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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 6, 1996
KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
1-32738-0729500
(Commission File Number)(I.R.S. Employer Identification No.)
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 7. EXHIBITS
The following exhibits are filed in connection with the Company's Registration
Statement on Form S-3 (Registration No. 33-64905):
1 Underwriting Agreement, dated June 6, 1996, among the Company, Kmart
Financing I and the Underwriters named therein.
4(b) Indenture, dated as of June 6, 1996, between the Company and The Bank
of New York, as Trustee.
4(c)(i) Form of Convertible Preferred Security (included in Exhibit 4(h)(i)).
4(c)(ii) Form of Convertible Debenture (included in Exhibit 4(i)).
4(h)(i) Amended and Restated Declaration of Trust of Kmart Financing I.
4(i) First Supplemental Indenture, dated as of June 6, 1996, between the
Company and The Bank of New York, as trustee.
4(j)(i) Preferred Securities Guarantee Agreement, dated as of June 17, 1996,
between the Company and The Bank of New York, as guarantee trustee,
for the benefit of holders of Convertible Preferred Securities of
Kmart Financing I.
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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
----------------------------
Nancie W. LaDuke
Vice President and Secretary
Date: June 25, 1996
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
1 Underwriting Agreement, dated June 6, 1996, among the Company, Kmart
Financing I and the Underwriters named therein.
4(b) Indenture, dated as of June 6, 1996, between the Company and The Bank
of New York, as Trustee.
4(c)(i) Form of Convertible Preferred Security (included in Exhibit 4(h)(i)).
4(c)(ii) Form of Convertible Debenture (included in Exhibit 4(i)).
4(h)(i) Amended and Restated Declaration of Trust of Kmart Financing I.
4(i) First Supplemental Indenture, dated as of June 6, 1996, between the
Company and The Bank of New York, as trustee.
4(j)(i) Preferred Securities Guarantee Agreement, dated as of June 17, 1996,
between the Company and The Bank of New York, as guarantee trustee,
for the benefit of holders of Convertible Preferred Securities of
Kmart Financing I.
</TABLE>
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EXHIBIT 1
17,400,000
Trust Convertible Preferred Securities
KMART FINANCING I
7 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(liquidation amount $50 per trust convertible preferred security)
guaranteed to the extent set forth in the guarantee agreement by,
and convertible into the common stock of,
KMART CORPORATION
UNDERWRITING AGREEMENT
June 6, 1996
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June 6, 1996
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
CS First Boston Inc.
Lehman Brothers Inc.
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Merrill Lynch International
CS First Boston Limited
Lehman Brothers International (Europe)
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Street
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
Kmart Financing I, a special purpose statutory business
trust formed under the laws of the State of Delaware (the "Trust"),
proposes to issue and sell to the several Underwriters an aggregate of
17,400,000 of its 7 3/4% trust convertible preferred securities,
liquidation amount $50 per trust convertible preferred security (the "Firm
Securities").
It is understood that, subject to the conditions
hereinafter stated, 15,150,000 Firm Securities (the "U.S. Securities")
will be sold to the several U.S. Underwriters named in Schedule I hereto
(the "U.S. Underwriters") in connection with the offering and sale of such
U.S. Securities in the United States and Canada to United States and
Canadian Persons (as such terms are defined in the Agreement Between U.S.
and International Underwriters of even date herewith), and 2,250,000 Firm
Securities (the "International Securities") will be sold to the several
International Underwriters named in Schedule II hereto (the "International
Underwriters") in connection with the offering and sale of such
International Securities outside the
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United States and Canada to persons other than United States and Canadian
Persons. Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, CS First Boston Corporation, Lehman Brothers Inc. and
Salomon Brothers Inc shall act as representatives (the "U.S.
Representatives") of the several U.S. Underwriters, and Morgan Stanley &
Co. International Limited, Merrill Lynch International, CS First Boston
Limited, Lehman Brothers International (Europe) and Salomon Brothers
International Limited shall act as representatives (the "International
Representatives") of the several International Underwriters. The U.S.
Underwriters and the International Underwriters are hereinafter
collectively referred to as the Underwriters.
The Trust also proposes to issue and sell to the several
U.S. Underwriters not more than an additional 2,600,000 of its 7 3/4% trust
convertible preferred securities, liquidation amount $50 per preferred
security (the "Additional Securities") if and to the extent that the U.S.
Representatives shall have determined to exercise, on behalf of the U.S.
Underwriters, the right to purchase such trust convertible preferred
securities granted to the U.S. Underwriters in Section 2 hereof. The Firm
Securities and the Additional Securities are hereinafter collectively
referred to as the "Convertible Preferred Securities."
The Convertible Preferred Securities will be guaranteed
(the "Guarantee") by Kmart Corporation, a Michigan corporation ("Kmart"),
to the extent described in a Preferred Securities Guarantee Agreement dated
as of June 17, 1996, and will be convertible into shares of common stock,
par value $1.00 per share, of Kmart ("Kmart Common Stock"). The Trust will
use the proceeds from the sale of the Convertible Preferred Securities to
purchase from Kmart 7 3/4% Convertible Junior Subordinated Debentures in an
aggregate principal amount equal to the aggregate liquidation amount of the
Convertible Preferred Securities due June 15, 2016 (the "Convertible
Debentures") to be issued under the Subordinated Indenture (the "Base
Indenture") dated as of June 6, 1996 between Kmart and The Bank of New
York, as trustee (the "Indenture Trustee"), as supplemented by the First
Supplemental Indenture dated as of June 6, 1996 (the "Supplemental
Indenture" and together with the Base Indenture, the "Indenture"). Kmart
will also be the holder of one hundred percent of the common securities
representing undivided beneficial interests in the assets of the Trust (the
"Trust Common Securities"). The Trust has been formed under Delaware law
pursuant to a Declaration of Trust (the "Declaration") executed by Kmart
and by the trustees of the Trust (the "Kmart Trustees"), all of whom have
been appointed by Kmart as holder of
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one hundred percent of the Trust Common Securities. Pursuant to the
Declaration, the number of Kmart Trustees will initially be five. Three of
the Kmart Trustees (the "Regular Trustees") will be persons who are
employees or officers of or who are affiliated with Kmart. The fourth
Trustee will be a financial institution that maintains its principal place
of business in the State of Delaware (the "Delaware Trustee"). The fifth
Trustee will be a financial institution that is unaffiliated with Kmart and
will serve as institutional trustee under the Declaration and as indenture
trustee for the purposes of compliance with the provisions of the Trust
Indenture Act of 1939 (the "Trust Indenture Act") (the "Institutional
Trustee"). Initially, The Bank of New York, a New York banking
corporation, will act as the Institutional Trustee and The Bank of New
York (Delaware), an affiliate of the Institutional Trustee, will act as the
Delaware Trustee until removed or replaced by the holder of the Common
Securities. For the purpose of compliance with the provisions of the Trust
Indenture Act, The Bank of New York will initially act as trustee (the
"Guarantee Trustee") under the Guarantee and as Indenture Trustee.
The Trust and Kmart have filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-64905), including a prospectus relating to the registration of
certain securities (the "Shelf Securities") to be issued from time to time
by Kmart and certain trusts. The registration statement as amended to the
date of this Agreement is hereinafter referred to as the "Registration
Statement" and the related prospectus covering the Shelf Securities in the
form first used to confirm sales of the Convertible Preferred Securities is
hereinafter called the "Basic Prospectus." The Basic Prospectus as
supplemented by the U.S. prospectus supplement (the "U.S. Prospectus
Supplement") specifically relating to the Convertible Preferred Securities
in the form first used by the U.S. Underwriters to confirm sales of the
Convertible Preferred Securities is hereafter called the U.S. Prospectus.
The Basic Prospectus as supplemented by the international prospectus
supplement (the "International Prospectus Supplement") specifically
relating to the Convertible Preferred Securities in the form first used by
the International Underwriters to confirm sales of the Convertible
Preferred Securities is called the International Prospectus. The U.S.
Prospectus will be used in connection with the offering and sale of the
Convertible Preferred Securities in the United States and Canada to United
States and Canadian Persons and the International Prospectus will be used
in connection with the offering and sale of the Convertible Preferred
Securities outside the United States and Canada to persons other than
United States or Canadian Persons. The U.S. Prospectus and the
International
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Prospectus are identical except for the outside front cover page of the
prospectus supplement. The U.S Prospectus and the International Prospectus
are collectively referred to as the "Prospectus" and the U.S. Prospectus
Supplement and the International Prospectus Supplement are collectively
referred to as the "Prospectus Supplement". Any reference in this
Agreement to the Registration Statement, the Basic Prospectus, any
preliminary form of the Prospectus (a "preliminary prospectus") previously
filed with the Commission pursuant to Rule 424 or the Prospectus shall
include the documents incorporated therein by reference pursuant to Item 12
of Form S-3 under the Securities Act of 1933, as amended (the "Securities
Act"), filed under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder (collectively, the
"Exchange Act").
If Kmart and the Trust have filed an abbreviated
registration statement to register additional Trust Convertible Preferred
Securities pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462
Registration Statement. The terms "supplement" and "amendment" or "amend"
as used in this Agreement shall include all documents subsequently filed by
Kmart and the Trust with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), that are deemed to be
incorporated by reference in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES. Each of the Trust
and Kmart jointly and severally represent and warrant to and agree with
each of the Underwriters that:
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are
pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed
pursuant to the Exchange Act and incorporated by reference in the
Prospectus complied or will comply when so filed in all material
respects with the Exchange Act and the applicable rules and
regulations of the Commission thereunder, (ii) the Registration
Statement, when it became effective, did not contain, as of the
date hereof as supplemented by the Prospectus Supplement, does not
contain, and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to
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state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (iii) the Registration
Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of
the Commission thereunder and (iv) the Prospectus does not contain
and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this Section
1(b) do not apply to (A) statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to Kmart and the Trust in
writing by such Underwriter through you expressly for use therein
or (B) to that part of the Registration Statement that constitutes
the Statements of Eligibility (Form T-1) under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), of the
Indenture Trustee, the Guarantee Trustee and the Institutional
Trustee.
(c) Kmart has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of
Michigan, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on Kmart and its
subsidiaries, taken as a whole.
(d) Each subsidiary of Kmart has been duly incorporated,
is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate
power and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material
adverse effect on Kmart and its subsidiaries, taken as a whole.
(e) The Trust has been duly created and is validly
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existing in good standing as a business trust under the Delaware
Business Trust Act, is a "grantor trust" for Federal income tax
purposes under existing law, has the business trust power and
authority to conduct its business as presently conducted and as
described in the Registration Statement and the Prospectus, and is
not required to be authorized to do business in any other
jurisdiction.
(f) This Agreement has been duly authorized, executed and
delivered by the Trust and Kmart.
(g) The Indenture has been duly qualified under the Trust
Indenture Act; the Indenture has been duly authorized by Kmart and,
upon execution and delivery thereof by Kmart, and assuming due
authorization, execution and delivery thereof by the Indenture
Trustee, will be, as of the Closing Date (as hereinafter defined),
a valid and legally binding agreement of Kmart, enforceable against
Kmart in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(h) The Declaration has been duly qualified under the
Trust Indenture Act; the Declaration has been duly authorized by
Kmart and, upon execution and delivery thereof by Kmart, the Kmart
Trustees, and assuming due authorization, execution and delivery
thereof by the Kmart Trustees, will be, as of the Closing Date (as
hereafter defined), a valid and legally binding agreement of Kmart
and the Kmart Trustees, enforceable against Kmart and the Kmart
Trustees in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(i) The Guarantee has been duly qualified under the Trust
Indenture Act; the Guarantee has been duly authorized by Kmart and,
upon execution and delivery thereof by Kmart, and assuming due
authorization, execution and delivery thereof by the Guarantee
Trustee, will be, as of the Closing Date, a valid and legally
binding agreement of Kmart, enforceable against Kmart in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of
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whether enforceability is considered in a proceeding at law or in
equity).
(j) The Convertible Debentures have been duly authorized
and, when executed by Kmart, authenticated by the Indenture
Trustee, issued in accordance with the Indenture and delivered to
the Trust against payment therefor as described in the Registration
Statement and the Prospectus, will constitute valid and legally
binding obligations of Kmart, enforceable against Kmart in
accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding
at law or in equity).
(k) The Convertible Preferred Securities have been duly
authorized by the Declaration and, when executed by the Trust and
authenticated by the Institutional Trustee in accordance with the
Declaration and delivered to you against payment therefor in
accordance with the terms hereof, will be validly issued and will
be fully paid and non-assessable undivided beneficial interests in
the assets of Trust, and the issuance of such Convertible Preferred
Securities is not subject to any preemptive or similar rights.
Holders of the Convertible Preferred Securities will be entitled to
the same limitation of personal liability extended to stockholders
of private corporations for profit under the General Corporation
Law of the State of Delaware. The Trust Common Securities to be
issued to Kmart will be authorized by the Declaration and, when
executed in accordance with the terms of the Declaration and
delivered to Kmart against payment therefor as described in the
Registration Statement and the Prospectus, will represent validly
issued undivided beneficial interests in the assets of the Trust.
(l) The execution and delivery by Kmart of, and the
performance by Kmart of its obligations under, this Agreement, the
Declaration, the Guarantee and the Indenture, the issuance and sale
of the Convertible Debentures, and the conversion of the
Convertible Debentures and the Convertible Preferred Securities
into shares of Kmart Common Stock, will not contravene any
provision of applicable law, the Declaration, the articles of
incorporation or by-laws of Kmart or any agreement or other
instrument binding upon Kmart or any of its subsidiaries, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over Kmart or any subsidiary, except such
contraventions as would not in the aggregate have a material
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adverse effect on Kmart and its subsidiaries, taken as a whole; no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by Kmart of its obligations under this Agreement,
except such as may be required by the Securities Act, the Exchange
Act or the securities or Blue Sky laws of the various states and
the securities laws of jurisdictions outside the United States in
connection with the offer and sale of the Convertible Preferred
Securities.
(m) The execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement,
the Declaration and the Guarantee will not contravene any provision
of applicable law, the Declaration, or any agreement or other
instrument binding upon the Trust, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over
the Trust, except such contraventions as would not in the aggregate
have a material adverse effect on the Trust; no consent, approval,
authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Trust of its
obligations under this Agreement, except such as may be required by
the Securities Act, the Exchange Act or the securities or Blue Sky
laws of the various states and the securities laws of jurisdictions
outside the United States in connection with the offer and sale of
the Convertible Preferred Securities.
(n) The authorized capital stock of Kmart conforms as to
legal matters to the description thereof contained in the
Prospectus.
(o) The shares of Kmart Common Stock initially issuable
upon the conversion of the Convertible Debentures and the
Convertible Preferred Securities (the "Conversion Shares") have
been duly authorized and validly reserved for issuance upon such
conversion by all necessary corporate action of Kmart and, when
issued upon such conversion, will be validly issued, fully paid and
nonassessable; the issuance of the Conversion Shares will not be
subject to any preemptive or similar rights.
(p) There has not occurred any material adverse change,
or any development involving a prospective material adverse change,
in the condition, financial or otherwise, or in the earnings,
business or operations of the Trust or of Kmart and its
subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this
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Agreement).
(q) There are no legal or governmental proceedings
pending or threatened to which Kmart or any of its subsidiaries or
the Trust is a party or to which any of the properties of Kmart or
any of its subsidiaries or the Trust is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as
required.
(r) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed in all material respects
with the Securities Act and the rules and regulations of the
Commission thereunder.
(s) The Trust is not, and after giving effect to the
offering and sale of the Convertible Preferred Securities and the
application of the proceeds thereof as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act") and
Kmart is not, and after giving effect to the issuance of the
Convertible Debentures and the application of the proceeds thereof
as described in the Prospectus will not be, an "investment company"
as such term is defined in the 1940 Act.
(t) Kmart and its subsidiaries (i) are, to Kmart's best
knowledge, in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received, to Kmart's best
knowledge, all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance, to Kmart's best
knowledge, with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, in the
aggregate, have a material adverse effect on Kmart and its
subsidiaries, taken as a whole. Kmart has concluded that
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any environmental costs and liabilities (including without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval any related constraints on
operating activities and any potential liabilities to third
parties) would not, singly or in the aggregate, have a material
adverse effect on Kmart and its subsidiaries, taken as a whole.
(u) No person has the right to require Kmart to file a
registration statement under the Securities Act with respect to any
securities of Kmart or to require Kmart to include such securities
with the Convertible Preferred Securities or the Guarantee
registered pursuant to the Registration Statement as a consequence
of the filing of the Registration Statement with the Commission.
(v) Each of the Trust and Kmart has complied with all
provisions of Section 517.075, Florida Statutes relating to doing
business with the Government of Cuba or with any person or
affiliate located in Cuba.
2. AGREEMENTS TO SELL AND PURCHASE. The Trust hereby
agrees to sell to the several Underwriters, and each Underwriter, upon the
basis of the representations and warranties of each of the Trust and Kmart
herein contained, but subject to the conditions hereinafter stated, agrees,
severally and not jointly, to purchase from the Trust, at a purchase price
of $50 (the "Purchase Price") for each Convertible Preferred Security the
respective numbers of Firm Securities set forth in Schedules I and II
hereto opposite its name.
On the basis of the representations and warranties of each
of the Trust and Kmart herein contained, and subject to its terms and
conditions, the Trust agrees to sell to the U.S. Underwriters the
Additional Securities, and the U.S. Underwriters shall have a one-time
right to purchase, severally and not jointly, up to 2,600,000 Additional
Securities at the Purchase Price plus accrued distributions, if any. If
the U.S. representatives, on behalf of the U.S. Underwriters, elect to
exercise such option, they shall so notify the Trust and Kmart in writing
not later than 30 days after the date of this Agreement, which notice shall
specify the number of Additional Securities to be purchased by the U.S.
Underwriters and the date on which such securities are to be purchased.
Such date may be the same as the Closing Date (as defined below) but not
earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Securities may be purchased as provided in
Section 4 hereof solely for the purpose of covering
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over-allotments made in connection with the offering of the Firm
Securities. If any Additional Securities are to be purchased, each U.S.
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Securities (subject to such adjustments to eliminate fractional
securities as the U.S. Representatives may determine) that bears the same
proportion to the total number of Additional Securities to be purchased as
the number of Firm Securities set forth in Schedule I hereto opposite the
name of such U.S. Underwriter bears to the total number of Firm
Securities.
In consideration of purchases of Convertible Preferred
Securities by the Underwriter the proceeds of which will be used to
purchase Convertible Debentures, Kmart shall pay to the Underwriters as
compensation, $1.40 for each Convertible Preferred Security, in federal or
other funds immediately available in New York City, concurrently with the
purchases of the Convertible Preferred Securities by the Underwriters.
Each of the Trust and Kmart hereby agree that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 90 days after the date
of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Kmart Common Stock, any
securities convertible into or exercisable or exchangeable for Kmart Common
Stock or (ii) enter into any swap or other agreement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of Kmart Common Stock, or any preferred stock of Kmart, the Trust or any
similar trust whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Kmart Common Stock, any preferred
stock of Kmart, the Trust or any similar trust or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Convertible Preferred Securities to be sold hereunder, (B) the issuance by
Kmart of shares of Kmart Common Stock upon the exercise of any conversion
rights by a holder of the Convertible Preferred Securities to be sold
hereunder, (C) securities, options or awards issued pursuant to Kmart's
stock option or other benefit, compensation or incentive plans or
arrangements maintained for its officers, directors or employees, (D)
securities issued by Kmart in connection with mergers, acquisitions or
similar transactions, or (E) the issuance by Kmart of shares of Kmart
Common Stock upon the exercise of an option or warrant or the conversion of
a security outstanding on the date hereof of which the Underwriters have
been advised in writing.
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3. TERMS OF PUBLIC OFFERING. Each of the Trust and
Kmart is advised by you that the Underwriters propose to make a public
offering of their respective portions of the Convertible Preferred
Securities as soon after signing of this Agreement as in your judgment is
advisable. The Trust and Kmart are further advised by you that the
Convertible Preferred Securities are to be offered to the public initially
at $50 a security (the "Public Offering Price") plus accrued distributions,
if any, and to certain dealers selected by you at a price that represents a
concession not in excess of $0.84 a security under the Public Offering
Price.
Each U.S. Underwriter hereby makes to the International
Underwriters the representations and agreements of such U.S. Underwriter
contained in the fifth paragraph of Article III of the Agreement Between
U.S. and International Underwriters of even date herewith. Each
International Underwriter hereby makes to the U.S. Underwriters the
representations and agreements of such International Underwriter contained
in the seventh, eighth and ninth paragraphs of Article III of such
Agreement.
4. PAYMENT AND DELIVERY. Payment for the Firm
Securities shall be made by wire transfer in Federal or other funds
immediately available in New York City against delivery of such Firm
Securities for the respective accounts of the several Underwriters at 12:15
P.M., New York City time, on June 17, 1996, or at such other time on the
same or such other date, not later than June 20, 1996, as shall be
designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Securities shall be made in
Federal or other funds immediately available in New York City against
delivery of such Firm Securities for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on the date specified in
the notice described in Section 2 or on such other date, in any event not
later than July 19, 1996, as shall be designated in writing by you (or at
12:15 P.M., New York City time, if such date is the Closing Date). The
time and date of such payment are hereinafter referred to as the "Option
Closing Date."
Certificates for the Firm Securities and Additional
Securities shall be in definitive form and registered in the name of Cede &
Co., as nominee for the Depositary Trust Company. The certificates
evidencing the Firm Securities and Additional Securities shall be delivered
to you through the facilities of The Depositary Trust Company on the
Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of
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<PAGE> 14
the several Underwriters, with any transfer taxes payable in connection
with the transfer of the Convertible Preferred Securities to the
Underwriters duly paid, against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligation of the Trust to sell the Convertible Preferred Securities to the
Underwriters and the several obligations of the Underwriters to purchase
and pay for the Convertible Preferred Securities on the Closing Date are
subject to the condition that the Registration Statement shall be effective
on the date hereof.
The several obligations of the Underwriters are subject to
the following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date there shall not have
occurred any change, or any development involving a prospective
change, in the condition, financial or otherwise, or in the
earnings, business or operations of Kmart and its subsidiaries,
taken as a whole, or of the Trust from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment,
is material and adverse and that makes it, in your judgment,
impracticable to market the Convertible Preferred Securities on the
terms and in the manner contemplated in the Prospectus.
(b) The New Credit Agreement (as defined in the
Prospectus) providing for a $2.5 billion revolving credit facility
and a $1.2 billion term loan facility shall have been executed and
delivered by the parties thereto and concurrently with the payment
and delivery of the Firm Securities hereunder, the Initial
Extension of Credit (as defined in the New Credit Agreement) under
the New Credit Agreement shall take place and such Initial
Extension of Credit, together with the proceeds from the sale of
the Convertible Preferred Securities and available cash balances
resulting from the removal of payment restrictions in Kmart's
current bank credit facilities and certain real estate related debt
shall be in an amount sufficient to repay Kmart's current bank
facilities and certain real estate related debt all as described in
the "Use of Proceeds" section of the Prospectus.
(c) The Underwriters shall have received on the Closing
Date certificates, dated the Closing Date and signed by an
executive officer of Kmart and one of the Regular Trustees to the
effect that the representations and warran-
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<PAGE> 15
ties of each of Kmart and the Trust contained in this Agreement are
true and correct in all material respects as of the Closing Date
and that each of Kmart and the Trust has complied in all material
respects with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.
The officer of Kmart and the Regular Trustee signing and
delivering such certificate may rely upon the best of his knowledge
as to proceedings threatened.
(d) The Underwriters shall have received on the Closing
Date an opinion of Skadden, Arps, Slate, Meagher & Flom, special
counsel for each of Kmart and the Trust, dated the Closing Date, to
the effect that:
(i) The Trust has been duly created and is
validly existing in good standing as a business trust
under the Delaware Business Trust Act and has the business
trust power and authority to conduct its business as
presently conducted and as described in the Registration
Statement and the Prospectus and is not required to be
authorized to do business in New York.
(ii) This Agreement has been duly authorized,
executed and delivered by the Trust.
(iii) The Trust Common Securities have been
duly authorized by the Declaration and when issued,
delivered and paid for as set forth in the Registration
Statement, will represent validly issued, undivided
beneficial interests in the assets of the Trust. The
issuance of the Trust Common Securities is not subject to
preemptive or other similar rights under the Delaware
Business Trust Act or the Declaration.
(iv) The Convertible Preferred Securities have
been duly authorized by the Declaration and, subject to
the qualification set forth below, when executed by the
Trust and authenticated by the Institutional Trustee in
accordance with the Declaration and delivered to you
against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and
nonassessable undivided beneficial interests in the assets
of the Trust; the holders of the Convertible Preferred
Securities will be entitled to the same limitation of
personal liability extended to stockholders of private
corporations for profit
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<PAGE> 16
organized under the General Corporation Law of the State
of Delaware. Such counsel may state, however, that the
holders of Convertible Preferred Securities may be
obligated, pursuant to the Declaration, to (A) provide
indemnity and/or security in connection with and pay taxes
or governmental charges arising from transfers of the
Convertible Preferred Securities and the issuance of
replacement Convertible Preferred Securities, and (B)
provide security and indemnity in connection with requests
of or directions to the Institutional Trustee to exercise
its rights and powers under the Declaration. The issuance
of the Convertible Preferred Securities is not subject to
preemptive or other similar rights under the Delaware
Business Trust Act or the Declaration.
(v) The execution and delivery of this Agreement by
the Trust and the performance by the Trust of its
obligations hereunder, the issuance and sale of the
Convertible Preferred Securities by the Trust and the
consummation of the other transactions contemplated by
this Agreement will not contravene any provision of
Applicable Law or the Declaration or, to the knowledge of
such counsel, any agreement or other instrument binding
upon the Trust as set forth in a schedule to the opinion,
or any judgment, order or decree applicable to the Trust
of which such counsel is aware, as set forth in a schedule
to the opinion, of any Governmental Authority except such
contraventions as would not, individually or in the
aggregate, have a material adverse effect on the condition
(financial and other), business, properties, net worth or
results of operations of the Trust, and no Governmental
Approval is required for the performance by the Trust of
its obligations under this Agreement, except such as may
be required by the Securities Act, the Exchange Act or the
securities or Blue Sky laws of the various states and the
securities laws of jurisdictions outside the United States
in connection with the offer and sale of the Convertible
Preferred Securities by the U.S. Underwriters.
(vi) To the knowledge of such counsel based on inquiry
of responsible officers of the Trust, there are no legal
or governmental proceedings pending or threatened against
the Trust or to which the Trust or any of its property is
subject, that are required to be described in the
Registration Statement or the Prospectus that are not
described as required and there are
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<PAGE> 17
no agreements, contracts, indentures, leases or other
instruments of the Trust that are required to be described
in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement that are
not described or filed as required by the Act.
(vii) Assuming the due authorization and delivery of the
Declaration by Kmart, the Declaration is a valid and
legally binding agreement of Kmart, enforceable against
Kmart in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or
equity).
(viii) Assuming the due authorization and
delivery of the Guarantee and the Indenture by Kmart, each
of the Guarantee and the Indenture is a valid and legally
binding agreement of Kmart, enforceable against Kmart in
accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, or other similar
laws affecting creditors' rights generally and general
principles of equity (regardless of whether enforceability
is considered in a proceeding at law or equity).
(ix) Assuming the due authorization and delivery of the
Indenture by Kmart, and when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the purchasers thereof, the
Convertible Debentures will be valid and binding
obligations of Kmart enforceable in accordance with their
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, or other similar laws affecting
creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered
in a proceeding at law or equity).
(x) The statements in the Prospectus under the
captions "The Trusts", "Risk Factors," "Description of
Debt Securities," "Description of the Convertible
Preferred Securities," "Description of Trust Preferred
Securities Guarantees," "Description of the Convertible
Debentures," "Description of Common Stock," and
"Description of Capital Stock" insofar as they describe
legal documents or refer to statements of law or legal
17
<PAGE> 18
conclusions, are accurate and present fairly the
information required to be shown.
(xi) Neither Kmart nor the Trust is, and after giving
effect to the issuance of the Convertible Debentures and
the application of the proceeds thereof as described in
the Prospectus, neither Kmart nor the Trust will be an
"investment company" as such term is defined in the 1940
Act, as amended.
(xii) Such counsel (A) is of the opinion that each
document filed under the Exchange Act and incorporated by
reference into the Prospectus (except for financial
statements and schedules and other financial and
statistical data included therein or excluded therefrom or
the exhibits of such documents incorporated by reference
as to which such counsel need not express any opinion)
complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and
regulations of the Commission thereunder and (B) is of the
opinion that the Registration Statement, as of its
effective date, and the Prospectus as of the date hereof,
appeared on their face to be appropriately responsive in
all material respects to the requirements of the
Securities Act and the applicable rules and regulations of
the Commission thereunder.
In addition, such counsel shall state that it has
participated in conferences with officers and representatives of
each of Kmart and the Trust and representatives of the independent
accountants of Kmart at which the contents of the Registration
Statement and the Prospectus, the documents incorporated by
reference therein and related matters were discussed and, although
such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Prospectus or the documents incorporated by reference therein and
have made no independent check or verification thereof except for
those made under the captions listed in paragraph (x) above and
paragraph (e) (ii) below in the Prospectus insofar as they relate
to provisions of documents therein described, on the basis of the
foregoing, no facts have come to such counsel's attention that have
led such counsel to believe that the Registration Statement, at the
time it became effective or at the date hereof as supplemented by
the Prospectus Supplement, contained an untrue statement of a
material fact or omitted to state any
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<PAGE> 19
material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus, as of
the Closing Date, contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except that such counsel need not
express any belief with respect to the financial statements,
schedules and other financial and statistical data included or
incorporated by reference therein or excluded therefrom or the
exhibits to the Registration Statement, including the Forms T-1.
For purposes of the foregoing opinion, such counsel may
state that (a) "Applicable Law" shall mean only the laws of the
United States, the Delaware Trust Act and those other laws of the
State of Delaware and the State of New York which, in such
counsel's experience, are normally applicable to transactions of
the type contemplated by this Agreement (other than federal and
state securities laws and the rules and regulations of the National
Association of Securities Dealers, Inc.), but without such counsel
having made any special investigation as to the applicability of
any specific law, rule or regulation except as specified herein,
(b) "Governmental Approval" shall mean any consent, approval,
license, authorization or validation of, or filing, recording or
registration with, any Governmental Authority pursuant to
Applicable Laws, and (c) "Governmental Authority" means any
Delaware, New York or federal executive, legislative, judicial,
administrative or regulatory body. Such counsel has been orally
advised by the Commission that each of the Indenture, the
Declaration and the Guarantee has been qualified under the Trust
Indenture Act and that the Registration Statement has been declared
effective under the Securities Act and that the Registration
Statement has been declared effective under the Securities Act.
(e) The Underwriters shall have received on the Closing
Date an opinion of Skadden, Arps, Slate, Meagher & Flom, special
tax counsel for each of Kmart and the Trust, dated the Closing
Date, to the effect that under current United States federal income
tax law:
(i) The Trust will be classified for United
States federal income tax purposes as a grantor trust and
not as an association taxable as a corporation.
Accordingly, for United States federal income tax
purposes, each holder of Convertible Preferred
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<PAGE> 20
Securities will generally be considered the owner of an
undivided interest in the Convertible Debentures, and each
holder will be required to include in its gross income any
income paid or accrued with respect to its allocable share
of those Convertible Debentures.
(ii) Although the discussion set forth in the
Prospectus under the heading "United States Federal Income
Taxation" does not purport to discuss all possible United
States federal income tax consequences of the purchase,
ownership and disposition of the Convertible Preferred
Securities, in such counsel's opinion such discussion
constitutes, in all material respects, a fair and accurate
summary of the United States federal income tax
consequences of the purchase, ownership and disposition of
the Convertible Preferred Securities based upon current
law and the assumptions stated or referred to therein.
Such opinion may be conditioned on, among other things,
the initial and continuing accuracy of the facts, financial and
other information, covenants and representations set forth in
certificates of officers of each of Kmart and the Trust and other
documents deemed necessary for such opinion.
(f) The Underwriters shall have received on the Closing
Date an opinion of A.N. Palizzi, executive vice president, general
counsel for Kmart, to the effect that
(i) Kmart has been duly incorporated, is validly
existing as a corporation in good standing under the laws
of the state of Michigan, has the corporate power and
authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to
transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such
qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a
material adverse effect on Kmart and its subsidiaries,
taken as a whole;
(ii) each of Kmart Canada, Ltd., Builders
Square Inc. and Kmart Properties, Inc. has been
duly incorporated, is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has the
corporate power and authority to own its property
and to conduct its business as described in the
Prospectus and is duly qualified to
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<PAGE> 21
transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such
qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a
material adverse effect on Kmart and its subsidiaries,
taken as a whole;
(iii) the shares of Kmart Common Stock
outstanding prior to the issuance of the Convertible
Preferred Securities have been duly authorized by
requisite corporate action on the part of Kmart and are
validly issued, fully paid and non-assessable;
(iv) the authorized capital stock of
Kmart conforms as to legal matters in all material
respects to the description thereof contained in the
Prospectus;
(v) the shares of Kmart Common Stock initially
issuable upon the conversion of the Convertible Debentures
and/or the Convertible Preferred Securities have been duly
authorized by requisite corporate action on the part of
Kmart and reserved for issuance upon such conversion and,
when issued upon such conversion in accordance with the
terms thereof, will be duly issued, fully paid and
nonassessable and will not be subject to any preemptive or
similar rights;
(vi) this Agreement has been duly authorized
by requisite corporate action on the part of Kmart, and
duly executed and delivered by Kmart;
(vii) the Declaration and the Guarantee have
each been duly authorized by requisite corporate action on
the part of Kmart, and duly executed and delivered by
Kmart and the Declaration is a valid and legally binding
agreement of Kmart and the Kmart Trustees, respectively,
and the Guarantee is a valid and binding agreement of
Kmart, in each case enforceable against Kmart and, in the
case of the Declaration, the Kmart Trustees, except as
enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors'
rights generally and general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity).
(viii) the Indenture has been duly authorized by
requisite corporate action on the part of Kmart, and
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<PAGE> 22
duly executed and delivered by Kmart and is a valid and
binding agreement of Kmart enforceable in accordance with
its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(ix) the Convertible Debentures have been duly
authorized by requisite corporate action on the part of
Kmart by Kmart and, when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the purchasers thereof, will
be valid and binding obligations of Kmart enforceable in
accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and general
principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
(x) the execution and delivery by Kmart of this
Agreement, the Declaration, the Guarantee and the
Indenture and the performance by Kmart of its obligations
hereunder and thereunder, the extension of the Guarantee,
the issuance and sale of the Convertible Debentures by
Kmart and the consummation of the other transactions
contemplated by this Agreement will not contravene any
provision of Applicable Law or the articles of
incorporation or by-laws of Kmart or, to the best
knowledge of such counsel, any agreement or other
instrument binding upon Kmart or any of its subsidiaries
that is material to Kmart and its subsidiaries, taken as a
whole, or, to the best knowledge of such counsel, any
judgment, order or decree of which such counsel is aware,
of any Governmental Authority except such contraventions
as would not, individually or in the aggregate, have a
material adverse effect on the condition (financial and
other), business, properties, net worth or results of
operations of Kmart and its subsidiaries, taken as a
whole. No Governmental Approval is required for the
performance by Kmart of its obligations under this
Agreement, except such as may be required by the
Securities Act, the Exchange Act or the securities or Blue
Sky laws of the various states and the securities laws of
jurisdictions outside the United States in connection with
the offer and sale of the Convertible
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<PAGE> 23
Preferred Securities;
(xi) To the best knowledge of such counsel based on
inquiry of responsible officers of Kmart and review of
letters of counsel to Kmart obtained in connection with
preparation of financial statements, there are no legal or
governmental proceedings pending or threatened to which
Kmart or any of its subsidiaries is a party or to which
any of the properties of Kmart or any of its subsidiaries
is subject that are required to be described in the
Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or
other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not
described or filed as required;
(xii) Kmart and its subsidiaries (A) are in
compliance with any and all applicable Environmental Laws,
(B) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses and (C) are in
compliance with all terms and conditions of any such
permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure
to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on Kmart and its
subsidiaries, taken as a whole; and
(xiii) such counsel (A) is of the opinion that
each document filed under the Exchange Act and
incorporated by reference into the Prospectus (except for
financial statements and schedules and other financial and
statistical data included therein or excluded therefrom or
the exhibits of such documents incorporated by reference
as to which such counsel need not express any opinion)
complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and
regulation of the Commission thereunder, (B) is of the
opinion that the Registration Statement, as of its
effective date, and the Prospectus, as of the date hereof,
appeared on their face to be appropriately responsive in
all material respects to the requirements of the
Securities Act and the applicable rules and regulations of
the Commission thereunder.
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<PAGE> 24
For purposes of the foregoing opinion, such counsel may
state that (a) "Applicable Law" shall mean only the laws of the
United States and the State of Michigan which, in such counsel's
experience, are normally applicable to transactions of the type
contemplated by this Agreement (other than federal and state
securities laws and the rules and regulations of the National
Association of Securities Dealers, Inc.), but without such counsel
having made any special investigation as to the applicability of
any specific law, rule or regulation except as specified herein,
(b) "Governmental Approval" shall mean any consent, approval,
license, authorization or validation of, or filing, recording or
registration with, any Governmental Authority pursuant to
Applicable Laws, and (c) "Governmental Authority" means any
Michigan or federal executive, legislative, judicial,
administrative or regulatory body.
In addition, such counsel shall state that he has participated in
conferences with officers and representatives of each of Kmart and
the Trust and representatives of the independent accountants of
Kmart at which the contents of the Registration Statement and the
Prospectus, the documents incorporated by reference therein and
related matters were discussed and, although such counsel is not
passing upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Registration Statement or the Prospectus or the documents
incorporated by reference therein and has made no independent check
or verification thereof, on the basis of the foregoing, no facts
have come to such counsel's attention that have led such counsel to
believe that the Registration Statement, at the time it became
effective or at the date hereof as supplemented by the Prospectus
Supplement, contained an untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, as of the Closing Date, contains an untrue statement of
a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that such
counsel need not express any belief with respect to the financial
statements, schedules and other financial and statistical data
included or incorporated by reference therein or excluded therefrom
or the exhibits to the Registration Statement, including the Forms
T-1.
(g) You shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the
24
<PAGE> 25
Underwriters, dated the Closing Date, covering the matters referred
to in subparagraphs (d) (viii), (d) (ix) and d (x) (but only as to
the statements in the Prospectus under "Description of the
Convertible Debentures," and "Underwriters.") and paragraph (d)
(xii) above (but not as to the compliance as to form under the
Exchange Act of the documents incorporated by reference in the
Prospectus or as to the Registration Statement as of the date of
its effectiveness).
The opinions of A.N. Palizzi and of Skadden, Arps, Slate,
Meagher & Flom described in paragraphs (d), (e) and (f) above shall be
rendered to the Underwriters at the request of Kmart and the Trust and
shall so state therein.
(h) The Underwriters shall have received, on each of the
date hereof and on the Closing Date, a letter dated the date hereof
or the Closing Date, as the case may be, in form and substance
satisfactory to the Underwriters, from Price Waterhouse LLP,
independent public accountants, containing statements and
information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the
Prospectus.
The several obligations of the U.S. Underwriters to
purchase Additional Securities hereunder are subject to the delivery to the
U.S. Representatives on the Option Closing Date of such documents as they
may reasonably request with respect to the good standing of Kmart and of
the Trust, the due authorization and issuance of the Additional Securities
and the related Convertible Debentures, and other matters related to the
issuance of the Additional Securities and the related Convertible
Debentures.
6. COVENANTS OF KMART AND THE TRUST. In further
consideration of the agreements of the Underwriters herein contained, each
of Kmart and the Trust covenant with each Underwriter as follows:
(a) To furnish to you, without charge, six signed copies
of the Registration Statement (including exhibits thereto and
documents incorporated by reference) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto, but including documents incorporated by
reference) and to furnish you in New York City without charge,
prior to 10 A.M. local time on the business day next succeeding the
date
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<PAGE> 26
of this Agreement and during the period mentioned in paragraph (c)
below, as many copies of the Prospectus and any supplements and
amendments thereto, and any documents incorporated therein by
reference or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object.
(c) If, during such period after the first date of the
public offering of the Convertible Preferred Securities as in the
opinion of counsel for the Underwriters the Prospectus is required
by law to be delivered in connection with sales by an Underwriter
or dealer, any event shall occur or condition exist as a result of
which it is necessary, in your reasonable judgment to amend or
supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if, in the opinion of counsel
for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare,
file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to Kmart) to which Convertible Preferred Securities may
have been sold by you on behalf of the Underwriters and to any
other dealers upon request, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended
or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with
law.
(d) To endeavor to qualify the Convertible Preferred
Securities, the Guarantee, the Convertible Debentures and the Kmart
Common Stock for offer and sale under the securities or Blue Sky
laws of such jurisdictions as you shall reasonably request.
(e) To make generally available to Kmart security holders
and to you as soon as practicable an earning statement covering a
twelve-month period beginning after the date of this Agreement that
satisfies the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder.
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<PAGE> 27
(f) To reserve and keep available at all times, free of
preemptive rights, Kmart Common Stock for the purpose of enabling
Kmart to satisfy any obligations to issue shares of Kmart Common
Stock upon the conversion of the Convertible Debentures and/or the
Convertible Preferred Securities.
(g) To pay all expenses incident to the performance of
its obligations under this Agreement, including: (i) the
preparation and filing of the Registration Statement and the
Prospectus and all amendments and supplements thereto; (ii) the
preparation, issuance and delivery of the Convertible Preferred
Securities and the Convertible Debentures, including any transfer
taxes payable in connection with the transfer of Convertible
Preferred Securities to the Underwriters; (iii) the fees and
disbursements of Kmart's and the Trust's counsel and accountants;
(iv) the qualification of the Convertible Preferred Securities, the
Guarantee, the Convertible Debentures and the Kmart Common Stock
under state securities or Blue Sky laws in accordance with the
provisions of Section 6(d), including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of
any Blue Sky or Legal Investment Memoranda; (v) the printing and
delivery to the Underwriters in quantities as hereinabove stated of
copies of the Registration Statement and all amendments thereto and
of each preliminary prospectus and the Prospectus and any
amendments or supplements thereto; (vi) the printing and delivery
to the Underwriters of copies of any Blue Sky or Legal Investment
Memoranda; (vii) the filing fees and reasonable expenses, if any,
incurred with respect to any filing with the National Association
of Securities Dealers, Inc. made in connection with the offering of
the Convertible Preferred Securities; (viii) the fees and expenses
of the Indenture Trustee, the Institutional Trustee and the
Guarantee Trustee (as determined by Kmart and each of the Trustees)
and the fees and disbursements of counsel for such Trustees in
connection with the Indenture, the Declaration, the Guarantee and
the Convertible Debentures; (viii) the fees and expenses associated
with obtaining ratings for the Convertible Preferred Securities
from nationally recognized statistical rating organizations; (viii)
any expenses incurred by Kmart in connection with a "road show"
presentation to potential investors; (ix) the listing of the
Convertible Preferred Securities on the New York Stock Exchange,
Inc.; and (x) the reasonable fees and disbursements of Canadian
counsel for the Underwriters in connection with the qualification
or exemption of the Convertible Preferred Securities under Canadian
law.
