AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1998
REGISTRATION NO. 333-43251
===================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
AMERICAN STORES COMPANY
(Exact name of registrant as specified in its charter)
-----------------------------
DELAWARE 87-0207226
(State or other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
P.O. BOX 27447
709 EAST SOUTH TEMPLE
SALT LAKE CITY, UTAH 84127-0447
(801) 539-0112
(Address and telephone number of principal executive office)
-----------------------------
KATHLEEN E. MCDERMOTT, ESQ.
CHIEF LEGAL OFFICER
AND ASSISTANT SECRETARY
AMERICAN STORES COMPANY
709 EAST SOUTH TEMPLE
SALT LAKE CITY, UTAH 84102
(801) 539-0112
(Name, address and telephone number of agent for service)
COPIES TO:
ERIC S. ROBINSON, ESQ. WINTHROP B. CONRAD, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ DAVIS POLK & WARDWELL
51 WEST 52ND STREET 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10017
(212) 403-1000 (212)450-4000
-----------------------------
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of these securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE AMOUNT OF
SECURITIES REGISTERED PRICE OFFERING REGISTRATION
TO BE REGISTERED(1) PER UNIT PRICE(2) FEE
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Debt Securities...........
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Preferred Stock, par value $1.00 per share.....
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Depositary Shares.........
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Common Stock, par value $1.00 per share(3)........
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Total..................... $1,000,000,000 $303,030.30(4)
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(1) Any securities registered hereunder may be sold separately, together or as
units with other securities registered hereunder. The securities registered
hereunder include such indeterminate number of shares of Common Stock or
Preferred Stock as may be issued in exchange for, or upon conversion of,
securities registered hereunder. (2) Estimated in accordance with Rule 457(o)
under the Securities Act of 1933, as amended ("Rule 457(o)"), solely for the
purpose of determining the registration fee. (3) Attached to the Common Stock
are preferred share purchase rights that will not be exercisable prior to the
occurrence of certain events. (4) Previously paid upon initial filing of
Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 2, 1998
PROSPECTUS
AMERICAN STORES COMPANY
$1,000,000,000
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
American Stores Company ("American Stores" or the "Company") may offer
from time to time (i) unsecured debt securities ("Debt Securities") consisting
of debentures, notes and/or other evidences of unsecured indebtedness in one
or more series, (ii) shares of preferred stock, par value $1.00 per share
("Preferred Stock"), in one or more series, or fractional interests in shares
of Preferred Stock represented by depositary shares ("Depositary Shares"), or
(iii) shares of common stock, par value $1.00 per share ("Common Stock") (the
Debt Securities, Preferred Stock, Depositary Shares and Common Stock are
collectively referred to as "Securities"), or any combination of the
foregoing, at an aggregate initial offering price not to exceed
U.S.$1,000,000,000, or its equivalent if some or all of the Securities are
denominated in one or more foreign currencies, foreign currency units, or
composite currencies, at prices and on terms to be determined at or prior to
the time of sale in light of market conditions at the time of sale. The Debt
Securities may be senior ("Senior Debt Securities") or subordinated
("Subordinated Debt Securities"). The Senior Debt Securities will rank equally
with all other unsubordinated and unsecured indebtedness of the Company. The
Subordinated Debt Securities will be subordinate to all existing and future
Senior Indebtedness as defined in the Subordinated Indenture described herein.
The Debt Securities of any series and Preferred Stock of any series may be
convertible into or exchangeable for Debt Securities of another series or
other securities of the Company.
Specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in one or more accompanying
Prospectus Supplements (each a "Prospectus Supplement"), together with the
terms of the offering of the Securities and the initial price and the net
proceeds to American Stores from the sale thereof. The Prospectus Supplement
will set forth with regard to the particular Securities, without limitation,
the following: (i) in the case of Debt Securities, the specific designation,
aggregate principal amount, ranking as senior debt or subordinated debt,
authorized denomination, maturity, rate or method of calculation of interest
and dates for payment thereof, any exchangeability, conversion, redemption,
prepayment or sinking fund provisions, the currency or currencies or currency
unit or currency units in which principal, premium, if any, or interest, if
any, is payable, any modification of the covenants and any other specific
terms thereof; (ii) in the case of Preferred Stock, the designation, number of
shares, liquidation preference per share, initial public offering price,
dividend rate (or method of calculation thereof), dates on which dividends
will be payable and dates from which dividends will accrue, any redemption or
sinking fund provisions, any conversion or exchange rights, any other relative
rights and whether American Stores has elected to offer fractional interests
in the Preferred Stock in the form of Depositary Shares evidenced by
depositary receipts; and (iii) in the case of Common Stock, the number of
shares of Common Stock and the terms of the offering and sale thereof. The
amounts payable by the Company in respect of Securities may be calculated by
reference to the value, rate or price of one or more specified commodities,
currencies or indices as set forth in the Prospectus Supplement. The
Prospectus Supplement will also contain information, where applicable, about
certain United States federal income tax considerations relating to the
Securities covered by the Prospectus Supplement.
The Debt Securities may be issued only in registered form, including in
the form of one or more global securities ("Global Securities"), unless
otherwise set forth in the Prospectus Supplement.
The outstanding Common Stock is listed on the New York Stock Exchange,
Inc., the Chicago Stock Exchange, Inc., the Pacific Exchange, Inc. and the
Philadelphia Stock Exchange, Inc. (collectively, the "Exchanges") under the
symbol "ASC." On January 28, 1998 the last reported sale price of the
Common Stock on the New York Stock Exchange, Inc. was $21.94 per share. Any
Common Stock offered will be listed,
<PAGE>
subject to notice of issuance, on the Exchanges. The applicable Prospectus
Supplement will contain information about any listing of the other Securities on
any securities exchange.
The Securities may be sold directly, through agents designated from time
to time, or through underwriters or dealers. If any agents of American Stores or
any underwriters or dealers are involved in the sale of the Securities, the
names of such agents, underwriters, or dealers, any applicable commissions or
discounts, and the net proceeds to the Company will be set forth in the
applicable Prospectus Supplement. See "Plan of Distribution" for possible
indemnification arrangements for agents, underwriters and dealers.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is , 199 .
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OR THEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, ANY SECURITIES OTHER THAN
THE SECURITIES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE
DATES.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
New York, New York 10048; or from the Commission's worldwide web site at
http://www.sec.gov. Copies of such material can be obtained at prescribed rates
by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, proxy statements and other information are
also available for inspection and copying at the offices of each of the
following exchanges on which the Company's Common Stock is listed: The New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005; the Chicago
Stock Exchange, Inc., 440 South LaSalle Street, Chicago, Illinois 60605; the
Pacific Exchange, Inc., 301 Pine Street, San Francisco, California 94104; and
the Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia,
Pennsylvania 19103.
The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part) under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information with respect to the Company and the Securities,
reference is hereby made to such Registration Statement, including the exhibits
filed as part thereof. The Registration Statement and the exhibits thereto may
be inspected without
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<PAGE>
charge at the office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 and copies thereof may be obtained from the Commission at prescribed
rates.
FORWARD-LOOKING STATEMENTS
This Prospectus and certain of the documents incorporated herein by
reference contain certain forward-looking statements about the future
performance of the Company which are based on management's assumptions and
beliefs in light of the information currently available to it. These
forward-looking statements are subject to uncertainties and other factors that
could cause actual results to differ materially from such statements including,
but not limited to: competitive practices and pricing in the food and drug
industries generally and particularly in the Company's principal markets; the
ability of the Company to implement the Company's centralization initiatives in
accordance with the currently contemplated schedule and budget; changes in the
financial markets which may affect the Company's cost of capital and the ability
of the Company to access the public debt and equity markets to refinance
indebtedness and fund the Company's capital expenditure program on satisfactory
terms; supply or quality control problems with the Company's vendors; and
changes in economic conditions which affect the buying patterns of the Company's
customers.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company (File No. 1-5392)
with the Commission pursuant to the Exchange Act are incorporated herein by
reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997, as amended by the Form 10-K/A (Amendment No. 1) filed on
January 29, 1998, which incorporates by reference certain portions of (a)
the Company's 1996 Annual Report to Stockholders and (b) the Company's
proxy statement for the 1997 Annual Meeting of Stockholders;
2. The Company's Quarterly Reports on Form 10-Q for the periods ended
May 3, 1997, August 2, 1997 and November 1, 1997;
3. The Company's Current Reports on Form 8-K dated February 21, 1997,
April 1, 1997, April 3, 1997 and July 11, 1997.
4. Amendment No. 6 to the Company's Registration Statement on Form
8-A, Commission File No. 1-5392, filed with the Commission on July 17,
1997, in which there is described the terms, rights and provisions
applicable to the Company's Preferred Share Purchase Rights, and any
similar report or amendment filed subsequently for the purpose of updating
such description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the shares shall be
deemed to be incorporated by reference herein and to be part hereof from the
date of filing of such documents. Any statement contained herein
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<PAGE>
or 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 which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement as
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents which have been or
may be incorporated herein by reference (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to American Stores
Company, 709 East South Temple, Salt Lake City, Utah 84102, P.O. Box 27447, Salt
Lake City, Utah 84127-0447, Attention: Investor Relations (telephone:
801-539-0112).
CERTAIN PERSONS PARTICIPATING IN ANY OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID DURING AND AFTER SUCH
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES SEE "PLAN OF DISTRIBUTION."
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<PAGE>
THE COMPANY
American Stores is one of the nation's leading food and drug retailers
with annual sales in its fiscal year ended February 1, 1997 of $18.7 billion.
The Company is principally engaged in a single industry segment, the retail sale
of food and drug merchandise. The Company's principal food operations are Acme
Markets, Jewel Food Stores, Lucky Stores Northern California Division, Lucky
Stores Southern California Division and Jewel Osco Southwest. The Company's drug
stores operate under the Osco Drug and Sav-on names. As of February 1, 1997, the
Company operated 1,695 stores in 27 states, including 166 combination stores
which are jointly operated by the Company's food and drug store operations and
are each counted as two separate stores. The Company's principal executive
offices are located at 709 East South Temple, Salt Lake City, Utah 84102
(telephone: 801-539-0112). References to the "Company" in this Prospectus
include American Stores Company and its subsidiaries unless the context
otherwise requires.
In 1993, the Company made a strategic decision to move from a holding
company orientation to an operating company approach to take advantage of the
size and strength of its operations. Key aspects of the Company's strategy and
business strengths are:
STRONG MARKET POSITIONS
The Company's food and drug store operations hold leading market
positions, generally number one or two, in each of their core market areas. The
Company works to maintain and expand its strong market positions by
significantly investing in core market areas.
MAINTAIN A MODERN STORE BASE
Over the last several years, the Company has significantly increased its
capital spending to improve and expand its store base. Capital spending grew
from $565 million in 1994 to $801 million in 1995, and to $1.0 billion in 1996.
New and replacement stores are an increasingly important focus of the capital
spending program, accounting for 34% of capital spending in 1994, 45% in 1995,
and 57% in 1996, and are expected to account for over 50% of capital spending in
1997. The Company expects to continue to make significant investments in its
store base. In 1997, the Company plans to spend approximately $1.0 billion for
capital expenditures. The Company plans to open over 100 new and replacement
stores (including 20 jointly operated combination stores which are each counted
as two separate stores) and to remodel approximately 100 stores in 1997.
EMPHASIZE COMPETITIVE FORMATS
The type and mix of store formats must keep pace with the constant changes
in customers' needs and tastes. The Company believes that the success of
individual food and drug stores is enhanced when they are paired together in a
combination store that maintains the identity and full selection of each. The
Company also believes that having both combination food and drug stores and
stand-alone drug stores in the same market better enables it to meet customer
needs. New stores currently being developed are combination food and drug stores
of approximately
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<PAGE>
65,000 square feet and stand-alone drug stores of approximately 16,500
square feet. As of February 1, 1997, the Company operated 233 combination stores
(including 166 combination stores jointly operated by the Company's food and
drug operations) and plans to open an additional 32 combination stores in 1997
(including 20 jointly operated combination stores).
DELTA INITIATIVES
"Delta" is a series of initiatives that is transforming the Company from
seven regional, autonomous business units to a single centrally focused
operating company. Delta seeks to build on the size of the Company and develop
common business processes and systems to best manage growth for the future.
Following completion of all of the Delta initiatives, the Company expects to be
able to buy products and move them through the supply chain more quickly,
efficiently and cost-effectively. The information gathered from the common
systems and processes will also assist the Company's marketing and merchandising
programs which are designed to enhance sales and margin growth.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data in the following table (other
than the information under "Other Data", which is unaudited) for each of the
five years in the period ended February 1, 1997 have been derived from the
Company's consolidated financial statements which have been audited by Ernst &
Young LLP, independent auditors.
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<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30,
1997(1)<F1> 1996(2)<F2> 1995 1994 1993
----------- ----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND "OTHER DATA")
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Sales............. $18,678,129 $18,308,894 $18,355,126 $18,763,439 $19,051,180
Cost of
merchandise
sold, including
warehousing and
transportation
expenses(3)<F3>.... 13,713,151 13,558,690 13,603,882 13,985,115 14,250,344
----------- ----------- ----------- ------------ ------------
Gross profit...... 4,964,978 4,750,204 4,751,244 4,778,324 4,800,836
Operating and
administrative
expenses(3)<F3>.... 4,203,302 4,043,381 4,101,176 4,136,442 4,177,522
----------- ----------- ----------- ------------ ------------
Operating profit.. 761,676 706,823 650,068 641,882 623,314
Other income
(expense):
Interest expense. (171,558) (159,545) (170,703) (189,773) (214,394)
Other............ (85,566) 3,638 126,898 28,696 (30,639)
----------- ----------- ----------- ------------ ------------
Total other
income (expense) (257,124) (155,907) (43,805) (161,077) (245,033)
----------- ----------- ----------- ------------ ------------
Earnings before
income taxes and
extraordinary
item............. 504,552 550,916 606,263 480,805 378,281
Federal and state
income taxes..... (217,331) (234,107) (261,079) (218,715) (170,815)
----------- ----------- ----------- ------------ ------------
Earnings before
extraordinary
item............. 287,221 316,809 345,184 262,090 207,466
Extraordinary
item--early
retirement of
debt, net of
taxes............ -- -- -- (15,000) --
----------- ----------- ----------- ------------ ------------
Net earnings...... $ 287,221 $ 316,809 $ 345,184 $ 247,090 $ 207,466
=========== =========== =========== ============ ============
Average common
shares
outstanding (in
thousands)(4)<F4>.. 291,776 293,887 285,534 284,403 280,626
Earnings per
common share
before
extraordinary
item(4)<F4>...... $ .98 $ 1.08 $ 1.21 $ .92 $ .74
Extraordinary
item(4)......... -- -- -- (.05) --
----------- ----------- ----------- ------------ ------------
Net earnings per
common share(4)<F4>$ .98 $ 1.08 $ 1.21 $ .87 $ .74
=========== =========== =========== ============ ============
Fully diluted
earnings per
share(4)<F4> $ .98 $ 1.07 $ 1.17 $ .84 $ .71
FINANCIAL STATISTICS
=========== =========== =========== ============ ============
Gross profit
margin........... 26.6% 25.9% 25.9% 25.5% 25.2%
Operating profit
margin........... 4.1% 3.9% 3.5% 3.4% 3.3%
Capital
expenditures(5)<F5>$ 999,986 $ 801,371 $ 565,313 $ 652,928 $ 476,617
Depreciation and
amortization..... 440,445 404,562 407,286 384,307 370,439
Total assets...... 7,881,405 7,362,964 7,031,566 6,927,434 6,763,793
Working capital... 364,815 96,264 200,664 (58,290) 101,215
Total debt........ 2,679,147 2,240,168 2,205,291 2,167,999 2,248,316
Shareholders'
equity........... 2,535,427 2,354,496 2,050,921 1,742,285 1,544,014
FIFO EBITDA(6)<F6>.. 1,127,963 1,127,829 1,192,437 1,062,089 979,663
Cash dividends
per common
share(4)<F4>...... $ .32 $ .28 $ .24 $ .20 $ .18
OTHER DATA
Comparable store
sales increase
(decrease)....... 3.3% 1.4% 0.5% (0.7)% (0.5)%
Total stores(7)<F7>. 1,695 1,650 1,597 1,695 1,672
Total retail
square footage
(in thousands)... 33,823 32,523 31,179 32,727 32,320
Number of stores
opened/acquired(7)<F7> 122 92 49 98 151
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<FN>
<F1>(1) Includes special charges totaling $100 million, pre-tax ($.21 per share
after tax), included in gross profit ($10 million), operating and
administrative expenses ($15.5 million) and other ($74.5 million).
