Exhibit 10.5
KMART MANAGEMENT CORPORATION
RESTRICTED STOCK AGREEMENT
XXXXX XXXXX
THIS AGREEMENT, dated and effective as of September 3, 2003 (the "Grant
Date") by and between Kmart Management Corporation, a Michigan corporation (the
"Company"), and Xxxxx Xxxxx (the "Executive"), is entered into as follows:
WHEREAS, the Company and the Executive are parties to an Employment
Agreement made and entered into on September 3, 2003 (the "Employment
Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Effective Date of
the Executive's employment with the Company is September 3, 2003 ("Effective
Date"); and
WHEREAS, the Compensation Committee of the Board of Directors of Kmart
Holding Corporation ("Holding Corp."), a Delaware corporation and the Company's
parent corporation, has determined that, as an inducement material to the
Executive's agreement to enter into employment with the Company, in satisfaction
of the Company's obligation under Section 5(b) of the Employment Agreement, and
subject to the restrictions stated below, the Executive should be granted shares
of the Holding Corp.'s $1.00 par value Common Stock (the "Restricted Stock");
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of Stock.
Pursuant to Section 5(b) of the Employment Agreement, the Executive is
hereby granted, effective on the Grant Date and subject to the terms and
conditions of this Agreement, 34,218 shares of Restricted Stock, said number of
shares being determined as follows: (a) the average of the highest ($29.66) and
lowest ($28.79) fair market value of one share of Holding Corp. Common Stock on
the Grant Date is $29.225; and (b) 34,218 shares of Holding Corp. Common Stock,
at a fair market value of $29.225 per share, would have a fair market value of
$1,000,021.05.
2. Issuance of Stock.
As soon as practicable, the Company shall cause the shares of
Restricted Stock to be issued in the Executive's name. The Restricted Stock
shall be held in the custody of the Company or its designee for the Executive's
account. The Restricted Stock shall be subject to the restrictions described
herein. The Restricted Stock shall bear appropriate legends with respect to the
restrictions described herein.
3. Vesting.
(a) The interest of the Executive in the Restricted
Stock shall vest as to one-third of such Restricted Stock (11,406
shares) on the first anniversary of the Effective Date, as to an
additional one-third (11,406 shares) on the second anniversary of the
Effective Date, and as to the final one-third (11,406 shares) on the
third anniversary of the Effective Date, so as to be 100% vested on the
third anniversary thereof, conditioned upon the Executive's continued
employment with the Company as of each vesting date.
(b) Notwithstanding the foregoing, pursuant to and in
accordance with the terms, conditions and definitions of the Employment
Agreement, the interest of the Executive in the Stock shall vest as to
100% of the then unvested Restricted Stock upon the Executive's
termination of employment (i) without Cause (other than due to
disability or death), (ii) by reason of Constructive Termination, or
(iii) upon expiration of the Term of Employment following the Company's
having given a notice of non-extension of the Term of Employment.
4. Restrictions.
(a) No portion of the Restricted Stock or rights
granted hereunder may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of by the Executive until such portion
of the Restricted Stock becomes vested in accordance with Section 3 of
this Agreement. The period of time between the date hereof and the date
all Restricted Stock becomes vested is referred to herein as the
"Restriction Period."
(b) If the Executive's employment with the Company is
terminated for any reason which does not give rise to 100% vesting of
the Restricted Stock, as provided in Section 3 above, the balance of
the Restricted Stock subject to the provisions of this Agreement which
have not vested at the time of the Executive's termination of
employment shall be forfeited by the Executive, and ownership
transferred back to the Company.
5. Executive Shareholder Rights.
During the Restriction Period, the Executive shall have all the rights
of a shareholder with respect to the Restricted Stock except for the right to
transfer the Restricted Stock, as set forth in Section 4 of this Agreement.
Accordingly, the Executive shall have the right to vote the Restricted Stock and
to receive any cash dividends paid to or made with respect to the Restricted
Stock, provided, however, that dividends paid, if any, with respect to that
Restricted Stock which has not vested at the time of the dividend payment shall
be held in the custody of the Company and shall be subject to the same
restrictions that apply to the corresponding Restricted Stock.
6. Changes in Stock.
In the event that as a result of (a) any stock dividend, stock split or
other change in the Restricted Stock, or (b) any merger or sale of all or
substantially all of the assets or other acquisition of the Company or Holding
Corp., and by virtue of any such change, the Executive shall in her capacity as
owner of unvested shares of Restricted Stock which have been awarded to her (the
"Prior Stock") be entitled to new or additional or different shares or
securities, such new or additional or different shares or securities shall
thereupon be considered to be unvested Restricted Stock and shall be subject to
all of the conditions and restrictions which were applicable to the Prior Stock
pursuant to this Agreement.
7. Taxes.
The Executive shall be liable for any and all taxes, including
withholding taxes, arising out of this grant or the vesting of Restricted Stock
hereunder. The Executive may elect to satisfy such withholding tax obligation by
having the Company retain Restricted Stock having a fair market value equal to
the Company's minimum withholding obligation.
8. Miscellaneous.
(a) The Company shall not be required (i) to transfer
on its books any shares of Restricted Stock which shall have been sold
or transferred in violation of any of the provisions set forth in this
Agreement, or (ii) to treat as owner of such shares or to accord the
right to vote as such owner or to pay dividends to any transferee to
whom such shares shall have been so transferred.
(b) The parties agree to execute such further
instruments and to take such action as may reasonably be necessary to
carry out the intent of this Agreement.
(c) Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon delivery
to the Executive at her address then on file with the Company.
(d) This Agreement shall not be construed so as to
grant the Executive any right to remain in the employ of the Company.
(e) The parties agree that: (i) this Restricted Stock
Agreement and the grant of Restricted Stock hereunder are in full and
final satisfaction of the Company's obligations under Section 5(b) of
the Employment Agreement; (ii) the Company shall have no further
obligation to the Executive pursuant to Section 5(b) of the Employment
Agreement except as stated herein; and (iii) neither the Company nor
Holding Corp. shall have any further obligation to the Executive
relating to the grant of stock except as stated herein.
(f) This Agreement and the Employment Agreement
constitute the entire agreement of the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective on the date first set above.
EXECUTIVE KMART MANAGEMENT CORPORATION
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxx X. Day
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Xxxxx Xxxxx
