As filed with the Securities and Exchange Commission on September 17, 2001
Registration No.333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Kmart Corporation
(Exact name of Registrant as specified in its charter)
Michigan 5331 38-0729500
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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3100 West Big Beaver Road
Troy, Michigan 48084
(248) 463-1000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Janet Kelley, Esq.
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(248) 463-1000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
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Copy to:
Vincent J. Pisano, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
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If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
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. |_|
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CALCULATION OF REGISTRATION FEE
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Title of Each Class Amount to Be Proposed Maximum Proposed Maximum Amount of
of Securities to Be Registered Registered Offering Price Per Share(1) Aggregate Offering Price(1) Registration Fee
9 7/8% Notes due June 15, 2008..... $430,000,000 100% $430,000,000 $107,500
===============================================================================================================================
(1)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
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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 Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 2001
PROSPECTUS
Offer to Exchange $430 million 9 7/8% Notes due
June 15, 2008 for $430 million 9 7/8% Notes
due June 15, 2008, Which Have Been Registered
Under the Securities Act of 1933, of
[GRAPHIC OMITTED]
KMART CORPORATION
The exchange offer will expire at
5:00 P.M., New York City time, on ,
2001, unless extended.
Terms of the exchange offer:
o The exchange notes are being registered with the Securities and
Exchange Commission and are being offered in exchange for the
original notes that were previously issued in an offering exempt from
the Securities and Exchange Commission's registration requirements.
The terms of the exchange offer are summarized below and more fully
described in this prospectus.
o We will exchange all original notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
o You may withdraw tenders of original notes at any time prior to the
expiration of the exchange offer.
o We believe that the exchange of original notes for exchange notes
pursuant to the exchange offer will not result in any taxable gain or
loss to you for U.S. federal income tax purposes, but you should see
"U.S. Federal Income Tax Consequences" on page 33 for more
information.
o We will not receive any proceeds from the exchange offer.
o The terms of the exchange notes are substantially identical to the
original notes, except that the exchange notes are registered under
the Securities Act of 1933, as amended (the "Securities Act") and the
transfer restrictions and registration rights applicable to the
original notes do not apply to the exchange notes.
See "Risk Factors" beginning on page 12 for a discussion of the risks
that should be considered by holders prior to tendering their original notes.
PRINCIPAL AMOUNT ANNUAL INTEREST FINAL DISTRIBUTION DATE
$430,000,000 9 7/8% June 15, 2008
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is
September __, 2001.
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You should rely on the information contained in or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with
different information. This prospectus is not an offer to sell, or a
solicitation of an offer to buy, any of the securities to any person or by
anyone in any jurisdiction where it is unlawful. You should not assume that
the information contained in or incorporated by reference in this prospectus
is accurate as of any date other than the date on the front of this prospectus
or the date of the document incorporated by reference.
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TABLE OF CONTENTS
PAGE
FORWARD-LOOKING STATEMENTS................................................... 4
WHERE YOU CAN FIND
MORE INFORMATION............................................................. 5
PROSPECTUS SUMMARY........................................................... 6
RISK FACTORS.................................................................12
USE OF PROCEEDS..............................................................13
RATIO OF EARNINGS TO
FIXED CHARGES...............................................................13
THE EXCHANGE OFFER...........................................................14
DESCRIPTION OF NOTES.........................................................23
U.S. FEDERAL INCOME TAX CONSEQUENCES.........................................32
PLAN OF DISTRIBUTION.........................................................33
LEGAL MATTERS................................................................34
EXPERTS......................................................................34
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[GRAPHIC OMITTED]
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PROSPECTUS
----------------
, 2001
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FORWARD-LOOKING STATEMENTS
This prospectus, as well as other statements or reports made by us or on
our behalf, may contain, or may incorporate material by reference which
includes, forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements, other than those based
solely on historical facts, which address activities, events or developments
that we expect or anticipate may occur in the future are forward-looking
statements, which are based upon a number of assumptions concerning future
conditions that may ultimately prove to be inaccurate. Actual events and
results may materially differ from anticipated results described in such
statements. Our ability to achieve such results is subject to certain risks
and uncertainties, including, but not limited to:
o general economic and weather conditions, including those which affect
buying patterns of our customers,
o changes in consumer spending, and our ability to anticipate buying
patterns and implement appropriate inventory strategies,
o the availability of various sources of capital and the cost thereof,
o competitive pressures and other third party actions,
o inability to timely acquire desired goods and/or fulfill labor needs
at planned costs, ability to successfully implement business
strategies and otherwise execute planned changes in various aspects
of the business,
o regulatory and legal developments, and
o other factors affecting business beyond our control.
Consequently, all of the forward-looking statements are qualified by
these cautionary statements and there can be no assurance that the results or
developments anticipated will be realized or that they will have the expected
effects on our business or operations. The forward-looking statements
contained herein or otherwise made by us or on our behalf speak only as of the
date of this prospectus or, if not contained herein, as of the date when made,
and we do not undertake to update any such forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the U.S. Securities and Exchange Commission (the "SEC"). Our
SEC filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference rooms in Washington, D.C. and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our common stock is listed on the New York Stock Exchange,
the Chicago Stock Exchange, and the Pacific Stock Exchange under the trading
symbol "KM." Our reports, proxy statements, and other information are also
available for inspection at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, the Chicago Stock Exchange at 120 South LaSalle Street,
Chicago, Illinois 60603 and at the Pacific Stock Exchange, 301 Pine Street,
San Francisco, California 94104.
We are "incorporating by reference" information into this prospectus
which means that we are disclosing important information to you by referring
you to documents we have filed with the SEC. The information incorporated by
reference is an important part of this prospectus, and information that we
file later with the SEC will automatically update and supersede the
information in this prospectus. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"):
o our Annual Report on Form 10-K for the fiscal year ended January 31,
2001 filed with the SEC on March 22, 2001;
o our Proxy Statement filed with the SEC on April 4, 2001;
o our Quarterly Report on Form 10-Q for the fiscal quarter ended May 2,
2001 filed with the SEC on May 17, 2001 and our Quarterly Report on
Form 10-Q for the fiscal quarter ended August 1, 2001 filed with the
SEC on August 23, 2001; and
o our Current Reports on form 8-K filed with the SEC on March 1, 2001,
March 13, 2001, August 1, 2001 and September 6, 2001.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Investor Relations
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(248) 463-1040
Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this document.
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO
LATER THAN 5 BUSINESS DAYS BEFORE YOU MAKE YOUR INVESTMENT DECISION.
PROSPECTUS SUMMARY
The following summary highlights selected information from this
prospectus and may not contain all of the information that is important to
you. This prospectus includes specific terms of the exchange notes we are
offering. We encourage you to read this prospectus in its entirety. You should
pay special attention to the "Risk Factors" section beginning on page 11 of
this prospectus. References to "we," "our," "us," "the Company" and "Kmart"
mean Kmart Corporation excluding, unless the context otherwise requires or as
otherwise expressly stated, our subsidiaries.
Recent Developments
On September 6, 2001, we announced that it will restructure certain
aspects of its overall operations. The focus of this restructuring program
will be on the supply chain infrastructure, including the reconfiguration of
our distribution center network and implementation of new operating software
across its supply chain.
New operating software will be implemented across our supply chain
beginning this quarter. Completion of the implementation is expected by the
end of the second quarter of 2002.
In conjunction with these actions, we expect to record special
charges totaling approximately $195 million ($124 million, after taxes) over
the next three quarters. Approximately $130 million of the charges relate to
the impairment of supply chain software and hardware that will no longer be
utilized and to accelerate depreciation on assets that will continue to be
used until their replacement. Approximately $65 million of the charges relate
to costs to exit the outdated distribution centers. Cash outlays related to
the supply chain strategy will be approximately $45 million.
Approximately $150 million of the charge will be recognized in the
third quarter of 2001. As certain components of our supply chain software will
continue to be utilized until replaced, deprecia tion will be accelerated to
reflect the revised useful lives and these assets will be fully-amortized by
mid-2002. The expected incremental depreciation aggregates $15 million in the
fourth quarter 2001, and $30 million in 2002.
Summary of the Exchange Offer
On June 19, 2001, we completed the private offering of $430 million
aggregate principal amount of 9 7/8% Notes due June 15, 2008. As part of that
offering, we entered into a registration rights agreement with the initial
purchasers of these original notes in which we agreed, among other things, to
deliver this prospectus to you and to complete an exchange offer for the
original notes. Below is a summary of the exchange offer.
Securities Offered........ Up to $430,000,000 aggregate principal
amount of new 9 7/8% Notes due June 15,
2008, which have been registered under the
Securities Act. The form and terms of these
exchange notes are identical in all material
respects to those of the original notes. The
exchange notes, however, will not contain the
transfer restrictions and registration rights
applicable to the original notes.
The Exchange Offer........ We are offering to exchange new $1,000 principal
amount of our 9 7/8% Notes due June 15, 2008,
which have been registered under the Securities
Act, for $1,000 principal amount of our
outstanding 9 7/8% Notes due June 15, 2008.
In order to be exchanged, an original note must be
properly tendered and accepted. All original notes
that are validly tendered and not withdrawn will
be exchanged. As of the date of this prospectus,
there are $430 million principal amount of
original notes outstanding. We will issue exchange
notes promptly after the expiration of the
exchange offer.