<F2>(2) Fifty-three week fiscal year.
<F3>(3) Beginning with the first quarter of 1996, advertising expense is classified
as cost of merchandise sold, rather than operating expense. Prior periods have
been reclassified to conform to the new presentation.
<F4>(4) Restated as necessary to reflect the April 1994 and July 1997 two-for-one
common stock splits.
<F5>(5) Amount includes capitalized leases and the net present value of property,
plant and equipment leased under operating leases.
<F6>(6) Earnings before LIFO inventory charges, interest expense, taxes,
depreciation and amortization. EBITDA is not derived pursuant to generally
accepted accounting principles ("GAAP") and therefore should not be construed
as an alternative to operating profit, as an alternative to cash flows from
operating activities (as determined in accordance with GAAP) or as a measure
of liquidity.
<F7>(7) Includes jointly operated combination stores which are each counted as two
separate stores.
</FN>
</TABLE>
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<PAGE>
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the
net proceeds from the sale of the Securities will be used for general corporate
purposes, including the repayment of existing indebtedness, additions to working
capital, capital expenditures and acquisitions. Any specific allocation of the
net proceeds of an offering of Securities to a specific purpose will be
described in the related Prospectus Supplement. The Company anticipates that it
will raise additional funds from time to time through equity or debt financings
to refinance outstanding indebtedness and to finance its businesses.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company for the fiscal
years ended February 1, 1997, February 3, 1996, January 28, 1995, January 29,
1994 and January 30, 1993 was 2.76, 3.09, 3.27, 2.68 and 2.21 respectively, and
for the thirty-nine week periods ended November 1, 1997 and November 2, 1996 was
2.37 and 2.85, respectively. In the computation of the ratio of earnings to
fixed charges for the Company, earnings consist of earnings before income taxes
and before cumulative effect of changes in accounting principles plus fixed
charges (adjusted for capitalized interest). Fixed charges consist of interest,
whether expensed or capitalized (including the amortization of debt expense),
plus the amount of rental expense which is representative of the interest factor
in the particular case.
DESCRIPTION OF DEBT SECURITIES
The following descriptions of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Offered Debt Securities.
The Debt Securities which will constitute senior debt of the Company are
to be issued under an Indenture (the "Senior Debt Indenture"), to be entered
into between the Company and The First National Bank of Chicago (the "Senior
Trustee"), and Debt Securities which will constitute subordinated debt of the
Company are to be issued under an Indenture (the "Subordinated Debt Indenture"
and, collectively with the Senior Debt Indenture, the "Indentures"), to be
entered into between the Company and a trustee to be determined (the
"Subordinated Trustee"), the forms of which have been filed, or will be filed by
amendment, as exhibits to the Registration Statement. The following summaries of
certain provisions of the Debt Securities and 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 respective Indentures, including the definitions
therein of certain terms. Whenever particular provisions or defined terms in the
Indentures are referred to herein, such provisions or defined terms are
incorporated by reference.
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GENERAL
The Debt Securities will be unsecured senior or subordinated obligations
of the Company.
The Indentures do not limit the 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.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Debt Securities): (i) classification as senior or
subordinated Debt Securities, the specific designation, aggregate principal
amount, purchase price and denomination; (ii) the currency or units based on or
relating to currencies in which such Debt Securities are denominated and/or in
which principal (and premium, if any) and/or any interest will or may be
payable; (iii) any date of maturity; (iv) the method by which amounts payable in
respect of principal, premium (if any) or interest on, or upon the redemption
of, such Debt Securities may be calculated, and any currencies or indices, or
value, rate or price, relevant to such calculation; (v) interest rate or rates
(or the method by which such rate will be determined), if any; (vi) the date or
dates on which any such interest will be payable; (vii) the place or places
where the principal of and interest, if any, on the Offered Debt Securities will
be payable; (viii) any redemption, repayment or sinking fund provisions; (ix)
whether the Offered Debt Securities will be issuable in registered form or
bearer form ("Bearer Securities") or both and, if Bearer Securities are
issuable, any restrictions applicable to the exchange of one form for another
and to the offer, sale and delivery of Bearer Securities; (x) any applicable
United States federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on Offered Debt Securities
held by a person who is not a U.S. person (as defined in the Prospectus
Supplement) in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Debt Securities rather than pay such additional amounts; and (xi) any other
specific terms of the Offered Debt Securities, including any additional or
different events of default, remedies or covenants provided for with respect to
such Debt Securities, and any terms which may be required by or advisable under
applicable laws or regulations.
Debt Securities may be presented for exchange and registered Debt
Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Debt Securities and the Prospectus
Supplement. Such services will be provided without charge, other than any tax or
other governmental charge payable in connection therewith, but subject to the
limitations provided in the applicable Indenture. Bearer Securities and the
coupons, if any ("Coupons"), appertaining thereto will be transferable by
delivery.
Debt Securities may bear interest at a fixed rate (a "Fixed Rate
Security") or a floating rate (a "Floating Rate Security"). Debt Securities
bearing no interest or interest at a rate that at the time of issuance is below
the prevailing market rate may be sold at a discount below their stated
principal amount. Special United States federal income tax considerations
applicable to any such discounted Debt Securities or to certain Debt Securities
issued at par which are treated
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as having been issued at a discount for United States federal income tax
purposes will be described in the relevant Prospectus Supplement to the extent
not described herein.
Debt Securities may be issued from time to time with payment terms which
are calculated by reference to the value or price of one or more currencies or
indices. Holders of such Debt Securities may receive a payment of the principal
amount on any principal payment date, or a payment of interest on any interest
payment date, that is greater than or less than the amount of principal or
interest otherwise payable on such dates, or a redemption amount on any
redemption date that is greater than or less than the principal amount of such
Debt Securities, depending upon the value or price on such dates of the
applicable currency or index. Information for determining the amount of
principal, premium (if any), interest or redemption amounts payable on any date,
the currencies, commodities or indices to which the amount payable on such date
is linked and certain additional tax considerations will be set forth in the
relevant Prospectus Supplement.
Substantially all of the Company's assets are held by the Company's
subsidiaries. The rights of the Company and its creditors, including the Holders
of the Debt Securities, to participate in the assets of any subsidiary upon any
liquidation or reorganization of such subsidiary or otherwise will be
effectively subordinated to and subject to the prior claims of creditors of such
subsidiary, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary. As of February 1, 1997, the Company's
subsidiaries had approximately $3.5 billion of debt and other obligations. The
ability of the Company to pay principal of and premium, if any, and interest on
the Debt Securities will be dependent upon the receipt of funds from its
subsidiaries by way of dividends, interest, loans or otherwise.
SENIOR DEBT
The Debt Securities and Coupons, if any, appertaining thereto that will
constitute part of the senior debt of the Company will be issued under the
Senior Debt Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of the Company.
The Senior Debt Indenture also provides the following covenants:
Limitations on Liens. The Company covenants that, so long as any Debt
Securities under the Senior Debt Indenture remain outstanding, it will not, and
will not permit any Restricted Subsidiary (as defined below) to issue, assume or
guarantee any Indebtedness (as defined below) which is secured by a mortgage,
pledge, security interest, lien or encumbrance (each a "lien") upon any
Operating Property or Operating Asset, whether now owned or hereafter acquired,
of the Company or any Restricted Subsidiary without effectively providing that
such Debt Securities (together with, if the Company shall so determine, any
other Indebtedness of the Company ranking equally with such Debt Securities)
shall be equally and ratably secured by a lien on such assets ranking ratably
with or equal to (or at the Company's option prior to) such secured
Indebtedness, except that the foregoing restriction shall not apply to (a) liens
on any property or assets of any corporation existing at the same time such
corporation becomes a Restricted Subsidiary provided that such lien does not
extend to any other property of the Company or any of its Restricted
Subsidiaries; (b) liens on any property or assets (including stock) existing at
the time of
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acquisition thereof, or to secure the payment of the purchase price of
such property or assets, or to secure indebtedness incurred, assumed or
guaranteed by the Company or a Restricted Subsidiary for the purpose of
financing the purchase price of such property or of improvements or construction
thereon, which indebtedness is incurred, assumed or guaranteed prior to, at the
time of, or within 18 months after such acquisition (or in the case of real
property, completion of such improvement or construction or commencement of full
operations at such property, whichever is later (which in the case of a retail
store is the opening of the store for business to the public)) provided that
such lien does not extend to any other property of the Company or any of its
Restricted Subsidiaries; (c) liens securing indebtedness owing by any Restricted
Subsidiary to the Company or another Restricted Subsidiary; (d) liens on any
property or assets of a corporation existing at the time such corporation is
merged into or consolidated with the Company or a Restricted Subsidiary or at
the time of a purchase, lease or other acquisition of the assets of a
corporation or firm as an entirety or substantially as an entirety by the
Company or a Restricted Subsidiary provided that such lien does not extend to
any other property of the Company or any of its Restricted Subsidiaries; (e)
liens on any property or assets of the Company or a Restricted Subsidiary in
favor of the United States of America or any State thereof, or in favor of any
other country, or political subdivision thereof, to secure certain payments
pursuant to any contract or statute or to secure any indebtedness incurred or
guaranteed for the purpose of financing all or any part of the purchase price
(or, in the case of real property, the cost of construction) of the property or
assets subject to such liens (including but not limited to, liens incurred in
connection with pollution control, industrial revenue or similar financing); (f)
any extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part, of any lien referred to in the foregoing
clauses (a) to (e), inclusive; (g) certain statutory liens or other similar
liens arising in the ordinary course of business of the Company or a Restricted
Subsidiary, or certain liens arising out of governmental contracts; (h) certain
pledges, deposits or liens made or arising under worker's compensation or
similar legislation or in certain other circumstances; (i) certain liens in
connection with legal proceedings, including certain liens arising out of
judgments or awards; (j) liens for certain taxes or assessments, landlord's
liens and liens and charges incidental to the conduct of the business, or the
ownership of the property or assets of the Company or of a Restricted
Subsidiary, which were not incurred in connection with the borrowing of money
and which do not in the opinion of the Company, materially impair the use of
such property or assets in the operation of the business of the Company or such
Restricted Subsidiary or the value of such property or assets for the purposes
thereof; or (k) liens not permitted by the foregoing clauses (a) to (j),
inclusive, if at the time of and after giving effect to, the creation or
assumption of such liens, the aggregate amount of all Indebtedness of the
Company and its Restricted Subsidiaries secured by all liens not so permitted by
the foregoing clauses (a) through (j), inclusive, together with the Attributable
Debt (as defined below) in respect of Sale and Lease-Back Transactions permitted
by clause (a) under "Limitation on Sale and Lease-Back Transactions" below, does
not exceed the greater of (i) $250 million or (ii) 15% of Consolidated Net
Tangible Assets (as defined below).
Limitation on Sale and Lease-Back Transactions. So long as any Debt
Securities under the Senior Debt Indenture are outstanding, the Company will
not, and will not permit any Restricted Subsidiary to, enter into any
arrangement with any person providing for the leasing by the Company or a
Restricted Subsidiary of any Operating Property or Operating Asset (other
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than any such arrangement involving a lease for a term, including renewal
rights, for not more than three years and leases between the Company and a
Subsidiary or between Subsidiaries), whereby such Operating Property or
Operating Asset has been or is to be sold or transferred by the Company or a
Restricted Subsidiary to such person (a "Sale and Lease-Back Transaction")
unless (a) the Company or such Restricted Subsidiary would, at the time of
entering into a Sale and Lease-Back Transaction, be entitled to incur
Indebtedness secured by a lien on the Operating Property or Operating Asset to
be leased in an amount at least equal to the Attributable Debt in respect of
such transaction without equally and ratably securing the Debt Securities
pursuant to the provisions described under "Limitations on Liens" above, or (b)
the proceeds of the sale of the Operating Property or Operating Assets to be
leased are at least equal to their fair market value and an amount in cash equal
to the net proceeds is applied, within 180 days of the effective date of such
transaction to the purchase or acquisition (or, in the case of Operating
Property, the construction) of Operating Property or Operating Assets or to the
retirement (other than at maturity or pursuant to a mandatory sinking fund or
redemption provision and other than Indebtedness owned by the Company or any
Restricted Subsidiary) of Debt Securities or of Funded Indebtedness (as defined
below) of the Company ranking on a parity with or senior to the Debt Securities,
or in the case of a Sale and Lease-Back Transaction by a Restricted Subsidiary,
of Funded Indebtedness of such Restricted Subsidiary, provided that in
connection with any such retirement, any related loan commitment or the like
shall be reduced in an amount equal to the principal amount so retired. The
foregoing restriction shall not apply to, in the case of any Operating Property
or Operating Asset acquired or constructed subsequent to the date eighteen
months prior to the date of the Indenture, any Sale and Lease-Back Transaction
with respect to such Operating Asset or Operating Property (including presently
owned real property upon which such Operating Property is to be constructed) if
a binding commitment is entered into with respect to such Sale and Lease-Back
Transaction within 18 months after the later of the acquisition of the Operating
Property or Operating Asset or the completion of improvements or construction
thereon or commencement of full operations at such Operating Property (which in
the case of a retail store is the opening of the store for business to the
public).
Definitions. "Attributable Debt" means in connection with a Sale and
Lease-Back Transaction the aggregate of present values (discounted at a rate per
annum equal to the average interest borne by all outstanding Debt Securities
determined on a weighted average basis and compounded semi-annually) of the
obligations of the Company or any Subsidiary for net rental payments during the
remaining term of the applicable lease (including any period for which such
lease has been extended or may, at the option of the lessor, be extended).
"Capital Lease" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder as
if so capitalized should be disclosed in a note to such balance sheet; and
"Capitalized Lease Obligation" means the amount of the liability which should be
so capitalized or disclosed.
"Consolidated" when used with respect to any of the terms defined in the
Indenture, refers to such terms as reflected in a consolidation of the accounts
of the Company and its Restricted Subsidiaries in accordance with generally
accepted accounting principles.
