PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated December 23, 1997)
FILED PURSUANT TO RULE 424(b)(2)
FILE NUMBER 333-42733
$300,000,000
[LOWE'S COMPANIES LOGO]
6 7/8% Debentures due February 15, 2028
---------------
Lowe's Companies, Inc. (the "Company" or "Lowe's") will issue 6 7/8%
Debentures due February 15, 2028 (the "Debentures"), offered hereby (the
"Offering") in the principal amount of $300,000,000. Interest on the Debentures
is payable semi-annually on February 15 and August 15 of each year, beginning
August 15, 1998. The Debentures may not be redeemed prior to maturity.
The Debentures will be represented by one or more Global Notes
(collectively, the "Global Note") registered in the name of the nominee of The
Depository Trust Company ("DTC"), which will act as the Depositary Bank.
Interests in the Global Note will be evidenced only by, and transfers thereof
will be effected only through, records maintained by the Depositary Bank and
its participants. See "Description of Debentures -- Book-Entry System." Except
as described in the Prospectus, Debentures in definitive form will not be
issued. Settlement for the Debentures will be made in immediately available
funds. All payments of principal and interest will be made by Lowe's in
immediately available funds. See "Description of Debentures -- Same-Day Funds
Settlement and Payment."
---------------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
<S> <C>
Per Debenture ......... 99.595% .875% 98.720%
Total ................. $298,785,000 $2,625,000 $296,160,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $400,000.
---------------
The Debentures are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the several Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Debentures will be made through the book-entry
facilities of DTC in New York, New York against payment therefor in immediately
available funds on or about February 9, 1998.
---------------
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley Dean Witter
---------------
The date of this Prospectus Supplement is February 4, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
DEBENTURES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THE COMPANY
Lowe's is a leading specialty retailer of products and services for the
home improvement, home decor, home repair and remodeling, and home construction
markets. The Company's principal customer groups are do-it-yourself customers,
repair and remodeling contractors and new home builders. As of December 31,
1997, the Company operated 442 stores with 35.9 million square feet of sales
floor in 25 states located principally in the South Atlantic and South Central
regions of the United States. According to National Home Center News, an
industry publication, Lowe's is the second largest home center retailer in the
United States.
USE OF PROCEEDS
Net proceeds from the sale of the Debentures offered hereby will be used to
finance a portion of the Company's store expansion program and for general
corporate purposes. Funds not applied immediately to those purposes may be
invested temporarily in short-term marketable securities.
DESCRIPTION OF DEBENTURES
The following description of the particular terms of the Debentures offered
hereby (referred to in the Prospectus as "Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
General
The Debentures are to be issued under an Amended and Restated Indenture,
dated as of December 1, 1995 (the "Senior Indenture"), between the Company and
The First National Bank of Chicago, as trustee (the "Trustee").
The Debentures will be issued in fully registered book-entry form without
coupons and in denominations of $1,000 and integral multiples thereof. The
Company does not intend to apply for the listing of the Debentures on a national
securities exchange.
The following statements relating to the Debentures and the Senior
Indenture are summaries of certain provisions thereof and are subject to the
detailed provisions of the Senior Indenture, to which reference is hereby made
for a complete statement of such provisions. The summary description of the
Senior Indenture is also contained in the Prospectus.
The Debentures will be unsecured senior obligations of the Company, will
mature February 15, 2028, will be limited to $300 million aggregate principal
amount and will bear interest at the rate set forth on the cover page of this
Prospectus Supplement from date of issuance, payable semi-annually on each
February 15 and August 15, commencing August 15, 1998, to the persons in whose
names the Debentures are registered at the close of business on the August 1
immediately preceding each August 15 or the February 1 immediately preceding
each February 15. Interest will be computed on the basis of a 360-day year
composed of 12 30-day months. Payments of principal and interest to owners of
book-entry interests (as described below) are expected to be made in accordance
with the procedures of DTC and its participants in effect from time to time.
The Debentures may not be redeemed prior to maturity.
S-2
<PAGE>
Book-Entry System
It is expected that the Debentures initially will be represented by one or
more Global Notes in definitive fully registered form without coupons and will
be deposited with, or on behalf of, DTC and registered in the name of Cede &
Co., as the nominee of DTC. Except under the circumstances described in the
Prospectus under the caption "Description of Debt Securities -- Global
Securities," the Debentures will not be issuable in definitive form. Unless and
until they are exchanged in whole or in part for the individual Debentures
represented thereby, any interests in the Global Note may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any nominee of DTC to a successor depository
or any nominee of such successor. See "Description of Debt Securities -- Global
Securities" in the Prospectus.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, 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 Securities Exchange Act of 1934, as
amended. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly. The rules applicable to DTC and its Participants are on
file with the Securities and Exchange Commission (the "Commission").
Same-Day Funds Settlement and Payment
Settlement for the Debentures will be made by the Underwriters (as defined
below in "Underwriting") in immediately available funds. All payments of
principal and interest in respect of Debentures in book-entry form will be made
by the Company in immediately available funds to the accounts specified by DTC.
Concerning the Trustee
The First National Bank of Chicago will be the trustee under the Senior
Indenture. The Company and its subsidiaries may maintain deposit accounts or
conduct other banking transactions with the Trustee in the ordinary course of
business.
<PAGE>
S-3
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") between the Company and the Underwriters named below (the
"Underwriters"), the Company has agreed to sell to each of the Underwriters, and
each of the Underwriters has severally agreed to purchase, the respective
principal amount of the Debentures set forth opposite its name below.
Principal
Amount
of Debentures
Underwriter --------------
Merrill Lynch, Pierce Fenner & Smith
Incorporated ........................ $100,000,000
Lehman Brothers Inc ....................... 100,000,000
Morgan Stanley & Co. Incorporated ......... 100,000,000
------------
Total ..................................... $300,000,000
============
In the Purchase Agreement, the Underwriters have severally agreed, subject
to the terms and conditions set forth therein, to purchase all of the Debentures
offered hereby if any of the Debentures are purchased. The Underwriters have
advised the Company that they propose initially to offer the Debentures to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of .50% of the principal amount. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of .25% of the principal
amount of the Debentures to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Debentures are a new issue of securities with no established trading
market. The Company currently has no intention to list the Debentures on any
securities exchange. The Company has been advised by the Underwriters that,
following the completion of the Offering, the Underwriters presently intend to
make a market in the Debentures, as permitted by applicable laws and
regulations. The Underwriters, however, are under no obligation to do so and may
discontinue any market-making at any time without notice and at the sole
discretion of the Underwriters. No assurance can be given as to the liquidity of
the trading market for the Debentures.
In order to facilitate the offering of the Debentures, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Debentures.
Until the distribution of the Debentures is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Debentures. As an exception to these rules,
the Underwriters are permitted to engage in certain transactions that stabilize
the price of the Debentures. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Debentures. If
the Underwriters create a short position in the Debentures in connection with
this offering (i.e., if they sell more Debentures than are set forth on the
cover page of this Prospectus Supplement), the Underwriters may reduce that
short position by purchasing Debentures in the open market. In general,
purchases of a security for the purpose of stabilization or to reduce a short
position could cause the price of the security to be higher than it might be in
the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Debentures. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-4
<PAGE>
LEGAL MATTERS
The legality of the Debentures offered hereby will be passed upon for the
Company by its General Counsel or Senior Corporate Counsel and Hunton &
Williams, Richmond, Virginia, and for the Underwriters by Shearman & Sterling,
New York, New York. Lawyers of Hunton & Williams, who have performed services in
connection with the Offering, hold an aggregate number of shares of Lowe's
common stock having a fair market value of less than $100,000.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Prospectus have been audited by Deloitte & Touche LLP,
independent accountants, to the extent and for the periods indicated in their
report thereon which is also included or incorporated by reference in the Annual
Report on Form 10-K of the Company for the fiscal year ended January 31, 1997.
