in respect of the Bonds sold in the offering may be
reclaimed by the Underwriters if such Bonds are repurchased by the
Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Bonds, which
may be higher than the price that might otherwise prevail in the open market,
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
VALIDITY OF THE BONDS
The validity of the Bonds will be passed upon for the Company by Paul W.
Heldman, Esq., Senior Vice President, Secretary and General Counsel of the
Company, and for the Underwriters by Fried, Frank, Harris, Shriver & Jacobson
(a partnership including professional corporations), New York, New York. Mr.
Heldman may rely as to matters of New York law upon the opinion of Fried,
Frank, Harris, Shriver & Jacobson, and Fried, Frank, Harris, Shriver &
Jacobson may rely as to matters of Ohio law upon the opinion of Mr. Heldman.
As of May 31, 1998, Mr. Heldman owned approximately 28,958 shares of the
Company's Common Stock and had options to acquire an additional 228,750
shares. Fried, Frank, Harris, Shriver & Jacobson from time to time performs
legal services for the Company.
FORWARD-LOOKING STATEMENTS
The Prospectus and this Prospectus Supplement contain, or incorporate by
reference, certain statements that may be deemed "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements, other than statements of historical facts, that
address activities, events or developments that the Company intends, expects,
projects, believes or anticipates will or may occur in the future are forward-
looking statements. Such statements are based on certain assumptions and
assessments made by management of the Company in light of its experience and
its perception of historical trends, current conditions, expected future
developments and other factors it believes to be appropriate. The forward-
looking statements included in the Prospectus and this Prospectus Supplement
are also subject to a number of material risks and uncertainties, including
but not limited to economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices, and other factors discussed in the Company's filings under the
Securities Act and the Exchange Act. Prospective investors are cautioned that
such forward-looking statements are not guarantees of future performance and
that actual results, developments and business decisions may differ from those
envisaged by such forward-looking statements.
S-20
<PAGE>
PROSPECTUS
$800,000,000
THE KROGER CO.
SECURITIES
----------------
The Kroger Co., an Ohio corporation (the "Company"), may offer from time to
time (i) its debt securities (the "Debt Securities"), which may be any of
senior secured Debt Securities, senior unsecured Debt Securities, senior
subordinated Debt Securities or subordinated Debt Securities, in each case
consisting of bonds, debentures, notes and/or other evidences of indebtedness,
(ii) shares of its common stock, $1 par value (the "Common Stock"), (iii)
shares of its preferred stock, $100 par value (the "Preferred Stock"), in one
or more series, which may be issued in the form of depositary shares (the
"Depositary Shares"), evidenced by depositary receipts (the "Depositary
Receipts"), and (iv) warrants to purchase Debt Securities, or shares of Common
Stock or Preferred Stock (the "Warrants"), in each case, as will be designated
by the Company at the time of the offering thereof. The Debt Securities, the
Common Stock, the Preferred Stock, the Depositary Shares and the Warrants are
collectively referred to in this Prospectus as the "Securities" and will have
an aggregate initial offering price of up to $800,000,000, or the equivalent
thereof in U.S. dollars if any Securities are denominated in a currency other
than U.S. dollars or in currency units. The Securities may be offered
separately or together (in any combination) and as separate series, in any
case in amounts, at prices and on terms to be determined at the time of sale.
The form in which the Securities are to be issued, their specific title or
designation, authorized denominations, aggregate principal amount or aggregate
initial offering price, maturity, if any, rate or rates (which may be fixed or
variable) (or the manner of calculation thereof) and times of payment of
interest or dividends, if any, redemption, repayment, conversion, exchange and
sinking fund terms, if any, voting or other rights, if any, exercise price and
detachability, if any, additional covenants, if any, and other specific terms
will be set forth in a Prospectus Supplement (including any related terms
sheet) relating to such Securities (the "Prospectus Supplement"), together
with the terms of offering of such Securities. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent global
securities. The Prospectus Supplement will also contain information, as
applicable, about certain material United States federal income tax
considerations relating to the particular Securities offered thereby. The
Prospectus Supplement will also contain information, where applicable, as to
any listing on a national securities exchange of the Securities covered by
such Prospectus Supplement.
The Common Stock is traded on the New York Stock Exchange under the symbol
"KR." On April 15, 1998, the last reported sale price of the Common Stock, as
reported on the New York Stock Exchange Composite Tape, was $45.375 per share.
The Securities may be offered directly to one or more purchasers, through
agents designated from time to time by the Company or to or through
underwriters or dealers. If any agents or underwriters are involved in the
sale of the Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth,
or will be calculable from the information set forth, in the applicable
Prospectus Supplement. See "Plan of Distribution." No Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
The date of this Prospectus is April 29, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
----------------
AVAILABLE INFORMATION
The Kroger Co. (together with its consolidated subsidiaries and affiliates,
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 Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding registrants that file electronically.
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 27, 1997.
2. Reports on Form 8-K dated January 22, 1998, February 25, 1998, and April
15, 1998.
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 Securities will 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 will 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 will not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
2
<PAGE>
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.
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 1997. At December 27,
1997, the Company operated 1,392 supermarkets in 24 states and 697 convenience
stores in 15 states. Additionally the Company had 119 franchised convenience
stores in 4 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.
USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Securities to
repay amounts outstanding under its revolving credit facilities. From time to
time, the Company expects to use borrowings under its revolving credit
facilities to repurchase or redeem outstanding indebtedness of the Company, or
for other general corporate purposes.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table presents the consolidated ratio of earnings to fixed
charges for the Company. For purposes of determining the ratio of earnings to
fixed charges, "earnings" includes earnings before tax expense, cumulative
effect of change in accounting for income taxes and extraordinary loss, plus
fixed charges (excluding capitalized interest) and "fixed charges" consists of
interest (including capitalized interest) on all indebtedness, amortization of
deferred financing costs and that portion of rental expense which the Company
believes to be representative of interest.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
- ------------------------------------------------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1,
1997 1996 1995 1994 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
- ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
2.5 2.2 2.0 1.8 1.5
</TABLE>
DESCRIPTION OF DEBT SECURITIES
Offered Debt Securities (as defined below) will constitute either senior or
subordinated debt of the Company and will be issued, in the case of Offered
Debt Securities that will be senior debt ("Senior Debt Securities"), under an
Indenture (the "Senior Indenture"), between the Company and a trustee to be
selected by the Company (the "Senior Trustee"), and, in the case of Offered
Debt Securities that will be subordinated debt ("Subordinated Debt
Securities"), under an Indenture (the "Subordinated Indenture"), between the
Company and a trustee to be selected by the Company (the "Subordinated
Trustee"). The Senior Indenture and the Subordinated Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures", and the Senior Trustee and the Subordinated Trustee are
hereinafter referred to as the "Trustee". The statements under this caption
relating to the Debt Securities and the Indentures are summaries and do not
purport to be complete. Such summaries make use of terms defined in the
Indentures and are qualified in their entirety by express reference to the
Indentures and the cited provisions thereof, the forms of which are filed as
exhibits to the Registration Statement. For purposes of this description of
the Debt Securities the term "Company" refers only to The Kroger Co. and does
not include The Kroger Co.'s consolidated subsidiaries.