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"Funded Indebtedness" means any Indebtedness maturing by its terms more
than one year from the date of the determination thereof, including any
Indebtedness renewable or extendible at the option of the obligor to a date
later than one year from the date of the determination thereof.
"Indebtedness" means all obligations (other than the Debt Securities of
such series) of, or guaranteed or assumed by, the Company or any Restricted
Subsidiary for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments.
"Net Tangible Assets" means the total amounts of assets (less depreciation
and valuation reserves and other reserves and items deductible from gross book
value of specific asset accounts under generally accepted accounting principles)
which under generally accepted accounting principles would be included on a
balance sheet after deducting therefrom (a) all liability items except Funded
Indebtedness, Capitalized Lease Obligations, stockholders' equity and reserves
for deferred income taxes and (b) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles, which
in each case would be so included on such balance sheet.
"Operating Assets" means all merchandise inventories, furniture, fixtures
and equipment (including all transportation and warehousing equipment but
excluding office equipment and data processing equipment) owned or leased
pursuant to Capital Leases by the Company or a Restricted Subsidiary.
"Operating Property" means all real property and improvements thereon
owned or leased pursuant to Capital Leases by the Company or a Restricted
Subsidiary and constituting, without limitation, any store, warehouse, service
center or distribution center wherever located, provided that such term shall
not include any store, warehouse, service center or distribution center which
the Company's Board of Directors declares by written resolution not to be of
material importance to the business of the Company and its Restricted
Subsidiaries.
"Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted
Subsidiaries. "Non-Restricted Subsidiary" means any Subsidiary that the
Company's Board of Directors has in good faith declared pursuant to a written
resolution not to be of material importance, either singly or together with all
other Non-Restricted Subsidiaries, to the business of the Company and its
consolidated Subsidiaries taken as a whole. Initially the Company will have no
Non-Restricted Subsidiaries.
"Subsidiary" means (i) any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Company or (ii) any partnership of
which more than 50% of the partnership interests are owned by the Company or any
Subsidiary.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Offered Debt Securities, the covenants applicable to the
Debt Securities would not necessarily afford holders protection in the event of
a highly leveraged or other transaction involving the Company or in the event of
a material adverse change in the Company's financial condition or
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results of operation. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of Offered Debt Securities, the Debt
Securities do not contain any other provisions that are designed to afford
protection in the event of a highly leveraged transaction involving the Company.
SUBORDINATED DEBT
The Debt Securities and Coupons, if any, appertaining thereto that will
constitute part of the subordinated debt of the Company (the "Subordinated Debt
Securities") will be issued under the Subordinated Debt Indenture and will be
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Subordinated Debt Indenture, to all "Senior Indebtedness" of the
Company. The Subordinated Debt Indenture defines "Senior Indebtedness" as all
indebtedness of, or guaranteed or assumed by, the Company for borrowed money or
evidenced by bonds, debentures, notes, letters of credit, interest rate exchange
agreements, currency exchange agreements, commodity forward contracts or other
similar instruments, or indebtedness or obligations with respect to any lease of
real or personal property whether existing on the date hereof or hereinafter
incurred, and any guarantee, amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation, provided that Senior
Indebtedness shall not include (i) obligations that, when incurred and without
respect to any election under Section 1111(b) of Title 11, United States Code,
were without recourse to the Issuer, (ii) obligations of the Company to any
Subsidiary, and (iii) any other obligations which by the terms of the instrument
creating or evidencing the same are specifically designated as not being senior
in right of payment to the Subordinated Debt Securities.
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation or other similar proceedings including reorganization
in respect of the Company or a substantial part of its property or (b) that (i)
a default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable on
any Senior Indebtedness or (ii) there shall have occurred an event of default
(other than a default in the payment of principal, premium, if any, or interest,
or other monetary amounts due and payable) with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the maturity
thereof, and such default or event of default shall not have been cured or
waived or shall not have ceased to exist, unless, in the case of a default under
clause (ii) above, the default with respect to the Senior Indebtedness is cured
or waived, or 180 days pass after notice of the default is given to the holders
of Senior Indebtedness (unless the maturity of such Senior Indebtedness has been
accelerated), then the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount unpaid thereon, or provision
shall be made, in accordance with the relevant Senior Indebtedness, for such
payment in money or money's worth, before the holders of any of the Subordinated
Debt Securities or Coupons are entitled to receive a payment on account of the
principal of (and premium, if any) or any interest on the indebtedness evidenced
by such Subordinated Debt Securities or of such Coupons. No new period of
suspension of payments under clause (ii) above may be commenced by reason of the
same event of default (or any other event of default that existed or was
continuing on the date of the commencement of such period) within twelve months
after the first such notice relating thereto. Without
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limitation of the foregoing, upon any acceleration of the Subordinated
Debt Securities because of an Event of Default, the Company must promptly notify
the holders of Senior Indebtedness of such acceleration, and may not pay the
Subordinated Debt Securities unless (A) 120 days pass after such acceleration
and (B) the terms of the Subordinated Debt Indenture permit such payment at such
time.
By reason of such subordination, in the event of bankruptcy, insolvency or
liquidation of the Company, creditors of the Company who are holders of Senior
Indebtedness and general creditors of the Company may recover more, ratably,
than holders of the Subordinated Debt Securities. Certain contingent obligations
of the Company, including certain guarantees, letters of credit, interest rate
exchange agreements, currency exchange agreements and commodity forward
contracts, would constitute Senior Indebtedness if such contingent obligations
became payable by the Company.
The Company expects from time to time to incur additional indebtedness
constituting Senior Indebtedness. The Subordinated Debt Indenture does not
prohibit or limit the incurrence of additional Senior Indebtedness or any other
indebtedness and does not contain financial covenants or similar restrictions on
the Company.
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series will be
convertible into or exchangeable for Common Stock or Preferred Stock, property
or cash, or a combination of any of the foregoing, will be summarized in the
Prospectus Supplement relating thereto. Such terms may include provisions for
conversion or exchange, either on a mandatory basis, at the option of the
holder, or at the option of the Company, in which case the number of shares of
Common Stock or Preferred Stock to be received by the holders of the Debt
Securities would be calculated according to the factors and at such time as
summarized in the related Prospectus Supplement.
MERGER AND CONSOLIDATION
Each Indenture provides that the Company will not merge or consolidate
with any corporation, partnership or other entity and will not sell, lease or
convey all or substantially all its assets to any entity, unless the Company
shall be the surviving entity, or the surviving entity or the successor entity
that acquires all or substantially all the assets of the Company shall be a
corporation or partnership organized under the laws of the United States or a
State thereof or the District of Columbia and shall expressly assume all
obligations of the Company under such Indenture and the Debt Securities issued
thereunder, and immediately after such merger, consolidation, sale, lease or
conveyance, the Company or such successor entity shall not be in default in the
performance of the covenants and conditions of the Indenture to be performed or
observed by the Company.
EVENTS OF DEFAULT
An Event of Default is defined under each Indenture with respect to Debt
Securities of any series issued under such Indenture as being: (a) default in
payment of any principal of the
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Debt Securities of such series, either at maturity (or upon a redemption),
by declaration or otherwise (including any sinking fund payment); (b) default
for 30 days in payment of any interest on any Debt Securities of such series;
(c) default for 60 days after written notice thereof to the Company by the
Trustee, or to the Company and the Trustee by the holders of not less than 25%
in principal amount of outstanding Debt Securities of such series, in the
observance or performance of any other covenant or agreement in the Debt
Securities of such series or the Indenture other than a covenant included in the
Indenture solely for the benefit of a series of Debt Securities other than such
series; (d) certain events of bankruptcy, insolvency or reorganization relating
to the Company or any Significant Subsidiary (as such term is defined in
Regulation S-X under the Exchange Act). In addition, with respect to Senior Debt
Securities, the Senior Debt Indenture defines an event of default as being: (e)
failure by the Company or any Significant Subsidiary to make any payment at
maturity, including any applicable grace period, in respect of indebtedness, in
an amount in excess of $25,000,000 or the equivalent thereof in any other
currency or composite currency and continuance of such failure for a period of
30 days after written notice thereof to the Company by the Trustee, or to the
Company and the Trustee by the holders of not less than 25% in principal amount
of outstanding Debt Securities of such series; (f) a default with respect to any
indebtedness of the Company or any Significant Subsidiary, which default results
in the acceleration of any indebtedness (other than non-recourse obligations or
the Debt Securities of such series) in an amount in excess of $25,000,000
without such indebtedness having been discharged or such acceleration having
been cured, waived, rescinded or annulled for a period of 30 days after written
notice thereof to the Company by the Trustee, or to the Company and the Trustee
by the holders of not less than 25% in principal amount of outstanding Debt
Securities of such series, indebtedness being defined to mean all obligations
of, or guaranteed or assumed by, the Company or any Significant Subsidiary for
borrowed money or evidenced by bonds, debentures, notes or other similar
instruments; provided, however, that if any such failure, default or
acceleration referred to in clause (e) or (f) above shall cease to exist or be
cured, waived, rescinded or annulled, then the Event of Default by reason
thereof shall be deemed likewise to have been thereupon cured and (g) any other
Event of Default provided with respect to Debt Securities of that series.
Each Indenture provides that, if an Event of Default shall have occurred
and be continuing (other than an Event of Default specified in clause (d) above
relating to the Company), either the Trustee or the holders of not less than 25%
in the principal amount of the Debt Securities of such series then outstanding
may declare the principal of all Debt Securities of such series and interest
accrued thereon to be due and payable immediately, but upon certain conditions
such declarations may be annulled and past defaults may be waived (except a
continuing default in payment of principal (including any required purchase) of
(or premium, if any) or interest on such Debt Securities) by the holders of a
majority in principal amount of the Debt Securities of such series then
outstanding. If an Event of Default specified in clause (d) above relating to
the Company occurs, such principal amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any holder.
Each Indenture provides that the Trustee, subject to the duty of the
Trustee during a default to act with the required standard of care, has no
obligation to exercise any right or power granted it under the Indenture at the
request of holders of Debt Securities unless the Trustee is
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indemnified by such holders. Subject to such provisions in each Indenture
for the indemnification of the Trustee and certain other limitations, the
holders of a majority in principal amount of the outstanding Debt Securities of
each series issued under such Indenture may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee.
Each Indenture provides that no holder of Debt Securities of any series
issued under such Indenture may institute any action against the Company under
such Indenture (except actions for payment of overdue principal, premium (if
any) or interest) unless such holder previously shall have given to the Trustee
written notice of default and continuance thereof and the holders of not less
than 25% in principal amount of the Debt Securities of such series issued under
such Indenture then outstanding shall have requested the Trustee to institute
such action and shall have offered the Trustee reasonable indemnity, the Trustee
shall not have instituted such action within 60 days of such request and the
Trustee shall not have received direction inconsistent with such written request
by the holders of a majority in principal amount of the Debt Securities of such
series issued under such Indenture and then outstanding.
Under each Indenture, the Company is required to file annually with the
Trustee a certificate of no default or a certificate specifying any default that
exists.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Company can discharge or defease its obligations with respect to each series of
Debt Securities as set forth below.
Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to holders of any series of Debt Securities issued under such
Indenture which have not already been delivered to the Trustee for cancellation
and which have either become due and payable or are by their terms due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee cash or, in the case of Debt Securities
payable only in U.S. dollars, U.S. Government Obligations (as defined in such
Indenture) as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption) the principal of and interest on such Debt
Securities.
The Company may also discharge any and all of its obligations to holders
of any series of Debt Securities issued under an Indenture at any time
("defeasance"), but may not thereby avoid its duty to register the transfer or
exchange of such series of Debt Securities, to replace any temporary, mutilated,
destroyed, lost, or stolen series of Debt Securities or to maintain an office or
agency in respect of such series of Debt Securities. Defeasance may be effected
only if, among other things: (i) the Company irrevocably deposits with the
Trustee cash or, in the case of Debt Securities payable only in U.S. dollars,
U.S. Government Obligations, as trust funds in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of and interest
on all outstanding Debt Securities of such series issued under the Indenture;
(ii) the Company delivers to the Trustee an opinion of counsel to the effect
that the holders of such series of Debt Securities will not recognize income,
gain or loss for United States federal income tax pur-
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poses as a result of such defeasance and that defeasance will not
otherwise alter such holders' United States federal income tax treatment of
principal and interest payments on such series of Debt Securities (such opinion
must be based on a ruling of the Internal Revenue Service (the "IRS") or a
change in United States federal income tax law occurring after the date of such
Indenture, since such a result would not occur under current tax law); and (iii)
in the case of the Subordinated Debt Indenture (a) no event or condition shall
exist that, pursuant to certain provisions described under "Subordinated Debt"
above, would prevent the Company from making payments of principal of (and
premium, if any) and interest on the Subordinated Debt Securities at the date of
the irrevocable deposit referred to above or at any time during the period
ending on the 121st day after such deposit date and (b) the Company delivers to
the Trustee for the Subordinated Debt Indenture an opinion of counsel to the
effect that (1) the trust funds will not be subject to any rights of holders of
Senior Indebtedness and (2) after the 121st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, except that if a court were to rule under any such law in any case or
proceeding that the trust funds remained property of the Company, then the
Trustee and the holders of the Subordinated Debt Securities would be entitled to
certain rights as secured creditors in such trust funds.
MODIFICATION OF THE INDENTURE
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure such Debt Securities, (b) evidence the assumption by a successor
entity of the obligations of the Company, (c) add covenants for the protection
of the holders of such Debt Securities, (d) evidence the acceptance of
appointment by a successor trustee or (e) cure any ambiguity or correct any
inconsistency in the Indenture or amend the Indenture in any other manner which
the Company may deem necessary or desirable and which will not adversely affect
the interests of the holders of Debt Securities issued thereunder.
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of Debt Securities of any series issued under such Indenture
then outstanding and affected, to add any provisions to, or change in any manner
or eliminate any of the provisions of, such Indenture or modify in any manner
the rights of the holders of the Debt Securities of such series; provided that
the Company and the Trustee may not, without the consent of the holder of each
outstanding Debt Security affected thereby, (a) change the stated maturity of
the principal of any Debt Security, or reduce the principal amount thereof or
any premium thereon or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof or otherwise change
the redemption provisions in a manner adverse to holders or change the currency
in which the principal thereof or interest thereon is payable or reduce the
amount of any original issue discount security payable upon acceleration or
provable in bankruptcy or alter certain provisions of the Indenture relating to
the Debt Securities issued thereunder not denominated in U.S. dollars or impair
the right to institute suit for the enforcement of any payment on any Debt
Security when due or (b) reduce the aforesaid percentage in principal amount of
Debt Securities of
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any series issued under such Indenture, the consent of the holders of
which is required for any such modification.
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness then outstanding that would be
adversely affected thereby.
CONCERNING THE TRUSTEES
The Trustees, in their individual or any other capacity, have performed
and may perform services for the Company and may otherwise deal with the Company
as if they were not the Trustees. An affiliate of the Senior Trustee is a
participating bank under the Company's principal bank credit agreement and has
other banking relationships with the Company. If a Trustee has or shall acquire
any conflicting interest (as defined in Section 310(b) of the Trust Indenture
Act of 1939, as amended, after a default under the relevant indenture) the
Trustee shall either eliminate such conflicting interest or resign as Trustee.
In addition, an affiliate of the Senior Trustee is the Transfer Agent and
Registrar and dividend paying agent for the Common Stock.
