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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 8, 1999
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KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
1-327 38-0729500
(Commission File Number) (I.R.S. Employer Identification No.)
3100 WEST BIG BEAVER ROAD, TROY MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
(248) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
The Company is filing certain exhibits under Item 7 hereof which
relate to the Company's offering of $300,000,000 principal amount of its 8 3/8%
Notes due 2004, which have been registered under the Securities Act of 1933 on
Form S-3 (Registration No. 333-74665).
ITEM 7. EXHIBITS.
The following exhibits are filed in connection with the Company's
Registration Statement on Form S-3 (Registration No. 333-74665):
1. Underwriting Agreement, dated December 8, 1999, between the Company
and the Underwriters named therein.
4.3 Supplemental Indenture, dated December 13, 1999, between the Company
and The Bank of New York, as Trustee.
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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: December 17, 1999
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Exhibit Index
Exhibit Number Description
------------------------- ----------------------------
1 Underwriting Agreement dated
December 8, 1999.
4.3 Supplemental Indenture dated
December 13, 1999
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EXHIBIT 1
$300,000,000
KMART CORPORATION
8 3/8% Notes Due 2004
UNDERWRITING AGREEMENT
December 8, 1999
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December 8, 1999
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
As Representatives of the Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Kmart Corporation, a Michigan corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS"), for whom you are acting as representatives, $300,000,000
aggregate principal amount of its 8 3/8% Notes Due 2004 (the "SECURITIES") to be
issued pursuant to the provisions of the Indenture dated as of December 13, 1999
(the "INDENTURE") between the Company and The Bank of New York, as Trustee (the
"TRUSTEE"), as supplemented by the First Supplemental Indenture dated as of
December 13, 1999 (the "SUPPLEMENTAL INDENTURE").
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") two registration statements on Form S-3 (File Nos. 33-64905 and
333-74665), including a prospectus, relating to debt and equity securities (the
"SHELF SECURITIES") to be issued from time to time by the Company and has filed
with, or transmitted for filing to, or shall promptly hereafter file with or
transmit for filing to, the Commission a prospectus supplement (the "PROSPECTUS
SUPPLEMENT") specifically relating to the Securities pursuant to Rule 424 under
the Securities Act of 1933, as amended (the "SECURITIES ACT"). The term
"REGISTRATION STATEMENT" means the registration statements, including the
exhibits thereto, as amended to the date of this Agreement. The term "BASIC
PROSPECTUS" means the prospectus relating to the Registration Statement and the
Shelf Securities in the form first used to confirm sales of the Securities. The
term "PROSPECTUS" means the Basic Prospectus together with the Prospectus
Supplement. The term "PRELIMINARY PROSPECTUS" means a preliminary prospectus
supplement specifically relating to the Securities, together with the Basic
Prospectus. As used herein, the terms "REGISTRATION STATEMENT", "BASIC
PROSPECTUS," "PROSPECTUS" and "PRELIMINARY PROSPECTUS" shall include in each
case the documents, if any, incorporated by reference therein. The terms
"SUPPLEMENT," "AMENDMENT" and "AMEND" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Basic Prospectus by the Company with the
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Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
If the Company has filed an abbreviated registration statement to
register additional 8 3/8 % Notes Due 2004 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.
1. Representations and Warranties. The Company represents and
warrants to and agrees 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) each part of the Registration Statement,
when such part became effective, did 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 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 paragraph do not apply to (A) statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein or
(B) that part of the Registration Statement that constitutes the
Statement of Eligibility (Form T-1) under the Trust Indenture Act of
1939, as amended (the "TRUST INDENTURE ACT"), of the Trustee.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its
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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 the Company and its subsidiaries,
taken as a whole.
(d) Each subsidiary of the Company 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 the Company and
its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been qualified under the Trust Indenture
Act and each of the Indenture and the Supplemental Indenture has been
duly authorized by the Company, and upon execution and delivery thereof
by the Company, and assuming due authorization, execution and delivery
thereof by the Trustee, each of the Indenture and the Supplemental
Indenture will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally and by general principles of
equity.
(g) The Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture as
supplemented by the Supplemental Indenture and delivered to and paid
for by the Underwriters in accordance with the terms of this Agreement,
will be entitled to the benefits of the Indenture as supplemented by
the Supplemental Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors rights generally and by general principles of equity.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture and the Supplemental Indenture and the issuance and sale
of the
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Securities will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or any agreement
or other instrument binding upon the Company or any of its subsidiaries
that is material to the Company and its subsidiaries, taken as a whole,
or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, except
such contraventions as would not in the aggregate have a material
adverse effect on the Company and its subsidiaries, taken as a whole,
and no consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the performance
by the Company of its obligations under this Agreement, the Indenture,
the Supplemental Indenture or the issuance and sale of the Securities,
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 Securities.
(i) 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 Company 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 Agreement).
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company 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
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.
(k) 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 applicable rules and regulations of the Commission thereunder.
(l) The Company is not and, after giving effect to the offering
and sale of the 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.
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(m) The Company and its subsidiaries (i) are, to the Company'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 the Company'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 the Company'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,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(n) Any costs or liabilities associated with Environmental Laws
(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 the Company and its subsidiaries, taken as a whole.
(o) No person has the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Securities registered pursuant to the Registration
Statement as a consequence of the filing of the Registration Statement
with the Commission.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective principal amounts of Securities set forth in Schedule I
hereto opposite its name at 98.695% of their principal amount plus accrued
interest, if any, from December 1, 1999 to the date of payment and delivery.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Securities as soon after this Agreement has been entered into as in your
judgment is advisable. The terms of the public offering of the Securities are
set forth in the Prospectus. The Company is further advised by you that the
Securities are to be
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offered to the public initially at 99.695% of their principal amount (the
"PUBLIC OFFERING PRICE") plus accrued interest, if any, from December 1, 1999 to
the date of payment and delivery and to certain dealers selected by you at a
price that represents a concession not in excess of 0.60% of the principal
amount, and that any Underwriter may allow, and such dealers may reallow, a
concession, not in excess of 0.25% of the principal amount, to any Underwriter
or to certain other dealers.