Resales................... Based on interpretations by the staff of the SEC,
as detailed in a series of no-action letters
issued to third parties, we believe that the
exchange notes issued in the exchange offer may be
offered for resale, resold or otherwise
transferred by you without compliance with the
registration and prospectus delivery requirements
of the Securities Act as long as:
o you are acquiring the exchange notes in the
ordinary course of your business;
o you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to
participate, in a distribution of the
exchange notes; and
o you are not an affiliate of ours.
If you are an affiliate of ours, are engaged in or
intend to engage in or have any arrangement or
understanding with any person to participate in
the distribution of the exchange notes:
(1) you cannot rely on the applicable
interpretations of the staff of the
SEC; and
(2) you must comply with the registration
requirements of the Securities Act in
connection with any resale
transaction.
Each broker or dealer that receives exchange notes
for its own account in exchange for original notes
that were acquired as a result of market-making or
other trading activities must acknowledge that it
will comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any offer to resell, resale, or
other transfer of the exchange notes issued in the
exchange offer, including the delivery of a
prospectus that contains information with respect
to any selling holder required by the Securities
Act in connection with any resale of the exchange
notes.
Furthermore, any broker-dealer that acquired any
of its original notes directly from us:
o may not rely on the applicable
interpretation of the staff of the SEC's
position contained in Exxon Capital
Holdings Corp., SEC no-action letter (April
13, 1988), Morgan, Stanley & Co. Inc., SEC
no-action letter (June 5, 1991) and
Shearman & Sterling, SEC no-action letter
(July 2, 1983); and
must also be named as a selling noteholder in
connection with the registration and prospectus
delivery requirements of the Securities Act
relating to any resale transaction.
Expiration Date 5:00 p.m., New York City time, on , 2001 unless we
extend the expiration date.
Accrued Interest on the
Exchange Notes and
Original Notes............ The exchange notes will bear interest from the
most recent date to which interest has been paid
on the original notes. If your original notes are
accepted for exchange, then you will receive
interest on the exchange notes and not on the
original notes.
Conditions to the
Exchange Offer............ The exchange offer is subject to customary
conditions. We may assert or waive these
conditions in our sole discretion. If we
materially change the terms of the exchange offer,
we will resolicit tenders of the original notes.
See "The Exchange Offer--Conditions to the
Exchange Offer" for more information regarding
conditions to the exchange offer.
Procedures for Tendering
Original Notes............ Except as described in the section titled "The
Exchange Offer--Guaranteed Delivery Procedures," a
tendering holder must, on or prior to the
expiration date:
o transmit a properly completed and duly
executed letter of transmittal, including
all other documents required by the letter
of transmittal, to United States Trust
Company of New York at the address listed
in this prospectus; or
o if original notes are tendered in
accordance with the book-entry procedures
described in this prospectus, the tendering
holder must transmit an agent's message to
the exchange agent at the address listed in
this prospectus.
See "The Exchange Offer--Procedures for
Tendering."
Special Procedures for
Beneficial Holders........ If you are the beneficial holder of original notes
that are registered in the name of your broker,
dealer, commercial bank, trust company or other
nominee, and you wish to tender in the exchange
offer, you should promptly contact the person in
whose name your original notes are registered and
instruct that person to tender on your behalf.
See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery
Procedures................ If you wish to tender your original notes and you
cannot deliver your original notes, the letter of
transmittal or any other required documents to the
exchange agent before the expiration date, you may
tender your original notes by following the
guaranteed delivery procedures under the heading
"The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights......... Tenders may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date.
Acceptance of Original
Notes and Delivery of
Exchange Notes............ Subject to the conditions stated in the section
"The Exchange Offer--Conditions to the Exchange
Offer" of this prospectus, we will accept for
exchange any and all original notes which are
properly tendered in the exchange offer before
5:00 p.m., New York City time, on the expiration
date. The exchange notes will be delivered
promptly after the expiration date.
See "The Exchange Offer--Terms of the Exchange
Offer."
U.S. Federal Income
Tax Consequences.......... We believe that your exchange of original notes
for exchange notes pursuant to the exchange offer
will not result in any taxable gain or loss to you
for U.S. federal income tax purposes.
See "U.S. Federal Income Tax Consequences."
Exchange Agent............ The Bank of New York is serving as exchange agent
in connection with the exchange offer. The address
and telephone number of the exchange agent are
listed under the heading "The Exchange
Offer--Exchange Agent."
Use of Proceeds........... We will not receive any proceeds from the issuance
of exchange notes in the exchange offer. We will
pay all expenses incident to the exchange offer.
See "Use of Proceeds."
Summary of Terms of the Exchange Notes
The form and terms of the exchange notes and the original notes are
identical in all material respects, except that the transfer restrictions and
registration rights applicable to the original notes do not apply to the
exchange notes. The exchange notes will evidence the same debt as the original
notes and will be governed by the same indenture.
Exchange Notes Offered.... $430 million principal amount of 9 7/8% Notes due
June 15, 2008.
Maturity.................. June 15, 2008.
Interest.................. Interest accrues on the principal amount of the
exchange notes at 9 7/8% per year. Interest is
payable on the exchange notes, and distributions
will be made semi-annually in arrears on June 15
and December 15 of each year. The first payment
will be made on December 15, 2001.
Ranking................... The exchange notes will be our senior unsecured
obligations and will rank equal in right of
payment with all other unsecured and
unsubordinated debt of Kmart. See "Description of
Notes - General."
Optional Redemption....... Kmart may redeem any of the Notes at any time at
the redemption price specified herein. See
"Description of Notes - Optional Redemption."
Covenants................. The indenture pursuant to which the Notes will be
issued will contain covenants that, among other
things, limit the ability of Kmart and certain of
it's subsidiaries to secure indebtedness with a
security interest on certain property or stock or
engage in certain sale and leaseback transactions
with respect to certain properties. See
"Description of Notes - Covenants."
RISK FACTORS
In addition to the information contained elsewhere in this prospectus,
the following risk factors should be carefully considered in evaluating the
exchange offer and an investment in the exchange notes. The following risk
factors, other than "You may have difficulty selling the original notes that
you do not exchange," generally apply to the original notes as well as the
exchange notes.
You may have difficulty selling the original notes that you do not exchange.
If you do not exchange your original notes for exchange notes in the
exchange offer, you will continue to be subject to the restrictions on
transfer of your original notes described in the legend on your original
notes. The restrictions on transfer of your original notes arise because we
issued the original notes under exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, you may only offer or sell the original
notes if they are registered under the Securities Act and applicable state
securities laws, or offered and sold under an exemption from these
requirements. We do not intend to register the original notes under the
Securities Act. To the extent original notes are tendered and accepted in the
exchange offer, the trading market, if any, for the original notes would be
adversely affected. See "The Exchange Offer--Consequences of Exchanging or
Failing to Exchange Original Notes."
You may find it difficult to sell your exchange notes because there is no
existing trading market for the exchange notes.
You may find it difficult to sell your exchange notes because an active
trading market for the exchange notes may not develop. The exchange notes are
being offered to the holders of the original notes. The original notes were
issued on June 19, 2001 primarily to a small number of institutional
investors. After the exchange offer, the trading market for the remaining
untendered original notes also could be adversely affected.
There is no existing trading market for the exchange notes. We do not
intend to apply for listing or quotation of the exchange notes on any
exchange, and so we do not know the extent to which investor interest will
lead to the development of a trading market or how liquid that market might
be. Although Credit Suisse First Boston Corporation, J.P. Morgan Securities
Inc., BNY Capital Markets, Inc., Fleet Securities, Inc., and Banc One Capital
Markets, the initial purchasers of the original notes have informed us that
they intend to make a market in the exchange notes, they are not obligated to
do so, and any market-making may be discontinued at any time without notice.
As a result, the market price of the exchange notes, as well as your ability
to sell the exchange notes, could be adversely affected.
Broker-dealers or noteholders may become subject to the registration and
prospectus delivery requirements of the Securities Act.
Any broker-dealer that:
o exchanges its original notes in the exchange offer for the purpose of
participating in a distribution of the exchange notes, or
o resells exchange notes that were received by it for its own account
in the exchange offer,
may be deemed to have received restricted securities and may be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction by that
broker-dealer. Any profit on the resale of the exchange notes and any
commission or concessions received by a broker-dealer may be deemed to be
underwriting compensation under the Securities Act.
In addition to broker-dealers, any noteholder that exchanges its original
certificates in the exchange offer for the purpose of participating in a
distribution of the exchange notes may be deemed to have received restricted
securities and may be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction by that noteholder.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In
consideration for issuing the exchange notes, we will receive in exchange the
original notes of like principal amount, the terms of which are identical in
all material respects to the exchange notes. The original notes surrendered in
exchange for exchange notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the exchange notes will not result in any
increase in our indebtedness. We have agreed to bear the expenses of the
exchange offer. No underwriter is being used in connection with the exchange
offer.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table shows Kmart's (1) ratio of earnings to fixed
charges and (2) ratio of earnings to combined fixed charges and preferred
stock dividends for the 26 weeks ended August 1, 2001 and July 26, 2000 and
each of the five most recent fiscal years.