BOOK-ENTRY SYSTEM
Unless otherwise specified in the applicable Prospectus Supplement, any
Debt Securities will be represented by certificate in book entry form ("Global
Debt Securities") as set forth below.
Any Global Debt Securities will be registered in the name of DTC's
nominee. Except as set forth below, a Global Debt Security 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 such nominee to a successor of
DTC or a nominee of such successor.
DTC has advised the Company and the Underwriters that it is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the 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 was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. Persons who are not participants may beneficially own securities
held by DTC only through participants.
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Upon the issuance by the Company of any Global Debt Securities, DTC will
credit, on its book-entry registration and transfer system, the respective
principal amounts of Debt Securities to the accounts of participants. The
accounts to be credited will be designated by the applicable Underwriter.
Ownership of beneficial interests in a Global Debt Security will be limited to
participants or persons that may hold interests through participants. Beneficial
interests in a Global Debt Security will be shown on, and the transfer thereof
will be effected only through, records maintained by DTC (with respect to
beneficial interests of participants) or by participants or persons that may
hold interests through participants (with respect to beneficial interests of
beneficial owners). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Debt Security.
For a Global Debt Security, so long as DTC or its nominee is the
registered owner of such Global Debt Security, DTC or its nominee, as the case
may be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Debt Security for all purposes under the Senior Debt
Indenture. Except as provided below, owners of beneficial interests in a Global
Debt Security will not be entitled to have Debt Securities represented by such
Global Debt Security registered in their names, will not receive or be entitled
to receive physical delivery of such Debt Securities in certificated form and
will not be considered the owners or holders thereof under the Senior Debt
Indenture.
Principal and interest payments in respect of the Debt Securities will be
made in immediately available funds by the Company to DTC or its nominee, as the
case may be, as the holder of the related Global Debt Securities. Neither the
Company nor the Trustee 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 Debt Securities, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests. Neither
the Company nor the Trustee will have any responsibility or liability for DTC's
exercise of or failure to exercise any redemption option with respect to any
Debt Securities on behalf of any holder of a beneficial interest therein, other
than the Company's obligation to redeem such Debt Securities if such option is
properly exercised by DTC or its nominee, as registered holder, in accordance
with the procedures specified therefor. The Company expects that DTC, upon
receipt of any payment of principal or interest in respect of any Global Debt
Securities, will credit immediately the accounts of the related participants
with payment in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Debt Securities as shown on the records
of DTC. The Company also expects that payments by participants to owners of
beneficial interests in any Global Debt Securities will be governed by standing
customer instructions and customary practices, as is now the case, with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants. Payments to
DTC in respect of the Debt Securities which are represented by any Global Debt
Securities shall be the responsibility of the Company or the Trustee,
disbursement of such payments to direct participants shall be the responsibility
of DTC and disbursement of such payments to beneficial owners shall be the
responsibility of direct and indirect participants.
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Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners, and vice versa, are governed by
arrangements among them, subject to statutory or regulatory requirements as may
be in effect from time to time; and neither the Company nor the Trustee will
have any responsibility or liability with respect thereto.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy of such information.
If DTC is at any time unwilling or unable to continue as depository and a
successor depository is not appointed by the Company within 90 days, the Company
will issue Debt Securities in certificated form in exchange for each Global Debt
Security. In addition, the Company may at any time determine not to have one or
more series of Debt Securities represented by any Global Debt Securities. In any
such instance, owners of beneficial interests in any such Global Debt Security
will be entitled to physical delivery of Debt Securities in certificated form
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in their names. Debt Securities so issued in certificated
form will be issued in denominations of $1,000 or any integral multiple thereof
and will be issued in registered form only, without coupons.
DESCRIPTION OF PREFERRED STOCK
The Company currently has no shares of Preferred Stock outstanding. The
Company is authorized to issue 10,000,000 shares of Preferred Stock, which may
be issued from time to time in one or more series with such voting rights,
dividend rates, rights, preferences and limitations as may be determined by the
Company's Board of Directors. Satisfaction of any dividend preferences of any
outstanding shares of Preferred Stock would reduce the amount of funds available
for the payment of dividends to holders of the Common Stock on some or all
matters submitted to stockholders. Holders of Preferred Stock would normally be
entitled to receive a preference payment before any payment is made to holders
of Common Stock in the event of any liquidation, dissolution or winding up of
the Company. Holders of Preferred Stock may be entitled to vote with holders of
Common Stock. For a description of certain existing provisions of the Company's
Restated Certificate of Incorporation, as amended (the "Certificate"), and of
the Company's Restated By-Laws which may have an anti-takeover effect, see
"Certain Provisions of the Restated Certificate of Incorporation and Restated
By-Laws." The Company has authorized a series of Preferred Stock in connection
with its Preferred Share Purchase Rights Plan, a description of which is
contained in Amendment No. 6 to the Company's Registration Statement on Form
8-A, dated July 17, 1997, which is incorporated by reference herein. See
"Available Information."
The descriptions of the Preferred Stock set forth below and the
descriptions of the terms of a particular series of Preferred Stock that will be
set forth in a Prospectus Supplement do not purport to be complete and are
qualified in their entirety by reference to American Stores' Re-
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stated Certificate of Incorporation, and the certificate establishing
designation, preferences and rights relating to such series or the Rights
Agreement referred to below. All material terms of the Preferred Stock will be
described herein or in a Prospectus Supplement.
The specific terms of a particular series of Preferred Stock offered
hereby will be described in a Prospectus Supplement relating to such series and
will include the following:
(i) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(ii) The annual dividend rate, if any, on shares of the series,
whether such rate is fixed or variable or both, the date or dates from
which dividends will begin to accrue or accumulate and whether dividends
will be cumulative;
(iii) Whether the shares of the series will be redeemable and, if
so, the price at and the terms and conditions on which the shares of the
series may be redeemed, including the time during which shares of the
series may be redeemed and any accumulated dividends thereon that the
holders of shares of the series shall be entitled to receive upon the
redemption thereof;
(iv) The liquidation preference, if any, applicable to shares of
the series;
(v) Whether the shares of the series will be subject to operation
of a retirement or sinking fund and, if so, the extent and manner in which
any such fund shall be applied to the purchase or redemption of the shares
of the series for retirement or for other corporate purposes, and the
terms and provisions relating to the operation of such fund;
(vi) The terms and conditions, if any, on which the shares of the
series shall be convertible into, or exchangeable for, shares of any other
class or classes of capital stock of the Company or any series of any
other class or classes, or of any other series of the same class,
including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(vii) The voting rights, if any, of the shares of the series;
(viii) The currency or units based on or relating to currencies in
which such series is denominated and/or in which payments will or may be
payable;
(ix) The methods by which amounts payable in respect of such series
may be calculated and any commodities, currencies or indices, or price,
rate or value, relevant to such calculation;
(x) Whether fractional interests in shares of the series will be
offered in the form of Depositary Shares as described below under
"Description of Depositary Shares"; and
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(xi) Any other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
The name of the transfer agent, registrar, dividend disbursing agent and
redemption agent, as applicable, will be disclosed in a Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
As of November 29, 1997, there were 273,328,276 shares of Common Stock
outstanding. The holders of Common Stock of the Company are entitled to receive
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors of the Company, subject to the prior rights of any holders of
Preferred Stock. The holders of Common Stock are entitled upon liquidation,
dissolution or winding up of the Company to share ratably in the net assets of
the Company after satisfaction in full of the prior rights of creditors of the
Company and any holders of Preferred Stock.
The holders of Common Stock are entitled to one vote for each share held
on all matters as to which stockholders are entitled to vote. The holders of
Common Stock do not have cumulative voting rights, any preferential or
preemptive rights with respect to any securities of the Company, or any
conversion rights. The Common Stock is not subject to redemption and is not
entitled to the benefit of any sinking fund. The outstanding shares of Common
Stock are fully paid and nonassessable. For a description of certain existing
provisions of the Certificate, and of the Company's Restated By-Laws which may
have an anti-takeover effect, see "Certain Provisions of the Restated
Certificate of Incorporation and Restated By-Laws." First Chicago Trust Company
of New York is the Transfer Agent and Registrar and dividend paying agent for
the Common Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of
certain provisions of the Deposit Agreement (as defined below) and of the
Depositary Shares and Depositary Receipts (as defined below) does not purport to
be complete and is subject to and qualified in its entirety by reference to the
forms of Deposit Agreement and Depositary Receipts relating to each series of
Preferred Stock which have been or will be filed with the Commission in
connection with the offering of such series of Preferred Stock. All material
terms of the Deposit Agreement, the Depositary Shares and the Depositary
Receipts will be described herein or in a Prospectus Supplement.
GENERAL
American Stores may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, American Stores will provide for the issuance by a
Depositary to the public of receipts for Depositary Shares, each of which will
represent fractional interests of a particular series of Preferred Stock (which
will be set forth in the Prospectus Supplement relating to a particular series
of Preferred Stock).
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The shares of any series of Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between American Stores and a bank or trust company selected by
American Stores having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000 (the "Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Depositary. Subject to the terms of the Deposit
Agreement, each owner of Depositary Shares will be entitled, in proportion to
the applicable fractional interests in shares of Preferred Stock underlying such
Depositary Shares, to all the rights and preferences of the Preferred Stock
underlying such Depositary Shares (including dividend, voting, redemption,
conversion and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional
interests in shares of the related series of Preferred Stock in accordance with
the terms of the offering for Preferred Stock described in the related
Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of Preferred Stock to the record holders of
Depositary Shares relating to such Preferred Stock in proportion, as nearly as
practicable, to the numbers of such Depositary Shares owned by such holders on
the relevant record date, subject to any applicable tax withholding. The
Depositary shall distribute only such amount, however, as can be distributed
without attributing to any holder of Depositary Shares a fraction of one cent,
and any balance not so distributed shall be added to and treated as part of the
next sum received by the Depositary for distribution to record holders of
Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
American Stores, adopt such method as it deems equitable and practicable for the
purpose of effecting such distribution, including the sale of such property and
distribution of the net proceeds from such sale to such holders, subject to any
applicable tax withholding.
Any subscription or similar rights offered by American Stores to holders
of Preferred Stock will be made available to the holders of Depositary Shares in
such manner as the Depositary may determine, with the approval of American
Stores.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be
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so redeemed at their respective addresses appearing in the Depositary's
books. 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 the Preferred Stock. Whenever American Stores redeems shares of Preferred
Stock held by the Depositary, the Depositary will redeem as of the same
redemption date the number of Depositary Shares relating to shares of Preferred
Stock so redeemed. If less than all of 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.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys, securities or other property payable upon such redemption and any money,
securities or other property to which the holders of such Depositary Shares were
entitled, including any accrued and unpaid dividends payable in connection with
such redemption, upon such redemption upon surrender to the Depositary of the
Depositary Receipts evidencing such Depositary Shares.
VOTING OF PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
applicable Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such 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, subject to any applicable
restrictions, to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and American Stores will agree to take all
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so.
AMENDMENT AND TERMINATION OF 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 American Stores and the Depositary. However, any amendment which
materially and adversely alters the rights of the existing holders of Depositary
Shares will not be effective unless such amendment has been approved by the
record holders of at least a majority of the Depositary Shares then outstanding.
A Deposit Agreement may be terminated by American Stores or the Depositary only
if (i) all outstanding Depositary Shares relating thereto have been redeemed or
(ii) there has been a final distribution in respect of the Preferred Stock of
the relevant series in connection with any liquidation, dissolution or winding
up of American Stores and such distribution has been distributed to the holders
of the related Depositary Shares.
CHARGES OF DEPOSITARY
American Stores will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements.
American Stores will pay charges of
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the Depositary in connection with the initial deposit of any Preferred
Stock and any redemption of such Preferred Stock. Holders of Depositary Shares
will pay transfer and other taxes and governmental charges and such other
charges as are expressly provided in the Deposit Agreement to be for their
accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to American Stores
notice of its election to do so, and American Stores may at any time remove the
Depositary, any such resignation or removal to take effect upon the appointment
of a successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all
reports and communications from American Stores which are delivered to the
Depositary and which American Stores is required to furnish to the holders of
the applicable Preferred Stock.
Neither the Depositary nor American Stores 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 American Stores
and the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
CURRENT CAPITAL STRUCTURE
As of the date of this Prospectus, American Stores is authorized by its
Restated Certificate of Incorporation to issue 700,000,000 shares of Common
Stock and 10,000,000 shares of Preferred Stock. As of November 29, 1997, there
were 273,328,276 shares of Common Stock and no shares of Preferred Stock
outstanding. In addition, as of November 29, 1997, 37,068,467 shares of Common
Stock were authorized and remained available for issuance under American Stores'
stock option plans and other employee benefit plans. The Company has authorized
a series of Preferred Stock in connection with its Preferred Share Purchase
Rights Plan, a description of which is contained in Amendment No. 6 to the
Company's Registration Statement on Form 8-A, dated July 17, 1997, which is
incorporated by reference herein. See "Available Information."
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CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND
RESTATED BY-LAWS
Certain existing provisions of the Company's Restated Certificate of
Incorporation, as amended (the "Certificate"), and of the Company's Restated
By-Laws, may have an anti-takeover effect. Under the Certificate, (a) any merger
or consolidation of the Company with any other person or entity, if such other
person or entity and its affiliates, individually or in the aggregate, are
directly or indirectly the beneficial owners of more than 10% of the outstanding
Common Stock (a "Related Person"), (b) any sale or exchange of all or
substantially all of the Company's assets or business to or with a Related
Person, or (c) any issuance or delivery of any of the Company's stock or other
securities in exchange or payment for any properties or assets of a Related
Person or any securities issued by a Related Person, or in any merger of any
affiliate of the Company with or into any Related Person or any of its
affiliates, requires, in addition to any approval otherwise required by law, the
approval of not less than two-thirds of the outstanding Common Stock not owned
by such Related Person, unless the Board of Directors approves the transaction
by a two-thirds vote of the then authorized number of directors or by a vote
taken prior to the acquisition of more than 10% of the Common Stock by such
Related Person, in which event the normal requirements with respect to
stockholder votes would apply.
The Certificate provides that the number of directors will be not less
than five nor more than 20. The Board of Directors currently has 11 members. The
Company's By-Laws provide that vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and that the directors so chosen will hold office
until the event of their death, resignation or removal.
Stockholders can only take action at meetings of the stockholders. Special
meetings of the stockholders may only be called by the Board of Directors or by
any person authorized by the Board. The Company's Restated By-Laws provide that
only such business may be conducted at a special meeting as is specified in the
notice of meeting. The Certificate provides that the Board of Directors, when
evaluating proposals regarding a tender offer, a merger, a consolidation or the
purchase or acquisition of substantially all of the properties and assets of the
Company, shall, in connection with the exercise of its judgment in determining
what is in the best interests of the Company and its stockholders, give due
consideration to all relevant factors, including, without limitation, the social
and economic effects of the transaction on employees, suppliers, customers and
other constituents of the Company and its subsidiaries and on the communities in
which they operate or are located.
The provisions referred to above and in this paragraph and all of the
By-Laws of the Company can be amended or repealed by the stockholders only if
stockholders holding not less than 80% of the outstanding Common Stock and
stockholders holding a majority of the total outstanding Common Stock, excluding
Common Stock owned by a Related Person, vote for such amendment or repeal.