The consolidated financial statements audited by Deloitte & Touche LLP have been
incorporated by reference in reliance on their report given upon their authority
as experts in accounting and auditing.
With respect to the unaudited interim financial information, as of and for
each of the periods ended May 2, 1997 and April 30, 1996, August 1, 1997 and
July 31, 1996, and October 31, 1997 and October 31, 1996, which is incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in the Company's Quarterly Reports
on Form 10-Q for the quarters ended May 2, August 1 and October 31, 1997, and
incorporated by reference herein, they did not audit and do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
the reports are not "reports" or "part" of a registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Securities Act of 1933.
S-5
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
PROSPECTUS
$600,000,000
Lowe's Companies, Inc.
Securities
Lowe's Companies, Inc. ("Lowe's" or the "Company") intends to issue from
time to time in one or more series up to $600,000,000 aggregate offering price
of its (i) unsecured debt securities ("Debt Securities"), which may be either
senior debt securities ("Senior Debt Securities") or subordinated debt
securities ("Subordinated Debt Securities"), (ii) shares of preferred stock, par
value $5.00 per share ("Preferred Stock"), which may be issued in the form of
depositary shares evidenced by depositary receipts ("Depositary Shares"), (iii)
shares of common stock, par value $.50 per share ("Common Stock"), and (iv)
warrants to purchase shares of Common Stock or Preferred Stock ("Warrants") on
terms to be determined at the time of sale (the Debt Securities, Preferred
Stock, Depositary Shares, Common Stock and Warrants are referred to collectively
as the "Securities"). The Securities offered hereby (the "Offered Securities")
may be offered separately or as units with other Offered Securities, in separate
series in amounts, at prices and on terms to be determined at the time of sale
and to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The Senior Debt Securities will rank equally with all other unsubordinated
and unsecured indebtedness of the Company. The Subordinated Debt Securities will
be subordinated in right of payment to all existing and future Senior
Indebtedness, as defined in the Senior Indenture described herein. Both the
Senior Debt Securities and the Subordinated Debt Securities will be effectively
subordinated to any secured indebtedness of the Company and its subsidiaries and
to any unsecured, unsubordinated indebtedness and other liabilities of the
Company's subsidiaries. At October 31, 1997, the Company and its subsidiaries
had $67.4 million of secured indebtedness outstanding and the Company had $603.9
million of unsecured and unsubordinated indebtedness outstanding. At October 31,
1997, the Company's subsidiaries had $67.1 million of secured unsubordinated
indebtedness outstanding. The indentures governing Debt Securities will not
contain any restrictions on the ability of the Company to incur additional
unsecured indebtedness or any provisions that would afford holders of the Debt
Securities protection in the event of a significant transaction involving the
Company that might adversely affect the holders of the Debt Securities. See
"Description of Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered, such as, where applicable, (i) in the case of
Debt Securities, the specific designation (including whether senior or
subordinated), aggregate principal amount, denomination, maturity, premium, if
any, priority, interest rate (which may be variable or fixed), time of payment
of any premium and any interest, terms for optional redemption or repayment or
for sinking fund payments, terms for conversion into or exchange for other
Offered Securities, and the initial public offering price; (ii) in the case of
Preferred Stock, the specific title and stated value, number of shares or
fractional interests therein, and the dividend, liquidation, redemption,
conversion, voting and other rights, the initial public offering price, and
whether interests in the Preferred Stock will be represented by Depositary
Shares; (iii) in the case of Common Stock, the initial offering price; (iv) in
the case of Warrants, the number and terms thereof, the description and the
number of securities issuable upon their exercise, the exercise price, the terms
of the offering and sale thereof and, where applicable, the duration and
detachability thereof, and (v) in the case of all Offered Securities, whether
such Offered Security will be offered separately or as a unit with other Offered
Securities, will be set forth in a Prospectus Supplement. The Prospectus
Supplement will also contain information, where applicable, about material
United States federal income tax considerations relating to, and any listing on
a securities exchange of, the Offered Securities covered by the Prospectus
Supplement.
The Offered Securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters, or through such firms or other firms acting alone or
through dealers. The Offered Securities may also be sold directly by the Company
or through agents to investors. The names of any agents, dealers or managing
underwriters, and of any underwriters, involved in the sale of the Offered
Securities in respect of which this Prospectus is being delivered, the
applicable agent's commission, dealer's purchase price or underwriter's discount
and the net proceeds to the Company from such sale will be set forth in the
Prospectus Supplement. See "Plan of Distribution."
This Prospectus may not be used to consummate the sale of the Securities
unless accompanied by a Prospectus Supplement.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is December 23, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 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 and 7 World
Trade Center, New York, New York 10045. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, Inc. at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-3 (herein, together with all amendments and
exhibits thereto, referred to as the "Registration Statement") under the
Securities Act with respect to the Securities to which this Prospectus relates.
As permitted by the Rules and Regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement,
including the exhibits thereto, which may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon
payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
Section 13 of the Exchange Act are hereby incorporated by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1997; (ii) the Company's Quarterly Reports on Form 10-Q for
the fiscal quarters ended May 2, August 1 and October 31, 1997.
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 shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such earlier statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the Prospectus
Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents). Written or telephone requests should be
directed to Lowe's Companies, Inc., P. O. Box 1111, North Wilkesboro, North
Carolina 28656, Attention: Robert A. Niblock, (910) 658-4561.
FORWARD-LOOKING STATEMENTS
This Prospectus, any Prospectus Supplement and the documents incorporated
by reference herein may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import. Such forward-looking
statements relate to future events, the future financial performance of the
Company, and involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
or industry to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Prospective investors should specifically consider the various factors
identified in the Prospectus, any Prospectus Supplement, and the documents
incorporated by reference herein, which could cause actual results to differ.
The Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained or incorporated by reference herein to reflect future events or
developments.
2
<PAGE>
THE COMPANY
Lowe's Companies, Inc. is a specialty retailer of building materials and
related products for the do-it-yourself home improvement, home decor and home
construction, repair and remodeling markets. As of October 31, 1997, Lowe's
operated 425 retail stores with more than 33.7 million square feet of sales
floor located principally in the South Atlantic and South Central regions of the
United States. According to National Home Center News, an industry publication,
Lowe's is the second largest home center retailer in the United States. Lowe's
general offices are located in North Wilkesboro, North Carolina.
USE OF PROCEEDS
Except as may be otherwise set forth in the Prospectus Supplement
accompanying this Prospectus, the net proceeds from the sale of the Securities
will be used for general corporate purposes, which may include financing the
acquisition of land, buildings and equipment for new and existing stores, the
repayment of indebtedness and the repurchase of outstanding securities of the
Company, including Common Stock. Funds not required immediately for those
purposes may be invested temporarily in short-term marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include pretax earnings plus fixed
charges. "Fixed charges" include interest expense, capitalized interest and the
portion of rental expense that is representative of the interest factor in these
rentals.
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------------
October 31, 1997 October 31, 1996
------------------ ------------------
<S> <C>
Historical ratio of earnings to fixed charges .. 6.85x 6.77x
Years Ended January 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
Historical ratio of earnings to fixed charges .. 6.26x 5.76x 6.82x 6.45x 5.73x
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. Further terms of the Offered Securities are set forth
in the Prospectus Supplement.
The Senior Debt Securities are to be issued under an Amended and Restated
Indenture, dated as of December 1, 1995, between the Company and The First
National Bank of Chicago, as Trustee (the "Senior Trustee"). The Subordinated
Debt Securities are to be issued under an Indenture between the Company and The
Bank of New York, as Trustee (the "Subordinated Trustee"). The Senior Indenture
and the Subordinated Indenture are sometimes referred to individually as an
"Indenture" and collectively as the "Indentures." The Senior Trustee and the
Subordinated Trustee are sometimes referred to individually as a "Trustee" and
collectively as the "Trustees." The Senior Indenture and the form of the
Subordinated Indenture are filed as exhibits to the Registration Statement. The
following summaries of material provisions of the Indentures do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures, including the definitions therein of
certain terms. Whenever particular Sections, Articles or defined terms of the
Indentures are referred to, it is intended that such Sections, Articles or
defined terms shall be incorporated herein by reference.
