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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 4, 1995
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KMART CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
<TABLE>
<S> <C>
1-327 38-0729500
(Commission File Number) (I.R.S. Employer Identification No.)
</TABLE>
3100 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
(810) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
Kmart Corporation entered into the attached employment agreement with
Floyd Hall who was named chairman, president and chief executive officer as of
June 4, 1995.
EXHIBITS
Exhibit (10n) Employment Agreement with Floyd Hall
-2-
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KMART CORPORATION
(Registrant)
By: /s/ NANCIE W. LADUKE
Vice President and Secretary
Date: June 14, 1995
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
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<S> <C>
10n Employment Agreement with Floyd Hall
</TABLE>
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EXHIBIT (10n)
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 4th day of June, 1995
by and between Kmart Corporation, a Michigan corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), and
Floyd Hall (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive and to enter
into an agreement embodying the terms of such employment (this "Agreement") and
the Executive desires to enter into this Agreement and to accept such
employment, subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
receipt of which is mutually acknowledged, the Company and the Executive
(individually a "Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Affiliate" of a person or other entity shall mean a
person or other entity that directly or indirectly controls, is controlled by,
or is under common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for in
Section 4 below or any increased salary granted to the Executive pursuant to
Section 4.
(c) "Board" shall mean the Board of Directors of the
Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony
involving moral turpitude or any other felony if in the case of such other
felony the Executive is unable to show that he (A) acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company and (B) had no reasonable cause to believe his conduct was
unlawful;
or
(ii) the Executive engages in conduct that
constitutes willful gross neglect or willful gross misconduct in carrying out
his duties under this Agreement, resulting, in either case, in material harm to
the Company, unless the Executive believed in good faith that such act or
nonact was in or not opposed to the best interests of the Company.
(e) A "Change in Control" shall have the meaning set
forth in Section 5(B) of the Company's 1992 Stock Option Plan as in effect on
the date hereof.
(f) "Committee" shall mean the Compensation and
Incentives Committee of the Board or any other committee of the Board
performing similar functions.
(g) "Constructive Termination Without Cause" shall mean a
termination of the Executive's employment at his initiative as provided in
Section 10(d) below within six months following the occurrence, without either
(x) the Executive's prior written consent or (y) the Executive's vote as a
member of the Board in favor of an action directly resulting in one of the
following events (unless prior to or within five business days following such
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vote he furnishes the Secretary of the Company with a written notice that such
event may nevertheless serve as a basis for a Constructive Termination Without
Cause), of one or more of the following events (except in consequence of a
prior termination):
(i) a reduction in the Executive's then current
Base Salary or on-plan target bonus opportunity under the Company's Annual
Incentive Bonus Plan or any similar plan (the "Bonus Plan") below the minimum
opportunity set forth herein or the termination or material reduction of any
employee benefit or perquisite enjoyed by him (other than as part of an
across-the-board reduction of such benefit or perquisite applicable to all
executive officers of the Company);
(ii) the failure to elect or reelect the Executive
to any of the positions described in Section 3 below or removal of him from any
such position;
(iii) a material diminution in the Executive's
duties or the assignment to the Executive of duties which are materially
inconsistent with his duties or which materially impair the Executive's ability
to function as the Chairman, President and Chief Executive Officer of the
Company;
(iv) the relocation of the Company's principal
office, or the Executive's own office location as assigned to him by the
Company, to a location more than 35 miles from Troy, Michigan; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company within 15
days after a merger, consolidation, sale or similar transaction.
(h) "Disability" shall mean the Executive's inability to
substantially perform his duties and responsibilities under this Agreement by
reason of any physical or mental incapacity for a period of 180 consecutive
days.
(i) "Stock" shall mean the Common Stock of the Company.
(j) "Subsidiary" of the Company shall mean any
corporation of which the Company owns, directly or indirectly, more than 50% of
the Voting Stock.
(k) "Term of Employment" shall mean the period specified
in Section 2 below.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive
hereby accepts such employment, for the period commencing June 4, 1995 and
ending at the close of business on June 3, 2000, subject to earlier termination
of the Term of Employment in accordance with the terms of this Agreement;
provided that the Term of Employment may be extended by mutual consent of the
Parties.