26 Weeks Ended Year Ended
8/01/01(1) (7/26/00(1) (1/31/01(1) 1/26/00 1/27/99 1/28/98 1/29/97
Ratio of Earnings to Fixed Charges.............. - - - 2.8 2.4 1.6 1.5
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends................... - - - 2.5 2.1 1.5 1.4
(1) Due to Kmart's loss from continuing operations for the 26 weeks ended
August 1, 2001 and July 26, 2000 and the fiscal year ended January
31, 2001, the ratio of coverage was less than 1:1. Excluding pre-tax
charges in 2001 of $115 million for restructuring, impairments and
employee severance, the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock
dividends were 1.1 for the 26 weeks ended August 1, 2001. Excluding
the $740 million pre-tax charge for strategic initiatives in 2000,
the ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends were 1.5 and
1.4, respectively for the 26 weeks ended July 26, 2000. Excluding the
$728 million pre- tax charge for fiscal year ended January 31, 2001,
the ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends were 1.8 and
1.5, respectively for the fiscal year ended January 31, 2001. The
deficiency of income from continuing operations versus fixed charges
were $92 million, $628 million and $353 million for the 26 weeks
ended August 1, 2001, July 26, 2000 and the fiscal year ended January
31, 2001, respectively.
In computing the ratios, earnings consist of pre-tax income from
continuing operations before extraordinary items and the effect of accounting
changes, less undistributed equity income of unconsolidated affiliated retail
companies, plus fixed charges (excluding capitalized interest). Fixed charges
represent total interest charges, a portion of operating rentals deemed
representative of the interest factor, and amortization of debt discount and
expense. Certain prior year amounts have been restated for the effect of
discontinued operations.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
When we sold the original notes in June 2001, we entered into a
registration rights agreement with the initial purchasers of those original
notes. Under the registration rights agreement, we agreed to file a
registration statement regarding the exchange of the original notes for
exchange notes which are registered under the Securities Act of 1933. We also
agreed to use our reasonable best efforts to cause the registration statement
to become effective with the Securities and Exchange Commission, and to
conduct this exchange offer after the registration statement is declared
effective. The registration rights agreement provides that we will be required
to pay liquidated damages to the holders of the original notes if:
o the registration statement is not filed by September 17, 2001;
o the registration statement is not declared effective by December
16, 2001; or
o the exchange offer has not been consummated by March 16, 2002.
A copy of the registration rights agreement is filed as an exhibit to
the registration statement of which this prospectus is a part.
Terms of the Exchange Offer
Upon the terms and conditions described in this prospectus and in the
accompanying letter of transmittal, which together constitute the exchange
offer, we will accept for exchange original notes that are properly tendered
on or before the expiration date and not withdrawn as permitted below. As used
in this prospectus, the term "expiration date" means 5:00 p.m., New York City
time, on , 2001. However, if we, in our sole discretion, have extended the
period of time for which the exchange offer is open, the term "expiration
date" means the latest time and date to which we extend the exchange offer.
As of the date of this prospectus, $430 million aggregate principal
amount of the original notes is outstanding. This prospectus, together with
the letter of transmittal, is first being sent on or about , 2001 to all
holders of original notes known to us. Our obligation to accept original notes
for exchange in the exchange offer is subject to the conditions described
below under "Conditions to the Exchange Offer."
We reserve the right to extend the period of time during which the
exchange offer is open. We would then delay acceptance for exchange of any
original notes by giving oral or written notice of an extension to the holders
of original notes as described below. During any extension period, all
original notes previously tendered will remain subject to the exchange offer
and may be accepted for exchange by us. Any original notes not accepted for
exchange will be returned to the tendering holder after the expiration or
termination of the exchange offer.
Original notes tendered in the exchange offer must be in
denominations of principal amount of $1,000 and any integral multiple of
$1,000.
We reserve the right to amend or terminate the exchange offer, and
not to accept for exchange any original notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified below under "Conditions to the Exchange Offer." We will give oral or
written notice of any extension, amendment, non-acceptance or termination to
the holders of the original notes as promptly as practicable. If we materially
change the terms of the exchange offer, we will resolicit tenders of the
original notes, file a post-effective amendment to the prospectus and provide
notice to the noteholders. If the change is made less than five business days
before the expiration of the exchange offer, we will extend the offer so that
the noteholders have at least five business days to tender or withdraw. We
will notify you of any extension by means of a press release or other public
announcement no later than 9:00 a.m., New York City time on that date.
Our acceptance of the tender of original notes by a tendering holder
will form a binding agreement upon the terms and subject to the conditions
provided in this prospectus and in the accompanying letter of transmittal.
Procedures for Tendering
Except as described below, a tendering holder must, on or prior to
the expiration date:
o transmit a properly completed and duly executed letter of
transmittal, including all other documents required by the
letter of transmittal, to The Bank of New York at the address
listed below under the heading "Exchange Agent;" or
o if original notes are tendered in accordance with the book-entry
procedures listed below, the tendering holder must transmit an
agent's message to the exchange agent at the address listed
below under the heading "Exchange Agent."
In addition:
o the exchange agent must receive, on or before the expiration
date, certificates for the original notes; or
o a timely confirmation of book-entry transfer of the original
notes into the exchange agent's account at the Depository Trust
Company, the book-entry transfer facility, along with the letter
of transmittal or an agent's message; or
o the holder must comply with the guaranteed delivery procedures
described below.
The Depository Trust Company will be referred to as DTC in this
prospectus.
The term "agent's message" means a message, transmitted to DTC and
received by the exchange agent and forming a part of a book-entry transfer,
that states that DTC has received an express acknowledgment that the tendering
holder agrees to be bound by the letter of transmittal and that we may enforce
the letter of transmittal against this holder.
The method of delivery of original notes, letters of transmittal and
all other required documents is at your election and risk. If the delivery is
by mail, we recommend that you use registered mail, properly insured, with
return receipt requested. In all cases, you should allow sufficient time to
assure timely delivery. You should not send letters of transmittal or original
notes to us.
If you are a beneficial owner whose original notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee,
and wish to tender, you should promptly instruct the registered holder to
tender on your behalf. Any registered holder that is a participant in DTC's
book-entry transfer facility system may make book-entry delivery of the
original notes by causing DTC to transfer the original notes into the exchange
agent's account.
Signatures on a letter of transmittal or a notice of withdrawal must
be guaranteed unless the original notes surrendered for exchange are tendered:
o by a registered holder of the original notes who has not
completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the letter of transmittal, or
o for the account of an "eligible institution."
If signatures on a letter of transmittal or a notice of withdrawal
are required to be guaranteed, the guarantees must be by an "eligible
institution." An "eligible institution" is a financial institution, including
most banks, savings and loan associations and brokerage houses, that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program.
We will determine in our sole discretion all questions as to the
validity, form and eligibility of original notes tendered for exchange. This
discretion extends to the determination of all questions concerning the timing
of receipts and acceptance of tenders. These determinations will be final and
binding.
We reserve the right to reject any particular original note not
properly tendered or any which acceptance might, in our judgment or our
counsel's judgment, be unlawful. We also reserve the right to waive any
defects or irregularities or conditions of the exchange offer as to any
particular original note either before or after the expiration date, including
the right to waive the ineligibility of any tendering holder. Our
interpretation of the terms and conditions of the exchange offer as to any
particular original note either before or after the expiration date, including
the letter of transmittal and the instructions to the letter of transmittal,
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of original notes must be cured
within a reasonable period of time. Neither we, the exchange agent nor any
other person will be under any duty to give notification of any defect or
irregularity in any tender of original notes. Nor will we, the exchange agent
or any other person incur any liability for failing to give notification of
any defect or irregularity.
If the letter of transmittal is signed by a person other than the
registered holder of original notes, the letter of transmittal must be
accompanied by a written instrument of transfer or exchange in satisfactory
form duly executed by the registered holder with the signature guaranteed by
an eligible institution. The original notes must be endorsed or accompanied by
appropriate powers of attorney. In either case, the original notes must be
signed exactly as the name of any registered holder appears on the original
notes.
If the letter of transmittal or any original notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, these persons should so indicate when signing. Unless
waived by us, proper evidence satisfactory to us of their authority to so act
must be submitted.
By tendering, each holder will represent to us that, among other
things,
o the exchange notes are being acquired in the ordinary course of
business of the person receiving the exchange notes, whether or
not that person is the holder and
o neither the holder nor the other person has any arrangement or
understanding with any person to participate in the distribution
of the exchange notes.
In the case of a holder that is not a broker-dealer, that holder, by
tendering, will also represent to us that the holder is not engaged in and
does not intend to engage in a distribution of the exchange notes.
If any holder or other person is an "affiliate" of ours, as defined
under Rule 405 of the Securities Act, or is engaged in, or intends to engage
in, or has an arrangement or understanding with any person to participate in,
a distribution of the exchange notes, that holder or other person can not rely
on the applicable interpretations of the staff of the SEC and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account
in exchange for original notes, where the original notes were acquired by it
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus that meets the requirements of
the Securities Act in connection with any resale of the exchange notes. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date, all original notes
properly tendered. We will issue the exchange notes promptly after acceptance
of the original notes. See "Conditions to the Exchange Offer" below. For
purposes of the exchange offer, we will be deemed to have accepted properly
tendered original notes for exchange when, as and if we have given oral or
written notice to the exchange agent, with prompt written confirmation of any
oral notice.