The particular terms of each issue of Debt Securities (the "Offered Debt
Securities"), as well as any modifications or additions to the following
general terms which may be applicable in the case of such Offered Debt
Securities, will be described in the Prospectus Supplement relating to such
Offered
3
<PAGE>
Debt Securities. Accordingly, for a description of the terms of a particular
issue of Offered Debt Securities, reference must be made both to the
Prospectus Supplement relating thereto and the following description.
GENERAL
The Debt Securities will represent general unsecured senior or subordinated
obligations of the Company or, in the case of Offered Debt Securities that are
secured Debt Securities, secured obligations of the Company. The Debt
Securities may be issued in one or more series with the same or various
maturities. Capitalized terms used herein shall have the meanings established
in the Indenture unless otherwise defined herein.
As of the date of this Prospectus, Debt Securities relating to this
Prospectus may be issued from time to time up to an aggregate principal amount
of $800,000,000 or the equivalent thereof. Reference is made to the Prospectus
Supplement for the following terms of the Offered Debt Securities: (i) the
title, aggregate principal amount and authorized denominations of the Offered
Debt Securities; (ii) the percentage of their principal amount at which such
Offered Debt Securities will be issued; (iii) the date or dates on which the
Offered Debt Securities will mature; (iv) the rate or rates (which may be
fixed or variable) per annum, if any, at which the Offered Debt Securities
will bear interest and the date from which such interest may accrue; (v) the
times and places at which principal and any such interest will be payable;
(vi) any redemption or sinking fund provisions; (vii) the currency of payment
of principal of, premium, if any, and interest on the Offered Debt Securities;
(viii) any index or other basis used to determine the amount of payments of
principal of and interest on the Offered Debt Securities; (ix) whether the
Offered Debt Securities of any series will be represented by a single global
note registered in the name of a depositary's nominee and, if so, the
depositary for and the method of transferring beneficial interests in the
global note; (x) whether the Offered Debt Securities will be issuable in
registered form or bearer form or both and, if Offered Debt Securities in
bearer form are issuable, restrictions applicable to the exchange of one form
for another and to the offer, sale and delivery of Offered Debt Securities in
bearer form; (xi) ranking as Subordinated Debt Securities, if applicable, and
the terms of any such subordination; (xii) if the Offered Debt Securities are
secured, the security therefor; and (xiii) any other terms relating to the
Offered Debt Securities not inconsistent with the Indenture, including any
terms which may be required by or advisable under United States laws or
regulations or advisable in connection with the marketing of Offered Debt
Securities.
Offered Debt Securities may be presented for transfer in the manner, at the
places and subject to the restrictions set forth in the Offered Debt
Securities and the Prospectus Supplement. Such services will be provided
without charge, other than any tax or other governmental charge payable in
connection therewith, but subject to the limitations provided in the
Indentures. Offered Debt Securities in bearer form and the coupons, if any,
appertaining thereto will be transferable by delivery.
The indentures under which certain of the Company's outstanding indebtedness
was issued restrict the Company's ability to redeem, defease or otherwise
acquire the Debt Securities.
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other considerations
applicable thereto will be described in the Prospectus Supplement relating
thereto.
EVENTS OF DEFAULT AND NOTICE THEREOF
The Indentures will define "Events of Default" with respect to any series of
Debt Securities as being any one of the following events and such other events
as may be established for a particular series of Debt Securities: (a) failure
to pay interest on Debt Securities of such series for 30 days after
4
<PAGE>
it becomes due; (b) failure to pay principal (or premium or sinking fund
payment, if any) on Debt Securities of such series when due at maturity, upon
redemption, by declaration or otherwise; (c) failure to perform any other
covenants for 60 days after notice (other than a covenant included in the
Indentures solely for the benefit of Debt Securities of any series other than
such Debt Securities); (d) a default under any indebtedness for borrowed money
in excess of $30,000,000 constituting a failure to pay when due or resulting
in such indebtedness becoming due prior to maturity; (e) certain events of
bankruptcy, insolvency or reorganization; and (f) any other Event of Default
provided with respect to Debt Securities of such series. (Section 501.) No
Event of Default (except an Event of Default described in (c), (d) or (e)
above) with respect to a particular series of Debt Securities issued under the
Indenture necessarily constitutes an Event of Default with respect to any
other series of Debt Securities issued thereunder.
Each Indenture will provide that the Trustee shall, within 90 days after the
occurrence of a default with respect to any series of Debt Securities or all
Debt Securities, give to the holders of such series of Debt Securities or all
Debt Securities, as the case may be, notice of all uncured defaults known to
it (the term "default" to include the events specified above without grace
periods); provided, that except in the case of default in the payment of
principal (or premium or sinking fund payment, if any) or interest on any
series of the Debt Securities, the Trustee shall be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the holders of the Debt Securities of such series.
(Section 602.)
The Company will be required to furnish to the Trustee annually after the
first issue of the Debt Securities under the Indenture a statement of certain
officers of the Company to the effect that to the best of their knowledge the
Company is not in default in the performance and observance of the terms of
the Indenture or, if they have knowledge that the Company is in default,
specifying such default. (Section 1004.)