3. Position, Duties and Responsibilities.
(a) During the Term of Employment, the Executive shall be
employed and serve as the Chairman of the Board, President and Chief Executive
Officer of the Company (or such other position or positions as may be agreed
upon in writing by the Executive and the Company) and be responsible for the
general management of the affairs of the Company. The Executive shall promptly
be elected by the Board to be a member of the Board. During the Term of
Employment, the Company shall nominate the Executive for re-election as a
director at each annual meeting of shareholders coinciding with the expiration
of his term as a director and recommend him for re-election. If elected by
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the shareholders, he shall serve as a member of the Board during the Term of
Employment. The Executive, in carrying out his duties under this Agreement,
shall report to the Board.
(b) The Executive shall perform such duties and carry out such
responsibilities incident to his position as may be determined from time to
time by the Board, which shall be consistent with the duties and
responsibilities customarily performed by persons in a similar executive
capacity. The Executive shall devote substantially all of his business time,
attention and skill to the performance of such duties and responsibilities,
and shall use his best efforts to promote the interests of the Company. The
Executive shall not, without the prior written approval of the Board, engage
in any other business activity which is in violation of policies established
from time to time by the Company.
(c) Anything herein to the contrary notwithstanding, nothing
shall preclude the Executive from (i) serving on the boards of directors of a
reasonable number of other corporations or the boards of a reasonable number of
trade associations and/or charitable organizations (subject to the reasonable
approval of the Board), (ii) engaging in charitable activities and community
affairs, and (iii) managing his personal investments and affairs, provided that
such activities do not materially interfere with the proper performance of his
duties and responsibilities as the Company's Chairman, President and Chief
Executive Officer.
4. Base Salary.
During the Term of Employment, the Executive shall be paid an
annualized Base Salary, payable in accordance with the regular payroll
practices of the Company, of $1,000,000. The Base Salary shall be reviewed no
less frequently than annually for increase in the discretion of the Board
and/or the Committee.
5. Annual Incentive Awards.
During the Term of Employment, the Executive shall participate in
all annual incentive award programs, including, without limitation, commencing
with the fiscal year beginning February 1, 1996, the Bonus Plan. He shall
receive a guaranteed bonus of $1,000,000 for the fiscal year ending January 31,
1996. Thereafter, he shall have an on-plan target bonus opportunity each year
under the Bonus Plan of at least $1,000,000, payable in that amount if the
performance goals established by the Committee for the relevant year are met.
If such performance goals are exceeded, the Executive shall receive a greater
amount as determined in accordance with guidelines established by the
Committee, but not more than 225% of the target bonus, unless the Committee
shall increase the maximum payable under such guidelines. If such performance
goals are not met, the Executive shall receive a lesser amount as determined
in accordance with guidelines established by the Committee, consistent with
the guidelines applicable to the Chief Executive Officer as a senior executive
of the Company. Payment of annual incentive awards shall be made at the same
time that other senior-level executives receive their incentive awards. The
Executive shall not participate in the Company's Management Stock Purchase Plan.
6. Long-Term Incentive Programs.
(a) General. During the Term of Employment, the Executive
shall be eligible to participate in the long-term incentive programs of the
Company, any awards under such programs to be in the sole discretion of the
Committee. In any event, he shall be entitled to the awards described in
Sections 6(b) and 6(c) below.
(b) Restricted Stock Award. As of the date of the commencement
of the Executive's employment, the Committee shall grant the Executive 500,000
shares of Stock pursuant to an agreement substantially in
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the form attached to this Agreement as Exhibit A. Such Stock shall be subject
to forfeiture if the Executive's employment terminates pursuant to Section 10(c)
or 10(f) below prior to the third anniversary of the date of this Agreement. In
the event that the Executive's employment terminates due to death or Disability
prior to such third anniversary, he or his estate shall forfeit two-thirds of
such Stock if termination occurs prior to the first anniversary of this
Agreement and one-third if termination occurs prior to the second anniversary.
Notwithstanding anything to the contrary in this Section 6(b), if the Executive
violates the provisions of Section 11 prior to the third anniversary of the date
of this Agreement, all such Stock (other than shares that shall have vested as a
result of the termination of the Executive's employment due to death or
Disability) shall be forfeited. In no other case shall such Stock be forfeited.