4. Payment and Delivery. Payment for the Securities shall be made by
wire transfer to the Company in Federal or other funds immediately available in
New York City at 10:00 a.m., New York City time, on December 13, 1999, or at
such other time on the same or such other date, not later than December 20,
1999, 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 the Securities shall be made against delivery to you on the
Closing Date for the respective accounts of the several Underwriters of the
Securities registered in such names and in such denominations as you shall
request in writing not less than one full business day prior to the Closing
Date, with any transfer taxes payable in connection with the transfer of the
Securities to the Underwriters duly paid.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Securities to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Securities 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:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded the Company or any of the Company's securities or in the
rating outlook for the Company by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of Rule 436 (g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development revolving a prospective change, in the condition,
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financial or otherwise, or in the earnings, business or operations of
the Company 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 Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct in all material respects as of the
Closing Date and that the Company 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 the Company signing and delivering such certificate may
rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of,, Slate, &, special counsel for
the Company, dated the Closing Date, to the effect that:
(i) the Indenture has been qualified under the Trust Indenture
Act and, assuming the due authorization, execution and delivery of the
Indenture and the Supplemental Indenture by the Company and the
Trustee, each of the Indenture and the Supplemental Indenture will be
a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and by general principles of equity;
(ii) assuming the due authorization, execution and delivery of
the Indenture and the Supplemental Indenture by the Company, the
Securities, when executed and authenticated in accordance with the
provisions of the Indenture and the Supplemental Indenture and
delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be entitled to the benefits of the
Indenture and the Supplemental Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their
terms, except as
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the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally and by general principles of
equity;
(iii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture and the Supplemental Indenture and the issuance and sale
of the Securities will not contravene any provision of Applicable Law
(as defined below), 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 Company and its subsidiaries, taken as
a whole, provided that such counsel may state that they express no
opinion under this paragraph with regard to the anti-fraud provisions
of the Securities Act, the Exchange Act or the rules and regulations
thereunder or the information contained in, the accuracy, completeness
or correctness of, or the adequacy of the disclosure contained in, the
Prospectus or the Registration Statement or the responsiveness thereof
to the requirements of the Act and the rules and regulations
thereunder which matters are addressed in paragraph 5(c)(vi) below and
the second paragraph following paragraph 5(c)(vi) below; and no
Governmental Approval is required for the performance by the Company
of its obligations under this Agreement, the Indenture, the
Supplemental Indenture or the Securities, 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 Securities.
(iv) the statements in the Prospectus under the captions
"Description of Debt Securities," "Description of Notes", and
"Underwriters" insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to
therein;
(v) the Company is not and, after giving effect to the offering
and sale of the 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; and
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(vi) such counsel (A) is of the opinion that each document,
if any, filed pursuant to the Exchange Act and incorporated by
reference in the Prospectus (except for financial statements and
schedules and other financial and statistical data included
therein 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 rules and regulations of the Commission
thereunder and (B) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included
therein as to which such counsel need not express any opinion)
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.
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
New York which, in such counsel's experience, are normally applicable to
transactions of the type contemplated by this Agreement (other than 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 New York or federal executive, legislative, judicial,
administrative or regulatory body.
In addition, such counsel shall state that it has participated in
conferences with officers and representatives of the Company and representatives
of the independent accountants of the Company 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 except for those made
under the captions listed in paragraph 5(c)(iv) above, in each case insofar as
such statements relate to provisions of documents therein described, on the
basis of the foregoing, no facts have come to such counsel's knowledge that have
led such counsel to believe that the Registration Statement, at the time it
became effective or as supplemented by the Prospectus Supplement at the date of
this Agreement, 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 date of this
Agreement or the Closing
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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 Form T-1.
(d) The Underwriters shall have received on the Closing Date an
opinion of A.N. Palizzi, executive vice president, general counsel for the
Company, to the effect that
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
Michigan, has the corporate power and authority to own its
property and to conduct its business as presently conducted and as
described in the Registration Statement and 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 the Company and its
subsidiaries, taken as a whole;
(ii) 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
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 the Company and its
subsidiaries, taken as a whole;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) each of the Indenture and the Supplemental Indenture
has been duly authorized by requisite corporate action on the part
of the Company, and duly executed and delivered by the Company,
and is a valid and binding agreement of the Company enforceable in
accordance with its terms, except as enforcement thereof may be
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limited by, bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity;
(v) the Securities have been duly authorized by requisite
corporate action on the part of the Company and, when executed and
authenticated in accordance with the provisions of the Indenture and
the Supplemental Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
valid and binding obligations of the Company enforceable in accordance
with their terms, except as the same may be limited by, bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
by general principles of equity;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture, the Supplemental Indenture and the Securities will not
contravene any provision of Applicable Law or the certificate of
incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, 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 the
Company and its subsidiaries, taken as a whole, provided that such
counsel may state that they express no opinion under this paragraph
with regard to the anti-fraud provisions of the Securities Act, the
Exchange Act or the rules and regulations thereunder or the
information contained in, the accuracy, completeness or correctness
of, or the adequacy of the disclosure contained in, the Prospectus or
the Registration Statement which matters are addressed in the second
paragraph following paragraph 5(d)(ix) below; and no Governmental
Approval is required for the performance by the Company 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 in connection with the offer and sale of
the Securities;
(vii) to the best knowledge of such counsel based on inquiry of
responsible officers of the Company and review of
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letters of counsel to the Company obtained in connection with
preparation of financial statements, there are no legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company 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 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;
(viii) the statements in the Registration Statement in Item 15,
insofar as said statements constitute summaries of the legal matters
referred to therein, fairly present the information called for with
respect to such legal matters; and
(ix) the Company 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 the Company and its
subsidiaries, taken as a whole.