27
<PAGE> 28
7. INDEMNITY AND CONTRIBUTION. (a) Each of Kmart
and the Trust jointly and severally agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if there shall have been any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission
or alleged untrue statement or omission based upon information relating to
any Underwriter furnished to Kmart or the Trust in writing by such
Underwriter through you expressly for use therein; provided, that the
foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any such losses, claims, damages or liabilities purchased
Convertible Preferred Securities or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto)
was not sent or given by or on behalf of such Underwriter to such person,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities.
(b) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Trust, the Regular Trustees, Kmart, its
directors, its officers who sign the Registration Statement and each
person, if any, who controls the Trust or Kmart within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action or
claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if there shall have
28
<PAGE> 29
been any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such Underwriter furnished
to Kmart or the Trust in writing by such Underwriter through you expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 7,
such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is
understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for the Trust,
the Regular Trustees, Kmart, its directors, its officers who sign the
Registration Statement and each person, if any, who controls Kmart or the
Trust within the meaning of either such Section, and that all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters and such control persons of
Underwriters, such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated. In the case of any such separate firm for the Trust, the
Regular Trustees, Kmart, and such directors, officers and control persons
of Kmart, such firm shall be designated in
29
<PAGE> 30
writing by Kmart. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement, unless the indemnifying party has contested such obligation and
provides reasonable assurances that such payment can be made upon
resolution of such dispute. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by
Kmart and the Trust on the one hand and the Underwriters on the other hand
from the offering of the Convertible Preferred Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
Kmart and the Trust on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by Kmart and the
Trust on the one hand and the Underwriters on the other hand in connection
with the offering of the
30
<PAGE> 31
Convertible Preferred Securities shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Convertible Preferred Securities (before deducting expenses) received by
Kmart and the Trust and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate public offering price of the
Convertible Preferred Securities. The relative fault of Kmart and the
Trust on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Kmart
and the Trust or by the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Convertible Preferred Securities they have purchased
hereunder, and not joint.
(e) Kmart, the Trust and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) of this Section 7. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) of this Section 7 shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Convertible Preferred Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained
in this Section 7 and the representations, warranties
31
<PAGE> 32
and other statements of Kmart and the Trust contained in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Trust, the Regular Trustees, Kmart, its officers or directors
or any other person controlling Kmart and (iii) acceptance of and payment
for any of the Convertible Preferred Securities.
8. TERMINATION. This Agreement shall be subject to
termination by notice given by you to Kmart, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., or the
Chicago Board of Trade, (ii) trading of any securities of Kmart shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have
been declared by either Federal or New York State authorities or (iv) there
shall have occurred any outbreak or escalation of hostilities or any change
in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event, singly or together with any other
such event, makes it, in your judgment, impracticable to market the
Convertible Preferred Securities on the terms and in the manner
contemplated in the Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This
Agreement shall become effective upon the execution and delivery hereof by
the parties hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Convertible Preferred Securities that it has or they have agreed
to purchase hereunder on such date, and the aggregate number of Convertible
Preferred Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Convertible Preferred Securities to be purchased on
such date, the other Underwriters shall be obligated severally in the
proportions that the number of Firm Securities set forth opposite their
respective names in Schedule I bears to the aggregate number of Firm
Securities set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase
the Convertible Preferred Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such
32
<PAGE> 33
date; provided that in no event shall the number of Convertible Preferred
Securities that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Convertible Preferred Securities without the
written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Firm
Securities which it or they have agreed to purchase hereunder on such date
and the aggregate number of Firm Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm
Securities to be purchased, and arrangements satisfactory to you and Kmart
for the purchase of such Firm Securities are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or of Kmart and the Trust. In any such
case either you or Kmart shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in
any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Securities and the aggregate number of Additional
Securities with respect to which such default occurs is more than one-tenth
of the aggregate number of Additional Securities to be purchased, the
non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase Additional Securities or (ii) purchase not
less than the number of Additional Securities that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of Kmart or
the Trust to comply with the terms or to fulfill any of the conditions of
this Agreement, or if for any reason Kmart or the Trust shall be unable to
perform their respective obligations under this Agreement (other than on
account of an Underwriter's breach of obligations causing a termination
pursuant to the preceding paragraph), Kmart will reimburse the Underwriters
or such Underwriters as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees
and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
10. COUNTERPARTS. This Agreement may be signed in two
33
<PAGE> 34
or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
11. APPLICABLE LAW. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New
York.
12. HEADINGS. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall
not be deemed a part of this Agreement.
Very truly yours,
34
<PAGE> 35
KMART FINANCING I
By /s/ Martin E. Welch, III
----------------------------------
Name: Martin E. Welch, III
solely as a Regular Trustee and not
in his individual capacity
KMART CORPORATION
By /s/ Martin E. Welch, III
----------------------------------
Name: Martin E. Welch, III
Title: Senior Vice President and
Chief Financial Officer
Accepted, June 6, 1996
Morgan Stanley & Co. Incorporated
Merrill Lynch, Piece, Fenner & Smith Incorporated
CS First Boston Corporation
Lehman Brothers Inc.
Salomon Brothers Inc
Acting severally on behalf
of themselves and the
several U.S. Underwriters
named in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By /s/ Richard Steinman
--------------------
Name: Richard Steinman
Title: Vice President
35
<PAGE> 36
Morgan Stanley & Co.
International Limited
Merrill Lynch International
CS First Boston Limited
Lehman Brothers International (Europe)
Salomon Brothers International Limited
Acting severally on behalf of
themselves and the several International
Underwriters named in Schedule II hereto.
By Morgan Stanley & Co.
International Limited
By /s/ Richard Steinman
-----------------------
Name: Richard Steinman
Title: Vice President
36
<PAGE> 37
SCHEDULE I
U.S. Underwriters
<TABLE>
<CAPTION>
Number of
Firm Securities
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated 2,622,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 2,622,000
CS First Boston Corporation 2,622,000
Lehman Brothers Inc. 2,622,000
Salomon Brothers Inc 2,622,000
Bear, Stearns & Co. Inc. 150,000
Sanford C. Bernstein & Co., Inc. 90,000
Chase Securities Inc. 150,000
CIBC Wood Gundy Securities Corp. 150,000
Dean Witter Reynolds Inc. 150,000
Deutsche Morgan Grenfell/C.J. Lawrence Inc. 150,000
Donaldson, Lufkin & Jenrette Securities Corporation 150,000
First of Michigan Corporation 90,000
Goldman, Sachs & Co. 150,000
Gruntal & Co., Incorporated 90,000
J.P. Morgan Securities Inc. 150,000
Paine Webber Incorporated 150,000
Prudential Securities Incorporated 150,000
Roney & Co., LLC 90,000
Utendahl Capital Partners, L.P. 90,000
Wheat, First Securities, Inc. 90,000
----------
Total U.S. Firm Securities 15,150,000
==========
</TABLE>
I-1
<PAGE> 38
SCHEDULE II
International Underwriters
<TABLE>
<CAPTION>
Number of
Firm Securities
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. International Limited 394,000
Merrill Lynch International 394,000
CS First Boston Limited 394,000
Salomon Brothers International Limited 394,000
Lehman Brothers International (Europe) 394,000
Bayerische Vereinsbank Aktiengesellschaft 40,000
Credit Lyonnais Securities 40,000
Morgan Grenfell & Co. Limited 40,000
Robert Fleming & Co. Limited 40,000
Kleinwort Benson Limited 40,000
Sumitomo Finance International 40,000
Swiss Bank Corporation acting through its division 40,000
---------
Total International Firm Securities 2,250,000
=========
</TABLE>
II-1
<PAGE> 1
EXHIBIT 4(b)
KMART CORPORATION,
as Issuer
TO
THE BANK OF NEW YORK,
as Trustee
Indenture
Dated as of June 6, 1996
Subordinated Debentures
<PAGE> 2
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
RECITALS OF THE COMPANY
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.3 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.4 Acts of Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.5 Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 1.6 Notice to Holders of Debentures; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.7 Language of Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.8 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.9 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.11 Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.12 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.14 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.15 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.16 Immunity of Incorporators, Shareholders, Officers, Directors
and Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
DEBENTURE FORMS . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.2 Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.3 Debentures in Global Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.4 Form of Legend for Book-Entry Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.5 Form of Conversion Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
____________________
1 NOTE: This table of contents shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 3
ARTICLE III
<TABLE>
<S> <C> <C>
THE DEBENTURES . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.1 Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.2 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.3 Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.4 Temporary Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.5 Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Debentures and Coupons . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.7 Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.8 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.9 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.10 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.11 Electronic Debenture Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.12 CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . 37
SECTION 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.3 Company's Option to Effect Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.4 Discharge and Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.5 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.6 Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . 46
SECTION 5.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.5 Trustee May Enforce Claims Without Possession of Debentures or Coupons . . . . . . . . . . . . . . . 48
SECTION 5.6 Application of Money Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . . 50
SECTION 5.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.12 Control by Holders of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 5.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.14 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.15 Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior
to Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.3 Not Responsible for Recitals or Issuance of Debentures . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.4 May Hold Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.5 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.6 Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.7 Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.8 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.9 Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.10 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.11 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.12 Merger, Conversion Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.13 Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.14. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . 62
SECTION 7.1 Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.2 Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.3. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE . . . . . . . . . . . . . . . 65
SECTION 8.1 Company May Consolidate, Etc. on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.2 Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.3 Opinion of Counsel to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . 66
SECTION 9.1 Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.2 Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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SECTION 9.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.6 Reference in Debentures to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE X
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.1 Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.3 Money for Debentures Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.4 Limitation on Dividends; Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.5 Covenants as to Kmart Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.6 Additional Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.7 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.8 Purchase of Debentures by Company or Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.9 Statement by Officers as to Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.10 Calculation of Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XI
REDEMPTION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.2 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.3 Selection by Trustee of Debentures to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.6 Debentures Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.7 Debentures Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE XII
SINKING FUNDS . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.2 Satisfaction of Sinking Fund Payments with Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.3 Redemption of Debentures for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE XIII
MEETINGS OF HOLDERS OF DEBENTURES . . . . . . . . . . . . . . . . . . . 81
SECTION 13.1 Purposes for Which Meetings May be Called . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.2 Call, Notice and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.3 Persons Entitled to Vote at Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.4 Quorum; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.5 Determination of Voting Rights; Conduct and Adjournment
</TABLE>
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of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.6 Counting Votes and Recording Action of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE XIV
CONVERSION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . 84
SECTION 14.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 14.2 Exercise of Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 14.3 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 14.4 Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 14.5 Notice of Certain Corporate Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 14.6 Reservation of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 14.7 Payment of Certain Taxes upon Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 14.8 Nonassessability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 14.9 Effect of Consolidation or Merger on Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 14.10 Duties of Trustee Regarding Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 14.11 Repayment of Certain Funds upon Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE XV
SUBORDINATION OF DEBENTURES . . . . . . . . . . . . . . . . . . . 90
Section 15.1 Debentures Subordinate to Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 15.2 Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 15.3 Prior Payment to Senior Indebtedness Upon Acceleration of Debentures. . . . . . . . . . . . . . . . . . 92
Section 15.4 No Payment When Senior Indebtedness in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 15.5 Payment Permitted in Certain Situations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 15.6 Subrogation to Rights of Holders of Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 15.7 Provisions Solely to Define Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 15.8 Trustee to Effectuate Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 15.9 No Waiver of Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 15.10 Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 15.11 Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . . . . . 96
Section 15.12 Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 15.13 Rights of Trustee as Holder of Senior Indebtedness, Preservation of Trustee's Rights . . . . . . . . . . 96
Section 15.14 Article Applicable to Paying Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 15.15 Certain Conversions Deemed Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
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INDENTURE, dated as of June 6, 1996, between Kmart Corporation, a
corporation duly organized and existing under the laws of the State of Michigan
(herein called the "Company"), having its principal office at 3100 West Big
Beaver Road, Troy, Michigan 48084, and The Bank of New York, a New York banking
corporation having its principal corporate trust office at 101 Barclay Street,
Floor 21 West, New York, New York 10286, as Trustee (herein called the
"Trustee") .
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its secured or
unsecured subordinated debentures, notes or other evidences of indebtedness
(herein called the "Debentures"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Debentures
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Debentures or of a series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States of America, and,
except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any
computation re-
<PAGE> 8
quired or permitted hereunder shall mean such accounting
principles as are generally accepted in the United States of
America at the date of such computation; and
(d) The words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder of a Debenture, has the meaning
specified in Section 1.4.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.13 to act on behalf of the Trustee to authenticate Debentures of
one or more series.
"Authorized Newspaper" means a newspaper, in the English language or in an
official language of the country of publication, customarily published on each
Business Day, whether or not published on Saturdays, Sundays or holidays, and
of general circulation in the place, in connection with which the term is used,
or in the financial community of such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may
be made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
"Bearer Debenture" means any Debenture in the form established pursuant to
Section 2.1 which is payable to bearer.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Book-Entry Debenture" means a Debenture bearing the legend specified in
Section 2.4, evidencing all or part of a series of Debentures, issued to the
Depository for such series or its nominee, and registered in the name of such
Depository or nominee. Book-Entry Debentures shall not be deemed to be
securities in global form for purposes of Sections 2.1 and 2.3 and Article III
of this Indenture.
"Business Day", when used with respect to any Place of Payment or any other
particular location referred to in this Indenture or in the Debentures, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that
2
<PAGE> 9
Place of Payment or other location are authorized or obligated by law or
executive order to close.
"Cedel S.A." means Cedel Bank, Societe Anonyme, or its successor.
"Commission" means the United States Securities and Exchange Commission.
"Common Depository" has the meaning specified in Section 3.4.
"Common Securities" means undivided beneficial interests in the assets of a
Kmart Trust which rank pari passu with Preferred Securities issued by such
Kmart Trust; provided, however, that upon the occurrence of an Event of
Default, the rights of holders of Common Securities to payment in respect to
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Common Securities Guarantee" means any Guarantee that the Company enters
into with The Bank of New York or other Persons that operates directly or
indirectly for the benefit of holders of Common Securities of a Kmart Trust.
"Common Stock" includes any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the
anti-dilution provisions of any convertible Debenture, however, shares of Kmart
Common Stock issuable on conversion of a Debenture shall include only shares of
the class designated as Common Stock of the Company at the date of any
supplemental indenture, Board Resolution or other instrument authorizing such
Debenture or shares of any class or classes resulting from any reclassification
or reclassifications thereof and which have no preference in respect of the
payment of dividends or the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company, provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by the Chairman of the Board of Directors or
the President or any Vice Chairman or any Vice President and by the Treasurer
or the Secretary or any Assistant Treasurer or any Assistant Secretary of the
Company and delivered to the Trustee.
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<PAGE> 10
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Coupon" means any interest coupon appertaining to a Bearer Debenture.
"Debenture Register" and "Debenture Registrar" have the respective meanings
specified in Section 3.5.
"Debentures" has the meaning stated in the first recital of this Indenture
and more particularly means any Debentures authenticated and delivered under
this Indenture.
"Declaration", with respect to a Kmart Trust, means the Amended and
Restated Declaration of Trust of such Kmart Trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Defeasance" has the meaning specified in Section 4.4.
"Depository" means, with respect to the Debentures of any series issuable
or issued in whole or in part in the form of one or more Book-Entry Debentures
of such series, the clearing agency registered under the Securities Exchange
Act of 1934, as amended specified for that purpose as contemplated by Section
3.1.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"Euro-clear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euro-clear System.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Date" has the meaning specified in Section 3.4.
"Guarantor" means Kmart Corporation, a Michigan corporation, in its
capacity as guarantor under any Trust Securities Guarantees.
"Holder", when used with respect to any Debenture, means, in the case of a
Registered Debenture, the Person in whose name the Debenture is registered in
the Debenture Register and, in the case of a Bearer Debenture, the bearer
thereof and, when used with respect to any Coupon, the bearer thereof.
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<PAGE> 11
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of Debentures of any series established as contemplated by
Section 3.1.
"Institutional Trustee" has the meaning set forth in the Declaration of the
applicable Kmart Trust.
"Interest", when used with respect to any Original Issue Discount Debenture
which by its terms bears interest only at Maturity, means interest payable at
Maturity.
"Interest Payment Date", when used with respect to any Debenture, means the
Stated Maturity of an installment of interest on such Debenture.
"Kmart Trust" means each of Kmart Trust I, II, III and IV, each, a Delaware
statutory business trust.
"Maturity", when used with respect to any Debenture, means the date on
which the principal of such Debenture or an installment of such principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, notice of
option to elect repayment or otherwise.
"New Credit Agreement" means the $3,700,000,000 credit agreement, dated
June 6, 1996, by and among Kmart Corporation, the several banks, financial
institutions and other entitles parties thereto and Chemical Bank, as
Administrative Agent.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors or the President or any Vice Chairman or any Vice President
and by the Treasurer or the Secretary or any Assistant Treasurer or any
Assistant Secretary of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company, and who shall be acceptable to the
Trustee.
"Original Issue Discount Debenture" means any Debenture which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 5.2.
"Outstanding", when used with respect to Debentures of any series, means,
as of the date of determination, all Debentures of such series theretofore
authenticated and delivered under this Indenture, except:
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<PAGE> 12
(i) Debentures of such series theretofore cancelled by the
Trustee or any Paying Agent or delivered to the Trustee for
cancellation or that have previously been cancelled;
(ii) Debentures of such series for whose payment or redemption
of which money or United States Government Obligations in the
necessary amount has been theretofore deposited in accordance
with Article IV with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for
the Holders of Debentures of such series and any Coupons
appertaining thereto; provided that, if Debentures of such series
or portions of Debentures of such series are to be redeemed prior
to the Maturity thereof, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Debentures of such series which have been paid pursuant to
Section 3.6 or in exchange for or in lieu of which other
Debentures of such series have been authenticated and delivered
pursuant to this Indenture, other than any Debentures of such
series in respect of which there shall have been presented to the
Trustee proof satisfactory to it that Debentures of such series
are held by a bona fide purchaser in whose hands Debentures of
such series are valid obligations of the Company; and
(iv) Debentures of such series as to which Defeasance has been
effected pursuant to Section 4.4;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of the Outstanding Debentures of such series have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder or whether a quorum is present at a meeting of Holders of Debentures
of such series (A) the principal amount of an Original Issue Discount Debenture
of such series that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof pursuant to Section
5.2, (B) the principal amount of a Debenture of such series denominated in a
foreign currency or currencies shall be the U.S. dollar equivalent, determined
on the date of original issuance of such Debenture, of the principal amount
(or, in the case of an Original Issue Discount Debenture of such series, the
U.S. dollar equivalent on the date of original issuance of such Debenture of
the amount determined as provided in (A) above) of such Debenture, and (C)
Debentures of such series owned by the Company or any other obligor upon such
Debentures, or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, or upon any such
determination as to the presence of a quorum, only Debentures of such series
which the Trustee actually knows to be so owned shall be so disregarded.
Debentures of such series so
6
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owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Debentures and that the pledgee is not the
Company or any other obligor upon such Debentures or any Affiliate of the
Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and any premium and interest on any Debentures or any Coupons
appertaining thereto on behalf of the Company.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, trust, association, joint stock company,
limited liability company, unincorporated association or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Place of Payment", when used with respect to the Debentures of any series,
means the place or places where, subject to the provisions of Section 10.2, the
principal of and any premium and interest on Debentures of such series are
payable as specified as contemplated by Section 3.1.
"Predecessor Debenture" of a Debenture of any series means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by
such Debenture; and, for the purposes of this definition, a Debenture of any
series authenticated and delivered under Section 3.6 in exchange for or in lieu
of a mutilated, destroyed, lost or stolen Debenture or a Debenture to which a
mutilated, destroyed, lost or stolen Coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Debenture or
the Debenture to which the mutilated, destroyed, lost or stolen Coupon
appertains, as the case may be.
"Preferred Securities" means undivided beneficial interests in the assets
of a Kmart Trust which rank pari passu with Common Securities issued by such
Kmart Trust; provided, however, that upon the occurrence of an Event of
Default, the rights of holders of Common Securities to payment in respect to
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any Guarantee that the Guarantor may
enter into with The Bank of New York or other Persons that operates directly or
indirectly for the benefit of holders of Preferred Securities of such Kmart
Trust.
"Redemption Date", when used with respect to any Debenture to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Debenture to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
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"Registered Debenture" means any Debenture in the form established pursuant
to Section 2.1 which is registered in the Debenture Register.
"Regular Record Date" for the interest payable on any Interest Payment Date
on Registered Debentures of any series means the date specified for that
purpose as contemplated by Section 3.1., whether or not such day is a Business
Day.
"Responsible Officer" means, when used with respect to the Trustee, the
chairman of the board of directors, the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (a) indebtedness of the
Company for money borrowed and (b) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by the Company,
including, without limitation, all indebtedness, and all obligations of the
Company to pay fees and other amounts, under the New Credit Agreement, and any
refinancing of the New Credit Agreement in the bank credit market (including
institutional participants therein), including interest accruing on or after a
bankruptcy or other similar event, whether or not an allowed claim therein;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of the
Company for the reimbursement on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction; (v) all obligations
of the types referred to in clauses (i) through (iv) of other Persons for the
payment of which the Company is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the types referred to in clauses (i)
through (v) of other Persons secured by any lien on any property or asset of
the Company (whether or not such obligation is assumed by the Company), except
for (A) any such indebtedness that is by its terms subordinated to or pari
passu with the Debentures, and (B) any indebtedness between or among the
Company or its Affiliates, including all other debt securities and guarantees
in respect of those debt securities, issued to (a) any Kmart Trust or a trustee
of such trust and (b) any other trust, or a trustee of such trust, partnership
or other entity affiliated with the Company that is a financing vehicle of the
Company (a "Financing Entity") in connection with the issuance by such
Financing Entity of preferred securities, unless otherwise expressly provided
in the terms of such debt securities.
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"Special Record Date" for the payment of any Defaulted Interest on
Registered Debentures of any series means a date fixed by the Trustee pursuant
to Section 3.7.
"Stated Maturity", when used with respect to any Debenture or any
installment of principal thereof or interest thereon, means the date specified
in such Debenture or a Coupon representing such installment of interest as the
fixed date on which the principal of such Debenture or such installment of
principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture, business trust or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at the
time be owned by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries and (iii) any limited partnership of
which such Person or any of its Subsidiaries is a general partner.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to Debentures of
any series shall mean the Trustee with respect to Debentures of such series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred Securities of a
Kmart Trust.
"Trust Securities Guarantees" means the Common Securities Guarantee and the
Preferred Securities Guarantee.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"United States Alien" means any Person who, for United States federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, for United States federal
income tax purposes, a foreign corporation, a non-resident alien individual or
a nonresident alien fiduciary of a foreign estate or trust or a foreign
partnership.
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"U.S. Government Obligations" means direct obligations of the United States
for the payment of which its full faith and credit is pledged, or obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended)
as custodian with respect to any such U.S. Government Obligations or a specific
payment of principal of or interest on any such U.S. Government Obligations
held by such custodian for the account of the holder of such depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligations or the specific payment of principal of or interest
on the U.S. Government Obligations evidenced by such depository receipt.
"Voting Stock", as applied to stock of any Person, means shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person having ordinary voting power for the election of a majority of
the directors (or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
"Yield to Maturity" means the yield to maturity on Debentures of any
series, calculated at the time of issuance of such series, or, if applicable,
at the most recent redetermination of interest on such series, and calculated
in accordance with accepted financial practice.
SECTION 1.2 Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion by or on behalf of the Company with respect to
compliance with a condition or covenant provided for in this Indenture, except
for certificates provided for in Section 10.9, shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
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(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
the individual has made such examination or investigation as is
necessary to enable such individual to express an informed
opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing. If Debentures of any series are issuable as Bearer
Debentures of such series , any request, demand, authorization, direction,
notice, consent, waiver or other action provided or permitted by this Indenture
to be given or
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taken by Holders of Debentures of such series may, alternatively, be embodied
in and evidenced by the record of Holders of Debentures of such series voting
in favor thereof, either in person or by proxies duly appointed in writing, at
any meeting of Holders of Debentures of such series duly called and held in
accordance with the provisions of Article XIII, or a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or
record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any such record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
and so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent or proxy, or of the holding by any
Person of a Debenture of any series, shall be sufficient for any purpose of
this Indenture and (subject to Section 6.2) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section. The record of
any meeting of Holders of Debentures of any series shall be proved in the
manner provided in Section 13.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such notary public or other such
officer the execution thereof. Where such execution is by a signer acting in a
capacity other than the signer's individual capacity, such certificate or
affidavit shall also constitute sufficient proof of the signer's authority. The
fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other
manner which the Trustee reasonably deems sufficient.
(c) The principal amount and serial numbers of Registered Debentures of
any series held by any Person, and the date of holding the same, shall be
proved by the Debenture Register.
(d) The principal amount and serial numbers of Bearer Debentures of any
series held by any Person, and the date of holding the same, may be proved by
the production of such Bearer Debentures or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be
satisfactory, showing that at the date therein mentioned such Person had on
deposit with such depositary, or exhibited to it, the Bearer Debentures therein
described; or such facts may be proved by the certificate or affidavit of the
Person holding such Bearer Debentures, if such certificate or affidavit is
deemed by the Trustee to be satisfactory. The Trustee and the Company may
assume that such ownership of any Bearer Debenture continues until (i) another
certificate or affidavit bearing a later date issued in respect of the same
Bearer Debenture is produced, or (ii) such Bearer Debenture is produced to the
Trustee by some other Person, or (iii) such Bearer Debenture is surrendered in
exchange for a Registered Debenture of such series, or (iv) such Bearer
Debenture is no longer Outstanding. The principal amount and serial numbers of
Bearer Debentures held by any Person, and the date
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of holding the same, may also be proved in any other manner which the Trustee
deems sufficient.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of a Debenture of any series shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Debenture.
(f) With respect to the Debentures of any series, upon receipt by the
Trustee of (i) any written notice directing the time, method or place of
conducting any proceeding or exercising any trust or power pursuant to Section
5.1 with respect to Debentures of such series or (ii) any written demand,
request or notice with respect to any matter on which the Holders of Debentures
of such series are entitled to act under this Indenture, in each case from
Holders of less than, or proxies representing less than, the requisite
principal amount of Outstanding Debentures of such series entitled to give such
demand, request or notice, the Trustee shall establish a record date for
determining Holders of Outstanding Debentures of such series entitled to join
in such demand, request or notice, which record date shall be the close of
business on the day the Trustee received such demand, request or notice. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such demand, request or notice whether or
not such Holders remain Holders after such record date; provided, however, that
unless the Holders of the requisite principal amount of Outstanding Debentures
of such series shall have joined in such demand, request or notice prior to the
day which is the ninetieth day after such record date, such demand, request or
notice shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or
a proxy of a Holder, from giving, (i) after the expiration of such 90-day
period, a new demand, request or notice identical to a demand, request or
notice which has been canceled pursuant to the proviso to the preceding
sentence or (ii) during any such 90-day period, a new demand, request or notice
which has been canceled pursuant to the proviso to the preceding sentence or
(iii) during any such 90-day period, a new demand, request or notice contrary
to or different from such demand, request or notice, in either of which events
a new record date shall be established pursuant to the provisions of this
clause.
(g) The Company may set any day as the record date for the purpose of
determining the Holders of Outstanding Debentures of any series entitled to
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders of Debentures of such series. With regard to any record date
set pursuant to this paragraph, the Holders of Outstanding Debentures of such
series on such record date (or their duly appointed agents), and only such
Persons, shall be entitled to give or take the relevant action, whether or not
such Holders remain Holders after such record date. With regard to any action
that may be given or taken hereunder only by Holders of a requisite principal
amount of Outstanding Debentures of any series (or their
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duly appointed agents) and for which a record date is set pursuant to this
paragraph, the Company may, at its option, set an expiration date after which
no such action purported to be given or taken by any Holder shall be effective
hereunder unless given or taken on or prior to such expiration date by Holders
of the requisite principal amount of Outstanding Debentures of such series on
such record date (or their duly appointed agents). On or prior to any
expiration date set pursuant to this paragraph, the Company may, on one or more
occasions at its option, extend such date to any later date. Nothing in this
paragraph shall prevent any Holder (or any duly appointed agent thereof) from
giving or taking, after any expiration date, any action identical to, or, at
any time, contrary to or different from, any action given or taken, or
purported to have been given or taken, hereunder by a Holder on or prior to
such date, in which event the Company may set a record date in respect thereof
pursuant to this clause. Notwithstanding the foregoing or the Trust Indenture
Act, the Company shall not set a record date for, and the provisions of this
clause shall not apply with respect to, any action to be given or taken by
Holders pursuant to Section 5.1, 5.2 or 5.12.
SECTION 1.5 Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Trustee Administration, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this
Indenture, to the attention of its Treasurer, or at any other
address previously furnished in writing to the Trustee by the
Company.
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SECTION 1.6 Notice to Holders of Debentures; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Debentures of any event:
(a) such notice shall be sufficiently given to Holders of
Registered Debentures of any series if in writing and mailed,
first-class postage prepaid, to each Holder of a Registered
Debenture affected by such event, at the address of such Holder
as it appears in the Debenture Register, not earlier than the
earliest date, and not later than the latest date, prescribed for
the giving of such notice; and
(b) such notice shall be sufficiently given to Holders of Bearer
Debentures of any series if published in an Authorized Newspaper
in The City of New York, The City of London and in such other
city or cities as may be specified in such Debentures on a
Business Day at least twice, the first such publication to be not
earlier than the earliest date, and the second such publication
to be not later than the latest date, prescribed for the giving
of such notice.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice to Holders of
Registered Debentures by mail, then such notification as shall be made with the
approval of the Trustee shall constitute sufficient notice to such Holders for
every purpose hereunder. In any case where notice to Holders of Registered
Debentures is given by mail, neither the failure to mail such notice, nor any
defect in any notice mailed to any particular Holder of a Registered Debenture
shall affect the sufficiency of such notice with respect to other Holders of
Registered Debentures or the sufficiency of any notice to Holders of Bearer
Debentures given as provided herein.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Debentures as provided
above, then such notification as shall be given with the approval of the
Trustee shall constitute sufficient notice to such Holders for every purpose
hereunder. Neither the failure to give notice by publication to Holders of
Bearer Debentures as provided above, nor any defect in any notice so published,
shall affect the sufficiency of any notice to Holders of Registered Debentures
given as provided herein.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders of Debentures shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
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SECTION 1.7 Language of Notices, Etc.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
SECTION 1.8 Conflict with Trust Indenture Act.
If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with another provision included in this Indenture which is
required to be included in this Indenture by any of Sections 310 to 318,
inclusive, of the Trust Indenture Act of 1939, such required provision shall
control.
SECTION 1.9 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.10 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.11 Separability Clause.
In case any provision in this Indenture or the Debentures or Coupons shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 1.12 Benefits of Indenture.
Nothing in this Indenture or the Debentures or Coupons, express or implied,
shall give to any Person, other than the parties hereto, any Authenticating
Agent, any Paying Agent, any Debentures Registrar and their successors
hereunder and the Holders of Debentures and coupons, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 1.13 Governing Law.
This Indenture and the Debentures and Coupons shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws principles thereof.
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SECTION 1.14 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, sinking fund
payment date, Maturity or Stated Maturity of a Debenture of any series shall
not be a Business Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Debentures or Coupons other than a
provision in Debentures of any series which specifically states that such
provision shall apply in lieu of this Section) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue on the amount so payable for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be, to such
succeeding Business Day.
SECTION 1.15 Judgment Currency.
The Company agrees, to the fullest extent that it may effectively do so
under applicable law, that (a) if for the purpose of obtaining judgment in any
court it is necessary to convert the sum due on Debentures of any series from
the currency in which such sum is payable in accordance with the terms of such
Debentures (the "Required Currency") into a currency in which a judgment will
be rendered (the "Judgment Currency"), the rate of exchange used shall be the
rate at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the New York Banking Day preceding that on which a final
unappealable judgment is rendered and (b) its obligations under this Indenture
to make payments in the Required Currency (i) shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment (whether or
not entered in accordance with subsection (a)), in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments, (ii) shall be
enforceable as an alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Indenture. For purposes of the
foregoing, "New York Banking Day" means any day except a Saturday, Sunday or a
legal holiday in The City of New York or a day on which banking institutions in
The City of New York are authorized or required by law or executive order to
close.
SECTION 1.16 Immunity of Incorporators, Shareholders, Officers, Directors
and Employees.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of a Debenture of any series, or for any claim based thereon or
otherwise in respect thereof, shall be had against any incorporator,
shareholder, officer, director or employee, as such,
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past, present or future, of the Company or of any successor corporation, either
directly or through the Company, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations of the Company,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, shareholders, officers, directors or employees,
as such, of the Company or of any successor corporation, or any of them,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations or agreements contained in this Indenture or in any
of the Debentures or implied therefrom; and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer, director or employee, as such, because of the creation of
the indebtedness hereby authorized, or under of by reason of the obligations or
agreements contained in this Indenture or in any of the Debentures or implied
therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Debentures.
All payments of interest and other amounts, if any, to be made by the
Trustee hereunder shall be made only from the money deposited with the Trustee
and only to the extent that the Trustee shall have sufficient income or
proceeds to make such payments in accordance with the terms of this Indenture,
and each Holder thereof, by its acceptance of a Debenture, agrees that it will
look solely to the income and proceeds deposited with the Trustee to the extent
available for distribution to such Holder as provided and that the Trustee is
not personally liable in any manner to such Holder for any amounts payable or
any liability under this Indenture or any Debenture.
ARTICLE II
DEBENTURE FORMS
SECTION 2.1 Forms Generally.
The Registered Debentures, if any, of each series and the Bearer
Debentures, if any, of each series and related Coupons shall be in such form
(including temporary or permanent global form) as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Debentures or Coupons, as evidenced by their execution
of the Debentures or Coupons. If temporary Debentures of any series are issued
in global form as permitted by Section 3.4, the form thereof
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shall be established as provided in the preceding sentence. If the forms of
Debentures or Coupons of any series (or any such temporary global Debenture)
are established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.3 for the
authentication and delivery of such Debentures (or any such temporary global
Debenture) or Coupons.
Unless otherwise specified as contemplated by Section 3.1, Debentures in
bearer form shall have interest Coupons attached.
The definitive Debentures and Coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Debentures or
Coupons, as evidenced by their execution of such Debentures or Coupons.
SECTION 2.2 Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Debentures of the series designated therein referred to
in the within-mentioned Indenture.
The Bank of New York,
As Trustee
By: _______________
Authorized Signatory
SECTION 2.3 Debentures in Global Form.
If Debentures of any series are issuable in global form, as specified as
contemplated by Section 3.1, then, notwithstanding clause (e) of Section 3.1
and the provisions of Section 3.2, any such Debenture shall represent such of
the Outstanding Debentures of such series as shall be specified therein and may
provide that it shall represent the aggregate amount of Outstanding Debentures
of such series from time to time endorsed thereon and that the aggregate amount
of Outstanding Debentures of such series represented thereby may from time to
time be reduced to reflect exchanges. Any endorsement of a Debenture in global
form to reflect the amount, or any increase or decrease in the amount, of
Outstanding Debentures of such series represented thereby shall be made by the
Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Company Order to be delivered to the
Trustee pursuant to Section 3.3 or Section 3.4. Subject to the provisions of
Section 3.3 and, if applicable, Section 3.4, the Trustee shall deliver and
rede-
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liver any Debenture in permanent global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 3.3 or 3.4 has
been, or simultaneously is, delivered, any instructions by the Company with
respect to endorsement or delivery or redelivery of a Debenture in global form
shall be in writing but need not comply with Section 1.2 and need not be
accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 3.3 shall apply to any
Debenture represented by a Debenture in global form if such Debenture was never
issued and sold by the Company and the Company delivers to the Trustee the
Debenture in global form together with written instructions (which need not
comply with Section 1.2 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Debentures represented
thereby, together with the written statement contemplated by the last sentence
of Section 3.3.
Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise
specified as contemplated by Section 3.1, payment of principal of and any
premium and interest on any Debenture in permanent global form shall be made to
the Person or Persons specified therein.
Notwithstanding the provisions of Section 3.8 and except as provided in the
preceding paragraph, the Company, the Trustee and any agent of the Company and
the Trustee shall treat a Person as the Holder of such principal amount of
Outstanding Debentures represented by a permanent global Debenture as shall be
specified in a written statement of the Holder of such permanent global
Debenture or, in the case of a permanent global Debenture in bearer form, of
Euro-clear or Cedel S.A. which is provided to the Trustee by such Person.
SECTION 2.4 Form of Legend for Book-Entry Debentures.
Any Book-Entry Debenture authenticated and delivered hereunder shall bear a
legend in substantially the following form:
"This Debenture is a Book-Entry Debenture within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depository
or a nominee of a Depository. This Debenture is exchangeable for Debentures
registered in the name of a Person other than the Depository or its nominee
only in the limited circumstances described in the Indenture, and no transfer
of this Debenture (other than a transfer of this Debenture as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository) may be registered except
in such limited circumstances."
SECTION 2.5 Form of Conversion Notice.
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The Form of conversion notice for the conversion of Debentures into shares
of Common Stock or other securities of the Company shall be in substantially
the form included with the applicable form of Debentures as shall be
established pursuant to Section 2.1 hereinabove.
ARTICLE III
THE DEBENTURES
SECTION 3.1 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Debentures which may be authenticated and
delivered under this Indenture is unlimited.
The Debentures may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth, or determined in the manner provided, in an Officers' Certificate,
or established in one or more indentures supplemental hereto, prior to the
issuance of Debentures of any series:
(a) the title of the Debentures of the series (which shall
distinguish the Debentures of the series from all other series of
Debentures);
(b) any limit upon the aggregate principal amount of the
Debentures of the series which may be authenticated and delivered
under this Indenture (except for Debentures of the series
authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Debentures of the series
pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 and except for any
Debentures of the series which, pursuant to Section 3.3, are
deemed never to have been authenticated and delivered hereunder);
(c) whether Debentures of the series are to be issuable as
Registered Debentures, Bearer Debentures or both, whether any
Debentures of the series are to be issuable initially in
temporary global form and whether any Debentures of the series
are to be issuable in permanent global form with or without
coupons and, if so, whether beneficial owners of interests in any
such permanent global Debenture may exchange such interests for
Debentures of the series and of like tenor of any authorized form
and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in
Section 3.5;
(d) the Person to whom any interest on any Registered Debenture
of the series shall be payable, if other than the Person in whose
name that Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date
for such interest, the manner in which, or the Person to whom,
any interest on any Bearer Debenture of the series shall be
payable, if
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otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature, and the extent to
which, or the manner in which, any interest payable on a
temporary global Debenture on an Interest Payment Date will be
paid if other than in the manner provided in Section 3.4;
(e) the date or dates, or the method by which such date or dates
will be determined or extended, on which the principal of the
Debentures of the series is payable;
(f) the rate or rates at which the Debentures of the series
shall bear interest, if any, or the formula pursuant to which
such rate or rates shall be determined, the date or dates from
which any such interest shall accrue, the Interest Payment Dates
on which any such interest shall be payable, and the Regular
Record Date for any interest payable on any Registered Debentures
on any Interest Payment Date and the basis upon which interest
shall be calculated if other than that of a 360-day year
consisting of twelve 30-day months;
(g) the place or places where, subject to the provisions of
Sections 11.4 and 10.2, the principal of and any premium and
interest on Debentures of the series shall be payable, any
Registered Debentures of the series may be surrendered for
registration of transfer, Debentures of the series may be
surrendered for conversion or exchange, notices and demands to or
upon the Company in respect of the Debentures of the series and
this Indenture may be served and where notices to Holders of
Bearer Debentures of the series pursuant to Section 1.6 will be
published;
(h) the right, if any, to extend the interest payment periods in
respect of the Debentures of the series and the duration of such
extension;
(i) the period or periods within which, the price or prices at
which and the terms and conditions upon which Debentures of the
series may be redeemed, in whole or in part, at the option of the
Company;
(j) the obligation, if any, of the Company to redeem, repay or
purchase Debentures of the series, or any Debentures within the
series, pursuant to any sinking fund or analogous provisions and
the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debentures shall be
redeemed, repaid or purchased, in whole or in part, pursuant to
such obligation;
(k) the terms of any right to convert or exchange Debentures of
the series, either at the election of the Holder thereof or the
Company, into or for shares of Common Stock of the Company or
other securities or property, including, without limitation, the
period or periods within which and the price or prices (including
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adjustments thereto) at which any Debentures of the series shall
be converted or exchanged, in whole or in part and any other
provision in addition to or in lieu of those set forth in this
Indenture;
(l) the denominations in which any Registered Debentures of the
series shall be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or
denominations in which any Bearer Debentures of the series shall
be issuable, if other than the denomination of $5,000;
(m) the currency or currencies, including composite currencies,
in which payment of the principal of and any premium and interest
on the Debentures of the series shall be payable if other than
the currency of the United States of America;
(n) if the principal of and any premium or interest on the
Debentures of the series are to be payable, at the election of
the Holder thereof or the Company, in a currency or currencies,
including composite currencies, other than that or those in which
the Debentures of the series are stated to be payable, the
currency or currencies in which payment of the principal of and
any premium and interest on Debentures of the series as to which
such election is made shall be payable, and the periods within
which and the terms and conditions upon which such election is to
be made;
(o) if the amount of payments of principal of and any premium or
interest on the Debentures of the series may be determined with
reference to an index, the manner in which such amounts shall be
determined;
(p) if other than the principal amount thereof, the portion of
the principal amount of any Debentures of the series which shall
be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 5.2;
(q) the Person who shall be the Debenture Registrar, if other
than the Trustee;
(r) whether the Debentures of the series shall be issued upon
original issuance in whole or in part in the form of one or more
Book-Entry Debentures and, in such case, (a) the Depository with
respect to such Book-Entry Debenture or Debentures; and (b) the
circumstances under which any such Book-Entry Debenture may be
exchanged for Debentures registered in the name of, and any
transfer of such Book-Entry Debenture may be registered to, a
Person other than such Depository or its nominee, if other than
as set forth in Section 3.5;
(s) if the provisions of Section 4.4 or 4.5 are applicable to
the Debentures of the series;
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(t) provisions, if any, granting special rights to the Holders
of Debentures of the series upon the occurrence of such events as
may be specified;
(u) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company with respect to
Debentures of the series, whether or not such Events of Default
or covenants are consistent with the Events of Default or
covenants set forth herein;
(v) whether and under what conditions additional amounts will be
payable to Holders of Debentures of the series pursuant to
Section 10.6;
(w) the terms and conditions, if any, pursuant to which
Debentures of the series are secured;
(x) the subordination terms of the Debentures of the series; and
(y) any other terms of the Debentures of the series.