(c) Stock Option Awards. As of the date of the commencement
of the Executive's employment, the Company shall grant the Executive 10-year
options, substantially in the form attached to this Agreement as Exhibits B and
C, to purchase an aggregate of 3,450,000 shares of Stock (the "Options"). The
exercise price of the Options shall be $12.75 per share. Unless the Options
shall have previously terminated as described below, the Options shall vest and
become exercisable on the third anniversary of the date of this Agreement and
shall remain exercisable thereafter for the remainder of their respective terms
without regard to any subsequent termination of the Executive's employment. If
the Executive's employment terminates pursuant to Section 10(c) or 10(f) below
prior to the third anniversary of the date of this Agreement, the Options shall
terminate. If the Executive's employment terminates prior to such third
anniversary as a result of death or Disability, the Options shall become
exercisable upon such termination and shall terminate on the third anniversary
of the date employment is terminated. In the event of any other termination
prior to such third anniversary, the Options shall become exercisable upon such
termination and remain exercisable thereafter for the remainder of their
respective terms. Notwithstanding anything to the contrary in this Section
6(c), if the Executive violates the provisions of Section 11 prior to such
third anniversary, the Options shall terminate.
7. Employee Benefit Programs.
During the Term of Employment, the Executive shall be entitled to
participate in all employee pension and welfare benefit plans and programs made
available to the Company's senior-level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. The Executive shall be entitled to post-retirement
welfare benefits, if any, as are made available by the Company to its
senior-level executives, provided that for this purpose the Executive's
period of employment shall, in accordance with the last sentence of this
Section 7, be deemed to be the period necessary to obtain the maximum level
of such benefits. The Executive shall, in all events, be entitled during the
Term of Employment to term life insurance which, together with other life
insurance under the Company's term life insurance program, shall provide face
amount coverage of no less than two times Base Salary, provided that the
amount of such coverage in excess of $1,000,000 may be subject to a physical
examination. To the extent there is a period of employment required as a
condition for full benefit coverage under any employee welfare benefit
program, the Executive shall be deemed to have met such requirement.
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8. Supplemental Pension.
The Executive shall be entitled to participate in any
nonqualified supplemental retirement plan the Company may subsequently adopt.
For the purposes of determining his eligibility to participate in such
subsequently adopted plan, the Executive shall be deemed to have been employed
as Chief Executive Officer of the Company for ten years prior to the date of
this Agreement, to have received the Base Salary for each such year and to have
participated in any Company plan, participation in which shall be a condition
to eligibility under such subsequently adopted nonqualified supplemental
retirement plan. If the Executive is eligible to participate in such
subsequently adopted plan, he shall be deemed credited with 10 years of
service under such plan as of the commencement of his employment in addition
to credited service for his actual employment with the Company.
9. Reimbursement of Business and Other Expenses; Perquisites;
Vacations.
(a) The Executive is authorized to incur reasonable expenses
in carrying out his duties and responsibilities under this Agreement and the
Company shall promptly reimburse him for all business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay
all reasonable legal expenses incurred in connection with the preparation of
the Executive's employment arrangements with the Company.
(b) During the Term of Employment, the Executive shall be
entitled to participate in any of the Company's executive fringe benefits in
accordance with the terms and conditions of such arrangements as are in effect
from time to time for the Company's senior-level executives.
(c) The Company shall, at Company expense (except as provided
below), make available to the Executive and his family Company or other private
aircraft for business and personal use at his discretion, provided that such
personal use shall be limited to travel within the United States. During the
period in which the Executive continues to reside in Montclair, New Jersey, if
and to the extent the Executive is taxable on any commutation between a
business location and his residence in Montclair, New Jersey, the Company
shall provide him with tax gross-up payments so that after taxes incurred on
such commutation the Executive shall be kept whole. The Company and the
Executive acknowledge that for purposes of this Section 9(c) such commutation
is a business use. The Executive shall pay the Company the standard Company
charges for personal use of such aircraft. It is recognized that some of the
Executive's travel by Company aircraft may be required for security purposes
and, as such, will constitute business use of the aircraft.
(d) In all events, during the Term of Employment, the Company
shall:
(i) make available to the Executive a car and a driver
for his use in the Detroit metropolitan area;
(ii) reimburse the Executive for personal financial
(including tax) counseling (other than legal fees) by a firm or firms to be
chosen by the Executive, such reimbursement to be no more than the amount
authorized under Company policy in effect from time to time; and
(iii) provide the Executive with a residential security
system in his residence in the Detroit metropolitan area and pay the
maintenance of such system including the monthly service charges.
(e) The Executive shall be entitled to four weeks paid vacation
per year.
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10. Termination of Employment.