3
<PAGE>
General
The Debt Securities to be offered by this Prospectus are limited to
$600,000,000 in aggregate principal amount of unsecured debt obligations of the
Company. However, the Indentures do not limit the aggregate principal amount of
Debt Securities that may be issued thereunder and provide that Debt Securities
may be issued thereunder from time to time in one or more series. (Section 301).
The Company has outstanding under the Senior Indenture $100,000,000 aggregate
principal amount of 6 3/8% Senior Notes due December 15, 2005 (the "6 3/8%
Senior Notes") and $268 million of Medium Term Notes, Series B, at rates ranging
from 6.70% to 7.61% with final maturities ranging from September 1, 2007, to May
15, 2037. The Company has outstanding under a separate indenture an additional
$239 million of Medium Term Notes, Series A, at rates ranging from 6.50% to
8.20% and with final maturities from March 10, 1999, to January 11, 2023 (the
Series A and Series B Medium Term Notes are referred to collectively as the
"Medium Term Notes"). No Debt Securities are currently issued and outstanding
under the Subordinated Indenture. Neither the Indentures nor the Debt Securities
will limit or otherwise restrict the amount of Senior Indebtedness (as defined
below under " -- Subordination of Debt Securities") that may be incurred by the
Company or any of its subsidiaries.
The Senior Debt Securities will be unsecured obligations of the Company and
will rank on a parity with the 6 3/8% Senior Notes, the Medium Term Notes and
all other unsecured and unsubordinated indebtedness of the Company. The Senior
Debt Securities will be effectively subordinated to any secured indebtedness of
the Company and its subsidiaries and to any unsecured, unsubordinated
indebtedness of the Company's subsidiaries. At October 31, 1997, the Company and
its subsidiaries had $67.4 million of secured indebtedness outstanding and the
Company had $603.9 million of Senior Indebtedness outstanding. At October 31,
1997, the Company's subsidiaries had $67.1 million of secured unsubordinated
indebtedness outstanding. The Subordinated Debt Securities will be unsecured
obligations of the Company and will be subordinated in right of payment to all
Senior Indebtedness.
Reference is made to the applicable Prospectus Supplement for the specific
terms of the series of Debt Securities offered thereby including: (1) the title
of the Debt Security; (2) the aggregate principal amount and denominations; (3)
the maturity or maturities; (4) the price to be received by the Company from the
sale of such Debt Securities; (5) the interest rate or rates (or the method of
calculation thereof) to be established for the Debt Securities, which rate or
rates may vary from time to time; (6) the date or dates on which principal of
the Debt Securities is payable; (7) the date or dates from which interest on the
Debt Securities shall accrue and the payment and record date or dates for
payments of interest or the methods by which any such dates will be determined;
(8) the place or places where principal of, premium, if any, and interest, if
any, on the Debt Securities is payable; (9) the terms of any sinking fund and
analogous provisions with respect to the Debt Securities; (10) the respective
redemption and repayment rights, if any, of the Company and of the holders of
the Debt Securities and the related redemption and repayment prices and any
limitations on such redemption or repayment rights; (11) any provisions relating
to the conversion or exchange of the Debt Securities; (12) any addition to or
change in the affirmative or negative covenants, if any, to be imposed upon the
Company relating to any of the Debt Securities; (13) any trustee or fiscal or
authenticating or payment agent, issuing and paying agent, transfer agent or
registrar or any other person or entity to act in connection with such Debt
Securities for or on behalf of the holders thereof or the Company or an
affiliate; (14) whether such Debt Securities are to be issuable initially in
temporary global form and whether any such Debt Securities are to be issuable in
permanent global form and, if so, whether beneficial owners of interests in any
such permanent global security may exchange such interests for Debt Securities
of like tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur; (15) the listing of the Debt
Securities on any securities exchange or inclusion in any other market or
quotation or trading system; and (16) any other specific terms, conditions and
provisions of the Debt Securities.
The holders of Debt Securities of a specified series that are convertible
into Common Stock ("Convertible Debt Securities") will be entitled at certain
times specified in the Prospectus Supplement relating to such Convertible Debt
Securities, subject to prior redemption, repayment or repurchase, to convert any
Convertible Debt Securities of such series into Common Stock, at the conversion
price set forth in such Prospectus Supplement, subject to adjustment and to such
other terms as are set forth in such Prospectus Supplement. (Senior Indenture,
Article 14; Subordinated Indenture, Article 15).
Unless otherwise provided in the Prospectus Supplement, principal of and
any premium and interest on the Debt Securities shall be payable, and the
transfer of the Debt Securities will be registrable, at the office of the
applicable Trustee, except that, at the option of the Company, interest may be
paid by mailing a check to the address of the person entitled thereto as it
appears on the register for the Debt Securities. (Sections 305 and 1002).
Unless otherwise indicated in the Prospectus Supplement, the Debt
Securities will be issued only in fully registered form without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for
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any registration of transfer or exchange of the Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Sections 302 and 305).
Debt Securities may be issued as Original Issue Discount Securities (as
defined in the Indentures) to be sold at a substantial discount below their
principal amount. Special federal income tax and other considerations applicable
thereto will be described in the Prospectus Supplement relating thereto.
Certain Covenants Applicable to Senior Debt Securities
Unless otherwise indicated in the applicable Prospectus Supplement with
respect to a series of Senior Debt Securities, Senior Debt Securities will have
the benefit of the following covenants contained in the Senior Indenture. Unless
otherwise indicated in the applicable Prospectus Supplement with respect to
Subordinated Debt Securities of a series, the Subordinated Debt Securities will
not have the benefit of such covenants. Certain capitalized terms used in this
section are defined below under "Certain Definitions." Other capitalized terms
not otherwise defined herein have the meanings ascribed to them in the Senior
Indenture.
Restrictions on Debt. The Senior Indenture provides that the Company will
not itself, and will not permit any Subsidiary to, incur, issue, assume or
guarantee any Debt secured by a Mortgage on any Principal Property of the
Company or any Subsidiary, or any shares of Capital Stock or Debt of any
Subsidiary, without effectively providing that the Securities of each series of
Senior Debt Securities then Outstanding (together with, if the Company shall so
determine, any other Debt of the Company or such Subsidiary then existing or
thereafter created that is not subordinate to the Securities of each series then
Outstanding) will be secured equally and ratably with (or, at the option of the
Company, prior to) such secured Debt, so long as such secured Debt shall be so
secured, and will not permit any Subsidiary to incur, issue, assume or guarantee
any unsecured Debt or to issue any Preferred Stock, in each instance unless the
aggregate amount of all such secured Debt together with the aggregate
preferential amount to which such Preferred Stock would be entitled on any
involuntary distribution of assets and all Attributable Debt of the Company and
its Subsidiaries in respect of sale and leaseback transactions would not exceed
10% of Consolidated Net Tangible Assets. This restriction does not apply to, and
there shall be excluded in computing Debt for the purpose of such restriction:
(a) Debt secured by Mortgages on any property acquired, constructed or improved
by the Company or any Subsidiary after the first date on which a Senior Debt
Security is authenticated by the Trustee under the Senior Indenture, which
Mortgages are created or assumed contemporaneously with, or within 30 months
after, such acquisition, or completion of such construction or improvement, or
within six months thereafter pursuant to a firm commitment for financing
arranged with a lender or investor within such 30-month period, to secure or
provide for the payment of all or any part of the purchase price of such
property or the cost of such construction or improvement incurred after the
first date on which a Senior Debt Security is authenticated by the Trustee under
the Senior Indenture or Mortgages on any property existing at the time of the
acquisition thereof if any such Mortgage does not apply to any property
previously owned by the Company or any Subsidiary other than, in the case of any
such construction or improvement, any previously unimproved real property on
which the property so constructed, or the improvement, is located; (b) Debt of
any corporation existing at the time such corporation is merged with or into the
Company or a Subsidiary; (c) Debt of any corporation existing at the time such
corporation becomes a Subsidiary; (d) Debt of a Subsidiary to the Company or to
another Subsidiary; (e) Debt secured by Mortgages securing obligations issued by
a state, territory or possession of the United States, or any political
subdivision of any of the foregoing, or the District of Columbia to finance the
acquisition of or construction on property, and on which the interest is not, in
the opinion of counsel, includable in gross income of the holder; and (f)
certain extensions, renewals or replacements of any Debt referred to in the
foregoing clauses (a) through (e) inclusive. This restriction does not apply to
any issuance of Preferred Stock by a Subsidiary to the Company or another
Subsidiary, provided that such Preferred Stock is thereafter not transferable to
any Person other than the Company or a Subsidiary. (Senior Indenture, Section
1008).