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 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, and (b) "Governmental Approval"
shall mean any consent, approval, license, authorization or validation of,
or filing, recording or registration with, and Governmental Authority
pursuant to Applicable Laws, and (c) "Governmental Authority" means any
Michigan or federal executive, legislative, judicial, administrative or
regulatory body.
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In addition, such counsel shall state that he has participated in
conferences with officers and representatives of the Company and
representatives of the independent accountants of the Company 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 knowledge that have led such counsel to believe that
the Registration Statement, at the time it became effective or as
supplemented by the Prospectus Supplement at the date of this Agreement,
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 date of
this Agreement or 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.
(e) The Underwriters shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in Sections 5(c)(i),
5(c)(ii) and 5(c)(iv) and to the effect that nothing has come to such
counsel's attention that causes such counsel to believe that (i) the
Registration Statement (except for financial statements and schedules and
other financial and statistical data included therein as to which such
counsel need not express any opinion) does not comply as to form in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder; (ii) (except for financial
statements and schedules and other financial and statistical data as to
which such counsel need not express any belief and except for that part of
the Registration Statement that constitutes the Form T-1 heretofore
referred to) the Registration Statement, as supplemented by the Prospectus
Supplement, as of the date of this Agreement contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
or (iii) (except for financial statements and schedules and other financial
and statistical data as to which such counsel need not
13
<PAGE> 15
express any belief) the Prospectus as of the date of this Agreement or the
Closing Date contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Davis Polk & Wardwell may state that their opinion and belief are
based upon their participation in the preparation of the Prospectus and any
amendments or supplements thereto (other than the documents incorporated by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), but are without independent
check or verification except as specified.
The opinions of Skadden, Arps, Slate, Meagher & Flom LLP and of A.N.
Palizzi described in Sections 5(c) and 5(d) above shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the date hereof
and 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 PricewaterhouseCoopers 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; provided that the
letter delivered on the Closing Date shall use a "cut-off date" not earlier
than five business days prior to the Closing Date.
6. Covenants of the Company. In further consideration of the agreements of
the Underwriters herein contained, the Company covenants with each Underwriter
as follows:
(a) To furnish you, without charge, six signed copies of the
Registration Statement (including exhibits thereto and documents
incorporated therein by reference) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto but including documents incorporated therein by reference)
and to furnish you in New York City, without charge, prior to 10:00 a.m.
New York City time on the business day next succeeding the date of this
Agreement and during the period mentioned in Section 6(c) below, as many
copies of the Prospectus, any documents incorporated
14
<PAGE> 16
therein by reference and any supplements and amendments thereto 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, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the 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 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 the Company) to which 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 Securities 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 the Company's security holders and
to you as soon as practicable an earning statement covering the
twelve-month period ending December 31, 2000 that satisfies the provisions
of Section 11(a) of the Securities Act and the rules and regulations
(including Rule 158) of the Commission thereunder.
(f) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase or otherwise acquire debt securities of the Company
15
<PAGE> 17
substantially similar to the Securities (other than (i) the Securities and
(ii) commercial paper issued in the ordinary course of business), without
the prior written consent of Morgan Stanley & Co. Incorporated.
(g) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Securities under the Securities Act and
all other fees or expenses in connection with the preparation and filing of
the Registration Statement, the Prospectus and amendments and supplements
to any of the foregoing, including all printing costs associated therewith,
and the mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the
Underwriters, including any transfer or other taxes payable thereon, (iii)
the cost of printing or producing any Blue Sky or legal investment
memorandum in connection with the offer and sale of the Securities under
state law and all expenses in connection with the qualification of the
Securities for offer and sale under state law as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky or legal investment memorandum, (iv) all
filing fees and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of
the offering of the Securities by the National Association of Securities
Dealers, Inc., (v) any fees charged by the rating agencies for the rating
of the Securities, (vi) the cost of printing certificates representing the
Securities, (vii) the costs and charges of any trustee, transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Securities, including,
without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of
the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (ix) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. The
Underwriters will reimburse to the Company $375,000 in respect of the costs
and expenses of the offering. This amount shall be taken into account in
making the payment called for by Section 4.
16
<PAGE> 18
7. Indemnity and Contribution. (a) The Company agrees 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 the Company shall have furnished
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 the Company
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 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 Securities 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 Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company 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 Section 7(a) or 7(b), 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
17
<PAGE> 19
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 the fees and
expenses of more than one separate firm (in addition to any local counsel)
for all such indemnified parties and that all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated, in the case of parties
indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). 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 Section 7(a) or
7(b) 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,
18
<PAGE> 20
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 the Company on the one hand and the Underwriters on the other hand from
the offering of the Securities or (ii) if the allocation provided by clause
7(d)(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
7(d)(i) above but also the relative fault of the Company 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 the Company on the one hand and the Underwriters on
the other hand in connection with the offering of the Securities shall be
deemed to be in the same respective proportions as the net proceeds from
the offering of the Securities (before deducting expenses) received by the
Company 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
Securities. The relative fault of the Company 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 the Company 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 principal amounts of Securities they have
purchased hereunder, and not joint.
(e) The Company 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 Section 7(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph 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 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
19
<PAGE> 21
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 and other statements of the
Company 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 Company, its officers
or directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Securities.
8. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, 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., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade,
(ii) trading of any securities of the Company 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 8(a)(i) through 8(a)(iv), such event, singly or together with any
other such event, makes it, in your judgment, impracticable to market the
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, any one or more of the Underwriters shall
fail or refuse to purchase Securities that it has or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of the Securities to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the
principal amount of Securities set forth opposite their respective names in
Schedule I bears to the principal amount of Securities set forth opposite
the names of all such non-defaulting Underwriters, or in such other
proportions as you may specify, to purchase the Securities which such
defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the principal amount
of Securities that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an
20
<PAGE> 22
amount in excess of one-ninth of such principal amount of Securities
without the written consent of such Underwriter. If, on the Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Securities
and the aggregate principal amount of Securities with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of
Securities to be purchased on such date, and arrangements satisfactory to
you and the Company for the purchase of such 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 the Company. In
any such case either you or the Company 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. 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 the Company to
comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement (other than on account of an Underwriter's
breach of obligations causing a termination pursuant to the preceding
paragraph), the Company 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 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.
21
<PAGE> 23
Very truly yours,
KMART CORPORATION
By: /s/ Michael J. Viola
-----------------------------------
Name: Michael J. Viola
Title: Vice President and Treasurer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: /s/ Harold Hendershot III
----------------------------
Name: Harold Hendershot
Title: Vice President
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER SECURITIES TO BE
- --------------------------------- -------------------
<S> <C>
Morgan Stanley & Co. Incorporated $147,000,000
Chase Securities Inc. 60,000,000
BancBoston Robertson Stephens Inc. 27,000,000
Credit Suisse First Boston Corporation 27,000,000
Lehman Brothers Inc. 27,000,000
Utendahl Capital Partners, L.P. 6,000,000
The Williams Capital Group, L.P. 6,000,000
------------
Total:............................................... $300,000,000
============
</TABLE>
<PAGE> 1
EXHIBIT 4.3
KMART CORPORATION,
Issuer
and
THE BANK OF NEW YORK,
Trustee
-----------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of December 13, 1999
to
INDENTURE
Dated as of December 13, 1999
-----------------------------------------------------
8 3/8% Notes Due 2004
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions......................................................................1
ARTICLE 2
TERMS OF NOTES
SECTION 2.01. Designation of Notes; Aggregate Principal Amount.................................3
SECTION 2.02. Form of Notes....................................................................3
SECTION 2.03. Certain Terms of the Notes.......................................................4
SECTION 2.04. Global Form......................................................................4
SECTION 2.05. Defeasance.......................................................................4
SECTION 2.06. Covenants........................................................................4
SECTION 2.07. Additional Notes.................................................................4
ARTICLE 3
COVENANTS APPLICABLE TO THE NOTES
SECTION 3.01. Restrictions on Liens............................................................5
SECTION 3.02. Limitations on Sale and Leaseback Transactions...................................7
ARTICLE 4
SUCCESSOR CORPORATION
SECTION 4.01. Consolidation, Merger and Sale of Assets.........................................8
ARTICLE 5
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 5.01. Indenture Satisfaction and Discharge Provisions..................................9
SECTION 5.02. Company's Option to Effect Defeasance or Covenant
Defeasance.......................................................................9
SECTION 5.03. Defeasance and Discharge.........................................................9
SECTION 5.04. Covenant Defeasance..............................................................9
SECTION 5.05. Conditions to Defeasance and Discharge or Covenant
Defeasance.......................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
ARTICLE 6
MISCELLANEOUS
<S> <C> <C>
SECTION 6.01. Ratification and Confirmation...................................................11
SECTION 6.02. Recitals, Validity and Sufficiency..............................................11
SECTION 6.03. Counterparts....................................................................11
SECTION 6.04. Governing Law...................................................................11
EXHIBIT A: Form of Note....................................................................A-1
</TABLE>
ii
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE dated as of December 13, 1999 (the "FIRST
SUPPLEMENTAL INDENTURE") between Kmart Corporation, a corporation duly organized
and existing under the laws of the State of Michigan (the "COMPANY") and The
Bank of New York, a New York banking corporation, as trustee (the "TRUSTEE").
WHEREAS, the Company has executed and delivered to the Trustee an
Indenture dated as of December 13, 1999 (the "INDENTURE") providing for the
issuance from time to time of one or more series of the Company's debt
securities;
WHEREAS, Section 2.01 of the Indenture provides that the Company and
the Trustee may enter into an indenture supplemental to the Indenture to
establish the form or terms of Securities of any series as permitted by Section
2.01 and Section 9.01 of the Indenture; and
WHEREAS, the Company is entering into this First Supplemental Indenture
to establish the form and terms of its 8 3/8% Notes Due 2004 (the "NOTES").
NOW THEREFORE, in consideration of the premises and the purchase of the
Notes by the holders thereof, the Company and the Trustee mutually covenant and
agree for the equal and ratable benefit of the holders of Notes as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Indenture has the meaning
assigned to such term in the Indenture. The following terms, as used herein,
have the following meanings:
"ATTRIBUTABLE DEBT" means, with respect to a Sale and Leaseback
Transaction, at the time of determination, the present value of the obligation
of the lessee for net rental payments during the remaining term of the lease
included in such Sale and Leaseback Transaction (including any period for which
such lease has been extended or may, at the option of the lessor, be extended),
using a discount rate equal to the average interest rate per annum used to
calculate the present value of operating lease payments for the most recent year
in the Company's most recent Annual Report to Stockholders. The term "net rental
payments" under any lease for any period shall mean the sum of the rental and
other payments required to be paid in such period by the lessee thereunder, not
<PAGE> 5
including, however, any amounts required to be paid by such lessee (whether or
not designated as rental or additional rental) on account of maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges required
to be paid by such lessee thereunder or any amounts required to be paid by such
lessee thereunder contingent upon the amount of sales, maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total of all the assets
appearing on the consolidated balance sheet of the Company and its Subsidiaries,
less the following:
(1) current liabilities, including liabilities for Debt maturing
more than 12 months from the date of the original creation
thereof but maturing within 12 months from the date of
determination;
(2) reserves for depreciation and other asset valuation reserves;
(3) intangible assets, including, without limitation, such items
as goodwill, trademarks, trade names, patents, unamortized
debt discount and expense and other similar intangibles
carried as an asset on said balance sheet; and
(4) appropriate adjustments on account of minority interests of
other Persons holding stock in any Subsidiary of the Company.