All Debentures of any series and the coupons appertaining to any Bearer
Debentures of such series shall be substantially identical except, in the case
of Registered Debentures of such series, as to denomination and except as may
otherwise be provided in or pursuant to the Board Resolution referred to above
and (subject to Section 3.3) set forth in, or determined in the manner provided
in, the Officers' Certificate referred to above or in any such indenture
supplemental hereto. Not all Debentures of any series need be issued at the
same time, and, unless otherwise provided, a series may be reopened for
issuances of additional Debentures of such series.
If any of the terms of the Debenture of any series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary of the Company and delivered to
the Trustee at or prior to the delivery of the Officers' Certificate setting
forth the terms, or the manner of determining the terms, of the series.
SECTION 3.2 Denominations.
Unless otherwise provided as contemplated by Section 3.1 with respect to
Debentures of any series, any Registered Debentures shall be issuable in
denominations of $1,000 and any integral multiple thereof and any Bearer
Debentures shall be issuable in the denomination of $5,000.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
Debentures shall be signed on behalf of the Company by both (a) its
Chairman of the Board of Directors or any Vice Chairman of the Board of
Directors or its President or one of
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its Vice Presidents and (b) its Treasurer or one of its Assistant Treasurers or
its Secretary or one of its Assistant Secretaries, under its corporate seal
which may, but need not, be attested. The signature of any of these officers on
Debentures may be manual or facsimile. Coupons shall bear the facsimile
signature of the Treasurer of the Company.
Debentures and Coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Debentures or did not hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Debentures of any series, together with any
Coupons appertaining thereto executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of Debentures of such series, and the Trustee in accordance with the
Company Order shall authenticate and make Debentures of such series available
for delivery; provided, however, that, in connection with its original
issuance, no Bearer Debenture of such series shall be mailed or otherwise
delivered to any location in the United States; and provided, further, that a
Bearer Debenture of such series may be delivered in connection with its
original issuance only if the Person entitled to receive such Bearer Debenture
shall have furnished a certificate in the form specified in the Debenture of
such series as to certain tax matters in respect of United States citizens,
dated no earlier than 15 days prior to the earlier of the date on which the
Bearer Debenture of such series is delivered and the date on which any
temporary global Debenture first becomes exchangeable for such Bearer Debenture
of such series in accordance with the terms of such temporary global Debenture
and this Indenture. If any Debenture of such series shall be represented by a
permanent global Bearer Debenture of such series, then, for purposes of this
Section and Section 3.4, the notation of a beneficial owner's interest therein
upon original issuance of such Debenture or upon exchange of a portion of a
temporary global Debenture shall be deemed to be delivery in connection with
its original issuance of such beneficial owner's interest in such permanent
global Debenture. Except as permitted by Section 3.6, the Trustee shall not
authenticate and deliver any Bearer Debenture of such series unless all
appurtenant Coupons for interest then matured have been detached and cancelled.
If all the Debentures of any series are not to be issued at one time and if
the Board Resolution and indenture supplement establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the issuance of Debentures of such series and determining the terms of such
series, such as interest rate, maturity date, date of issuance and date from
which interest shall accrue.
If the forms or terms of the Debentures of any series, together with any
Coupons appertaining thereto, have been established in or pursuant to one or
more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating
Debentures of such series, and accepting the additional responsibilities under
this Indenture in relation to such Debentures of such
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series, the Trustee shall be entitled to receive, and (subject to Section 6.2)
shall be fully protected in relying upon, an Opinion of Counsel stating:
(a) that such forms have been established in conformity with the
provisions of this Indenture;
(b) that such terms, or the manner of determining such terms,
have been established in conformity with the provisions of this
Indenture;
(c) that Debentures of such series, together with any Coupons
appertaining thereto, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to
any conditions specified in such Opinion of Counsel, will
constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting the enforcement of creditors' rights generally
and general equity principles (regardless of whether
enforceability is considered in a proceeding at law or equity);
and
(d) that all laws and requirements in respect of the execution
and delivery by the Company of Debentures of such series have
been complied with.
If such forms or terms have been so established, the Trustee shall not be
required to authenticate Debentures of such series if the issue of such
Debentures pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under such Debentures and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the two preceding
paragraphs, if all Debentures of any series are not to be originally issued at
one time, it shall not be necessary to deliver the Officers' Certificate
otherwise required pursuant to Section 3.1 or the Company Order and Opinion of
Counsel otherwise required pursuant to such preceding paragraphs at or prior to
the time of authentication of each Debenture of such series if such documents
are delivered at or prior to the authentication upon original issuance of the
first Debenture of such series to be issued.
Each Registered Debenture of any series shall be dated the date of its
authentication; and each Bearer Debenture shall be dated as of the date of
original issuance of the first Debenture of such series to be issued.
No Debenture of any series or any Coupon appertaining thereto shall be
entitled to any benefit under this Indenture or be valid or obligatory for any
purpose unless there appears on the Debenture, or the Coupon appertaining to
such Debenture, a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Debenture shall be conclusive evidence, and the only
evidence,
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that such Debenture has been duly authenticated and delivered hereunder.
Notwithstanding the foregoing, if any Debenture shall have been authenticated
and delivered hereunder but never issued and sold by the Company, and the
Company shall deliver such Debenture to the Trustee for cancellation as
provided in Section 3.9 together with a written statement (which need not
comply with Section 1.2 and need not be accompanied by an Opinion of Counsel)
stating that such Debenture has never been issued and sold by the Company, for
all purposes of this Indenture such Debenture shall be deemed never to have
been authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 3.4 Temporary Debentures.
Pending the preparation of definitive Debentures of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Debentures of such series which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive
Debentures of such series in lieu of which they are issued, in registered form
or, if authorized, in bearer form with one or more coupons or without coupons,
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Debentures or Coupons may determine,
as evidenced by their execution of such Debentures or Coupons. In the case of
Debentures of any series issuable as Bearer Debentures, such temporary
Debentures may be in global form. A temporary Bearer Debenture shall be
delivered only in compliance with the conditions set forth in Section 3.3.
Except in the case of temporary Debentures in global form issued in a
transaction exempt from registration under the Securities Act of 1933, as
amended, pursuant to Regulation S thereunder (a "Regulation S Debenture")(which
shall be exchanged in accordance with the provisions of the following
paragraphs), if temporary Debentures of any series are issued, the Company will
cause definitive Debentures of such series to be prepared without unreasonable
delay. After the preparation of definitive Debentures of such series, the
temporary Debentures of such series shall be exchangeable for definitive
Debentures of such series upon surrender of the temporary Debentures of such
series at the office or agency of the Company maintained pursuant to Section
10.2 in a Place of Payment for such series for the purpose of exchanges of
Debentures of such series, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Debentures of any series (accompanied
by any unmatured Coupons appertaining thereto) the Company shall execute and
the Trustee shall authenticate and make available for delivery in exchange
therefor a like aggregate principal amount of definitive Debentures of such
series and of like tenor of authorized denominations; provided, however, that
no definitive Bearer Debenture shall be delivered in exchange for a temporary
Registered Debenture.
If temporary Regulation S Debentures of any series are issued in global
form, any such temporary global Regulation S Debenture shall, unless otherwise
provided therein, be delivered to the London office of a depositary or common
depositary (the "Common Deposi-
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tary"), for the benefit of Euro-clear and Cedel S.A., for credit to the
respective accounts of the beneficial owners of such Debentures (or to such
other accounts as they may direct).
Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary global
Regulation S Debenture of any series (the "Exchange Date"), the Company shall
deliver to the Trustee definitive Debentures of such series, in aggregate
principal amount equal to the principal amount of such temporary global
Regulation S Debenture, executed by the Company. On or after the Exchange Date
such temporary global Regulation S Debenture shall be surrendered by the Common
Depositary to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Debentures of
such series without charge and the Trustee shall authenticate and make
available for delivery, in exchange for each portion of such temporary global
Regulation S Debenture, a like aggregate principal amount of definitive
Debentures of such series of authorized denominations and of like tenor as the
portion of such temporary global Regulation S Debenture to be exchanged;
provided, however, that, unless otherwise specified in such temporary global
Regulation S Debenture, upon such presentation by the Common Depositary, such
temporary global Regulation S Debenture is accompanied by a certificate dated
the Exchange Date or a subsequent date and signed by Euro-clear as to the
portion of such temporary global Regulation S Debenture held for its account
then to be exchanged and a certificate dated the Exchange Date or a subsequent
date and signed by Cedel S.A. as to the portion of such temporary global
Regulation S Debenture held for its account then to be exchanged, each in the
form or in such form as shall be specified in such Regulation S Debenture. The
definitive Debentures of such series to be delivered in exchange for any such
temporary global Regulation S Debenture shall be in bearer form, registered
form, permanent global bearer form or permanent global registered form, or any
combination thereof, as specified as contemplated by Section 3.1, and, if any
combination thereof is so specified, as requested by the beneficial owner
thereof; provided, however, that definitive Bearer Debentures of such series
shall be delivered in exchange for a portion of a temporary global Regulation S
Debenture of such series only in compliance with the requirements of Section
3.3.
Unless otherwise specified in such temporary global Regulation S Debenture,
the interest of a beneficial owner of Debentures of any series in a temporary
global Regulation S Debenture shall be exchanged for definitive Debentures of
such series and of like tenor following the Exchange Date when the account
holder instructs Euro-clear or Cedel S.A., as the case may be, to request such
exchange on the Holder's behalf and delivers to Euro-clear or Cedel S.A., as
the case may be, a certificate in such form as shall be specified in the
Regulation S Debenture of such series, dated no earlier than 15 days prior to
the Exchange Date, copies of which certificate shall be available from the
offices of Euro-clear and Cedel S.A., the Trustee, any Authenticating Agent
appointed for the Debentures of such series and each Paying Agent. Unless
otherwise specified in such temporary global Regulation S Debenture, any such
exchange shall be made free of charge to the beneficial owners of such
temporary global Regulation S Debenture, except that a Person receiving
definitive Debentures of such series must bear the cost of insurance, postage,
transportation and the like in the event that
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such Person does not take delivery of such definitive Debentures of such series
in person at the offices of Euro-clear or Cedel S.A. Definitive Debentures of
such series in bearer form to be delivered in exchange for any portion of a
temporary global Regulation S Debenture of such series shall be delivered only
outside the United States.
Until exchanged in full as hereinabove provided, the temporary Regulation S
Debentures of any series shall in all respects be entitled to such benefits
under this Indenture as definitive Debentures of such series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 3.1, interest payable on a temporary global
Regulation S Debenture of such series on an Interest Payment Date for
Debentures of such series occurring prior to the applicable Exchange Date shall
be payable to Euro-clear and Cedel S.A. on such Interest Payment Date upon
delivery by Euro-clear and Cedel S.A. to the Trustee of a certificate or
certificates in such form as shall be specified in the Debenture of such
series, for credit without further interest on or after such Interest Payment
Date to the respective accounts of the Persons who are the beneficial owners of
such temporary global Regulation S Debenture on such Interest Payment Date and
who have each delivered to Euro-clear or Cedel S.A., as the case may be, a
certificate in such form as shall be specified in the Debenture of such series.
Any interest so received by Euro-clear and Cedel S.A. and not paid as herein
provided shall be returned to the Trustee immediately prior to the expiration
of two years after such Interest Payment Date in order to be repaid to the
Company in accordance with Section 10.3.
SECTION 3.5 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at an office or agency to be maintained
by the Company in accordance with Section 10.2 a register (the "Debenture
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Registered
Debentures and the registration of transfers of Registered Debentures. The
Trustee is hereby appointed "Debenture Registrar" for the purpose of
registering Registered Debentures and transfers of Registered Debentures as
herein provided.
Upon due surrender for registration of transfer of any Registered Debenture
of any series at the office or agency of the Company maintained pursuant to
Section 10.2 for such purpose in a Place of Payment for such series, the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, in the name of the designated transferee or transferees, one or
more new Registered Debentures of such series of any authorized denominations
and of a like aggregate principal amount and tenor.
At the option of the Holder, Registered Debentures of any series may be
exchanged for other Registered Debentures of such series of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Debentures to be exchanged at any such office or agency.
Whenever any Debentures are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and make available for delivery,
the
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Debentures which the Holder making the exchange is entitled to receive.
Registered Debentures may not be exchanged for Bearer Debentures.
At the option of the Holder, Bearer Debentures of any series may be
exchanged for Registered Debentures of such series of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Bearer Debentures of such series to be exchanged at any such
office or agency, with all unmatured Coupons, and all matured Coupons in
default appertaining thereto. If the Holder of a Bearer Debenture of such
series is unable to produce any such unmatured Coupon or Coupons or matured
Coupon or Coupons in default, such exchange may be effected if the Bearer
Debentures of such series are accompanied by payment in funds acceptable to the
Company in an amount equal to the face amount of such missing Coupon or
Coupons, or the surrender of such missing Coupon or Coupons may be waived by
the Company and the Trustee if there is furnished to them such security or
indemnity as they may require to save each of them and any Paying Agent
harmless. If thereafter the Holder of such Debentures of such series shall
surrender to any Paying Agent any such missing Coupon in respect of which such
a payment shall have been made, such Holder shall be entitled to receive the
amount of such payment; provided, however, that, except as otherwise provided
in Section 10.2, interest represented by Coupons shall be payable only upon
presentation and surrender of those Coupons at an office or agency located
outside the United States. Notwithstanding the foregoing, in case a Bearer
Debenture of any series is surrendered at any such office or agency in exchange
for a Registered Debenture of such series and of like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at
such office or agency on the related proposed date for payment of Defaulted
Interest, the Bearer Debenture of such series shall be surrendered without the
Coupon relating to such Interest Payment Date or proposed date for payment, as
the case may be, and interest or Defaulted Interest, as the case may be, will
not be payable on such Interest Payment Date or proposed date for payment, as
the case may be, in respect of the Registered Debenture of such series issued
in exchange for such Bearer Debenture, but will be payable only to the Holder
of such Coupon when due in accordance with the provisions of this Indenture.
Whenever any Debentures of any series are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, the Debentures of such series which the Holder making the
exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 3.1, any permanent global Debenture of any series shall
be exchangeable only as provided in this paragraph. If the beneficial owners of
interests in a permanent global Debenture of any series are entitled to
exchange such interests for Debentures of such series and of like principal
amount and tenor of another authorized form and denomination, as specified as
contemplated by Section 3.1, then without unnecessary delay but in any event
not later than the earliest date on which such interests may be so exchanged,
the Company shall deliver to the Trustee definitive Debentures of such series
in aggregate principal amount equal to the prin-
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cipal amount of such permanent global Debenture, executed by the Company. On or
after the earliest date on which such interests may be so exchanged, such
permanent global Debenture of any series shall be surrendered by the Common
Depositary or such other depositary or Common Depositary as shall be specified
in the Company Order with respect thereto to the Trustee, as the Company's
agent for such purpose, to be exchanged, in whole or from time to time in part,
for definitive Debentures of such series without charge and the Trustee shall
authenticate and make available for delivery, in exchange for each portion of
such permanent global Debenture, a like aggregate principal amount of
definitive Debentures of such series of authorized denominations and of like
tenor as the portion of such permanent global Debenture of such series to be
exchanged which, unless the Debentures of such series are not issuable both as
Bearer Debentures and as Registered Debentures of such series, as specified as
contemplated by Section 3.1, shall be in the form of Bearer Debentures or
Registered Debentures of such series, or any combination thereof, as shall be
specified by the beneficial owner thereof; provided, however, that no Bearer
Debenture of such series delivered in exchange for a portion of a permanent
global Debenture of such series shall be mailed or otherwise delivered to any
location in the United States. If a Registered Debenture of such series is
issued in exchange for any portion of a permanent global Debenture of such
series after the close of business at the office or agency where such exchange
occurs on (i) any Regular Record Date and before the opening of business at
such office or agency on the relevant Interest Payment Date, or (ii) any
Special Record Date and before the opening of business at such office or agency
on the related proposed date for payment of Defaulted Interest, interest or
Defaulted Interest, as the case may be, will not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of
the Registered Debenture of such series, but will be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such permanent global
Debenture of such series is payable in accordance with the provisions of this
Indenture.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
Every Registered Debenture presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee or
any transfer agent) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and the Debenture Registrar or
any transfer agent duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Debentures, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
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The Company shall not be required (i) to issue, register the transfer of or
exchange Debentures of any series during a period beginning at the opening of
business 15 days before any selection of Debentures of such series to be
redeemed and ending at the close of business on (A) if Debentures of such
series are issuable only as Registered Debentures, the day of the mailing of
the relevant notice of redemption and (B) if Debentures of such series are
issuable as Bearer Debentures, the day of the first publication of the relevant
notice of redemption or, if Debentures of such series are also issuable as
Registered Debentures and there is no publication, the mailing of the relevant
notice of redemption, (ii) to register the transfer of or exchange any
Registered Debenture so selected for redemption, in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part, or (iii) to
exchange any Bearer Debenture so selected for redemption except that such a
Bearer Debenture may be exchanged for a Registered Debenture of such series and
like tenor, provided that such Registered Debenture shall be simultaneously
surrendered for redemption.
Notwithstanding the foregoing and except as otherwise specified or
contemplated by Section 3.1, any Book-Entry Debenture shall be exchangeable
pursuant to this Section 3.5 or Sections 3.4, 9.6 and 11.7 for Debentures
registered in the name of, and a transfer of a Book-Entry Debenture of any
series may be registered to, any Person other than the Depository for such
Debenture or its nominee only if (i) such Depository notifies the Company that
it is unwilling or unable to continue as Depository for such Book-Entry
Debenture or if at any time such Depository ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, (ii) the
Company executes and delivers to the Trustee a Company Order that such
Book-Entry Debenture shall be so exchangeable and the transfer thereof so
registerable or (iii) there shall have occurred and be continuing an Event of
Default, or an event which after notice or lapse of time would be an Event of
Default, with respect to the Debentures of such series. Upon the occurrence in
respect of any Book-Entry Debenture of any series of any one or more of the
conditions specified in clauses (i), (ii) or (iii) or the preceding sentence or
such other conditions as may be specified as contemplated by Section 3.1 for
such series, such Book-Entry Debenture may be exchanged for Debentures
registered in the names of, and the transfer of such Book-Entry Debenture may
be registered to, such Persons (including Persons other than the Depository
with respect to such series and its nominees) as such Depository shall direct.
Notwithstanding any other provision of this Indenture, any Debenture
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Book-Entry Debenture shall also be a Book-Entry
Debenture and shall bear the legend specified in Section 2.4 except for any
Debenture authenticated and delivered in exchange for, or upon registration of
transfer of, Book-Entry Debenture pursuant to the preceding sentence.
Notwithstanding anything in this Indenture or in the terms of a
Debenture to the contrary, the exchange of Bearer Debentures for Registered
Debentures will be subject to satisfaction of the provisions of the United
States federal income tax laws in effect at the time of such exchange. None of
the Company, the Trustee or any Authenticating Agent of the Company or the
Trustee (any of which, other than the Company, shall rely on an
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Officers' Certificate and an Opinion of Counsel) shall be required to exchange
any Bearer Debenture for a Registered Debenture if as a result thereof and in
the Company's reasonable judgment, the Company would incur adverse consequences
under then applicable United States federal income tax laws.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Debentures and Coupons.
If any mutilated Debenture of any series or a Debenture of any series with
a mutilated Coupon appertaining thereto is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a new Debenture of such series and of like
principal amount and tenor and bearing a number not contemporaneously
outstanding, with Coupons corresponding to the Coupons, if any, appertaining to
the surrendered Debenture and such mutilated Debenture or a Debenture with a
mutilated Coupon, if any, shall be cancelled by the Trustee in accordance with
the Indenture.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Debenture of any
series or any Coupon appertaining thereto and (ii) such security or indemnity
as may be required by them, then, in the absence of notice to the Company or
the Trustee that such Debenture or Coupon has been acquired by a bona fide
purchaser, the Company shall, subject to the following paragraph, execute, and
the Trustee shall authenticate and make available for delivery, in lieu of any
such destroyed, lost or stolen Debenture or in exchange for the Debenture to
which a destroyed, lost or stolen Coupon appertains (with all appurtenant
Coupons not destroyed, lost or stolen), a new Debenture of such series and of
like principal amount and tenor and bearing a number not contemporaneously
outstanding, with Coupons corresponding to the Coupons, if any, appertaining to
such destroyed, lost or stolen Debenture or to the Debenture to which such
destroyed, lost or stolen Coupon appertains.
In case any such mutilated, destroyed, lost or stolen Debenture or Coupon
appertaining thereto has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Debenture, pay such
Debenture or Coupon; provided, however, that principal of and any premium and
interest on Bearer Debentures shall, except as otherwise provided in Section
10.2, be payable only at an office or agency located outside the United States.
Upon the issuance of any new Debenture under this Section, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Debenture of any series, with any Coupons appertaining thereto,
issued pursuant to this Section in lieu of any destroyed, lost or stolen
Debenture or in exchange for a Debenture to which a destroyed, lost or stolen
Coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen
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Debenture and any Coupons appertaining thereto, or the destroyed, lost or
stolen Coupon shall be at any time enforceable by anyone, and any such new
Debenture and Coupons, if any, shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debentures of such
series and Coupons appertaining thereto, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures or Coupons.
SECTION 3.7 Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 3.1 with respect to
any series of Debentures, interest on any Registered Debenture which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Debenture (or one or more
Predecessor Debentures) is registered at the close of business on the Regular
Record Date for such interest.
Unless otherwise provided as contemplated by Section 3.1 with respect to
any series of Debentures, any interest on any Registered Debenture of any
series which is payable, but is not punctually paid or duly provided for, on
any Interest Payment Date (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (a) and (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Debentures
of such series (or their respective Predecessor Debentures) are
registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid
on each Registered Debenture of such series and the date of the
proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed,
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first-class postage prepaid, to each Holder of Registered
Debentures of such series at the address of such Holder as it
appears in the Debenture Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Registered Debentures of such series
(or their respective Predecessor Debentures) are registered at
the close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clause (b); and
(b) The Company may make payment of any Defaulted Interest on
the Registered Debentures of any series in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which such Debentures may be listed, and upon such
notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5, each
Debenture delivered under this Indenture upon registration of, transfer of or
in exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.
In the case of any Debenture which is converted into Common Stock of the
Company after any Regular Record Date and on or prior to the next succeeding
Interest Payment Date (other than any Debenture whose Maturity is prior to such
Interest Payment Date), interest whose Stated Maturity is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding
such conversion, and such interest (whether or not punctually paid or duly
provided for) shall be paid to the Person in whose name that Debenture (or one
or more Predecessor Debentures) is registered at the close of business on such
Regular Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Debenture which is converted, interest
whose Stated Maturity is after the date of conversion of such Debenture shall
not be payable.
SECTION 3.8 Persons Deemed Owners.
Prior to due presentment of a Registered Debenture for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Registered Debenture is registered as
the owner of such Registered Debenture for the purpose of receiving payment of
principal of (and premium, if any) and (subject to Sections 3.5 and 3.7) any
interest on such Debenture and for all other purposes whatsoever, whether or
not such Debenture shall be overdue, and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary.
Title to any Bearer Debenture and any coupons appertaining thereto shall
pass by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the
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bearer of any Bearer Debenture and the bearer of any coupon as the absolute
owner of such Debenture or coupon for the purpose of receiving payment thereof
or on account thereof and for all other purposes whatsoever, whether or not
such Debenture or coupon shall be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 3.9 Cancellation.
All Debentures and coupons surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee. All Registered Debentures and matured coupons so
delivered shall be promptly cancelled by the Trustee. All Bearer Debentures and
unmatured coupons so delivered shall be cancelled. All Bearer Debentures and
unmatured coupons held by the Trustee pending such cancellation or reissuance
shall be deemed to be delivered for cancellation for all purposes of this
Indenture and the Debentures. The Company may at any time deliver to the
Trustee for cancellation any Debentures previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Debentures previously authenticated hereunder which the
Company has not issued and sold, and all Debentures so delivered shall be
promptly cancelled by the Trustee. No Debentures shall be authenticated in lieu
of or in exchange for any Debentures cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Debentures and
coupons held by the Trustee shall be returned to the Company.
Notwithstanding the foregoing, with respect to any Book-Entry Debenture,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by a Depository or impair, as between a
Depository and holders of beneficial interests in any Book-Entry Debenture, the
operation of customary practices governing the exercise of the rights of the
Depositary (or its nominee) as Holder of such Book-Entry Debenture.
SECTION 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for Debentures
of any series, interest on the Debentures of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 3.11 Electronic Debenture Issuance.
The Debentures may, pursuant to a Board Resolution and Officers'
Certificate complying with Section 3.1 hereof, be issued by means of an
electronic issuance system. Any such Debenture issuance instructions may
specify the name, address and taxpayer identification number of the Holder, the
principal amount and Maturity of the Debenture, the interest rate to be borne
by the Debenture and any other terms not inconsistent with such Board Resolu-
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tion and Officers' Certificate. Nothing in this Section 3.11 shall be construed
as prohibiting the Company from issuing Debentures by any means not
inconsistent with the provisions of this Indenture.
SECTION 3.12 CUSIP Numbers.
The Company in issuing the Debentures may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Debentures herein expressly provided for, and any right to receive additional
amounts, as provided in Section 10.4), and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when:
(a) either
(1) all Debentures theretofore authenticated and delivered and
all coupons, if any, appertaining thereto (other than (i) coupons
appertaining to Bearer Debentures surrendered for exchange for
Registered Debentures and maturing after such exchange, whose
surrender is not required or has been waived as provided in
Section 3.5, (ii) Debentures and coupons which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 3.6, (iii) coupons appertaining to Debentures
called for redemption and maturing after the relevant Redemption
Date, whose surrender has been waived as provided in Section
11.6, and (iv) Debentures and coupons for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3) have
been delivered to the Trustee for cancellation; or
(2) all such Debentures and, in the case of (i) or (ii) below,
any coupons appertaining thereto not theretofore delivered to the
Trustee for cancellation,
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(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose, an amount sufficient to pay and
discharge the entire indebtedness on such Debentures and coupons
not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and any interest to the date of
such deposit (in the case of Debentures which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6, the obligations of
the Company to any Authenticating Agent under Section 6.13 and, if money shall
have been deposited with the Trustee pursuant to clause (a)(2) of this Section,
the obligations of the Trustee under Section 4.2 and the last paragraph of
Section 10.3 shall survive .
SECTION 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
and U.S. Government Obligations deposited with the Trustee pursuant to Section
4.1 or 4.3 and all money received by the Trustee in respect of such U.S.
Government Obligations shall be held in trust and applied by it, in accordance
with the provisions of the Debentures, the Coupons and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and any interest for
whose payment such money and U.S. Government Obligations has been deposited
with or received by the Trustee. Money deposited pursuant to this Section not
in violation of this Indenture shall not be subject to claims of the holders of
Senior Indebtedness under Article XV.
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SECTION 4.3 Company's Option to Effect Defeasance or Covenant Defeasance.
If applicable to Debentures of any series, the Company may elect, at its
option at any time, to have Section 4.4 or Section 4.5 applied to any such
series of Debentures or any Debentures of such series, as the case may be,
designated pursuant to Section 3.1 as being defeasible pursuant to such Section
4.4 or 4.5, in accordance with any applicable requirements provided pursuant to
Section 3.1 and upon compliance with the conditions set forth below in this
Article. Any such election shall be evidenced by a Board Resolution or in
another manner specified as contemplated by Section 3.1 for such Debentures.
SECTION 4.4 Discharge and Defeasance.
If this Section 4.4 is specified, as contemplated by Section 3.1, to be
applicable to Debentures of any series, then notwithstanding Section 4.1 and
upon compliance with the applicable conditions set forth in Section 4.6: (1)
the Company shall be deemed to have paid and discharged the entire indebtedness
on all the Outstanding Debentures of such series ("Defeasance"); and (2) the
provisions of this Indenture as it relates to Outstanding Debentures of such
series shall no longer be in effect (except as to the rights of Holders of
Debentures of such series to receive, solely from the trust fund described in
Section 4.6, payment of (a) the principal of (and premium, if any) and any
installment of principal of (and premium, if any) or interest on Debentures of
such series on the Stated Maturity of such principal (and premium, if any) or
installment of principal (and premium, if any) or interest or upon optional
redemption and/or (b) any mandatory sinking fund payments or analogous payments
applicable to the Debentures of such series on that day on which such payments
are due and payable in accordance with the terms of the Indenture and of
Debentures of such series, the Company's obligations with respect to Debentures
of such series under Sections 3.4, 3.5, 3.6, 10.2, 10.3, and 10.4 and the
rights, powers, trusts, duties and immunities of the Trustee hereunder,
including those under Section 6.8 hereof);
SECTION 4.5 Covenant Defeasance.
If this Section 4.5 is specified, as contemplated by Section 3.1, to be
applicable to any series of Debentures or any Debentures of such series, as the
case may be, (a) the Company shall be released from its obligations under
Sections 10.4 through 10.7, inclusive, and any covenants provided pursuant to
Section 3.1(u) or 9.1(b) for the benefit of the Holders of Debentures of such
series that pursuant to the terms of such Debentures of such series are
defeasible pursuant to this Section 4.5 and (b) the occurrence of any event
specified in Sections 5.1(d) (with respect to any of Sections 10.3 through
10.7, inclusive, and any such covenants provided pursuant to Section 3.1(u),
9.1(b), or 9.1(f) and 5.1(g) (if pursuant to the terms of the Debentures of
such series this Section 4.5 is applicable to any such event specified in
Section 5.1(g)) shall be deemed not to be or result in an Event of Default, in
each case with respect to the Debentures of such series as provided in this
Section on and after the date the conditions set forth in Section 4.6 are
satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that, with respect to the Debe-
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ntures of such series, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
specified Section (to the extent so specified in the case of Section 5.1(d) and
5.1(g)), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and the Debentures of such series shall be unaffected thereby.
SECTION 4.6 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 4.4 or
Section 4.5 to any series of Debentures or any Debentures of such series, as
the case may be.
(a) either
(1) with respect to all Outstanding Debentures of such series or
such Debentures of such Series, as the case may be, with
reference to this Section 4.6, the Company has deposited or
caused to be deposited with the Trustee irrevocably (but subject
to the provisions of Section 4.2 and the last paragraph of
Section 10.3), as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders
of the Debentures of such series, (i) lawful money of the United
States in an amount, or (ii) U.S. Government Obligations which
through the payment of interest and principal in respect thereof
in accordance with their terms will provide not later than the
opening of business on the due dates of any payment referred to
in clause (i) or (ii) of this subparagraph (a)(1) lawful money of
the United States in an amount, or (iii) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge (A) the principal of (and premium, if any) and each
installment of principal (and premium, if any) and interest on
such Debentures of such series on the Stated Maturity of such
principal or installment of principal or interest or upon
optional redemption and (B) any mandatory sinking fund payments
or analogous payments applicable to the Debentures of such series
on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of the Debentures
of such series; or
(2) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified, as contemplated by
Section 3.1, to be applicable to the Debentures of such series;
(b) the Company has paid or caused to be paid all other sums
payable with respect to the Debentures of such series;
(c) such deposit for the benefit of Holders of Debentures of
such series will not result in a breach or violation of, or
constitute a default under, this Indenture or
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any other agreement or instrument to which the Company is a party
or by which it is bound;
(d) no Event of Default or event which with the giving of notice
or lapse of time, or both, would become an Event of Default with
respect to the Debentures of such series shall have occurred and
be continuing on the date of such deposit and no Event of Default
under Section 5.1(e) or Section 5.1(f) or event which with the
giving of notice or lapse of time, or both, would become an Event
of Default under Section 5.1(e) or Section 5.1(f) shall have
occurred and be continuing on the 91st day after such date;
(e) in the event of an election to have Section 4.4 apply to the
Debentures of any series, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that (i) the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in applicable federal income
tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of
Debentures of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income
tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred;
(f) in the event of an election to have Section 4.5 apply to
Debentures of any series, the Company shall have delivered to the
Trustee an Opinion of Counsel, to the effect that the Holders of
Debentures of such series will not recognize gain or loss for
United States federal income tax purposes as a result of the
deposit and Covenant Defeasance to be effected with respect to
the Debentures of such series and will be subject to United
States federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur;
(g) if the Debentures of such series are then listed on any
domestic or foreign securities exchange, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that
such deposit, defeasance and discharge will not cause the
Debentures of such series to be delisted;
(h) no default in the payment of the principal of (and premium,
if any) or any interest on any Senior Indebtedness beyond any
applicable grace period shall have occurred and be continuing;
(i) no other default with respect to any Senior Indebtedness
shall have occurred and be continuing and shall have resulted in
the acceleration of such Senior Indebtedness; and
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(j) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
Defeasance or Covenant Defeasance with respect to such Debentures
of such series have been complied with and an Opinion of Counsel
to the effect that either (i) as a result of such deposit and the
related exercise of the Company's option under this Article,
registration is not required under the Investment Company Act of
1940, as amended, by the Company, the trust funds representing
such deposit or the Trustee or (ii) all necessary registrations
under said Act have been effected.
Any deposits with the Trustee referred to in Section 4.6(a)(1) above shall
be irrevocable and shall be made under the terms of an escrow/trust agreement
in form and substance satisfactory to the Trustee. If any Outstanding
Debentures of such series are to be redeemed prior to their Stated Maturity,
whether pursuant to any optional redemption provisions or in accordance with
any mandatory sinking fund requirement, the applicable escrow trust agreement
shall provide therefor and the Company shall make such arrangements as are
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
Upon Defeasance with respect to all the Debentures of any series, the terms
and conditions of the Debentures of such series, including the terms and
conditions with respect thereto set forth in this Indenture, shall no longer be
binding upon, or applicable to, the Company; provided that the Company shall
not be discharged from any payment obligations in respect of Debentures of such
series which are deemed not to be Outstanding under clause (iii) of the
definition thereof if such obligations continue to be valid obligations of the
Company under applicable law.
Notwithstanding the cessation, termination and discharge of all
obligations, covenants and agreements (except as provided above in this Section
4.6) of the Company under this Indenture with respect to the Debentures of any
series, the obligations of the Company to the Trustee under Section 6.6, and
the obligations of the Trustee under Section 4.2 and the last paragraph of
Section 10.3 shall survive with respect to the Debentures of such series.
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in this Section 4.6 with
respect to Debentures of any series which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance
or Covenant Defeasance, as the case may be, with respect to Debentures of such
series.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge
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imposed on or assessed against the U.S. Government Obligations deposited
pursuant to this Section 4.6 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of Outstanding Debentures.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default.
"Event of Default", wherever used herein with respect to Debentures of any
series, unless otherwise provided in the applicable supplemental indenture,
means any one or more of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest upon or any
additional amounts payable in respect of any Debenture of such
series when it becomes due and payable, and continuance of such
default for a period of 30 days (whether or not such payment is
prohibited by the subordination provisions set forth in Article
XV hereof); provided, however, that a valid extension of an
interest payment period by the Company in accordance with the
terms of any indenture supplemental hereto, shall not constitute
a default in the payment of interest for this purpose; or
(b) default in the payment of the principal of (or premium, if
any, on) any Debenture of such series as and when the same
shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment
required by any sinking or analogous fund established with
respect to that series (whether or not such payment is prohibited
by the subordination provisions set forth in Article XV hereof);
provided, however, that a valid extension of the maturity of the
Debentures of such series in accordance with the terms of any
indenture supplemental hereto shall not constitute a default in
the payment of principal or premium, if any; or
(c) if the Debentures of such series are convertible or
exchangeable into or for shares of Common Stock of the Company or
other securities, cash or other property pursuant to any
supplemental indenture, Board Resolution or other instrument
authorizing Debentures of such series, failure by the Company to
convert such Debentures (whether or not such conversion or
exchange is prohibited by the subordination provisions set forth
in Article XV); or
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(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant
or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with or which has
expressly been included in this Indenture solely for the benefit
of any series of Debentures other than such series), and
continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the
Outstanding Debentures of such series, a written notice
specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default, hereunder;
or
(e) the entry by a court having jurisdiction in the premises of
a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar
law, or appointing a custodian, receiver, liquidation, assignee,
trustee, sequestrator or other similar official of the Company or
of any substantial part of their property, or ordering the
winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive days;
or
(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidation, assignee, trustee, sequestrator or similar official
of the Company or of any substantial part of their property, or
the making by it of an assignment for the benefit of creditors;
or
(g) in the event Debentures of any series are issued to a Kmart
Trust or a trustee of such trust in connection with the issuance
of Trust Securities by such Kmart Trust, such Kmart Trust shall
have voluntarily or involuntarily dissolved, wound-up its
business or otherwise terminated its existence except in
connection with (i) the distribution of Debentures of such series
to holders of Trust Securities in liquidation of their interest
in such Kmart Trust, (ii) the redemption of all of the
outstanding Trust Securities of such Kmart Trust or (iii) certain
mergers, consolidations or amalgamations, each as permitted by
the Declaration of such Kmart Trust; or
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(h) any other Event of Default provided with respect to
Debentures of such series.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default described in clause (a), (b), (c), (d), (g) or (h)
(if the Event of Default under clause (d) is with respect to less than all
series of Debentures then Outstanding) of Section 5.1 above occurs and is
continuing, then, and in each and every such case, unless the principal of all
of the Debentures of such series shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Debentures of such series then Outstanding hereunder (each such
series voting as a separate class), by notice in writing to the Company (and to
the Trustee if given by the Holders of Debentures of such series), may declare
the entire principal (or, if the Debentures of such series are Original Issue
Discount Debentures, such portion of the principal amount as may be specified
in the terms of such series) of all Debentures of such series and the interest
accrued thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clause (d) (if the Event of Default under clause (d)
relates to all series of Debentures then Outstanding), (e) or (f) of Section
5.1 occurs and is continuing, then and in each and every such case, unless the
principal of all the Debentures of all series shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of all the Debentures of all series then Outstanding hereunder
(treated as one class), by notice in writing to the Company (and to the Trustee
if given by Holders of the Debentures), may declare the entire principal (or,
if any Debentures are Original Issue Discount Debentures, such portion of the
principal as may be specified in the terms thereof) of all Debentures of all
series then Outstanding and interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at
any time after the principal (or, if any Debentures are Original Issue Discount
Debentures, such portion of the principal as may be specified in the terms
thereof) of the Debentures of any series (or of all the Debentures of all
series, as the case may be) then Outstanding shall have been so declared due
and payable, and before any judgment or decree for the payment of such moneys
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Debentures of such series (or of all
Debentures of all series, as the case may be) and the principal of (and
premium, if any, on) the Debentures of such series (or of all Debentures of all
series, as the case may be) which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments
of interest, at the same rate as the rate of interest or Yield to Maturity (in
the case of Original Issue Discount Debentures) specified in the Debentures of
such series, (or at the respective rates of interest or Yields to Maturity of
all Debentures of all series, as the case may be) to the date of such payment
or deposit) and
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any other amounts payable in respect of all the Debentures of such series and
such amount as shall be sufficient to cover reasonable compensation to the
Trustee, and each predecessor Trustee, their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances
made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith, and if any and all Events of Default under the
Indenture, other than the non-payment of the principal of Debentures of such
series (or, if any Debentures are Original Issue Discount Debentures, such
portion of the principal as may be specified in the terms thereof) which shall
have become due by acceleration, shall have been cured, waived or otherwise
remedied as provided herein -- then and in every such case the Holders of a
majority in aggregate principal amount of all the Debentures of such series,
each series voting as a separate class (or of all Debentures of all series, as
the case may be, voting as a single class), then Outstanding, by written notice
to the Company and to the Trustee, may waive all such defaults with respect to
the Debentures of such series (or with respect to all Debentures of all series,
as the case may be) and rescind and annul such declaration and its consequence,
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right with respect
to Debentures of such series under this Indenture and such proceedings shall
have been discontinued or abandoned because of such rescission or annulment or
for any other reason or shall have been determined adversely to the Trustee,
then and in every such case the Company and the Trustee shall be restored
respectively to their former positions and rights hereunder, and all rights,
remedies and powers of the Company and the Trustee shall continue as though no
such proceedings had been taken.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if,
(a) default is made in the payment of any interest on any
Debenture of any series, or any payment required by any sinking
or analogous fund established with respect to Debentures of such
series as and when the same shall have become due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Debenture of any series when the same
shall have become due and payable, whether upon maturity of the
Debentures of such series or upon redemption or upon declaration
or otherwise,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of Debentures of such series and any Coupons appertaining thereto, the
whole amount then due and payable on Debentures of such series and Coupons for
principal and any premium and interest and, to the extent that payment of such
interest shall be legally enforceable under applicable law, interest on any
overdue principal and on the premium, if any, and overdue
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interest, at the rate or rates prescribed therefor in Debentures of such series
and, if the Debentures of such series are held by a Kmart Trust or a trustee of
such trust, without duplication of any other amounts paid by such Kmart Trust
or trustee in respect thereof, upon overdue installments of interest at the
rate per annum expressed in the Debentures of such series; and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel under Section
6.6.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon Debentures of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon Debentures of
such series, wherever situated.
If an Event of Default with respect to Debentures of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Debentures of such series and any
Coupons appertaining thereto by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
either at law or in equity or in bankruptcy or otherwise whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debentures of any series or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of Debentures of such series shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal
and any premium and interest owing and unpaid in respect of the
Debentures of any series and to file such other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders of Debentures
of such series and coupons allowed in such judicial proceeding,
and
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(b) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidation, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Debentures of such series and Coupons appertaining thereto to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders of Debentures of
such series and Coupons appertaining thereto, to pay to the Trustee any amount
due it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Debenture of any series or any Coupon appertaining thereto any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
of such series or Coupons appertaining thereto or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder of Debentures of any series or any Coupon appertaining thereto in any
such proceeding.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Debentures or
Coupons.
All rights of action and claims under this Indenture or under any of the
terms established with respect to the Debentures of any series or Coupons
appertaining thereto may be prosecuted and enforced by the Trustee without the
possession of any of the Debentures of such series or Coupons appertaining
thereto or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel due under
Section 6.6, be for the ratable benefit of the Holders of the Debentures of
such series and Coupons appertaining thereto in respect of which such judgment
has been recovered.
SECTION 5.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article with respect to
Debentures of any series shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or any premium or interest, upon presentation of the
Debentures of such series or any Coupons appertaining thereto, or both, as the
case may be, and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.6;
SECOND: To the payment of all Senior Indebtedness of the Company
to the extent required by Article XV;
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THIRD: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Debentures of
such series and Coupons appertaining thereto in respect of which
or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to
the amounts due and payable on Debentures of such series and
Coupons appertaining thereto for principal and any premium and
interest, respectively; and
FOURTH: To the payment of the remainder, if any, to the Company.
SECTION 5.7 Limitation on Suits.
No Holder of any Debenture of any series or any Coupons appertaining
thereto shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless;
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Debentures of such series and of the continuance thereof with
respect to the Debentures of such series specifying such Event of
Default, as hereinbefore provided;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Debentures of such series shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities
to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of
a majority in principal amount of the Outstanding Debentures of
such series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
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SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, but subject to
Article XV of this Indenture, the Holder of any Debenture of any series or any
Coupon appertaining thereto shall have the right, which is absolute and
unconditional, to receive payment of the principal of and any premium and
(subject to Section 3.7) interest on Debentures of such series, and any
additional amounts contemplated by Section 10.4 in respect of Debentures of
such series or payment of any Coupons appertaining thereto on the Stated
Maturity or Maturities expressed in the Debentures of such series or any
Coupons appertaining thereto (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder of Debentures of any series or any Coupon
appertaining thereto has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders of Debentures of such
series and any Coupons appertaining thereto shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debentures or Coupons in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders of Debentures or Coupons is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture or
Coupon to exercise any right or remedy accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Subject to the provisions of Section 5.7, every right and remedy given by this
Article or by law to the Trustee or to the Holders of Debentures or Coupons may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Debentures or Coupons, as the case may be.