Restrictions on Sales and Leasebacks. The Senior Indenture provides that
the Company will not itself, and will not permit any Subsidiary to, after the
first date on which a Senior Debt Security is authenticated by the Trustee under
the Senior Indenture, enter into any sale and leaseback transaction involving
any Principal Property that has been or is to be sold or transferred, unless,
after giving effect thereto, the aggregate amount of all Attributable Debt with
respect to such transactions plus all Debt to which Section 1008 of the Senior
Indenture is applicable, would not exceed 10% of Consolidated Net Tangible
Assets. This restriction will not apply to, and there shall be excluded in
computing Attributable Debt for the purpose of such restriction, Attributable
Debt with respect to any sale and leaseback transaction if: (a) the lease in
such transaction is for a period (including renewal rights) not exceeding three
years; (b) the Company or a Subsidiary, within 180 days after such transaction,
applies an amount not less than the greater of the net proceeds of the sale of
the Principal Property leased pursuant to such arrangement or the fair market
value of the Principal Property so leased at the time of entering into
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such arrangement (as determined by the Board of Directors) to, subject to
certain restrictions, the retirement of Funded Debt of the Company ranking on a
parity with or senior to the Senior Debt Securities or the retirement of Funded
Debt of a Subsidiary; (c) such transaction is entered into prior to, at the time
of, or within 30 months after the later of the acquisition of the Principal
Property or the completion of the construction thereon; (d) the lease in such
transaction secures or relates to obligations issued by a state, territory or
possession or the United States, or any political subdivision thereof, or the
District of Columbia, to finance the acquisition of or construction on property,
and on which the interest is not, in the opinion of counsel, includable in the
gross income of the holder; or (e) such transaction is entered into between the
Company and a Subsidiary or between Subsidiaries.
(Senior Indenture, Section 1009).
Certain Definitions. The Senior Indenture defines the following terms used
in this section:
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to such date at the rate of 10% per annum
compounded annually. The net amount of rent required to be paid under any such
lease for any such period shall be the amount of the rent payable by the lessee
with respect to such period, after excluding amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates
and similar charges and contingent rents (such as those based on sales). In the
case of any lease that is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated.
"Capital Stock", as applied to the stock of any corporation, means the
capital stock of every class whether now or hereafter authorized, regardless of
whether such capital stock shall be limited to a fixed sum or percentage with
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of such corporation.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent balance sheet of the Company
and its consolidated subsidiaries and computed in accordance with generally
accepted accounting principles.
"Debt" means loans, notes, bonds, indentures or other similar evidences of
indebtedness for money borrowed.
"Funded Debt" means all indebtedness for money borrowed having a maturity
of more than 12 months from the date as of which the amount thereof is to be
determined or having a maturity of less than 12 months but by its terms being
renewable or extendible beyond 12 months from such date at the option of the
borrower.
"Preferred Stock" means any stock of any class of the Company that has a
preference over Common Stock in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Company and that is not mandatorily redeemable or repayable, or
redeemable or repayable at the option of the Holder, otherwise than in shares of
Common Stock or Preferred Stock of another class or series or with the proceeds
of the sale of Common Stock or Preferred Stock.
"Principal Property" means any building, structure or other facility,
together with the land upon which it is erected and fixtures comprising a part
thereof, used primarily for selling home improvement products or the
manufacturing, warehousing or distributing of such products, owned or leased by
the Company or any Subsidiary of the Company. (Senior Indenture, Section 101).
Subordination of Subordinated Debt Securities
The obligations of the Company to make any payment on account of the
principal of and premium, if any, and interest on the Subordinated Debt
Securities will be subordinate and junior in right of payment, to the extent set
forth in the Subordinated Indenture, to all Senior Indebtedness of the Company.
(Subordinated Indenture, Article 14).
In the event that the Company shall default in the payment of any principal
of or any premium or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property, securities by set-off or otherwise) will be
made or agreed to be made for principal of or any premium or interest on the
Subordinated Debt Securities, or in respect of any redemption,
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retirement, purchase or other acquisition of any of the Subordinated Debt
Securities. (Subordinated Indenture, Section 1401). Senior Indebtedness is
defined in the Subordinated Indenture as: (a) all indebtedness of the Company
for money borrowed or constituting reimbursement obligations with respect to
letters of credit and interest or currency swap agreements (including
indebtedness secured by a mortgage, conditional sales contract or other lien
that is (i) given to secure all or a part of the purchase price of property
subject thereto, whether given to the vendor of such property or to another or
(ii) existing on property at the time of acquisition thereof); (b) all
indebtedness of the Company evidenced by notes, debentures, bonds or other
securities sold by the Company for money; (c) lease obligations (including but
not limited to capitalized lease obligations); (d) all indebtedness of others of
the kinds described in either of the preceding clauses (a) or (b) and all lease
obligations and obligations of others of the kind described in the preceding
clause (c) assumed by or guaranteed in any manner by the Company or in effect
guaranteed by the Company through an agreement to purchase, contingent or
otherwise; and (e) all (whether initial or seriatim) renewals, deferrals,
increases, extensions or refundings of and modifications to indebtedness of the
kinds described in any of the preceding clauses (a), (b) or (d) and all renewals
or extensions of leases of the kinds described in either of the preceding
clauses (c) or (d); unless, in the case of any particular indebtedness, lease,
renewal, extension or refunding, the instrument or lease creating or evidencing
the same or the assumption or guarantee of the same expressly provides that such
indebtedness, lease, renewal, extension, deferral, increase, modification or
refunding is not superior in right of payment to the Subordinated Debt
Securities or is expressly subordinated by its terms in right of payment to all
other indebtedness of the Company (including the Subordinated Debt Securities).
In the event of: (1) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property; (2) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings; (3)
any assignment by the Company for the benefit of creditors; or (4) any other
marshalling of the assets of the Company, all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made to any holder of any of the Subordinated
Debt Securities on account thereof. In such event, any payment or distribution
on account of the principal of or any premium or interest on the Subordinated
Debt Securities, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness at the
time outstanding, and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of the
Subordinated Debt Securities, shall be paid or delivered directly to the holders
of Senior Indebtedness in accordance with the priorities then existing among
such holders until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holder or Holders of Subordinated Debt
Securities, together with the holders of any obligations of the Company ranking
on a parity with the Subordinated Debt Securities, shall be entitled to be paid
from the remaining assets of the Company the amounts at the time due and owing
on account of unpaid principal of (and premium, if any) and interest on the
Subordinated Debt Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, shall be made on
account of any capital stock or obligations of the Company ranking junior to the
Subordinated Debt Securities and such other obligations. If any payment or
distribution on account of the principal of or any premium or interest on the
Subordinated Debt Securities of any character, whether in cash, securities or
other property (other than securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in the subordination provisions
with respect to the Subordinated Debt Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), or any security
shall be received by the Trustee or any Holder of any Subordinated Debt
Securities in contravention of any of the terms of the Indenture and before all
the Senior Indebtedness shall have been paid in full, such payment or
distribution or security will be received in trust for the benefit of, and will
be paid over or delivered and transferred to, the holders of the Senior
Indebtedness at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full. (Subordinated Indenture, Section 1401).
