Exhibit C
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of May 6, 2003 (this
"Agreement"), by and among Kmart Holding Corporation, a Delaware corporation
(the "Company"), on the one hand, and ESL Investments, Inc., a Delaware
corporation ("ESL"), and Third Avenue Trust, a Delaware business trust, on
behalf of certain of its investment series ("Third Avenue and, collectively with
ESL, the "Plan Investors"), on the other hand.
W I T N E S S E T H :
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WHEREAS, in connection with the Restructuring (as defined below) and
pursuant to the terms and subject to the conditions set forth in the Investment
Agreement, dated as of January 24, 2003, by and among Kmart Corporation and the
Plan Investors, as amended (the "Investment Agreement"), the Plan Investors have
agreed to purchase, and the Company has agreed to sell to the Plan Investors,
the Plan Investors' Shares (as defined below); and
WHEREAS, pursuant to Section 6.7 of the Investment Agreement, the
Company and the Plan Investors desire to enter into this Agreement to set forth
the terms and conditions of the registration rights of the Plan Investors, their
respective Affiliates (as defined below) and certain transferees of New Common
Shares (as defined below) held by the Plan Investors or their Affiliates;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
Article I
Definitions
Section 1.1 Definitions. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Investment Agreement. As used in
this Agreement, the following capitalized terms shall have the meanings ascribed
to them below:
"Holder" shall mean any Plan Investor, any Affiliate of any Plan
Investor, and any permitted transferee, pursuant to the Investment Agreement, of
Registrable Securities held by such Holder, in each case so long as such Holder
holds Registrable Securities.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement or any other amendments and supplements
to such prospectus, including without limitation any preliminary prospectus, any
pre-effective or post-effective amendment and all material incorporated by
reference in any prospectus.
"Registrable Securities" means New Common Shares which are issued to
any Holder pursuant to the Plan or pursuant to Sections 2.1 or 6.14 of the
Investment Agreement, and New Common Shares issued pursuant to the conversion of
the Called Notes and any securities issued or issuable in respect of or in
exchange for any of such New Common Shares by way of a stock dividend or other
distribution, stock split, reverse stock split or other combination of shares,
recapitalization, reclassification, merger, consolidation or exchange offer. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (i) a Registration Statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such Registration Statement, (ii) such securities shall have been sold to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, or (iii) such securities shall have ceased to be outstanding.
"Registration Expenses" has the meaning set forth in Article 5.
"Registration Statement" means any registration statement of the
Company which covers Registrable Securities pursuant to the provisions of this
Agreement, all amendments and supplements to such registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such registration statement.
Article II
Demand Registrations
Section 2.1 Requests for Registration. Subject to the provisions of
this Article II, any Holder or group of Holders holding Registrable Securities
representing at least 5% of the New Common Shares then outstanding may at any
time make a written request for registration under the Securities Act of all or
any part of such Holders' Registrable Securities (a "Demand Registration");
provided that no Holder shall be entitled to request a Demand Registration until
11 months after the effective date of the Plan. Such request shall specify the
amount of Registrable Securities to be registered and the intended method or
methods of disposition. Promptly after receipt of such request, the Company
shall send written notice of such request to all Holders and shall, subject to
the provisions of this Article II, include in such Demand Registration all
Registrable Securities with respect to which the Company receives written
requests (specifying the amount of Registrable Securities to be registered and
the intended method or methods of disposition) for inclusion therein within 15
days after such notice is sent; provided that if the managing underwriter for a
Demand Registration in which Registrable Securities are proposed to be included
pursuant to this Article II that involves an underwritten offering shall advise
the Holders that, in its opinion, the inclusion of the amount of Registrable
Securities to be sold for the account of Holders other than the Holder that
initiated such Demand Registration ("Non-Initiating Holders") would adversely
affect the success of the offering, then the number of Registrable Securities to
be sold for the account of such Non-Initiating Holders shall be reduced (and may
be reduced to zero) in accordance with the managing underwriter's
recommendation. As promptly as practicable thereafter, but in no event later
than 45 days after the end of such 15-day period, but subject to Section 2.3
hereof, the Company shall use its reasonable best efforts to file with the SEC a
Registration Statement, registering all Registrable Securities that any Holders
have requested to register, for disposition in accordance with the intended
method or methods set forth in their notices to the Company. The Company shall
use its reasonable best efforts to cause such Registration Statement to be
declared effective as soon as practicable after filing and to remain effective
until the earlier of (i) 90 days following the date on which it was declared
effective and (ii) the date on which all of the Registrable Securities covered
thereby are disposed of in accordance with the method or methods of disposition
stated
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therein; provided that no Registration Statement for a Demand
Registration shall become effective prior to the day following the one-year
anniversary of the effective date of the Plan.