For each original note accepted for exchange, the holder of the
original note will receive an exchange note having a principal amount equal to
that of the surrendered original note. The exchange notes will bear interest
from the most recent date to which interest has been paid on the original
notes. Accordingly, registered holders of exchange notes on the relevant
record date for the first interest payment date following the completion of
the exchange offer will receive interest accruing from the most recent date to
which interest has been paid. Original notes accepted for exchange will cease
to accrue interest from and after the date of completion of the exchange
offer. Holders of original notes whose original notes are accepted for
exchange will not receive any payment for accrued interest on the original
notes otherwise payable on any interest payment date the record date for which
occurs on or after completion of the exchange offer and will be deemed to have
waived their rights to receive the accrued interest on the original notes.
In all cases, issuance of exchange notes for original notes will be
made only after timely receipt by the exchange agent of:
o certificates for the original notes, or a timely book-entry
confirmation of the original notes, into the exchange agent's
account at the book-entry transfer facility;
o a properly completed and duly executed letter of transmittal;
and
o all other required documents.
Unaccepted or non-exchanged original notes will be returned without
expense to the tendering holder of the original notes. In the case of original
notes tendered by book-entry transfer in accordance with the book-entry
procedures described below, the non-exchanged original notes will be credited
to an account maintained with the book-entry transfer facility, as promptly as
practicable after the expiration or termination of the exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account for
the original notes at DTC for purposes of the exchange offer within two
business days after the date of this prospectus. Any financial institution
that is a participant in DTC's systems must make book-entry delivery of
original notes by causing DTC to transfer those original notes into the
exchange agent's account at DTC in accordance with DTC's procedure for
transfer. This participant should transmit its acceptance to DTC on or prior
to the expiration date or comply with the guaranteed delivery procedures
described below. DTC will verify this acceptance, execute a book-entry
transfer of the tendered original notes into the exchange agent's account at
DTC and then send to the exchange agent confirmation of this book-entry
transfer. The confirmation of this book-entry transfer will include an agent's
message confirming that DTC has received an express acknowledgment from this
participant that this participant has received and agrees to be bound by the
letter of transmittal and that we may enforce the letter of transmittal
against this participant. Delivery of exchange notes issued in the exchange
offer may be effected through book-entry transfer at DTC. However, the letter
of transmittal or facsimile of it or an agent's message, with any required
signature guarantees and any other required documents, must:
o be transmitted to and received by the exchange agent at the
address listed below under "--Exchange Agent" on or prior to the
expiration date; or
o comply with the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
If a registered holder of original notes desires to tender the
original notes, and the original notes are not immediately available, or time
will not permit the holder's original notes or other required documents to
reach the exchange agent before the expiration date, or the procedure for
book-entry transfer described above cannot be completed on a timely basis, a
tender may nonetheless be made if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent received from
an eligible institution a properly completed and duly executed
letter of transmittal, or a facsimile of the letter of
transmittal, and notice of guaranteed delivery, substantially in
the form provided by us, by facsimile transmission, mail or hand
delivery,
(1) stating the name and address of the holder of original
notes and the amount of original notes tendered;
(2) stating that the tender is being made; and
(3) guaranteeing that within three New York Stock Exchange
trading days after the expiration date, the certificates
for all physically tendered original notes, in proper form
for transfer, or a book-entry confirmation, as the case may
be, and any other documents required by the letter of
transmittal will be deposited by the eligible institution
with the exchange agent; and
o the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation, as the
case may be, and all other documents required by the letter of
transmittal, are received by the exchange agent within three New
York Stock Exchange trading days after the expiration date.
Withdrawal Rights
Tenders of original notes may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a
written notice of withdrawal at the address or, in the case of eligible
institutions, at the facsimile number, indicated below under "Exchange Agent"
before 5:00 p.m., New York City time, on the expiration date. Any notice of
withdrawal must:
o specify the name of the person, referred to as the depositor,
having tendered the original notes to be withdrawn;
o identify the original notes to be withdrawn, including the
certificate number or numbers and principal amount of the
original notes;
o contain a statement that the holder is withdrawing his election
to have the original notes exchanged;
o be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the original
notes were tendered, including any required signature
guarantees, or be accompanied by documents of transfer to have
the trustee with respect to the original notes register the
transfer of the original notes in the name of the person
withdrawing the tender; and
o specify the name in which the original notes are registered, if
different from that of the depositor.
If certificates for original notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of these
certificates, the withdrawing holder must also submit the serial numbers of
the particular certificates to be withdrawn and signed notice of withdrawal
with signatures guaranteed by an eligible institution unless this holder is an
eligible institution. If original notes have been tendered in accordance with
the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn original notes. We will
determine all questions as to the validity, form and eligibility, including
time of receipt, of notices of withdrawal. Any original notes so withdrawn
will be deemed not to have been validly tendered for exchange. No exchange
notes will be issued unless the original notes so withdrawn are validly
re-tendered. Any original notes that have been tendered for exchange, but
which are not exchanged for any reason, will be returned to the tendering
holder without cost to the holder. In the case of original notes tendered by
book-entry transfer, the original notes will be credited to an account
maintained with the book-entry transfer facility for the original notes.
Properly withdrawn original notes may be re-tendered by following the
procedures described under "Procedures for Tendering" above at any time on or
before 5:00 p.m., New York City time, on the expiration date.
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we will
not be required to accept for exchange, or to issue exchange notes in exchange
for, any original notes, and may terminate or amend the exchange offer, if at
any time before the acceptance of the original notes for exchange or the
exchange of the exchange notes for the original notes, any of the following
events occurs:
o there is threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree issued by,
any court or governmental agency or other governmental
regulatory or administrative agency or commission:
(1) seeking to restrain or prohibit the making or completion of
the exchange offer or any other transaction contemplated by
the exchange offer, or assessing or seeking any damages as
a result of this transaction;
(2) resulting in a material delay in our ability to accept for
exchange or exchange some or all of the original notes in
the exchange offer; or
(3) any statute, rule, regulation, order or injunction has been
sought, proposed, introduced, enacted, promulgated or
deemed applicable to the exchange offer or any of the
transactions contemplated by the exchange offer by any
governmental authority, domestic or foreign; or
o any action has been taken, proposed or threatened, by any
governmental authority, domestic or foreign, that in our sole
judgment might directly or indirectly result in any of the
consequences referred to in clauses (1), (2) or (3) above or, in
our sole judgment, might result in the holders of exchange notes
having obligations with respect to resales and transfers of
exchange notes which are greater than those described in the
interpretation of the SEC referred to above, or would otherwise
make it inadvisable to proceed with the exchange offer; or
o the following has occurred:
(1) any general suspension of or general limitation on prices
for, or trading in, securities on any national securities
exchange or in the over-the-counter market; or
(2) any limitation by a governmental authority, which may
adversely affect our ability to complete the transactions
contemplated by the exchange offer; or
(3) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by any governmental agency or authority which
adversely affects the extension of credit; or
(4) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the
United States, or, in the case of any of the preceding
events existing at the time of the commencement of the
exchange offer, a material acceleration or worsening of
these calamities; or
o any change, or any development involving a prospective change,
has occurred or been threatened in our business, financial
condition, operations or prospects and those of our subsidiaries
taken as a whole that is or may be adverse to us, or we have
become aware of facts that have or may have an adverse impact on
the value of the original notes or the exchange notes; which in
our sole judgment in any case makes it inadvisable to proceed
with the exchange offer and/or with such acceptance for exchange
or with such exchange.
These conditions to the exchange offer are for our sole benefit and
we may assert them regardless of the circumstances giving rise to any of these
conditions, or we may waive them in whole or in part in our sole discretion.
If we do so, the exchange offer will remain open for at least 5 business days
following any waiver of the preceding conditions. Our failure at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right.
In addition, we will not accept for exchange any original notes
tendered, and no exchange notes will be issued in exchange for any original
notes, if at this time any stop order is threatened or in effect relating to
the registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939.
Exchange Agent
We have appointed The Bank of New York as the exchange agent for the
exchange offer. You should direct all executed letters of transmittal to the
exchange agent at the address indicated below. You should direct requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery to the exchange agent addressed as
follows:
Delivery To: The Bank of New York, Exchange Agent
By Hand Before 4:30 p.m.: By Registered or Certified Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Floor 21 West Floor 21 West
New York, New York 10286 New York, New York 10286
Facsimile: (212) 815-5915 Facsimile: (212) 815-5915
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
By Hand or Overnight Delivery
after
4:30 p.m. on the Expiration Date:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust
Administration
All other questions should be addressed to Kmart Corporation, 3100
West Big Beaver Road, Troy, Michigan 48084, Attention: Investor Relations. If
you deliver the letter of transmittal to an address other than any address
indicated above or transmit instructions via facsimile other than any
facsimile number indicated, then your delivery or transmission will not
constitute a valid delivery of the letter of transmittal.
Fees and Expenses
We will not make any payment to brokers, dealers, or others
soliciting acceptances of the exchange offer. The estimated cash expenses to
be incurred in connection with the exchange offer will be paid by us. We
estimate these expenses in the aggregate to be approximately $ .
Accounting Treatment
We will not recognize any gain or loss for accounting purposes upon
the consummation of the exchange offer. We will amortize the expense of the
exchange offer over the term of the exchange notes under generally accepted
accounting principles.
Transfer Taxes
Holders who tender their original notes for exchange will not be
obligated to pay any related transfer taxes, except that holders who instruct
us to register exchange notes in the name of, or request that original notes
not tendered or not accepted in the exchange offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer taxes.