Consolidated Net Tangible Assets shall be determined in accordance with
generally accepted accounting principles and practices applicable to the type of
business in which the Company and its Subsidiaries are engaged and that are
approved by the independent accountants regularly retained by the Company, and
may be determined as of a date not more than 60 days prior to the happening of
the event for which such determination is being made.
"DEBT" means, all obligations of a Person for borrowed money, including
obligations secured by Liens on property owned by the Person whether or not the
Person is directly liable for the obligations.
"FUNDED DEBT" means Debt which matures more than one year from the date
of computation, or which is extendable or renewable at the sole option of the
obligor so that it may become payable more than one year from such date.
"LIEN" means any mortgage, deed of trust, security interest, pledge,
lien or other encumbrance.
2
<PAGE> 6
"OPERATING PROPERTY" means (a) all real property and improvements
thereon owned by the Company or a Subsidiary constituting, without limitation,
any store, warehouse, service center or distribution center wherever located,
provided that such term shall not include any store, warehouse, service center
or distribution center which the Company's Board of Directors declares by
resolution, together with all other stores, warehouses, service centers or
distribution centers similarly not included in such term, not to be of material
importance to the business of the Company and its Subsidiaries taken as a whole,
and (b) all equipment (including all transportation and warehousing equipment
but excluding office equipment and data processing equipment) owned by the
Company or a Subsidiary.
"SALE AND LEASEBACK TRANSACTION" means any arrangement with any Person
providing for the leasing to the Company or any Subsidiary of any Operating
Property, which Operating Property has been or is to be sold or transferred by
the Company or such Subsidiary to such Person.
"SUBSIDIARY" means (1) a corporation more than 50% of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Company, by one
or more other Subsidiaries, or by the Company and one or more other Subsidiaries
or (2) any other Person in which the Company, or one or more Subsidiaries, or
the Company and one or more Subsidiaries, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs of
such Person.
ARTICLE 2
TERMS OF NOTES
SECTION 2.01. Designation of Notes; Aggregate Principal Amount. Subject
to and in accordance with Section 2.01 of the Indenture, the Company hereby
establishes a series of securities to be issued under the Indenture with the
title "8 3/8% Notes Due 2004." The aggregate principal amount of the Notes that
may be authenticated and delivered under the Indenture shall be $300,000,000
(except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes and except as set forth in
Section 2.07 in this First Supplemental Indenture).
SECTION 2.02. Form of Notes. The form of the Notes and the form of
the Certificate of Authentication for the Notes shall be substantially in the
form of Exhibit A hereto.
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SECTION 2.03. Certain Terms of the Notes. Set forth in the form of the
Notes attached hereto as Exhibit A are:
(i) the date on which the principal of the Notes is payable;
(ii) the rate at which the Notes shall bear interest;
(iii) the place where payments with respect to the Notes shall
be payable;
(iv) the date from which interest on the Notes will accrue,
the Interest Payment Dates and the record dates for the
determination of holders to whom interest is payable on Interest
Payment Dates; and
(v) the period within which, the price at which and the terms
and conditions upon which, the Notes may be redeemed.
SECTION 2.04. Global Form. The Notes will be issued initially as a
Global Security in accordance with Section 2.11 of the Indenture. The Depositary
for the Notes shall be The Depository Trust Company, a New York corporation.
SECTION 2.05. Defeasance. The Notes shall be subject to defeasance as
set forth in Article XI of the Indenture as amended and supplemented by Article
5 of this First Supplemental Indenture.
SECTION 2.06. Covenants. Holders of the Notes shall have the benefit
of the additional restrictive covenants set forth in Article 3 and 4 of this
First Supplemental Indenture.
SECTION 2.07. Additional Notes. Notwithstanding Section 2.01 of this
First Supplemental Indenture, the Company may, without the consent of the
holders of Notes, issue additional notes having the same ranking and the same
interest rate, maturity and other terms as the Notes. Any additional notes
having such similar terms, together with the Notes, will constitute a single
series of Notes under the Indenture, and will be issued in compliance with
Section 2.01 of the Indenture.
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<PAGE> 8
ARTICLE 3
COVENANTS APPLICABLE TO THE NOTES
For the sole benefit of the holders of the Notes, the Company agrees:
SECTION 3.01. Restrictions on Liens. (a) The Company will not, nor will
it permit any Subsidiary to, issue, assume or guarantee any Debt secured by any
Lien upon any Operating Property or upon any shares of stock or Debt of any
Subsidiary (whether such Operating Property, shares of stock or Debt is now or
hereafter acquired) without in any such case effectively securing, concurrently
with the issuance, assumption or guaranty of any such Debt, the Notes (together
with, if the Company shall so determine, any other Debt of or guaranteed by the
Company or such Subsidiary ranking equally with such Notes and then existing or
thereafter created) equally and ratably with such Debt; provided that the
foregoing restrictions shall not apply to:
(i) Liens on any Operating Property acquired, constructed or
improved by the Company or any Subsidiary after the date of the
Indenture to secure Debt issued, assumed or guaranteed within 360 days
after such acquisition or completion of construction or improvement to
provide for the payment of the purchase price of, or the cost of
constructing or improving, such Operating Property;
(ii) Liens existing on any Operating Property at the time of
its acquisition by the Company or one of its Subsidiaries, or Liens on
any shares of stock or Debt of any Subsidiary existing at the time it
becomes a Subsidiary;
(iii) Liens existing on any property acquired from a Person that
is merged with or into the Company or a Subsidiary;
(iv) Liens to secure Debt of a Subsidiary to the Company or to
another Subsidiary;
(v) Liens in existence on any Operating Property or any shares
of stock or Debt of any Subsidiary on the date of the Indenture;
(vi) Liens in favor of the United States of America or any
state thereof, or any department, agency or instrumentality or
political subdivision of the United States of America or any state
thereof to secure partial progress, advance or other payments pursuant
to any contract or statute or to secure any Debt incurred for the
purpose of financing all or any part of the purchase price or the cost
of constructing or improving the property subject to such Liens;
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<PAGE> 9
(vii) Liens imposed by law, such as carriers', warehousemen's,
mechanics', landlord's, materialmen's, repairmen's or other like Liens;
(viii) pledges or deposits in connection with workers'
compensation, unemployment insurance and similar legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(x) Liens for taxes, assessments, governmental charges or
levies not yet due or which are being contested in good faith;
(xi) any Lien incurred or assumed in connection with the
issuance by a state or political subdivision of a state of any
securities the interest on which is exempt from Federal income taxes by
virtue of Section 103 of the Internal Revenue Code of 1986, as amended,
or any other laws and regulations in effect at the time of such
issuance; or
(xii) Liens securing Debt incurred to extend, renew or replace
in whole or in part Debt secured by any Lien, provided that (a) the
principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and (b) such extension, renewal or replacement shall be
limited to all or a part of the property that secured the Debt so
extended, renewed or replaced plus improvements on such property.