Section 2.2 Number and Timing of Registrations. ESL, its Affiliates and
their permitted transferees shall be entitled to request four (4) Demand
Registrations. Third Avenue, its Affiliates and their permitted transferees
shall be entitled to request one (1) Demand Registration. No more than one (1)
request for a Demand Registration shall be permitted in any twelve (12) month
period.
Section 2.3 Suspension of Registration. The Company shall have the
right to delay the filing or effectiveness of the Registration Statement for any
Demand Registration or to require the Holders not to sell under any Registration
Statement or to delay the preparation and filing of any supplement or
post-effective amendment to the applicable Registration Statement or Prospectus
or any document incorporated therein by reference, in each case during one or
more periods aggregating not more than 90 days in each 12-month period, if (i)
the Company would, in accordance with the advice of its outside counsel, be
required to disclose in the Prospectus information not otherwise then required
to be publicly disclosed and (ii) in the judgment of the Company's Board of
Directors, there is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the Prospectus, would materially and
adversely affect any existing or prospective material business situation,
transaction or negotiation or otherwise materially and adversely affect the
Company.
Section 2.4 Interrupted Registration. A registration requested pursuant
to this Article II shall not be deemed to have been requested by the Holders of
Registrable Securities pursuant to Section 2.2: (i) unless it has been declared
effective by the SEC; (ii) if after it has become effective, such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC for any reason other than misrepresentation or an omission by the
requesting Holders and such stop order, injunction or other order or requirement
is not lifted or resolved and Registrable Securities are not sold pursuant to
such registration; (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied other than by reason of some wrongful act or
omission, or act or omission in bad faith, by such Holders; or (iv) if such
request has been withdrawn by the requesting Holders and such Holders shall have
elected to pay all Registration Expenses of the Company in connection with such
withdrawn request.
Article III
Piggy-back Registrations
Section 3.1 Right to Include Registrable Securities. If at any time the
Company proposes to register any of its equity securities under the Securities
Act, whether or not for sale for its own account (other than pursuant to a
registration statement on Form S-4 or Form S-8, or any successor or similar
forms), in a manner that would permit registration of Registrable Securities for
sale to the public under the Securities Act, it will each such time promptly
give written notice to all Holders: (i) of its intention to do so, (ii) of the
form of registration statement of the SEC that has been selected by the Company
and (iii) of rights of Holders under this Article III (the "Article III
Notice"). The Company will include in the proposed registration all Registrable
Securities that the Company is requested in writing, within 15 days after the
Article
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III Notice is given, to register by the Holders thereof; provided,
however, that (i) if, at any time after giving written notice of its intention
to register any equity securities and prior to the effective date of the
Registration Statement filed in connection with such registration, the Company
shall determine that none of such equity securities shall be registered, the
Company may, at its election, give written notice of such determination to all
Holders who so requested registration and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Article II hereof and (ii) in case of a determination by the Company to
delay registration of its equity securities, the Company shall be permitted to
delay the registration of such Registrable Securities pursuant to this Article
III for the same period as the delay in registering such other equity securities
by the Company. No registration effected under this Article III shall relieve
the Company of its obligations to effect registrations upon request under
Article II and, notwithstanding anything to the contrary in Article II, no
Holder shall have the right to require the Company to register any Registrable
Securities pursuant to Article II until the later of (A) the completion of the
distribution of the securities offered by the Company and registered pursuant to
the Article III Notice and (B) 90 days after the date the applicable
registration statement for the registration effected under this Article III is
declared effective.