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SECTION 5.12 Control by Holders of Debentures.
The Holders of a majority in aggregate principal amount of the Outstanding
Debentures of any series shall 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
Debentures of such series, provided that,
(a) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee; provided, however, that such direction shall not be in
conflict with any rule of law or with this Indenture or be unduly
prejudicial to the rights of Holders of Debentures of any other
series at the time Outstanding. Subject to the provisions of
Section 6.2, the Trustee shall have the right to decline to
follow any such direction if the trustee in good faith shall, by
a Responsible Officer or Officers of the Trustee, determine that
the proceeding so directed would involve the Trustee in personal
liability.
SECTION 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures of any series may on behalf of the Holders of all the
Debentures of such series and any Coupons appertaining thereto waive any past
default hereunder with respect to the Debentures of such series and its
consequences, except a default
(a) in the payment of the principal of (or premium, if any) or
any interest on any Debenture of such series as and when the same
shall become due by the terms of Debentures of such series
otherwise than by acceleration (unless such default has been
cured and sums sufficient to pay all matured installments of
interest and principal and any premium has been deposited with
the Trustee (in accordance with Section 5.2), or
(b) in the covenants contained in Section 10.4, or
(c) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of
the Holder of each Outstanding Debenture of such series affected;
provided, however, that if the Debentures of such series are held by a Kmart
Trust or a trustee of such trust, such waiver or modification to such waiver
shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the applicable Kmart Trust shall have
consented to such waiver or modification to such waiver; provided further, that
if the consent of the Holder of each Outstanding Debenture of such series is
required,
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such waiver shall not be effective until each holder of the Trust Securities of
the applicable Kmart Trust shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture and the Company, the Trustee and the holders of
the Debentures of such series shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Debenture or
Coupon by such Holder's acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Debentures of any series, or to
any suit instituted by any Holder of any Debenture or Coupon for the
enforcement of the payment of the principal of or any premium or interest on
such Debenture or the payment of any Coupon on or after the Stated Maturity or
Maturities expressed in such Debenture or Coupon (or, in the case of
redemption, on or after the Redemption Date).
SECTION 5.15 Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE VI
THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior
to Default.
With respect to the Holders of any series of Debentures issued hereunder,
the Trustee, prior to the occurrence of an Event of Default with respect to the
Debentures of such series and after the curing or waiving of all Events of
Default which may have occurred with respect to Debentures of such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default with respect to the
Debentures of any series has occurred (which has not been cured or waived), the
Trustee shall exercise with respect to the Debentures of such series such of
the rights and powers vested in it by this Indenture, and shall use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act
or its own wilful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to
the Debentures of any series and after the curing or waiving of all such Events
of Default with respect to the Debentures of such series which may have
occurred:
(i) the duties and obligations of the Trustee with respect to
the Debentures of such series shall be determined solely by the
express provisions of this Indenture, and the Trustee shall not
be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case
of any such statements, certificates or opinions which by any
provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
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(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 5.12 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.
SECTION 6.2 Certain Rights of Trustee.
Subject to the provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, coupon, other
evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order or as otherwise expressly provided herein and any
resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders of Debentures of any
series or any Coupons appertaining thereto pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
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(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, coupon, other
evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
SECTION 6.3 Not Responsible for Recitals or Issuance of Debentures.
The recitals contained herein and in the Debentures (except the Trustee's
certificates of authentication) and in any Coupons shall be taken as the
statements of the Company, and the Trustee or any Authenticating Agent assumes
no responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of any Debentures or
Coupons. The Trustee or any Authenticating Agent shall not be accountable for
the use or application by the Company of Debentures or the proceeds thereof.
SECTION 6.4 May Hold Debentures.
The Trustee, any Authenticating Agent, any Paying Agent, any Debenture
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Debentures and Coupons and,
subject to Section 6.9 and 6.11, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Debenture Registrar or such other agent.
SECTION 6.5 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.6 Compensation and Reimbursement..
The Company agrees:
(a) to pay to the Trustee or any predecessor Trustee from time
to time such compensation as shall be agreed in writing between
the Company and the Trustee for all services rendered by it
hereunder (which compensation shall not be limited
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by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee or any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any provision of this Indenture
(including the compensation and the expenses and disbursements of
its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith;
and
(c) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or bad
faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.1(e) or Section 5.1(f), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar laws.
The provisions of this Section 6.6 shall survive the termination of this
Indenture.
SECTION 6.7 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.8.
(b) The Trustee may resign at any time with respect to the Debentures of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.8 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Debentures of such series.
(c) The Trustee may be removed at any time with respect to the Debentures
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Debentures of such series delivered to the Trustee and to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 6.8 shall not have been delivered to the Trustee within 30 days after
the delivery of such Act of removal, the Trustee being removed may
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petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Debentures of such series.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310(b) of the
Trust Indenture Act after written request therefor by the Company
or by any Holder of a Debenture who has been a bona fide Holder
of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.10
and Section 310(a) of the Trust Indenture Act and shall fail to
resign after written request therefor by the Company or by any
Holder of a Debenture who has been a bona fide Holder of a
Debenture for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee with respect to all Debentures,
or (ii) subject to Section 5.14 any Holder of a Debenture who has
been a bona fide Holder of a Debenture for at least six months
may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee with respect to all Debentures and the appointment of
a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Debentures of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Debentures of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Debentures of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Debentures of any particular series) and shall comply with
the applicable requirements of Section 6.8. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Debentures of any series shall be
appointed by Act of the Holders of a majority in principal amount of
Outstanding Debentures of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements
of Section 6.8, become the successor Trustee with respect to the Debentures of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Debentures of any series
shall have been so appointed by the Company or the Holders of Debentures of
such series and accepted appointment in the manner required by Section 6.8, any
Holder of a Debenture of such series who has been a bona fide Holder of a
Debenture of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent juris-
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diction for the appointment of a successor Trustee with respect to the
Debentures of such series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Debentures of any series and each appointment
of a successor Trustee with respect to the Debentures of any series in the
manner provided in Section 1.6. Each notice shall include the name of the
successor Trustee with respect to the Debentures of such series and the address
of its Corporate Trust Office.
SECTION 6.8 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Debentures, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but on the written
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Debentures of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Debentures of
such series shall execute and deliver an indenture supplemental hereto wherein
each successor Trustee shall accept such appointment and which (i) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Debentures of
such series to which the appointment of such successor Trustee relates, (ii) if
the retiring Trustee is not retiring with respect to all Debentures, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Debentures of such series as to which the retiring Trustee is
not retiring shall continue to be vested in the retiring Trustee, and (iii)
shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees as co-trustees of
the same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Debentures of such series to which the appointment of such successor
Trustee relates; but, on the written request of the
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Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Debentures of such series
to which the appointment of such successor Trustee relates.
(c) Upon the written request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.9 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.10 Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereunder specified in this Article.
SECTION 6.11 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 6.12 Merger, Conversion Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substan-
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tially all the corporate trust business of the Trustee shall be the successor
of the Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Debentures shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Debentures
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Debentures.
SECTION 6.13 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
Debentures of one or more series which shall be authorized to act on behalf of
the Trustee to authenticate Debentures of each such series issued upon original
issue or upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.6, and Debentures of such series so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Debentures by the Trustee or the Trustee's certificate of authentication
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of such Authenticating Agent, shall continue to be an
Authenticating Agent provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall
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be acceptable to the Company and shall promptly give notice of such appointment
to all Holders of Debentures pursuant to Section 1.6. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment with respect to Debentures of one or more series is made
pursuant to this Section, the Debentures of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Debentures of the series designated therein referred to
in the within-mentioned Indenture.
The Bank of New York,
As Trustee
By _______________
Authenticating Agent
By _______________
Authorized Signatory
If all of the Debentures of any series may not be originally issued at one
time, and if the Company has an Affiliate eligible to be appointed as an
Authenticating Agent hereunder or the Trustee does not have an office capable
of authenticating Debentures of such series upon original issuance located in a
Place of Payment where the Company wishes to have Debentures of such series
authenticated upon original issuance, the Trustee, if so requested by the
Company in writing (which writing need not comply with Section 1.2 and need not
be accompanied by an Opinion of Counsel), shall appoint in accordance with this
Section an Authenticating Agent (which if so requested by the Company, shall be
such Affiliate of the Company) having an office in a Place of Payment
designated by the Company with respect to such series of Debentures.
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SECTION 6.14. Notice of Defaults.
If a default occurs hereunder with respect to Debentures of any series, the
Trustee shall give the Holders of Debentures of such series notice of such
default as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
5.1(d) with respect to Debentures of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Debentures of such series.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Debentures (i) contained in
the most recent list furnished to the Trustee as provided in Section 312(a) of
the Trust Indenture Act, (ii) received by the Trustee in its capacity as
Debenture Registrar and (iii) filed with it within the two preceding years
pursuant to Section 313(c)(2) of the Trust Indenture Act. The Trustee may (A)
destroy any list furnished to it as provided in Section 312(a) of the Trust
Indenture Act upon receipt of a new list so furnished, (B) destroy any
information received by it as Paying Agent (if so acting) hereunder upon
delivering to itself as Trustee, not earlier than March 20 or September 20 of
each year, a list containing the names and addresses of the Holders of
Debentures obtained from such information since the delivery of the next
previous list, if any, (C) destroy any list delivered to itself as Trustee
which was compiled from information received by it as Paying Agent (if so
acting) hereunder upon the receipt of a new list so delivered and (D) destroy
not earlier than two years after filing, any information filed with it pursuant
to Section 313(c)(2) of the Trust Indenture Act. For purposes of Section
312(a) of the Trust Indenture Act, the term "stated intervals" shall mean
January 15 and July 15.
(b) If three or more Holders of Debentures of any series (herein referred
to as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Debenture of such series
for a period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with other
Holders of Debentures of such series with respect to their rights under this
Indenture or under the Debentures of such series and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the Trustee shall, within five business days after the receipt
of such application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 7.1(a), or
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(ii) inform such applicants as to the approximate number of
Holders of Debentures of such series whose names and addresses
appear in the information preserved at the time by the Trustee in
accordance with Section 7.1(a), and as to the approximate cost of
mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of Debentures of such series whose name and address appears
in the information preserved at the time by the Trustee in accordance with
Section 7.1(a) a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment of the reasonable expenses of mailing, unless within five days after
such tender the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interest of the Holders of Debentures of such series or
would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing that all the objections so sustained
have been met and shall enter an order so declaring, the Trustee shall mail
copies of such material to all such Holders of Debentures of such series with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Every Holder of Debentures or Coupons, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
Holders of Debentures in accordance with Section 7.1(b), regardless of the
source from which such information was derived and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a request
made under Section 7.1(b).
SECTION 7.2 Reports by Trustee.
The Trustee shall in each year transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act in the manner provided pursuant thereto. If required
by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days
after each May 15 following the date of this Indenture deliver to Holders a
brief report, dated as of such May 15, which complies with the provisions of
Section 313(a).
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A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Debentures are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when any Debentures are listed on any stock
exchange or market center.
SECTION 7.3. Reports by Company.
The Company shall:
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents or
reports pursuant to either of such Sections, then it shall file with the
Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the supplementary
and periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act in respect of a security listed
and registered on a national securities exchange as may be prescribed from
time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports required to be filed with
respect to compliance by the Company with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit to all Holders, in the manner and to the extent
provided in Trust Indenture Act Section 313(c), within 30 days after the
filing thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (a) and (b) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 8.1 Company May Consolidate, Etc. on Certain Terms.
The Company shall not merge or consolidate with any other corporation or
sell or convey all or substantially all of its assets to any Person, unless (a)
either the Company shall be the continuing corporation, or the successor
corporation (if other than the Company) shall be a corporation organized under
the laws of the United States of America or any State thereof and shall
expressly assume the due and punctual payment of the principal of and interest
on all the Debentures, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Company, by supplemental indenture
satisfactory to the Trustee, executed and delivered to the Trustee by such
corporation, and (b) the Company or such successor corporation, as the case may
be, shall not, immediately after such merger or consolidation, or such sale or
conveyance, be in default in the performance of any such covenant or condition.
SECTION 8.2 Successor Corporation Substituted.
In case of any such consolidation, merger, sale or conveyance, and
following such an assumption by the successor corporation, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein. Such successor corporation may cause to
be signed, and may issue either in its own name or in the name of the Company
prior to such succession any or all of the Debentures issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of the
Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
securities which previously shall have been signed and delivered by the
officers of the Company, to the Trustee for authentication, and any Debentures
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Debentures so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Debentures theretofore or thereafter issued in accordance with the terms
or this Indenture as though all of such Debentures had been issued at the date
of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such changes
in phraseology and form (but not in substance) may be made in the Debentures
thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by way
of lease) the Company or any successor corporation which shall theretofore have
become such in the manner described in this Article shall be discharged from
all obligations and covenants under this Indenture and the Debentures and may
be liquidated and dissolved.
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SECTION 8.3 Opinion of Counsel to Trustee.
The Trustee may receive an Opinion of Counsel, prepared in accordance with
Section 1.2, as conclusive evidence that any such consolidation, merger, sale,
lease or conveyance, and any such assumption, and any such liquidation or
dissolution, complies with the applicable provisions of this Indenture.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Debentures or Coupons, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of
the Holders of Debentures of all or any series (and if such
covenants are to be for the benefit of Debentures of less than
all series, stating that such covenants are expressly being
included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(c) to add any additional Events of Default (and if such Events
of Default are to be for the benefit of Debentures of less than
all series, stating that such Events of Default are expressly
being included solely for the benefit of such series); or
(d) to add to or change any of the provisions of this Indenture
to provide that Bearer Debentures may be registerable as to
principal, to change or eliminate any restrictions on the payment
of principal of or any premium or interest on Bearer Debentures,
to permit Bearer Debentures to be issued in exchange for
Registered Debentures, to permit Bearer Debentures to be issued
in exchange for Bearer Debentures of other authorized
denominations or to permit or facilitate the issuance of
Debentures in uncertificated form, provided that any such action
shall not adversely affect the interests of the Holders of
Debentures of any series or any related Coupons in any material
respect; or
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(e) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall
become effective only when there is no Debenture Outstanding of
any series created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision; or
(f) to establish the form or terms of Debentures of any series
and any related coupons as permitted by Sections 2.1 and 3.1; or
(g) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to the Debentures
of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.8(b);
or
(h) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XIV, including
providing for the conversion of the Debentures into any security
or property (other than the Common Stock of the Company); or
(i) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that
such action shall not adversely affect the interests of the
Holders of Debentures of any series or any related Coupons in any
material respect.
SECTION 9.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Debentures of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Debentures of such series and any related coupons under this
Indenture; provided, however, that no such supplemental indenture shall,
without the consent of each Holder of each Outstanding Debenture of the series
affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debenture of any
series, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption
thereof, or change any obligation of the Company to pay
additional amounts pursuant to Section 10.6 (except as
contemplated by Section 8.1 and permitted by Section 9.1(a)), or
reduce the amount of the principal of an Original Issue Discount
Debenture that would be due and payable upon a declaration of
acceleration
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of the Maturity thereof pursuant to Section 5.2 or change the
coin or currency in which any Debenture or any premium or
interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(b) reduce the percentage in principal amount of the Outstanding
Debentures of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver of certain defaults
hereunder and their consequences provided for in this Indenture,
or reduce the requirements of Section 13.4 for quorum or voting,
or
(c) change any obligation of the Company to maintain an office
or agency in the places and for the purposes specified in Section
10.2, or
(d) modify any of the provisions of this Section or Section
5.13, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding
Debenture of the series affected thereby; provided, however, that
this clause shall not be deemed to require the consent of any
Holder of a Debenture of such series or Coupon appertaining
thereto with respect to changes in the references to "the
Trustee" and concomitant changes in this Section or the deletion
of this proviso, in accordance with the requirements of Sections
6.7(b) and 9.1(h), or
(e) make any change that adversely affects the right to convert
any Debenture of any series as provided in Article XIV or
pursuant to Section 3.1 (except as permitted by Section 9.1) or
decrease the conversion rate or increase the conversion price of
any such Debenture of such series, or
(f) if the Debentures of any series are secured, change the
terms and conditions pursuant to which the Debentures of such
series are secured in a manner adverse to the Holders of the
secured Debentures of such series, or
(g) make any change in Article XV that adversely affects the
rights of any Holders of Outstanding Debentures of such series;
If the Debentures of such series are held by a Kmart Trust or a trustee of such
trust, such supplemental indenture shall not be effective until the holders of
a majority in liquidation preference of Trust Securities of the applicable
Trust shall have consented to such supplemental indenture; provided, that if
the consent of the Holder of each Outstanding Debenture of such series is
required, such supplemental indenture shall not be effective until each holder
of the Trust Securities of the applicable Kmart Trust shall have consented to
such supplemental indenture.
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A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of Debentures of one or more series, or which modifies the rights of
the Holders of Debentures of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Debentures of any other series.
It shall not be necessary for any Act of Holders of Debentures of any
series under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve
the substance thereof.
SECTION 9.3 Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.2) shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Debentures theretofore or thereafter authenticated and delivered
hereunder and of any Coupons appertaining thereto shall be bound thereby.
SECTION 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act of 1939, as amended, in
effect on such date.
SECTION 9.6 Reference in Debentures to Supplemental Indentures.
Debentures of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Debentures of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Debentures of such series.
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ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of Debentures of any
series that it will duly and punctually pay the principal of and any premium
and interest on the Debentures of such series in accordance with the terms of
the Debentures of such series, any Coupons appertaining thereto and this
Indenture. Unless otherwise specified as contemplated by Section 3.1 with
respect to Debentures of such series, any interest due on Bearer Debentures of
such series on or before Maturity shall be payable only upon presentation and
surrender outside the United States of the several Coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 10.2 Maintenance of Office or Agency.
If Debentures of any series are issuable only as Registered Debentures, the
Company will maintain in each Place of Payment for Debentures of such series an
office or agency where Debentures of such series may be presented or
surrendered for payment, where Debentures of such series may be surrendered for
registration of transfer, exchange, or conversion and where notices and demands
to or upon the Company in respect of Debentures of such series and this
Indenture may be served. If Debentures of any series are issuable as Bearer
Debentures, the Company will maintain (a) in The City of New York, an office or
agency where any Registered Debentures of such series may be presented or
surrendered for payment, where any Registered Debentures of such series may be
surrendered for registration of transfer, where Debentures of such series may
be surrendered for conversion or exchange, where notices and demands to or upon
the Company in respect of Debentures of such series and this Indenture may be
served and where Bearer Debentures of such series and related Coupons may be
presented or surrendered for payment in the circumstances described in the
following paragraph (and not otherwise), (b) subject to any laws or regulations
applicable thereto, in a Place of Payment for such series which is located
outside the United States, an office or agency where Debentures of such series
and related Coupons may be presented and surrendered for payment (including
payment of any additional amounts payable on Debentures of such series pursuant
to Section 10.4); provided, however, that if Debentures of such series are
listed on The Stock Exchange of the United Kingdom and the Republic of Ireland,
the Luxembourg Stock Exchange or any other stock exchange located outside the
United States and such stock exchange shall so require, the Company will
maintain a Paying Agent for Debentures of such series in London, Luxembourg or
any other required city located outside the United States, as the case may be,
so long as Debentures of such series are listed on such exchange, and (c)
subject to any laws or regulations applicable thereto in a Place of Payment for
Debentures of such series located outside the United States an office or agency
where any Registered Debentures of such series may be surrendered for
registration of transfer, where Debentures of such series may be surrendered
for conversion or exchange and where notices
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and demands to or upon the Company in respect of the Debentures of such series
and this Indenture may be served. The Company will give prompt notice to the
Trustee and to the Holders as provided in Sections 1.5 and 1.6, respectively,
of the location and any change in the location, of any such office or agency.
If at any time the Company shall fail to maintain any such required office or
agency in respect of Debentures of any series or shall fail to furnish the
Trustee with the address thereof, such presentations and surrenders of
Debentures of such series may be made and notices and demands may be made or
served at the Corporate Trust Office of the Trustee, except that Bearer
Debentures of such series and the related Coupons may be presented and
surrendered for payment (including payment of any additional amounts payable on
Bearer Debentures of such series pursuant to Section 10.4) at the office of the
Trustee for such series located outside the United States, and the Company
hereby appoints the same as its agent to receive such respective presentations,
surrenders, notices and demands.
No payment of principal, premium or interest on Bearer Debentures shall be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States; provided, however, that if
the Debentures of any series are denominated and payable in Dollars, payment of
principal of and any premium and interest on any Bearer Debenture of such
series (including any additional amounts payable on Debentures of such series
pursuant to Section 10.4) shall be made at the office of the Company's Paying
Agent in The City of New York, if (but only if) payment in Dollars of the full
amount of such principal, premium, interest or additional amounts, as the case
may be, at all offices or agencies outside the United States maintained for the
purpose by the Company in accordance with this Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more other offices
or agencies where the Debentures of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in accordance with the requirements set forth above for Debentures of
any series for such purposes. The Company will give prompt written notice to
the Trustee and the Holders of Debentures of such series of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 10.3 Money for Debentures Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to Debentures of any series, it will, on or before each due date of the
principal of and any premium or interest on any of the Debentures of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure to act.
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Whenever the Company shall have one or more Paying Agents for Debentures of
any series it will, prior to each due date of the principal of and any premium
or interest on any Debentures of such series, deposit with a Paying Agent a sum
sufficient to pay the principal and any premium or interest so becoming due,
such sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company will promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent for Debentures of any series other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
and any premium or interest on Debentures of such series in trust
for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Debentures of such series) in the
making of any payment of principal of and any premium or interest
on the Debentures of such series; and
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of and any premium or
interest on any Debenture of any series and remaining unclaimed for two years
after such principal and any premium or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of the Debenture
of such series or any Coupon appertaining thereto shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money and all liability of the Company as trustee thereof shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in an Authorized Newspaper in each Place of
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Payment, notice that such money remains unclaimed and that after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 10.4 Limitation on Dividends; Transactions with Affiliates.
If Debentures of any series are issued to a Kmart Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such Kmart
Trust and (a) there shall have occurred any event that would constitute an
Event of Default, (b) the Guarantor shall be in default with respect to its
payment of any obligations under the Preferred Securities Guarantee or the
Common Securities Guarantee relating to such Kmart Trust or (c) the Company
shall have given notice of its election to defer payments of interest on
Debentures of such series by extending the interest payment period and such
period, or any extension thereof, shall be continuing, then (y) the Company
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its capital stock (other than (i) purchases or acquisitions of shares of
Common Stock of the Company in connection with the satisfaction by the Company
of its obligations under any employee benefit plans, (ii) as a result of a
reclassification of capital stock of the Company or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of capital stock of the Company or, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged) or make any guarantee payments with respect to
the forgoing), and (z) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to Debentures of such series.
SECTION 10.5 Covenants as to Kmart Trusts.
In the event Debentures of such series are issued to a Kmart Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Kmart Trust, for so long as such Trust Securities remain outstanding, the
Company will (a) maintain 100% direct or indirect ownership of the Common
Securities of such Kmart Trust; provided, however, that any permitted successor
of the Company under the Indenture may succeed to the Company's ownership of
the Common Securities, (b) use its reasonable efforts to cause such Kmart Trust
(i) to remain a statutory business trust, except in connection with a
distribution of Debentures of such series to the holders of Trust Securities in
liquidation of such Kmart Trust, the redemption of all of the Trust Securities
of such Kmart Trust, or certain mergers, consolidations or amalgamations, each
as permitted by the Declaration of such Kmart Trust, and (ii) to continue to be
classified as a grantor trust for United States federal income tax purposes and
(c) to use its reasonable efforts to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures of such
series.
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SECTION 10.6 Additional Amounts.
If the Debentures of any series provide for the payment of additional
amounts, the Company will pay to the Holder of any Debenture of such series or
any Coupon appertaining thereto additional amounts as provided therein.
Whenever in this Indenture there is mentioned, in any context, the payment of
the principal of or any premium or interest on, or in respect of any Debenture
of any series or payment of any related Coupon or the net proceeds received on
the sale or exchange of any Debenture of any series, such mention shall be
deemed to include mention of the payment of additional amounts provided for in
this Section to the extent that, in such context additional amounts are, were
or would be payable in respect thereof pursuant to the provisions of this
Section and express mention of the payment of additional amounts (if
applicable) in any provisions hereof shall not be construed as excluding
additional amounts in those provisions hereof where such express mention is not
made.
If the Debentures of any series provide for the payment of additional
amounts, at least 10 days prior to the first Interest Payment Date with respect
to Debentures of such series (or if the Debentures of such series will not bear
interest prior to Maturity, the first day on which a payment of principal and
any premium is made), and at least 10 days prior to each date of payment of
principal and any premium or interest if there has been any change with respect
to the matters set forth in the below-mentioned Officers' Certificate, the
Company will furnish the Trustee and the Company's principal Paying Agent or
Paying Agents, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and such Paying Agent or Paying Agents whether such
payment of principal of and any premium or interest on the Debentures of such
series shall be made to Holders of Debentures of such series or any Coupons
appertaining thereto who are United States Aliens without withholding for or on
account of any tax assessment or other governmental charge described in the
Debentures of such series. If any such withholding shall be required, then such
Officers' Certificate shall specify by country the amount, if any, required to
be withheld on such payments to such Holders of Debentures of such series or
any Coupons appertaining thereto and the Company will pay to the Trustee or
such Paying Agent the additional amounts required by this Section. The Company
covenants to indemnify the Trustee and any Paying Agent for, and to hold them
harmless against, any loss, liability or expense reasonably incurred without
negligence or willful misconduct on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Officers'
Certificate furnished pursuant to this Section.
SECTION 10.7 Existence.
Subject to Article VIII, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
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SECTION 10.8 Purchase of Debentures by Company or Subsidiary.
If and so long as the Debentures of any series are listed on The Stock
Exchange of the United Kingdom and the Republic of Ireland and such stock
exchange shall so require, the Company will not, and will not permit any of its
Subsidiaries to, purchase any Debentures of such series by private treaty at a
price (exclusive of expenses and accrued interest) which exceeds 120% of the
mean of the nominal quotations of the Debentures of such series as shown in The
Stock Exchange Daily Official List for the last trading day preceding the date
of purchase.
SECTION 10.9 Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating whether or not to the best
knowledge of the signer thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of this
Indenture, and if the Company shall be in default, specifying all such defaults
and the nature and status thereof of which they may have knowledge.
The Company shall file with the Trustee written notice of the occurrence of
any default or Event of Default within five Business Days of its becoming aware
of any such default or Event of Default.
SECTION 10.10 Calculation of Original Issue Discount
The Company shall file with the Trustee promptly at the end of each year a
written notice specifying the amount of Original Issue Discount (including
daily rates and accrual periods) accrued on Outstanding Debentures as of the
end of such year.
ARTICLE XI
REDEMPTION OF DEBENTURES
SECTION 11.1 Applicability of Article.
Debentures of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.1 for Debentures of any series) in
accordance with this Article.
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SECTION 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem Debentures of any series shall be
evidenced by an Officers' Certificate. In the case of any redemption, at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Debentures of such series to be redeemed. In the case
of any redemption of Debentures of such series (a) prior to the expiration of
any restriction on such redemption provided in the terms of Debentures of such
series or elsewhere in this Indenture, or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of Debentures of
such series, the Company shall furnish the Trustee with an Officers'
Certificate evidencing compliance with such restriction or condition.
SECTION 11.3 Selection by Trustee of Debentures to Be Redeemed.
If less than all the Debentures of any series and of like tenor are to be
redeemed, the particular Debentures of such series to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Debentures of such series and of like tenor not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection, for redemption of portions
(equal to the minimum authorized denomination for Debentures of such series or
any integral multiple thereof) of the principal amount of Registered Debentures
of such series of a denomination larger than the minimum authorized
denomination for Debentures of such series. If so specified in the Debentures
of any series, partial redemptions must be in an amount not less than
$1,000,000 principal amount of Debentures.
If Debentures of any series selected for partial redemption are converted
in part before termination of the conversion right with respect to the portion
of the Debentures of such series so selected, the converted portion of the
Debentures of such series shall be deemed (so far as may be) to be the portion
selected for redemption. Debentures (or portions thereof) which have been
converted during a selection of Debentures of such series to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such selection. In
any case where more than one Debenture of such series is registered in the same
name, the Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Debenture of such series.
The Trustee shall promptly notify the Company in writing of the Debentures
of such series selected for redemption and, in the case of any Debentures of
such series selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Debentures of any series shall
relate, in the case of any Debentures of such series redeemed or to be redeemed
only in part, to the portion of the principal amount of the Debentures of such
series which has been or is to be redeemed.
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SECTION 11.4 Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 1.6
to the Holders of Debentures to be redeemed not less than 30 nor more than 60
days prior to the Redemption Date.
All notices of redemption shall identify the Debentures (including the
CUSIP number) to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all the Outstanding Debentures of any series
are to be redeemed, the identification (and, in the case of
partial redemption, the principal amounts) of the particular
Debentures of such series to be redeemed, and a statement to the
effect that on or after the Redemption Date upon surrender of
such Debenture a new Debenture of such series in the principal
amount equal to the unredeemed portion will be issued;
(d) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture of such series to be
redeemed and, if applicable, that interest thereon will cease to
accrue on and after said date;
(e) the place or places where such Debentures of such series,
together in the case of Bearer Debentures of such series with all
Coupons appertaining thereto, if any maturing after the
Redemption Date, are to be surrendered for payment of the
Redemption Price;
(f) that the redemption is for a sinking fund, if such is the
case; and
(g) if applicable, the conversion rate or price, the date on
which the right to convert the Debentures of such series to be
redeemed will terminate and the place or places where such
Debentures may be surrendered for conversion.
A notice of redemption published as contemplated by Section 1.6 need not
identify particular Registered Debentures of such series to be redeemed.
Notice of redemption of Debentures to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
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SECTION 11.5 Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 10.3) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Debentures
which are to be redeemed on that date.
If any Debenture called for redemption is converted into Common Stock of
the Company, any money deposited with the Trustee or with any Paying Agent or
so segregated and held in trust for the redemption of such Debenture shall
(subject to any right of the Holder of such Debenture or any Predecessor
Debenture to receive interest as provided in the last paragraph of Section 3.7)
be paid to the Company upon Company Request or, if then held by the Company,
shall be discharged from such trust.
SECTION 11.6 Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Debentures so to
be redeemed shall on the Redemption Date become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Debentures shall cease to bear interest and the Coupons for such
interest appertaining to any Bearer Debentures so to be redeemed except to the
extent provided below, shall be void. Upon surrender of any such Debenture for
redemption in accordance with said notice together with all Coupons, if any,
appertaining thereto maturing after the Redemption Date, such Debenture shall
be paid by the Company at the Redemption Price together with accrued interest
to the Redemption Date; provided, however, that installments of interest on
Bearer Debentures whose Stated Maturity is on or prior to the Redemption Date
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 10.2) and, unless otherwise specified
as contemplated by Section 3.1, only upon presentation and surrender of Coupons
for such interest; and provided, further, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest on Registered Debentures
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Debentures or one or more Predecessor Debentures,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 3.7.
If any Bearer Debenture surrendered for redemption shall not be accompanied
by all appurtenant Coupons maturing after the Redemption Date, such Debenture
may be paid after deducting from the Redemption Price an amount equal to the
face amount of all such missing Coupons, or the surrender of such missing
Coupon or Coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such
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Debenture shall surrender to the Trustee or any Paying Agent any such missing
Coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by Coupons shall be payable only
at an office or agency located outside the United States (except as otherwise
provided in Section 10.2) and unless otherwise specified as contemplated by
Section 3.1 only upon presentation and surrender of those Coupons.
If any Debenture called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Debenture.
SECTION 11.7 Debentures Redeemed in Part.
Any Registered Debenture of any series which is to be redeemed only in part
shall be surrendered at a Place of Payment therefor (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and make available for
delivery to the Holder of such Debenture without service charge, a new
Registered Debenture or Debentures of such series and of like tenor of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture of such series so surrendered.
ARTICLE XII
SINKING FUNDS
SECTION 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Debentures of any series except as otherwise specified as
contemplated by Section 3.1 for Debentures of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Debentures of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Debentures of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Debentures of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 12.2. Each sinking fund payment shall be applied to the redemption
of Debentures of any series as provided for by the terms of Debentures of such
series.
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SECTION 12.2 Satisfaction of Sinking Fund Payments with Debentures.
The Company (a) may deliver Outstanding Debentures of any series (other
than any previously called for redemption), together in the case of any Bearer
Debentures of such series with all unmatured Coupons appertaining thereto, and
(b) may apply as a credit Debentures of such series which have been redeemed
either at the election of the Company pursuant to the terms of the Debentures
of such series or through the application of permitted optional sinking fund
payments pursuant to the terms of the Debentures of such series, in each case
in satisfaction of all or any part of any sinking fund payment with respect to
the Debentures of such series required to be made pursuant to the terms of the
Debentures of such series; provided that the Debentures of such series have not
been previously so credited. The Debentures of such series shall be received
and credited for such purpose by the Trustee at the Redemption Price specified
in the Debentures of such series for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
SECTION 12.3 Redemption of Debentures for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for
Debentures of any series, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Debentures of such series
pursuant to Section 12.2 and will also deliver to the Trustee any Debentures of
such series to be so delivered. Not less than 45 days before each such sinking
fund payment date the Trustee shall select the Debentures of such series to be
redeemed upon such sinking fund payment date in the manner specified in Section
11.3 and cause notice of the redemption thereof to be given in the name of and
at the expense of the Company in the manner provided in Section 11.4. Such
notice having been duly given, the redemption of such Debentures of such series
shall be made upon the terms and in the manner stated in Sections 11.6 and
11.7.
ARTICLE XIII
MEETINGS OF HOLDERS OF DEBENTURES
SECTION 13.1 Purposes for Which Meetings May be Called.
If Debentures of any series are issuable as Bearer Debentures, a meeting of
Holders of Debentures of such series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Debentures of such
series.
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SECTION 13.2 Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Debentures of
any series for any purpose specified in Section 13.1, to be held at such time
and at such place in the Borough of Manhattan, The City of New York, or in
London as the Trustee shall determine. Notice of every meeting of Holders of
Debentures of such setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be given,
in the manner provided in Section 1.6, not less than 21 nor more than 180 days
prior to the date fixed for the meeting (or, in the case of a meeting of
Holders with respect to Debentures of any series all or part of which are
represented by a Book-Entry Debenture, not less than 20 nor more than 40 days).
(b) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 25% in principal amount of the Outstanding Debentures
of any series shall have requested the Trustee to call a meeting of the Holders
of Debentures of such series for any purpose specified in Section 13.1, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have made the first publication
of the notice of such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided
herein, then the Company or the Holders of Debentures of such series in the
amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York or in London for such
meeting and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.
SECTION 13.3 Persons Entitled to Vote at Meetings.
Upon the calling of a meeting of Holders with respect to the Debentures of
any series all or part of which are represented by a Book-Entry Debenture, a
record date shall be established for determining Holders of Outstanding
Debentures of such series entitled to vote at such meeting, which record date
shall be the close of business on the day the notice of the meeting of Holders
is given in accordance with Section 13.2. The Holders on such record date, and
their designated proxies, and only such Persons, shall be entitled to vote at
any meeting of Holders. To be entitled to vote at any meeting of Holders a
Person shall (a) be a Holder of one or more Debentures of such series or (b) be
a Person appointed by an instrument in writing as proxy by a Holder of one or
more Debentures of such series; provided, however, that in the case of any
meeting of Holders with respect to the Debentures of any series all or part of
which are represented by a Book-Entry Debenture, only Holders, or their
designated proxies, of record on the record date established pursuant to
Section 13.3 hereof shall be entitled to vote at such meeting. The only Persons
who shall be entitled to be present or to speak at any meeting of Holders shall
be the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
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SECTION 13.4 Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Debentures of any series shall constitute a quorum for a meeting of
Holders of Debentures of such series; provided, however, that if any action is
to be taken at such meeting with respect to a consent or waiver which this
Indenture expressly provides may be given by the Holders of a specified
percentage in aggregate principal amount of Outstanding Debentures of such
series that is less or greater than a majority in principal amount of the
Outstanding Debentures of such series, then, with respect to such action (and
only such action) the Persons entitled to vote such lesser or greater
percentage in principal amount of the Outstanding Debentures of such series
shall constitute a quorum. In the absence of a quorum within 30 minutes of the
time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Debentures of such series, be dissolved. In any other
case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such adjourned meeting. Notice of the reconvening of any adjourned meeting
shall be given as provided in Section 13.2 (a), except that such notice need be
given only once not less than five days prior to the date on which the meeting
is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the outstanding Debentures of such series which shall
constitute a quorum. Notwithstanding the foregoing, no meeting of Holders with
respect to Debentures of any series which is represented in whole or in part by
a Book-Entry Debenture, shall be adjourned to a date more than 90 days after
the record date for such meeting unless the Trustee shall send out a new notice
of meeting and establish, in accordance with Section 13.3, a new record date
for Holders entitled to vote at such meeting.
Except as limited by the proviso to Section 9.2, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debentures of such series;
provided, however, that, except as limited by the proviso to Section 9.2, any
resolution with respect to any consent or waiver which this Indenture expressly
provides may be given by the Holders of a specified percentage in aggregate
principal amount of Outstanding Debentures of such series that is less or
greater than a majority in principal amount of the Outstanding Debentures of
such series may be adopted at a meeting or an adjourned meeting duly convened
and at which a quorum is present as aforesaid only by the affirmative vote of
the Holders of such specified percentage in principal amount of the Outstanding
Debentures of such series.
Any resolution passed or decision taken at any meeting of Holders of
Debentures of any series duly held in accordance with this Section shall be
binding on all the Holders of Debentures of such series and the Coupons
appertaining thereto, whether or not present or represented at the meeting.
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SECTION 13.5 Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting
of Holders of Debentures of any series in regard to proof of the holding of
Debentures of such series and of the appointment of proxies and in regard to
the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Debentures of such series shall be proved in the manner
specified in Section 1.4 and the appointment of any proxy shall be proved in
the manner specified in Section 1.4 or by having the signature of the person
executing the proxy witnessed or guaranteed by any trust company, bank or
banker authorized by Section 1.4 to certify to the holding of Bearer Debentures
of such series. Such regulations may provide that written instruments
appointing proxies, regular on their face, may be presumed valid and genuine
without the proof specified in Section 1.4 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Debentures of such series as provided in Section
13.2(b), in which case the Company or the Holders of Debentures of such series
calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Persons entitled to vote a majority in
principal amount of the Outstanding Debentures of such series represented at
the meeting.
(c) At any meeting each Holder of a Debenture of such series or proxy
shall be entitled to one vote for each $ 1,000 principal amount of the
Outstanding Debentures of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Debenture challenged as not Outstanding and ruled by the chairman of the
meeting to be not Outstanding. The chairman of the meeting shall have no right
to vote, except as a Holder of a Debenture of such series or proxy.
(d) Any meeting of Holders of Debentures of any series duly called
pursuant to Section 13.2 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote a majority in principal amount of the
Outstanding Debentures of such series represented at the meeting; and the
meeting may be held as so adjourned without further notice.
SECTION 13.6 Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Debentures of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Debentures of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Debentures of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall
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count all votes cast at the meeting for or against any resolution and who shall
make and file with the secretary of the meeting their verified written reports
in duplicate of all votes cast at the meeting. A record, at least in duplicate,
of the proceedings of each meeting of Holders of Debentures of any series shall
be prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 13.2 and, if applicable, Section 13.4.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company, and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
ARTICLE XIV
CONVERSION OF DEBENTURES
SECTION 14.1 Applicability of Article.
The provisions of this Article shall be applicable to the Debentures of any
series which are convertible into shares of Common Stock of the Company, and
the issuance of such shares of Common Stock upon the conversion of Debentures
of such series, except as otherwise specified as contemplated by Section 3.1
for the Debentures of such series. The terms and provisions applicable to the
conversion of Debentures of any series into securities of the Company (other
than Common Stock) shall, if applicable, be set forth in an Officers'
Certificate or established in one or more indentures supplemental hereto, prior
to the issuance of Debentures of such series in accordance with Section 3.1.
SECTION 14.2 Exercise of Conversion Privilege.
In order to exercise a conversion privilege, the Holder of a Debenture of
any series with such a privilege shall surrender such Debenture to the Company
at the office or agency maintained for that purpose pursuant to Section 10.2,
accompanied by written notice to the Company that the Holder elects to convert
such Debenture or a specified portion thereof. Such notice shall also state, if
different from the name and address of such Holder, the name or names (with
address) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued. Debentures of such
series surrendered for conversion shall (if so required by the Company or the
Trustee) be duly endorsed by or accompanied by instruments of transfer in forms
satisfactory to the Company and the Trustee duly executed by the registered
Holder or its attorney duly authorized in writing; and, if expressly specified,
as contemplated by Section 3.1, to be applicable to any series of Debentures,
Debentures of such series so surrendered for conversion during the period from
the close of business on any Regular Record Date to the opening of business on
the next suc-
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ceeding Interest Payment Date (excluding Debentures or portions thereof called
for redemption during such period) shall also be accompanied by payment in
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of such Debenture then being
converted, and such interest shall be payable to such registered Holder
notwithstanding the conversion of such Debenture, subject to the provisions of
Section 3.7 relating to the payment of Defaulted Interest by the Company. As
promptly as practicable after the receipt of such notice and of any payment
required pursuant to a Board Resolution and, subject to Section 3.1, set forth,
or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto setting forth the
terms of the Debentures and the surrender of such Debentures in accordance with
such reasonable regulations as the Company may prescribe, the Company shall
issue and shall deliver, at the office or agency at which such Debenture is
surrendered, to such Holder or on its written order, a certificate or
certificates for the number of full shares of Common Stock issuable upon the
conversion of such Debenture (or specified portion thereof), in accordance with
the provisions of such Board Resolution, Officers' Certificate or supplemental
indenture, and cash as provided therein in respect of any fractional share of
such Common Stock otherwise issuable upon such conversion. Such conversion
shall be deemed to have been effected immediately prior to the close of
business on the date on which such notice and such payment, if required, shall
have been received in proper order for conversion by the Company and such
Debenture shall have been surrendered as aforesaid (unless such Holder shall
have so surrendered such Debenture and shall have instructed the Company to
effect the conversion on a particular date following such surrender and such
Holder shall be entitled to convert such Debenture on such date, in which case
such conversion shall be deemed to be effected immediately prior to the close
of business on such date) and at such time the rights of the Holder of such
Debenture as such Debenture Holder shall cease and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
of the Company shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.