(b) In addition to the foregoing, the Company and its Subsidiaries may
issue, assume or guarantee Debt secured by a Lien upon any Operating Property or
shares of stock or Debt of any Subsidiary or enter into a Sale and Leaseback
Transaction involving any Operating Property without equally and ratably
securing the Notes if the sum of (1) the amount of the Debt secured by Liens
otherwise prohibited by Section 3.01(a) and (2) the Attributable Debt of all
Sale and Leaseback Transactions otherwise prohibited by Section 3.02 does not
exceed at the time 10% of Consolidated Net Tangible Assets.
(c) If at any time the Company or any Subsidiary shall issue, assume
or guarantee any Debt secured by any Lien upon any Operating Property or shares
of stock or Debt of any Subsidiary and if Section 3.01(a) requires that the
Notes be secured equally and ratably with such Debt, the Company will promptly
execute,
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<PAGE> 10
at its expense, any instruments necessary to so equally and ratably secure such
Notes and deliver the same to the Trustee together with:
(i) an Officers' Certificate stating that the covenant of the
Company contained in Section 3.01(a) has been complied with; and
(ii) an Opinion of Counsel to the effect that such covenant has
been complied with, and that any instruments executed by the Company in
the performance of such covenant comply with the requirements of such
covenant.
(d) If the Company shall hereafter secure the Notes equally and
ratably with any other Debt pursuant to the provisions of this Section 3.01, the
Trustee is hereby authorized to enter into an indenture or supplemental
indenture and to take such action, if any, as it may deem advisable to enable it
to enforce effectively the rights of the holders of the Notes so secured,
equally and ratably with such other Debt.
SECTION 3.02. Limitations on Sale and Leaseback Transactions. The
Company will not, nor will it permit any Subsidiary to, enter into any Sale and
Leaseback Transaction involving any Operating Property, unless within 360 days
of the effective date of such Sale and Leaseback Transaction, the Company or
such Subsidiary applies or causes to be applied an amount equal to the greater
of (i) the fair market value of the Operating Property so sold and leased back
at the time of entering into such Sale and Leaseback Transaction (as determined
by the Company's Board of Directors) and (ii) the net proceeds of the sale of
the Operating Property sold and leased back pursuant to such Sale and Leaseback
Transaction, to:
(a) the prepayment or retirement (other than mandatory prepayment or
retirement) of Funded Debt of the Company or any Subsidiary, or
(b) the purchase of other property that will constitute Operating
Property.
The foregoing restriction shall not apply to a Sale and Leaseback Transaction,
if:
(i) the Company or such Subsidiary would be entitled to issue,
assume or guarantee Debt in an amount equal to the Attributable Debt of
the Sale and Leaseback Transaction secured by the Operating Property
without being required to equally and ratably secure the Notes pursuant
to Section 3.01(a),
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<PAGE> 11
(ii) such Sale and Leaseback Transaction is between the Company
and a Subsidiary or between Subsidiaries, or
(iii) such Sale and Leaseback Transaction involves taking back a
lease for a period of three years or less (including renewals).
ARTICLE 4
SUCCESSOR CORPORATION
SECTION 4.01. Consolidation, Merger and Sale of Assets. The Company
will not consolidate with or merge into any other Person or convey, transfer or
lease all or substantially all of its properties and assets to any Person,
unless:
(i) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases all or
substantially all of the properties and assets of the Company shall be
a corporation organized and existing under the laws of the United
States of America, any state or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due
and punctual payment of the principal of (and premium, if any) and
interest on all the Notes and the performance of every covenant of this
Indenture as supplemented by the First Supplemental Indenture on the
part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction, no
Event of Default and no Default shall have happened and be continuing.
The Trustee may require that the Company deliver an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
complies with this Section 4.01 and that all conditions precedent herein
provided for relating to such transaction have been complied with.
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<PAGE> 12
ARTICLE 5
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 5.01. Indenture Satisfaction and Discharge Provisions. Section
11.02 of the Indenture shall not apply to the Notes. Section 11.03 and 11.04
shall apply to all moneys and Governmental Obligations deposited with the
Trustee or held by any paying agent under this Article 5.
SECTION 5.02. Company's Option to Effect Defeasance or Covenant
Defeasance. In addition to discharge of the Indenture pursuant to Section 11.01
of the Indenture, the Company may at its option elect at any time either (a) to
effect a defeasance and discharge of the Notes under Section 5.03 hereof or (b)
to effect a covenant defeasance of the Notes under Section 5.04 hereof, in each
case upon compliance with the applicable conditions set forth in Section 5.05
hereof.