Section 3.2 Priority; Registration Form. If the managing underwriter
for a registration in which Registrable Securities are proposed to be included
pursuant to this Article III that involves an underwritten offering shall advise
the Company that, in its opinion, the inclusion of the amount of Registrable
Securities to be sold for the account of Holders would adversely affect the
success of the offering, then the number of Registrable Securities to be sold
for the account of such Holders shall be reduced (and may be reduced to zero) in
accordance with the managing underwriter's recommendation. In the event that the
number of Registrable Securities to be included in any registration is reduced
(but not to zero), the number of such Registrable Securities included in such
registration shall be allocated pro rata among all requesting Holders on the
basis of the relative number of shares of such New Common Shares each such
Holder has requested to be included in such registration. If, as a result of the
proration provisions of this Section 3.2, any Holder shall not be entitled to
include all Registrable Securities in a registration pursuant to this Article
III that such Holder has requested be included, such Holder may elect to
withdraw its Registrable Securities from the registration.
Section 3.3 Merger, Consolidation, etc. Notwithstanding anything in
this Article III to the contrary, Holders shall not have any right to include
their Registrable Securities in any distribution or registration of equity
securities by the Company, which is pursuant to a merger, consolidation,
acquisition, exchange offer, recapitalization, other reorganization, dividend
reinvestment plan, stock option plan or other employee benefit plan, or any
similar transaction having the same effect.
Article IV
Registration Procedures
Section 4.1 The Company to Use Reasonable Best Efforts. In connection
with the Company's registration obligations pursuant to Article II and Article
III hereof, the Company shall use its reasonable best efforts to effect such
registrations to permit the sale of such
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Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
reasonably practicable:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements relating to the registration on any appropriate form
under the Securities Act, and to cause such Registration Statements to become
effective as soon as reasonably practicable and to remain continuously effective
for the time period required by this Agreement to the extent permitted under the
Securities Act; provided, however, that as soon as reasonably practicable but in
no event later than three (3) Business Days before filing such Registration
Statement, any related Prospectus or any amendment or supplement thereto, other
than any amendment or supplement made solely as a result of incorporation by
reference of documents filed with the SEC subsequent to the filing of such
Registration Statement, the Company shall furnish to the Holders of the
Registrable Securities covered by such Registration Statement, their counsel
selected as provided in Section 5.1(vi) hereof and the underwriters, if any,
copies of all such documents proposed to be filed, which Holders, counsel and
underwriters shall be afforded a reasonable opportunity to review such documents
and comment thereon;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period set forth in Section
2.1; and to cause the Registration Statement and the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed in accordance with the Securities Act and any rules and regulations
promulgated thereunder; and otherwise to comply with the provisions of the
Securities Act as may be necessary to facilitate the disposition of all
Registrable Securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
disposition by the selling Holders thereof set forth in such Registration
Statement or such Prospectus or Prospectus supplement;
(c) notify the selling Holders and the managing underwriters, if any,
promptly if at any time (i) any Prospectus, Registration Statement or amendment
or supplement thereto is filed, (ii) any Registration Statement, or any
post-effective amendment thereto, becomes effective, (iii) the SEC requests any
amendment or supplement to, or any additional information in respect of, any
Registration Statement or Prospectus, (iv) the SEC issues any stop order
suspending the effectiveness of a Registration Statement or initiates any
proceedings for that purpose, (v) the Company receives any notice that the
qualification of any Registrable Securities for sale in any jurisdiction has
been suspended or that any proceeding has been initiated for the purpose of
suspending such qualification, or (vi) any event occurs which requires that any
changes be made in such Registration Statement or any related Prospectus so that
such Registration Statement or Prospectus will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that in the case of this subclause (vi), such notice need only state
that an event of such nature has occurred, without describing such event. The
Company hereby agrees to promptly reimburse any selling Holders for any
reasonable out-of-pocket losses and expenses incurred in connection with any
uncompleted sale of any Registrable Securities in the event that the Company
fails to timely notify such Holder that the Registration Statement then on file
with the SEC is no longer effective;
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(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the qualification