If an Event of Default described in clause (a) or (b) above with respect to
Debt Securities of any series at the time Outstanding or an Event of Default
specified pursuant to clause (f) with respect to Debt Securities of a
particular series occurs and is continuing, then in every such case, unless
the principal of all such Debt Securities shall have become due and payable,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may in writing to the Company declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities (as defined in the Indenture), such portion of the
principal amount as may be specified in the terms of that series) of all of
the Debt Securities of that series, to be due and payable five business days
after the receipt by the Company and the Administrative Agents of such written
notice. If an Event of Default described in clause (c), (d) or (e) above
occurs and is continuing, then in every such case the Trustee or the Holders
of not less than 25% in principal amount of all the Debt Securities then
Outstanding may in writing to the Company declare the principal amount (or, if
any such Debt Securities are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of
all of the Debt Securities to be due and payable five business days after the
receipt by the Company of such written notice; provided, that each of the two
preceding provisions shall not restrict the availability of other rights or
remedies that the Trustee or the Holders may have. However, at any time after
such a declaration of acceleration with respect to Debt Securities of such
series (or of all Outstanding Securities, as the case may be) has been made,
but before the maturity thereof, the Holders of a majority in principal amount
of Outstanding Securities of such series (or of all Outstanding Securities, as
the case may be) may, subject to certain conditions, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof) with respect to Debt
Securities of such series (or of all Outstanding Securities, as the case may
be) have been cured or waived as provided in the Indenture. (Section 502.)
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Each Indenture also provides that the Holders of not less than a majority in
principal amount of the Debt Securities of a series (or of all Outstanding
Securities, as the case may be) may, subject to certain limitations, waive
certain defaults. Subject to certain limitations, the Holders of not less than
a majority of the principal amount of the Debt Securities of any series may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. (Sections 512 and 513.) Each Indenture will provide that in case an
Event of Default shall occur (which shall not have been cured or waived), the
Trustee will be required to exercise such of its rights and powers under the
Indenture and to use the degree of care and skill in their exercise that a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. (Section 601.) Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the Holders of the Debt Securities unless
they shall have offered to the Trustee reasonable security or indemnity.
(Section 603.)
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of a portion of the principal
amount of such Original Issue Discount Securities upon the occurrence of an
Event of Default and the continuation thereof.
MODIFICATION OF THE INDENTURE
Each Indenture will provide that with certain exceptions, the Indenture, the
rights and obligations of the Company and the rights of the Holders of the
Debt Securities may be modified by the Company and the Trustee with the
consent of the Holders of not less than 50% in aggregate principal amount of
all series of Debt Securities directly affected by such modification; but no
such modification may be made, without the consent of each Holder of such Debt
Securities affected thereby, which would (i) change the stated maturity of any
Debt Security, or any installment of interest, if any, on any such Debt
Security, or reduce the principal amount thereof, or reduce any premium
payable upon the redemption thereof, or reduce the rate of interest thereon,
or reduce the principal amount payable on acceleration with respect to an
Original Issue Discount Security, or change the place or currency of payment
of principal or any premium or interest on any such Debt Security; (ii) reduce
the above-stated percentage of Debt Securities, the consent of the Holders of
which is required to modify or alter the Indenture; (iii) impair the right to
institute suit for the enforcement of any payment of the principal of, and
premium, if any, and interest on any such Debt Security; (iv) modify the
foregoing requirements except to increase the percentage of outstanding Debt
Securities or to provide that certain other provisions cannot be modified or
waived without the consent of the Holders of all outstanding Debt Securities;
or (v) modify the provisions of the Subordinated Indenture with respect to the
subordination of the Subordinated Debt Securities in a manner adverse to the
Holders of such Debt Securities. (Section 902.) The Company may set a record
date for any Act of the Holders with respect to consenting to any amendment
(Section 104.)
THE TRUSTEES
Each Indenture contains limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. In addition, the Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time of a default
under the Indenture it is a creditor of the Company.
As of the date hereof, the Company has not selected a Trustee for either the
Senior Indenture or the Subordinated Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Prospectus Supplement will contain provisions regarding the ability of
the Company to consolidate or merge with or into, or convey, transfer or lease
its properties or assets to any Person.
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CERTAIN DEFINITIONS
"Indebtedness" means (without duplication), with respect to any Person, (i)
every obligation of such Person for money borrowed, (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every obligation of such Person issued or assumed as the
deferred purchase price of property, every conditional sale obligation and
every obligation under any title retention agreement, in each case if on terms
permitting any portion of the purchase price to be paid beyond one year from
the date of purchase (but excluding trade accounts payable arising in the
ordinary course of business which are not overdue by more than 90 days or
which are being contested in good faith), (iv) every obligation of such Person
issued or contracted for as payment in consideration of the purchase by such
Person or an Affiliate of such Person of the stock or substantially all of the
assets of another Person or a merger or consolidation to which such Person or
an Affiliate of such Person was a party, (v) every obligation of the type
referred to in clauses (i) through (iv) of other Persons and all dividends of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, and (vi) every obligation of the type referred to in clauses (i)
through (v) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured. "Indebtedness,"
however, does not include any obligation of any Person under any interest rate
swap, cap, collar or similar arrangement.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
If Subordinated Debt Securities are issued, a Prospectus Supplement relating
thereto will describe the terms whereby such Subordinated Debt Securities will
be made subordinate and subject in right of payment to the prior payment in
full of senior indebtedness of the Company, and such description will include
a definition of what constitutes "senior indebtedness" of the Company.
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 March 17, 1998, 255,664,563
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 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.
TRANSFER AGENT
The Bank of New York is the transfer agent and registrar for the Company's
Common Stock.
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PREFERRED STOCK
General
The Company may issue, from time to time, shares of one or more series of
Preferred Stock.
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. The particular terms of any series of
Preferred Stock offered by any Prospectus Supplement and the extent, if any,
to which such general provisions may apply to the series of Preferred Stock so
offered will be described in a Prospectus Supplement relating to such
Preferred Stock. The following summary of certain provisions of the Preferred
Stock does not purport to be complete and is subject to, and is qualified in
its entirety by express reference to, the provisions of the Company's Amended
Articles of Incorporation, as amended (the "Articles of Incorporation"), and
each Certificate of Designation relating to a specific series of the Preferred
Stock (each, a "Certificate of Designation"), which will be in the form filed
as an exhibit to, or incorporated by reference in, the Registration Statement
at or prior to the time of issuance of such series of Preferred Stock.