Except as set forth above and subject to the final paragraph of Section 3.7, no
payment or adjustment shall be made upon any conversion on account of any
interest accrued on the Debentures of such series surrendered for conversion or
on account of any dividends on the Common Stock of the Company issued upon such
conversion.
In the case of any Debenture of any series which is converted in part only,
upon such conversion the Company shall execute and the Trustee shall
authenticate and make available for delivery to or on the order of the Holder
thereof, at the expense of the Company, a new Debenture or Debentures of such
series, of authorized denominations, in aggregate principal amount equal to the
unconverted portion of such Debenture.
SECTION 14.3 No Fractional Shares.
No fractional share of Common Stock of the Company shall be issued upon
conversions of Debentures of any series. If more than one Debenture of such
series shall be surrendered for conversion at one time by the same Holder, the
number of full shares which shall be
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issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Debentures of such series (or specified portions
thereof to the extent permitted hereby) so surrendered. If, except for the
provisions of this Section 14.3, any Holder of a Debenture or Debentures of
such series would be entitled to a fractional share of Common Stock of the
Company upon the conversion of such Debenture or Debentures, or specified
portions thereof, the Company shall pay to such Holder an amount in cash equal
to the current market value of such fractional share computed, (a) if such
Common Stock is listed or admitted to unlisted trading privileges on a national
securities exchange, on the basis of the last reported sale price regular way
on such exchange on the last trading day prior to the date of conversion upon
which such a sale shall have been effected, or (b) if such Common Stock is not
at the time so listed or admitted to unlisted trading privileges on a national
securities exchange, on the basis of the average of the bid and asked prices of
such Common Stock in the over-the-counter market, on the last trading day prior
to the date of conversion, as reported by the National Quotation Bureau,
Incorporated or similar organization if the National Quotation Bureau,
Incorporated is no longer reporting such information, or if not so available,
the fair market price as determined by the Board of Directors. For purposes of
this Section, "trading day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday other than any day on which the Common Stock is not traded
on the New York Stock Exchange, or if the Common Stock is not traded on the New
York Stock Exchange, on the principal exchange or market on which the Common
Stock is traded or quoted.
SECTION 14.4 Adjustment of Conversion Price.
The conversion price of Debentures of any series that is convertible into
Common Stock of the Company shall be adjusted for any stock dividends, stock
splits, reclassification, combinations or similar transactions in accordance
with the terms of the supplemental indenture or Board Resolutions setting forth
the terms of the Debentures of such series.
Whenever the conversion price is adjusted, the Company shall compute the
adjusted conversion price in accordance with terms of the applicable Board
Resolution or supplemental indenture and shall prepare an Officers' Certificate
setting forth the adjusted conversion price and showing in reasonable detail
the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at each office or agency maintained for the purpose of
conversion of Debentures of such series pursuant to Section 10.2 and, if
different, with the Trustee. The Company shall forthwith cause a notice setting
forth the adjusted conversion price to be mailed, first class postage prepaid,
to each Holder of Debentures of such series at its address appearing on the
Debenture Register and to any conversion agent other than the Trustee.
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SECTION 14.5 Notice of Certain Corporate Actions.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash
out of its retained earnings (other than a dividend for which
approval of any shareholders of the Company is required); or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for
or purchase any shares of capital stock of any class or of any
other rights (other than any such grant for which approval of any
shareholders of the Company is required); or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding
shares of Common Stock) or of any consolidation, merger or share
exchange to which the Company is a party and for which approval
of any shareholders of the Company is required, or of the sale of
all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then the Company shall cause to be
filed with the Trustee, and shall cause to be mailed to all
Holders at their last addresses as they shall appear in the
Debenture Register, at least 20 days (or 10 days in any case
specified in clause (a) or (b) above) prior to the applicable
record date hereinafter specified, a notice stating (i) the date
on which a record is to be taken for the purpose of such
dividend, distribution, rights, options or warrants, or, if a
record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distribution, rights, options or warrants are to be determined,
or (ii) the date on which such reclassification, consolidation,
merger, share exchange, sale, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, dissolution,
liquidation or winding up. If at any time the Trustee shall not
be the conversion agent, a copy of such notice shall also
forthwith be filed by the Company with the Trustee.
SECTION 14.6 Reservation of Shares of Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock or treasury
shares, for the purpose of effecting the conversion of Debentures, the full
number of shares of Common Stock of the
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Company then issuable upon the conversion of all outstanding Debentures of any
series that has conversion rights.
SECTION 14.7 Payment of Certain Taxes upon Conversion.
The Company will pay any and all taxes that may be payable in respect of
the issue or delivery of shares of its Common Stock on conversion of Debentures
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of its Common Stock in a name other than that of the Holder
of the Debenture or Debentures to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax, or has established, to the satisfaction of
the Company, that such tax has been paid.
SECTION 14.8 Nonassessability.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Debentures will upon issue in accordance with the terms
hereof be duly and validly issued and fully paid and nonassessable.
SECTION 14.9 Effect of Consolidation or Merger on Conversion Privilege.
Unless otherwise provided as contemplated by Section 3.1 with respect to
Debentures of any series, in case of any consolidation of the Company with, or
merger of the Company into or with any other Person, or in case of any sale of
all or substantially all of the assets of the Company, the Company or the
Person formed by such consolidation or the Person into which the Company shall
have been merged or the Person which shall have acquired such assets, as the
case may be, shall execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Debenture then outstanding of any series that
is convertible into Common Stock shall have the right, which right shall be the
exclusive conversion right thereafter available to said Holder (until the
expiration of the conversion right of such Debenture), to convert such
Debenture into the kind and amount of shares of stock or other securities or
property (including cash) receivable upon such consolidation, merger or sale by
a holder of the number of shares of Common Stock into which such Debenture
might have been converted immediately prior to such consolidation, merger or
sale, subject to compliance with the other provisions of this Indenture, such
Debenture and such supplemental indenture. Such supplemental indenture shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in such Debenture. The above
provisions of this Section shall similarly apply to successive consolidations,
mergers or sales. Unless otherwise provided as contemplated by Section 3.1 with
respect to Debentures of any series, it is expressly agreed and understood that
anything in this Indenture to the contrary notwithstanding, if, pursuant to
such merger, consolidation or sale, holders of outstanding shares of Common
Stock do not receive shares of common stock of the surviving corporation but
receive other securities, cash or other property or any combination thereof,
Hold-
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ers of Debentures shall not have the right to thereafter convert their
Debentures into common stock of the surviving corporation or the corporation
which shall have acquired such assets, but rather, shall have the right upon
such conversion to receive the other securities, cash or other property
receivable by a holder of the number of shares of Common Stock into which the
Debentures held by such Holder might have been converted immediately prior to
such consolidation, merger or sale, all as more fully provided in the first
sentence of this Section 14.9. Anything in this Section 14.9 to the contrary
notwithstanding, the provisions of this Section 14.9 shall not apply to a
merger or consolidation of another corporation with or into the Company
pursuant to which both of the following conditions are applicable: (i) the
Company is the surviving corporation and (ii) the outstanding shares of Common
Stock are not changed or converted into any other securities or property
(including cash) or changed in number or character or reclassified pursuant to
the terms of such merger or consolidation.
As evidence of the kind and amount of shares of stock or other securities
or property (including cash) into which Debentures may properly be convertible
after any such consolidation, merger or sale, or as to the appropriate
adjustments of the conversion prices applicable with respect thereto, the
Trustee shall be furnished with and may accept the certificate or opinion of an
independent certified public accountant with respect thereto; and, in the
absence of bad faith on the part of the Trustee, the Trustee may conclusively
rely thereon, and shall not be responsible or accountable to any Holder of
Debentures for any provision in conformity therewith or approved by such
independent certified accountant which may be contained in said supplemental
indenture.
SECTION 14.10 Duties of Trustee Regarding Conversion.
Neither the Trustee nor any conversion agent shall at any time be under any
duty or responsibility to any Holder of Debentures of any series that is
convertible into Common Stock to determine whether any facts exist which may
require any adjustment of the conversion price, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed, whether herein or in any supplemental indenture (or whether a
supplemental indenture need be entered into), any resolutions of the Board of
Directors or written instrument executed by one or more officers of the Company
provided to be employed in making the same. Neither the Trustee nor any
conversion agent shall be accountable with respect to the validity or value (or
the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Debentures and neither the Trustee nor any conversion agent makes any
representation with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property upon the surrender of any Debenture for the purpose of conversion or
to comply with any of the covenants of the Company contained in this Article
XIV or in the applicable supplemental indenture, resolutions of the Board of
Directors or written instrument executed by one or more duly authorized
officers of the Company. All Debentures delivered for conversion shall be
delivered to the
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Trustee to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.9.
SECTION 14.11 Repayment of Certain Funds upon Conversion.
Any funds which at any time shall have been deposited by the Company or on
its behalf with the Trustee or any other paying agent for the purpose of paying
the principal of, and premium, if any, and interest, if any, on any of the
Debentures (including funds deposited for the sinking fund referred to in
Article III hereof) and which shall not be required for such purposes because
of the conversion of such Debentures as provided in this Article XIV shall
after such conversion be repaid to the Company by the Trustee upon the
Company's written request.
ARTICLE XV
SUBORDINATION OF DEBENTURES
Section 15.1 Debentures Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Debenture, by the
Holder's acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article, the indebtedness
represented by the Debenture and the payment of the principal of (and premium,
if any) and interest on each and all of the Debentures are hereby expressly
made subordinate and junior in right of payment to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding at the date of this
Indenture or thereafter incurred. No provision of this Article shall prevent
the occurrence of any default or Event of Default hereunder.
Section 15.2 Payment Over of Proceeds Upon Dissolution, Etc.
Upon any payment by the Company or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company
on account of the principal (and premium, if any) or interest on the
Debentures; and upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Debentures or the Trustee would be entitled to receive
from the Company, except for the provisions of this Article, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders of
the Debentures or by the
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Trustee under the Indenture if received by them or it, directly to the holders
of Senior Indebtedness of the Company (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness
in full, in money or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness,
before any payment or distribution is made to the Holders of the Debentures or
to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness of
the Company, as the case may be, remaining unpaid to the extent necessary to
pay such Senior Indebtedness in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Indebtedness.
For purposes of this Article only, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which are subordinated in right of
payment to all Senior Indebtedness which may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to another Person
upon the terms and conditions set forth in Article VIII shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article VIII.
Section 15.3 Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures.
In the event that any Debentures are declared due and payable before their
Stated Maturity, then and in such event the holders of Senior Indebtedness
shall be entitled to receive
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payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness or provision shall be made for such payment in cash, before
the Holders of the Debentures are entitled to receive any payment (including
any payment which may be payable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Debentures) by the Company on account of the principal of (or premium, if any)
or interest on the Debentures or on account of the purchase or other
acquisition of Debentures; provided, however, that nothing in this Section
shall prevent the satisfaction of any sinking fund payment in accordance with
Article XII by delivering and crediting pursuant to Section 12.2 Debentures
which have been acquired (upon redemption or otherwise) prior to such
declaration of acceleration or which have been converted pursuant to Article
XIV.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with respect
to which Section 14.2 would be applicable.
Section 15.4 No Payment When Senior Indebtedness in Default.
In the event and during the continuation of any default by the Company in
the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, as the case may be, beyond any applicable
grace period with respect thereto, or in the event that the maturity of any
Senior Indebtedness of the Company, as the case may be, has been accelerated
because of a default, or in the event and during the continuation of any
default under the New Credit Agreement or any refinancing of the New Credit
Agreement in the bank credit market (including institutional participants
therein) that would permit the lenders under the New Credit Agreement or such
refinancing to accelerate the maturity thereof or demand payment in full, then,
in any such case, no payment shall be made by the Company with respect to the
principal (including redemption and sinking fund payments) of, or premium, if
any, or interest on the Debentures until such default is cured or waived or
ceases to exist or any such acceleration or demand for payment has been
rescinded.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.4, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the
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Senior Indebtedness and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Senior Indebtedness.
Section 15.5 Payment Permitted in Certain Situations.
Nothing contained in this Article or elsewhere in this Indenture or in any
of the Debentures shall prevent (a) the Company, at any time except during the
pendency of any dissolution, winding-up, liquidation or reorganization of the
Company, whether voluntary or involuntary or any bankruptcy, insolvency,
receivership or other proceedings of the Company referred to in Section 15.2 or
under the conditions described in Section 15.3 or 15.4, from making payments at
any time of principal of, or premium, if any, or interest on the Debentures, or
(b) the application by the Trustee of any money deposited with it hereunder to
the payment of or on account of the principal of, or premium, if any, or
interest on the Debentures or the retention of such payment by the Holders, if,
at the time of such application by the Trustee, it did not have knowledge that
such payment would have been prohibited by the provisions of this Article.
Section 15.6 Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness or the provision
for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, the rights of the Holders
of Debentures shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article (equally and ratably with the holders of
indebtedness of the Company which by its express terms is subordinated to
indebtedness of the Company to substantially the same extent as the Debentures
are subordinated to the Senior Indebtedness and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of (and premium, if any) and
interest on the Debentures shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of
Debentures or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to or
for the benefit of the holders of Senior Indebtedness by Holders of Debentures
or the Trustee, shall, as among the Company, its creditors other than holders
of Senior Indebtedness and the Holders of Debentures, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
Section 15.7 Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of Debentures on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Debentures is intended to
or shall (a) impair, as among the Company, its credi-
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tors other than holders of Senior Indebtedness and the Holders of Debentures,
the obligation of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior Indebtedness,
is intended to rank equally with all other general obligations of the Company),
to pay to the Holders of Debentures the principal of (and premium, if any) and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of Debentures and creditors of the Company, as the case
may be, other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
Section 15.8 Trustee to Effectuate Subordination.
Each Holder of a Debenture by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee such Holder's attorney-in-fact for any and all
such purposes.
Section 15.9 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of Debentures, without
incurring responsibility to the Holders of Debentures and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of Debentures to the holders of Senior Indebtedness do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against
the Company and any other Person.
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Section 15.10 Notice to Trustee.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company which would prohibit the making of
any payment to or by the Trustee in respect of any Debentures pursuant to the
provisions of this Article. Notwithstanding the provisions of this Article or
any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of any Debentures pursuant to the
provisions of this Article, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 6.2, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall have not received the
notice provided for in this Section at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Debentures), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purposes for
which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 6.2, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 15.11 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.2, and the
Holders of Debentures shall be entitled to conclusively rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Persons entitled to partici-
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pate in such payment or distribution, the holders of Senior Indebtedness and
other indebtedness of the Company, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article.
Section 15.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of such Senior Indebtedness shall be read into the
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holders or creditors if it shall in good faith pay over or distribute
to Holders of Debentures or to the Company or to any other Person cash,
property or securities to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article or otherwise.
Section 15.13 Rights of Trustee as Holder of Senior Indebtedness,
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.6.
Section 15.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in
this Article in addition to or in place of the Trustee; provided, however, that
Section 14.13 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as Paying Agent.
Section 15.15 Certain Conversions Deemed Payment.
For the purposes of this Article only, (a) the issuance and delivery of
junior securities (or cash paid in lieu of fractional shares) upon conversion
of Debentures in accordance with Article XIV, or pursuant to the terms set
forth in an Officers' Certificate or established in one or more indentures
supplemental hereto in accordance with Section 3.1, shall not be deemed to
constitute a payment or distribution on account of the principal of or premium
or
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<PAGE> 103
interest on Debentures or on account of the purchase or other acquisition of
Debentures, and (b) the payment, issuance or delivery of cash, property or
securities (other than junior securities and cash paid in lieu of fractional
shares) upon conversion of a Debenture shall be deemed to constitute payment on
account of the principal of such Debenture. For the purposes of this Section,
the term "junior securities" means (i) shares of any stock of any class of the
Company and (ii) securities of the Company which are subordinated in right of
payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Debentures are so subordinated as provided in
this Article. Nothing contained in this Article or elsewhere in this Indenture
or in the Debentures is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of
Debentures, the right, which is absolute and unconditional, of the Holder of
any Debenture to convert such Debenture in accordance with Article XIV.
97
<PAGE> 104
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
KMART CORPORATION
By /s/ Michael J. Viola
-------------------------------------
Name: Michael J. Viola
Title: Vice President and Treasurer
THE BANK OF NEW YORK
By /s/ Paul J. Schmalzel
-------------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
98
<PAGE> 1
EXHIBIT 4(h)(i)
====================================
AMENDED AND RESTATED DECLARATION
OF TRUST
KMART FINANCING I
Dated as of June 6, 1996
====================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . 8
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . 8
SECTION 2.3 Reports by the Institutional Trustee . . . . . . . . . . . 9
SECTION 2.4 Periodic Reports to Institutional Trustee . . . . . . . . . 9
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . 9
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . . . 10
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . 12
ARTICLE III
ORGANIZATION
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.5 Title to Property of the Trust . . . . . . . . . . . . . . 13
SECTION 3.6 Powers and Duties of the Regular Trustees . . . . . . . . . 13
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees . . . 17
SECTION 3.8 Powers and Duties of the Institutional Trustee . . . . . . 17
SECTION 3.9 Certain Duties and Responsibilities of the Institutional
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.10 Certain Rights of Institutional Trustee . . . . . . . . . . 22
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.12 Execution of Documents . . . . . . . . . . . . . . . . . . 25
SECTION 3.13 Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.14 Duration of Trust . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities . . . . . . . . . . 27
SECTION 4.2 Responsibilities of the Sponsor . . . . . . . . . . . . . . 27
i
<PAGE> 3
Page
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.3 Institutional Trustee; Eligibility . . . . . . . . . . . . 29
SECTION 5.4 Certain Qualifications of Regular
Trustees and Delaware Trustee Generally . . . . . . . . . . 30
SECTION 5.5 Regular Trustees . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.6 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.7 Appointment, Removal and Resignation of
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.8 Vacancies among Trustees . . . . . . . . . . . . . . . . . 32
SECTION 5.9 Effect of Vacancies . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.10 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.11 Delegation of Power . . . . . . . . . . . . . . . . . . . . 33
Section 5.12 Merger, Conversion, Consolidation or Suc-
cession to Business . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities . . . . . . . . . . 34
SECTION 7.2 Execution and Authentication . . . . . . . . . . . . . . . 35
SECTION 7.3 Form and Dating . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.4 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities . . . . . . . . . . . . . . . . . . 38
SECTION 9.2 Transfer of Certificates . . . . . . . . . . . . . . . . . 38
SECTION 9.3 Deemed Security Holders . . . . . . . . . . . . . . . . . . 39
SECTION 9.4 Book Entry Interests . . . . . . . . . . . . . . . . . . . 39
SECTION 9.5 Notices to Clearing Agency . . . . . . . . . . . . . . . . 40
SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . . . 40
SECTION 9.7 Definitive Convertible Preferred Security
Certificates . . . . . . . . . . . . . . . . . . . . . . . 40
ii
<PAGE> 4
Page
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . 41
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10.5 Outside Businesses . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 11.2 Certain Accounting Matters . . . . . . . . . . . . . . . . 48
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent . . . . . . . . . . . . . . . . 51
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee . . 53
SECTION 13.2 Representations and Warranties of Delaware Trustee . . . . 54
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 14.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 14.3 Intention of the Parties . . . . . . . . . . . . . . . . . 56
SECTION 14.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 14.5 Successors and Assigns . . . . . . . . . . . . . . . . . . 56
SECTION 14.6 Partial Enforceability . . . . . . . . . . . . . . . . . . 56
SECTION 14.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 56
iii
<PAGE> 5
Page
ANNEX I TERMS OF SECURITIES . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT A-1 FORM OF CONVERTIBLE PREFERRED SECURITY
CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE . . . . . . . . . . . . A2-1
EXHIBIT B SPECIMEN OF DEBENTURE . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C UNDERWRITING AGREEMENT . . . . . . . . . . . . . . . . . . C-1
iv
<PAGE> 6
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . Annex I
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(e)
- ---------------
</TABLE>
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
v
<PAGE> 7
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
KMART FINANCING I
June 6, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of June 6, 1996, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established Kmart
Financing I (the "Trust"), a trust under the Delaware Business Trust Act
pursuant to a Declaration of Trust dated as of February 16, 1996, (the
"Original Declaration") and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on February 16, 1996, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer;
WHEREAS, as of the date hereof, no interests in the Trust have
been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 8
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent or Conversion Agent.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Base Indenture" means the Indenture dated as of June 6, 1996,
among the Debenture Issuer and the Debenture Trustee.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in New York, New York or Detroit,
Michigan are permitted or required by any applicable law to close.
2
<PAGE> 9
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Certificate" means a Common Security Certificate or a Convertible
Preferred Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Convertible Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Convertible
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means June 17, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.1.
"Common Securities Guarantee" means the guarantee agreement to be
dated as of June 17, 1996 of the Sponsor in respect of the Common Securities.
"Common Security Certificate" means a definitive certificate in
fully registered form representing a Common Security substantially in the form
of Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee; (b)
any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Conversion Agent" has the meaning specified in Section 7.2.
"Convertible Preferred Securities Guarantee" means the guarantee
agreement to be dated as of June 17, 1996, of the Sponsor in respect of the
Convertible Preferred Securities.
3
<PAGE> 10
"Convertible Preferred Security" has the meaning specified in
Section 7.1.
"Convertible Preferred Security Beneficial Owner" means, with
respect to a Book Entry Interest, a Person who is the beneficial owner of such
Book Entry Interest, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly as
a Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Convertible Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Corporate Trust Office" means the office of the Institutional
Trustee at which the corporate trust business of the Convertible Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Agreement is located at 101
Barclay Street, Floor 21 West, New York, New York 10286.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Kmart Corporation in its capacity as
issuer of the Debentures under the Indenture.
"Debenture Trustee" means The Bank of New York, as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"Debentures" means the series of Debentures to be issued by the
Debenture Issuer under the Indenture to be held by the Institutional Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Definitive Convertible Preferred Security Certificates" has the
meaning set forth in Section 9.4.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
4
<PAGE> 11
"Event of Default" in respect of the Securities means an Event
of Default (as defined in the Indenture) has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Global Certificate" has the meaning set forth in Section 9.4.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Base Indenture as supplemented by the
Supplemental Indenture.
"Institutional Trustee" means the Trustee meeting the
eligibility requirements set forth in Section 5.3.
"Institutional Trustee Account" has the meaning set forth in
Section 3.8(c).
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex
I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Convertible Preferred Securities or by
the Trust Indenture Act, Holder(s) of outstanding Securities voting together as
a single class or, as the context may require, Holders of outstanding
Convertible Preferred Securities or Holders of outstanding Common Securities
voting separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon
5
<PAGE> 12
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Ministerial Action" has the meaning set forth in the terms of
the Securities as set forth in Annex I.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate
has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both of them.
"Regular Trustee" has the meaning set forth in Section 5.1.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Institutional
Trustee, any officer within the Corporate Trust
6
<PAGE> 13
Office of the Institutional Trustee, including any vice president, any
assistant vice president, any assistant secretary, the treasurer, any assistant
treasurer or other officer of the Corporate Trust Office of the Institutional
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Convertible
Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time or any successor legislation.
"Special Event" has the meaning set forth in Annex I hereto.
"Securities Guarantees" means the Common Securities Guarantee
and the Convertible Preferred Securities Guarantee.
"Sponsor" means Kmart Corporation, a Michigan corporation, or
any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Supplemental Indenture" means the First Supplemental
Indenture dated as of June 6, 1996, among the Debenture Issuer and the
Debenture Trustee, pursuant to which the Debentures are to be issued.
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of 10% or more of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
7
<PAGE> 14
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement for
the offering and sale of Convertible Preferred Securities in the form of
Exhibit C.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of
the Trust Indenture Act that are required to be part of this Declaration and
shall, to the extent applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee
which is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Section
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on
behalf of the Trust shall provide the Institutional Trustee (i) within 14 days
after each record date for payment of Distribu-
8
<PAGE> 15
tions, a list, in such form as the Institutional Trustee may reasonably
require, of the names and addresses of the Holders of the Securities ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Regular Trustees on behalf of the Trust shall be obligated to provide such List
of Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Institutional Trustee by the Sponsor and the
Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30
days of receipt by the Trust of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is given to the
Institutional Trustee. The Institutional Trustee shall preserve, in as current
a form as is reasonably practicable, all information contained in Lists of
Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity) provided that the Institutional Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Institutional Trustee.
Within 60 days after May 15 of each year, the Institutional
Trustee shall provide to the Holders of the Convertible Preferred Securities
such reports as are required by Section 313 of the Trust Indenture Act, if
any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Institutional Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Institutional Trustee such documents, reports and
information as required by Section 314 (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the
Institutional Trustee is for informational purposes only and the Institutional
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Sponsor's compliance with any of its covenants hereunder
(as to which the Institutional Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
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Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Institutional Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Declaration
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Convertible Preferred Securities may, by vote, on behalf of the Holders of all
of the Convertible Preferred Securities, waive any past Event of Default in
respect of the Convertible Preferred Securities and its consequences, provided
that, if the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation amount of the
Convertible Preferred Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any
such default shall cease to exist, and any Event of Default with respect to the
Convertible Preferred Securities arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend
to any subsequent or other default or an Event of Default with respect to the
Convertible Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Convertible Preferred Securities of an Event of
Default with respect to the Convertible Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common Securities for all purposes of
this Declaration without any further act, vote, or consent of the Holders of
the Common Securities.
(b) The Holders of a Majority in liquidation amount of
the Common Securities may, by vote, on behalf of the Holders
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of all of the Common Securities, waive any past Event of Default with respect
to the Common Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority to
be waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the Declaration as
provided below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Convertible Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the Holders of the Convertible Preferred Securities and
only the Holders of the Convertible Preferred Securities will have the right to
direct the Institutional Trustee in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu
of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture
Act are hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act. Subject to the foregoing provisions of
this Section 2.6(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising
therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture
by the Institutional Trustee at the direction of the Holders of the Convertible
Preferred Securities, constitutes a waiver of the corresponding Event of
Default under this Declaration. The foregoing provisions of this Section
2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and
such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly
excluded from this
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Declaration and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Institutional Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Securities, notices of all defaults with
respect to the Securities actually known to a Responsible Officer of the
Institutional Trustee, unless such defaults have been cured before the giving
of such notice (the term "defaults" for the purposes of this Section 2.7(a)
being hereby defined to be an Event of Default as defined in the Indenture, not
including any periods of grace provided for therein and irrespective of the
giving of any notice provided therein); provided that, except for a default in
the payment of principal of (or premium, if any) or interest on any of the
Debentures or in the payment of any sinking fund installment established for
the Debentures, the Institutional Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Institutional
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Securities.
(b) The Institutional Trustee shall not be deemed to
have knowledge of any default except:
(i) a default under Sections 5.1(1) and 5.1(2) of the
Indenture; or
(ii) any default as to which the Institutional Trustee
shall have received written notice or of which a Responsible Officer
of the Institutional Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Kmart Financing I" as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Kmart
Corporation, 3100 West Big Beaver Road, Troy, Michigan
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48084. On ten Business Days written notice to the Holders of Securities, the
Regular Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only those
other activities necessary, or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States federal
income tax purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Institutional Trustee, the Regular Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Debentures and the Institutional Trustee Account or as otherwise provided in
this Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Convertible Preferred
Securities and the Common Securities in accordance with this
Declaration; provided, however, that the Trust may issue no more than
one series of Convertible Preferred Securities and
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no more than one series of Common Securities, and, provided further,
that there shall be no interests in the Trust other than the
Securities, and the issuance of Securities shall be limited to a
simultaneous issuance of both Convertible Preferred Securities and
Common Securities on the Closing Date;
(b) in connection with the issue and sale of the
Convertible Preferred Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission the
registration statement on Form S-3 prepared by the Sponsor,
including any amendments thereto, pertaining to the
Convertible Preferred Securities;
(ii) execute and file any documents prepared by
the Sponsor, or take any acts as determined by the Sponsor to
be necessary in order to qualify or register all or part of
the Convertible Preferred Securities in any State in which the
Sponsor has determined to qualify or register such Convertible
Preferred Securities for sale;
(iii) execute and file an application, prepared
by the Sponsor, to the New York Stock Exchange, Inc. or any
other national stock exchange or the Nasdaq Stock Market's
National Market for listing upon notice of issuance of any
Convertible Preferred Securities;
(iv) execute and file with the Commission a
registration statement on Form 8-A, including any amendments
thereto, prepared by the Sponsor, relating to the registration
of the Convertible Preferred Securities under Section 12(b) of
the Exchange Act; and
(v) execute and enter into the Underwriting
Agreement providing for the sale of the Convertible Preferred
Securities;
(c) to acquire the Debentures with the proceeds of the
sale of the Convertible Preferred Securities and the Common
Securities; provided, however, that the Regular Trustees shall cause
legal title to the Debentures to be held of record in the name of the
Institutional Trustee for the benefit of the Holders of the
Convertible Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Institutional Trustee
prompt written notice of the occurrence of a Special Event; provided
that the Regular Trustees shall consult with the Sponsor and the
Institutional Trustee before taking or
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refraining from taking any Ministerial Action in relation to a Special
Event;
(e) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including and with respect to, for the purposes of
Section 316(c) of the Trust Indenture Act, Distributions, voting
rights, redemptions and exchanges, and to issue relevant notices to
the Holders of Convertible Preferred Securities and Holders of Common
Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may
be required of the Regular Trustees pursuant to the terms of the
Securities;
(g) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or
demands of or against the Trust ("Legal Action"), unless pursuant to
Section 3.8(e), the Institutional Trustee has the exclusive power to
bring such Legal Action;
(h) to employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers,
contractors, advisors, and consultants and pay reasonable compensation
for such services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate required by Section
314(a)(4) of the Trust Indenture Act to the Institutional Trustee,
which certificate may be executed by any Regular Trustee;
(k) to incur expenses that are necessary or incidental
to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as,
registrar and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its
election to defer payments of interest on the Debentures by extending
the interest payment period under the Indenture;
(n) to execute all documents or instruments, perform
all duties and powers, and do all things for and on behalf of the
Trust in all matters necessary or incidental to the foregoing;
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(o) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's
valid existence, rights, franchises and privileges as a statutory
business trust under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Convertible Preferred
Securities or to enable the Trust to effect the purposes for which the
Trust was created;
(p) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees
determine in their discretion to be necessary or desirable in carrying
out the activities of the Trust as set out in this Section 3.6,
including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(ii) causing the Trust to be classified for
United States federal income tax purposes as a grantor
trust; and
(iii) cooperating with the Debenture Issuer to
ensure that the Debentures will be treated as indebtedness of
the Debenture Issuer for United States federal income tax
purposes,
provided that such action does not adversely affect the interests of
Holders; and
(q) to take all action necessary to cause all
applicable tax returns and tax information reports that are required
to be filed with respect to the Trust to be duly prepared and filed by
the Regular Trustees, on behalf of the Trust.
The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust
set forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have
none of the powers or the authority of the Institutional Trustee set forth in
Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.
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SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including
the Institutional Trustee) shall not, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall not
and the Trustees (including the Institutional Trustee) shall cause the Trust
not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders of Securities pursuant to the terms of this Declaration and of
the Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as
to vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other
than the Securities; or
(vii) other than as provided in this Amended and Restated
Declaration or Annex I, (A) direct the time, method and place of
exercising any trust or power conferred upon the Debenture Trustee
with respect to the Debentures, (B) waive any past default that is
waivable under the Indenture, (C) exercise any right to rescind or
annul any declaration that the principal of all the Debentures shall
be due and payable, or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent
shall be required unless the Trust shall have received an opinion of
counsel to the effect that such modification will not cause more than
an insubstantial risk that for United States federal income tax
purposes the Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Institutional Trustee.
(a) The legal title to the Debentures shall be owned by
and held of record in the name of the Institutional Trustee in trust for the
benefit of the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the
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Debentures shall vest automatically in each Person who may hereafter be
appointed as Institutional Trustee in accordance with Section 5.7. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Institutional Trustee shall not transfer its
right, title and interest in the Debentures to the Regular Trustees or to the
Delaware Trustee (if the Institutional Trustee does not also act as Delaware
Trustee).
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Institutional Trustee Account") in the
name of and under the exclusive control of the Institutional Trustee
on behalf of the Holders of the Securities and, upon the receipt of
payments of funds made in respect of the Debentures held by the
Institutional Trustee, deposit such funds into the Institutional
Trustee Account and make payments to the Holders of the Convertible
Preferred Securities and Holders of the Common Securities from the
Institutional Trustee Account in accordance with Section 6.1. Funds
in the Institutional Trustee Account shall be held uninvested until
disbursed in accordance with this Declaration. The Institutional
Trustee Account shall be an account that is maintained with a banking
institution the rating on whose long-term unsecured indebtedness is at
least equal to the rating assigned to the Convertible Preferred
Securities by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Convertible
Preferred Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain special events (as may be
defined in the terms of the Securities) arising from a change in law
or a change in legal interpretation or other specified circumstances
pursuant to the terms of the Securities.
(d) The Institutional Trustee shall take all actions
and perform such duties as may be specifically required of the Institutional
Trustee pursuant to the terms of the Securities.
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(e) The Institutional Trustee shall take any Legal
Action which arises out of or in connection with an Event of Default of which a
Responsible Officer of the Institutional Trustee has actual knowledge or the
Institutional Trustee's duties and obligations under this Declaration or the
Trust Indenture Act; provided however, that if a Declaration Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Debenture Issuer to pay interest or principal on the Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
on the redemption date), then a Holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the Debentures having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of such Holder (a
"Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the Holders
of the Common Securities Holder will be subrogated to the rights of such Holder
of Preferred Securities to the extent of any payment made by the Issuer to such
Holder of Preferred Securities in such Direct Action. Except as provided in
the preceding sentences, the Holders of Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the
Debentures.
(f) The Institutional Trustee shall not resign as a
Trustee unless either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders of Securities
pursuant to the terms of the Securities; or
(ii) a Successor Institutional Trustee has been
appointed and has accepted that appointment in accordance with Section
5.7.
(g) The Institutional Trustee shall have the legal
power to exercise all of the rights, powers and privileges of a holder of
Debentures under the Indenture and, if an Event of Default actually known to a
Responsible Officer of the Institutional Trustee occurs and is continuing, the
Institutional Trustee shall, for the benefit of Holders of the Securities,
enforce its rights as holder of the Debentures subject to the rights of the
Holders pursuant to the terms of such Securities.
(h) The Institutional Trustee may authorize one or more
Persons (each, a "Paying Agent") to pay Distributions, redemption payments or
liquidation payments on behalf of the Trust with respect to all securities and
any such Paying Agent shall comply with Section 317(b) of the Trust Indenture
Act. Any Paying Agent may be removed by the Institutional Trustee at any
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time and a successor Paying Agent or additional Paying Agents may be appointed
at any time by the Institutional Trustee.
(i) Subject to this Section 3.8, the Institutional
Trustee shall have none of the duties, liabilities, powers or the authority of
the Regular Trustees set forth in Section 3.6.
The Institutional Trustee must exercise the powers set forth
in this Section 3.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Institutional Trustee
shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Institutional
Trustee.
(a) The Institutional Trustee, before the occurrence of
any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed
to relieve the Institutional Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the
Institutional Trustee shall be determined solely by the
express provisions of this Declaration and the Institutional
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Declaration, and no implied covenants or obligations shall be
read into this Declaration against the Institutional Trustee;
and
(B) in the absence of bad faith on the part of
the Institutional Trustee, the Institutional Trustee may
conclusively rely, as to the truth of the state-
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ments and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the
Institutional Trustee and conforming to the requirements of
this Declaration; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Institutional Trustee, the
Institutional Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Declaration;
(ii) the Institutional Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Institutional Trustee, unless it shall be proved that the
Institutional Trustee was negligent in ascertaining the pertinent
facts;
(iii) the Institutional Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Institutional
Trustee against such risk or liability is not reasonably assured to
it;
(v) the Institutional Trustee's sole duty with respect
to the custody, safe keeping and physical preservation of the
Debentures and the Institutional Trustee Account shall be to deal with
such property in a similar manner as the Institutional Trustee deals
with similar property for its own account, subject to the protections
and limitations on liability afforded to the Institutional Trustee
under this Declaration and the Trust Indenture Act;
(vi) the Institutional Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
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(vii) the Institutional Trustee shall not be liable for
any interest on any money received by it except as it may otherwise
agree in writing with the Sponsor. Money held by the Institutional
Trustee need not be segregated from other funds held by it except in
relation to the Institutional Trustee Account maintained by the
Institutional Trustee pursuant to Section 3.8(c)(i) and except to the
extent otherwise required by law; and
(viii) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Institutional Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Institutional Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration,
the Institutional Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting any action
hereunder, the Institutional Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the
Sponsor or the Regular Trustees;
(iv) the Institutional Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Institutional Trustee may consult with counsel
of its selection or other experts and the advice or opinion of such
counsel and experts with respect to legal
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matters or advice within the scope of such experts' area of expertise
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion, such counsel may be
counsel to the Sponsor or any of its Affiliates, and may include any
of its employees. The Institutional Trustee shall have the right at
any time to seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Institutional Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Institutional Trustee security
and indemnity, reasonably satisfactory to the Institutional Trustee,
against the costs, expenses (including attorneys' fees and expenses
and the expenses of the Institutional Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as
may be requested by the Institutional Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve the
Institutional Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) the Institutional Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Institutional Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Institutional Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or
by or through agents, custodians, nominees or attorneys and the
Institutional Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(ix) any action taken by the Institutional Trustee or
its agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Institutional Trustee or its
agents alone shall be sufficient and effective to perform any such
action and no third party shall be required to inquire as to the
authority of the Institutional Trustee to so act or as to its
compliance with any of the
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terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Institutional Trustee's or its agent's
taking such action;
(x) whenever in the administration of this Declaration
the Institutional Trustee shall deem it desirable to receive written
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Institutional Trustee (i) may request
written instructions from the Holders of the Securities which
instructions may only be given by the Holders of the same proportion
in liquidation amount of the Securities as would be entitled to direct
the Institutional Trustee under the terms of the Securities in respect
of such remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions
are received, and (iii) shall be protected in conclusively relying on
or acting in or accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration; and
(xii) the Institutional Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Institutional Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or imposed
on it, in any jurisdiction in which it shall be illegal, or in which the
Institutional Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts, or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Institutional Trustee shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Institutional Trustee described
in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
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SECTION 3.12 Execution of Documents.
Except as otherwise required by the Business Trust Act, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
that the Regular Trustees have the power and authority to execute pursuant to
Section 3.6; provided that, the registration statement referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Regular Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall have existence for fifty-five (55) years from the
Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge
with or into, or be replaced by, or convey, transfer or lease its properties
and assets substantially as an entirety to any corporation or other body,
except as described in Section 3.15(b) and (c).
(b) The Trust may, with the consent of the Regular
Trustees or, if there are more than two, a majority of the Regular Trustees and
without the consent of the Holders of the Securities, the Delaware Trustee or
the Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations
of the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the
Convertible Preferred Securities (the "Successor Securi-
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ties") so long as the Successor Securities rank the same as
the Convertible Preferred Securities rank with respect to
Distributions and payments upon liquidation, redemption
and otherwise;
(ii) the Debenture Issuer expressly acknowledges a
trustee of the Successor Entity that possesses the same powers and
duties as the Institutional Trustee as the Holder of the Debentures;
(iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities
exchange or with another organization on which the Convertible
Preferred Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Convertible Preferred Securities
(including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Securities (including any Successor
Securities) in any material respect (other than with respect to any
dilution of such Holders' interests in the Convertible Preferred
Securities as a result of such merger, consolidation, amalgamation or
replacement);
(vi) such Successor Entity has a purpose identical to
that of the Trust;
(vii) prior to such merger, consolidation, amalgamation
or replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the Securities (including any
Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new
entity); and
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company;
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(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for
United States federal income tax purposes; and
(viii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Convertible Preferred Securities Guarantees.
(c) Notwithstanding Section 3.15(b), the Trust shall
not, except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date the Sponsor will purchase all of the
Common Securities issued by the Trust, in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Convertible Preferred Securities
are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Convertible
Preferred Securities, the Sponsor shall have the exclusive right and
responsibility to engage in the following activities:
(a) to prepare for filing by the Trust with the
Commission a registration statement on Form S-3 in relation to the
Convertible Preferred Securities and the Convertible Preferred
Securities Guarantees, including any amendments thereto;
(b) to determine the States in which to take
appropriate action to qualify or register for sale all or part of the
Convertible Preferred Securities and the Convertible Preferred
Securities Guarantees and to do any and all such acts, other than
actions which must be taken by the Trust, and advise the Trust of
actions it must take, and prepare for execution and filing any
documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advis-
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able in order to comply with the applicable laws of any such States;
(c) to prepare for filing by the Trust an application
to the New York Stock Exchange or any other national stock exchange or
the Nasdaq National Market for listing upon notice of issuance of any
Convertible Preferred Securities;
(d) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A relating to the
registration of the Convertible Preferred Securities under Section
12(b) of the Exchange Act, including any amendments thereto; and
(e) to negotiate the terms of the Underwriting
Agreement providing for the sale of the Convertible Preferred
Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities,
the Sponsor may, by written instrument, increase or decrease the
number of Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a
majority in liquidation amount of the Common Securities voting as a
class at a meeting of the Holders of the Common Securities; provided,
however, that the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee, in the case of a
natural person, shall be a person who is a resident of the State of
Delaware or that, if not a natural person, is an entity which has its
principal place of business in the State of Delaware (the "Delaware
Trustee"); (2) there shall be at least one Trustee who is an employee
or officer of, or is affiliated with the Sponsor (a "Regular
Trustee"); and (3) one Trustee shall be the Institutional Trustee for
so long as this Declaration is required to qualify as an indenture
under the Trust Indenture Act, and such Trustee may also serve as
Delaware Trustee if it meets the applicable requirements.
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SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise
meets the requirements of applicable law,
provided that, if the Institutional Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable
law, then the Institutional Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
SECTION 5.3 Institutional Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall
act as Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by federal, state, territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then for the
purposes of this Section 5.3(a)(ii), the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Institutional Trustee shall
cease to be eligible to so act under Section 5.3(a), the Institutional
Trustee shall immediately resign in the manner and with the effect set forth in
Section 5.7(c).
(c) If the Institutional Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Institutional Trustee and the Holder of the Common
Securities (as if it were the obligor
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referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
(d) The Convertible Preferred Securities Guarantee
shall be deemed to be specifically described in this Declaration for purposes
of clause (i) of the first provision contained in Section 310(b) of the Trust
Indenture Act.
(e) The initial Institutional Trustee shall be:
The Bank of New York
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware
Trustee Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Institutional Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5 Regular Trustees.
The initial Regular Trustees shall be:
Marvin P. Rich
Martin E. Welch III
Michael J. Viola
(a) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any
matter over which the Regular Trustees have power to act, any power of the
Regular Trustees may be exercised by, or with the consent of, any one such
Regular Trustee.