of any Registrable Securities for sale in any jurisdiction, at the earliest
reasonably practicable moment;
(e) if requested by the managing underwriters and a Holder of
Registrable Securities being sold in connection with an underwritten offering,
incorporate into a Prospectus supplement or a post-effective amendment to the
Registration Statement any information which the managing underwriters, such
Holder and the Company reasonably agree is required to be included therein
relating to such sale of Registrable Securities; and to file such supplement or
post-effective amendment as soon as practicable in accordance with the
Securities Act and the rules and regulations promulgated thereunder;
(f) furnish to each selling Holder and each managing underwriter, if
any, one signed copy of the Registration Statement or Registration Statements
(or a copy or copies thereof) and any post-effective amendment thereto,
including all financial statements and schedules thereto and all exhibits
thereto as promptly as practicable after filing such documents with the SEC;
(g) deliver to each selling Holder and each underwriter, if any, as
many copies of the Prospectus or Prospectuses (including each preliminary
Prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; and to consent to the use of such Prospectus or any
amendment or supplement thereto by each such selling Holder and underwriter, if
any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus, amendment or supplement;
(h) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify, or to cooperate with the selling
Holders, the underwriters, if any, and their respective counsel in connection
with the registration or qualification of, such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as may be
requested by the Holders of a majority of the Registrable Securities included in
such Registration Statement; to keep each such registration or qualification
effective during the period set forth in Section 2.1 that the applicable
Registration Statement is required to be kept effective; and to do any and all
other acts or things necessary to enable the disposition in such jurisdictions
of the Registrable Securities covered by such Registration Statement; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service in any jurisdiction where it is
not then so subject;
(i) to cooperate with the selling Holders and the underwriters, if any,
in the preparation and delivery of certificates representing the Registrable
Securities to be sold, such certificates to be in such denominations and
registered in such names as such selling Holders or managing underwriters may
request at least two (2) Business Days prior to any sale of Registrable
Securities represented by such certificates;
(j) subject to Section 2.3 hereof, upon the occurrence of any event
described in clause (vi) of Section 4.1(c) above, promptly to prepare and file a
supplement or post-effective amendment to the applicable Registration Statement
or Prospectus or any document incorporated
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therein by reference, and any other required documents, so that such
Registration Statement and Prospectus will not thereafter contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, and to cause such supplement or
post-effective amendment to become effective as soon as practicable;
(k) to take all other actions in connection therewith as are reasonably
necessary or desirable in order to expedite or facilitate the disposition of the
Registrable Securities included in such Registration Statement and, in the case
of an underwritten offering: (i) to enter into an underwriting agreement in
customary form with the managing underwriter (such agreement to contain standard
and customary indemnities, representations, warranties and other agreements of
or from the Company); (ii) to obtain opinions of counsel to the Company (which
(if reasonably acceptable to the underwriters) may be the Company's inside
counsel) addressed to the underwriters, such opinions to be in customary form;
and (iii) to obtain "comfort" letters from the Company's independent certified
public accountants addressed to the underwriters, such letters to be in
customary form;
(l) make available for inspection by any selling Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by
any such selling Holder or underwriter all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees, attorneys and independent accountants
to supply all information reasonably requested by any such selling Holders,
underwriters, attorneys, accountants or agents in connection with such
Registration Statement. Each selling Holder of Registrable Securities agrees, on
its own behalf and on behalf of all its underwriters, accountants, attorneys and
agents, that the information obtained by it as a result of such inspections
shall be kept confidential by it and not disclosed by it, in each case unless
and until such information is made generally available to the public other than
by such selling Holder. Each selling Holder of Registrable Securities further
agrees, on its own behalf and on behalf of all its underwriters, accountants,
attorneys and agents, that it will, upon learning that disclosure of such
information is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the information deemed confidential; and
(m) take all such other actions not inconsistent with the terms of this
Agreement as the Holders of a majority of the Registrable Securities being sold
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities pursuant to a
Registration Statement in accordance with the terms of this Agreement.