Pursuant to the Articles of Incorporation, the Company has the authority to
issue 5,000,000 shares of voting cumulative Preferred Stock. As of the date of
this Prospectus, 2,000,000 shares were available for issuance. Of these
amounts, 50,000 shares have been designated Series A Preferred Shares, for
issuance pursuant to Preferred Stock Purchase Rights issued under the
Company's warrant dividend plan. The Board of Directors of the Company is
authorized to issue shares of Preferred Stock, in one or more series, and to
fix for each such series relative, participating, optional or other special
rights and such qualifications, limitations or restrictions, as are permitted
by the Ohio Revised Code.
The Board of Directors of the Company is authorized to determine for each
series of Preferred Stock, and the Prospectus Supplement will set forth with
respect to such series, the following: (i) the designation and number of
shares of such series, (ii) the dividend rate of such series, (iii) the dates
of payment of dividends on shares of such series and the dates from which they
are cumulative, (iv) the redemption rights of the Company with respect to
shares of such series and the price or prices at which shares of such series
may be redeemed, (v) the amount or amounts payable to holders of shares of
such series on any voluntary or involuntary liquidation, dissolution or
winding up of the Company, which may be different for voluntary and
involuntary liquidation, dissolution, or winding up, (vi) the amount of the
sinking fund, if any, to be applied to the purchase or redemption of shares of
such series and the manner of its application, (vii) whether or not the shares
of such series will be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same class of stock
of the Company, and if made so convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and the adjustments, if any, at
which such conversion or exchange may be made, and (viii) whether or not the
issue of any additional shares of such series or any future series in addition
to such series or any other class of stock will be subject to any restrictions
and, if so, the nature of such restrictions.
Dividends
Holders of shares of Preferred Stock will be entitled to receive, when and
as declared by the Board of Directors of the Company out of funds of the
Company legally available therefor, cash dividends payable on such dates and
at such rates, if any, per share as set forth in the applicable Prospectus
Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, each
series of Preferred Stock will rank equally to any other series of Preferred
Stock. If at any time the Company has failed to pay accrued dividends on any
senior series at the time dividends are payable on a junior series, the
Company may not pay any dividend on such junior series of Preferred Stock or
redeem or otherwise
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repurchase shares of such junior series of Preferred Stock until such
accumulated but unpaid dividends on the senior series have been paid or set
aside for payment in full by the Company. As of the date of this Prospectus,
the Company's Articles of Incorporation provide that all shares of Preferred
Stock will rank equally.
Unless otherwise set forth in the applicable Prospectus Supplement, no
dividends (other than in Common Stock or other capital stock ranking junior to
the Preferred Stock of any series as to dividends and upon liquidation) will
be declared or paid or set aside for payment, nor will any other distribution
be declared or made upon the Common Stock, or any other capital stock of the
Company ranking junior to or on a parity with the Preferred Stock of such
series as to dividends, nor will any Common Stock or any other capital stock
of the Company ranking junior to or on a parity with the Preferred Stock of
such series as to dividends be redeemed, purchased or otherwise acquired for
any consideration (or any monies be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the Company
(except by conversion into or exchange for other capital stock of the Company
ranking junior to the Preferred Stock of such series as to dividends) unless,
full cumulative dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for all past dividend periods and the then
current dividend period; provided, however, that any monies theretofore
deposited in any sinking fund with respect to any Preferred Stock of the
Company in compliance with the provisions of such sinking fund may thereafter
be applied to the purchase or redemption of such Preferred Stock in accordance
with the terms of such sinking fund, regardless of whether at the time of such
application full cumulative dividends upon shares of the Preferred Stock
outstanding on the last dividend payment date have been paid or declared and
set apart for payment; and provided, further, that any such junior or parity
Preferred Stock of the Company or Common Stock of the Company may be converted
into or exchanged for stock of the Company ranking junior to the series of
Preferred Stock then senior to such junior or parity Preferred Stock as to
dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period will be computed on the basis of a
360-day year of twelve 30-day months. Accrued but unpaid dividends will not
bear interest.
Convertibility
No series of Preferred Stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the applicable Prospectus
Supplement.
Redemption and Sinking Fund
No series of Preferred Stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the applicable Prospectus Supplement.
Liquidation Rights
Unless otherwise set forth in the applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding-up of the Company, the
holders of shares of each series of Preferred Stock are entitled to receive
out of assets of the Company available for distribution to stockholders,
before any distribution of assets is made to holders of: (i) any other shares
of Preferred Stock of the Company ranking junior to such series of Preferred
Stock as to rights upon liquidation, dissolution or winding-up; or (ii) shares
of Common Stock, liquidating distributions per share in the amount of the
liquidation preference specified in the applicable Prospectus Supplement for
such series of Preferred Stock plus any dividends accrued and accumulated but
unpaid to the date of final distribution, but, in either case, the holders of
each series of Preferred Stock will not be entitled to receive the liquidating
distribution of, plus such dividends on, such shares until the liquidation
preference of any shares of the Company's capital stock ranking senior to such
series of the Preferred Stock as to the rights upon
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liquidation, dissolution or winding-up have been paid (or a sum set aside
therefor sufficient to provide for payment) in full. If upon any liquidation,
dissolution or winding-up of the Company, funds available for such purpose are
insufficient to pay in full the amounts payable with respect to any series of
the Preferred Stock, and any other Preferred Stock ranking as to any such
distribution on a parity with such series of the Preferred Stock, the holders
of such series of the Preferred Stock of the Company and such other parity
Preferred Stock will share ratably in any such distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled. Unless otherwise specified in a Prospectus Supplement for a series
of Preferred Stock, after payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company. Neither a consolidation or merger of the Company with
another corporation nor a sale of securities will be considered a liquidation,
dissolution or winding-up of the Company.
Voting Rights
Holders of Preferred Stock will be entitled to one vote per share held,
unless otherwise set forth in the applicable Prospectus Supplement, or as
otherwise from time to time required by law.