Consequences of Exchanging or Failing to Exchange Original Notes
Holders of original notes who do not exchange their original notes
for exchange notes in the exchange offer will continue to be subject to the
provisions in the indenture regarding transfer and exchange of the original
notes and the restrictions on transfer of the original notes as described in
the legend on the original notes as a consequence of the issuance of the
original notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the original notes may not be offered or sold,
unless registered under the Securities Act, except under an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws.
Under existing interpretations of the Securities Act by the SEC's
staff contained in several no-action letters to third parties, and subject to
the immediately following sentence, we believe that the exchange notes would
generally be freely transferable by holders after the exchange offer without
further registration under the Securities Act, subject to certain
representations required to be made by each holder of exchange notes, as set
forth below. However, any purchaser of exchange notes who is one of our
"affiliates" (as defined in Rule 405 under the Securities Act) or who intends
to participate in the exchange offer for the purpose of distributing the
exchange notes:
o will not be able to rely on the interpretation of the SEC's
staff;
o will not be able to tender its original notes in the exchange
offer; and
o must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale
or transfer of the exchange notes unless such sale or transfer
is made pursuant to an exemption from such requirements. See
"Plan of Distribution."
We do not intend to seek our own interpretation regarding the
exchange offer and there can be no assurance that the SEC's staff would make a
similar determination with respect to the exchange notes as it has in other
interpretations to other parties, although we have no reason to believe
otherwise.
DESCRIPTION OF NOTES
The terms of the exchange notes to be issued in the exchange offer
are identical in all material respects to the terms of the original notes,
except for the transfer restrictions relating to the original notes. Any
original notes that remain outstanding after the exchange offer, together with
exchange notes issued in the exchange offer, will be treated as a single class
of securities under the indenture for voting purposes. For the purposes of
this Section--"Description of Notes"--where we refer to the terms "note" or
"notes", we are referring to both the original notes and the exchange notes.
The notes are governed by a Senior Indenture (the "Senior
Indenture"), as supplemented by the Third Supplemental Indenture (together
with the Senior Indenture, the "Indenture") between us and The Bank of New
York, as trustee (the "Trustee"). We have summarized select portions of the
Indenture below. The summary is not complete and is qualified by reference to
the Indenture. Capitalized terms not otherwise defined herein have the
meanings given to them in the Indenture.
General
The notes are our senior unsecured obligations. The notes will be
limited to $430,000,000 aggregate principal amount and will mature on June 15,
2008. The notes will bear Interest at 9 7/8% per annum from June 19, 2001. We
will pay interest semiannually on June 15 and December 15 of each year
beginning December 15, 2001, to the person in whose name such note (or any
predecessor note) is registered at the close of business on June 1 or December
1, respectively, preceding such interest payment date. Interest on the notes
will be paid on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, if any, and interest on the notes will be
payable, and the notes will be exchangeable and transfers thereof will be
registrable, at an office or agency, maintained by us for this purpose in New
York, New York (which initially will be the corporate trust office of the
Trustee) or such other office or agency permitted under the Indenture.
We do not intend to list the notes on a national securities exchange.
The Indenture does not contain any provisions that would limit our
ability to incur indebtedness or require the maintenance of financial ratios
or specified levels of net worth or liquidity. However, the Indenture does:
o provide that, subject to certain exceptions, neither Kmart nor
any Subsidiary will subject its property or assets to any
mortgage or other encumbrance unless the notes are secured
equally and ratably with such other indebtedness thereby
secured; and
o contain limitations on the ability of Kmart and its Subsidiaries
to enter into certain sale and leaseback arrangements.
In addition, the Indenture does not contain any provisions that would
require us to repurchase or redeem or otherwise modify the terms of any of the
notes upon a change in control or other events involving us that may adversely
affect our creditworthiness.
Redemption
We, at our option, may at any time redeem all or any portion of notes
on not less than 30 nor more than 90 days' prior notice mailed to the holders
of the notes to be redeemed. The notes will be redeemable at a redemption
price, plus accrued interest to the date of redemption, equal to the greater
of (1) 100% of the Principal Amount of the notes to be redeemed or (2) the sum
of the present values of the remaining scheduled payments of principal and
interest on the notes to be redeemed that would be due after the related
redemption date but for such redemption (except that, if such redemption date
is not an interest payment date, the amount of the next succeeding scheduled
interest payment will be reduced by the amount of interest accrued thereon to
the redemption date), discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 62.5 basis points.
If the notes are to be redeemed, we will not be required to:
o issue, register the transfer of, or exchange any notes during a
period beginning at the opening of business 15 days before the
day of mailing of a notice of redemption of any notes that may
be selected for redemption and ending at the close of business
on the day of such mailing; or
o register the transfer of or exchange any notes so selected for
redemption, in whole or in part, except the unredeemed portion
of any notes being redeemed in part.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity (computed as of
the second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by us.
"Comparable Treasury Price" means, with respect to any redemption
date, (1) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its statistical release (or
any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government notes" or (2)
if such release (or any successor release) is not published or does not
contain such prices on such business day, (a) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (b) if the
Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all Quotations obtained.
"Reference Treasury Dealer" means Credit Suisse First Boston
Corporation and its successors and two other nationally recognized investment
banking firms that are Primary Treasury Dealers specified from time to time by
us, except that if any of the foregoing ceases to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), we are
required to designate as a substitute another nationally recognized investment
banking firm that is a Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer as of 3:30 pm, New
York City time, on the third business day preceding such redemption date.
On and after any redemption date, interest will cease to accrue on
the notes called for redemption. If we are redeeming less than all of the
notes, the Trustee must select the notes to be redeemed by lot or by such
method as the Trustee deems fair and appropriate in its discretion.
Covenants
Limitations on Liens
We will not, and will not permit any Subsidiary to, issue, assume or
guarantee any Debt secured by any Lien upon any Operating Property or any
shares of stock or indebtedness of any Subsidiary, without effectively
securing the notes (together with, if we determine, any other Debt of, or
guaranteed by, us or any such Subsidiary ranking equally with the notes)
equally and ratably with such Debt. This restriction does not apply to:
(a) Liens on any Operating Property acquired, constructed,
improved or opened by us or any Subsidiary after the date of
the Indenture to secure Debt issued, assumed or Guaranteed
within 360 days after such acquisition or completion of
construction or improvement or Opening to provide for the
payment of the purchase price of, or the cost of
constructing or improving or Opening, the Operating
Property;
(b) Liens existing on any Operating Property at the time of its
acquisition by us or one of our Subsidiaries, or Liens on
any shares of stock or indebtedness of any Subsidiary
existing at the time it becomes a Subsidiary;
(c) Liens existing on any property acquired from a corporation
merged with or into us or a Subsidiary;
(d) Liens to secure Debt of a Subsidiary to us or to another
Subsidiary;
(e) Liens in existence on any Operating Property or any shares
of stock or indebtedness of any Subsidiary on the date of
the Indenture;
(f) Liens in favor of governmental bodies to secure partial
progress, advance or other payments pursuant to any contract
or statute or to secure Debt incurred to finance the
purchase price or cost of constructing or improving the
property subject to such Liens;
(g) Liens imposed by law, such as carriers', warehousemen's,
mechanics', landlord's, materialmen's, repairmen's or other
like Liens;
(h) pledges or deposits in connection with workers'
compensation, unemployment insurance and similar legislation
and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(i) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in
connection with the importation of goods;
(j) Liens for taxes, assessments, governmental charges or levies
not yet due or which are being contested in good faith;
(k) any Lien incurred or assumed in connection with the issuance
by a state or political subdivision of a state of any
securities the interest on which is exempt from Federal
income taxes by virtue of Section 103 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any other
laws and regulations in effect at the time of such issuance;
(l) Liens securing Debt incurred to extend, renew or replace
Debt secured by any Lien; provided the new Debt has a
principal amount no greater than the original Debt and so
long as the Lien does not extend to any other property; and
(m) the issuance, assumption or guarantee by us or any
Subsidiary of Debt secured by a Lien which would otherwise
be prohibited by the Indenture if the sum of (1) all secured
Debt of ours and our Subsidiaries otherwise prohibited by
the Indenture and (2) the Attributable Debt of all Sale and
Leaseback Transactions otherwise prohibited under the
Indenture does not exceed 10% of Consolidated Net Tangible
Assets.
Limitations on Sale and Leaseback Transactions
We will not, and will not permit any Subsidiary to, enter into any
Sale and Leaseback Transaction involving any Operating Property, unless within
360 days of the effective date of the Sale and Leaseback Transaction we or the
Subsidiary apply an amount equal to the greater of (a) the fair market value
of such property (as determined by our Board of Directors) or (b) the net
proceeds to:
(1) the prepayment or retirement (other than mandatory
prepayment or retirement) of Funded Debt of Kmart or a
Subsidiary; or
(2) the purchase of other property that will constitute
Operating Property.
This restriction does not apply to a Sale and Leaseback Transaction, if:
(a) Kmart or the Subsidiary could create Debt in an amount equal
to the Attributable Debt of the Sale and Leaseback
Transaction secured by the Operating Property without being
required to equally and ratably secure the notes under the
"Limitation on Liens" covenant;
(b) the Sale and Leaseback Transaction involves a store and
occurs within 360 days of the store Opening;
(c) the Sale and Leaseback Transaction is between Kmart and a
Subsidiary or between Subsidiaries; or
(d) the Sale and Leaseback Transaction involves taking back a
lease for a period of three years or less (including
renewals).