Section 4.2 Holders' Obligation to Furnish Information. The Company may
require each Holder of Registrable Securities as to which any registration is
being effected to furnish to the Company such information regarding the
distribution of such Registrable Securities as the Company may from time to time
reasonably request.
Section 4.3 Suspension of Sales Pending Amendment of Prospectus. Each
Holder shall, upon receipt of any notice from the Company of the happening of
any event of the kind described in clauses (iii)-(vi) of Section 4.1(c) above,
suspend the disposition of any Registrable
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Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of a supplemented or amended Prospectus or until
it is advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and, if so directed by the Company, such Holder will
deliver to the Company all copies, other than permanent file copies, then in
such Holder's possession of any Prospectus covering such Registrable Securities.
If the Company shall have given any such notice during a period when a Demand
Registration is in effect, the 90-day period described in Section 2.3 shall be
extended by the number of days of such suspension period.
Section 4.4 No Required Registration. The Company shall not be required
to file a Registration Statement pursuant to the provisions of Article II
hereof, if the Company shall receive a written opinion from its counsel that the
Registrable Securities which any Holder has requested or may request to have
registered may, as of the date of such opinion, be sold in the public market, in
unlimited amounts, under Rule 144 or otherwise, without registration under the
Securities Act, provided that such opinion is also addressed to, and is
reasonably acceptable to, such Holders.
Article V
Registration Expenses
Section 5.1 Registration Expenses. All expenses incident to the
Company's performance of or compliance with its obligations under this
Agreement, including without limitation all (i) registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws, (iii)
printing expenses, (iv) fees and disbursements of its counsel and its
independent certified public accountants (including the expenses of any special
audit or "comfort" letters required by or incident to such performance or
compliance), (v) securities acts liability insurance (if the Company elects to
obtain such insurance), (vi) reasonable fees and expenses of one counsel for the
Holders of Registrable Securities covered by each Registration Statement, with
such counsel to be selected by Holders of a majority of such Registrable
Securities (all such expenses being herein referred to as "Registration
Expenses"), and (vii) the expenses and fees for listing securities to be
registered on each securities exchange on which New Common Shares are then
listed shall be borne by the Company; provided, however, that Registration
Expenses shall not include any underwriting discounts, commissions or fees
attributable to the sale of the Registrable Securities.
Article VI
Indemnification
Section 6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Article II or Article III hereof, the Company will, and hereby does,
indemnify and hold harmless the selling Holder of any Registrable Securities
covered by such Registration Statement, its affiliates, general and limited
partners, members and shareholders and each of its and their directors,
officers, managers, employees, attorneys, investment advisors and agents, each
other Person who participates as an underwriter, if any, in the offering or sale
of such securities and each other Person, if any, who controls such selling
Holder or any such underwriter within the meaning of the Securities Act, against
any and all losses, claims, damages or liabilities, joint or several, and
expenses (including
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any amounts paid in any settlement effected with the Company's consent, which
consent shall not be unreasonably withheld) to which such selling Holder or
other indemnified Person may become subject under the Securities Act, common law
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary Prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), if used prior to the
effective date of such Registration Statement, or contained in the Prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if the Company shall have filed with the SEC any amendment thereof
or supplement thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such registration,
and the Company will reimburse such selling Holder and each other indemnified
Person for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable to
any such selling Holder or other indemnified Person in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement or amendment thereof or supplement thereto or in any such
preliminary, final or summary Prospectus in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of any such selling Holder or other indemnified Person, specifically for
use in the preparation thereof; and provided, further, that the Company will not
be liable to any Person who participates as an underwriter in any underwritten
offering or sale of Registrable Securities, or to any Person who is a selling
Holder in any non-underwritten offering or sale of Registrable Securities, or
any other Person, if any, who controls such underwriter or selling Holder within
the meaning of the Securities Act, under the indemnity agreement in this Section
6.1 with respect to any preliminary Prospectus or the final Prospectus
(including any amended or supplemented preliminary or final Prospectus), as the
case may be, to the extent that any such loss, claim, damage or liability of
such underwriter, selling Holder or controlling Person results from the fact
that such underwriter or selling Holder sold Registrable Securities to a person
to whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final Prospectus as then amended or supplemented,
whichever is most recent, if the Company has previously furnished copies thereof
to such underwriter or selling Holder and such final Prospectus, as then amended
or supplemented, has corrected any such misstatement or omission. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such selling Holder or other indemnified Person.