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The Company's Restated By-Laws establish an advance notice procedure for
stockholders to nominate candidates for election as directors or to bring other
business before meetings of stockholders of the Company (the "Stockholder Notice
Procedure"). Only those stockholder nominees who are nominated in accordance
with the Stockholder Notice Procedure will be eligible for election as directors
of the Company. Under the Stockholder Notice Procedure, notice of stockholder
nominations or proposals of other business to be made at an annual meeting (or
of any other business to be brought before such meeting) generally must be
received by the Company not less than 60 days nor more than 90 days prior to the
first anniversary of the previous year's annual meeting (or, if the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, not earlier than the 90th day prior to such meeting and not
later than the later of (i) the 60th day prior to such meeting or (ii) the 10th
day after public announcement of the date of such meeting is first made). The
Company's Restated By-Laws specify information required to be provided to the
Company by stockholders to comply with the Stockholder Notice Procedure.
By requiring advance notice of nominations by stockholders, the
Stockholder Notice Procedure will afford the Company's Board an opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Company's Board, to inform stockholders about such
qualifications. Although the Company's Restated By-Laws do not give the
Company's Board any power to approve or disapprove stockholder nominations for
the election of directors or proposals for action, they may have the effect of
precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to the Company and its stockholders.
Section 203 of the Delaware General Corporation Law ("Section 203")
prohibits certain persons ("interested stockholders") from engaging in a
"business combination" with a Delaware corporation for three years following the
date such persons become interested stockholders. Interested stockholders
generally include (i) persons who are the beneficial owners of 15% or more of
the outstanding voting stock of the corporation and (ii) persons who are
affiliates or associates of the corporation and who hold 15% or more of the
corporation's outstanding voting stock at any time within three years before the
date on which such a person's status as an interested stockholder is determined.
Subject to certain exceptions, a "business combination" includes, among other
things (i) mergers or consolidations, (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (iii) transactions that result in
the issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder, except pursuant to a transaction that effects a pro
rata distribution to all stockholders of the corporation, (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation that is owned directly or
indirectly by the interested stockholder or (v) any receipt by the interested
stockholder of the benefit (except propor-
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tionately as a stockholder) of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation.
Section 203 does not apply to a business combination if (i) before a
person becomes an interested stockholder, the board of directors of the
corporation approves the transaction in which the interested stockholder became
an interested stockholder or approves the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (other than certain excluded shares) or (iii) following a
transaction in which the person became an interested stockholder, the business
combination is (a) approved by the board of directors of the corporation and (b)
authorized at a regular or special meeting of stockholders (and not by written
consent) by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
For a discussion of the preferred share purchase rights associated with
the outstanding shares of Common Stock, which also have certain anti-takeover
effects, reference is made to the description of the Company's Rights Agreement
contained in Amendment No. 6 to the Company's Registration Statement on Form
8-A, dated July 17, 1997, which is incorporated by reference herein. See
"Available Information."
CERTAIN U.S. FEDERAL INCOME
TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
consequences of the acquisition, ownership and disposition by a U.S. Holder (as
defined below) or a United States Alien Holder (as defined below) of Debt
Securities issued in registered form and of the acquisition, ownership and
disposition by a United States Alien Holder of Common Stock. In the event that
the Company issues Preferred Stock or Debt Securities in bearer form, the
applicable Prospectus Supplement will describe the material federal income tax
consequences thereof.
The discussion does not cover all aspects of federal taxation that may be
relevant to, or the actual tax effect that any of the matters described herein
will have on, the acquisition, ownership or disposition of Debt Securities or
Common Stock by particular investors, and does not address state, local, foreign
or other tax laws. In particular, this summary addresses only investors that
will hold the Debt Securities or Common Stock as capital assets and does not
discuss all of the tax considerations that may be relevant to certain types of
investors subject to special treatment under the federal income tax laws (such
as banks, insurance companies, investors liable for the alternative minimum tax,
individual retirement accounts and other tax-deferred accounts, tax-exempt
organizations, dealers in securities or currencies, investors that will hold the
Debt Securities or Common Stock as part of straddles, hedging transactions or
conversion transactions for federal tax purposes, investors whose functional
currency is not the U.S. dollar or investors who enter into "constructive sales"
of the Debt Securities or Common Stock). Additional United States federal income
tax consequences applicable to particular Debt Securities may be set forth in
the applicable Prospectus Supplement.
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As used herein, the term "U.S. Holder" means a beneficial owner of Debt
Securities or Common Stock, as the case may be, that is (i) a citizen or
resident of the United States for U.S. federal income tax purposes, (ii) a
corporation or partnership created or organized under the laws of the United
States or any State thereof, (iii) an estate the income of which is subject to
U.S. federal income tax on a net income basis regardless of its source or (iv)
in general, a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons has the authority to control all substantial decisions of the
trust. A "United States Alien Holder" is any holder who or that is not a U.S.
Holder.
The summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions, all as currently in effect and all
subject to change at any time, perhaps with retroactive effect.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE PURCHASERS ARE
URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF
THE DEBT SECURITIES OR COMMON STOCK.
U.S. HOLDERS OF DEBT SECURITIES
Except where otherwise expressly indicated, this summary under "U.S.
Holders of Debt Securities" deals only with initial purchasers of Debt
Securities at the issue price that are U.S. Holders.
PAYMENTS OF INTEREST
General. Interest on a Debt Security, whether payable in U.S. dollars or a
currency, composite currency or basket of currencies other than U.S. dollars (a
"foreign currency"), other than interest on a "Discount Debt Security" that is
not "qualified stated interest" (each as defined below under "Original Issue
Discount -- General"), will be taxable to a U.S. Holder as ordinary income at
the time it is received or accrued, depending on the holder's method of
accounting for tax purposes.
Foreign Currency Denominated Interest. If an interest payment is
denominated in, or determined by reference to, a foreign currency, the amount of
income recognized by a cash basis U.S. Holder will be the U.S. dollar value of
the interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted into U.S.
dollars.
An accrual basis U.S. Holder may determine the amount of income recognized
with respect to an interest payment denominated in, or determined by reference
to, a foreign currency in accordance with either of two methods. Under the first
method, the amount of income accrued will be based on the average exchange rate
in effect during the interest accrual period (or, with
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respect to an accrual period that spans two taxable years of a U.S.
Holder, the part of the period within the taxable year).
Under the second method, the U.S. Holder may elect to determine the amount
of income accrued on the basis of the exchange rate in effect on the last day of
the accrual period or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year. Additionally, if a payment of interest is actually
received within five business days of the last day of the accrual period or
taxable year, an electing accrual basis U.S. Holder may instead translate such
accrued interest into U.S. dollars at the exchange rate in effect on the day of
actual receipt. Any such election will apply to all debt instruments held by the
U.S. Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder, and will be irrevocable
without the consent of the IRS.
Upon receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Debt Security)
denominated in, or determined by reference to, a foreign currency, the U.S.
Holder will recognize ordinary income or loss measured by the difference between
the exchange rate used to accrue interest income pursuant to one of the two
above methods and the exchange rate in effect on the date of receipt, regardless
of whether the payment is in fact converted into U.S. dollars.
ORIGINAL ISSUE DISCOUNT
General. The following is a summary of the principal federal income tax
consequences of the ownership of Debt Securities issued at an original issue
discount. It is based in part upon the rules governing original issue discount
that are set forth in Sections 1271 through 1275 of the Code and in Treasury
regulations thereunder (the "OID Regulations"). The following summary does not
discuss the federal income tax consequences of an investment in contingent
payment debt instruments. In the event the Company issues contingent payment
debt instruments, the applicable Prospectus Supplement will describe the
material federal income tax consequences thereof.
A Debt Security, other than a Debt Security with a term of one year or
less (a "short-term Debt Security"), will be treated as issued at an original
issue discount (a "Discount Debt Security") if the excess of the Debt Security's
"stated redemption price at maturity" over its issue price is more than a "de
minimis amount" (as defined below). Generally, the issue price of a Debt
Security will be the first price at which a substantial amount of Debt
Securities included in the issue of which the Debt Security is a part is sold to
persons other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Debt Security is the total of all
payments provided by the Debt Security that are not payments of "qualified
stated interest." A qualified stated interest payment is generally any one of a
series of stated interest payments on a Debt Security that are unconditionally
payable at least annually during the entire term of the Debt Security at a
single fixed rate (with certain exceptions for lower rates paid during some
periods) applied to the outstanding principal amount of the Debt Security.
Special rules for
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"Floating Rate Debt Securities" (as defined below under "Original Issue
Discount -- Floating Rate Debt Securities") are described below under "Original
Issue Discount -- Floating Rate Debt Securities."
In general, if the excess of a Debt Security's stated redemption price at
maturity over its issue price is less than 1/4 of 1 percent of the Debt
Security's stated redemption price at maturity multiplied by the number of
complete years to its maturity (the "de minimis amount"), then such excess, if
any, constitutes "de minimis original issue discount" and the Debt Security is
not a Discount Debt Security. Unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, a United
States Holder of a Debt Security with de minimis original issue discount must
include such de minimis original issue discount in income as capital gain as
stated principal payments on the Debt Security are made. The includible amount
with respect to each such payment will equal the product of the total amount of
the Debt Security's de minimis original issue discount and a fraction, the
numerator of which is the amount of the principal payment made and the
denominator of which is the stated principal amount of the Debt Security.
U.S. Holders of Discount Debt Securities having a maturity of more than
one year from their date of issue must include original issue discount ("OID")
in income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Debt Security. The
amount of OID includible in income by a U.S. Holder of a Discount Debt Security
is the sum of the daily portions of OID with respect to the Discount Debt
Security for each day during the taxable year or portion of the taxable year on
which the U.S. Holder holds such Discount Debt Security ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. Accrual periods
with respect to a Debt Security may be of any length selected by the U.S. Holder
and may vary in length over the term of the Debt Security as long as (i) no
accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Debt Security occurs on either the final or first
day of an accrual period. The amount of OID allocable to an accrual period
equals the excess of (a) the product of the Discount Debt Security's adjusted
issue price at the beginning of the accrual period and such Debt Security's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of the payments of qualified stated interest on the Debt Security
allocable to the accrual period. The "adjusted issue price" of a Discount Debt
Security at the beginning of any accrual period is the issue price of the Debt
Security increased by (x) the amount of accrued OID for each prior accrual
period and decreased by (y) the amount of any payments previously made on the
Debt Security that were not qualified stated interest payments. For purposes of
determining the amount of OID allocable to an accrual period, if an interval
between payments of qualified stated interest on the Debt Security contains more
than one accrual period, the amount of qualified stated interest payable at the
end of the interval (including any qualified stated interest that is payable on
the first day of the accrual period immediately following the interval) is
allocated pro rata on the basis of relative lengths to each accrual period in
the interval, and the adjusted issue price at the beginning of each accrual
period in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the
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accrual period but that is not payable until the end of the interval. The
amount of OID allocable to an initial short accrual period may be computed using
any reasonable method if all other accrual periods other than a final short
accrual period are of equal length. The amount of OID allocable to the final
accrual period is the difference between (x) the amount payable at the maturity
of the Debt Security (other than any payment of qualified stated interest) and
(y) the Debt Security's adjusted issue price as of the beginning of the final
accrual period.
Acquisition Premium. A U.S. Holder that purchases a Discount Debt Security
for an amount less than or equal to the sum of all amounts payable on the Debt
Security after the purchase date other than payments of qualified stated
interest but in excess of its adjusted issue price (any such excess being
"acquisition premium") and that does not make the election described below under
"Election to Treat All Interest as Original Issue Discount" is permitted to
reduce the daily portions of OID by a fraction, the numerator of which is the
excess of the U.S. Holder's adjusted basis in the Debt Security immediately
after its purchase over the adjusted issue price of the Debt Security, and the
denominator of which is the excess of the sum of all amounts payable on the Debt
Security after the purchase date, other than payments of qualified stated
interest, over the Debt Security's adjusted issue price.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Debt Security is attributable to pre-issuance accrued interest, (ii)
the first stated interest payment on the Debt Security is to be made within one
year of the Debt Security's issue date and (iii) the payment will equal or
exceed the amount of pre-issuance accrued interest, then the issue price of the
Debt Security may be computed by reducing the issue price (as determined under
"Original Issue Discount--General") by the amount of pre-issuance accrued
interest. In that event, a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Debt Security.
Debt Securities Subject to Contingencies Including Optional Redemption. In
general, if a Debt Security provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies and
the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, and if, based on all the facts and circumstances as
of the issue date, a single payment schedule is significantly more likely than
not to occur, then the yield and maturity of the Debt Security are computed
based on that payment schedule.
Notwithstanding the general rule described in the preceding paragraph, if
the Company has an unconditional option or options to redeem a Debt Security, or
the Holder has an unconditional option or options to cause a Debt Security to be
repurchased, prior to the Debt Security's stated maturity, then (i) in the case
of an option or options of the Company, the Company will be deemed to exercise
or not exercise an option or combination of options in the manner that minimizes
the yield on the Debt Security and (ii) in the case of an option or options of
the Holder, the Holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Debt
Security. For purposes of those calculations, the yield on the Debt Security is
determined by using any date on which the Debt Security may be
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redeemed or repurchased as the maturity date and the amount payable on
such date in accordance with the terms of the Debt Security as the principal
amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Debt
Security is repaid as a result of a change in circumstances and solely for
purposes of the accrual of OID, the yield and maturity of the Debt Security are
redetermined by treating the Debt Security as reissued on the date of the change
in circumstances for an amount equal to the Debt Security's adjusted issue price
on that date.
Election to Treat All Interest as Original Issue Discount. A U.S. Holder
may elect to include in gross income all interest that accrues on a Debt
Security using the constant-yield method described above under the heading
"Original Issue Discount -- General", with the modifications described below.
For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described below
under "Debt Securities Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Debt Security with respect to
which this election has been made, the issue price of the Debt Security will
equal the electing U.S. Holder's adjusted basis in the Debt Security immediately
after its acquisition, the issue date of the Debt Security will be the date of
its acquisition by the electing U.S. Holder, and no payments on the Debt
Security will be treated as payments of qualified stated interest. This election
will generally apply only to the Debt Security with respect to which it is made
and may not be revoked without the consent of the IRS. If this election is made
with respect to a Debt Security with amortizable bond premium, then the electing
U.S. Holder will be deemed to have elected to apply amortizable bond premium
against interest with respect to all debt instruments with amortizable bond
premium (other than debt instruments the interest on which is excludible from
gross income) held by the electing U.S. Holder as of the beginning of the
taxable year in which the Debt Security with respect to which the election is
made is acquired or thereafter acquired. The deemed election with respect to
amortizable bond premium may not be revoked without the consent of the IRS.
If the election to apply the constant-yield method to all interest on a
Debt Security is made with respect to a Market Discount Debt Security (as
defined below under "U.S. Holders of Debt Securities -- Market Discount"), the
electing United States Holder will be treated as having made the election
discussed below under "Market Discount" to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such U.S. Holder.