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Indebtedness may receive more, ratably, and any
Holder or Holders of the Subordinated Debt Securities having a claim pursuant to
such Subordinated Debt Securities may receive less, ratably, than the other
creditors of the Company. Such subordination will not prevent the occurrence of
an Event of Default in respect of the Subordinated Debt Securities.
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Effect of Corporate Structure
The Debt Securities are obligations exclusively of the Company. Because the
operations of the Company are currently conducted through subsidiaries, the cash
flow and the consequent ability to service debt of the Company, including the
Debt Securities, are dependent, in part, upon the earnings of its subsidiaries
and the distribution of those earnings to the Company or upon loans or other
payments of funds by those subsidiaries to the Company. The subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debt Securities or to make any
funds available therefor, whether by dividends, loans or other payments. In
addition, the payment of dividends and the making of loans and advances to the
Company by its subsidiaries may be subject to statutory or contractual
restrictions, are contingent upon the earnings of those subsidiaries and are
subject to various business considerations.
Although the Senior Indenture limits the incurrence of such indebtedness,
as described above under " -- Certain Covenants Applicable to Senior Debt
Securities," the Debt Securities will be effectively subordinated to all
indebtedness and other liabilities, including current liabilities and
commitments under leases, if any, of the Company's subsidiaries. Any right of
the Company to receive assets of any of its subsidiaries upon liquidation or
reorganization of the subsidiary (and the consequent right of the holders of the
Debt Securities to participate in those assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinated
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
No Restriction on Sale or Issuance of Stock of Subsidiaries
The Indentures contain no covenant that the Company will not sell, transfer
or otherwise dispose of any shares of, or securities convertible into, or
options, warrants or rights to subscribe for or purchase shares of, voting stock
of any of its subsidiaries, nor does it prohibit any subsidiary from issuing any
shares of, securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of, voting stock of such subsidiary.
Consolidation, Merger and Sale of Assets
The Company, without the consent of the Holder or Holders of any of the
outstanding Debt Securities, may consolidate or merge with or into, or convey,
transfer or lease its properties and assets substantially as an entirety, to any
corporation organized under the laws of any domestic jurisdiction, provided that
the successor corporation assumes the Company's obligations on the Debt
Securities and under the Indentures and that after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time would become an Event of Default, has occurred and is continuing, and that
certain other conditions are met. (Section 801).
Events of Default
Events of Default with respect to Debt Securities of any series issued
thereunder are defined in the Indentures as being: (a) default for thirty days
in payment when due of any interest on any Debt Security of that series or any
additional amount payable with respect to Debt Securities of such series as
specified in the applicable Prospectus Supplement; (b) default in payment when
due of principal, premium, if any, or on redemption or otherwise, or in the
making of a mandatory sinking fund payment of any Debt Securities of that
series; (c) default for sixty days after notice to the Company by the Trustee
for such series, or by the holders of 25% in aggregate principal amount of the
Debt Securities of such series then outstanding, in the performance of any other
agreement in the Debt Securities of that series, in the Indentures or in any
supplemental indenture or board resolution referred to therein under which the
Debt Securities of that series may have been issued; (d) default in the payment
of principal when due or resulting in acceleration of other indebtedness of the
Company for borrowed money where the aggregate principal amount with respect to
which such default or acceleration has occurred exceeds $10 million and such
acceleration is not rescinded or annulled within ten days after the written
notice thereof to the Company by the trustee or to the Company and the Trustee
by the holders of 25% in aggregate principal amount of the Debt Securities of
such series then outstanding, provided that such Event of Default will be cured
or waived if the default that resulted in the acceleration of such other
indebtedness is cured or waived or such indebtedness is discharged; and (e)
certain events of bankruptcy, insolvency or reorganization of the Company.
(Section 501). Events of Default with respect to a specified series of Debt
Securities may be added to the Indenture under which the series is issued and,
if so added, will be described in the applicable Prospectus Supplement. (Section
301). No Event of Default with respect to a particular series of Debt Securities
issued under the Indentures necessarily constitutes an Event of Default with
respect to any other series of Debt Securities issued thereunder.
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The Indentures provide that the Trustee for any series of Debt Securities
shall, within ninety days after the occurrence of a Default with respect to Debt
Securities of that series, give to the holder of the Debt Securities of that
series notice of all uncured Defaults known to it, provided, that, except in the
case of default in payment on the Debt Securities of that series, the Trustee
may withhold the notice if and so long as it in good faith determines that
withholding such notice is in the interest of the holders of the Debt Securities
of that series, provided, further, that no notice of a default made in the
performance of any covenant or a breach of any warranty contained in the
Indentures shall be given until at least 60 days after the occurrence thereof.
"Default" means any event which is, or, after notice or passage of time or both,
would be, an Event of Default. (Section 602).
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the Holder or
Holders of at least 25% in aggregate principal amount of the outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
the Debt Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on acceleration has
been obtained, the Holder or Holders of a majority in aggregate principal amount
of outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502).
The Indentures provide that, subject to the duty of the Trustees in the
case of an Event of Default to act with the required standard of care, the
Trustees will be under no obligation to exercise any of these rights or powers
under the Indentures at the request or direction of any of the Holders, unless
such Holder or Holders shall have offered to the Trustees reasonable indemnity.
(Sections 601 and 603). Subject to such provisions for the indemnification of
the Trustees, the Holder or Holders of a majority in aggregate principal amount
of the outstanding Debt Securities of each series will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustees, or exercising any trust or power conferred on the Trustees with
respect to the Debt Securities of that series. (Section 512).
The Company is required to furnish to the Trustees annually a statement as
to the performance by the Company of certain of its obligations under the
Indentures and as to any default in such performance. (Section 1005).
Global Securities
The Debt Securities of a series may be issued in the form of one or more
fully registered securities in global form (each a "Global Security") that will
be deposited with, or on behalf of, a depositary (the "Depositary Bank")
identified in the Prospectus Supplement relating to such series and will be
registered in the name of the Depositary Bank or its nominee. In such case, one
or more Global Securities will be issued in a denomination or aggregate
denominations equal to the aggregate principal amount of outstanding Debt
Securities of the series represented by such Global Security or Securities.
Unless and until any such Global Security is exchanged in whole or in part for
Debt Securities in definitive certificated form, such Global Security may not be
transferred except as a whole by the Depositary Bank for such Global Security to
a nominee of such Depositary Bank or by a nominee of such Depositary Bank to
such Depositary Bank or another nominee of such Depositary Bank or by such
Depositary Bank or any such nominee to a successor of such Depositary Bank or a
nominee of such successor and except as described in the applicable Prospectus
Supplement. (Section 303).
The specific terms of the depositary arrangement with respect to a series
of Debt Securities to be represented by a Global Security will be described in
the Prospectus Supplement relating to such series. The Company anticipates that
the following provisions will apply to all depositary arrangements.
Upon the issuance of any Global Security, and the deposit of such Global
Security with or on behalf of the Depositary Bank for such Global Security, the
Depositary Bank will credit, on its book-entry registration and transfer system,
the respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of institutions ("participants") that have
accounts with such Depositary Bank or its nominee. The accounts to be credited
will be designated by the underwriters or agents engaging in the distribution or
placement of such Debt Securities or by the Company, if such Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
such Global Security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown by book-keeping entries on,
and the transfer of that ownership interest will be effected only through
book-keeping entries to, records maintained by the Depositary Bank or its
nominee for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be shown by
book-keeping entries on, and the transfer of that ownership interest among or
through such participants will be effected only through book-keeping entries to,
records maintained by such participants. The laws of some jurisdictions
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<PAGE>
require that certain purchasers of securities take physical delivery of such
securities in definitive certificated form rather than book-entry form. Such
laws may impair the ability to own, transfer or pledge beneficial interests in
any Global Security.