Section 6.2 Indemnification by the Selling Holders. In consideration of
the Company's including any Registrable Securities in any Registration Statement
filed in
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accordance with Article II or Article III hereof, each prospective selling
Holder (each, a "Holder Indemnitor") of such Registrable Securities and any
underwriter shall be deemed to have agreed to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 6.1 hereof) the
Company and its directors, officers, employees, managers, attorneys, investment
advisors and agents and each person controlling the Company within the meaning
of the Securities Act (each, a "Company Indemnitee") against any and all losses,
claims, damages or liabilities, joint or several, and expenses (including any
amounts paid in any settlement effected with such Holder Indemnitor's consent,
which consent shall not be unreasonably withheld) to which the Company
Indemnitees may become subject under the Securities Act, common law or
otherwise, insofar and to the extent as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of and are
based upon any statement or alleged statement in or omission or alleged omission
from such Registration Statement, any preliminary, final or summary Prospectus
contained therein, or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or its
representatives by or on behalf of such selling Holder or underwriter
specifically for use in the preparation of such Registration Statement,
preliminary, final or summary Prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of its directors, officers or
controlling Persons. The Company may require as a condition to its including
Registrable Securities in any Registration Statement filed hereunder that the
holder thereof acknowledge its agreement to be bound by the provisions of this
Agreement (including Article VI) applicable to it.
Section 6.3 Notices of Claims. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Article VI, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Article VI, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party; provided, further, that if, in the indemnified party's reasonable
judgment, a conflict of interest between the indemnified party and the
indemnifying party exists or may exist in respect of such claim, then such
indemnified party shall have the right to participate in the defense of such
claim and to employ one firm of attorneys at the indemnifying party's expense to
represent such indemnified party. No indemnified party will consent to entry of
any judgment or enter into any settlement without the indemnifying party's
consent to such judgment or settlement, which shall not be unreasonably
withheld.
Section 6.4 Contribution. If the indemnification provided for in this
Article VI is unavailable or insufficient to hold harmless an indemnified party
under this Article VI, then, except as otherwise provided herein, each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in this Article VI in such proportion as is appropriate to reflect
the relative fault of the
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indemnifying party on the one hand and the indemnified party on the other hand
in connection with statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The Company agrees, and
the Holders (in consideration of the Company's including any Registrable
Securities in any Registration Statement filed in accordance with Article II or
Article III hereof) shall be deemed to have agreed, that it would not be just
and equitable if contributions pursuant to this Section 6.4 were to be
determined by pro rata allocation or by any other method or allocation which
does not take account of the equitable considerations referred to in the first
sentence of this Section 6.4. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this Section 6.4 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim (which shall be limited as
provided in Section 6.3 if the indemnifying party has assumed the defense of any
such action accordance with the provisions thereof) which is the subject of this
Section 6.4. 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. Promptly after receipt by an indemnified party under this
Section 6.4 of notice of the commencement of any action against such party in
respect of which a claim for contribution has been made against an indemnifying
party under this Section 6.4, such indemnified party shall notify the
indemnifying party in writing of the commencement thereof if the notice
specified in Section 6.3 has not been given with respect to such action;
provided, however, that the omission so to notify the indemnifying party shall
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise under this Section 6.4, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
Notwithstanding anything in this Section 6.4 to the contrary, no indemnifying
party (other than the Company) shall be required pursuant to this Section 6.4 to
contribute any amount in excess of the proceeds received by such indemnifying
party from the sale of Registrable Securities in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate.