Floating Rate Debt Securities. Debt Securities that bear interest at a
floating rate ("Floating Rate Debt Securities") generally will bear interest at
a "qualified floating rate" and thus will be treated as "variable rate debt
instruments" under the OID Regulations. A Floating Rate Debt Security will
qualify as a "variable rate debt instrument" under the OID Regulations if (a)
its issue price does not exceed the total noncontingent principal payments due
under the
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Floating Rate Debt Security by more than a specified de minimis amount and
(b) it provides for stated interest, paid or compounded at least annually, at
current values of (i) one or more qualified floating rates, (ii) a single fixed
rate and one or more qualified floating rates, (iii) a single objective rate, or
(iv) a single fixed rate and a single objective rate that is a qualified inverse
floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Debt Security is denominated. Although a multiple of a qualified
floating rate will generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35 will constitute a
qualified floating rate. A variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than 0.65 but not more than
1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Floating Rate Debt Security (e.g., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Floating Rate Debt Security's issue date) will be treated as a
single qualified floating rate. Notwithstanding the foregoing, a variable rate
that would otherwise constitute a qualified floating rate but which is subject
to one or more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the OID
Regulations unless such cap or floor is fixed throughout the term of the Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon
objective financial or economic information (e.g., one or more qualified
floating rates or the yield of actively traded personal property). The OID
Regulations also provide that other variable interest rates may be treated as
objective rates if so designated by the IRS in the future. Despite the
foregoing, a variable rate of interest on a Floating Rate Debt Security will not
constitute an objective rate if it is reasonably expected that the average value
of such rate during the first half of the Floating Rate Debt Security's term
will be either significantly less than or significantly greater than the average
value of the rate during the final half of the Floating Rate Debt Security's
term. A "qualified inverse floating rate" is any objective rate where such rate
is equal to a fixed rate minus a qualified floating rate, as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also provide that
if a Floating Rate Debt Security provides for stated interest at a fixed rate
for an initial period of one year or less followed by a variable rate that is
either a qualified floating rate or an objective rate and if the variable rate
on the Floating Rate Debt Security's issue date is intended to approximate the
fixed rate (e.g., the value of the variable rate on the issue date does not
differ from the value of the fixed rate by more than 25 basis points), then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be.
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of
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the rate on any day that is no earlier than 3 months prior to the first
day on which that value is in effect and no later than 1 year following that
first day.
If a Floating Rate Debt Security that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, then any stated interest on such Note which is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually will constitute qualified stated interest and will be taxed
accordingly. Thus, a Floating Rate Debt Security that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with OID unless the Floating Rate Debt Security is issued at a
"true" discount (i.e., at a price below the Debt Security's stated principal
amount) in excess of a specified de minimis amount. OID on such a Floating Rate
Debt Security arising from "true" discount is allocated to an accrual period
using the constant yield method described above by assuming that the variable
rate is a fixed rate equal to (i) in the case of a qualified floating rate or
qualified inverse floating rate, the value, as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Debt Security.
In general, any other Floating Rate Debt Security that qualifies as a
"variable rate debt instrument" will be converted into an "equivalent" fixed
rate debt instrument for purposes of determining the amount and accrual of OID
and qualified stated interest on the Debt Security. The OID Regulations
generally require that such a Floating Rate Debt Security be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of the
Floating Rate Debt Security with a fixed rate equal to the value of the
qualified floating rate or qualified inverse floating rate, as the case may be,
as of the Floating Rate Debt Security's issue date. Any objective rate (other
than a qualified inverse floating rate) provided for under the terms of the
Floating Rate Debt Security is converted into a fixed rate that reflects the
yield that is reasonably expected for the Floating Rate Debt Security. In the
case of a Floating Rate Debt Security that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or a
qualified inverse floating rate, if the Floating Rate Debt Security provides for
a qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Floating Rate Debt Security as of
the Floating Rate Debt Security's issue date is approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
either the qualified floating rate or qualified inverse floating rate rather
than the fixed rate. Subsequent to converting the fixed rate into either a
qualified floating rate or a qualified inverse floating rate, the Floating Rate
Debt Security is then converted into an "equivalent" fixed rate debt instrument
in the manner described above.
Once the Floating Rate Debt Security is converted into an "equivalent"
fixed rate debt instrument pursuant to the foregoing rules, the amount of OID
and qualified stated interest, if any,
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are determined for the "equivalent" fixed rate debt instrument by applying
the general OID rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Floating Rate Debt Security will account for such OID and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed rate
debt instrument. In each accrual period, appropriate adjustments will be made to
the amount of qualified stated interest or OID assumed to have been accrued or
paid with respect to the "equivalent" fixed rate debt instrument in the event
that such amounts differ from the actual amount of interest accrued or paid on
the Floating Rate Debt Security during the accrual period.
If a Floating Rate Debt Security, such as a Debt Security the payments on
which are determined by reference to any index, does not qualify as a "variable
rate debt instrument" under the OID Regulations, then the Floating Rate Debt
Security would be treated as a contingent payment debt obligation. The proper
United States Federal income tax treatment of Floating Rate Debt Securities that
are treated as contingent payment debt obligations will be more fully described
in the applicable Prospectus Supplement.
Short-Term Debt Securities. In general, an individual or other cash basis
United States Holder of a short-term Debt Security is not required to accrue OID
(as specially defined below for the purposes of this paragraph) for United
States federal income tax purposes unless it elects to do so (but may be
required to include any stated interest in income as the interest is received).
Accrual basis U.S. Holders and certain other U.S. Holders, including banks,
regulated investment companies, dealers in securities, common trust funds, U.S.
Holders who hold Debt Securities as part of certain identified hedging
transactions, certain pass-thru entities and cash basis U.S. Holders who so
elect, are required to accrue OID on short-term Debt Securities on either a
straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the U.S. Holder. In the case of a U.S. Holder
not required and not electing to include OID in income currently, any gain
realized on the sale, exchange or retirement of the short-term Debt Security
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale, exchange or retirement. U.S. Holders who are
not required and do not elect to accrue OID on short-term Debt Securities will
be required to defer deductions for interest on borrowings incurred or continued
to purchase or carry short-term Debt Securities in an amount not exceeding the
deferred interest income until the deferred interest income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Debt Security, including stated interest, are
included in the short-term Debt Security's stated redemption price at maturity.
Foreign Currency Discount Debt Securities. OID for any accrual period on a
Discount Debt Security that is denominated in, or determined by reference to, a
foreign currency will be determined in the foreign currency and then translated
into U.S. dollars in the same manner as stated interest accrued by an accrual
basis U.S. Holder, as described above under "Payments of Interest -- Foreign
Currency Denominated Interest." Upon receipt of an amount attributable to OID
(whether in connection with a payment of interest or the sale or retirement of a
Debt Security), a U.S. Holder may recognize ordinary income or loss.
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MARKET DISCOUNT
A Debt Security, other than a short-term Debt Security, will be treated as
purchased at a market discount (a "Market Discount Debt Security") if the Debt
Security's stated redemption price at maturity or, in the case of a Discount
Debt Security, the Debt Security's "revised issue price", exceeds the amount for
which the U.S. Holder purchased the Debt Security by at least 1/4 of 1 percent
of such Debt Security's stated redemption price at maturity or revised issue
price, respectively, multiplied by the number of complete years to the Debt
Security's maturity. If such excess is not sufficient to cause the Debt Security
to be a Market Discount Debt Security, then such excess constitutes "de minimis
market discount." The Code provides that, for these purposes, the "revised issue
price" of a Debt Security generally equals its issue price, increased by the
amount of any OID that has accrued on the Debt Security.
Any gain recognized on the maturity or disposition of a Market Discount
Debt Security will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such Debt Security.
Alternatively, a U.S. Holder of a Market Discount Debt Security may elect to
include market discount in income currently over the life of the Debt Security.
Such an election shall apply to all debt instruments with market discount
acquired by the electing United States Holder on or after the first day of the
first taxable year to which the election applies. This election may not be
revoked without the consent of the IRS.
Market discount on a Market Discount Debt Security will accrue on a
straight-line basis unless the United States Holder elects to accrue such market
discount on a constant-yield method. Such an election shall apply only to the
Debt Security with respect to which it is made and may not be revoked without
the consent of the IRS. A United States Holder of a Market Discount Debt
Security that does not elect to include market discount in income currently
generally will be required to defer deductions for interest on borrowings
allocable to such Debt Security in an amount not exceeding the accrued market
discount on such Debt Security until the maturity or disposition of such Debt
Security.
DEBT SECURITIES PURCHASED AT A PREMIUM
A U.S. Holder that purchases a Debt Security for an amount in excess of
its principal amount, or in the case of a Discount Debt Security, its stated
redemption price at maturity, may elect to treat such excess as "amortizable
bond premium," in which case the amount required to be included in the U.S.
Holder's income each year with respect to interest on the Debt Security will be
reduced by the amount of amortizable bond premium allocable (based on the Debt
Security's yield to maturity) to such year. A U.S. Holder who makes such
election must reduce such Holder's tax basis in the Debt Security by the amount
of amortized premium. In the case of a Debt Security that is denominated in, or
determined by reference to a foreign currency, bond premium will be computed in
units of foreign currency, and amortizable bond premium will reduce interest
income in units of the foreign currency. At the time amortized bond premium
offsets interest income, exchange gain or loss (taxable as ordinary income or
loss) is realized measured by the difference between exchange rates at that time
and at the time of the acquisition of the Debt Securities. Any election to
amortize bond premium shall apply to all bonds (other than
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bonds the interest on which is excludible from gross income) held by the U.S.
Holder at the beginning of the first taxable year to which the election applies
or thereafter acquired by the U.S. Holder, and is irrevocable without the
consent of the IRS. See also "Original Issue Discount -- Election to Treat All
Interest as Original Issue Discount."
PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES
A U.S. Holder's tax basis in a Debt Security will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the U.S. Holder's income with respect to the Debt Security
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the U.S. Holder's income
with respect to the Debt Security, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Debt Security. The
U.S. dollar cost of a Debt Security purchased with a foreign currency will
generally be the U.S. dollar value of the purchase price on the date of purchase
or, in the case of Debt Securities traded on an established securities market,
as defined in the applicable Treasury Regulations, that are purchased by a cash
basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the
settlement date for the purchase.
A U.S. Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and the tax basis of the Debt Security. The
amount realized on a sale or retirement for an amount in foreign currency will
be the U.S. dollar value of such amount on the date of sale or retirement or, in
the case of Debt Securities traded on an established securities market, as
defined in the applicable Treasury Regulations, sold by a cash basis U.S. Holder
(or an accrual basis U.S. Holder that so elects), on the settlement date for the
sale. Except to the extent described above under "Original Issue Discount --
Short-Term Debt Securities" or "Market Discount" or described in the next
succeeding paragraph or attributable to accrued but unpaid interest, gain or
loss recognized on the sale or retirement of a Debt Security will be capital
gain or loss. Gain on property held by an individual taxpayer for more than 18
months is generally subject to a maximum rate of tax of 20%. Gain on property
held by an individual taxpayer for more than one year and up to 18 months is
generally subject to tax at a maximum rate of tax of 28%. U.S. Holders are urged
to consult their own tax advisors with respect to recently enacted capital gains
legislation.
Gain or loss recognized by a U.S. Holder on the sale or retirement of a
Debt Security that is attributable to changes in exchange rates will be treated
as ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
CONVERSION
A U.S. Holder's conversion of Debt Securities into Common Stock generally
will not be a taxable event (except to the extent attributable to accrued but
unpaid interest or to cash received in lieu of a fractional Share) for U.S.
federal income tax purposes. A U.S. Holder's basis and holding period in Common
Stock received upon conversion will generally be the same as the
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U.S. Holder's basis (exclusive of any tax basis allocable to a fractional share)
and holding period in the Debt Securities converted.
The conversion ratio of Debt Securities that are convertible will be
subject to adjustment in certain circumstances. Those adjustments may give rise
to deemed dividend income to U.S. Holders. Furthermore, the failure to adjust
the conversion ratio to reflect certain events can in some circumstances give
rise to deemed dividend income to U.S.
Holders.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Debt Security or on the sale or
retirement of a Debt Security will have a tax basis equal to its U.S. dollar
value at the time such interest is received or at the time of such sale or
retirement. Foreign currency that is purchased will generally have a tax basis
equal to the U.S. dollar value of the foreign currency on the date of purchase.
Any gain or loss recognized on a sale or other disposition of foreign currency
(including its use to purchase Debt Securities or upon exchange for U.S.
dollars) will be ordinary income or loss.
AMORTIZING DEBT SECURITIES
The applicable Prospectus Supplement will contain a discussion of special
United States federal income tax rules applicable to Debt Securities that
provide for partial principal payments prior to stated maturity.
UNITED STATES ALIEN HOLDERS
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States on at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to United States federal tax as if they were United States citizens and
residents. See "U.S. Holders of Debt Securities" above.
DEBT SECURITIES
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding and, in the case of Debt Securities
convertible into Common Stock of the Company ("Convertible Debt Securities"),
the discussion under "United States Real Property Holding Corporation
Considerations," below:
(i) payments of principal, premium (if any) and interest (including
OID) by the Company or any of its paying agents to any holder of a Debt
Security who or which is a United States Alien Holder will not be subject
to United States federal withholding tax if, in the case of interest or
OID, (a) the beneficial owner of the Debt Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the beneficial owner
of the Debt Security is
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not a controlled foreign corporation that is related to the Company
through stock ownership, (c) the interest on the Debt Security is not
contingent interest to which Section 871(h)(4)(A) of the Code is
applicable, and (d) either (A) the beneficial owner of the Debt Security
certifies to the Company or its agent, under penalties of perjury, that it
is not a U.S. Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Debt Security certifies to the
Company or its agent under penalties of perjury that such statement has
been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor
with a copy thereof;
(ii) a United States Alien Holder of a Debt Security will not be
subject to United States federal withholding tax on any gain realized on
the sale or exchange of a Debt Security; and
(iii) a Debt Security held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States federal estate
tax as a result of the individual's death if the individual did not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, the income
on the Debt Security would not have been effectively connected with a
United States trade or business of the individual at the individual's
death and in the case of a Debt Security on which all or a portion of the
interest payments are contingent interest to which Section 871(h)(4)(A) is
applicable, only to the extent that the value of such Debt Security is not
allocable to such interest.
Recently issued Treasury regulations (the "Withholding Regulations") that
will be effective with respect to payments made after December 31, 1998, will
provide alternative methods for satisfying the certification requirements
described in clause (i)(d) above. The Withholding Regulations also will require,
in the case of Debt Securities held by a foreign partnership, that (x) such
certification requirements be satisfied by the partners and (y) the partnership
provide certain information, including its taxpayer identification number. A
look-through rule will apply in the case of tiered partnerships.
COMMON STOCK
Dividends. In the event that dividends are paid on shares of Common Stock,
except as described below, such dividends paid to a United States Alien Holder
of Common Stock will be subject to withholding of United States federal income
tax at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty, unless the dividends are effectively connected with the conduct of a
trade or business of the United States Alien Holder within the United States. If
the dividend is effectively connected with the conduct of a trade or business of
the United States Alien Holder within the United States, the dividend would be
subject to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates, provided that Form 4224 is filed with
the paying agent, and would be exempt from the
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30% withholding tax described above. Certification and disclosure
requirements relating to the effectively connected income exemption from
withholding are slightly modified under the Withholding Regulations with respect
to payments made after December 31, 1998. Any effectively connected dividends
received by a foreign corporation may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under currently effective United States Treasury regulations, dividends
paid to an address outside the United States are presumed to be paid to a
resident of such country (unless the payor has knowledge to the contrary) for
purposes of the withholding discussed above, and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under the Withholding
Regulations, however, effective for payments made after December 31, 1998, a
United States Alien Holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification and
other requirements.