Miscellaneous
The holders of Preferred Stock will have no preemptive rights. The Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. There are no restrictions on repurchase or
redemption of the Preferred Stock on account of any arrearage on sinking fund
installments except as may be set forth in an applicable Prospectus
Supplement. Payment of dividends on any series of Preferred Stock may be
restricted by loan agreements, indentures or other agreements entered into by
the Company. The accompanying Prospectus Supplement will describe any material
contractual restrictions on dividend payments. Such Prospectus Supplement also
will describe any material United States federal income tax considerations
applicable to the Preferred Stock.
No Other Rights
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement, the
Articles of Incorporation or the applicable Certificate of Designation, or as
otherwise required by law.
Transfer Agent and Registrar
The transfer agent and registrar for each series of Preferred Stock will be
designated in the applicable Prospectus Supplement.
PREFERRED STOCK PURCHASE RIGHTS
On February 28, 1986, the Company adopted a warrant dividend plan providing
for stock purchase rights to owners of the Company's common stock. The Plan
was amended and restated as of April 4, 1997. Each right, when exercisable,
entitles the holder to purchase from the Company one ten-thousandth of a share
of Series A Preferred Shares, par value $100 per share, at $87.50 per one ten-
thousandth of a share. The rights will become exercisable, and separately
tradeable, ten days after a person or group acquires 10% or more of the
Company's common stock or ten business days following a tender offer or
exchange offer resulting in a person or group having beneficial ownership of
10% or
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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 other circumstances,
including certain acquisitions of the Company in a merger or other business
combination transaction, or if 50% or more of the Company's assets or earning
power are sold under certain circumstances, each right will entitle the holder
to receive upon payment of the exercise price, shares of common stock of the
acquiring company 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 $.01 per right. The rights are subject to
adjustment and expire March 19, 2006. This summary description of the Plan is
qualified in its entirety by the terms of the plan more particularly set forth
in the Company's Form 8-A/A dated
April 4, 1997.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer fractional shares of the
Preferred Stock of a series, rather than full shares of the Preferred Stock of
such series. In the event such option is exercised, the Company will issue
Depositary Receipts for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to a
particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") among
the Company, a depositary to be named in the applicable Prospectus Supplement
(the "Preferred Stock Depositary") and the holders from time to time of
Depositary Receipts issued thereunder. Subject to the terms of the Deposit
Agreement, each holder of a Depositary Share will be entitled, in proportion
to the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Preferred Stock
represented thereby (including dividend, voting, redemption, subscription and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement to those persons purchasing Depositary
Shares.
The following description of the terms of the Depositary Shares sets forth
certain general terms and provisions of the Depositary Shares to which any
Prospectus Supplement may relate. The particular terms of the Depositary
Shares offered by any Prospectus Supplement and the extent, if any, to which
such general provisions may apply to the Depositary Shares so offered will be
described in a Prospectus Supplement relating to such Depositary Shares. The
forms of Deposit Agreement and Depositary Receipt will be filed with the
Commission as exhibits to a document incorporated by reference in the
Registration Statement prior to the date of any Prospectus Supplement relating
to an offering of the Depositary Shares.
Immediately following the issuance of fractional shares of a series of
Preferred Stock by the Company, the Company will deposit such shares with the
Preferred Stock Depositary, which will then issue and deliver the Depositary
Receipts to the purchasers thereof. Depositary Receipts will only be issued
evidencing whole Depositary Shares. A Depositary Receipt may evidence any
number of whole Depositary Shares.
Pending the preparation of definitive engraved Depositary Receipts, the
Preferred Stock Depositary may, upon the written order of the Company, issue
temporary Depositary Receipts substantially identical to (and entitling the
holders thereof to all the rights pertaining to) the definitive Depositary
Receipts but not in definitive form. Definitive Depositary Receipts will be
prepared thereafter without unreasonable delay, and such temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Company's expense.
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The following summary of certain provisions which will be included in the
Deposit Agreement with respect to the Depositary Shares does not purport to be
complete and is subject to, and is qualified in its entirety by express
reference to, all the provisions of the Deposit Agreement, including the
definitions therein of certain terms.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock represented by
the Depositary Shares to the record holders of the Depositary Shares in
proportion to the number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares entitled thereto in proportion to the number of Depositary
Shares owned by such holders, unless the Preferred Stock Depositary determines
that such distribution cannot be made proportionately among such holders or
that it is not feasible to make such distributions, in which case the
Preferred Stock Depositary may, with the approval of the Company, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including the sale (at public or private sale) of the securities
or other property thus received, or any part thereof, at such place or places
and upon such terms as it may deem proper.
The amount distributed in any of the foregoing cases will be reduced by any
amounts required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes or other governmental charges.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the
proceeds received by the Preferred Stock Depositary resulting from any
redemption, in whole or in part, of such series of the Preferred Stock held by
the Preferred Stock Depositary. The redemption price per Depositary Share will
be the fraction of the redemption price per share payable with respect to such
series of the Preferred Stock equal to the fraction of a share of such
Preferred Stock represented by a Depositary Share. If the Company redeems
shares of a series of Preferred Stock held by the Preferred Stock Depositary,
the Preferred Stock Depositary will redeem as of the same redemption date the
number of Depositary Shares representing the shares of Preferred Stock so
redeemed. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or substantially
equivalent method determined by the Preferred Stock Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
monies payable upon such redemption and any money or other property to which
the holders of such Depositary Shares were entitled upon such redemption, upon
surrender to the Preferred Stock Depositary of the Depositary Receipts
evidencing such Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
the Preferred Stock are entitled to vote, the Preferred Stock Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such series of Preferred Stock. Each
record holder of such Depositary Shares on the record date (which will be the
same date as the
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record date for the related series of Preferred Stock) will be entitled to
instruct the Preferred Stock Depositary as to the exercise of the voting
rights pertaining to the number of shares of the series of Preferred Stock
represented by such holder's Depositary Shares. The Preferred Stock Depositary
will endeavor, insofar as practicable, to vote or cause to be voted the number
of shares of the Preferred Stock represented by such Depositary Shares in
accordance with such instructions, provided the Preferred Stock Depositary
receives such instructions sufficiently in advance of such meeting to enable
it to so vote or cause to be voted the shares of Preferred Stock, and the
Company will agree to take all reasonable action that may be deemed necessary
by the Preferred Stock Depositary in order to enable the Preferred Stock
Depositary to do so. The Preferred Stock Depositary will abstain from voting
shares of the Preferred Stock represented by Depositary Shares to the extent
it does not receive specific instructions from the holders of Depositary
Shares representing such Preferred Stock.