Limitations on Consolidation, Merger and Sale of Assets
We may not consolidate with or merge into any other Person, or
convey, transfer or lease all or substantially all of our properties and
assets to any Person, unless:
(a) the Person formed by, or surviving, any consolidation is a
Person organized and existing under the laws of the United
States of America or a state of the United States of America
or the District of Columbia and assumes payment of the
principal of and premium, if any, and interest, on the notes
and the performance and observance of the Indenture; and
(b) immediately after giving effect to the transaction, no Event
of Default will have happened and be continuing.
Definitions
"Attributable Debt" means, with respect to a Sale and Leaseback
Transaction, at the time of determination, the present value of the obligation
of the lessee for net rental payments during the remaining term of the lease
included in the Sale and Leaseback Transaction, including any period for which
the lease has been extended or may, at the option of the lessor, be extended,
using a discount rate equal to the average interest rate used to calculate the
present value of operating lease payments for the most recent year in Kmart's
most recent Annual Report to Stockholders.
"Consolidated Net Tangible Assets" means the total of all assets
appearing on the consolidated balance sheet of us and our subsidiaries, less:
(a) current liabilities;
(b) reserves for depreciation and other asset valuation
reserves;
(c) intangible assets such as goodwill, trademarks, tradenames,
patents, unamortized debt discount and expense and other
similar intangibles; and
(d) appropriate adjustments on account of minority interests of
other persons holding stock in any Subsidiary.
"Debt" means, all obligations of a Person for borrowed money,
including obligations secured by Liens on property owned by the Person whether
or not the Person is directly liable for the obligations.
"Funded Debt" means Debt which matures more than one year from the
date of computation, or which is extendable or renewable at the sole option of
the obligor so that it may become payable more than one year from such date.
"Lien" means any mortgage, deed of trust, security interest, pledge,
lien or other encumbrance.
"Opening" means the completion of construction or commencement of
commercial operation of such property, whichever is later.
"Operating Property" means:
(a) all real property and improvements on the real property
owned by us or a Subsidiary, including, without limitation,
any store, warehouse, service center or distribution center
wherever located; provided that this paragraph (a) will not
include any store, warehouse, service center or distribution
center which our Board of Directors declares by resolution,
together with all other stores, warehouses, service centers
or distribution centers similarly not included in Operating
Property, not to be of material importance to the business
of us and our Subsidiaries; and
(b) all equipment (including all transportation and warehousing
equipment but excluding office equipment and data processing
equipment) owned by us or a Subsidiary.
"Person" means any individual, corporation, limited liability
company, partnership, joint-venture, joint-stock company, unincorporated
organization or government or any agency or political subdivision of the
government.
"Sale and Leaseback Transaction" means any arrangement with any
Person providing for the leasing to Kmart or any Subsidiary of any Operating
Property, which Operating Property has been or is to be sold or transferred by
us or such Subsidiary to such Person.
"Subsidiary" means:
(a) a corporation more than 50% of the outstanding voting stock
of which is owned, directly or indirectly, by Kmart, by one
or more other Subsidiaries, or by Kmart and one or more
other Subsidiaries; or
(b) any other Person in which Kmart, or one or more
Subsidiaries, or Kmart and one or more Subsidiaries,
directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs of
such Person.
Defeasance and Covenant Defeasance
Kmart may elect either:
(a) to defease and be discharged from any and all obligations
with respect to the notes; or
(b) to be released from its obligations described above under
"Limitations on Liens" and "Limitations on Sale and
Leaseback Transactions" with respect to the notes, only:
(1) upon the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations, which
through the payment of interest and principal of
the U.S. Government Obligations in accordance with
their terms will provide money in an amount
sufficient to pay any installment of principal and
premium, if any and interest on the notes on the
stated maturity of the payments in accordance with
the terms of the Indenture and the notes;
(2) upon delivery to the Trustee by Kmart of an opinion
of counsel to the effect that the deposit and
related defeasance or release will not cause the
holders of the notes to recognize income, gain or
loss for federal income tax purposes;
(3) if at the time of defeasance or release no Event of
Default will have happened or be continuing; and
(4) if certain other conditions are satisfied.
Concerning the Trustee
The Bank of New York is the trustee under the Indenture and serves as
registrar and paying agent with regard to the notes. The Bank of New York is a
lender under our $1.1 billion and $465 million revolving credit facilities and
also serves as Trustee for notes previously issued under the Senior Indenture.
Events of Default, Waiver and Notice
The following are events of default under the Indenture:
o failure by us to pay interest on the notes when due and such
failure continues for 30 days and the time for payment has
not been extended or deferred;
o failure by us to pay the principal or premium of the notes,
if any, when due;
o failure by us to observe or perform any other covenant
contained in the notes or the Indenture other than a
covenant specifically relating to another series of debt
securities, and such failure continues for 90 days after we
receive notice from the trustee or holders of at least 25%
in aggregate principal amount of the outstanding notes; and
o particular events of bankruptcy, insolvency, or
reorganization of Kmart.
If an event of default with respect to the notes occurs and is
continuing, the trustee or the holders of at least 25% in aggregate principal
amount of the outstanding notes, by notice in writing to Kmart and to the
trustee, if notice is given by such holders, may declare the unpaid principal
of, premium, if any, and accrued interest, if any, immediately due and
payable.
The holders of a majority in principal amount of the outstanding
notes may waive any default or event of default and its consequences, except
defaults or events of default regarding payment of principal, premium, if any,
or interest on the notes. Any such waiver shall cure such default or event of
default.
Subject to the terms of the Indenture, if an event of default under
an indenture shall occur and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of the notes, unless such holders
have offered the Trustee reasonable indemnity. The holders of a majority in
principal amount of the outstanding notes will have the right to 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,
with respect to the notes, provided that:
o it is not in conflict with any law or the Indenture;
o the trustee may take any other action deemed proper by it
which is not inconsistent with such direction; and
o subject to any applicable duties under the Trust Indenture
Act, the trustee need not take any action that might involve
it in personal liability or might be unduly prejudicial to
the holders not involved in the proceeding.
A holder of the notes will only have the right to institute a
proceeding under the Indenture or to appoint a receiver or trustee, or to seek
other remedies if:
o the holder has given written notice to the trustee of a
continuing event of default with respect to the notes;
o the holders of at least 25% in aggregate principal amount of
the outstanding notes have made written request, and such
holders have offered reasonable indemnity to the trustee to
institute such proceedings as trustee; and
o the trustee does not institute such proceeding, and does not
receive from the holders of a majority in aggregate
principal amount of the outstanding notes other conflicting
directions within 60 days after such notice, request, and
offer.
These limitations do not apply to a suit instituted by a holder of
notes if Kmart defaults in the payment of the principal, premium, if any, or
interest on, the notes.
Kmart will periodically file statements with the Trustee regarding
its compliance with some of the covenants in the Indenture.
Modification
Kmart and the Trustee may change the Indenture without the consent of
any holders with respect to specific matters, including:
o to fix any ambiguity, defect, or inconsistency in the
Indenture; and
o to change anything that does not materially adversely affect
the interests of any holder of notes.
In addition, under the Indenture, the rights of holders of notes may
be changed by Kmart and the Trustee with the written consent of the holders of
at least a majority in aggregate principal amount of the notes. However, the
following changes may only be made with the consent of each holder of any
note:
o extend the fixed maturity of the notes;
o reduce the principal amount, reduce the rate of, or extend
the time of payment of interest, or any premium payable upon
the redemption of the notes;
o reduce the amount of principal payable upon acceleration of
the maturity thereof;
o change the currency in which the notes or any premium or
interest thereon is payable;
o impair the right to enforce any payment on or with respect
to any notes;
o reduce the percentage in principal amount of outstanding
notes, the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of
compliance with certain provisions of the Indenture or for
waiver of certain defaults;
o reduce the requirements contained in the Indenture for
quorum or voting;
o change any obligations of Kmart to maintain an office or
agency in the places and for the purposes required by the
Indenture; or
o modify any of the above provisions.
Book-Entry Issuance
The Depository Trust Company ("DTC") will act as the depositary for
the global securities. We will issue global securities as fully registered
securities registered in the name of DTC's nominee, Cede & Co. Kmart will
issue one or more fully registered global securities for notes and will
deposit the global securities with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. DTC's direct
participants include securities brokers and dealers (which may include the
initial purchasers), banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its direct participants and
by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to DTC's
book-entry system is also available to others, such as securities brokers and
dealers, banks and trust companies, that clear through or maintain a custodial
relationship with a direct participant. The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of securities under DTC's system must be made by or through
a direct participant, which will receive a credit for such securities on DTC's
records. The ownership interest of each actual purchaser of each security -
the beneficial owner - is in turn recorded on the records of direct and
indirect participants. Beneficial owners will not receive written confirmation
from DTC of their purchases, but they should receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the participants through which they entered into the
transactions. Transfers of ownership interest in the securities are
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates
representing their securities, except in the event that use of the book-entry
system for the securities is discontinued.
To facilitate subsequent transfers, all global securities that are
deposited with, or on behalf of, DTC are registered in the name of DTC's
nominee, Cede & Co. The deposit of global securities with, or on behalf of,
DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the securities; DTC's records reflect only the identity of the direct
participants to whose accounts such securities are credited, which may or may
not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
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 will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
global securities. Under its usual procedures, DTC will mail an omnibus proxy
to us as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
to whose accounts the securities are credited on the applicable record date
(identified in a listing attached to the omnibus proxy).