(b) Unless otherwise determined by the Regular
Trustees, and except as otherwise required by the Business Trust Act or
applicable law, any Regular Trustee is authorized to execute on behalf of the
Trust any documents which the Regular Trustees have the power and authority to
cause the Trust to execute pursuant to Section 3.6, provided, that, the
registration statement referred to in Section 3.6, including any amendments
thereto, shall be signed by all of the Regular Trustees; and
(c) a Regular Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purposes of signing any documents which the
Regular Trustees have power and authority to cause the Trust to execute
pursuant to Section 3.6.
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SECTION 5.6 Delaware Trustee.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.7(b), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of
the Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders of the Common
Securities.
(b)(i) The Trustee that acts as Institutional Trustee shall
not be removed in accordance with Section 5.7(a) until a Successor
Institutional Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor
Institutional Trustee and delivered to the Regular Trustees and the
Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not
be removed in accordance with this Section 5.7(a) until a successor
Trustee possessing the qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office
until his successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Trustee and
delivered to the Sponsor and the Trust, which resignation shall take effect
upon such delivery or upon such later date as is specified therein; provided,
however, that:
(i) No such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee has
been appointed and has accepted such appointment by instrument
executed by such Successor Institutional
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Trustee and delivered to the Trust, the Sponsor and the
resigning Institutional Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the holders of the Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the
Trust, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use
their best efforts to promptly appoint a Successor Delaware Trustee or
Successor Institutional Trustee as the case may be if the Institutional Trustee
or the Delaware Trustee delivers an instrument of resignation in accordance
with this Section 5.7.
(e) If no Successor Institutional Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as provided
in this Section 5.7 within 60 days after delivery of an instrument of
resignation or removal, the Institutional Trustee or Delaware Trustee resigning
or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Institutional Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Institutional
Trustee or Successor Delaware Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall
be liable for the acts or omissions to act of any Successor Institutional
Trustee or successor Delaware Trustee, as the case may be.
SECTION 5.8 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees or,
if there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to
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perform the duties of a Trustee shall not operate to annul the Trust. Whenever
a vacancy in the number of Regular Trustees shall occur, until such vacancy is
filled by the appointment of a Regular Trustee in accordance with Section 5.7,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.10 Meetings.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 48 hours before such meeting. Notice of any telephonic meetings of
the Regular Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before a meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Regular Trustees may be taken at a meeting by vote of a
majority of the Regular Trustees present (whether in person or by telephone)
and eligible to vote with respect to such matter, provided that a Quorum is
present, or without a meeting by the unanimous written consent of the Regular
Trustees. In the event there is only one Regular Trustee, any and all action
of such Regular Trustee shall be evidenced by a written consent of such Regular
Trustee.
SECTION 5.11 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.6, including any registration statement or amendment
thereto filed with the Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate
from time to time to such of their number or to officers of the Trust the doing
of such things and the execution of such instruments either in the name of the
Trust or the names of the
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Regular Trustees or otherwise as the Regular Trustees may deem expedient, to
the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
Section 5.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either
may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Institutional Trustee or the Delaware Trustee, as
the case may be, shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Institutional Trustee or
the Delaware Trustee, as the case may be, shall be the successor of the
Institutional Trustee or the Delaware Trustee, as the case may be, hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined herein) in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Convertible Preferred Securities and the
Common Securities in accordance with the preferences set forth in their
respective terms. If and to the extent that the Debenture Issuer makes a
payment of interest (including Compounded Interest (as defined in the
Indenture) and Additional Interest (as defined in the Indenture)), premium
and/or principal on the Debentures held by the Institutional Trustee (the
amount of any such payment being a "Payment Amount"), the Institutional Trustee
shall and is directed, to the extent funds are available for that purpose, to
make a distribution (a "Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust
issue one class of convertible preferred securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "Convertible
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Preferred Securities") and one class of convertible common securities,
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I (the "Common Securities.") The Trust
shall issue no securities or other interests in the assets of the Trust other
than the Convertible Preferred Securities and the Common Securities.
(b) The consideration received by the Trust for the
issuance of the Securities shall constitute a contribution to the capital of
the Trust and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable.
(d) Every Person, by virtue of having become a Holder
or a Convertible Preferred Security Beneficial Owner in accordance with the
terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Certificates shall be signed on behalf of the
Trust by a Regular Trustee. In case any Regular Trustee of the Trust who shall
have signed any of the Securities shall cease to be such Regular Trustee before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Regular Trustee; and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of
such Security, shall be the Regular Trustees of the Trust, although at the date
of the execution and delivery of the Declaration any such person was not such a
Regular Trustee.
(b) One Regular Trustee shall sign the Convertible
Preferred Securities for the Trust by manual or facsimile signature. Unless
otherwise determined by the Trust, such signature shall, in the case of Common
Securities, be a manual signature.
A Convertible Preferred Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Institutional Trustee. The signature shall be conclusive evidence that the
Convertible Preferred Security has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular
Trustee, the Institutional Trustee shall authenticate the Preferred Securities
for original issue.
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The Institutional Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Convertible Preferred Securities. An
authenticating agent may authenticate Convertible Preferred Securities whenever
the Institutional Trustee may do so. Each reference in this Declaration to
authentication by the Institutional Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Institutional
Trustee to deal with the Company or an Affiliate.
SECTION 7.3 Form and Dating.
The Convertible Preferred Securities and the Institutional
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 and the Common Securities shall be substantially in the form of
Exhibit A-2, each of which is hereby incorporated in and expressly made a part
of this Declaration. Certificates may be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof. The Securities may have
letters, numbers, notations or other marks of identification or designation and
such legends or endorsements required by law, stock exchange rule, agreements
to which the Trust is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Trust). The
Trust at the direction of the Sponsor shall furnish any such legend not
contained in Exhibit A-1 to the Institutional Trustee in writing. Each
Convertible Preferred Security Certificate shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex
I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and to the extent applicable, the Institutional
Trustee and the Sponsor, by their execution and delivery of this Declaration,
expressly agree to such terms and provisions and to be bound thereby.
SECTION 7.4 Paying Agent.
In the event that the Convertible Preferred Securities are not
in book-entry only form, the Trust shall maintain in the Borough of Manhattan,
City of New York, State of New York, an office or agency where the Convertible
Preferred Securities may be presented for payment ("Paying Agent). The Trust
shall maintain an office or agency where Securities may be presented for
conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and
the Conversion Agent and may appoint one or more additional paying agents and
one or more additional conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent and
the term "Conversion Agent" includes any additional conversion agent. The
Trust may change any Paying Agent or Conversion Agent without prior notice to
any Holder. The Trust shall notify the Institutional Trustee in writing of the
name and address of any Agent
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not a party to this Declaration. If the Trust fails to appoint or maintain
another entity as Paying Agent or Conversion Agent, the Institutional Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent
or Conversion Agent. The Trust shall act as Paying Agent and Conversion Agent
for the Common Securities.
The Trust initially appoints the Institutional Trustee as
Conversion Agent for the Convertible Preferred Securities.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
its equivalent with respect to the Sponsor; the filing of a
certificate of cancellation with respect to the Trust after having
obtained the consent of a majority in liquidation amount of the
Securities voting together as a single class to file such certificate
of cancellation or the revocation of the Sponsor's charter and the
expiration of 90 days after the date of revocation without a
reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution
of the Sponsor or the Trust;
(iv) when all of the Securities shall have been called
for redemption and the amounts necessary for redemption thereof shall
have been paid to the Holders in accordance with the terms of the
Securities;
(v) upon the occurrence and continuation of a Special
Event pursuant to which the Trust shall have been dissolved in
accordance with the terms of the Securities and all of the Debentures
held by the Institutional Trustee shall have been distributed to the
Holders of Securities in exchange for all of the Securities;
(vi) upon the distribution of the Sponsor's common stock
to all Securities Holders upon conversion of all outstanding
Convertible Preferred Securities;
(vii) the expiration of the term of the Trust on June 15,
2051; or
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(viii) before the issuance of any Securities, with the
consent of all of the Regular Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of
an event referred to in Section 8.1(a), the Trustees shall file a certificate
of cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Sections 3.9 and 3.10 and Article
X shall survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Convertible Preferred
Securities shall be freely transferable.
(c) Subject to this Article IX, the Sponsor and any
Related Party may only transfer Common Securities to the Sponsor or a Related
Party of the Sponsor; provided that, any such transfer is subject to the
condition precedent that the transferor obtain the written opinion of
nationally recognized independent counsel experienced in such matters that such
transfer would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United States
federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other government charges that may be imposed
in relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer
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in form satisfactory to the Regular Trustees duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer shall be canceled by the Regular
Trustees. A transferee of a Certificate shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Certificate. By acceptance of a Certificate, each transferee
shall be deemed to have agreed to be bound by this Declaration.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any
Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Securities represented by such
Certificate for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trust shall
have actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Convertible
Preferred Securities, the Convertible Preferred Securities Certificates, on
original issuance, will be issued in the form of one or more, fully registered,
global Convertible Preferred Security Certificates (each a "Global
Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on
behalf of, the Trust. Such Global Certificates shall initially be registered
on the books and records of the Trust in the name of Cede & Co., the nominee of
DTC, and no Convertible Preferred Security Beneficial Owner will receive a
definitive Convertible Preferred Security Certificate representing such
Convertible Preferred Security Beneficial Owner's interests in such Global
Certificates, except as provided in Section 9.7. Unless and until definitive,
fully registered Convertible Preferred Security Certificates (the "Definitive
Convertible Preferred Security Certificates") have been issued to the
Convertible Preferred Security Beneficial Owners pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in full
force and effect;
(b) the Trust and the Trustees shall be entitled to
deal with the Clearing Agency for all purposes of this Declaration
(including the payment of Distributions on the Global Certificates and
receiving approvals, votes or consents hereunder) as the Holder of the
Convertible Preferred Securities and the sole holder of the Global
Certificates
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and shall have no obligation to the Convertible Preferred Security
Beneficial Owners;
(c) to the extent that the provisions of this Section
9.4 conflict with any other provisions of this Declaration, the
provisions of this Section 9.4 shall control; and
(d) the rights of the Convertible Preferred Security
Beneficial Owners shall be exercised only through the Clearing Agency
and shall be limited to those established by law and agreements
between such Convertible Preferred Security Beneficial Owners and the
Clearing Agency and/or the Clearing Agency Participants and receive
and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants. DTC will make book entry transfers
among the Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Convertible
Preferred Security Holders is required under this Declaration, unless and until
Definitive Convertible Preferred Security Certificates shall have been issued
to the Convertible Preferred Security Beneficial Owners pursuant to Section
9.7, the Regular Trustees shall give all such notices and communications
specified herein to be given to the Convertible Preferred Security Holders to
the Clearing Agency, and shall have no notice obligations to the Convertible
Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Convertible Preferred Securities, the
Regular Trustees may, in their sole discretion, appoint a successor Clearing
Agency with respect to such Convertible Preferred Securities.
SECTION 9.7 Definitive Convertible Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its
services as securities depositary with respect to the Convertible
Preferred Securities and a successor Clearing Agency is not appointed
within 90 days after such discontinuance pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with
the Sponsor to terminate the book entry system through
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the Clearing Agency with respect to the Convertible Preferred
Securities,
then:
(c) Definitive Convertible Preferred Security
Certificates shall be prepared by the Regular Trustees on behalf of
the Trust with respect to such Convertible Preferred Securities; and
(d) upon surrender of the Global Certificates by the
Clearing Agency, accompanied by registration instructions, the Regular
Trustees shall cause Definitive Certificates to be delivered to
Convertible Preferred Security Beneficial Owners in accordance with
the instructions of the Clearing Agency. Neither the Trustees nor the
Trust shall be liable for any delay in delivery of such instructions
and each of them may conclusively rely on and shall be protected in
relying on, said instructions of the Clearing Agency. The Definitive
Convertible Preferred Security Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks
of identification or designation and such legends or endorsements as
the Regular Trustees may deem appropriate, or as may be required to
comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which
Convertible Preferred Securities may be listed, or to conform to
usage.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(a) any mutilated Certificates should be surrendered to
the Regular Trustees, or if the Regular Trustees shall receive
evidence to their satisfaction of the destruction, loss or theft of
any Certificate; and
(b) there shall be delivered to the Regular Trustees
such security or indemnity as may be required by them to keep each of
them harmless.
then, in the absence of notice that such Certificate shall have been acquired
by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 9.8,
the Regular Trustees may require the payment of a sum sufficient to
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cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration,
the Securities Guarantees and the terms of the Securities, the Sponsor shall
not be:
(i) personally liable for the return of any portion of
the capital contributions (or any return thereon) of the Holders of
the Securities which shall be made solely from assets of the Trust; or
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable
for all of the debts and obligations of the Trust (other than with respect to
the Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust
Act, the Holders of the Convertible Preferred Securities shall be entitled to
the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible
or accountable in damages or otherwise to the Trust or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.
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(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be
paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Institutional Trustee
under the Trust Indenture Act), are agreed by the parties hereto to replace
such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
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(c) Whenever in this Declaration an Indemnified Person
is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard
and shall not be subject to any other or different standard imposed by
this Declaration or by applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to
the full extent permitted by law, any Company Indemnified Person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is or
was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the
Company Indemnified Person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(ii) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Trust to procure
a judgment in its favor by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in
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or not opposed to the best interests of the Trust and except that no
such indemnification shall be made in respect of any claim, issue or
matter as to which such Company Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which such Court of Chancery or such other court shall
deem proper.
(iii) To the extent that a Company Indemnified Person
shall be successful on the merits or otherwise (including dismissal of
an action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in
defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii)
of this Section 10.4(a) (unless ordered by a court) shall be made by
the Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person
is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority
vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written
opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees) incurred by a
Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by
the Debenture Issuer in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section
10.4(a). Notwithstanding the foregoing, no advance shall be made by
the Debenture Issuer if a determination is reasonably and promptly
made (i) by the Regular Trustees by a majority vote of a quorum of
disinterested Regular Trust-
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ees, (ii) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Regular Trustees so directs, by
independent legal counsel in a written opinion or (iii) the Common
Security Holder of the Trust, that, based upon the facts known to the
Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Company Indemnified Person acted in
bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to
any criminal proceeding, that such Company Indemnified Person believed
or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Regular
Trustees, independent legal counsel or Common Security Holder
reasonably determine that such person deliberately breached his duty
to the Trust or its Common or Convertible Preferred Security Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 10.4(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Convertible Preferred Security
Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office. All rights to indemnification under this Section 10.4(a)
shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such capacity
at any time while this Section 10.4(a) is in effect. Any repeal or
modification of this Section 10.4(a) shall not affect any rights or
obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to
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the resulting or surviving entity as he would have with respect to
such constituent entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a Company Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(b) The Debenture Issuer agrees to indemnify the (i)
Institutional Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Institutional Trustee and the Delaware Trustee, and (iv) any officers,
directors, shareholders, members, partners, employees, representatives,
custodians, nominees or agents of the Institutional Trustee and the Delaware
Trustee (each of the Persons in (i) through (iv) being referred to as a
"Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified
Person harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration or the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 10.4(b) shall survive the
satisfaction and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated
to present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Institutional Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person, the Delaware
Trustee and the Institutional Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary
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for, trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail,
each transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of account
and the records of the Trust shall be examined by and reported upon as of the
end of each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss;
(c) The Regular Trustees shall cause to be duly
prepared and delivered to each of the Holders of Securities, any annual United
States federal income tax information statement, required by the Code,
containing such information with regard to the Securities held by each Holder
as is required by the Code and the Treasury Regulations. Notwithstanding any
right under the Code to deliver any such statement at a later date, the Regular
Trustees shall endeavor to deliver all such statements within 30 days after the
end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual United
States federal income tax return, on a Form 1041 or such other form required by
United States federal income tax law, and any other annual income tax returns
required to be filed by the Regular Trustees on behalf of the Trust with any
state or local taxing authority.
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SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Institutional Trustee shall be
made directly to the Institutional Trustee Account and no other funds of the
Trust shall be deposited in the Institutional Trustee Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Institutional Trustee shall designate the
signatories for the Institutional Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be limited
to an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or
by any applicable terms of the Securities, this Declaration may only be amended
by a written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than
two Regular Trustees a majority of the Regular Trustees);
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(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Institutional Trustee, the
Institutional Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the
Delaware Trustee;
(b) no amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Institutional Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Institutional Trustee, the Institutional Trustee shall have first
received:
(A) an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel
to the Sponsor or the Trust) that such amendment is permitted
by, and conforms to, the terms of this Declaration (including
the terms of the Securities); and
(iii) to the extent the result of such amendment would be
to:
(A) cause the trust to fail to continue to be
classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Institutional Trustee in contravention of the
Trust Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(c) at such time after the Trust has issued any
Securities that remain outstanding, any amendment that would adversely affect
the rights, privileges or preferences of any
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Holder of Securities may be effected only with such additional requirements as
may be set forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent
of the Holders of a Majority in liquidation amount of the Common Securities
and;
(f) the rights of the holders of the Common Securities
under Article V to increase or decrease the number of, and appoint and remove
Trustees shall not be amended without the consent of the Holders of a Majority
in liquidation amount of the Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration
may be amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or obligations
of the Sponsor; and
(iv) to conform to any change in Rule 3a-5 or written
change in interpretation or application of Rule 3a-5 by any
legislative body, court, government agency or regulatory authority
which amendment does not have a material adverse effect on the right,
preferences or privileges of the Holders.
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities
may be called at any time by the Regular Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration,
the terms of the Securities or the rules of any stock exchange on which the
Convertible Preferred Securities are listed or admitted for trading. The
Regular Trustees shall call a meeting of the Holders of such class if directed
to do so by the Holders of at least 10% in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the Regular
Trustees a writing stating that the signing Holders of Securities wish to call
a
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meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of Securities calling a meeting shall specify in
writing the Security Certificates held by the Holders of Securities exercising
the right to call a meeting and only those Securities specified shall be
counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the
terms of the Securities, the following provisions shall apply to meetings of
Holders of Securities:
(i) notice of any such meeting shall be given to all
the Holders of Securities having a right to vote thereat at least 7
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration or the rules of any stock
exchange on which the Convertible Preferred Securities are listed or
admitted for trading, such vote, consent or approval may be given at a
meeting of the Holders of Securities. Any action that may be taken at
a meeting of the Holders of Securities may be taken without a meeting
if a consent in writing setting forth the action so taken is signed by
the Holders of Securities owning not less than the minimum amount of
Securities in liquidation amount that would be necessary to authorize
or take such action at a meeting at which all Holders of Securities
having a right to vote thereon were present and voting. Prompt notice
of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in
writing. The Regular Trustees may specify that any written ballot
submitted to the Security Holder for the purpose of taking any action
without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person
to act for it by proxy on all matters in which a Holder of Securities
is entitled to participate, including waiving notice of any meeting,
or voting or participating at a meeting. No proxy shall be valid
after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Holder of Securities executing it. Except as
otherwise provided herein, all matters relating to the giving, voting
or validity of proxies shall be governed by the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities were stockholders of a
Delaware corporation;
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(iii) each meeting of the Holders of the Securities shall
be conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration,
the terms of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Convertible Preferred
Securities are then listed or trading, otherwise provides, the Regular
Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders of Securities, including
notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders of Securities, waiver of any
such notice, action by consent without a meeting, the establishment of
a record date, quorum requirements, voting in person or by proxy or
any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee.
The Trustee that acts as initial Institutional Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants,
as applicable, to the Trust and the Sponsor at the time of the Successor
Institutional Trustee's acceptance of its appointment as Institutional Trustee
that:
(a) the Institutional Trustee is a New York banking
corporation with trust powers, duly organized, validly existing and in
good standing, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, the
Declaration;
(b) the execution, delivery and performance by the
Institutional Trustee of the Declaration has been duly authorized by
all necessary corporate action on the part of the Institutional
Trustee. The Declaration has been duly executed and delivered by the
Institutional Trustee, and it constitutes a legal, valid and binding
obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity
or at law);
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(c) the execution, delivery and performance of the
Declaration by the Institutional Trustee does not conflict with or
constitute a breach of the charter or by-laws of the Institutional
Trustee; and
(d) no consent, approval or authorization of, or
registration with or notice to, any New York or federal banking
authority is required for the execution, delivery or performance by
the Institutional Trustee, of the Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is a Delaware banking
corporation with trust powers, duly organized, validly existing and in
good standing, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, the
Declaration.
(b) The Delaware Trustee has been authorized to perform
its obligations under the Certificate of Trust and the Declaration.
The Declaration under Delaware law constitutes a legal, valid and
binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity
or at law).
(c) No consent, approval or authorization of, or
registration with or notice to, any Delaware or federal banking
authority is required for the execution, delivery or performance by
the Delaware Trustee, of the Declaration.
(d) The Delaware Trustee is a natural person who is a
resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of
Delaware.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular
Trustees at the Trust's mailing address set forth below (or such other
address as the Trust may give notice of to the Holders of the
Securities):
Kmart Financing I
c/o Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention: General Counsel
(b) if given to the Delaware Trustee, at the mailing
address set forth below (or such other address as Delaware Trustee may
give notice of to the Holders of the Securities):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Institutional Trustee, at its
Corporate Trust Office to the attention of Corporate Trust Trustee
Administration (or such other address as the Institutional Trustee may
give notice of to the Holders of the Securities).
(d) if given to the Holder of the Common Securities, at
the mailing address of the Sponsor set forth below (or such other
address as the Holder of the Common Securities may give notice to the
Trust):
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention: General Counsel
(e) if given to any other Holder, at the address set
forth on the books and records of the Trust.
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All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature
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pages shall be read as though one, and they shall have the same force and
effect as though all of the signers had signed a single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
/s/ Marvin P. Rich
----------------------------------
Marvin P. Rich, as Regular Trustee
/s/Martin E. Welch III
----------------------------------
Martin E. Welch III, as Regular
Trustee
/s/ Michael J. Viola
----------------------------------
Michael J. Viola, as Regular
Trustee
The Bank of New York (Delaware),
as Delaware Trustee
By: /s/ Melissa J. Beneduce
----------------------------------
Name: Melissa J. Beneduce
Title: Vice President
The Bank of New York, as
Institutional Trustee
By: /s/ Paul J. Schmalzel
----------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
Kmart Corporation, as Sponsor
By: /s/ Nancie W. LaDuke
----------------------------------
Name: Nancie W. LaDuke
Title: Vice President and
Secretary
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ANNEX I
TERMS OF
7 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
7 3/4% TRUST CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of June 6, 1996 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred
Securities and the Common Securities are set out below (each capitalized term
used but not defined herein has the meaning set forth in the Declaration or, if
not defined in such Declaration, as defined in the Prospectus referred to
below):
1. Designation and Number.
(a) Convertible Preferred Securities. 20,000,000
Convertible Preferred Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of One Billion Dollars
($1,000,000,000) and a liquidation amount with respect to the assets of the
Trust of $50 per convertible preferred security, are hereby designated for the
purposes of identification only as "7 3/4% Trust Convertible Preferred
Securities" (the "Convertible Preferred Securities"). The Convertible
Preferred Security Certificates evidencing the Convertible Preferred Securities
shall be substantially in the form of Exhibit A-1 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the rules of any stock
exchange on which the Convertible Preferred Securities are listed.
(b) Common Securities. 618,557 Common Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of Thirty Million Nine Hundred Twenty-Seven Thousand Eight Hundred Fifty
Dollars ($30,927,850) and a liquidation amount with respect to the assets of
the Trust of $50 per common security, are hereby designated for the purposes of
identification only as "7 3/4% Common Securities" (the "Common Securities").
The Common Security Certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
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2. Distributions.
(a) Distributions payable on each Security will be fixed
at a rate per annum of 7 3/4% (the "Coupon Rate") of the stated liquidation
amount of $50 per Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
for more than one quarter will bear interest thereon compounded quarterly at
the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
(b) Distributions on the Securities will be cumulative,
will accrue from June 17, 1996, and will be payable quarterly in arrears, on
March 15, June 15, September 15 and December 15 of each year, commencing on
September 15, 1996, except as otherwise described below. So long as the
Debenture Issuer shall not be in default in the payment of interest on the
Debentures, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period from time to time
on the Debentures for a period not exceeding 20 consecutive quarters (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall last beyond
the date of maturity of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period; provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters or extend beyond the maturity of
the Debentures. Payments of accrued Distributions will be payable to Holders
as they appear on the books and records of the Trust on the first record date
after the end of the Extension Period. Upon the termination of any Extension
Period and the payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above requirements.
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(c) Distributions on the Securities will be payable to
the Holders thereof as they appear on the books and records of the Trust on the
relevant record dates. While the Convertible Preferred Securities remain in
book-entry only form, the relevant record dates shall be at the close of
business on the Business Day prior to the relevant payment dates which payment
dates correspond to the interest payment dates on the Debentures; provided that
if the payment date is a Redemption Date, then the record date for the
Distribution shall be as of the opening of business on such record date for the
purpose of permitting a Holder of a Convertible Preferred Security to convert
on such record date while continuing to be the record holder for the
Distribution and therefore entitled to receive the Distribution on the payment
date notwithstanding conversion on the record date. Subject to any applicable
laws and regulations and the provisions of the Declaration, each such payment
in respect of the Convertible Preferred Securities will be made as described
under the heading "Description of the Convertible Preferred Securities --
Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus
Supplement dated June 6, 1996, to the Base Prospectus dated June 6, 1996
(together, the "Prospectus"), of the Trust included in the Registration
Statement on Form S-3 of the Sponsor, the Trust and certain other business
trusts. The relevant record dates for the Common Securities shall be the same
record date as for the Convertible Preferred Securities. If the Convertible
Preferred Securities shall not continue to remain in book-entry only form, the
relevant record dates for the Convertible Preferred Securities shall conform to
the rules of any securities exchange on which the securities are listed and, if
none, shall be selected by the Regular Trustees, which dates shall be any date
at least one Business Day before the relevant payment dates, which payment
dates correspond to the interest payment dates on the Debentures.
Distributions payable on any Securities that are not punctually paid on any
Distribution payment date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, will cease to be payable to the Person in
whose name such Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day, then payment
of the Distribution payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(d) In the event of an election by the Holder to convert
its Securities through the Conversion Agent into Kmart's
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Common Stock pursuant to the terms of the Securities as set forth in this Annex
I to the Declaration, no payment, allowance or adjustment shall be made with
respect to accumulated and unpaid Distributions on such Securities, or be
required to be made; provided that Holders of Securities at the close of
business on any record date for the payment of Distributions will be entitled
to receive the Distributions payable on such Securities on the corresponding
payment date notwithstanding the conversion of such Securities into Kmart's
Common Stock following such record date.
(e) In the event that there is any money or other
property held by or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein) among the Holders of
the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution,
winding-up or termination of the Trust, the Holders of the Securities on the
date of the dissolution, winding-up or termination, as the case may be, will be
entitled to receive out of the assets of the Trust available for distribution
to Holders of Securities after satisfaction of liabilities to creditors an
amount equal to the aggregate of the stated liquidation amount of $50 per
Security plus accrued and unpaid Distributions thereon to the date of payment
(such amount being the "Liquidation Distribution"), unless such dissolution,
winding-up or termination occurs in connection with a Special Event in which,
in accordance with Section 4(c), Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of such Securities,
with an interest rate equal to the Coupon Rate of, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on,
such Securities, shall be distributed on a Pro Rata basis to the Holders of the
Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in
part, whether at maturity or upon redemption (either at the option of the
Debenture Issuer or pursuant to a Special Event as described below), the
proceeds from such repayment or payment shall be simultaneously applied to
redeem Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed at a redemption price
per Security equal to the redemption price of the Deben-
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tures, together with accrued and unpaid Distributions thereon through the date
of the redemption, payable in cash (the "Redemption Price"). Holders will be
given not less than 30 nor more than 60 days notice of such redemption.
(b) If fewer than all the outstanding Securities are to
be so redeemed, the Common Securities and the Convertible Preferred Securities
will be redeemed Pro Rata and the Convertible Preferred Securities to be
redeemed will be as described in Section 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company
Event (each, as defined below, a "Special Event") shall occur and be
continuing, the Regular Trustees may with the consent of the Debenture Issuer,
except in certain limited circumstances in relation to a Tax Event described in
this Section 4(c), dissolve the Trust and, after satisfaction of creditors,
cause Debentures held by the Institutional Trustee, having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
equal to accrued and unpaid Distributions on, and having the same record date
for payment as the Securities, to be distributed to the Holders of the
Securities in liquidation of such Holders' interests in the Trust on a Pro Rata
basis, within 90 days following the occurrence of such Special Event (the "90
Day Period"); provided, however, that such dissolution and distribution shall
be conditioned on (i) the Regular Trustees' receipt of an opinion of a
nationally recognized independent tax counsel experienced in such matters (a
"No Recognition Opinion"), which opinion may rely on published revenue rulings
of the Internal Revenue Service, to the effect that the Holders of the
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of the dissolution of the Trust and the distribution
of Debentures, (ii) in the case of a Tax Event, the Debenture Issuer or the
Trust being unable to eliminate, within the 90 Day Period, the Tax Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on
the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities
("Ministerial Action"), and (iii) the Debenture Issuer's prior written consent
to such dissolution and distribution.
If in the event of a Tax Event (i) after receipt of a
Dissolution Tax Opinion (as defined hereinafter) by the Regular Trustees, the
Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a
nationally recognized independent tax counsel experienced in such matters that,
as a result of a Tax Event, there is more than an insubstantial risk that the
Debenture Issuer would be precluded from deducting the interest on the
Debentures for United States federal income tax purposes even after the
Debentures were distributed to the Holders of Securi-
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ties in liquidation of such Holders' interests in the Trust as described in
this Section 4(c), or (ii) the Regular Trustees shall have been informed by
such tax counsel that a No Recognition Opinion cannot be delivered to the
Trust, the Debenture Issuer shall have the right at any time, upon not less
than 30 nor more than 60 days notice, to redeem the Debentures in whole or in
part, at a redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, for cash within 90 days following the
occurrence of such Tax Event. Following such redemption, Securities with an
aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so redeemed shall be redeemed by the Trust at the Redemption Price
on a Pro Rata basis; provided, however, that, if at the time there is available
to the Debenture Issuer or the Trust the opportunity to eliminate, within such
90 day period, the Tax Event by taking some Ministerial Action, the Trust or
the Debenture Issuer will pursue such Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect that on
or after June 6, 1996, as a result of (a) any amendment to, clarification of,
or change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, (b) any judicial
decision, official administrative pronouncement, ruling, regulatory procedure,
notice or announcement, including any notice or announcement of intent to adopt
such procedures or regulations (an "Administrative Action") or (c) any
amendment to, clarification of, or change in the official position or the
interpretation of such Administrative Action or judicial decision that differs
from the theretofore generally accepted position, in each case, by any
legislative body, court, governmental authority or regulatory body,
irrespective of the manner in which such amendment, clarification or change is
made known, which amendment, clarification, or change is effective or such
pronouncement or decision is announced, in each case, on or after, June 6,
1996, there is more than an insubstantial risk that (i) the Trust is or will be
within 90 days of the date thereof, subject to United States federal income tax
with respect to interest accrued or received on the Debentures, (ii) the Trust
is, or will be within 90 days of the date thereof, subject to more than a de
minimis amount of taxes, duties or other governmental charges, or (iii)
interest payable in cash by the Debenture Issuer to the Trust on the Debentures
is not, or within 90 days of the date thereof will not be, deductible, in whole
or in part, by the Debenture Issuer for United States federal income tax
purposes. Notwithstanding the foregoing, a Tax Event shall not include any
change in tax law that requires the Debenture Issuer for United States federal
income tax purposes to defer taking a deduction
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for any original issue discount ("OID") that accrues with respect to the
Debentures until the interest payment related to such OID is paid by the
Debenture Issuer in cash; provided, that such change in tax law does not create
more than an insubstantial risk that the Debenture Issuer will be prevented
from taking a deduction for OID accruing with respect to the Debentures as a
date that is no later than the date the interest payment related to such OID is
actually paid by the Debenture Issuer in cash.
"Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulations by any legislative body, court, governmental agency or regulatory
authority on or after June 6, 1996 (a "Change in 1940 Act Law"), there is more
than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
On and from the date fixed by the Regular Trustees for any
distribution of Debentures upon dissolution of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) The Depository Trust Company
(the "Depository") or its nominee (or any successor Clearing Agency or its
nominee), as the record Holder of the Convertible Preferred Securities, will
receive a registered certificate or certificates representing the Debentures to
be delivered upon such distribution, and (iii) any certificates representing
Securities, except for certificates representing Convertible Preferred
Securities held by the Depository or its nominee (or any successor Clearing
Agency or its nominee), will be deemed to represent Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the Coupon Rate of, and accrued and unpaid
interest equal to accrued and unpaid Distributions on such Convertible
Preferred Securities until such certificates are presented to the Debenture
Issuer or its agent for transfer or reissue.
(d) The Trust may not redeem fewer than all the
outstanding Securities unless all accrued and unpaid Distributions have been
paid on all Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) If the Debentures are distributed to holders of the
Securities, pursuant to the terms of the Indenture, the Debenture Issuer will
use its best efforts to have the Debentures listed on the New York Stock
Exchange or on such other exchange as the Convertible Preferred Securities were
listed immediately prior to the distribution of the Debentures.
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(f) Notice of any redemption of, or notice of
distribution of Debentures in exchange for the Securities (a "Redemption/
Distribution Notice") will be given by the Trust by mail to each Holder of
Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof which, in the case of
a redemption, will be the date fixed for redemption of the Debentures. For
purposes of the calculation of the date of redemption or exchange and the dates
on which notices are given pursuant to this Section 4(f), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, or by such other
means suitable to assure delivery of such written notice, to Holders of
Securities. Each Redemption/ Distribution Notice shall be addressed to the
Holders of Securities at the address of each such Holder appearing in the books
and records of the Trust. No defect in the Redemption/Distribution Notice or
in the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(g) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be redeemed
Pro Rata from each Holder of Convertible Preferred Securities, it being
understood that, in respect of Convertible Preferred Securities registered in
the name of and held of record by the Depository or its nominee (or any
successor Clearing Agency or its nominee) or any nominee, the distribution of
the proceeds of such redemption will be made to each Clearing Agency
Participant (or Person on whose behalf such nominee holds such securities) in
accordance with the procedures applied by such agency or nominee.
(h) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
irrevocable), then (A) while the Convertible Preferred Securities are in
book-entry only form, with respect to the Convertible Preferred Securities, by
12:00 noon, New York City time, on the redemption date, provided that the
Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash
in connection with the related redemption or maturity of the Debentures, the
Institutional Trustee will deposit irrevocably with the Depository or its
nominee (or successor Clearing Agency or its nominee) funds sufficient to pay
the applicable Redemption Price with respect to the Convertible Preferred
Securities and will give the Depository irrevocable instructions and authority
to pay the Redemption Price to the Holders of the Convertible Preferred
Securities, and (B) with respect to Convertible Preferred Securities issued in
definitive form and Common Securities, provided that the Debenture Issuer has
paid the Institutional Trustee a sufficient amount of cash in connection with
the related redemption or maturity of the Debentures,
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the Institutional Trustee will pay the relevant Redemption Price to the Holders
of such Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
required date of such deposit, distributions will cease to accrue on the
Securities so called for redemption and all rights of Holders of such
Securities so called for redemption will cease, except the right of the Holders
of such Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Regular Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any Securities
that have been so called for redemption. If any date fixed for redemption of
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date fixed for redemption. If payment of
the Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Institutional Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accrue from the original redemption date to the
actual date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
(i) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in respect of the Convertible
Preferred Securities, the Depository or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or, if
Definitive Convertible Preferred Security Certificates have been issued, to the
Holder thereof, and (B) in respect of the Common Securities to the Holder
thereof.
(j) Subject to the foregoing and applicable law
(including, without limitation, United States federal securities laws), the
Sponsor or any of its subsidiaries may at any time and from time to time
purchase outstanding Convertible Preferred Securities by tender, in the open
market or otherwise.
5. Conversion Rights.
The Holders of Securities shall have the right at any time,
beginning August 16, 1996 through the close of business on June 15, 2016 (or,
in the case of Securities called for redemption, prior to the close of business
on the Business Day prior to
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the redemption date), at their option, to cause the Conversion Agent to convert
Securities, on behalf of the converting Holders, into shares of Kmart's Common
Stock in the manner described herein on and subject to the following terms and
conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of Kmart Common Stock
pursuant to the Holder's direction to the Conversion Agent to exchange such
Securities for a portion of the Debentures theretofore held by the Trust on the
basis of one Security per $50 principal amount of Debentures, and immediately
convert such amount of Debentures into fully paid and nonassessable shares of
Kmart Common Stock at an initial rate of 3.3333 shares of Kmart Common Stock
per $50 principal amount of Debentures (which is equivalent to a conversion
price of $15 per share of Kmart Common Stock, subject to certain adjustments
set forth in Sections 7.3 and 7.4 of the Supplemental Indenture (as so
adjusted, "Conversion Price")).
(b) In order to convert Securities into Kmart's Common Stock
the Holder shall submit to the Conversion Agent at the office referred to above
an irrevocable request to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are in certificated form,
with such certificates. The Conversion Request shall (i) set forth the number
of Securities to be converted and the name or names, if other than the Holder,
in which the shares of Kmart's Common Stock should be issued and (ii) direct
the Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the
preceding paragraph) and (b) to immediately convert such Debentures on behalf
of such Holder, into Kmart's Common Stock (at the conversion rate specified in
the preceding paragraph). The Conversion Agent shall notify the Trust of the
Holder's election to exchange Securities for a portion of the Debentures held
by the Trust and the Trust shall, upon receipt of such notice, deliver to the
Conversion Agent the appropriate principal amount of Debentures for exchange in
accordance with this Section. The Conversion Agent shall thereupon notify
Kmart of the Holder's election to convert such Debentures into shares of
Kmart's Common Stock. Holders of Securities at the close of business on a
Distribution record date will be entitled to receive the Distribution payable
on such securities on the corresponding Distribution payment date
notwithstanding the conversion of such Securities following such record date
but prior to such distribution payment date. Except as provided above, neither
the Trust nor the Sponsor will make, or be required to make, any payment,
allowance or adjustment upon any conversion on account of any accumulated and
unpaid Distributions accrued on the Securities (including any Additional
Amounts accrued thereon) surrendered for conversion, or on account of any
accumulated and unpaid dividends on the shares of Kmart's Common Stock issued
upon such conversion. Securities
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shall be deemed to have been converted immediately prior to the close of
business on the day on which a Notice of Conversion relating to such Securities
is received the Trust in accordance with the foregoing provision (the
"Conversion Date"). The Person or Persons entitled to receive Kmart's Common
Stock issuable upon conversion of the Debentures shall be treated for all
purposes as the record holder or holders of such Kmart's Common Stock at such
time. As promptly as practicable on or after the Conversion Date, Kmart shall
issue and deliver at the office of the Conversion Agent a certificate or
certificates for the number of full shares of Kmart's Common Stock issuable
upon such conversion, together with the cash payment, if any, in lieu of any
fraction of any share to the Person or Persons entitled to receive the same,
unless otherwise directed by the Holder in the notice of conversion and the
Conversion Agent shall distribute such certificate or certificates to such
Person or Persons.
(c) Each Holder of a Security by his acceptance thereof
appoints The Bank of New York "Conversion Agent" for the purpose of effecting
the conversion of Securities in accordance with this Section. In effecting the
conversion and transactions described in this Section, the Conversion Agent
shall be acting as agent of the Holders of Securities directing it to effect
such conversion transactions. The Conversion Agent is hereby authorized (i) to
exchange Securities from time to time for Debentures held by the Trust in
connection with the conversion of such Securities in accordance with this
Section and (ii) to convert all or a portion of the Debentures into Kmart's
Common Stock and thereupon to deliver such shares of Kmart's Common Stock in
accordance with the provisions of this Section and to deliver to the Trust a
new Debenture or Debentures for any resulting unconverted principal amount.
(d) No fractional shares of Kmart's Common Stock will be
issued as a result of conversion, but in lieu thereof, such fractional interest
will be paid in cash by Kmart to the Conversion Agent, which in turn will make
such payment to the Holder or Holders of Securities so converted.
(e) Kmart shall at all times reserve and keep available out
of its authorized and unissued Kmart Common Stock, solely for issuance upon the
conversion of the Debentures, free from any preemptive or other similar rights,
such number of shares of Kmart Common Stock as shall from time to time be
issuable upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, Kmart shall be entitled to deliver upon
conversion of Debentures, shares of Kmart Common Stock reacquired and held in
the treasury of Kmart (in lieu of the issuance of authorized and unissued
shares of Kmart Common Stock), so long as any such treasury shares are free and
clear of all liens, charges, security interests or encumbrances. Any shares of
Kmart Common Stock issued upon conversion of the Deben-
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tures shall be duly authorized, validly issued and fully paid and
nonassessable. The Trust shall deliver the shares of Kmart Common Stock
received upon conversion of the Debentures to the converting Holder free and
clear of all liens, charges, security interests and encumbrances, except for
United States withholding taxes. Each of Kmart and the Trust shall prepare and
shall use its best efforts to obtain and keep in force such governmental or
regulatory permits or other authorizations as may be required by law, and shall
comply with all applicable requirements as to registration or qualification of
Kmart Common Stock (and all requirements to list Kmart Common Stock issuable
upon conversion of Debentures that are at the time applicable), in order to
enable Kmart to lawfully issue Kmart Common Stock to the Trust upon conversion
of the Debentures and the Trust to lawfully deliver Kmart Common Stock to each
Holder upon conversion of the Securities.
(f) Kmart will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Kmart Common Stock on conversion
of Debentures and the delivery of the shares of Kmart Common Stock by the Trust
upon conversion of the Securities. Kmart Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Kmart Common Stock in a name
other than that in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Trust the amount of any such tax, or has established
to the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the
Securities or set forth in this Annex I to the Declaration or in the
Declaration itself or otherwise require the Institutional Trustee or the Trust
to pay any amounts on account of such withholdings.
6. Voting Rights - Convertible Preferred Securities.
(a) Except as provided under Sections 6(b) and 8 and as
otherwise required by law and the Declaration, the Holders of the Convertible
Preferred Securities will have no voting rights.
(b) Subject to the requirements set forth in this
paragraph, the Holders of a Majority in liquidation amount of the Convertible
Preferred Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the
remedies available under the Indenture with respect
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to the Debentures, (ii) waive any past default and its consequences that is
waivable under Section 5.13 of the Indenture, or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall
be due and payable, provided, however, that, where a consent under the
Indenture would require the consent or act of the Holders of greater than a
majority of the Holders in principal amount of Debentures affected thereby (a
"Super Majority"), the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Convertible Preferred Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. The Institutional Trustee shall not revoke any action
previously authorized or approved by a vote of the Holders of the Convertible
Preferred Securities. Other than with respect to directing the time, method
and place of conducting any remedy available to the Institutional Trustee or
the Debenture Trustee as set forth above, the Institutional Trustee shall not
take any action in accordance with the directions of the Holders of the
Convertible Preferred Securities under this paragraph unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action. If a Declaration
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Debenture Issuer to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such Holder of the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the holders of the Common Securities Holder will be subrogated to the
rights of such holder of Preferred Securities to the extent of any payment made
by the Issuer to such holder of Preferred Securities in such Direct Action.
Except as provided in the preceding sentences, the Holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures.