WITHDRAWAL OF STOCK
Upon a holder's surrender of Depositary Receipts at the corporate trust
office of the Preferred Stock Depositary and upon such holder's payment of the
taxes, charges and fees provided for in the Deposit Agreement and subject to
the terms thereof, the holder of the Depositary Shares evidenced thereby will
be entitled to delivery at such office, to or upon his or her order, of the
number of whole shares of the related series of Preferred Stock and any money
or other property, if any, represented by such Depositary Shares.
Holders of Depositary Shares will be entitled to receive whole shares of the
related series of Preferred Stock, but holders of such whole shares of
Preferred Stock will not thereafter be entitled to deposit such shares of
Preferred Stock with the Preferred Stock Depositary or to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the holders evidence
a number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of the related series of Preferred
Stock to be withdrawn, the Preferred Stock Depositary will deliver to such
holder or upon such holder's order at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Preferred Stock Depositary.
However, any amendment that materially adversely alters the rights of the
holders of Depositary Shares will not be effective unless such amendment has
been approved by the holders of a majority of the Depositary Shares then
outstanding. Every holder of a Depositary Receipt at the time such amendment
becomes effective will be deemed, by continuing to hold such Depositary
Receipt, to be bound by the Deposit Agreement as so amended. Notwithstanding
the foregoing, in no event may any amendment impair the right of any holder of
any Depositary Shares, upon surrender of the Depositary Receipts evidencing
such Depositary Shares and subject to any conditions specified in the Deposit
Agreement, to receive shares of the related series of Preferred Stock and any
money or other property represented thereby, except in order to comply with
mandatory provisions of applicable law. The Deposit Agreement may be
terminated by the Company at any time upon not less than 60 days' prior
written notice to the Preferred Stock Depositary, in which case, on a date
that is not later than 30 days after the date of such notice, the Preferred
Stock Depositary will deliver or make available for delivery to holders of
Depositary Shares, upon surrender of the Depositary Receipts evidencing such
Depositary Shares, such number of whole or fractional shares of the related
series of Preferred Stock as are represented by such Depositary Shares. The
Deposit Agreement will automatically terminate after all outstanding
Depositary Shares have been redeemed or there has been a final distribution in
respect of the related series of Preferred Stock in connection with any
liquidation, dissolution or winding-up of the Company and such distribution
has been distributed to the holders of Depositary Shares.
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CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and the governmental
charges arising solely from the existence of the depositary arrangements. The
Company will pay the charges of the Preferred Stock Depositary, including
charges in connection with the initial deposit of any series of Preferred
Stock represented by Depositary Shares and the initial issuance of the
Depositary Shares and all withdrawals of shares of the related series of
Preferred Stock, except that holders of Depositary Shares will pay other
transfer and other taxes and governmental charges and such other charges as
are expressly provided in the Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company written notice of its election to do so, and the Company may at any
time remove the Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary, which
successor Preferred Stock Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to the holders of Depositary
Shares all reports and communications from the Company that are delivered to
the Preferred Stock Depositary and which the Company is required to furnish to
the holders of the Preferred Stock.
The Preferred Stock Depositary's corporate trust office will be identified
in the applicable Prospectus Supplement. Unless otherwise set forth in the
applicable Prospectus Supplement, the Preferred Stock Depositary will act as
transfer agent and registrar for Depositary Receipts and if shares of a series
of Preferred Stock are redeemable, the Preferred Stock Depositary will act as
redemption agent for the corresponding Depositary Receipts.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue, together with other Securities or separately,
warrants for the purchase of (i) Debt Securities (the "Debt Warrants"), (ii)
Common Stock (the "Common Stock Warrants") or (iii) Preferred Stock (the
"Preferred Stock Warrants" and, collectively with the Debt Warrants and the
Common Stock Warrants, the "Warrants").
The Warrants will be issued under Warrant Agreements (as defined below) to
be entered into between the Company and a bank or trust company, as warrant
agent (the "Warrant Agent"), all to be set forth in the applicable Prospectus
Supplement relating to Warrants for which this Prospectus is being delivered.
Copies of the form of agreement for each Warrant (each, a "Debt Securities
Warrant Agreement," a "Common Stock Warrant Agreement" or a "Preferred Stock
Warrant Agreement," as the case may be, or collectively, the "Warrant
Agreements"), including the forms of certificates representing the Warrants
(the "Debt Warrant Certificate(s)," the "Common Stock Warrant Certificate(s)"
or the "Preferred Stock Warrant Certificate(s)," as the case may be, or
collectively, the "Warrant Certificates"), reflecting the provisions to be
included in such agreements that will be entered into with respect to the
particular offerings of each type of Warrant will be, in each case, filed with
the Commission as an exhibit to a document incorporated by reference in the
Registration Statement prior to the date of any Prospectus Supplement relating
to an offering of such Warrant.
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The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus
Supplement may relate. The particular terms of the Warrants offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Warrants so offered will be described in a Prospectus
Supplement relating to such Warrants. The following summary of certain
provisions of the Warrants, the Warrant Agreements and the Warrant
Certificates does not purport to be complete and is subject to, and is
qualified in its entirety by express reference to, all of the provisions of
the Warrant Agreements and Warrant Certificates, including the definitions
therein of certain terms.
DEBT WARRANTS
General
Reference is made to the applicable Prospectus Supplement for the terms of
Debt Warrants for which this Prospectus is being delivered, the Debt
Securities Warrant Agreement relating to such Debt Warrants and the Debt
Warrant Certificate(s) representing such Debt Warrants, including the
following: (i) the designation, aggregate principal amount and terms of the
Debt Securities purchasable upon exercise of such Debt Warrants and the
procedures and conditions relating to the exercise of such Debt Warrants; (ii)
the designation and terms of any related Debt Securities with which such Debt
Warrants are issued and the number of such Debt Warrants issued with each such
Debt Security; (iii) the date, if any, on and after which such Debt Warrants
and the related Debt Securities will be separately transferable; (iv) the
principal amount of Debt Securities purchasable upon exercise of each Debt
Warrant and the price at which such principal amount of Debt Securities may be
purchased upon such exercise; (v) the date on which the right to exercise such
Debt Warrants will commence and the date on which such right will expire; (vi)
a discussion of the material United States federal income tax considerations
applicable to the exercise of Debt Warrants; (vii) whether the Debt Warrants
represented by the Debt Warrant Certificates will be issued in registered or
bearer form, and, if registered, where they may be transferred and registered;
(viii) call provisions of such Debt Warrants, if any; and (ix) any other terms
of the Debt Warrants.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated
in the applicable Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of holders
of the Debt Securities purchasable upon such exercise and will not be entitled
to payments of principal of (and premium, if any) or interest, if any, on the
Debt Securities purchasable upon such exercise.