Redemption proceeds, principal payments and any premium, interest or
other payments on the global securities will be made to Cede & Co., as nominee
of DTC. DTC's practice is to credit direct participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
DTC's records, unless DTC has reason to believe that it will not receive
payment on that date. Payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of the participant
and not of DTC, Kmart or the indenture trustee, subject to any statutory or
regulatory requirements in effect at the time. Payment of redemption payments,
principal and any premium, interest or other payments to DTC is the
responsibility of Kmart and the applicable paying agent, disbursement of
payments to direct participants will be the responsibility of DTC, and
disbursement of payments to the beneficial owners will be the responsibility
of direct and indirect participants.
If applicable, redemption notices will be sent to Cede & Co. If less
than all of the notes are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each direct participant in the notes to be
redeemed.
A beneficial owner electing to have its interest in a global security
repaid by us will give any required notice through its participant and will
effect delivery of its interest by causing the direct participant to transfer
the participant's interest in the global securities on DTC's records to the
appropriate party. The requirement for physical delivery in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
global securities are transferred on DTC's records.
DTC may discontinue providing its services as securities depositary
with respect to the global securities at any time by giving reasonable notice
to us or the indenture trustee. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificates for the
securities are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
certificates for the securities will be printed and delivered.
We have provided the foregoing information with respect to DTC to the
financial community for information purposes only. We do not intend the
information to serve as a representation, warranty or contract modification of
any kind. We have received the information in this section concerning DTC and
DTC's system from sources that we believe to be reliable, but we take no
responsibility for the accuracy of this information.
Certificated Notes
Subject to certain conditions, the notes represented by the global
securities are exchangeable for certificated notes of the same series in
definitive form of like tenor in denominations of $1,000 and integral
multiples thereof if:
o DTC notifies us that it is unwilling or unable to continue
as depositary for the global securities or the depositary
ceases to be a clearing agency registered under the Exchange
Act and, in either case, we are unable to locate a qualified
successor within 90 days;
o we in our discretion at any time determine not to have all
the notes represented by a global security; or
o a default entitling the holders of the notes to accelerate
the maturity thereof has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for
certificated notes of the same series as issuable in authorized denominations
and registered in such names as DTC shall direct. Subject to the foregoing,
the global securities are not exchangeable, except for global securities of
the same aggregate denomination to be registered in the name of the depositary
or its nominee.
All such certificates will bear the legend referred to under
"Transfer Restrictions" (unless we determine otherwise in accordance with
applicable law) and will be subject to the provisions of such legend.
Same-Day Payment
The Indenture requires us to make payments in respect of the notes
(including principal, premium, if any, and interest) by wire in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement that are applicable to such holder (including certain
indemnification obligations).
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth the anticipated material U.S.
federal income tax considerations to holders of original notes who exchange
original notes for exchange notes pursuant to the exchange offer.
This discussion is based on laws, regulations, ruling and decisions
now in effect, all of which are subject to change, possibly with retroactive
effect. There can be no assurance that the IRS will not challenge one or more
of the tax consequences described herein, and we have not obtained, nor do we
intend to obtain, a ruling from the IRS as to any U.S. federal income tax
consequences relating to the exchange notes.
This discussion deals only with holders of notes who hold the
exchange notes as capital assets and who exchange original notes for exchange
notes pursuant to this exchange offer. This discussion does not address tax
consequences arising under the laws of any foreign, state or local
jurisdiction. Prospective investors are urged to consult their tax advisors
regarding the U.S. federal tax consequences of acquiring, holding and
disposing of the exchange notes, as well as any tax consequences that may
arise under the laws of any foreign, state, local or other taxing
jurisdiction.
The Exchange Offer
An exchange of the original notes for the exchange notes pursuant to
the exchange offer will be ignored for U.S. federal income tax purposes,
assuming, as expected, that the terms of the original notes are substantially
identical to the terms of the exchange notes. Consequently, a holder of the
original notes will not recognize, for U.S. federal income tax purposes,
taxable gain or loss as a result of exchanging original notes for exchange
notes pursuant to the exchange offer. The holding period of the exchange notes
will be the same as the holding period of the original notes and the tax basis
in the exchange notes will be the same as the basis in the original notes
immediately before the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
in the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for original
notes where the original notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of
180 days after the expiration date of the exchange offer, we will make this
prospectus available to any broker-dealer for use in connection with any
resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own
account in the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of these
methods of resale. These resales may be made at market prices prevailing at
the time of resale, at prices related to these prevailing market prices or
negotiated prices. Any resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer or the purchasers of any of
the exchange notes. Any broker-dealer that resells exchange notes that were
received by it for its own account in the exchange offer and any broker or
dealer that participates in a distribution of the exchange notes may be deemed
to be an underwriter within the meaning of the Securities Act, and any profit
on the resale of exchange notes and any commission or concessions received by
those persons may be deemed to be underwriting compensation under the
Securities Act. Any broker-dealer that resells notes that were received by it
for its own account in exchange offer and any broker-dealer that participates
in a distribution of those notes may be deemed to be an underwriter within the
meaning of the Securities Act and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, including the delivery of a prospectus that contains
information with respect to any selling holder required by the Securities Act
in connection with any resale of the exchange notes. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
Furthermore, any broker-dealer that acquired any of its original
notes directly from us:
o may not rely on the applicable interpretation of the staff
of the SEC's position contained in Exxon Capital Holdings
Corp., SEC no-action letter (April 13, 1988), Morgan,
Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and
Shearman & Sterling, SEC no-action letter (July 2, 1983);
and
o must also be named as a selling noteholder in connection
with the registration and prospectus delivery requirements
of the Securities Act relating to any resale transaction.
For a period of 180 days after the expiration date of the exchange
offer, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. We have agreed to pay all
expenses incident to the exchange offer, including the expenses of one counsel
for the holders of the notes, other than commissions or concessions of any
brokers or dealers. We will indemnify the holders of the notes, including any
broker-dealers, against various liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the exchange notes covered by this prospectus has
been passed upon for Kmart by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York.
EXPERTS
The financial statements incorporated in this prospectus
by reference to the Annual Report on Form 10-K for the year ended January 31,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus does not
offer to sell or ask for offers to buy any securities other than those to
which this prospectus relates and it does not constitute an offer to sell or
ask for offers to buy any of the securities in any jurisdiction where it is
unlawful, where the person making the offer is not qualified to do so, or to
any person who cannot legally be offered the securities. The information
contained in this prospectus is current only as of its date.
$430,000,000
Kmart Corporation
Offer for All Outstanding 9 7/8% Notes due June 15, 2008
in Exchange for 9 7/8% Notes due June 15, 2008,
Which Have Been Registered Under
the Securities Act of 1933
[GRAPHIC OMITTED]
PROSPECTUS
September , 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers
Kmart's bylaws and the Michigan Business Corporation Act permit
Kmart's officers and directors to be indemnified under certain circumstances
for expenses and, in some instances, for judgments, fines, or amounts paid in
settlement of civil, criminal, administrative, and investigative suits or
proceedings, including those involving alleged violations of the Securities
Act of 1933 (the "Act"). In addition, Kmart maintains directors' and officers'
liability insurance which, under certain circumstances, would cover alleged
violations of the Act. Insofar as indemnification for liabilities arising
under the Act may be permitted to officers and directors pursuant to the
foregoing provisions, Kmart has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. Therefore, in
the event that a claim for such indemnification is asserted by any officer or
director Kmart (except insofar as such claim seeks reimbursement by Kmart of
expenses paid or incurred by an officer or director in the successful defense
of any action, suit or proceeding ) will, unless the matter has theretofore
been adjudicated by precedent deemed by Kmart to be controlling, submit to a
court of appropriate jurisdiction the question of whether or not
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 21. Exhibits and Financial Statement Schedules.
EXHIBIT NO. DESCRIPTION
1.1 Purchase Agreement dated June 14, 2001 between Kmart Corporation and Credit Suisse
First Boston Corporation and J.P. Morgan Securities Inc., as representatives of the several
Purchasers named therein. *
3.1 Restated Articles of Incorporation of Kmart Corporation. (4)
3.2 Bylaws of Kmart Corporation, as amended. (4)
4.1 Indenture, dated as of December 13, 1999, between Kmart Corporation and The Bank of
New York. *
4.2 Third Supplemental Indenture, dated as of June 19, 2001, between Kmart Corporation and
The Bank of New York. *
4.3 Form of certificate of 9 7/8% Rule 144A Notes due June 15, 2008 (included in Exhibit
4.2). *
4.4 Form of certificate of Exchange 9 7/8% Rule 144A Notes due June 15, 2008 (included in
Exhibit 4.2). *
4.5 Registration Rights Agreement, dated as of June 19, 2001, by and among Kmart
Corporation, Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., BNY
Capital Markets, Inc., Fleet Securities, Inc. and Banc One Capital Markets, Inc. *