So long as the Depositary Bank for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary Bank or such nominee,
as the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as set forth below or otherwise specified in the applicable
Prospectus Supplement, owners of beneficial interests in a Global Security will
not be entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in definitive certificated
form and will not be considered the holders thereof for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in such Global
Security must rely on the procedures of the Depositary Bank and, if such person
is not a participant, on the procedures of the participant through which such
person directly or indirectly owns its interest, to exercise any rights of a
holder under the Indenture. The Indenture provides that the Depositary Bank may
grant proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the Indenture. (Section 104). The
Company understands that under existing industry practices, if the Company
requests any action of holders or any owner of a beneficial interest in such
Global Security desires to give any notice or take any action that a holder is
entitled to give or take under the Indenture, the Depositary Bank for such
Global Security would authorize the participants holding the relevant beneficial
interest to give such notice or take such action, and such participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Principal and any premium and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary Bank or
its nominee will be made to such Depositary Bank or its nominee, as the case may
be, as the registered owner of such Global Security. None of the Company, the
Trustee or any paying agent for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in any Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. (Section 308).
The Company expects that the Depositary Bank for any series of Debt
Securities represented by a Global Security, upon receipt of any payment of
principal, premium or interest, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Security as shown on the records of such
Depositary Bank. The Company also expects that payments by participants to
owners of beneficial interests in such Global Security or Securities 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 registered in "street name," and will be the responsibility of such
participants.
If the Depositary Bank for any series of Debt Securities represented by a
Global Security is at any time unwilling or unable to continue as Depositary
Bank and a successor Depositary Bank is not appointed by the Company within 90
days, the Company will issue such Debt Securities in definitive certificated
form in exchange for such Global Security. In addition, the Company may at any
time and in its sole discretion determine not to have the Debt Securities of a
series represented by one or more Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for the Global Security representing such series of Debt Securities.
(Section 305).
Further, an owner of a beneficial interest in a Global Security
representing Debt Securities of a series may, on terms acceptable to the Company
and the Depositary Bank for such Global Security, receive Debt Securities of
such series in definitive certificated form, if the Company so specifies with
respect to the Debt Securities of such series. In any such instance, an owner of
a beneficial interest in a Global Security will be entitled to have Debt
Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest registered in its name and will be entitled
to physical delivery of such Debt Securities in definitive certificated form.
Debt Securities of such series so issued in definitive certificated form will,
except as set forth in the applicable Prospectus Supplement, be issued in
denominations of $1,000 and integral multiples thereof and will be issued in
registered form. (Section 305).
Modification and Waiver
Modifications and amendments of the Indentures may be made by the Company
and the applicable Trustee with the consent of the Holder or Holders of a
majority in principal amount of the Debt Securities of all affected series;
provided, however, that no such modification or amendment may, without the
consent of the Holder or Holders of all of the outstanding Debt Securities
affected thereby, (i) change the stated maturity date of the principal of, or
any installment of principal
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of, or premium, if any, or interest, if any, on, any Debt Security; (ii) reduce
the principal amount of, or premium, if any, or interest, if any, on, any Debt
Security, change the method of calculation thereon or reduce the amount payable
on redemption thereof; (iii) reduce the amount of principal of a Debt Security
payable upon acceleration of the maturity thereof; (iv) change the place or
currency of payment of principal of, or premium, if any, or interest, if any,
on, any Debt Security; (v) impair the rights of any holder of any Debt
Securities to conversion rights; (vi) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; or (vii)
reduce the percentage in principal amount of the Debt Security, the consent of
whose Holder or Holders is required for modification or amendment of the
Indentures or for waiver of compliance with certain provisions of the Indentures
or for waiver of certain defaults. (Sections 901 and 902).
The Holder or Holders of a majority in principal amount of the Debt
Securities of all affected series may, on behalf of the Holder or Holders of
such Debt Securities, waive compliance by the Company with certain restrictive
provisions of the Indentures. The Holder or Holders of a majority in principal
amount of the Debt Securities of all affected series also may, on behalf of the
Holder or Holders of all such Debt Securities, waive any past default under the
Indentures with respect to such Debt Securities, except a default in the payment
of the principal, or premium, if any, or interest on, any Debt Security or in
respect of a provision that under the Indentures cannot be modified or amended
without the consent of the Holder or Holders of all of the outstanding Debt
Securities affected thereby. (Section 513).
Regarding the Trustees
The First National Bank of Chicago is the Trustee under the Senior
Indenture. Notice to the Senior Trustee Bank should be directed to its
Corporate Trust Office, One First National Plaza, Suite 0126, Chicago, Illinois
60670-0126, Attention: Corporate Trust Administrator.
The Bank of New York is the Trustee under the Subordinated Indenture.
Notice to the Subordinated Trustee should be directed to its Corporate Trust
Office, located at 101 Barclay Street, New York, New York 10007.
DESCRIPTION OF PREFERRED STOCK
General
The following summary does not purport to be complete and is subject in all
respects to applicable North Carolina law and the Company's Restated and Amended
Charter and Bylaws.
The Company is authorized by its Restated and Amended Charter to issue
5,000,000 shares of Preferred Stock. The Board of Directors is authorized to
designate with respect to each new series of Preferred Stock the number of
shares in each series, the dividend rates and dates of payment, voluntary and
involuntary liquidation preferences, redemption prices, whether or not dividends
shall be cumulative and, if cumulative, the date or dates from which the same
shall be cumulative, the sinking fund provisions, if any, for redemption or
purchase of shares, the rights, if any, and the terms and conditions on which
shares can be converted into or exchanged for, or the rights to purchase, shares
of any other class or series, and the voting rights, if any. Any Preferred Stock
issued will rank prior to the Common Stock as to dividends and as to
distributions in the event of liquidation, dissolution or winding up of the
Company. The ability of the Board of Directors to issue Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
powers of holders of Common Stock and, under certain circumstances, may
discourage an attempt by others to gain control of the Company. The Company may
amend from time to time its Restated and Amended Charter to increase the number
of authorized shares of Preferred Stock. Any such amendment would require the
approval of the holders of a majority of the outstanding shares of Common Stock
and the approval of the holders of a majority of the outstanding shares of all
series of Preferred Stock voting together as a single class without regard to
series. As of the date of this Prospectus, the Company had no shares of
Preferred Stock outstanding.
The Prospectus Supplement relating to each series of the Preferred Stock
will describe the following terms thereof:
(a) title and stated value of such series;
(b) the number of shares in such series;
(c) the dividend payment dates and the dividend rate or method of determination
or calculation of such terms applicable to the series;
(d) applicable redemption provisions, if any;
(e) sinking fund or purchase fund provisions, if any;
(f) the fixed liquidation price and fixed liquidation premium, if any,
applicable to the series;
(g) the rate or basis of exchange or conversion into other securities or method
of determination thereof applicable to the series, if any;
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(h) the conversion rights, if any;
(i) applicable voting rights; and
(j) any other terms applicable thereto.
Redemption
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times and at the redemption prices
set forth in the Prospectus Supplement relating to such series.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption shall specify the number of shares of such
series of Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption.
If fewer than all the outstanding shares of any series of Preferred Stock
are to be redeemed, whether by mandatory or optional redemption, the selection
of the shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or a duly authorized committee thereof, or
by any other method which may be determined by the Board of Directors or such
committee to be equitable. From and after the date of redemption (unless default
shall be made by the Company in providing for the payment of the redemption
price), dividends shall cease to accrue on the shares of Preferred Stock called
for redemption and all rights of the holders thereof (except the right to
receive the redemption price) shall cease.
Conversion Rights; Preemptive Rights
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of preferred stock of the Company. The Preferred
Stock will have no preemptive rights.