Exercise of Debt Warrants
Each Debt Warrant will entitle the holder to purchase for cash such
principal amount of Debt Securities at such exercise price as will in each
case be set forth in, or be determinable as set forth in, the applicable
Prospectus Supplement relating to the Debt Warrants offered thereby. Debt
Warrants may be exercised at any time up to the date and time on such date set
forth in the applicable Prospectus Supplement. Thereafter, unexercised Debt
Warrants will become void.
Debt Warrants may be exercised as set forth in the applicable Prospectus
Supplement relating to the Debt Warrants. Upon receipt of payment and the Debt
Warrant Certificate properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
applicable Prospectus Supplement, the Company will, as soon as practicable,
forward the Debt Securities purchasable upon such exercise. If less than all
of the Debt Warrants represented by such Debt Warrant Certificate are
exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants.
COMMON STOCK WARRANTS
General
Reference is made to the applicable Prospectus Supplement for the terms of
Common Stock Warrants in respect of which this Prospectus is being delivered,
the Common Stock Warrant
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<PAGE>
Agreement relating to such Common Stock Warrants and the Common Stock Warrant
Certificates representing such Common Stock Warrants, including the following:
(i) the procedures and conditions relating to the exercise of such Common
Stock Warrants; (ii) the number of shares of Common Stock, if any, issued with
such Common Stock Warrants; (iii) the date, if any, on and after which such
Common Stock Warrants and any related shares of Common Stock will be
separately transferable; (iv) the offering price of such Common Stock
Warrants, if any; (v) the number of shares of Common Stock purchasable upon
exercise of such Common Stock Warrants and the price or prices at which such
shares may be purchased upon exercise; (vi) the date on which the right to
exercise such Common Stock Warrants will commence and the date on which such
right will expire; (vii) a discussion of the material United States federal
income tax considerations applicable to the exercise of Common Stock Warrants;
(viii) call provisions of such Common Stock Warrants, if any; and (ix) any
other terms of the Common Stock Warrants.
Common Stock Warrant Certificates will be exchangeable for new Common Stock
Warrant Certificates of different denominations and Common Stock Warrants may
be exercised at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement. Prior to the
exercise of their Common Stock Warrants, holders of Common Stock Warrants will
not have any of the rights of holders of Common Stock purchasable upon such
exercise, including, without limitation, the right to any dividend payments on
the Common Stock purchasable upon such exercise.
Exercise of Common Stock Warrants
Each Common Stock Warrant will entitle the holder to purchase for cash such
number of shares of Common Stock at such exercise price as will in each case
be set forth in, or be determinable as set forth in, the applicable Prospectus
Supplement relating to the Common Stock Warrants offered thereby. Common Stock
Warrants may be exercised at any time up to the date and time on such date set
forth in the applicable Prospectus Supplement. Thereafter, unexercised Common
Stock Warrants will become void.
Common Stock Warrants may be exercised as set forth in the applicable
Prospectus Supplement relating to the Common Stock Warrants. Upon receipt of
payment and the Common Stock Warrant Certificate properly completed and duly
executed at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement, the Company will, as
soon as practicable, forward a certificate representing the number of shares
of Common Stock purchasable upon such exercise. If less than all of the Common
Stock Warrants represented by such Common Stock Warrant Certificate are
exercised, a new Common Stock Warrant Certificate will be issued for the
remaining amount of Common Stock Warrants.
PREFERRED STOCK WARRANTS
General
Reference is made to the applicable Prospectus Supplement for the terms of
Preferred Stock Warrants for which this Prospectus is being delivered, the
Preferred Stock Warrant Agreement relating to such Preferred Stock Warrants
and the Preferred Stock Warrant Certificates representing such Preferred Stock
Warrants, including the following: (i) the designation and terms of the shares
of Preferred Stock purchasable upon exercise of such Preferred Stock Warrants
and the procedures and conditions relating to the exercise of such Preferred
Stock Warrants; (ii) the designation and terms of any related shares of
Preferred Stock with respect to which such Preferred Stock Warrants are issued
and the number of shares of such Preferred Stock, if any, issued with
Preferred Stock Warrants; (iii) the date, if any, on and after which such
Preferred Stock Warrants and any related shares of Preferred Stock will be
separately transferable; (iv) the offering price of such Preferred Stock
Warrants, if any; (v) the number of shares of Preferred Stock purchasable upon
exercise of such Preferred Stock Warrants and the initial price or prices at
which such shares may be purchased upon exercise; (vi) the date on which the
right to exercise such Preferred Stock Warrants will commence and the date on
which such right will expire; (vii) a discussion of the material United States
federal income tax
16
<PAGE>
considerations applicable to the exercise of Preferred Stock Warrants; (viii)
call provisions of such Preferred Stock Warrants, if any; and (ix) any other
terms of the Preferred Stock Warrants.
Preferred Stock Warrant Certificates will be exchangeable for new Preferred
Stock Warrant Certificates of different denominations and Preferred Stock
Warrants may be exercised at the corporate trust office of the Warrant Agent
or any other office indicated in the applicable Prospectus Supplement. Prior
to the exercise of their Preferred Stock Warrants, holders of Preferred Stock
Warrants will not have any of the rights of holders of Preferred Stock
purchasable upon such exercise, including, without limitation, any right to
any dividend payments on the Preferred Stock purchasable upon such exercise.
Exercise of Preferred Stock Warrants
Each Preferred Stock Warrant will entitle the holder to purchase for cash
such number of shares of Preferred Stock at such exercise price as will in
each case be set forth in, or be determinable as set forth in, the applicable
Prospectus Supplement relating to the Preferred Stock Warrants offered
thereby. Preferred Stock Warrants may be exercised at any time up to the date
and time on such date set forth in the applicable Prospectus Supplement.