Any approval or direction of Holders of Convertible Preferred
Securities may be given at a separate meeting of Holders of Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
Holders of Securities in the Trust or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which Holders of Convertible
Preferred Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of Convertible Preferred
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Securities. Each such notice will include a statement setting forth (i) the
date of such meeting or the date by which such action is to be taken, (ii) a
description of any resolution proposed for adoption at such meeting on which
such Holders are entitled to vote or of such matter upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Convertible Preferred
Securities will be required for the Trust to redeem and cancel Convertible
Preferred Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of Convertible Preferred
Securities are entitled to vote or consent under any of the circumstances
described above, any of the Convertible Preferred Securities that are owned by
the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under Sections 7(b), (c) and 8 and
as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to appoint, remove or
replace any Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only
after any Event of Default with respect to the Convertible Preferred Securities
has been cured, waived, or otherwise eliminated and subject to the requirements
of the second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waive any past
default and its consequences that is waivable under Section 5.13 of the
Indenture, or (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable, provided that,
where a consent or action under the Indenture would require the consent or act
of the Holders of greater than a majority in principal
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<PAGE> 79
amount of Debentures affected thereby (a "Super Majority"), the Institutional
Trustee may only give such consent or take such action at the written direction
of the Holders of at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Pursuant to this Section 6(c),
the Institutional Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Convertible Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any remedy available to the Institutional Trustee or the Debenture Trustee as
set forth above, the Institutional Trustee shall not take any action in
accordance with the directions of the Holders of the Common Securities under
this paragraph unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income tax
the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under
the Declaration, any Holder of Common Securities may institute a legal
proceeding directly against any Person to enforce the Institutional Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Institutional Trustee or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.1 of
the Declaration, if any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way
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<PAGE> 80
of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section 8.1
of the Declaration, then the Holders of outstanding Securities voting together
as a single class, will be entitled to vote on such amendment or proposal (but
not on any other amendment or proposal) and such amendment or proposal shall
not be effective except with the approval of the Holders of at least a Majority
in liquidation amount of the Securities affected thereby; provided, however, if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Convertible Preferred Securities or only the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of a Majority in liquidation amount of such class of Securities.
(b) In the event the consent of the Institutional Trustee
as the holder of the Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Debentures,
the Institutional Trustee shall request the written direction of the Holders of
the Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a Majority in liquidation amount of the Securities voting together
as a single class; provided, however, that where a consent under the Indenture
would require the consent of the holders of greater than a majority in
aggregate principal amount of the Debentures (a "Super Majority"), the
Institutional Trustee may only give such consent at the direction of the
Holders of at least the proportion in liquidation amount of the Securities
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding; provided, further, that the Institutional
Trustee shall not take any action in accordance with the directions of the
Holders of the Securities under this Section 7(b) unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each
Holder of Securities according to the aggregate liquidation amount of the
Securities held by the relevant Holder in relation to the aggregate liquidation
amount of all Securities outstanding unless, in relation to a payment, an Event
of Default under the Declaration has occurred and is continuing, in which case
any funds available to make such payment shall be paid first to each Holder of
the Convertible Preferred Securities pro rata according to the aggregate
liquidation amount of Convertible
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Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Convertible Preferred Securities outstanding, and
only after satisfaction of all amounts owed to the Holders of the Convertible
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Common Securities
outstanding.
10. Ranking.
The Convertible Preferred Securities rank pari passu and
payment thereon shall be made Pro Rata with the Common Securities except that,
where a Declaration Event of Default occurs and is continuing, the rights of
Holders of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights to payment of the Holders of the Convertible Preferred Securities.
11. Listing.
The Regular Trustees shall use their best efforts to cause the
Convertible Preferred Securities to be listed for quotation on the New York
Stock Exchange, Inc.
12. Acceptance of Securities Guarantee and Indenture.
Each Holder of Convertible Preferred Securities and Common
Securities, by the acceptance thereof, agrees to the provisions of the
Convertible Preferred Securities Guarantee and the Common Securities Guarantee,
respectively, including the subordination provisions therein and to the
provisions of the Indenture.
13. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
14. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Convertible Preferred Securities Guarantee or the Common Securities Guarantee
(as may be appropriate), and the Indenture to a Holder without charge on
written request to the Sponsor at its principal place of business.
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EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE
[IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL
CERTIFICATE INSERT - This Convertible Preferred Security is a Global
Certificate within the meaning of the Declaration hereinafter referred to and
is registered in the name of The Depository Trust Company (the "Depositary") or
a nominee of the Depositary. This Convertible Preferred Security is
exchangeable for Convertible Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Declaration and no transfer of this Convertible
Preferred Security (other than a transfer of this Convertible Preferred
Security as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Convertible Preferred Security is presented by an
authorized representative of The Depository Trust Company (55 Water Street, New
York, New York) to the Trust or its agent for registration of transfer,
exchange or payment, and any Convertible Preferred Security issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.]
Certificate Number Number of Convertible Preferred Securities
CUSIP NO. [ ]
Certificate Evidencing Convertible Preferred Securities
of
KMART FINANCING I
7 3/4% Trust Convertible Preferred Securities
(liquidation amount $50 per Trust Convertible Preferred Security)
Kmart Financing I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of convertible preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust
A1-1
<PAGE> 83
designated the 7 3/4% Trust Convertible Preferred Securities (liquidation
amount $50 per Trust Convertible Preferred Security) (the "Convertible
Preferred Securities"). The Convertible Preferred Securities are transferable
on the books and records of the Trust, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Convertible Preferred Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of June 6, 1996, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Convertible
Preferred Securities as set forth in Annex I to the Declaration. Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Convertible
Preferred Securities Guarantee to the extent provided therein. The Sponsor
will provide a copy of the Declaration, the Convertible Preferred Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Convertible
Preferred Securities as evidence of indirect beneficial ownership in the
Debentures.
Unless the Institutional Trustee's Certificate of
Authentication hereon has been properly executed, these Convertible Preferred
Securities shall not be entitled to any benefit under the Declaration or be
valid or obligatory for any purpose.
A1-2
<PAGE> 84
IN WITNESS WHEREOF, the Trust has executed this certificate
this 17 day of June, 1996.
Kmart Financing I
By:________________________________
Name:
Title: Regular Trustee
[FORM OF CERTIFICATE OF AUTHENTICATION]
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Securities referred
to in the within-mentioned Declaration.
Dated: June 17, 1996
The Bank of New York,
as Institutional Trustee or as Authentication Agent
By:______________________ By:______________________
Authorized Signatory Authorized Signatory
A1-3
<PAGE> 85
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Convertible Preferred Security
will be fixed at a rate per annum of 7 3/4% (the "Coupon Rate") of the stated
liquidation amount of $50 per Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed per 30-day month.
Except as otherwise described below, distributions on the
Preferred Securities will be cumulative, will accrue from June 17, 1996 and
will be payable quarterly in arrears, on March 15, June 15, September 15 and
December 15 of each year, commencing on September 15, 1996, which payment dates
shall correspond to the interest payment dates on the Debentures, to Holders of
record at the close of business on the regular record date for such
distribution which shall be the close of business on the Business Day next
preceding such distribution payment date unless otherwise provided in the
Declaration. The Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period from time to time
on the Debentures for a period not exceeding 20 consecutive quarters (each an
"Extension Period") provided that no Extension Period shall last beyond the
date of the maturity of the Debentures and, as a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period; provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters or extend beyond the maturity of
the Debentures. Payments of accrued Distributions will be payable to Holders
as they appear on the books and records of the Trust on the first record date
after the end of the Extension Period. Upon the termination of any Extension
Period and the payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above requirements.
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<PAGE> 86
The Convertible Preferred Securities shall be redeemable as
provided in the Declaration.
The Convertible Preferred Securities shall be convertible into
shares of Kmart Common Stock, through (i) the exchange of Preferred Securities
for a portion of the Debentures and (ii) the immediate conversion of such
Debentures into Debenture Issuer Common Stock, in the manner and according to
the terms set forth in the Declaration.
A1-5
<PAGE> 87
CONVERSION REQUEST
To: The Bank of New York
as Institutional Trustee of
Kmart Financing I
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Convertible Preferred
Securities, or the portion below designated, into Common Stock of Kmart
Corporation (the "Kmart Common Stock") in accordance with the terms of the
Amended and Restated Declaration of Trust (the "Declaration"), dated as of June
6, 1996, by Marvin P. Rich, Martin E. Welch III and Michael J. Viola, as
Regular Trustees, The Bank of New York (Delaware), as Delaware Trustee, The
Bank of New York, as Institutional Trustee, Kmart Corporation, as Sponsor, and
by the Holders, from time to time, of individual beneficial interests in the
Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Convertible Preferred Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Convertible Preferred Securities for a
portion of the Debentures (as that term is defined in the Declaration) held by
the Trust (at the rate of exchange specified in the terms of the Convertible
Preferred Securities set forth as Annex I to the Declaration) and (ii)
immediately convert such Debentures on behalf of the undersigned, into Kmart
Common Stock (at the conversion rate specified in the terms of the Convertible
Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
A1-6
<PAGE> 88
Date: ____________, ____
in whole __ in part __
Number of Preferred Securities to be
converted: ___________________
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Kmart Common Stock are to be issued, along
with the address or addresses of such person
or persons
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code,
and Social Security or Other
Identifying Number
________________________________________
________________________________________
________________________________________
Signature Guarantee:* __________________
__________________________________
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Conversion Agent, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Conversion Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A1-7
<PAGE> 89
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Preferred Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
___________________________________________________________ agent to transfer
this Convertible Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Convertible
Preferred Security Certificate)
Signature Guarantee** ___________________________________
__________________________________
** Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
A1-8
<PAGE> 90
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
KMART FINANCING I
7 3/4% Common Securities
(liquidation amount $50 per Common Security)
Kmart Financing I a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
_________________ (the "Holder") is the registered owner of common securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the 7 3/4% Common Securities (liquidation amount $50 per
Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of June 6,
1996, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration. Capitalized terms used herein but not defined
shall have the meaning given them in the Declaration. The Holder is entitled
to the benefits of the Common Securities Guarantee to the extent provided
therein. The Sponsor will provide a copy of the Declaration, the Common
Securities Guarantee and the Indenture to a Holder without charge upon written
request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
A2-1
<PAGE> 91
IN WITNESS WHEREOF, the Trust has executed this certificate
this ___ day of ____________, 199__.
Kmart Financing I
By:________________________________
Name:
Title: Regular Trustee
A2-2
<PAGE> 92
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of 7 3/4% (the "Coupon Rate") of the stated liquidation amount
of $50 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
for more than one quarter will bear interest thereon compounded quarterly at
the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the
Common Securities will be cumulative, will accrue from June 17, 1996 and will
be payable quarterly in arrears, on March 15, June 15, September 15 and
December 15 of each year, commencing on September 15, 1996, which payment dates
shall correspond to the interest payment dates on the Debentures, to Holders of
record at the close of business on the regular record date for such
distribution which shall be the close of business on the Business Day next
preceding such distribution payment date unless otherwise provided in the
Declaration. The Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period from time to time
on the Debentures for a period not exceeding 20 consecutive quarters (each an
"Extension Period") provided that no Extension Period shall last beyond the
date of maturity of the Debentures and, as a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period; provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters or extend beyond the date of
maturity of the Debentures. Payments of accrued Distributions will be payable
to Holders as they appear on the books and records of the Trust on the first
record date after the end of the Extension Period. Upon the termination of any
Extension Period and the payment of all amounts then due, the Debenture Issuer
may commence a new Extension Period, subject to the above requirements.
A2-3
<PAGE> 93
The Common Securities shall be redeemable as provided in the
Declaration.
The Common Securities shall be convertible into shares of
Kmart Common Stock, through (i) the exchange of Common Securities for a portion
of the Debentures and (ii) the immediate conversion of such Debentures into
Kmart Common Stock, in the manner and according to the terms set forth in the
Declaration.
A2-4
<PAGE> 94
CONVERSION REQUEST
To: The Bank of New York
as Institutional Trustee of
Kmart Financing I
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common Securities, or the
portion below designated, into Common Stock of Kmart Corporation (the "Kmart
Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of June 6, 1996, by Marvin
P. Rich, Martin E. Welch III and Michael J. Viola, as Regular Trustees, The
Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Institutional Trustee, Kmart Corporation, as Sponsor, and by the Holders, from
time to time, of individual beneficial interests in the Trust to be issued
pursuant to the Declaration. Pursuant to the aforementioned exercise of the
option to convert these Common Securities, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Declaration) to (i) exchange
such Common Securities for a portion of the Debentures (as that term is defined
in the Declaration) held by the Trust (at the rate of exchange specified in the
terms of the Common Securities set forth as Annex I to the Declaration) and
(ii) immediately convert such Debentures on behalf of the undersigned, into
Kmart Common Stock (at the conversion rate specified in the terms of the Common
Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
A2-5
<PAGE> 95
Date: ____________, ____
in whole __ in part __
Number of Common Securities to be
converted: _____________________
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Kmart Common Stock are to be issued,
along with the address or addresses of such
person or persons
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
Signature (for conversion only)
Please Print or Typewrite Name
and Address, Including Zip
Code, and Social or Other
Identifying Number
_________________________________________________
_________________________________________________
_________________________________________________
Signature Guarantee:*____________________________
__________________________________
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Conversion Agent, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Conversion Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A2-6
<PAGE> 96
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints _______________________________________________________
________________________________________________________________________________
_______________________________ agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee**: _________________________________________________________
__________________________________
** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
A2-7
<PAGE> 97
EXHIBIT B
SPECIMEN OF DEBENTURE
B-1
<PAGE> 98
EXHIBIT C
UNDERWRITING AGREEMENT
C-1
<PAGE> 1
EXHIBIT 4(i)
====================================
FIRST SUPPLEMENTAL INDENTURE
between
Kmart Corporation
and
The Bank of New York
Dated as of June 6, 1996
=====================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms......................................... 2
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.1. Designation and Principal Amount............................. 5
SECTION 2.2. Maturity..................................................... 6
SECTION 2.3. Form and Payment............................................. 6
SECTION 2.4. Global Debenture............................................. 6
SECTION 2.5. Interest..................................................... 7
ARTICLE III
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.1. Special Event Redemption..................................... 8
SECTION 3.2. Optional Redemption by Company............................... 9
SECTION 3.3. No Sinking Fund.............................................. 10
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period......................... 11
SECTION 4.2. Notice of Extension.......................................... 11
SECTION 4.3. Limitation of Transactions................................... 12
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses.......................................... 13
SECTION 5.2. Payment Upon Resignation or Removal.......................... 13
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1. Listing on an Exchange....................................... 14
ARTICLE VII
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 7.1. Conversion Rights............................................ 14
SECTION 7.2. Conversion Procedures........................................ 14
SECTION 7.3. Conversion Price Adjustments................................. 16
SECTION 7.4. Merger, Consolidation, or Sale of Assets.................. 23
SECTION 7.5. Notice of Adjustments of Conversion Price.................. 25
i
<PAGE> 3
Page
SECTION 7.6. Prior Notice of Certain Events............................ 25
SECTION 7.7. Dividend or Interest Reinvestment Plans................... 26
SECTION 7.8. Certain Additional Rights................................. 27
SECTION 7.9. Trustee Not Responsible for Determining
Conversion Price or Adjustments........................... 28
ARTICLE VIII
FORM OF CONVERTIBLE DEBENTURE
SECTION 8.1. Form of Convertible Debenture............................. 28
ARTICLE IX
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 9.1. Original Issue of Convertible Debentures.................. 39
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Ratification of Indenture; First Supplemental
Indenture Controls........................................ 39
SECTION 10.2. Trustee Not Responsible for Recitals...................... 39
SECTION 10.3. Governing Law............................................. 39
SECTION 10.4. Separability.............................................. 39
SECTION 10.5. Counterparts.............................................. 40
ii
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE, dated as of June 6, 1996 (the "First
Supplemental Indenture"), between Kmart Corporation, a Michigan corporation (the
"Company"), and The Bank of New York, as trustee (the "Trustee") under the
Indenture dated as of June 6, 1996 between the Company and the Trustee (the
"Indenture").
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Company's unsecured junior
subordinated debt securities to be issued from time to time in one or more
series as might be determined by the Company under the Indenture, in an
unlimited aggregate principal amount which may be authenticated and delivered as
provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its 7 3/4% Convertible Junior Subordinated Debentures (the "Convertible
Debentures"), the form and substance of such Convertible Debentures and the
terms, provisions and conditions thereof to be set forth as provided in the
Indenture and this First Supplemental Indenture;
WHEREAS, Kmart Financing I, a Delaware statutory business trust ( the
"Trust"), has offered to the public $1,000,000,000 aggregate liquidation amount
of its 7 3/4% Trust Convertible Preferred Securities (the "Convertible Preferred
Securities"), representing undivided beneficial interests in the assets of the
Trust and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Company of $30,927,850
aggregate liquidation amount of its Common Securities, in $1,030,927,850
aggregate principal amount of the Convertible Debentures; and
WHEREAS, the Company has requested that the Trustee execute and
deliver this First Supplemental Indenture and all requirements necessary to make
this First Supplemental Indenture a valid instrument in accordance with its
terms, and to make the Convertible Debentures, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Convertible Debentures by the Holders thereof, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Convertible
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms.
For all purposes of this First Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms which are defined in the Indenture have the same
meanings when used in this First Supplemental Indenture;
(b) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(c) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(d) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States of America, and, except as otherwise herein
expressly provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States of America
at the date of such computation;
(e) a reference to a Section or Article is to a Section or Article
of this First Supplemental Indenture;
(f) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this First Supplemental Indenture as a whole and not to
any particular Article, Section or other subdivision;
(g) headings are for convenience of reference only and do not affect
interpretation; and
(h) the following terms have the meanings given to them in the
Declaration: (i) Business Day; (ii) Clearing Agency; (iii) Common Stock; (iv)
Convertible Preferred Security Certificate; (v) Delaware Trustee; (vi)
Dissolution Tax Opinion; (vii) DTC; (viii) Institutional Trustee; (ix)
Investment Company Event; (x) No-Recognition Opinion; (xi) Redemption Tax
Opinion; (xii) Regular Trustees; (xiii) Special Event; (xiv) Tax Event; and (xv)
Underwriting Agreement.
2
<PAGE> 6
"Additional Interest" has the meaning specified in Section 2.5.
"Applicable Price" means (i) in the event of a Non-Stock Fundamental
Change in which the holders of Common Stock receive only cash, the amount of
cash received by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the average of the daily Closing Price for one
share of Common Stock during the 10 Trading Days immediately prior to the record
date for the determination of the holders of Common Stock entitled to receive
cash, securities, property or other assets in connection with such Fundamental
Change or, if there is no such record date, prior to the date upon which the
holders of Common Stock shall have the right to receive such cash, securities,
property or other assets.
"Closing Price" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices regular
way of such common stock, in each case on the NYSE Composite Tape or, if the
common stock is not listed or admitted to trading on such exchange, on the
principal national securities exchange on which such common stock is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm selected from time to time
by the Board of Directors of the Company for that purpose or, if not so
available in such manner, as otherwise determined in good faith by the Board of
Directors.
"Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on The Nasdaq National Market; provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding Convertible Debentures continue to exist as outstanding
Convertible Debentures, or (ii) not later than the occurrence of such
Fundamental Change, the outstanding Convertible Debentures are converted into or
exchanged for debentures of a corporation succeeding to the business of the
Company, which debentures have terms substantially similar to those of the
Convertible Debentures.
3
<PAGE> 7
"Compounded Interest" has the meaning specified in Section 4.1.
"Conversion Price" means $15 as of the date hereof and may be adjusted
from time to time as set forth in Section 7.3.
"Convertible Preferred Securities" has the meaning specified in the
recitals to this First Supplemental Indenture.
"Declaration" means the Amended and Restated Declaration of Trust of
Kmart Financing I, a Delaware statutory business trust, dated as of June 6,
1996.
"Deferred Interest" has the meaning specified in Section 4.1.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Convertible Debentures held by the Institutional
Trustee are to be distributed to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Declaration.
"Extended Interest Payment Period" has the meaning specified in
Section 4.1.
"Fundamental Change" means the occurrence of any transaction or event
or series of transactions or events pursuant to which all or substantially all
of the Common Stock shall be exchanged for, converted into, acquired for or
shall constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of any such series of transactions or
events, for purposes of adjustment of the Conversion Price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Common
Stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets, but the adjustment shall be based upon the consideration that the
holders of Common Stock received in the transaction or event as a result of
which more than 50% of the Common Stock outstanding shall have been exchanged
for, converted into or acquired for, or shall constitute solely the right to
receive, such cash, securities, property or other assets.
"Global Debenture" has the meaning specified in Section 2.4.
"Maturity Date" means the date on which the Convertible Debentures
mature and on which the principal shall be due and
4
<PAGE> 8
payable together with all accrued and unpaid interest thereon including
Compounded Interest and Additional Interest, if any.
"Non Book-Entry Convertible Preferred Securities" has the meaning
specified in Section 2.4.
"Non-Stock Fundamental Change" means any Fundamental Change other than
a Common Stock Fundamental Change.
"Optional Redemption Price" has the meaning specified in Section 3.2.
"Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Price for one share of the
common stock received by holders of Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of Common Stock entitled to receive
such common stock or, if there is no such date, prior to the date upon which the
holders of Common Stock shall have the right to receive such common stock.
"Reference Market Price" initially means $8 and, in the event of any
adjustment to the Conversion Price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial Conversion Price of $15 per share.
"Trading Day" shall mean a day on which any securities are traded on
the national securities exchange or quotation system used to determine the
Closing Price.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Debentures designated the
"7 3/4% Convertible Junior Subordinated Debentures", limited in aggregate
principal amount to $1,030,927,850, which amount shall be as set forth in any
written order of the Company for the authentication and delivery of Convertible
Debentures pursuant to Section 3.3 of the Indenture.
5
<PAGE> 9
SECTION 2.2. Maturity.
The Maturity Date is June 15, 2016
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Convertible Debentures shall be
issued in fully registered certificated form without Coupons, in denominations
of $50 in principal amount and integral multiples thereof. Principal and
interest on the Convertible Debentures issued in certificated form will be
payable, the transfer of such Convertible Debentures will be registrable and
such Convertible Debentures will be exchangeable for Convertible Debentures
bearing identical terms and provisions at the office or agency of the Trustee;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Holder at such address as shall appear in the
Debenture Register. Notwithstanding the foregoing, so long as the Holder of any
Convertible Debentures is the Institutional Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional
Interest, if any) on such Convertible Debentures held by the Institutional
Trustee will be made at such place and to such account as may be designated by
the Institutional Trustee.
SECTION 2.4. Global Debenture.
(a) In connection with a Dissolution Event,
(i) the Convertible Debentures in certificated form may be
presented to the Trustee by the Institutional Trustee in exchange for a
global Debenture in an aggregate principal amount equal to the aggregate
principal amount of all outstanding Convertible Debentures (a "Global
Debenture"), to be registered in the name of DTC, or its nominee, and
delivered by the Trustee to DTC for crediting to the accounts of its
participants pursuant to the instructions of the Regular Trustees. The
Company upon any such presentation shall execute a Global Debenture in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Indenture and this First
Supplemental Indenture. Payments on the Convertible Debentures issued as a
Global Debenture will be made to DTC; and
(ii) if any Convertible Preferred Securities are held in non
book-entry certificated form, any Convertible Preferred Security
Certificate which represents Convertible Preferred Securities other than
Convertible Preferred Securities held by the Clearing Agency or its nominee
("Non Book-Entry Convertible Preferred Securities") will be deemed to
represent beneficial interests in Convertible Debentures
6
<PAGE> 10
having an aggregate principal amount equal to the aggregate liquidation
amount of the Non Book-Entry Convertible Preferred Securities until such
Convertible Preferred Security Certificates are presented to the Debenture
Registrar for transfer or reissuance at which time such Convertible
Preferred Security Certificates will be cancelled and a Debenture,
registered in the name of the holder of the Convertible Preferred Security
Certificate or the transferee of the holder of such Convertible Preferred
Security Certificate, as the case may be, with an aggregate principal
amount equal to the aggregate liquidation amount of the Convertible
Preferred Security Certificate cancelled, will be executed by the Company
and delivered to the Trustee for authentication and delivery in accordance
with the Indenture and this First Supplemental Indenture. On issue of such
Convertible Debentures, Convertible Debentures with an equivalent aggregate
principal amount that were presented by the Institutional Trustee to the
Trustee will be deemed to have been cancelled.
(b) A Global Debenture may be transferred, in whole but not in part,
only to another nominee of DTC, or to a successor depositary selected or
approved by the Company or to a nominee of such successor depositary.
SECTION 2.5. Interest.
(a) Each Convertible Debenture will bear interest at the rate of
7 3/4% per annum (the "Coupon Rate") from June 17, 1996 until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
15, June 15, September 15 and December 15 of each year (each, an "Interest
Payment Date"), commencing on September 15, 1996, to the Person in whose name
such Convertible Debenture or any predecessor Convertible Debenture is
registered, at the close of business on the Regular Record Date for such
interest installment, which, in respect of (i) Convertible Debentures of which
the Institutional Trustee is the Holder and the related Convertible Preferred
Securities are in book-entry only form or (ii) a Global Debenture, shall be the
close of business on the Business Day next preceding that Interest Payment Date;
provided, that if the Interest Payment Date is a Redemption Date, then the
record date for the interest payment shall be as of the opening of business on
such day for the purpose of permitting the Holder of a Convertible Debenture to
convert on such record date while continuing to be the record holder for the
interest payment and therefore entitled to receive the interest payment on the
Interest Payment Date notwithstanding conversion on the record date.
Notwithstanding the foregoing sentence, if
7
<PAGE> 11
(i) the Convertible Debentures are held by the Institutional Trustee and the
Convertible Preferred Securities are no longer in book-entry only form or (ii)
the Convertible Debentures are not represented by a Global Debenture, the
Company may select a Regular Record Date for such interest installment which
shall be any date at least one Business Day before an Interest Payment Date.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed on
the basis of the actual number of days elapsed per 30-day month. In the event
that any date on which interest is payable on the Convertible Debentures is not
a Business Day, then payment of interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
(c) If, at any time while the Institutional Trustee is the Holder of
any Convertible Debentures, the Trust or the Institutional Trustee is required
to pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") on the Convertible Debentures held by the Institutional
Trustee, such additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Institutional Trustee after paying
such taxes, duties, assessments or other governmental charges will be equal to
the amounts the Trust and the Institutional Trustee would have received had no
such taxes, duties, assessments or other government charges been imposed.
ARTICLE III
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.1. Special Event Redemption.
If a Special Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel
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rendering the Dissolution Tax Opinion that a No-Recognition Opinion cannot
be delivered to the Trust,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company
shall have the right upon not less than 30 days nor more than 60 days notice to
the Holders of the Convertible Debentures to redeem the Convertible Debentures,
in whole or in part, for cash within 90 days following the occurrence of such
Tax Event (the "90-Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest (including
Compounded and Additional Interest) thereon to the date of such redemption (the
"Redemption Price"), provided that if at the time there is available to the
Company or the Trust the opportunity to eliminate, within the 90-Day Period, the
Tax Event by taking some ministerial action ("Ministerial Action"), such as
filing a form or making an election, or pursuing some other similar reasonable
measure which has no adverse effect on the Company, the Trust or the Holders of
the Trust Securities issued by the Trust, the Company shall pursue such
Ministerial Action in lieu of redemption, and, provided, further, that the
Company shall have no right to redeem the Convertible Debentures while the Trust
is pursuing any Ministerial Action pursuant to its obligations under the
Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price prior to the redemption date.
SECTION 3.2. Optional Redemption by Company.
(a) Subject to the provisions of Section 3.2(b) and to the
provisions of Article XI of the Indenture, except as otherwise may be specified
in Section 3.1 or elsewhere in this First Supplemental Indenture, the Company
shall have the right to redeem the Convertible Debentures, in whole or in part,
from time to time, on or after June 17, 1999. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days notice
to the Holder of the Convertible Debentures, at the following prices (expressed
as percentages of the principal amount of the Convertible Debentures) (the
"Optional Redemption Price") together with accrued and unpaid interest,
including Compounded and Additional Interest to, but excluding, the Redemption
Date, if redeemed during the 12-month period beginning June 15:
Year Redemption Price
---- ----------------
1999 105.425%
2000 104.650
2001 103.875
2002 103.100
2003 102.325
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2004 101.550
2005 100.775
and 100% if redeemed on or after June 15, 2006.
If Convertible Debentures are redeemed on any March 15, June 15,
September 15, or December 15, accrued and unpaid interest shall be payable to
holders of record on the relevant record date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
If the Convertible Debentures are only partially redeemed pursuant to
this Section 3.2, the Convertible Debentures will be redeemed pro rata or by lot
or by any other method utilized by the Trustee. The Optional Redemption Price
shall be paid prior to 12:00 noon, New York time, on the Redemption Date or at
such earlier time as the Company determines provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Optional Redemption
Price by 10:00 a.m., New York time, on the date such Optional Redemption Price
is to be paid.
(b) If a partial redemption of the Convertible Debentures would
result in the delisting of the Convertible Preferred Securities issued by the
Trust from any national securities exchange or other organization on which the
Convertible Preferred Securities are then listed, the Company shall not be
permitted to effect such partial redemption and may only redeem the Convertible
Debentures in whole.
(c) The Company may not redeem fewer than all of the outstanding
Convertible Debentures unless all accrued and unpaid interest has been paid on
all of the outstanding Convertible Debentures.
SECTION 3.3. No Sinking Fund.
The Convertible Debentures are not entitled to the benefit of any
sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
As long as an Event of Default under Section 5.1(a) of the Indenture
shall not have occurred and be continuing, the Company shall have the right, at
any time and from time to time
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during the term of the Convertible Debentures, to defer payments of interest by
extending the interest payment period of such Convertible Debentures for a
period not exceeding 20 consecutive quarters (the "Extended Interest Payment
Period"), during which Extended Interest Payment Period no interest shall be due
and payable; provided that no Extended Interest Payment Period may extend beyond
the Maturity Date or any earlier Redemption Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 4.1, will bear
interest thereon at the Coupon Rate compounded quarterly for each quarter of the
Extended Interest Payment Period ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all interest accrued and
unpaid on the Convertible Debentures, including any Additional Interest and
Compounded Interest (together, "Deferred Interest") that shall be payable to the
Holders of Convertible Debentures in whose names the Convertible Debentures are
registered in the Debenture Register on the first record date after the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the maturity date of the
Convertible Debentures. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the Company may
commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Company may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Institutional Trustee is the only registered Holder of
the Convertible Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give written notice to the Regular Trustees,
the Institutional Trustee and the Trustee of its election of such Extended
Interest Payment Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities issued by the
Trust are payable, or (ii) the date the Trust is required to give notice of the
record date, or the date such Distributions are payable, to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of
Convertible Preferred Securities issued by the Trust, but in any event at least
one Business Day before such record date.
(b) If the Institutional Trustee is not the only Holder of the
Convertible Debentures at the time the Company elects an Extended Interest
Payment Period, the Company shall
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give the Holders of Convertible Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to the New York Stock Exchange or other applicable
self-regulatory organization or to Holders of Convertible Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.1.
SECTION 4.3. Limitation of Transactions.
If the Company shall exercise its right to defer payment of interest
as provided in Section 4.1, then (i) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (A) purchases or acquisitions of shares of its common stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans, (B) as a result of a reclassification of its capital
stock or the exchange or conversion of one class or series of its capital stock
for another class or series of its capital stock or, (C) the purchase of
fractional interests in shares of its capital stock pursuant to the conversion
or exchange provisions of such capital stock or security being converted or
exchanged), (ii) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Company which rank pari passu with or junior to the Convertible
Debentures and (iii) the Company shall not make any guarantee payment with
respect to the foregoing (other than pursuant to the Guarantee).
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Convertible
Debentures to the Institutional Trustee and in connection with the sale of the
Trust Securities by the Trust, the Company, in its capacity as borrower with
respect to the Convertible Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Convertible Debentures, including commissions to the
underwriters payable pursuant to the Under-
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<PAGE> 16
writing Agreement and compensation of the Trustee under the Indenture in
accordance with the provisions of Section 6.6 of the Indenture;
(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust, the
fees and expenses of the Institutional Trustee and the Delaware Trustee, the
costs and expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets);
(c) pay all costs and expenses related to the enforcement by the
Institutional Trustee of the rights of the holders of the Convertible Preferred
Securities;
(d) be primarily liable for any indemnification obligations arising
with respect to the Declaration; and
(e) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
SECTION 5.2. Payment Upon Resignation or Removal.
Upon termination of this First Supplemental Indenture or the Indenture
or the removal or resignation of the Trustee pursuant to Section 6.7 of the
Indenture, the Company shall pay to the Trustee all amounts accrued to the date
of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Institutional Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Company shall pay to the Delaware Trustee or the Institutional
Trustee, and their respective counsel, as the case may be, all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1. Listing on an Exchange.
If the Convertible Debentures are to be distributed to the holders of
Convertible Preferred Securities issued by the Trust upon a Dissolution Event,
the Company will use its best efforts to list such Convertible Debentures on the
New York Stock
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<PAGE> 17
Exchange, Inc. or on such other exchange as the Convertible Preferred Securities
are then listed.
ARTICLE VII
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 7.1. Conversion Rights.
Subject to and upon compliance with the provisions of this Article
VII, the Convertible Debentures are convertible, at the option of the Holder, at
any time beginning August 16, 1996 through the close of business on June 15,
2016 (or, in the case of Convertible Debentures called for redemption, prior to
the close of business on the Business Day prior to the corresponding redemption
date) into fully paid and nonassessable shares of Common Stock of the Company at
an initial conversion rate of 3.3333 shares of Common Stock for each $50 in
aggregate principal amount of Convertible Debentures (equal to a Conversion
Price of $15 per share of Common Stock), subject to adjustment as described in
this Article VII. A Holder of Convertible Debentures may convert any portion of
the principal amount of the Convertible Debentures into that number of fully
paid and nonassessable shares of Common Stock obtained by dividing the principal
amount of the Convertible Debentures to be converted by such Conversion Price.
All calculations under this Article VII shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be.
SECTION 7.2. Conversion Procedures.
(a) In order to convert all or a portion of the Convertible
Debentures, the Holder thereof shall deliver to the Conversion Agent an
irrevocable Notice of Conversion setting forth the principal amount of
Convertible Debentures to be converted, together with the name or names, if
other than the Holder, in which the shares of Common Stock should be issued upon
conversion and, if such Convertible Debentures are definitive Convertible
Debentures, surrender to the Conversion Agent the Convertible Debentures to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Convertible Preferred Securities may exercise its right under the
Declaration to convert such Convertible Preferred Securities into Common Stock
by delivering to the Conversion Agent an irrevocable Notice of Conversion
setting forth the information called for by the preceding sentence and directing
the Conversion Agent (i) to exchange such Convertible Preferred Securities for a
portion of the Convertible Debentures held by the Trust (at an exchange rate of
$50 principal amount of Convertible Debentures for each Convertible Preferred
Security) and (ii) to immediately convert such Convertible Debentures, on behalf
of such holder, into Common Stock pursuant to this Article VII and, if such
Convert-
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<PAGE> 18
ible Preferred Securities are in definitive form, surrendering such Convertible
Preferred Securities, duly endorsed or assigned to the Trust or in blank. So
long as any Convertible Preferred Securities are outstanding, the Trust shall
not convert any Convertible Debentures except pursuant to a Notice of Conversion
delivered to the Conversion Agent by a holder of Convertible Preferred
Securities.
If a Notice of Conversion is delivered on or after the Regular Record
Date and prior to the subsequent Interest Payment Date, the Holder on the
Regular Record Date will be entitled to receive the interest payable on the
subsequent Interest Payment Date on the portion of Convertible Debentures to be
converted notwithstanding the conversion thereof prior to such Interest Payment
Date. Except as otherwise provided in the immediately preceding sentence, in the
case of any Convertible Debenture which is converted, interest whose payment
date is after the date of conversion of such Convertible Debenture shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest on
the Convertible Debentures being converted, which shall be deemed to be paid in
full. Each conversion shall be deemed to have been effected immediately prior
to the close of business on the day on which the Notice of Conversion was
received (the "Conversion Date") by the Conversion Agent from the Holder or from
a holder of the Convertible Preferred Securities effecting a conversion thereof
pursuant to its conversion rights under the Declaration, as the case may be.
The Person or Persons entitled to receive Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock as of the Conversion Date. As promptly as practicable on or
after the Conversion Date, the Company shall issue and deliver at the office of
the Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.
(b) The Company's delivery upon conversion of the fixed number of
shares of Common Stock into which the Convertible Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) shall be
deemed to satisfy the Company's obligation to pay the principal amount at
Maturity of the portion of Convertible Debentures so converted and any unpaid
interest (including Compounded Interest) accrued on such Convertible Debentures
at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a result
of conversion, but in lieu thereof, the
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Company shall pay to the Conversion Agent a cash adjustment in an amount equal
to the same fraction of the Closing Price of such fractional interest on the
date on which the Convertible Debentures were duly surrendered to the Conversion
Agent for conversion, or, if such day is not a Trading Day, on the next Trading
Day, and the Conversion Agent in turn will make such payment, if any, to the
Holder of the Convertible Debentures or the holder of the Convertible Preferred
Securities so converted.
(d) In the event of the conversion of any Convertible Debenture in
part only, a new Convertible Debenture or Convertible Debentures for the
unconverted portion thereof will be issued in the name of the Holder thereof
upon the cancellation thereof in accordance with Section 14.2 of the Indenture.
(e) In effecting the conversion transactions described in this
Section 7.2, the Conversion Agent is acting as agent of the holders of
Convertible Preferred Securities (in the exchange of Convertible Preferred
Securities for Convertible Debentures) and as agent of the Holders of
Convertible Debentures (in the conversion of Convertible Debentures into Common
Stock), as the case may be. The Conversion Agent is hereby authorized (i) to
exchange Convertible Debentures held by the Trust from time to time for
Convertible Preferred Securities in connection with the conversion of such
Convertible Preferred Securities in accordance with this Article VII and (ii) to
convert all or a portion of the Convertible Debentures into Common Stock and
thereupon to deliver such shares of Common Stock in accordance with the
provisions of this Article VII and to deliver to the Trust a new Convertible
Debenture or Convertible Debentures for any resulting unconverted principal
amount.
SECTION 7.3. Conversion Price Adjustments.
The Conversion Price shall be adjusted from time to time as follows:
(a) In case the Company shall, while any of the Convertible
Debentures are outstanding, (i) pay a dividend or make a distribution with
respect to Common Stock in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock, (iii) combine outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the conversion privilege and
the Conversion Price for the Convertible Debentures shall be adjusted so that
the Holder of any Convertible Debenture thereafter surrendered for conversion
shall be entitled to receive the number of shares of capital stock of the
Company which such Holder would have owned immediately following such action had
such Convertible Debenture been converted immediately prior thereto. An
adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date
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in the case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination or
reclassification (or immediately after the record date if a record date shall
have been established for such event). If, as a result of an adjustment made
pursuant to this subsection (a), the Holder of any Convertible Debenture
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes or series of capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
Board Resolution filed with the Trustee) shall determine the allocation of the
adjusted Conversion Price for the Convertible Debentures between or among shares
of such classes or series of capital stock.
(b) In case the Company shall, while any of the Convertible
Debentures are outstanding, issue rights or warrants to all holders of Common
Stock entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (g) below) on the record date mentioned below,
the Conversion Price for the Convertible Debentures shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights or warrants by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not so delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company shall not issue any rights or warrants
in respect of shares of Common Stock held in the treasury of the Company. In
case any rights or warrants referred to in this subsection in respect of which
an adjustment shall have been made shall expire unexercised within 45 days after
the same shall have been distributed or issued by the Company, the Conversion
Price shall be readjusted at the time of such expiration to the Conver-
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sion Price that would have been in effect if no adjustment had been made on
account of the distribution or issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subsection (c), in case the
Company shall, by dividend or otherwise, distribute to all holders of Common
Stock evidences of its indebtedness, shares of any class or series of capital
stock, cash or assets or rights or warrants to subscribe for or purchase any of
its securities (excluding any rights or warrants referred to in subsection (b),
any dividend or distribution paid exclusively in cash and any dividend or
distribution referred to in subsection (a) of this Section 7.3), the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this subsection
(c) by a fraction of which the numerator shall be the current market price per
share (determined as provided in subsection (g)) of the Common Stock on the date
fixed for the payment of such distribution (the "Reference Date") less the fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date; provided, however, that in the event
the numerator shall be less than one, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder of Convertible Debentures
shall have the right to receive upon conversion the amount of such distribution
such Holder would have received had such Holder converted each Convertible
Debenture immediately prior to the Reference Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of this
subsection (c) by reference to the actual or when issued trading market for any
securities comprising such distribution, it must in doing so consider the prices
in such market over the same period used in computing the current market price
per share of Common Stock (determined as provided in subsection (g)). For
purposes of this subsection (c), any dividend or distribution that includes
shares of Common Stock or rights or warrants to subscribe for or purchase shares
of Common Stock shall be deemed instead to be (i) a dividend or distribution of
the evidences of indebtedness, shares of capital stock, cash or assets other
than such shares of Common Stock or such rights or warrants (making any
Conversion Price reduction
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required by this subsection (c)) immediately followed by (ii) a dividend or
distribution of such shares of Common Stock or such rights or warrants (making
any further Conversion Price reduction required by subsection (a) or (b)),
except (A) the Reference Date of such dividend or distribution as defined in
this subsection (c) shall be substituted as (1) "the record date in the case of
a dividend or other distribution," and (2) "the record date for the
determination of stockholders entitled to receive such rights or warrants" and
(3) "the date fixed for such determination" within the meaning of subsections
(a) and (b) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of computing any
adjustment of the Conversion Price in subsection (a).
(d) In case the Company shall pay or make a dividend or other
distribution on the Common Stock exclusively in cash (excluding any quarterly
cash dividend on Common Stock to the extent that the aggregate cash dividend per
share of Common Stock in any quarter does not exceed the greater of (i) the
amount per share of Common Stock of the next preceding quarterly dividend on
Common Stock to the extent such preceding quarterly dividend did not require an
adjustment of the Conversion Price pursuant to this subsection (d)(as adjusted
to reflect subdivisions or combinations of Common Stock), and (ii) 3.75% of the
current market price per share determined as provided in subsection (g), and
excluding any dividend or distribution in connection with the liquidation,
dissolution or winding-up of the Company), the Conversion Price shall be reduced
so that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (d) by a fraction of which the
numerator shall be the current market price per share (determined as provided in
subsection (g)) of Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed (and not excluded as
provided above) applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock (determined as
provided in subsection (g)), such reduction to become effective immediately
prior to the opening of business on the day following the date fixed for the
payment of such distribution; provided, however, that in the event the portion
of the cash so distributed applicable to one share of Common Stock is equal to
or greater than the current market price per share (as defined in subsection
(g)) of Common Stock on the record date mentioned above, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder of
Convertible Debentures shall have the right to receive upon conversion the
amount of cash such Holder would have received had such Holder converted each
Convertible Debenture immediately prior to the record date for the distribution
of the cash. If an adjustment is required to be made pursuant to this
subsection (d) as a result of a distribution that is a quarterly dividend, such
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adjustment shall be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded as provided
above. If an adjustment is required to be made pursuant to this subsection (d)
as a result of a distribution that is not a quarterly dividend, such adjustment
shall be based upon the full amount of the distribution. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or any portion of
the Common Stock shall expire and such tender or exchange offer shall involve
the payment by the Company or such Subsidiary of consideration per share of
Common Stock having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds the Closing Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this subsection
(e) by a fraction (which shall not be greater than one) of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time multiplied by the Closing
Price of Common Stock on the Trading Day next succeeding the Expiration Time and
the denominator shall be the sum of (i) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (ii) the product of the number of
shares of the Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Closing Price of Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become retroactively effective
immediately prior to the opening of business on the day following the Expiration
Time.