Dividend Rights
The holders of the Preferred Stock of each series shall be entitled to
receive, if and when declared payable by the Board of Directors, out of assets
available therefor, dividends at, but not exceeding, the dividend rate for such
series (which may be fixed or variable), payable at such intervals and on such
dates as are provided in the resolution of the Board of Directors creating such
series. If such intervals and dividend payment dates shall vary from time to
time for such series, such resolution shall set forth the method by which such
intervals and such dates shall be determined. Such dividends on Preferred Stock
shall be paid before any dividends, other than a dividend payable in Common
Stock of the Company, may be paid upon or set apart for any shares of capital
stock ranking junior to the Preferred Stock in respect of dividends or
liquidation rights (referred to in this Prospectus as "stock ranking junior to
the Preferred Stock").
Voting Rights
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by the
laws of the State of North Carolina or other applicable law, the holders of the
Preferred Stock will not be entitled to vote. Except as indicated in the
Prospectus Supplement relating to a particular series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of the Preferred Stock are entitled to vote. However, as more fully
described below under "Depositary Shares," if the Company elects to issue
Depositary Shares representing a fraction of a share of a series of Preferred
Stock, each such Depositary Share will, in effect, be entitled to such fraction
of a vote, rather than a full vote. Because each full share of any series of
Preferred Stock shall be entitled to one vote, the voting power of such series,
on matters on which holders of such series and holders of other series of
preferred stock are entitled to vote as a single class, shall depend on the
number of shares in such series, not the aggregate liquidation preference or
initial offering price of the shares of such series of Preferred Stock.
In addition to the foregoing voting rights, under the North Carolina
Business Corporation Act as now in effect, the holders of Preferred Stock will
have the voting rights set forth above under "General" with respect to
amendments to the Company's Restated and Amended Charter that would increase the
number of authorized shares of Preferred Stock of the Company.
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Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Preferred Stock shall be entitled to receive, for each share
thereof, the fixed liquidation or stated value for the respective series
together in all cases with all dividends accrued or in arrears thereon, before
any distribution of the assets shall be made to the holders of any stock ranking
junior to the Preferred Stock. If the assets distributable among the holders of
Preferred Stock should be insufficient to permit the payment of the full
preferential amounts fixed for all series, then the distribution shall be made
among the holders of each series ratably in proportion to the full preferential
amounts to which they are respectively entitled.
Depositary Shares
General. The Company may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary Bank"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. If Depositary
Shares are issued, copies of the forms of Deposit Agreement and Depositary
Receipt will be incorporated by reference in the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such documents.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary Bank 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 temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Withdrawal of Preferred Stock. Upon surrender of the Depositary Receipts to
the Depositary Bank, the owner of the Depositary Shares evidenced thereby is
entitled to delivery at such office of the number of whole shares of Preferred
Stock represented by such Depositary Shares. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary Bank will deliver to such holder at the
same time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Owners of Depositary Shares will be entitled to receive only whole
shares of Preferred Stock. In no event will fractional shares of Preferred Stock
(or cash in lieu thereof) be distributed by the Depositary Bank. Consequently, a
holder of a Depositary Receipt representing a fractional share of Preferred
Stock would be able to liquidate his position only by sale to a third party (in
a public trading market transaction or otherwise), unless the Depositary Shares
are redeemed by the Company or converted by the holder.
Dividends and Other Distributions. The Depositary Bank will distribute all
cash dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Depositary Bank will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary Bank determines that it is not feasible
to make such distribution, in which case the Depositary Bank may, with the
approval of the Company, sell such property and distribute the net proceeds from
such sale to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary Bank resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary Bank. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of Preferred Stock. Whenever the Company redeems shares of Preferred
Stock held by the Depositary Bank, the Depositary
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Bank will redeem as of the same redemption date the number of Depositary Shares
representing the shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot or pro rata as may be determined by the Depositary Bank.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of Preferred Stock are entitled to vote, the Depositary Bank will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
Bank as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Depositary
Bank will endeavor, insofar as practicable, to vote the amount of Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all action that may be deemed
necessary by the Depositary Bank in order to enable the Depositary Bank to do
so. The Depositary Bank may abstain from voting shares of Preferred Stock to the
extent it does not receive specific instructions from the holders of Depositary
Shares representing such Preferred Stock.
Amendment and Termination of the Depositary Agreement. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary Bank. However, any amendment that materially and adversely
alters the rights of the holders of Depositary Shares will not be effective
unless such amendment has been approved by the holders of at least a majority of
the Depositary Shares then outstanding. The Deposit Agreement may be terminated
by the Company or the Depositary Bank only if (i) all outstanding Depositary
Shares have been redeemed or (ii) there has been a final distribution in respect
of the Preferred Stock in connection with any liquidation, dissolution or
winding up of the Company and such distribution has been distributed to the
holders of Depositary Receipts.
Charges of Depositary Bank. The Company will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Company will pay charges of the Depositary Bank in
connection with the initial deposit of the Preferred Stock and any redemption of
the Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges, including any fee
for the withdrawal of shares of Preferred Stock upon surrender of Depositary
Receipts, as are expressly provided in the Deposit Agreement to be for their
accounts.
Miscellaneous. The Depositary Bank will forward to holders of Depository
Receipts all reports and communications from the Company that are delivered to
the Depositary Bank and that the Company is required to furnish to the holders
of Preferred Stock.
Neither the Depositary Bank nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Deposit Agreement. The obligations of the Company and
the Depositary Bank under the Deposit Agreement will be limited to performance
in good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or upon information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
Resignation and Removal of Depositary Bank. The Depositary Bank may resign
at any time by delivering to the Company notice of its election to do so, and
the Company may at any time remove the Depositary Bank, any such resignation or
removal to take effect upon the appointment of a successor Depositary Bank and
its acceptance of such appointment. Such successor Depositary Bank 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, when issued and full consideration is received for
such Preferred Stock, will be fully paid and nonassessable.
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DESCRIPTION OF COMMON STOCK
General
The following summary does not purport to be complete and is subject in all
respects to applicable North Carolina law, the Company's Restated and Amended
Charter and Bylaws, and the Rights Agreement, dated September 9, 1988, between
the Company and Wachovia Bank of North Carolina, N.A., as Rights Agent.
The Company is authorized by its Restated and Amended Charter to issue
700,000,000 shares of Common Stock and had 174,901,889 shares of Common Stock
outstanding at October 31, 1997. Each share of Common Stock is entitled to one
vote on all matters submitted to a vote of shareholders. Holders of Common Stock
are entitled to receive dividends when and as declared by the Board of Directors
of the Company out of funds legally available therefor. Dividends may be paid on
the Common Stock only if all dividends on any outstanding Preferred Stock have
been paid or provided for.
The issued and outstanding shares of Common Stock are fully paid and
nonassessable. Holders of Common Stock have no preemptive or conversion rights
and are not subject to further calls or assessments by the Company.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of the Company, holders of Common Stock are entitled to receive, pro
rata, after satisfaction in full of the prior rights of creditors and holders of
Preferred Stock, if any, all the remaining assets of the Company available for
distribution.
Directors are elected by a vote of the holders of Common Stock. Holders of
Common Stock are not entitled to cumulative voting rights.
Wachovia Bank of North Carolina, N.A. of Winston-Salem, North Carolina,
acts as the transfer agent and registrar for the Common Stock.
Preferred Share Purchase Rights
In 1988, pursuant to the Company's Shareholder Rights Plan, the Company
distributed as a dividend one Right for each outstanding share of Common Stock.