Thereafter, unexercised Preferred Stock Warrants will become void.
Preferred Stock Warrants may be exercised as set forth in the applicable
Prospectus Supplement relating to the Preferred Stock Warrants. Upon receipt
of payment and the Preferred Stock Warrant Certificate properly completed and
duly executed at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement, the Company will, as
soon as practicable, forward a certificate representing the number of shares
of Preferred Stock purchasable upon such exercise. If less than all of the
Preferred Stock Warrants represented by such Preferred Stock Warrant
Certificate are exercised, a new Preferred Stock Warrant Certificate will be
issued for the remaining amount of Preferred Stock Warrants.
PLAN OF DISTRIBUTION
The Company may offer and sell the Securities directly to purchasers or to
or through underwriters, dealers or agents. Any such underwriter, dealer or
agent involved in the offer and sale of the Securities for which this
Prospectus is delivered will be named in the applicable Prospectus Supplement.
The applicable Prospectus Supplement for the Securities issued thereunder will
also set forth the terms of the offering of such Securities, including the
purchase price of such Securities and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such Securities may be listed.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or from
time to time at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
applicable Prospectus Supplement will describe the method of distribution of
the Securities.
If underwriters are used in an offering of Securities, the name of each
managing underwriter, if any, and any other underwriters and terms of the
transaction, including any underwriting discounts and other items constituting
compensation of the underwriters and dealers, if any, will be set forth in the
applicable Prospectus Supplement relating to such offering and the Securities
will be acquired by the underwriters for their own accounts and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time
to time. Underwriters, dealers and agents may be entitled, under agreements
which may be entered into with the Company, to indemnification against and
17
<PAGE>
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by the Company of certain expenses.
If a dealer is used in an offering of Securities, the Company will sell such
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of the dealer and the terms of the transaction
will be set forth in the applicable Prospectus Supplement relating thereto.
If an agent is used in an offering of Securities, the agent will be named,
and the terms of the agency will be set forth, in the applicable Prospectus
Supplement relating thereto. Unless otherwise indicated in such applicable
Prospectus Supplement, an agent will act on a best efforts basis for the
period of its appointment.
Dealers and agents named in an applicable Prospectus Supplement may be
deemed to be underwriters (within the meaning of the Securities Act) of the
Securities described therein and, under agreements which may be entered into
with the Company, may be entitled to indemnification by the Company against
certain civil liabilities under the Securities Act. Underwriters, dealers and
agents may be customers of, engage in transactions with or perform services
for, the Company in the ordinary course of business.
Offers to purchase Securities may be solicited, and sales thereof may be
made, by the Company directly to institutional investors or others, who may be
deemed to be underwriters within the meaning of the Securities Act with
respect to any resales thereof. The terms of any such offer will be set forth
in the applicable Prospectus Supplemental relating thereto.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other agents of the Company to solicit offers by
certain institutional investors to purchase Securities from the Company
pursuant to contracts providing for payment and delivery at a future date.
Institutional investors with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all
cases such purchasers must be approved by the Company. The obligations of any
purchaser under any such contract will not be subject to any conditions except
that (i) the purchase of the Securities must not at the time of delivery be
prohibited under the laws of any jurisdiction to which such purchaser is
subject and (ii) if the Securities are also being sold to underwriters, the
Securities must not be subject to delayed delivery. Underwriters and other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
In addition, the Securities may be offered and sold by the holders thereof
in one or more of the transactions described above, which transactions may be
effected at any time and from time to time. Upon any such sale of Securities,
the respective holders thereof and any broker, dealer or underwriter
participating therewith may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions, discounts or
concessions upon such sale, or any profit on the resale of such shares,
received thereby in connection with such sale may be deemed to be underwriting
commissions or discounts under the Securities Act. The compensation, including
commissions, discounts, concessions and other profits, received by any broker,
dealer or underwriter in connection with the sale of any of such Securities
may be less than or in excess of customary commissions.
The anticipated date of delivery of Securities will be set forth in the
applicable Prospectus Supplement relating to each offering.
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<PAGE>
The Securities may or may not be listed on a national securities exchange or
a foreign securities exchange. No assurances can be given that there will be a
market for any of the securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by Paul
W. Heldman, Esq., Senior Vice President, Secretary and General Counsel of the
Company. As of March 31, 1998, Mr. Heldman owned approximately 28,958 shares
of the Company's Common Stock and had options to acquire an additional 208,750
shares.
EXPERTS
The consolidated financial statements of The Kroger Co. as of December 27,
1997 and December 28, 1996 and for the fiscal years ended December 27, 1997,
December 28, 1996, and December 30, 1995, which appear in the Company's Annual
Report on Form 10-K for the fiscal year ended December 27, 1997, incorporated
by reference in this Prospectus, have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P. independent accountants, given on the
authority of that firm as experts in accounting and auditing.
Documents incorporated herein by reference in the future will include
financial statements, related schedules (if required) and auditors' reports
which financial statements and schedules will have been audited to the extent
and for the periods set forth in such reports by the firm or firms rendering
such reports and, to the extent so audited and consent to incorporation by
reference is given, will be incorporated herein by reference upon such reports
given upon the authority of such firms as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPEC-
TUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECU-
RITIES DESCRIBED IN THE PROSPECTUS SUPPLEMENT OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER 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 INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Incorporation of Certain Documents by Reference............................ S-2
Use of Proceeds............................................................ S-2
Description of Bonds....................................................... S-3
U.S. Federal Income Tax Consequences....................................... S-17
Underwriting............................................................... S-19
Validity of the Bonds...................................................... S-20
Forward-Looking Statements................................................. S-20
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Consolidated Ratio of Earnings to Fixed Charges............................ 3
Description of Debt Securities............................................. 3
Description of Capital Stock............................................... 7
Description of Depositary Shares........................................... 11
Description of Warrants.................................................... 14
Plan of Distribution....................................................... 17
Validity of Debt Securities................................................ 19
Experts.................................................................... 19
</TABLE>
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$200,000,000
THE KROGER CO.
PUTTABLE RESET SECURITIES
PURSSM DUE JULY 1, 2010
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LOGO
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GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
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