(a) Termination Due to Death. In the event the Executive's
employment is terminated due to his death, his estate or his beneficiaries as
the case may be, shall be entitled to:
(i) Base Salary through the date of death;
(ii) a pro rata annual incentive award for the year in
which the Executive's death occurs based on the on-plan target bonus for such
year, payable in a single installment promptly after his death;
(iii) any restricted stock award outstanding at the time
of his death, subject to any forfeiture provisions set forth in the relevant
restricted stock agreement;
(iv) the balance of any incentive awards earned (but
not yet paid);
(v) the right to exercise any stock option to the
extent and for the period set forth in the relevant option agreement;
(vi) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7 or 9 above; and
(vii) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. In the event the
Executive's employment is terminated due to his Disability, he shall be
entitled in such case to the following:
(i) the benefits due him under the then current
disability program of the Company;
(ii) annual incentive award for the year in which
termination due to Disability occurs based on the on-plan target bonus for
such year, payable in a single installment promptly following termination due
to Disability;
(iii) any restricted stock award outstanding at the time
of his termination due to Disability, subject to any forfeiture provisions set
forth in the relevant restricted stock agreement;
(iv) the balance of any incentive awards earned (but
not yet paid);
(v) the right to exercise any stock option to the
extent and for the period set forth in the relevant option agreement;
(vi) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7 or 9 above;
(vii) continued participation to the extent provided in
medical, dental, hospitalization and life insurance coverage and in all other
employee welfare plans and programs in which he was participating on the date
of termination of his employment due to Disability until he attains age 65; and
(viii) other or additional benefits in accordance with
applicable plans and programs of the Company.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 23 below.
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(c) Termination by the Company for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this paragraph (i) are complied with. The Executive
shall be given written notice by the Board of the intention to terminate him
for Cause, such notice (A) to state in detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within six months of the
Board learning of such act or acts or failure or failures to act. The
Executive shall have 10 days after the date that such written notice has been
given to the Executive in which to cure such conduct, to the extent such cure
is possible. If he fails to cure such conduct, the Executive shall then be
entitled to a hearing before the Board. Such hearing shall be held within
15 days of notice to the Company by the Executive, provided he requests such
hearing within 10 days of the written notice from the Board of the intention
to terminate him for Cause. If, within five days following such hearing, the
Executive is furnished written notice by the Board confirming that, in its
judgment, grounds for Cause on the basis of the original notice exist, he
shall thereupon be terminated for Cause.
(ii) In the event the Company terminates the
Executive's employment for Cause, he shall be entitled to:
(A) Base Salary through the date of the
termination of his employment for Cause;
(B) any incentive awards earned (but not yet
paid);
(C) the right to exercise any stock option to
the extent and for the period set forth in the relevant option
agreement;
(D) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7 or 9 above; and
(E) other or additional benefits in accordance
with applicable plans or programs of the Company.
(d) Termination Without Cause or Constructive Termination
Without Cause. In the event the Executive's employment is terminated without
Cause, other than due to Disability or death, or in the event there is a
Constructive Termination Without Cause, the Executive shall be entitled to:
(i) Base Salary through the date of termination of the
Executive's employment;
(ii) Base Salary, at the annualized rate in effect on
the date of termination of the Executive's employment (or in the event a
reduction in Base Salary is the basis for a Constructive Termination Without
Cause, then the Base Salary in effect immediately prior to such reduction), for
the period until the end of the originally scheduled Term of Employment;
provided that in no event shall such period be less than twelve months nor more
than thirty-six months; and provided further that the Executive and the Company
may agree that the Company shall pay him the present value of such salary
continuation payments in a lump sum (using as the discount rate the Applicable
Federal Rate for short-term Treasury obligations as published by the Internal
Revenue Service for the month in which such termination occurs);
(iii) pro rata annual incentive award for the year in
which termination occurs based on the Executive's on-plan target bonus for
such year, payable in a single installment promptly following termination;
(iv) an amount equal to the Executive's on-plan target
bonus for the year in which termination occurs multiplied by the number of
years (including fractional years) in the period during which he is receiving
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salary continuation payments (or in respect of which a lump-sum
salary-continuation payment is made), payable in equal monthly payments over
such period; provided that the Executive and the Company may agree that the
Company shall pay him the present value of such bonus amount in a lump sum