As a consequence of a 100% stock dividend effective June 26, 1992, and a
two-for-one stock split effective April 14, 1994, the number of Rights
outstanding was adjusted such that each share of Common Stock had associated
with it one-quarter Right. Each Right entitles the holder to buy one
one-thousandth of a share of Participating Cumulative Preferred Stock, Series A,
at an exercise price of $100, subject to adjustment. The Rights will become
exercisable only if a person or group acquires or announces a tender offer for
20% or more of the outstanding Common Stock. When exercisable, the Company may
issue a share of Common Stock in exchange for each Right other than those held
by such person or group. If a person or group acquires 30% or more of the
outstanding Common Stock, each Right will entitle the holder, other than the
acquiring person, upon payment of the exercise price, to acquire Preferred Stock
or, at the option of the Company, Common Stock, having a value equal to twice
the Right's exercise price. If the Company is acquired in a merger or other
business combination or if 50% of its earnings power is sold, each Right will
entitle the holder, other than the acquiring person, to purchase securities of
the surviving company having a market value equal to twice the exercise price of
the Right. The Rights will expire on September 9, 1998, and may be redeemed by
the Company at a price of $.01 per right at any time prior to the tenth day
after an announcement that a 20% position has been acquired.
Until such time as a person or group acquires or announces a tender offer
for 20% or more of the Common Stock, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, and (ii) the surrender for transfer of any certificate for
Common Stock will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Rights may not be transferred,
directly or indirectly (i) to any person or group that has acquired, or obtained
the right to acquire, beneficial ownership of 20% or more of the Rights (an
"Acquiring Person"); (ii) to any person in connection with a transaction in
which such person becomes an Acquiring Person; or (iii) to any affiliate or
associate of any such person. Any Right that is the subject of a purported
transfer to any such person will be null and void.
The Rights may have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that acquires more than 20% of the
outstanding shares of Common Stock of the Company if certain events thereafter
occur without the Rights having been redeemed. However, the Rights should not
interfere with any merger or other business combination approved by the Board of
Directors and the shareholders because the Rights are redeemable under certain
circumstances.
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Change of Control Provisions
The rights of holders of Common Stock are governed by other provisions that
are intended to affect any attempted change of control of the Company.
Board of Directors. The Restated and Amended Charter classifies the Board
of Directors into three separate classes, with the term of one-third of the
directors expiring at each annual meeting. A director may be removed only upon
the affirmative vote of 70% of outstanding voting shares.
Fair Price Provisions. Provisions of the Restated and Amended Charter (the
"Fair Price Provisions") limit the ability of an Interested Shareholder to
effect certain transactions involving the Company. Unless the Fair Price
Provisions are satisfied, an Interested Shareholder (defined as the beneficial
owner of 20% of outstanding voting shares) may not engage in a business
combination, which includes a merger, consolidation, share exchange or similar
transaction, involving the Company unless approved by 70% of the Company's
outstanding voting shares. In general, the Fair Price Provisions require that an
Interested Shareholder pay shareholders the same amount of cash or the same
amount and type of consideration paid by the Interested Shareholder when it
initially acquired the Company's shares.
The Fair Price Provisions are designed to discourage attempts to take over
Lowe's in non-negotiated transactions utilizing two-tier pricing tactics, which
typically involve the accumulation of a substantial block of the target
corporation's stock followed by a merger or other reorganization of the acquired
company on terms determined by the purchaser. Due to the difficulties of
complying with the requirements of the Fair Price Provisions, the Fair Price
Provisions generally may discourage attempts to obtain control of the Company.
North Carolina Shareholder Protection Act. The North Carolina Shareholder
Protection Act requires the affirmative vote of 95% of a corporation's voting
shares to approve a business combination with any person that beneficially owns
25% of the voting shares of the corporation unless the "fair price" provisions
of the Act are satisfied. The statute's intended effect is similar to the Fair
Price Provisions of the Company's Restated and Amended Charter.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Preferred Stock or
Common Stock. Warrants may be issued independently or together with any other
Offered Securities and may be attached to or separate from such securities. Each
series of Warrants will be issued under a separate warrant agreement (each a
"Warrant Agreement") to be entered into between the Company and a warrant agent
("Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants and
the applicable Warrant Agreement will be set forth in the applicable Prospectus
Supplement. If Warrants are issued, copies of the forms of Warrant Agreement and
the certificate evidencing the Warrants will be incorporated by reference in the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such documents.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered:
(a) the title of such Warrants;
(b) the aggregate number of such Warrants;
(c) the price or prices at which such Warrants will be issued;
(d) the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of such Warrants;
(e) the designation and terms of the Offered Securities with which
such Warrants are issued and the number of such Warrants issued
with each such security;
(f) if applicable, the date on and after which such Warrants and the related
securities will be separately transferable;
(g) the price at which the securities purchasable upon exercise of such
Warrants may be purchased;
(h) the date on which the right to exercise such Warrants shall commence and
the date on which such right shall expire;
(i) the minimum or maximum amount of such Warrants that may be exercised
at any one time;
(j) information with respect to book-entry procedures, if any;
(k) a discussion of material federal income tax considerations; and
(l) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
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PLAN OF DISTRIBUTION
The Offered Securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters, or through such firms or other firms acting alone or
through dealers. The Offered Securities may also be sold directly by the Company
or through agents to investors. The names of any agents, dealers or managing
underwriters, and of any underwriters, involved in the sale of the Offered
Securities in respect of which this Prospectus is being delivered, the
applicable agent's commission, dealer's purchase price or underwriter's discount
and the net proceeds to the Company from such sale will also be set forth in the
Prospectus Supplement.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions
under the Securities Act.
If an underwriter or underwriters are utilized in the sale of the Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriting agreement will provide that the obligations of the underwriters
are subject to certain conditions precedent and that the underwriters with
respect to a sale of Offered Securities will be obligated to purchase all such
Offered Securities if any are purchased. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent. Under such underwriting agreements, underwriters,
dealers and agents who participate in the distribution of the Offered
Securities, may be entitled to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act or
contribution with respect to payments that the underwriters, dealers or agents
may be required to make in respect thereof. The underwriter or underwriters with
respect to an underwritten offering of Offered Securities will be set forth in
the Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall not be less nor more than, the respective
amounts stated in such Prospectus Supplement. Institutions with whom Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
if the Offered Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of the Offered Securities
less the principal amount thereof covered by Contracts. Agents and underwriters
will have no responsibility in respect of the delivery or performance of
Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries and the Trustees in the ordinary course of business.
The Offered 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 the Offered Securities.
17
<PAGE>
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Hunton & Williams, Richmond, Virginia.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
January 31, 1997 have been audited by Deloitte & Touche LLP, independent
auditors as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended May 2, 1997 and April 30, 1996, August 1, 1997 and July 31, 1996, and
October 31, 1997, and October 31, 1996, which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their reports included in the Company's Quarterly Reports on Form 10-Q for
the quarters ended May 2, August 1 and October 31, 1997, and incorporated by
reference herein, they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because their reports are
not "reports" or a "part" of the registration statement prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Act.
18
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus Supplement and
the accompanying Prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which they relate as an offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement and the
accompanying 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 contained
herein or therein is correct as of any time subsequent to the date hereof.
----------------------------
TABLE OF CONTENTS
Prospectus Supplement
Page
The Company ................................. S-2
Use of Proceeds ............................. S-2
Description of Debentures ................... S-2
Underwriting ................................ S-4
Legal Matters ............................... S-5
Experts ..................................... S-5
Prospectus
Available Information ....................... 2
Incorporation of Certain Documents
by Reference ............................. 2
Forward-Looking Statements .................. 2
The Company ................................. 3
Use of Proceeds ............................. 3
Ratio of Earnings to Fixed Charges .......... 3
Description of Debt Securities .............. 3
Description of Preferred Stock .............. 11
Description of Common Stock ................. 15
Description of Warrants ..................... 16
Plan of Distribution ........................ 17
Legal Matters ............................... 18
Experts ..................................... 18
$300,000,000
[LOWE'S COMPANIES LOGO]
Lowe's Companies, Inc.
6 7/8% Debentures
due February 15, 2028
------------------------------------
P R O S P E C T U S S U P P L E M E N T
------------------------------------
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley Dean Witter
February 4, 1998
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