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of
the notes to be issued by Kmart Corporation in the Exchange Offer. **
10.1 Kmart Corporation 1973 Stock Option Plan, as amended [10a][A] (7)
10.2 Kmart Corporation 1981 Stock Option Plan, as amended [10b][A] (7)
10.3 Kmart Corporation Directors Retirement Plan, as amended. [10d][A] (4)
10.4 Kmart Corporation Performance Restricted Stock Plan, as amended. [10e][A] (2)
10.5 Kmart Corporation Deferred Compensation Plan for Non-Employee Directors, as amended.
[A] (5)
10.6 Kmart Corporation 1992 Stock Option Plan, as amended. [10f][A] (7)
10.7 Kmart Corporation Amended and Restated Directors Stock Plan. [A] (5)
10.8 Form of Employment Agreement with Executive Officers.[10j][A] (2)
10.9 Kmart Corporation Supplemental Executive Retirement Plan.[10c][a] (1)
10.10 Amended and Restated Kmart Corporation Annual Incentive Bonus Plan. [10k][A] (3)
10.11 Amended and Restated Kmart Corporation Management Stock Purchase Plan. [10k][A] (7)
10.12 Supplemental Pension Benefit Plan. [10m][A] (3)
10.13 Kmart Corporation 1997 Long-Term Equity Compensation Plan. [10m][A] (7)
10.14 Employment Agreement with Charles C. Conaway. [10n][A] (6)
10.15 Amended and Restated Kmart Corporation Special Severance Plan. [10o][A] (7)
10.16 Amended and Restated Kmart Corporation 1998 Management Deferred Compensation and
Restoration Plan. [10p][A] (7)
12.1 Statement Regarding Computation of Ratios. **
23.1 Consent of Independent Accountants. *
24.1 Power of Attorney (Included on the signature page of this registration statement). *
25.1 Statement of Eligibility and Qualification on Form T-1 of the Bank of New York to act as
trustee under the senior debt securities indenture. (8)
99.1 Form of Letter of Transmittal. **
99.2 Form of Notice of Guaranteed Delivery. **
99.3 Form of Letter to Clients. **
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees. **
* Filed herewith.
** To be filed by amendment.
Notes:
(1) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 27, 1993 (file
number 1-327) and are incorporated herein by reference.
(2) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 26, 1994 (file
number 1-327) and are incorporated herein by reference.
(3) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 25, 1995 (file
number 1-327) and are incorporated herein by reference.
(4) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 31, 1996 (file
number 1-327) and are incorporated herein by reference.
(5) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 27, 1999 (file
number 1-327) and are incorporated herein by reference.
(6) Filed as Exhibit to the Form 10-Q Report of Kmart for the fiscal quarter ended July 26, 2000
(file number 1-327) and incorporated herein by reference.
(7) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 31, 2001 (file
number 1-327) and are incorporated herein by reference.
(8) Filed as an Exhibit to the Current Report on Form 8-K of Kmart, filed December 3, 1999 and
incorporated herein by reference.
[#] Exhibit numbers in the Form 10-K or 10-Q Reports for the period indicated.
[A] This document is a management contract or compensatory plan.
ITEM 22. 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 Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement, provided, however, that paragraphs (1) (i) and (1)
(ii) do not apply if the Registration Statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement; (2) that,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registrant 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.
The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus to each employee to whom the prospectus is
sent or given a copy of the Registrant's annual report to shareholders for its
last fiscal year, unless such employee otherwise has received a copy of such
report, in which case the Registrant shall state in the prospectus that it
will promptly furnish, without charge, a copy of such report on written
request of the employee. If the last fiscal year of the Registrant has ended
within 120 days prior to the use of the prospectus, the annual report of the
Registrant for the preceding fiscal year may be so delivered, but within such
120 day period the annual report for the last fiscal year will be furnished to
each such employee.
The undersigned Registrant hereby undertakes to transmit or cause to
be transmitted to all employees participating in the plan who do not otherwise
receive such material as shareholders of the Registrant, at the time and in
the manner such material is sent to its shareholders, copies all of reports,
proxy statements and other communications distributed to its shareholders
generally.
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 foregoing provisions, 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 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.
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-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Troy and State of Michigan, on the
17th day of September 2001.
KMART CORPORATION
(Registrant)
By: /s/ Jeffrey N. Boyer
Jeffrey N. Boyer
Executive Vice President and Chief
Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Janet Kelley and James E. Defebaugh IV, and each of them, his true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name, place, and stead, in any and all
capacities, to sign any and all (i) amendments (including post-effective
amendments) and additions to this Registration Statement and (ii) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents
full power and authority to do and perform each and every act and this
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
KMART CORPORATION
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities indicated on September 17, 2001.
Signatures Title Signatures Title
---------- ----- ---------- -----
/s/ Charles C. Conaway Chairman of the Board and Chief /s/ Joseph P. Flannery
--- ------- -- -------
Executive Officer (Principal Executive ____________________ Director
Charles C. Conaway Officer) and Director Joseph P. Flannery
/s/ Jeffrey N. Boyer Executive Vice President and Chief /s/ Robert D. Kennedy
_______________________ Financial Officer (Principal Financial ____________________ Director
Jeffrey N. Boyer Officer and Principal Accounting Robert D. Kennedy
Officer)
/s/ James B. Adamson /s/ Robin B. Smith
_______________________ Director ____________________ Director
James B. Adamson Robin B. Smith
/s/ Lilyan H. Affinito /s/ Thomas T. Stallkamp
_______________________ Director ____________________ Director
Lilyan H. Affinito Thomas T. Stallkamp
/s/ Richard G. Cline /s/ Richard J. Statuto
_______________________ Director ____________________ Director
Richard G. Cline Richard J. Statuto
/s/ Willie D. Davis
_______________________ Director
Willie D. Davis
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
1.1 Purchase Agreement dated June 14, 2001 between Kmart Corporation and Credit Suisse First
Boston Corporation and J.P. Morgan Securities Inc., as representatives of the several
Purchasers named therein. *
3.1 Restated Articles of Incorporation of Kmart Corporation. (4)
3.2 Bylaws of Kmart Corporation, as amended. (4)
4.1 Indenture, dated as of December 13, 1999, between Kmart Corporation and The Bank of
New York. *
4.2 Third Supplemental Indenture, dated as of June 19, 2001, between Kmart Corporation and
The Bank of New York. *
4.3 Form of certificate of 9 7/8% Rule 144A Notes due June 15, 2008 (included in Exhibit 4.2). *
4.4 Form of certificate of Exchange 9 7/8% Rule 144A Notes due June 15, 2008 (included in
Exhibit 4.2). *
4.5 Registration Rights Agreement, dated as of June 19, 2001, by and among Kmart Corporation,
Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., BNY Capital Markets,
Inc., Fleet Securities, Inc. and Banc One Capital Markets, Inc. *
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the
notes to be issued by Kmart Corporation in the Exchange Offer. **
10.1 Kmart Corporation 1973 Stock Option Plan, as amended. [10a][A] (7)
10.2 Kmart Corporation 1981 Stock Option Plan, as amended. [10b][A] (7)
10.3 Kmart Corporation Directors Retirement Plan, as amended. [10d][A] (4)
10.4 Kmart Corporation Performance Restricted Stock Plan, as amended. [10e][A] (2)
10.5 Kmart Corporation Deferred Compensation Plan for Non-Employee Directors, as amended.
[A] (5)
10.6 Kmart Corporation 1992 Stock Option Plan, as amended. [10f][A] (7)
10.7 Kmart Corporation Amended and Restated Directors Stock Plan. [A] (5)
10.8 Form of Employment Agreement with Executive Officers.[10j][A] (2)
10.9 Kmart Corporation Supplemental Executive Retirement Plan.[10c][a] (1)
10.10 Amended and Restated Kmart Corporation Annual Incentive Bonus Plan. [10k][A] (3)
10.11 Amended and Restated Kmart Corporation Management Stock Purchase Plan. [10k][A] (7)
10.12 Supplemental Pension Benefit Plan. [10m][A] (3)
10.13 Kmart Corporation 1997 Long-Term Equity Compensation Plan. [10m][A] (7)
10.14 Employment Agreement with Charles C. Conaway. [10n][A] (6)
10.15 Amended and Restated Kmart Corporation Special Severance Plan. [10o][A] (7)
10.16 Amended and Restated Kmart Corporation 1998 Management Deferred Compensation and
Restoration Plan. [10p][A] (7)
12.1 Statement Regarding Computation of Ratios. **
23.1 Consent of Independent Accountants. *
24.1 Power of Attorney (Included on the signature page of this registration statement). *
25.1 Statement of Eligibility and Qualification on Form T-1 of the Bank of New York to act as
trustee under the senior debt securities indenture. (8)
99.1 Form of Letter of Transmittal. **
99.2 Form of Notice of Guaranteed Delivery. **
99.3 Form of Letter to Clients. **
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees. **
* Filed herewith.
** To be filed by amendment.
Notes:
(1) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 27, 1993 (file
number 1-327) and are incorporated herein by reference.
(2) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 26, 1994 (file
number 1-327) and are incorporated herein by reference.
(3) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 25, 1995 (file
number 1-327) and are incorporated herein by reference.
(4) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 31, 1996 (file
number 1-327) and are incorporated herein by reference.
(5) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 27, 1999 (file
number 1-327) and are incorporated herein by reference.
(6) Filed as Exhibit to the Form 10-Q Report of Kmart for the fiscal quarter ended July 262000
(file number 1-327) and incorporated herein by reference.
(7) Filed as Exhibits to the Form 10-K Report of Kmart for the fiscal year ended January 31, 2001 (file
number 1-327) and are incorporated herein by reference.
(8) Filed as an Exhibit to the Current Report on Form 8-K of Kmart, filed December 3, 1999 and
incorporated herein by reference.
[#] Exhibit numbers in the Form 10-K or 10-Q Reports for the period indicated.
[A] This document is a management contract or compensatory plan.