(using the discount referred to in Section 10(d)(ii) above);
(v) any restricted stock award outstanding at the time
of such termination of employment, subject to any forfeiture provisions set
forth in the relevant restricted stock agreement;
(vi) the balance of any incentive awards earned (but
not yet paid);
(vii) the right to exercise any stock option to the
extent and for the period set forth in the relevant option agreement;
(viii) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7 or 9 above;
(ix) continued participation in all medical, dental,
hospitalization and life insurance coverage and in other employee welfare
benefit plans or programs in which he was participating on the date of the
termination of his employment until the end of the period during which he is
receiving salary continuation payments (or in respect of which a lump-sum
severance payment is made); provided that the Company's obligations under this
clause (ix) shall be reduced to the extent that the Executive receives similar
coverage and benefits under the plans and programs of a subsequent employer;
and provided further that (x) if the Executive is precluded from continuing his
participation in any employee benefit plan or program as provided in this
clause (ix) of this Section 10(d), he shall be provided with the after-tax
economic equivalent of the benefits provided under the plan or program in
which he is unable to participate for the period specified in this clause
(ix) of this Section 10(d), (y) the economic equivalent of any benefit
foregone shall be deemed to be the lowest cost that would be incurred by the
Executive in obtaining such benefit himself on an individual basis, and
(z) payment of such after-tax economic equivalent shall be made quarterly in
advance; and
(x) other or additional benefits in accordance with
applicable plans and programs of the Company.
(e) Termination of Employment Following a Change in Control.
If, within two years following a Change in Control, the Executive's employment
is terminated without Cause or there is a Constructive Termination Without
Cause, the Executive shall be entitled to the payments and benefits provided in
Section 10(d) above, provided that the salary continuation payments shall be
paid in a lump sum without any discount. Also, immediately following a Change
in Control, all accrued or earned amounts that are not otherwise vested, as
well as all options, restricted stock and other equity-based awards in which
he is not yet vested, shall become fully vested.
(f) Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative, other than a termination due
to death or Disability or a Constructive Termination Without Cause, the
Executive shall have the same entitlements as provided in Section 10(c)(ii)
above for a termination for Cause. A voluntary termination under this Section
10(f) shall be effective upon 30 days prior written notice to the Company and
shall not be deemed a breach of this Agreement.
(g) Payment Following a Change in Control. In the event that
the termination of the Executive's employment is for one of the reasons set
forth in Section 10(e) above and the aggregate of all payments or benefits made
or provided to the Executive under Section 10(e) above and under all other
plans and programs of the Company (the "Aggregate Payment") is determined to
constitute a Parachute Payment, as such term is defined in Section 280G(b)(2)
of the Internal Revenue Code, the Company shall pay to the
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Executive, prior to the time any excise tax imposed by Section 4999 of the
Internal Revenue Code ("Excise Tax") is payable with respect to such Aggregate
Payment, an additional amount which, after the imposition of all income and
excise taxes thereon, is equal to the Excise Tax on the Aggregate Payment. The
determination of whether the Aggregate Payment constitutes a Parachute Payment
and, if so, the amount to be paid to the Executive and the time of payment
pursuant to this Section 10(g) shall be made by an independent auditor (the
"Auditor") jointly selected by the Company and the Executive and paid by the
Company. The Auditor shall be a nationally recognized United States public
accounting firm which has not, during the two years preceding the date of its
selection, acted in any way on behalf of the Company or any Affiliate thereof.
If the Executive and the Company cannot agree on the firm to serve as the
Auditor, then the Executive and the Company shall each select one accounting
firm and those two firms shall jointly select the accounting firm to serve as
the Auditor.
(h) No Mitigation; No Offset. In the event of any termination
of employment under this Section 10, the Executive shall be under no obligation
to seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of (i) any remuneration attributable
to any subsequent employment that he may obtain except as specifically provided
in this Section 10 or (ii) any claims the Company may have against the
Executive.
(i) Nature of Payments. Any amounts due under this Section 10
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
(j) Assignment. The severance payments hereunder may not be
transferred, assigned or encumbered in any manner, either voluntarily or
involuntarily.
(k) Exclusivity of Severance Payments. Upon termination of the
Executive's employment during the Term of Employment, he shall not be entitled
to any severance payments or severance benefits from the Company or any
payments by the Company on account of any claim by him of wrongful termination,
including claims under any federal, state or local human and civil rights or
labor laws, other than the payments and benefits provided hereunder, except
for any benefits which may be due the Executive in normal course under any
employee benefit plan of the Company which provides benefits after termination
of employment.