SECTION 5.03. Defeasance and Discharge. Upon election by Company to
effect a defeasance and discharge of the Notes under this Section 5.03 and
satisfaction of the conditions precedent set forth in Section 5.05 the Company
shall be deemed to have paid and discharged the Notes and the Company shall be
deemed to have satisfied all its other obligations under the Notes and all its
other obligations relating to the Notes under the Indenture, as supplemented by
the First Supplemental Indenture, except for Sections 2.03, 2.05, 2.07, 4.01,
4.02, 4.03, 7.06, 7.10 and 11.05 of the Indenture that shall survive until the
Notes mature and be paid. Thereafter, Sections 7.06 and 11.05 of the Indenture
shall survive.
SECTION 5.04. Covenant Defeasance. Upon election by the Company to
effect a covenant defeasance of the Notes under this Section 5.04, the Company
shall be released from its obligations under Sections 3.01 and 3.02 of this
First Supplemental Indenture on or after the date the conditions precedent set
forth in Section 5.05 are satisfied (hereinafter, "covenant defeasance"). For
this purpose, such covenant defeasance means that the Issuer may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in Section 3.01 or 3.02 of this First Supplemental Indenture.
SECTION 5.05. Conditions to Defeasance and Discharge or Covenant
Defeasance. The following shall be conditions precedent to the application of
either Section 5.03 or 5.04 :
(i) the Company shall have deposited or cause to be deposited
irrevocably with the Trustee, as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for
and dedicated solely to the benefit of the holders of Notes, of cash in
U.S. dollars (or such other money or currencies as shall then be legal
tender in the United States) and/or Government Obligations, which
through the
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<PAGE> 13
payment of interest and principal in respect thereof, in accordance
with their terms, will provide (and without reinvestment and assuming
no tax liability will be imposed on the Trustee), not later than the
due date of any payment of money, an amount in cash, sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to
the Trustee, to discharge principal (including premium, if any) under
the Notes, and each installment of principal (including premium, if
any) and interest on the Outstanding Notes on the stated maturity of
such principal or installment of principal or interest on the dates on
which such installments of principal and interest are due, in
accordance with the terms of the Indenture, as supplemented by this
First Supplemental Indenture, and the Notes;
(ii) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that holders of the Notes will not, or there
has been published by the Internal Revenue Service a ruling to the
effect that holders of the Notes will not, recognize income, gain or
loss for Federal income tax purposes as a result of the Company's
exercise of its option under Section 5.03 or 5.04, as the case may be,
and will be subject to Federal income tax on the same amounts and in
the same manner and at the same times, as would have been the case if
such defeasance or covenant defeasance had not occurred;
(iii) no Event of Default or Default shall have occurred and be
continuing on the date of such deposit, and no Event of Default under
Sections 6.01(a)(5) or (6) or event which with the giving of notice or
lapse of time, or both, would become an Event of Default under Sections
6.01(a)(5) or (6) shall have occurred and be continuing on the 91st day
after such date;
(iv) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance and discharge
under Section 5.03 or the covenant defeasance under Section 5.04 (as
the case may be) shall have been complied with;
(vi) such defeasance and discharge or covenant defeasance will
not result in the trust arising from such deposit to constitute an
investment company under the Investment Company Act of 1940 or such
trust shall be qualified under such act or exempt from regulation
thereunder; and
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<PAGE> 14
(vii) the Company has paid or caused to be paid all other sums
payable with respect to the Outstanding Notes.
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Ratification and Confirmation. The Indenture, as
supplemented by this First Supplemental Indenture, is in all respects ratified
and confirmed. This First Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.
SECTION 6.02. Recitals, Validity and Sufficiency. 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 6.03. 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.
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<PAGE> 15
SECTION 6.04. Governing Law. This First Supplemental Indenture and the
Notes shall be governed by, and construed in accordance with, the laws of the
State of New York without regard to conflict of law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.
KMART CORPORATION
By: /s/ Martin E. Welch III
---------------------------------------
Name: Martin E. Welch III
Title: Senior Vice President and Chief
Financial Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Ilianna A. Arciprete
---------------------------------------
Name: Ilianna A. Arciprete
Title: Assistant Treasurer
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<PAGE> 16
EXHIBIT A
[So long as the Notes are Global Securities with The Depository Trust
Company as Depositary, include the following legends:
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Except as provided in Section 2.11 of the Indenture, this Note may be
transferred, in whole but not in part, by the Depositary only to another nominee
of the Depositary or to a successor Depositary or to a nominee of such successor
Depositary.]
KMART CORPORATION
8 3/8% NOTE DUE 2004
No. 1
$300,000,000 CUSIP: 482584BA6
Kmart Corporation, a corporation duly organized and existing under the
laws of the State of Michigan (the "ISSUER"), for value received, hereby
promises to pay to Cede & Co. or registered assigns, the principal sum of
$300,000,000 on December 1, 2004, at the office or agency of the Issuer in the
Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay semi-annually on June 1 and
December 1 of each year (each, an "INTEREST PAYMENT DATE"), commencing December
1, 1999, the amount of interest on said principal sum at said office or agency,
in like coin or currency, at the rate per annum specified in the title of this
Note, from December 1, 1999 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for until said principal sum has
been paid or duly provided for. Interest shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
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The interest payable on any Interest Payment Date which is punctually
paid or duly provided for on such Interest Payment Date will be paid to the
Person in whose name this Note is registered at the close of business on May 15
or November 15 (in each case, whether or not a Business Day), as the case may be
(each, a "REGULAR RECORD DATE"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest may either (i) be paid to the Person in whose name this
Note is registered at the close of business on a special record date to be
established for such payment by the Trustee or (ii) be paid in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, all as more fully provided in the Indenture
referred to on the reverse hereof. At the option of the Issuer, interest on the
Notes may be paid (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of holders of the Notes or
(ii) at the expense of the Issuer, by wire transfer to an account maintained by
the Person entitled thereto as specified in writing to the Trustee by such
Person by the applicable record date of the Notes.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
under the Indenture referred to on the reverse hereof.