(f) In case a tender or exchange offer made by a Person other than
the Company or any Subsidiary of the Company for all or any portion of the
Common Stock shall expire and such tender or exchange offer shall involve the
payment by a Person other than the Company or any Subsidiary of the Company of
consideration per share of Common Stock having a fair market
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<PAGE> 24
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) at the applicable Expiration Time that exceeds the Closing Price of
the Common Stock on the Trading Day next succeeding the applicable Expiration
Time in which as of the closing date of the offer the Board of Directors of the
Company is not recommending rejection of the offer, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subsection (f) by a fraction
(which shall not be greater than one) of which the numerator shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the Closing Price of the Common
Stock on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (i) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (ii) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the Closing
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time, such reduction to become retroactively effective immediately prior to the
opening of business on the day following the Expiration Time; provided, however,
that the reduction of the Conversion Price contemplated by this subsection (f)
will only be made if the tender offer or exchange offer is made for an amount
which increases that Person's ownership of Common Stock to more than 25% of the
total shares of Common Stock outstanding and provided, further, that the
reduction of the Conversion Price contemplated by this subsection (f) will not
be made if as of the close of the offer, the offering documents with respect to
such offer disclose a plan or an intention to cause the Company to engage in a
consolidation or merger of the Company or a sale of all or substantially all of
the assets of the Company.
(g) For the purpose of any computation under subsections (b), (c) or
(d), the current market price per share of Common Stock on any date in question
shall be deemed to be the average of the daily Closing Prices for the ten
Trading Day period ending on the earlier of the day in question and, if
applicable, the day before the "ex" date with respect to the issuance or
distribution requiring such computation; provided, however, that if more than
one event occurs that would require an adjustment pursuant to subsections (a)
through (f), inclusive, the Board of Directors may make such adjustments to the
Closing Prices during such ten Trading Day period as it deems appropriate to
effectuate the intent of the adjustments in this Section 7.3,
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in which case any such determination by the Board of Directors shall be set
forth in a Board Resolution and shall be conclusive. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the New York Stock Exchange or on such successor securities exchange as the
Common Stock may be listed or in the relevant market from which the Closing
Prices were obtained without the right to receive such issuance or distribution,
and (2) when used with respect to any tender or exchange offer means the first
date on which the Common Stock trades regular way on such securities exchange or
in such market after the Expiration Time of such offer.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by subsections (a) through (f), as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. The Company from time to time may
reduce the Conversion Price by any amount for any period of time if the period
is at least 20 days, the reduction is irrevocable during the period, and the
Board of Directors shall have made a determination that such reduction would be
in the best interest of the Company, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the preceding sentence, the
Company shall mail to Holders of record of the Convertible Debentures a notice
of the reduction at least 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period it will be in effect.
(i) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments which by reason of
this subsection (i) are not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(j) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value to the Holder of Convertible Debentures.
SECTION 7.4. Merger, Consolidation, or Sale of Assets.
(a) In the event that the Company shall be a party to any
transaction (including without limitation (i) any recapitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from
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<PAGE> 26
no par value to par value, or as a result of a subdivision or combination of the
Common Stock), (ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in a reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company),
(iii) any sale or transfer of all or substantially all of the assets of the
Company or (iv) any compulsory share exchange) pursuant to which either shares
of Common Stock shall be converted into the right to receive other securities,
cash or other property, or, in the case of a sale or transfer of all or
substantially all of the assets of the Company, the holders of Common Stock
shall be entitled to receive other securities, cash or other property, then
lawful provision shall be made as part of the terms of such transaction whereby
the Holder of each Convertible Debenture then outstanding shall have the right
thereafter to convert such Convertible Debenture only into:
(A) in the case of any such transaction that does not constitute
a Common Stock Fundamental Change and subject to funds being legally
available for such purpose under applicable law at the time of such
conversion, the kind and amount of the securities, cash or other property
that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange
by a holder of the number of shares of Common Stock issuable upon
conversion of such Convertible Debenture immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after giving effect, in the case of any Non-Stock
Fundamental Change (as defined below), to any adjustment in the Conversion
Price in accordance with clause (i) of subsection (c) of this Section 7.4;
and
(B) in the case of any such transaction that constitutes a
Common Stock Fundamental Change, common stock of the kind received by
holders of Common Stock as a result of such Common Stock Fundamental Change
in an amount determined in accordance with clause (ii) of subsection (c) of
this Section 7.4.
(b) The company or the Person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquires the
Company's shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constituent document to establish such right.
Such certificate or articles of incorporation or other constituent document
shall provide for adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments
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<PAGE> 27
provided for in this Article VII. The above provisions shall similarly apply to
successive transactions of the foregoing type.
(c) Notwithstanding any other provision of this Section 7.4 to the
contrary, if any Fundamental Change occurs, then the Conversion Price in effect
will be adjusted immediately after such Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the Conversion
Price of the Convertible Debentures immediately following such Non-Stock
Fundamental Change shall be the lower of (A) the Conversion Price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to Section 7.3, and
(B) the product of (1) the greater of the Applicable Price and the then
applicable Reference Market Price and (2) a fraction, the numerator of
which is $50 and the denominator of which is (x) the amount of the Optional
Redemption Price set forth in Section 3.2 for $50 in principal amount of
Convertible Debentures if the redemption date were the date of such
Non-Stock Fundamental Change (or, for the period commencing June 17, 1996
and through June 14, 1997 and the twelve-month periods commencing June 15,
1997 and June 15, 1998, the product of 1.07750, 1.06975 and 1.06200,
respectively, times $50) plus (y) any then-accrued and unpaid interest on
$50 in principal amount of Convertible Debentures; and
(ii) in the case of a Common Stock Fundamental Change, the Conversion
Price of the Convertible Debentures immediately following such Common Stock
Fundamental Change shall be the Conversion Price in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect to
any other prior adjustments effected pursuant to Section 7.3, multiplied by
a fraction, the numerator of which is the Purchaser Stock Price and the
denominator of which is the Applicable Price; provided, however, that in
the event of a Common Stock Fundamental Change in which (A) 100% of the
value of the consideration received by a holder of Common Stock is common
stock of the successor, acquiror or other third party (and cash, if any,
paid with respect to any fractional interests in such common stock
resulting from such Common Stock Fundamental Change) and (B) all of the
Common Stock shall have been exchanged for, converted into or acquired for,
common stock of the successor, acquiror or other third party (and any cash
with respect to fractional interests), the Conversion Price of the
Convertible Preferred Securities immediately following such Common Stock
Fundamental Change shall be the Conversion Price in effect immediately
prior to such Common Stock Fundamental Change multiplied by a fraction, the
numerator of which is one and the denominator of which is the number of
shares of common
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<PAGE> 28
stock of the successor, acquiror or other third party received by a holder
of one share of Common Stock as a result of such Common Stock Fundamental
Change.
SECTION 7.5. Notice of Adjustments of Conversion Price.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee and the transfer agent for
the Convertible Preferred Securities and the Convertible Debentures; and
(b) a notice stating the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as practicable be
mailed by the Company to all record holders of Convertible Preferred Securities
and the Convertible Debentures at their last addresses as they appear upon the
stock transfer books of the Company and the Trust.
SECTION 7.6. Prior Notice of Certain Events.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 7.3(c) or (d) or (ii) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 7.3(e);
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or other property; or
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<PAGE> 29
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (i) if any Convertible Preferred Securities are
outstanding, cause to be filed with the transfer agent for the Convertible
Preferred Securities, and shall cause to be mailed to the holders of record of
the Convertible Preferred Securities, at their last addresses as they shall
appear upon the stock transfer books of the Trust or (ii) shall cause to be
mailed to all Holders at their last addresses as they shall appear in the
Debenture Register, at least 15 days prior to the applicable record or effective
date hereinafter specified, a notice stating (A) the date on which a record (if
any) is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (B) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up (but no failure to mail such
notice or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice).
SECTION 7.7. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any shares
of Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan, and
the issuance of any shares of Common Stock or options or rights to purchase such
shares pursuant to any employee benefit plan or program of the Company or
pursuant to any option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of June 17, 1996, shall not be deemed to
constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies. There shall also be no adjustment of the Conversion
Price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically described in this
Article VII.
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SECTION 7.8. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on the Common Stock referred to in Section 7.3 (c) or 7.3(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 7.3(d)), the Holder of Convertible Debentures, upon the
conversion thereof subsequent to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution and prior to
the effectiveness of the Conversion Price adjustment in respect of such
distribution, shall also be entitled to receive for each share of Common Stock
into which Convertible Debentures are converted, the portion of the shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose election shall be
evidenced by a resolution of the Board of Directors) with respect to all Holders
so converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of Convertible Debentures described in the
immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Common Stock which the Holder of Convertible
Debentures so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled, provided, that such due bill (a) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (b) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
SECTION 7.9. Trustee Not Responsible for Determining Conversion Price or
Adjustments.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Convertible Debenture to
determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or whether this supplemental
indenture need be entered into. Neither the Trustee nor
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<PAGE> 31
any Conversion Agent shall be accountable with respect to the validity or value
(or the kind of account) of any shares of Common Stock or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Convertible Debenture; and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Convertible Debenture for the purpose of conversion.
ARTICLE VIII
FORM OF CONVERTIBLE DEBENTURE
SECTION 8.1. Form of Convertible Debenture.
The Convertible Debentures and the Trustee's Certificate of
Authentication to be endorsed thereon are to be substantially in the following
forms:
[(FORM OF FACE OF CONVERTIBLE DEBENTURE)]
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING -
- - This Debenture is a Book Entry Debenture within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Debenture is exchangeable for Convertible
Debentures registered in the name of a Person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and no
transfer of this Debenture (other than a transfer of this Debenture as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in such limited circumstances.
Unless this Debenture is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]
No.__________________ CUSIP No. _______________
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<PAGE> 32
KMART CORPORATION
7 3/4% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE
Kmart Corporation, a Michigan corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to, ______________ or registered
assigns, the principal sum of _____________ Dollars ($___________) on June 15,
2016, and to pay interest on said principal sum from June 17, 1996, or from the
most recent interest payment date (each such date, an "Interest Payment Date")
to which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 15, June 15, September 15, and
December 15 of each year commencing September 15, 1996, at the rate of 7 3/4%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and premium, if any, and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum compounded quarterly.
The amount of interest payable on any Interest Payment Date shall be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed per 30-day month. In the event that
any date on which interest is payable on this Convertible Debenture is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
(referred to on the reverse hereof), be paid to the person in whose name this
Convertible Debenture (or one or more Predecessor Debentures, as defined in said
Indenture) is registered on the Regular Record Date for such interest
installment which shall be the close of business on the Business Day next
preceding such Interest Payment Date unless otherwise provided in the Indenture.
Any such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such Regular Record
Date and may be paid to the Person in whose name this Convertible Debenture (or
one or more Predecessor Debentures) is registered at the close of business on a
special record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered Holders of the
Convertible Debentures not less than 10 days prior to such special record date,
or may be paid at any time in any other lawful
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<PAGE> 33
manner not inconsistent with the requirements of any securities exchange on
which the Convertible Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
principal of (and premium, if any) and the interest on this Convertible
Debenture shall be payable at the office or agency of the Trustee maintained for
that purpose in any coin or currency of the United States of America that at the
time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the registered Holder at such address as shall appear
in the Debenture Register. Notwithstanding the foregoing, so long as the Holder
of this Convertible Debenture is the Institutional Trustee, the payment of the
principal of (and premium, if any) and interest on this Convertible Debenture
will be made at such place and to such account as may be designated by the
Institutional Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the
extent provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Convertible Debenture, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such Holder upon said
provisions.
This Convertible Debenture shall not be entitled to any benefit under
the Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed by
or on behalf of the Trustee.
The provisions of this Convertible Debenture are continued on the
reverse side hereof and such continued provisions shall for all purposes have
the same effect as though fully set forth at this place.
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<PAGE> 34
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
KMART CORPORATION
By:_________________________
Name:
Title
Attest:
By:_______________________
Name:
Title:
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures of the series of Convertible
Debentures described in the within-mentioned Indenture.
Dated: ______________
THE BANK OF NEW YORK,
as Trustee or as Authentication Agent
By ______________________ By _________________________
Authorized Signatory Authorized Signatory
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<PAGE> 35
[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Debentures of the Company (herein sometimes referred to as the "Debentures"),
specified in the Indenture, all issued or to be issued in one or more series
under and pursuant to an Indenture dated as of June 6, 1996, duly executed and
delivered between the Company and The Bank of New York, as Trustee (the
"Trustee"), as supplemented by the First Supplemental Indenture dated as of June
6, 1996, between the Company and the Trustee (the Indenture as so supplemented,
the "Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the Holders of Convertible Debentures. By the terms of the Indenture, the
Debentures are issuable thereunder in series that may vary as to amount, date of
maturity, rate of interest and in other respects as provided in the Indenture.
This series of Debentures is limited in aggregate principal amount as specified
in said First Supplemental Indenture and is herein sometimes referred to as the
"Convertible Debentures.
Because of the occurrence and continuation of a Special Event, in
certain circumstances, this Convertible Debenture may become due and payable, in
whole or in part, at the principal amount together with any interest accrued
thereon, including Compounded Interest and Additional Interest (the "Redemption
Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time,
on the date of such redemption or at such earlier time as the Company
determines. In addition, the Company shall have the right to redeem this
Convertible Debenture at the option of the Company, upon not less than 30 nor
more than 60 days notice, without premium or penalty, in whole or in part at any
time on or after June 17, 1999 (an "Optional Redemption") at the following
prices (expressed as percentages of the principal amount of the Convertible
Debentures) (the "Optional Redemption Price") together with accrued and unpaid
interest, including Additional Interest and Compounded Interest to, but
excluding, the redemption date, if redeemed during the 12-month period beginning
June 15:
Year Redemption Price
---- ----------------
1999 105.425%
2000 104.650
2001 103.875
2002 103.100
2003 102.325
2004 101.550
2005 100.775
and 100% if redeemed on or after June 15, 2006.
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<PAGE> 36
If Convertible Debentures are redeemed on any March 15, June 15,
September 15, or December 15, accrued and unpaid interest shall be payable to
holders of record on the relevant record date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
If the Convertible Debentures are only partially redeemed by the
Company pursuant to an Optional Redemption, the Convertible Debentures will be
redeemed pro rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Convertible Debenture in part only,
a new Convertible Debenture or Convertible Debentures of this series for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
may be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures of such
series; provided, however, that no such supplemental indenture shall (a) extend
the fixed maturity of any Debenture of any series, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, or make any
change that adversely affects the right to convert any Debenture of any series
or make any change in the subordination provisions that adversely affects the
rights of any Holders of any Debenture of any series, without the consent of the
Holder of each Debenture so affected, or (b) reduce the aforesaid percentage of
Debentures of such series, the Holders of which are required to consent to any
such supplemental indenture, without the consent of the Holders of each
Debenture of any series then outstanding and affected thereby. The Indenture
also contains provisions permitting the Holders of a majority in aggregate
principal amount of the Debentures of any series at the time outstanding
affected thereby, on behalf of all of the
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<PAGE> 37
Holders of the Debentures of such series, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture with respect to such series, and its consequences,
except a default in the payment of the principal of or premium, if any, or
interest on any Debentures of such series or a failure to convert any Debentures
of such series in accordance with its terms upon an election by the Holders
thereof. Any such consent or waiver by the registered Holder of this
Convertible Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of this Convertible Debenture and of any Convertible Debenture issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Convertible Debenture.
No reference herein to the Indenture and no provision of this
Convertible Debenture or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Convertible Debenture at the time and
place and at the rate and in the money herein prescribed.
As long as an Event of Default under Section 5.1(a) of the Indenture
shall not have occurred and be continuing, the Company shall have the right at
any time during the term of the Convertible Debentures and from time to time to
extend the interest payment period of such Convertible Debentures for up to 20
consecutive quarters (an "Extended Interest Payment Period"), at the end of
which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Convertible
Debentures to the extent that payment of such interest is enforceable under
applicable law). Before the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Extended Interest Payment Period together with all such
further extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extended Interest Payment Period and upon the payment of
all accrued and unpaid interest and any additional amounts then due, the Company
may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Convertible Debenture is transferable by the registered
Holder hereof on the Debenture Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered Holder hereof or his or her attorney
duly authorized in
34
<PAGE> 38
writing, and thereupon one or more new Convertible Debentures of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Convertible Debenture, the Company, the Trustee, any paying agent and the
Debenture Registrar may deem and treat the registered holder hereof as the
absolute owner hereof (whether or not this Convertible Debenture shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal hereof and premium, if any, and interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any paying agent nor any Debenture Registrar shall be affected by any notice to
the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Holder of any Convertible Debenture has the right, exercisable at
any time beginning August 16, 1996 through the close of business (New York time)
on June 15, 2016 (or, in the case of a Convertible Debenture called for
redemption, prior to the close of business on the Business Day prior to the
corresponding redemption date), to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $50) into shares of Common Stock
at the initial conversion rate of 3.3333 shares of Common Stock for each
Convertible Debenture (equivalent to a Conversion Price of $15 per share of
Common Stock), subject to adjustment under certain circumstances.
To convert a Convertible Debenture, a Holder must (a) complete and
sign a conversion notice substantially in the form attached hereto, (b)
surrender the Convertible Debenture to a Conversion Agent, (c) furnish
appropriate endorsements or transfer documents if required by the Conversion
Agent and (d) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but
35
<PAGE> 39
if any Holder surrenders a Convertible Debenture for conversion on or after the
Regular Record Date for the payment of an installment of interest and prior to
the opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date will be paid
to the registered Holder of such Convertible Debenture on such Regular Record
Date. In such event, such Convertible Debenture, when surrendered for
conversion, need not be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date on the portion so converted. The
number of shares issuable upon conversion of a Convertible Debenture is
determined by dividing the principal amount of the Convertible Debentures
converted by the Conversion Price in effect on the Conversion Date. No
fractional shares will be issued upon conversion but a cash adjustment will be
made for any fractional interest. The outstanding principal amount of any
Convertible Debenture shall be reduced by the portion of the principal amount
thereof converted into shares of Common Stock.
[The Convertible Debentures of this series are issuable only in
registered form without Coupons in denominations of $50 and any integral
multiple thereof.] [This Global Debenture is exchangeable for Convertible
Debentures in definitive form only under certain limited circumstances set forth
in the Indenture. Convertible Debentures of this series so issued are issuable
only in registered form without Coupons in denominations of $50 and any integral
multiple thereof.] As provided in the Indenture and subject to certain
limitations therein set forth, Convertible Debentures of this series are
exchangeable for a like aggregate principal amount of Convertible Debentures of
this series of a different authorized denomination, as requested by the Holder
surrendering the same.
All terms used in this Convertible Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE
AND THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
36
<PAGE> 40
[FORM OF ELECTION TO CONVERT]
ELECTION TO CONVERT
To: Kmart Corporation
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion below
designated, into Common Stock of KMART CORPORATION in accordance with the terms
of the Indenture referred to in this Convertible Debenture, and directs that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: ____________, ____
in whole __
Portions of Convertible Debenture to be
converted ($50 or integral multiples-thereof):
$_________________
______________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number
______________________________________________
______________________________________________
______________________________________________
Signature Guarantee:(1)_______________________
(1) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program" as
may be determined by the Conversion Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
37
<PAGE> 41
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Debenture to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints _______________________________________________________
________________________________________________________________________________
______________________________________________ agent to transfer this
Convertible Debenture on the books of the Trust. The agent may substitute
another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Convertible
Debenture)
Signature Guarantee(2): ___________________________________
____________________
(2) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Debenture Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities and Exchange Act of
1934, as amended.
38
<PAGE> 42
ARTICLE IX
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 9.1. Original Issue of Convertible Debentures.
Convertible Debentures in the aggregate principal amount of
$1,030,927,850 may, upon execution of this First Supplemental Indenture, be
executed by the Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and make available for delivery said
Convertible Debentures to or upon the written order of the Company, signed by
its Chairman, its Vice Chairman, its President, or any Vice President and its
Treasurer or an Assistant Treasurer, without any further action by the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Ratification of Indenture; First Supplemental Indenture Controls.
The Indenture, as supplemented by this First Supplemental Indenture,
is in all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein and
therein provided. The provisions of this First Supplemental Indenture shall
supersede the provisions of the Indenture to the extent the Indenture is
inconsistent herewith.
SECTION 10.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 10.3. Governing Law.
This First Supplemental Indenture and each Debenture shall be deemed
to be a contract made under the internal laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of said State.
SECTION 10.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Convertible Deben-
39
<PAGE> 43
tures shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this First Supplemental Indenture or of the Convertible
Debentures, but this First Supplemental Indenture and the Convertible Debentures
shall be construed as if such invalid or illegal or unenforceable provision had
never been contained herein or therein.
SECTION 10.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
40
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed on the date or dates indicated in the
acknowledgements and as of the day and year first above written.
KMART CORPORATION
By /s/ Michael J. Viola
------------------------------
Name: Michael J. Viola
Title: Vice President and
Treasurer
THE BANK OF NEW YORK,
as Trustee
By /s/ Paul J. Schmalzel
----------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
41
<PAGE> 1
EXHIBIT 4 (j)(i)
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
Kmart Financing I
Dated as of June 6, 1996
====================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . 4
SECTION 2.2 Lists of Holders of Securities . . . . . . 5
SECTION 2.3 Reports by the Preferred Guarantee Trust-
ee . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.4 Periodic Reports to Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . 5
SECTION 2.5 Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . . 6
SECTION 2.6 Events of Default; Waiver . . . . . . . . 6
SECTION 2.7 Event of Default; Notice . . . . . . . . . 6
SECTION 2.8 Conflicting Interests . . . . . . . . . . 6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guar-
antee Trustee . . . . . . . . . . . . . . 7
SECTION 3.2 Certain Rights of Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . 9
SECTION 3.3. Not Responsible for Recitals or Issuance
of Preferred Securities Guarantee . . . . 11
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility . 11
SECTION 4.2 Appointment, Removal and Resignation of
Preferred Guarantee Trustee . . . . . . . 12
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . 13
SECTION 5.2 Waiver of Notice and Demand . . . . . . . 13
SECTION 5.3 Obligations Not Affected . . . . . . . . . 13
SECTION 5.4 Rights of Holders . . . . . . . . . . . . 14
SECTION 5.5 Guarantee of Payment . . . . . . . . . . . 15
SECTION 5.6 Subrogation . . . . . . . . . . . . . . . 15
SECTION 5.7 Independent Obligations . . . . . . . . . 15
<PAGE> 3
Page
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions . . . . . . . . 16
SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . 16
ARTICLE VII
TERMINATION
SECTION 7.1 Termination . . . . . . . . . . . . . . . 16
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation . . . . . . . . . . . . . . . 17
SECTION 8.2 Indemnification . . . . . . . . . . . . . 17
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns . . . . . . . . . . 18
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . 18
SECTION 9.3 Notices . . . . . . . . . . . . . . . . . 18
SECTION 9.4 Benefit . . . . . . . . . . . . . . . . . 19
SECTION 9.5 Governing Law . . . . . . . . . . . . . . 19
ii
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of June 6, 1996, is executed and delivered
by Kmart Corporation, a Michigan corporation (the "Guarantor"),
and The Bank of New York, as trustee (the "Preferred Guarantee
Trustee"), for the benefit of the Holders (as defined herein)
from time to time of the Preferred Securities (as defined herein)
of Kmart Financing I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declara-
tion of Trust (the "Declaration"), dated as of June 6, 1996,
among the trustees of the Issuer named therein, the Guarantor, as
sponsor, and the holders from time to time of undivided benefi-
cial interests in the assets of the Issuer, the Issuer is issuing
on the date hereof 20,000,000 preferred securities, having an
aggregate liquidation amount of $1,000,000,000, designated the 7
3/4% Trust Convertible Preferred Securities (the "Preferred
Securities");
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and
unconditionally to agree, to the extent set forth in this Pre-
ferred Securities Guarantee, to pay to the Holders of the Pre-
ferred Securities the Guarantee Payments (as defined herein) and
to make certain other payments on the terms and conditions set
forth herein.
WHEREAS, as of the date hereof the Guarantor is also
executing and delivering a guarantee agreement (the "Common
Securities Guarantee") in substantially identical terms to this
Preferred Securities Guarantee for the benefit of the holders of
the Common Securities (as defined herein), except that if an
Event of Default (as defined in the Indenture), has occurred and
is continuing, the rights of holders of the Common Securities to
receive Guarantee Payments under the Common Securities Guarantee
are subordinated to the rights of Holders of Preferred Securities
to receive Guarantee Payments under this Preferred Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by
each Holder of Preferred Securities, which purchase the Guarantor
hereby agrees shall benefit the Guarantor, the Guarantor executes
and delivers this Preferred Securities Guarantee for the benefit
of the Holders.
<PAGE> 5
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the
context otherwise requires:
(a) Capitalized terms used in this Preferred Securi-
ties Guarantee but not defined in the preamble
above have the respective meanings assigned to
them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Preferred Securities Guarantee
have the same meaning when used in this Preferred
Securities Guarantee unless otherwise defined in
this Preferred Securities Guarantee;
(c) a term defined anywhere in this Preferred Securi-
ties Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities Guar-
antee" or "this Preferred Securities Guarantee"
are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to
time;
(e) all references in this Preferred Securities Guar-
antee to Articles and Sections are to Articles and
Sections of this Preferred Securities Guarantee,
unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the
same meaning when used in this Preferred Securi-
ties Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the con-
text otherwise requires; and
(g) a reference to the singular includes the plural
and vice versa.
"Authorized Officer" of a Person means any Person that
is authorized to bind such Personprovided,however that the
Authorized Officer signing an Officers' Certificate given pursu-
ant to Section 314(a)(4) of the Trust Indenture Act shall be the
principal executive, financial or accounting officer of such
Person.
"Corporate Trust Office" means the office of the
Preferred Guarantee Trustee at which the corporate trust business
of the Preferred Guarantee Trustee shall, at any particular time,
2
<PAGE> 6
be principally administered, which office at the date of execu-
tion of this Agreement is located at 101 Barclay Street, Floor 21
West, New York, New York 10286.
"Covered Person" means any Holder or beneficial owner
of Preferred Securities.
"Event of Default" means a default by the Guarantor on
any of its payment or other obligations under this Preferred
Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred
Securities, to the extent not paid or made by the Issuer: (i)
any accrued and unpaid Distributions (as defined in the Declara-
tion) that are required to be paid on such Preferred Securities
to the extent the Issuer shall have funds available therefor,
(ii) the redemption price (the "Redemption Price"), and all
accrued and unpaid Distributions to the date of redemption to the
extent the Issuer has funds available therefor, with respect to
any Preferred Securities called for redemption by the Issuer, and
(iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Issuer (other than in connection with the
conversion of all of the Trust Securities into the Guarantor's
common stock or the distribution of Debentures to the Holders in
exchange for Preferred Securities as provided in the Declara-
tion), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the Preferred Securi-
ties to the date of payment, to the extent the Issuer shall have
funds available therefor, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liqui-
dation of the Issuer (in either case, the "Liquidation Distribu-
tion"). If an event of default under the Indenture has occurred
and is continuing, the rights of holders of the Common Securities
to receive payments under the Common Securities Guarantee Agree-
ment are subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the
books and records of the Issuer of any Preferred Securities;
provided, however, that, in determining whether the holders of
the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee
Trustee, any Affiliate of the Preferred Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Preferred
Guarantee Trustee.
3
<PAGE> 7
"Indenture" means the Base Indenture dated as of June
6, 1996, among the Guarantor (the "Debenture Issuer") and The
Bank of New York, as trustee, as supplemented by the First
Supplemental Indenture dated as of June 6, 1996, among the
Debenture Issuer and the Bank of New York, as trustee.
"Majority in liquidation amount of the Preferred
Securities" means, except as provided in the terms of the Con-
vertible Preferred Securities or except as provided by the Trust
Indenture Act, a vote by Holder(s) of Preferred Securities,
voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemp-
tion, liquidation or otherwise, plus accrued and unpaid Distribu-
tions to the date upon which the voting percentages are deter-
mined) of all Preferred Securities.
"Preferred Guarantee Trustee" means The Bank of New
York, until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms
of this Preferred Securities Guarantee and thereafter means each
such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the
Preferred Guarantee Trustee, any officer within the Corporate
Trust Office of the Preferred Guarantee Trustee, including any
vice president, any assistant vice president, any assistant
secretary, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Preferred Guarantee
Trustee customarily performing functions similar to those per-
formed by any of the above designated officers and also means,
with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a succes-
sor Preferred Guarantee Trustee possessing the qualifications to
act as Preferred Guarantee Trustee under Section 4.1.
"Trust Securities" means the Common Securities and the
Preferred Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Preferred Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be
part of this Preferred Securities Guarantee and shall, to the
extent applicable, be governed by such provisions; and
4
<PAGE> 8
(b) if and to the extent that any provision of this
Preferred Securities Guarantee limits, qualifies or conflicts
with the duties imposed by Section 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Preferred Guaran-
tee Trustee with a list, in such form as the Preferred Guarantee
Trustee may reasonably require, of the names and addresses of the
Holders of the Preferred Securities ("List of Holders") as of
such date, (i) within 1 Business Day after January 1 and June 30
of each year, and (ii) at any other time within 30 days of
receipt by the Guarantor of a written request for a List of
Holders as of a date no more than 14 days before such List of
Holders is given to the Preferred Guarantee Trusteeprovided,
that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Preferred Guarantee
Trustee by the Guarantor. The Preferred Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of
a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with
its obligations under Sections 311(a), 311(b) and Section 312(b)
of the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee
Within 60 days after May 15 of each year, the Preferred
Guarantee Trustee shall provide to the Holders of the Preferred
Securities such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Pre-
ferred Guarantee Trustee shall also comply with the requirements
of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee
The Guarantor shall provide to the Preferred Guarantee
Trustee such documents, reports and information as required by
Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture
Act.
Delivery of such reports, information and documents to
the Preferred Guarantee Trustee is for informational purposes
only and the Preferred Guarantee Trustee's receipt of such shall
not constitute constructive notice of any information contained
therein or determinable from information contained therein,
including the Guarantor's compliance with any of its covenants
5
<PAGE> 9
hereunder (as to which the Preferred Guarantee Trustee is enti-
tled to rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Preferred Guarantee
Trustee such evidence of compliance with any conditions prece-
dent, if any, provided for in this Preferred Securities Guarantee
that relate to any of the matters set forth in Section 314(c) of
the Trust Indenture Act. Any certificate or opinion required to
be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of
all of the Preferred Securities, waive any past Event of Default
and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose
of this Preferred Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
(a) The Preferred Guarantee Trustee shall, within 90
days after the occurrence of an Event of Default, transmit by
mail, first class postage prepaid, to the Holders of the Pre-
ferred Securities, notices of all Events of Default actually
known to a Responsible Officer of the Preferred Guarantee Trust-
ee, unless such defaults have been cured before the giving of
such notice, provided, that, the Preferred Guarantee Trustee
shall be protected in withholding such notice if and so long as a
Responsible Officer of the Preferred Guarantee Trustee in good
faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the
Preferred Guarantee Trustee shall have received written notice,
or of which a Responsible Officer of the Preferred Guarantee
Trustee charged with the administration of the Declaration shall
have obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically
described in this Preferred Securities Guarantee for the purposes
of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
6
<PAGE> 10
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trus-
tee
(a) This Preferred Securities Guarantee shall be held
by the Preferred Guarantee Trustee for the benefit of the Holders
of the Preferred Securities, and the Preferred Guarantee Trustee
shall not transfer this Preferred Securities Guarantee to any
Person except a Holder of Preferred Securities exercising his or
her rights pursuant to Section 5.4(b) or to a Successor Preferred
Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Pre-
ferred Guarantee Trustee. The right, title and interest of the
Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and
cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the
appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Respon-
sible Officer of the Preferred Guarantee Trustee has occurred and
is continuing, the Preferred Guarantee Trustee shall enforce this
Preferred Securities Guarantee for the benefit of the Holders of
the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all
Events of Default that may have occurred, shall undertake to
perform only such duties as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities Guarantee against the Pre-
ferred Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section
2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee
shall exercise such of the rights and powers vested in it by this
Preferred Securities Guarantee, and use the same degree of care
and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Preferred Securities Guaran-
tee shall be construed to relieve the Preferred Guarantee Trustee
from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of De-
fault that may have occurred:
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<PAGE> 11
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities Guaran-
tee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied cove-
nants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of
the Preferred Guarantee Trustee, the Preferred Guaran-
tee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and con-
forming to the requirements of this Preferred Securi-
ties Guarantee; but in the case of any such certifi-
cates or opinions that by any provision hereof are
specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee
shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a
Responsible Officer of the Preferred Guarantee Trustee,
unless it shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction
of the Holders of not less than a Majority in liquidation
amount of the Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee, or exercising
any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guaran-
tee shall require the Preferred Guarantee Trustee to expend
or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Preferred
Guarantee Trustee shall have reasonable grounds for believ-
ing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Preferred
Securities Guarantee or indemnity, reasonably satisfactory
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<PAGE> 12
to the Preferred Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining
from acting upon, any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the
proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder,
the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any
instrument (or any rerecording, refiling or registration
thereof).
(v) The Preferred Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such
counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its Affil-
iates and may include any of its employees. The Preferred
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdic-
tion.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have pro-
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<PAGE> 13
vided to the Preferred Guarantee Trustee such security
and indemnity, reasonably satisfactory to the Preferred
Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Pre-
ferred Guarantee Trustee's agents, nominees or custodians)
and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable
advances as may be requested by the Preferred Guarantee
Trustee; provided that, nothing contained in this Section
3.2(a)(vi) shall be taken to relieve the Preferred Guarantee
Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by
this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be
bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instru-
ment, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Preferred Guarantee
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, nominees,
custodians or attorneys, and the Preferred Guarantee Trustee
shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by
it hereunder.
(ix) Any action taken by the Preferred Guarantee Trust-
ee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred
Guarantee Trustee or its agents alone shall be sufficient
and effective to perform any such action. No third party
shall be required to inquire as to the authority of the
Preferred Guarantee Trustee to so act or as to its compli-
ance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively
evidenced by the Preferred Guarantee Trustee's or its agent-
's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be
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<PAGE> 14
protected in conclusively relying on or acting in accordance
with such instructions.
(xi) The Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereun-
der either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(xii) The Preferred Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be
taken by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by this Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guaran-
tee shall be deemed to impose any duty or obligation on the
Preferred Guarantee Trustee to perform any act or acts or exer-
cise any right, power, duty or obligation conferred or imposed on
it in any jurisdiction in which it shall be illegal, or in which
the Preferred Guarantee Trustee shall be unqualified or incompe-
tent in accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or obligation.
No permissive power or authority available to the Preferred
Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Pre-
ferred Securities Guarantee
The recitals contained in this Preferred Securities
Guarantee shall be taken as the statements of the Guarantor, and
the Preferred Guarantee Trustee does not assume any responsibili-
ty for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this
Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility
(a) There shall at all times be a Preferred Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Securities and Ex-
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<PAGE> 15
change Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars ($50,000,00-
0), and subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If
such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then,
for the purposes of this Section 4.1(a)(ii), the combined
capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the
Preferred Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Preferred Guarantee
Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustee
(a) Subject to Section 4.2(b), the Preferred Guarantee
Trustee may be appointed or removed without cause at any time by
the Guarantor.
(b) The Preferred Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor
Preferred Guarantee Trustee has been appointed and has accepted
such appointment by written instrument executed by such Successor
Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to
office shall hold office until a Successor Preferred Guarantee
Trustee shall have been appointed or until its removal or resig-
nation. The Preferred Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instru-
ment in writing executed by the Preferred Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take
effect until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by instrument in
writing executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
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(d) If no Successor Preferred Guarantee Trustee shall
have been appointed and accepted appointment as provided in this
Section 4.2 within 60 days after delivery of an instrument of
resignation or removal, the Preferred Guarantee Trustee resigning
or being removed may petition any court of competent jurisdiction
for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for
the acts or omissions to act of any Successor Preferred Guarantee
Trustee.
(f) Upon termination of this Preferred Securities
Guarantee or removal or resignation of the Preferred Guarantee
Trustee pursuant to this Section 4.2, the Guarantor shall pay to
the Preferred Guarantee Trustee all amounts accrued to the date
of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid by the Issuer), as and
when due, regardless of any defense, right of set-off or counter-
claim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders
or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of
this Preferred Securities Guarantee and of any liability to which
it applies or may apply, presentment, demand for payment, any
right to require a proceeding first against the Issuer or any
other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption
and all other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of
the Guarantor under this Preferred Securities Guarantee shall in
no way be affected or impaired by reason of the happening from
time to time of any of the following:
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<PAGE> 17
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any
express or implied agreement, covenant, term or condition relat-
ing to the Preferred Securities to be performed or observed by
the Issuer;
(b) the extension of time for the payment by the
Issuer of all or any portion of the Distributions, Redemption
Price, Liquidation Distribution or any other sums payable under
the terms of the Preferred Securities or the extension of time
for the performance of any other obligation under, arising out
of, or in connection with, the Preferred Securities (other than
an extension of time for payment of Distributions, Redemption
Price, Liquidation Distribution or other sum payable that results
from the extension of any interest payment period on the Deben-
tures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence
on the part of the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Holders
pursuant to the terms of the Preferred Securities, or any action
on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolu-
tion, sale of any collateral, receivership, insolvency, bankrupt-
cy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Issuer or any of the assets of
the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of
a guarantor, it being the intent of this Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give
notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of
the Preferred Securities have the right to direct the time,
method and place of conducting of any proceeding for any remedy
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<PAGE> 18
available to the Preferred Guarantee Trustee in respect of this
Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Pre-
ferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to
enforce such Preferred Securities Guarantee, any Holder of
Preferred Securities may institute a legal proceeding directly
against the Guarantor to enforce the Preferred Guarantee Trustee-
's rights under this Preferred Securities Guarantee, without
first instituting a legal proceeding against the Issuer, the
Preferred Guarantee Trustee or any other person or entity. The
Guarantor waives any right or remedy to require that any action
be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Preferred Securities Guarantee creates a guarantee
of payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any)
rights of the Holders of Preferred Securities against the Issuer
in respect of any amounts paid to such Holders by the Guarantor
under this Preferred Securities Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise
any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a
result of payment under this Preferred Securities Guarantee, if,
at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall
be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders
and to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereun-
der are independent of the obligations of the Issuer with respect
to the Preferred Securities, and that the Guarantor shall be
liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Preferred Securities
Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
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<PAGE> 19
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding,
if there shall have occurred an Event of Default or an event of
default under the Declaration, then (a) the Guarantor shall not
declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection
with the satisfaction by the Guarantor of its obligations under
any employee benefit plans, (ii) as a result of a reclassifica-
tion of the Guarantor's capital stock or the exchange or conver-
sion of one class or series of the Guarantor's capital stock for
another class or series of the Guarantor's capital stock or,
(iii) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock of the Guarantor or the security
being converted or exchanged) or make any guarantee payments with
respect to the foregoing, (b) the Guarantor shall not make any
payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees)
issued by the Guarantor which rank pari passu with or junior to
the Debentures and (c) the Guarantor shall not make any guarantee
payments with respect to the foregoing (other than pursuant to
this Guarantee).
SECTION 6.2 Ranking
This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordi-
nate and junior in right of payment to all other liabilities of
the Guarantor, (ii) pari passu with the most senior Preferred or
preference stock now or hereafter issued by the Guarantor and
with any guarantee now or hereafter entered into by the Guarantor
in respect of any Preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to the Guarantor's common
stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Preferred Securities Guarantee shall terminate
upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) upon the distribution of the Guarantor's common
stock to all of the Holders in respect of the conversion of the
Preferred Securities into the Guarantor's common stock or upon
the distribution of the Debentures to the Holders of all of the
Preferred Securities or (iii) upon full payment of the amounts
payable in accordance with the Declaration upon liquidation of
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<PAGE> 20
the Issuer. Notwithstanding the foregoing, this Preferred
Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of
Preferred Securities must restore payment of any sums paid under
the Preferred Securities or under this Preferred Securities
Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible
or accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage, liability, expense or claim
incurred by reason of any act or omission performed or omitted by
such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemni-
fied Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by
reason of such Indemnified Person's negligence or willful miscon-
duct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Guarantor and upon
such information, opinions, reports or statements presented to
the Guarantor by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable
care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts perti-
nent to the existence and amount of assets from which Distribu-
tions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified
Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against, or investigating, any
claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the
termination of this Preferred Securities Guarantee.
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When the Preferred Guarantee Trustee incurs expenses or
renders services in connection with an Event of Default specified
in Section 5.1(5) or Section 5.1(6) of the Indenture, the expens-
es (including the reasonable charges and expenses of its counsel)
and the compensation for services are intended to constitute
expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Pre-
ferred Securities Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and
shall inure to the benefit of the Holders of the Preferred
Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not adverse-
ly affect the rights of Holders (in which case no consent of
Holders will be required), this Preferred Securities Guarantee
may only be amended with the prior approval of the Holders of at
least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or other-
wise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all the outstand-
ing Preferred Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of Holders of the Securities
apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving
such notice, and shall be delivered, telecopied or mailed by
first class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at
the Preferred Guarantee Trustee's mailing address set forth below
(or such other address as the Preferred Guarantee Trustee may
give notice of to the Holders of the Preferred Securities):
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
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<PAGE> 22
(b) If given to the Guarantor, at the Guarantor's
mailing address set forth below (or such other address as the
Guarantor may give notice of to the Holders of the Preferred
Securities):
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention: General Counsel
(c) If given to any Holder of Preferred Securities, at
the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given
when received in person, telecopied with receipt confirmed, or
mailed by first class mail, postage prepaid except that if a
notice or other document is refused delivery or cannot be deliv-
ered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Preferred Securities Guarantee is solely for the
benefit of the Holders of the Preferred Securities and, subject
to Section 3.1(a), is not separately transferable from the
Preferred Securities.
SECTION 9.5 Governing Law
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCI-
PLES THEREOF.
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<PAGE> 23
THIS PREFERRED SECURITIES GUARANTEE is executed as of
the day and year first above written.
Kmart Corporation, as Guarantor
By: /s/ Michael J. Viola
----------------------------------
Name: Michael J. Viola
Title: Vice President and
Treasurer
The Bank of New York, as Preferred
Guarantee Trustee
By: /s/ Paul J. Schmalzel
----------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
20