(l) Non-competition. The Executive agrees that any right to
receive severance payments hereunder will cease if the Executive breaches the
provisions of Section 11 below.
(m) Termination at Will. Notwithstanding anything herein to
the contrary, the Executive's employment with the Company is terminable at will
with or without Cause; provided, however, that a termination of the Executive's
employment shall be governed in accordance with the terms hereof.
11. Non-Compete.
(a) By and in consideration of the substantial compensation and
benefits to be provided by the Company hereunder, and further in consideration
of the Executive's exposure to the proprietary information of the Company, the
Executive agrees that he shall not, during the Term of Employment and for a
period equal to the period during which he is receiving salary continuation
payments (or in respect of which a lump-sum salary continuation payment is
made), but in no event less than eighteen months, directly or indirectly own,
manage, operate, join, control, be employed by, or participate in the
ownership, management, operation or control of or be connected in any manner,
including but not limited to holding the positions of officer, director,
shareholder, consultant, independent contractor, employee, partner, or
investor, with any Competing Enterprise; provided, however, that
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the Executive may invest in stocks, bonds, or other securities of any
corporation or other entity (but without participating in the business thereof)
if such stocks, bonds, or other securities are listed for trading on a national
securities exchange or NASDAQ and the Executive's investment does not exceed 1%
of the issued and outstanding shares of capital stock, or in the case of bonds
or other securities, 1% of the aggregate principal amount thereof issued and
outstanding. "Competing Enterprise" shall mean any person, corporation,
partnership or other entity which owns and operates retail stores selling
general merchandise and/or food if at least 10 of such stores have an area of
50,000 or more square feet and at least 10 of such stores with 50,000 or more
square feet are within 25 miles of a Kmart retail store.
(b) The Executive agrees that any breach of the terms of this
Section would result in irreparable injury and damage to the Company for which
the Company would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any reasonable threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Executive and/or any and all persons and/or entities acting for and/or with the
Executive. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages. The Executive
and the Company further agree that the provisions of the covenant not to compete
are reasonable. Should a court or arbitrator determine, however, that any
provision of the covenant not to compete is unreasonable, either in period of
time, geographical area, or otherwise, the parties hereto agree that the
covenant shall be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable.
(c) The provisions of this Section shall survive any
termination of this Agreement and the Term of Employment, and the existence of
any claim or cause of action by the Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of the covenants and agreements of this Section.
12. Indemnification.
(a) The Company agrees that if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that he is or was a director, officer or employee of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Michigan against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, officer, member, employee or agent of the
Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the
Executive all reasonable costs and expenses incurred by him in connection with
a Proceeding within 20 days after receipt by the Company of a written request
for such advance. Such request shall include an undertaking by the Executive
to repay the amount of such advance if it shall ultimately be determined that
he is not entitled to be indemnified against such costs and expenses.
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(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Executive under Section 11(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
13. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence
of this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the employee benefit and other plans or programs in which
senior executives of the Company are eligible to participate.
14. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors, heirs (in the case of the
Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in
the preceding sentence, it shall take whatever action it legally can in order to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of
the Executive under this Agreement may be assigned or transferred by the
Executive other than his rights to compensation and benefits, which may be
transferred only by will or operation of law, except as provided in Section 20
below.
15. Representation.
The Company represents and warrants that it is fully authorized
and empowered by action of the Board to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
16. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
17. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and an authorized
officer of the Company. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or
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dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
18. Severability.
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
19. Survivorship.
The respective rights and obligations of the Parties hereunder
shall survive any termination of the Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
20. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
21. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted
in accordance with the laws of Michigan without reference to principles of
conflict of laws.
22. Resolution of Disputes.
Any disputes arising under or in connection with this Agreement
shall, at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in Detroit, Michigan in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. One-half of all costs incurred by the Executive in connection with
such arbitration or litigation, including, without limitation, reasonable
attorneys' fees, shall be borne by the Company.
23. Notices.
Any notice given to a Party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address
as such Party may subsequently give such notice of:
If to the Company: Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084-3163
Attention: General Counsel
If to the Executive: Floyd Hall
c/o Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084-3163
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24. Withholding.
All amounts required to be paid by the Company shall be subject
to reduction in order to comply with applicable Federal, state and local tax
withholding requirements.
25. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
26. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Kmart Corporation
By: ________________________________
____________________________________
Floyd Hall