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<PAGE> 18
IN WITNESS WHEREOF, KMART CORPORATION. has caused this
instrument to be signed by its duly authorized officers and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: December 13, 1999
KMART CORPORATION
[SEAL] By: _______________________________
Title:
By: _______________________________
Title:
Attest: ________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.
Dated: December 13, 1999
THE BANK OF NEW YORK,
as Trustee
By: __________________________
Authorized Signatory
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<PAGE> 19
REVERSE OF NOTE
KMART CORPORATION
8 3/8% NOTE DUE 2004
1. Indenture. (a) This Note is one of a duly authorized issue of
senior debt securities of the Issuer (hereinafter called the "NOTES") of a
series designated as the 8 3/8% Notes Due 2004 of the Issuer, initially limited
in aggregate principal amount to $300,000,000, all issued or to be issued under
and pursuant to the Indenture, dated as of December 13, 1999, as supplemented by
the First Supplemental Indenture, dated as of December 13, 1999 (as so amended
and supplemented, the "INDENTURE"), between the Issuer and The Bank of New York,
as Trustee (herein called the "Trustee"), 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
Issuer, the Trustee and the holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "SECURITIES") may be issued
under the Indenture in one or more series, which different series may vary from
the Notes and each other, as in the Indenture provided.
(c) All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
2. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Issuer and the rights of the holders of the
Securities of each series to be affected under the Indenture at any time by the
Issuer and the Trustee with the consent of the holders of a majority in
principal amount of the Securities at the time Outstanding of each series to be
affected. The Indenture also contains provisions permitting the holders of a
majority in principal amount of the Securities of each series at the time
Outstanding, on behalf of the holder of all Securities of such series, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the holder of this Note shall be conclusive and binding upon such
holder and upon all future holders of this Note and of any issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.
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3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time, upon mailing a notice of such redemption not
less than 30 days and not more than 60 days before the date of redemption to the
holder of this Note as provided for in the Indenture, at a redemption price
equal to the greater of (a) 100% of the principal amount of this Note and (b) as
determined by the Independent Investment Banker, the sum of the present values
of the remaining scheduled payments of principal and interest thereon (not
including any portion of such payments of interest accrued as of the date of
redemption) discounted to the date of redemption on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
plus 25 basis points plus, in each case, accrued interest thereon to the date of
redemption. For purposes of the foregoing provisions, the following terms, as
used herein have the following meanings:
"ADJUSTED TREASURY RATE" means, with respect to any redemption date:
(i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (as defined below) (if
no maturity is within three months before or after the Remaining Life (as
defined below), yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on
a straight line basis, rounding to the nearest month); or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined below) for such redemption date. The Adjusted Treasury Rate shall be
calculated on the third Business Day preceding the redemption date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by the Independent Investment Banker (as defined below) as having a
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maturity comparable to the remaining term of the Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such securities ("REMAINING LIFE").
"COMPARABLE TREASURY PRICE" means (1) the average of five Reference
Treasury Dealer Quotations (as defined below) for such redemption date, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if
the Independent Investment Banker obtains fewer than five such Reference
Treasury Dealer Quotations, the average of all such quotations.
"INDEPENDENT INVESTMENT BANKER" means one of the Reference Treasury
Dealers appointed by the Issuer.
"REFERENCE TREASURY DEALER" means: (i) each of Morgan Stanley & Co.
Incorporated, Chase Securities Inc., BancBoston Robertson Stephens Inc., Credit
Suisse First Boston Inc., Lehman Brothers Inc. and their respective successors;
provided that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "PRIMARY TREASURY DEALER"), the
Issuer shall substitute therefor another Primary Treasury Dealer, and (ii) any
other Primary Treasury Dealer selected by the Issuer.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such redemption
date.
5. Certain Covenants. The Indenture restricts the ability of the
Issuer and its Subsidiaries to incur certain secured indebtedness and enter into
certain sale and leaseback transactions. These covenants are subject to the
covenant defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have
occurred and be continuing under the Indenture, the principal hereof 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.
7. Defeasance. The Indenture contains provisions for defeasance and
covenant defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
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8. Denominations; Exchanges. (a) The Notes are issuable in registered
form without coupons in denominations of $1,000 and any multiple of $1,000 at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture, Notes may be exchanged for a like aggregate principal amount of Notes
of other authorized denomination.
9. Holder as Owner. The Issuer, the Trustee and any authorized agent
of the Issuer or the Trustee may deem and treat the registered holder hereof as
the absolute owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and,
subject to the provisions on the face hereof, interest hereon, and for all other
purposes, and none of the Issuer or the Trustee or any authorized agent of the
Issuer or the Trustee shall be affected by any notice to the contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any past, present or
future incorporator, shareholder, officer or director, as such, of the Issuer or
of any successor corporation of either of them, either directly or through the
Issuer, or any successor corporation, under any constitution, statute or rule of
law or by the enforcement of any assessment or otherwise, all such liability
being expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11. Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to conflict of
law provisions thereof.
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<PAGE> 23
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
the within Note of Kmart Corporation and all rights thereunder and hereby
irrevocably constitutes and appoints such person attorney to transfer such
Note on the books of Kmart Corporation, with full power of substitution in
the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE WITHIN INSTRUMENT IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY, A MEMBER
ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR
BY SUCH OTHER ENTITY WHOSE SIGNATURE IS ON FILE
WITH AND ACCEPTABLE TO THE TRANSFER AGENT.
Signature Guarantee:
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