A United States Alien Holder of Common Stock that is eligible for a
reduced rate of United States withholding tax pursuant to a tax treaty may
obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the IRS.
Gain on Disposition of Common Stock. A United States Alien Holder
generally will not be subject to United States federal income tax on any gain
recognized on a disposition of a share of Common Stock unless (i) subject to the
exception discussed below under "United States Real Property Holding Corporation
Considerations," the Company is or has been a "United States real property
holding corporation" (a "USRPHC") within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such United States Alien Holder's holding period (the "Required
Holding Period"), (ii) the gain is effectively connected with the conduct of a
trade or business within the United States of the United States Alien Holder
and, if a tax treaty applies, attributable to a permanent establishment
maintained by the United States Alien Holder, (iii) the United States Alien
Holder is an individual who holds the share of Common Stock as a capital asset
and is present in the United States for 183 days or more in the taxable year of
the disposition and either (a) such individual has a "tax home" (as defined for
United States federal income tax purposes) in the United States or (b) the gain
is attributable to an office or other fixed place of business maintained in the
United States by such individual, or (iv) the United States Alien Holder is
subject to tax pursuant to the Code provisions applicable to certain United
States expatriates.
If an individual United States Alien Holder falls under clauses (ii) or
(iv) above, he or she will be taxed on his or her net gain derived from the sale
under regular United States federal income tax rates. If the individual United
States Alien Holder falls under clause (iii) above, he or she will be subject to
a flat 30% tax on the gain derived from the sale which may be offset by United
States capital losses (notwithstanding the fact that he or she is not considered
a resident of the United States). If a United States Alien Holder that is a
foreign corporation falls under clause (ii) above, it will be taxed on its gain
under regular graduated United States federal income tax rates and, in addition,
will under certain circumstances be subject to the branch profits tax equal
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to 30% of its "effectively connected earnings and profits" within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
Federal Estate Taxes. Common Stock owned or treated as owned by an
individual who is not a citizen or resident (as specially defined for United
States Federal estate tax purposes) of the United States at the date of death
will be included in such individual's estate for United States Federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
UNITED STATES REAL PROPERTY HOLDING CORPORATION CONSIDERATIONS
Gain realized by a United States Alien Holder who would not ordinarily be
subject to U.S. federal income tax on gain is, under certain circumstances,
subject to tax on gain realized on the disposition (and possible withholding tax
on the proceeds from such disposition) of interests (including stock and
convertible debt) in a USRPHC, other than interests solely as a creditor. Except
in the case of Convertible Debt Securities (or certain contingent payment Debt
Securities with respect to which the proper United States Federal income tax
treatment will be more fully described in the applicable Prospectus Supplement),
United States Alien Holders of Debt Securities will not be subject to such tax
or withholding, because Debt Securities will generally be considered interests
solely as a creditor. Furthermore, while not free from doubt, the Company
believes that it is not currently, and does not currently anticipate becoming, a
USRPHC. A corporation is generally a USRPHC if the fair market value of its
United States real property interests equals or exceeds 50% of the sum of the
fair market value of its worldwide real property interests plus its other assets
used or held for use in a trade or business. As a result, United States Alien
Holders of Common Stock or Convertible Debt Securities should also not be
subject to such tax or withholding.
Even if the Company were a USRPHC, a United States Alien Holder would
generally not be subject to tax, or withholding in respect of such tax, on gain
from a sale or other disposition of Common Stock or Convertible Debt Securities
by reason of the Company's USRPHC status so long as the Common Stock is
regularly traded (and, in the case of a sale or other disposition of Convertible
Debt Securities, such Securities are regularly traded) on an established
securities market during the calendar year in which such sale or disposition
occurs, provided that such holder does not own, actually or constructively,
Common Stock or Convertible Debt Securities with a fair market value in excess
of 5% of the fair market value of all Common Stock or Convertible Debt
Securities, respectively, outstanding at any time during the Required Holding
Period.
If the Company is or has been a USRPHC within the Required Holding Period,
and if a United States Alien Holder owns in excess of 5% (as described in the
preceding paragraph), such United States Alien Holder of Common Stock or
Convertible Debt Securities will be subject to United States federal income tax
on gain recognized on a sale or other disposition of such Common Stock or
Convertible Debt Securities, but will not be subject to withholding in respect
of such tax provided that the Common Stock and Convertible Debt Securities are
regularly traded during the year of sale or disposition.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. HOLDERS
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Debt Security, payments of dividends on
Common Stock and the proceeds of the sale of Common Stock or a Debt Security
before maturity within the United States to, and to the accrual of OID on a
Discount Debt Security with respect to, non-corporate U.S. Holders, and "backup
withholding" at a rate of 31% will apply to such payments and to payments of OID
if the U.S. Holder fails to provide an accurate taxpayer identification number
or to report all interest and dividends required to be shown on its federal
income tax returns. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable. The amount of any backup withholding
from a payment to a U.S. Holder will be allowed as a credit against such U.S.
Holder's U.S. federal income tax liability and may entitle such U.S. Holder to a
refund, provided that the required information is furnished to the IRS.
UNITED STATES ALIEN HOLDERS
Backup withholding will generally not apply to payments of principal,
premium (if any) and interest (including OID) made by the Company or a paying
agent to a United States Alien Holder on a Debt Security if the certification
described in clause (i)(d) under "United States Alien Holders -- Debt
Securities" above is received, provided that the payor does not have actual
knowledge that the holder is a United States person. The Company may be required
to report annually to the IRS and to each United States Alien Holder the amount
of interest paid to, and the tax withheld, if any, with respect to such Holder.
The Company must report annually to the IRS and to each United States
Alien Holder the amount of dividends paid to such holder and the tax withheld
with respect to such dividends. These information reporting requirements apply
regardless of whether withholding is required. Copies of the information returns
reporting such dividends and withholding may also be made available to the tax
authorities in the country in which the United States Alien Holder resides under
the provisions of an applicable income tax treaty.
Payments of the proceeds from the sale by a United States Alien Holder of
Common Stock or a Debt Security made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that
if the broker is a United States person, a controlled foreign corporation for
United States tax purposes, a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period or, effective after December 31, 1998, in certain other cases,
information reporting may apply to such payments. Payments of the proceeds from
the sale of Common Stock or a Debt Security to or through the United States
office of a broker is subject to information reporting and backup withholding
unless the holder or beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption from information reporting and
backup withholding.
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THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY. ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES OF THE DEBT SECURITIES OR COMMON STOCK TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, FEDERAL, LOCAL, FOREIGN
AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.
PLAN OF DISTRIBUTION
American Stores may sell the Securities in and/or outside the United
States: (i) through underwriters or dealers; (ii) directly to a limited number
of purchasers or to a single purchaser; or (iii) through agents. The applicable
Prospectus Supplement with respect to the Securities will set forth the terms of
the offering of the Securities, including the name or names of any underwriters
or agents, if any, the purchase price of the Securities and the proceeds to
American Stores from such sale. In addition, the applicable Prospectus
Supplement will set forth any delayed delivery arrangements, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers. Any initial public offering price and any discount or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Securities will be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Securities
will be subject to conditions precedent and the underwriters will be obligated
to purchase all the Securities if any are purchased.
If dealers are used in the sale of Securities in respect of which this
Prospectus is delivered, American Stores will sell such Securities to the
dealers as principals. The dealers may then resell such Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Securities may be sold through agents designated by American Stores
from time to time. Any agent involved in the offer or sale of the Securities in
respect to which this Prospectus is delivered will be named, and any commissions
payable by American Stores to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
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The Securities may be sold directly by American Stores to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales, including the terms of any bidding or auction process, will be described
in the Prospectus Supplement relating thereto.
Agents, dealers and underwriters may be entitled under agreements entered
into with American Stores to indemnification by American Stores against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for American
Stores in the ordinary course of business.
In connection with an offering, certain persons participating in such
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Securities. Specifically, such persons may overallot such
offering, creating a syndicate short position. In addition, such persons may bid
for, and purchase, the Securities in the open market to cover syndicate shorts
or to stabilize the price of the Securities. Finally, such persons may reclaim
selling concessions allowed for distributing the Securities in an offering, if
such persons repurchase previously distributed Securities in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Securities above
independent market levels. Such persons are not required to engage in these
activities, and may end any of these activities at any time. The Securities
(other than shares of Common Stock) may or may not be listed on a national
securities exchange. No assurances can be given as to the future liquidity of
the trading market, if any, for any Securities issued.
LEGAL MATTERS
Certain legal matters in connection with any Offerings will be passed upon
for the Company by Wachtell, Lipton, Rosen & Katz, New York, New York and for
any underwriters or agents by a firm specified in the applicable Prospectus
Supplement.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual report on Form 10-K for the year ended
February 1, 1997 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated herein
by reference. Such financial statements are, and audited financial statements to
be included in subsequently filed documents will be, incorporated herein in
reliance upon the reports of Ernst & Young LLP pertaining to such financial
statements (to the extent covered by consents filed with the Commission) given
upon the authority of such firm as experts in accounting and auditing.
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TABLE OF CONTENTS
PROSPECTUS
Available Information....................................... 2
Forward-Looking Statements.................................. 3
Incorporation of Certain Documents by Reference............. 3
The Company................................................. 5
Selected Consolidated Financial Data........................ 6
Use of Proceeds............................................. 8
Ratio of Earnings to Fixed Charges.......................... 8
Description of Debt Securities.............................. 8
Description of Preferred Stock.............................. 21
Description of Common Stock................................. 23
Description of Depositary Shares............................ 23
Current Capital Structure................................... 26
Certain Provisions of the Restated Certificate of
Incorporation and Restated By-Laws.......................... 27
Certain U.S. Federal Income Tax Considerations.............. 29
Plan of Distribution........................................ 45
Legal Matters............................................... 46
Experts..................................................... 46
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all fees and expenses payable in connection
with the issuance and distribution of the Securities, other than underwriting
discounts and commissions. All such fees and expenses will be paid by the
Company. All the amounts shown are estimates, except for the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission $303,031
Registration Fee...................
"Blue Sky" Fees and Expenses....... 30,000
Legal Fees and Expenses............ 125,000
Accounting Fees and Expenses....... 75,000
Trustees' Fees..................... 20,000
Printing Expenses.................. 150,000
Rating Agency Fees................. 540,000
Miscellaneous...................... 6,969
---------
Total.......................... $1,250,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 145 of the Delaware General Corporation Law
which provides for indemnification of directors and officers in certain
circumstances. Article Nine of the Restated Certificate of Incorporation of the
Company provides the following:
9.01 Elimination of Certain Liability of Directors. A Director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the Director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
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9.02 Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a Director or officer
of the Corporation or while serving as a Director or officer of the Corporation
is or was also serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a Director or officer, and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right (which may
not be reduced or limited by any repeal or modification of this Section 9.02)
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a Director or officer in his or her capacity as a
Director or officer (and not in any other capacity in which service was or is
rendered by such person while a Director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such Director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such Director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of Directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the
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Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination, prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation Law
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested Directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss whether or not the Corporation would
have the power to indemnify such person against such expense, liability to or
loss under the Delaware General Corporation Law.
In addition, the Company maintains a directors' and officers' liability
insurance policy.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
1.1 Form of Underwriting Agreement for Debt Securities incorporated herein
by reference to Exhibit 1.1 of Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Commission on
November 2, 1994.
1.2 Form of Underwriting Agreement for Preferred Stock.*
1.3 Form of Underwriting Agreement for Common Stock.*
1.4 Form of Agency Agreement, incorporated herein by referenceto Exhibit
1.2 of Amendment No. 1 to the Company's Registration Statement on Form
S-3 filed with the Commission on November 2, 1994.
3.1 The Restated Certificate of Incorporation of American Stores Company,
as amended, is incorporated herein by reference to Exhibit 3.1 of the
Company's Form 10-K for the fiscal year ended February 3, 1996, as
filed with the Commission on April 19, 1996, as amended by the
Certificate of Amendment dated June 30, 1997, incorporated by reference
to Exhibit 1 to the Form 8-K filed with the Commission on July 11,
1997.
II-3
<PAGE>
3.2 The Restated By-Laws of American Stores Company, as
amended September 16, 1997.+
4.1(a)Rights Agreement, dated as of March 8, 1988, between the Company and
First Chicago Trust Company of New York, formerly Morgan Stockholder
Services Trust Company, as Rights Agent, and the amendments thereto
(the "Rights Agreement"), are incorporated by reference to the
Company's Registration Statement on Form 8-A, as filed with the
Commission on March 16, 1988, and Amendments No. 1, 2, 3, 4, 5 and 6 to
such Registration Statement, as filed with the Commission on March 28,
1990, July 17, 1991, May 17, 1994, July 3, 1996, February 25, 1997 and
July 17, 1997, respectively.
4.1(b)Senior Indenture, dated May 1, 1995, between American Stores Company
and The First National Bank of Chicago, Trustee, with respect to Senior
Debt Securities ("Senior Indenture") incorporated herein by reference
to Exhibit 4.1 of the Company's Form 10-Q filed with the Commission on
June 12, 1995.
4.1(c)Form of Indenture between American Stores Company and _______, Trustee,
with respect to Subordinated Debt Securities ("Subordinated
Indenture").*
5 Opinion of Wachtell, Lipton, Rosen & Katz as to legality.
12 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wachtell, Lipton, Rosen & Katz (contained in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24 Powers of Attorney.+
25 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of The First National Bank of
Chicago.
99.1 Form of Deposit Agreement.+
99.2 Form of Depositary Receipt (included in Exhibit 4.3(b)).
- -----------------
* To be filed by Amendment.
+ Filed with initial Registration Agreement.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
II-4
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the reg-
istrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
II-5
<PAGE>
(6) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(7) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3, AND HAS DULY CAUSED THIS AMENDMENT TO
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN SALT LAKE CITY, UTAH ON THIS 2ND DAY OF FEBRUARY, 1998.
AMERICAN STORES COMPANY
By:/s/ Teresa Beck
TERESA BECK
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Victor L. Lund Chairman of the February 2, 1998
VICTOR L. LUND Board, Chief
Executive Officer
and Director (Principal
Executive Officer)
/s/ Teresa Beck Chief Financial February 2, 1998
TERESA BECK Officer (Principal
Financial Officer)
/s/ Bradley M. Vierig Senior Vice President February 2, 1998
BRADLEY M. VIERIG and Controller
(Principal
Accounting
Officer)
* Director February 2, 1998
PAMELA G. BAILEY
* Director February 2, 1998
HENRY I. BRYANT
II-7
<PAGE>
SIGNATURE TITLE DATE
* Director February 2, 1998
ARDEN B. ENGEBRETSEN
* Director February 2, 1998
JAMES B. FISHER
* Director February 2, 1998
FERNANDO R. GUMUCIO
* Director February 2, 1998
LEON G. HARMON
* Director February 2, 1998
JOHN E. MASLINE
* Director February 2, 1998
BARBARA S. PREISKEL
* Director February 2, 1998
J.L. SCOTT
* Director February 2, 1998
ARTHUR K. SMITH
*By: /s/ Teresa Beck
TERESA BECK, AS ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
1.1 Form of Underwriting Agreement for Debt Securities incorporated herein
by reference to Exhibit 1.1 of Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Commission on
November 2, 1994.