Article VII
Rule 144
Section 7.1 Rule 144. The Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, so long as it is subject to such reporting
requirements, all to the extent required from time to time to enable the Holders
to sell Registrable Securities without registration under the Securities Act
within the limitations of the exemptions provided by Rule 144. Upon the request
of any Holder, the Company shall deliver to such Holder a written statement
stating whether it has complied with such requirements, and will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144. At any time when the Company is not subject to Section 13
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or 15(d) of the Exchange Act, the Company agrees, for the benefit of the
Holders, to furnish, at the Company's expense, to any requesting Holder and
prospective purchasers designated by such Holder, information required to be
disclosed pursuant to subsection (d)(4)(i) of Rule 144A promulgated under the
Securities Act.
Article VIII
Underwritten Registrations
Section 8.1 Selection of Underwriters. If any of the Registrable
Securities covered by any Demand Registration are to be sold in an underwritten
offering, the underwriter or underwriters and managing underwriter or managing
underwriters that will administer the offering shall be selected by the Holders
of a majority in aggregate amount of Registrable Securities included in such
offering; provided, however, that such underwriters and managing underwriters
shall be subject to the approval of the Company, which approval shall not be
unreasonably withheld.
Section 8.2 Agreements of Selling Holders. No Holder shall sell any of
its Registrable Securities in any underwritten offering pursuant to a
registration hereunder unless such Holder (i) agrees to sell such Registrable
Securities on a basis provided in any underwriting agreement in customary form
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting agreements or as reasonably requested by the Company
(whether or not such offering is underwritten).
Article IX
Holdback Agreements
Section 9.1 Restrictions on Public Sales by Holders. To the extent not
inconsistent with applicable law, each Holder that is timely notified in writing
by the managing underwriter or underwriters shall not effect any public sale or
distribution (including a sale pursuant to Rule 144) of any securities of the
same class or issue being registered in an underwritten offering (other than
pursuant to an employee stock option, stock purchase, stock bonus or similar
plan, pursuant to a merger, an exchange offer or a transaction of the type
specified in Rule 145(a) under the Securities Act) or any securities of the
Company convertible into or exchangeable or exercisable for securities of the
same class or issue, during the 7-day period prior to the effective date of the
applicable Registration Statement, if such date is known, or during the period
beginning on such effective date and ending either (i) 75 days after such
effective date or (ii) any such earlier date as may be requested by the managing
underwriter or underwriters of such registration, except as part of such
registration; provided that such restrictions shall apply not more than once
during any nine-month period and provided further that such restrictions shall
not apply unless such underwritten offering relates to a primary offering of
securities for cash for net proceeds of at least $50,000,000 for the account of
the Company (based upon the closing price of the New Common Shares or the other
securities requested to be registered, as applicable, in the principal market
therefor on the trading date immediately preceding the date of the underwriters'
notice referred to in the first sentence of this Section 9.1).
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Section 9.2 Restrictions on Public Sales by the Company. If so
requested by the managing underwriter or underwriters, the Company shall not
effect any public sale or distribution of any issue of the same class or series
as Registrable Securities being registered in an underwritten offering or any
securities of the Company convertible into or exchangeable or exercisable for
securities of the same class or issue (other than, in either instance, pursuant
to an employee stock option, stock purchase, stock bonus or similar plan,
pursuant to a merger, exchange offer or a transaction of the type specified in
Rule 145(a) under the Securities Act), during the 7-day period prior to the
effective date of the applicable registration statement, if such date is known,
or during the period beginning on such effective date and ending either (i) 75
days after such effective date or (ii) any such earlier date as may be requested
by the managing underwriter or underwriters of such registration, except as part
of such registration.
Article X
Miscellaneous
Section 10.1 No Inconsistent Agreements. Until such time as all the
Demand Registrations permitted to be requested pursuant to Section 2.2 have been
effected, the Company will not enter into any agreement that conflicts with the
provisions of this Agreement or that grants registration or similar rights nor
has the Company entered into any such agreement; provided that nothing in this
sentence shall prohibit the Company from granting registration rights to any
Person (a "Third Party") who becomes an owner of New Common Shares after the
date hereof (including granting piggyback registration rights with respect to
any Registration Statement required to be filed or maintained hereunder) if, and
only if, (i) any registration pursuant to the Third Party's registration rights,
including the priority in registration provisions thereof, permits the Holders
to participate in any such registration on a pro rata basis, according to the
relative number of shares of New Common Shares each Holder and each Third Party
has requested to be included in such registration, (ii) the Third Party's
piggyback registration rights with respect to any registration required to be
effected pursuant hereto relate only to the Third Party's securities of the same
class as those actually registered in any such registration hereunder, utilize
the method of disposition utilized by the selling Holders and contain priority
in registration provisions with respect to any registration initiated by Holders
pursuant to Section 2.1 or in any registration as to which the Holders may
participate pursuant to Section 3.1 hereof that provide that all securities
requested to be included by Holders in any such registration receive priority to
all securities requested to be registered by any Third Party who may seek to
participate through its piggyback registration rights in any such registration
and (iii) require the Third Party to enter into the agreements provided for in
Article IX hereof on the terms and for the periods provided therein if requested
by the managing underwriter or underwriters in an underwritten offering
initiated by Holders pursuant to Section 2.1 or initiated by the Company
pursuant to Section 3.1. Notwithstanding the foregoing, the holders of a
majority in interest of the Registrable Securities outstanding at any time shall
have the right to waive the application of this Section 10.1 to any proposed
transaction to which the Company is or is proposed to be a party.
Section 10.2 Amendments and Waivers. This Agreement may be amended, and
waivers or consents to departures from the provisions hereof may be given, only
by a written instrument duly executed, in the case of an amendment, by all of
the parties hereto, or in the case
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of a waiver or consent, by the party against whom the waiver or consent, as the
case may be, is to be effective.
Section 10.3 Successors, Assigns and Transferees. This Agreement shall
be binding upon and shall inure to the benefit of the Company, the Holders and
their respective successors, assigns and transferees.
Section 10.4 Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto that form a part hereof contain the entire
understanding of the Company and the Holders with respect to its subject matter.
There are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof other than
those expressly set forth herein. This Agreement supersedes all prior agreements
and understandings between the Company and the Holders with respect to its
subject matter.
Section 10.5 Legend. Certificates evidencing Registrable Securities
held by Holders may bear a legend substantially in the form below:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 ("THE ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR PURSUANT TO A VALID EXEMPTION UNDER
THE ACT.
Section 10.6 Notices. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telecopier
or hand delivery:
If to the Company, to:
Kmart Holding Corporation
0000 Xxxx Xxx Xxxxxx Xxxx
Xxxx, XX 00000
Fax: (000) 000-0000
Attn: General Counsel
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx (Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xx. Xxxxxx, Jr.
Xxxx X. Xxxxxxx
If to any of the Holders, to the address of such Holders as shown in
the stock record books of the Company.
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All such notices and communications shall be deemed to have been given or made
(i) when delivered by hand or (ii) when telecopied, receipt acknowledged. The
Company may change its address for receipt of notices by notice of such change
given in the manner contemplated hereby to the Holders.
Section 10.7 Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit, expand or otherwise
affect the meaning of the terms contained herein.
Section 10.8 Severability. In the event that any one or more of the
provisions hereof is held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision, in
every other respect and of the remaining provisions hereof shall not be in any
way impaired, it being intended that all rights, powers and privileges of the
Company and the Holders shall be enforceable to the fullest extent permitted by
law.
Section 10.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the principles thereof relating to conflict of laws.
[Rest of Page Intentionally Blank;
Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
KMART HOLDING CORPORATION
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Title: Executive Vice President, Chief
Restructuring Officer
----------------------------------------
ESL INVESTMENTS, INC.
By /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Title: President and Chief Operating Officer
-----------------------------------------
THIRD AVENUE TRUST, on behalf of the Third
Avenue Value Fund Series
By /s/ Xxxxx Xxxxx
-------------------------------------------
Title: President
---------------------------------------
THIRD AVENUE TRUST, on behalf of the Third
Avenue Real Estate Value Fund Series
By /s/ Xxxxx Xxxxx
--------------------------------------------
Title: President
---------------------------------------
THIRD AVENUE TRUST, on behalf of the Third
Avenue Small Cap Value Fund Series
By /s/ Xxxxx Xxxxx
--------------------------------------------
Title: President
---------------------------------------