1.2 Form of Underwriting Agreement for Preferred Stock.*
1.3 Form of Underwriting Agreement for Common Stock.*
1.4 Form of Agency Agreement, incorporated herein by reference to Exhibit
1.2 of Amendment No. 1 to the Company's Registration Statement on Form
S-3 filed with the Commission on November 2, 1994.
3.1 The Restated Certificate of Incorporation of American Stores Company,
as amended, is incorporated herein by reference to Exhibit 3.1 of the
Company's Form 10-K for the fiscal year ended February 3, 1996, as
filed with the Commission on April 19, 1996, as amended by the
Certificate of Amendment dated June 30, 1997, incorporated by
reference to Exhibit 1 to the Form 8-K filed with the Commission on
July 11, 1997.
3.2 The Restated By-Laws of American Stores Company,
as amended September 16, 1997.+
4.1(a)Rights Agreement, dated as of March 8, 1988, between the Company and
First Chicago Trust Company of New York, formerly Morgan Stockholder
Services Trust Company, as Rights Agent, and the amendments thereto
(the "Rights Agreement"), are incorporated by reference to the
Company's Registration Statement on Form 8-A, as filed with the
Commission on March 16, 1988, and Amendments No. 1, 2, 3, 4, 5 and 6 to
such Registration Statement, as filed with the Commission on March 28,
1990, July 17, 1991, May 17, 1994, July 3, 1996, February 25, 1997 and
July 17, 1997, respectively.
4.1(b)Senior Indenture, dated May 1, 1995 between American Stores Company and
The First National Bank of Chicago, Trustee, with respect to Senior
Debt Securities ("Senior Indenture") incorporated herein by reference
to Exhibit 4.1 of the Company's Form 10-Q filed with the Commission on
June 12, 1995.
II-9
<PAGE>
4.1(c)Form of Indenture between American Stores Company and _______, Trustee,
with respect to Subordinated Debt Securities ("Subordinated
Indenture").*
5 Opinion of Wachtell, Lipton, Rosen & Katz as to legality.
12 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wachtell, Lipton, Rosen & Katz (contained in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24 Powers of Attorney.+
25 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of The First National Bank of
Chicago.
99.1 Form of Deposit Agreement.+
99.2 Form of Depositary Receipt (included in Exhibit 4.3(b)).
- -----------------
* To be filed by Amendment.
+ Filed with initial Registration Agreement.
II-10
EXHIBIT 5
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
February 2, 1998
American Stores Company
709 East South Temple
Salt Lake City, Utah 84102
Ladies and Gentlemen:
This opinion is being delivered in connection with the Registration
Statement on Form S-3, File No. 333-43251, as amended (the "Registration
Statement"), filed by American Stores Company, a Delaware corporation (the
"Company"), with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act"), for the registration of the offer and sale by
the Company, from time to time pursuant to the provisions of Rule 415 under the
Act, of up to $1 billion maximum aggregate initial offering price of securities
of the Company, which may consist of, among other things, the Company's senior
and subordinated debt securities (the "Debt Securities"), Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), depositary shares representing
fractional interests in shares of Preferred Stock (the "Depositary Shares"),
and/or Common Stock, par value $1.00 per share, including the preferred share
purchase rights attached thereto (the "Common Stock"). The Debt Securities, the
Preferred Stock, the Depositary Shares, and the Common Stock are hereinafter
referred to collectively as the "Securities." Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Registration
Statement.
The Debt Securities will constitute either senior or subordinated
debt of the Company and will be issued under, in the case of the senior Debt
Securities, an indenture between the Company and The First National Bank of
Chicago as trustee (the "Senior Debt Indenture"), and in the case of the
subordinated Debt Securities, an indenture to be between the Company and a
<PAGE>
American Stores Company
February 2, 1998
Page 2
bank or trust company as trustee (the "Subordinated Debt Indenture").
The Senior Debt Indenture and the Subordinated Debt Indenture are
hereinafter referred to collectively as the "Indentures." The Senior Debt
Indenture has been filed as an exhibit to the Registration Statement.
Depositary Shares will be deposited under a Deposit Agreement
between the Company and a bank or trust company and evidenced by Depositary
Receipts. A draft of the form of the Depositary Agreement has been filed as an
exhibit to the Registration Statement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials, and other instruments as we have deemed
necessary or advisable for purposes of this opinion.
Based upon the foregoing, we are of the opinion that, except as
limited by, in the case of paragraph 1, (i) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law), (iii) requirements that a claim with respect to any Debt Securities
denominated other than in United States dollars (or a judgment denominated other
than in United States dollars with respect of such a claim) be converted into
United States dollars at a rate of exchange prevailing on a date determined
pursuant to applicable law, and (iv) governmental authority to limit, delay, or
prohibit the making of payments outside the United States or in foreign currency
or currencies, or currency unit or units, or composite currency or currencies:
1. With respect to the Debt Securities, when the specific terms of
a particular Debt Security (including any Debt Security duly
issued upon conversion of any other Debt Securities or the
conversion or exchange of any shares of Preferred Stock) and its
issuance and sale have been duly established in accordance with
the Senior Indenture or the Subordinated Indenture, as the case
may be, and such Debt Security has been duly executed and
authenticated in accordance with the Senior Indenture or
Subordinated Indenture, as the case may be, and duly issued and
sold either (a) in accordance with the applicable definitive
purchase, underwriting or similar agreement approved by the Board
of Directors of the Company upon payment of the consideration
therefor provided for therein or (b) upon exchange or conversion
of any other Security that has been validly issued, paid for and
delivered, in accordance with the terms of such Security, or the
instrument governing such Security providing for such conversion
or exchange, as approved by the Board of Directors of the
Company, for the consideration approved by the Board of Directors
of the Company, such Debt Security will constitute the valid and
binding obligation of the Company.
<PAGE>
American Stores Company
February 2, 1998
Page 3
2. With respect to shares of Preferred Stock, when (i) the Board of
Directors of the Company has taken all necessary corporate action
to adopt a Certificate of Designation, Preferences and Rights (a
"Certificate") relating to such Preferred Stock and such
Certificate has been filed with the Secretary of State of the
State of Delaware, and (ii) certificates representing the shares
of Preferred Stock have been duly executed, countersigned,
registered and delivered either (a) in accordance with the
applicable definitive purchase, underwriting or similar agreement
approved by the Board of Directors of the Company upon payment of
the consideration therefor (not less than the par value of the
Preferred Stock) provided for therein or (b) upon conversion or
exchange of any other Security that has been validly issued, paid
for and delivered, in accordance with the terms of such Security,
or the instrument governing such Security providing for such
conversion or exchange, as approved by the Board of Directors of
the Company, for the consideration approved by the Board of
Directors of the Company (not less than the par value of the
Preferred Stock), the shares of Preferred Stock will be legally
issued, fully paid and nonassessable.
3. With respect to the Depositary Shares, when the terms of
Depositary Shares evidenced by Depositary Receipts are duly
established and such Depositary Shares are issued and sold, in
each case, in accordance with the terms of the Deposit Agreement
against the deposit of validly issued, fully paid and
nonassessable shares of Preferred Stock, and when the Depositary
Shares as evidenced by Depositary Receipts are issued and sold as
contemplated by the Registration Statement and applicable
Prospectus Supplement, such Depositary Shares will entitle the
persons in whose names the Depositary Receipts evidencing such
Depositary Shares are registered to the rights specified therein
and in the Deposit Agreement.
4. With respect to shares of Common Stock, when certificates
representing the shares of Common Stock have been duly executed,
countersigned, registered and delivered either (i) in accordance
with the applicable definitive purchase, underwriting or similar
agreement approved by the Board of Directors of the Company upon
payment of the consideration therefor (not less than the par
value of the Common Stock) provided for therein or (ii) upon
conversion or exchange of any other Security, in accordance with
the terms of such Security that has been validly issued, paid for
and delivered, or the instrument governing such Security
providing for such conversion or exchange, as approved by the
Board of Directors of the Company, for the consideration approved
by the Board of Directors of the Company (not less than the par
value of the Common Stock), the shares of Common Stock will be
legally issued, fully paid and nonassessable.
<PAGE>
American Stores Company
February 2, 1998
Page 4
In connection with the opinions expressed above, we have assumed
with your consent that, at or prior to the time of the delivery of any such
Security, (i) the Board of Directors of the Company, themselves or as so
delegated, shall have approved the specific sale and issuance of such Security
(including the terms thereof) and shall not have modified or rescinded the duly
authorized issuance and sale of such Security, (ii) the Registration Statement
shall have been declared effective and such effectiveness shall not have been
terminated or rescinded, (iii) with respect to paragraph 1, the applicable
Trustee and the applicable Indentures shall have been qualified under the Trust
Indenture Act of 1939, as amended, and the rules and regulations thereunder,
(iv) with respect to paragraphs 1 through 4, (a) the Company shall have full
power and authority to execute, deliver and perform the obligations set forth in
the applicable documents, (b) the applicable documents shall have been duly
authorized, executed and delivered by the Company and (c) the execution and
delivery of the applicable documents and the performance by the Company of its
obligations thereunder shall not have violated, breached or otherwise given rise
to a default under the terms or provisions of its Restated Certificate of
Incorporation as then in effect or Restated By-Laws as then in effect or of any
material contract, commitment or other obligation to which the Company is then a
party, and such execution, delivery and performance shall comply with any
requirement or restriction imposed by any court or governmental body then having
jurisdiction over the Company, and (v) there shall not have occurred any change
in law affecting the validity or enforceability of such Security. We have also
assumed that none of the terms of any Security to be established subsequent to
the date hereof nor the issuance and sale of such Security, nor the compliance
by the Company with the terms of such Security, will violate any applicable law
or will result in a violation of any provision of any instrument or agreement
then binding upon the Company, or any restriction imposed by any court or
governmental body having jurisdiction over the Company.
We are members of the Bar of the State of New York, and the
foregoing opinion is limited to the laws of the State of New York, the General
Corporation Law of the State of Delaware, and the federal laws of the United
States of America.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement of the Company relating to the Securities and to the
reference to our name in the Prospectus contained therein. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
ESR/jc
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3, Registration No. 333-43251) and
related Prospectus of American Stores Company for the registration of
$1,000,000,000 of Securities and to the incorporation by reference therein of
our report dated March 14, 1997, except for the Subsequent Events Note, as to
which the date is April 8, 1997, with respect to the consolidated financial
statements and schedules of American Stores Company included in its Annual
Report (Form 10-K/A) for the fiscal year ended February 1, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Salt Lake City, Utah
January 30, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)___
-----------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-----------------------
AMERICAN STORES COMPANY
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 87-0207226
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
709 EAST SOUTH TEMPLE
SALT LAKE CITY, UTAH 84102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
UNIVERSAL SECURITIES
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit Insurance
Corporation, Washington, D.C., The Board of Governors of the Federal
Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY.
1.A copy of the articles of association of the
trustee now in effect.*
2.A copy of the certificates of authority of the trustee to commence
business.*
3.A copy of the authorization of the trustee to exercise corporate
trust powers.*
4.A copy of the existing by-laws of the trustee.*
5.Not Applicable.
6.The consent of the trustee required by Section 321(b) of the Act.
2
<PAGE>
7.A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8.Not Applicable.
9.Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the United
States of America, has duly caused this Statement of Eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago and State of Illinois, on the 23rd day of January,
1998.
The First National Bank of Chicago,
Trustee
By /s/ STEVEN M. WAGNER
-----------------------------
Steven M. Wagner
Vice President
* Exhibits 1, 2, 3 and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of The First National Bank
of Chicago, filed as Exhibit 25.1 to the Registration Statement on Form S-3 of
SunAmerica Inc. filed with the Securities and Exchange Commission on October 25,
1996 (Registration No. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
January 23, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between American Stores
Company and The First National Bank of Chicago, the undersigned, in accordance
with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby
consents that the reports of examinations of the undersigned, made by Federal or
State authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
Very truly yours,
The First National Bank of Chicago
By: /s/ STEVEN M. WAGNER
--------------------------
Steven M. Wagner
Vice President
4
<PAGE>
EXHIBIT 7
Legal Title of Bank: The First National Bank of Chicago
Call Date: 09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
DOLLAR AMOUNTS IN ----
THOUSANDS RCFD BIL MIL THOU
--------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) ........ 0081 4,499,157 1.a.
b. Interest-bearing balances(2) ................................. 0071 6,967,103 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) .... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . 1773 5,251,713 2.b.
3. Federal funds sold and securities purchased under agreements to
resell .......................................................... 1350 5,561,976 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) ........................................................... RCFD 2122 24,171,565 4.a.
b. LESS: Allowance for loan and lease losses .................... RCFD 3123 419,216 4.b.
c. LESS: Allocated transfer risk reserve ........................ RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) ......................... 2125 23,752,349 4.d.
5. Trading assets (from Schedule RD-D) ............................. 3545 6,238,805 5.
6. Premises and fixed assets (including capitalized leases) ........ 2145 717,303 6.
7. Other real estate owned (from Schedule RC-M) .................... 2150 7,187 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) .................................. 2130 77,115 8.
9. Customers' liability to this bank on acceptances outstanding .... 2155 614,921 9.
10. Intangible assets (from Schedule RC-M) .......................... 2143 277,105 10.
11. Other assets (from Schedule RC-F) ............................... 2160 2,147,141 11.
12. Total assets (sum of items 1 through 11) ........................ 2170 56,108,875 12.
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE>
Legal Title of Bank: The First National Bank of Chicago
Call Date: 09/30/97
ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
--------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
- -----------
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) ................................... RCON 2200 21,496,468 13.a
(1) Noninterest-bearing(1) .................................... RCON 6631 8,918,843 13.a.1
(2) Interest-bearing .......................................... RCON 6636 12,577,625 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) ............................ RCFN 2200 14,164,129 13.b.
(1) Noninterest bearing ....................................... RCFN 6631 352,399 13.b.1
(2) Interest-bearing .......................................... RCFN 6636 13,811,730 13.b.2
14. Federal funds purchased and securities sold under
agreements to repurchase: ........................................ RCFD 2800 3,894,469 14
15. a. Demand notes issued to the U.S. Treasury ...................... RCON 2840 68,268 15.a
b. Trading Liabilities (from Schedule RC-D) ...................... RCFD 3548 5,247,232 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less ................ RCFD 2332 2,608,057 16.a
b. With a remaining maturity of than one year through three years A547 379,893 16.b
c. With a remaining maturity of more than three years ............ A548 323,042 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding .......... RCFD 2920 614,921 18
19. Subordinated notes and debentures (2) ............................ RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G) ........................... RCFD 2930 1,222,121 20
21. Total liabilities (sum of items 13 through 20) ................... RCFD 2948 51,718,600 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus .................... RCFD 3838 0 23
24. Common stock ..................................................... RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) ......... RCFD 3839 2,989,408 25
26. a. Undivided profits and capital reserves ....................... RCFD 3632 1,175,518 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities .................................................... RCFD 8434 26,750 26.b.
27. Cumulative foreign currency translation adjustments .............. RCFD 3284 (2,259) 27
28. Total equity capital (sum of items 23 through 27) ................ RCFD 3210 4,390,275 28
29. Total liabilities and equity capital (sum of items 21 and 28) .... RCFD 3300 56,108,875 29
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external
Number
auditors as of any date during 1996 . . . . . .RCFD 6724..../ N/A / M.1
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
6
