EXHIBIT 10.5
June 3, 2003
Xx. Xxxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Dear Xxxx:
Reference is made to your Employment Agreement with Kmart Corporation
(the "Company") dated as of April 8, 2002 (the "Agreement"). This letter will
set forth the respective rights and obligations of you and the Company in
connection with the termination of your employment from the Company. Capitalized
terms not defined herein shall have the meaning ascribed to such term in the
Employment Agreement.
1. Termination. Your employment with the Company was terminated effective
April 30, 2003 (the "Termination Date").
2. Certain Acknowledgments. You acknowledge having received an Emergence
Bonus of $68,000 (less applicable withholding) in full satisfaction of
your rights under Section 7 of the Agreement. You further acknowledge
that (1) you have received your full base salary through the
Termination Date and thus are not entitled to any payments pursuant to
Section 10(d)(ii)(A) of the Agreement and (2) there are no outstanding
balances owing to you in respect of any annual or long-term cash
incentive awards and thus you are not entitled to any amounts pursuant
to Section 10(d)(ii)(D) of the Agreement.
3. Compliance with Agreement. You will comply in all respects with your
obligations under Section 11 of the Agreement.
4. Return of Company Property. The Company expects that you will
immediately return to the Company all property of the Company or its
subsidiary or affiliates which is in your possession, including, but
not limited to, customers or clients lists, document, contracts,
agreements, plans, photographs, books, notes, memoranda, manuals,
records, electronically stored data, proprietary computer software,
source codes, algorithms and all copies of the foregoing, as well as
any
laptop or other computer hardware, automobile or other materials or
equipment supplied by the Company to you.
5. Severance, etc. Provided that (i) you execute the enclosed copy of this
letter and the enclosed Release and return them to the Company, (ii)
you do not revoke the Release and (iii) you are in substantial
compliance with your obligations under this letter, the Company will
pay to you the following amounts, less applicable withholding, within
ten days following the date of this letter (but in no event prior to
expiration of the revocation period applicable to the Release):
A. an amount equal to $1,530,000, pursuant to Section
10(d)(ii)(B)(III) of the Agreement; and
B. an amount equal to $70,439, pursuant to Section 8(b) of
the Agreement, representing 50% of the present value of
the enhanced benefit to which you would have been entitled
had you earned the so-called "90 point" pension under the
Company's tax-qualified defined benefit pension plan.
6. Additional Payments/Benefits. In addition, provided you are in
compliance with clauses (i)-(iii) of paragraph 5 above, you will be
entitled to the following payments and benefits, less applicable
withholding;
A. Prorated Annual Bonus. In accordance with Section
10(d)(ii)(C) of the Agreement, a prorated annual bonus for
fiscal year 2003, based on the actual performance for such
year, the amount of which prorated bonus, if any, shall be
determined in the same manner as such bonuses are
determined for other senior level executives of the
Company and shall be paid at the same time that other
senior level executives of the Company receive their
payment.
B. Miscellaneous Amounts. In accordance with Section
10(d)(ii)(E) of the Agreement, any amounts earned, accrued
or owing to you but not yet paid under the Agreement.
C. Other Benefits.
(1) Continuing Welfare Benefits. In accordance with
Section 10(d)(ii)(F) of the Agreement, continued
participation to the extent provided in medical,
dental, and hospitalization coverage in which you
were participating on the Termination Date, for a
period of two years following the Termination Date;
provided, that the Company's obligations under this
paragraph 6C.(1) shall be reduced to the extent that
you receive similar coverage under the plans and
programs of a subsequent employer; and provided,
further, that (x) if you are precluded from
continuing your participation in any such coverage,
you
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shall be provided with the after-tax economic
equivalent of the coverage in which you are unable to
participate for the period specified in this
paragraph 6C.(1), (y) the economic equivalent of any
coverage foregone shall be deemed to be the lowest
cost that would be incurred by you in obtaining such
coverage yourself on an individual basis, and (z)
payment of such after-tax economic equivalent shall
be made quarterly in advance.
(2) Non-Continuing Benefits. A lump sum payment of
$5,700.00 in exchange for your foregoing your right,
provided by Section 10(d)(ii)(F) of the Agreement, to
continued participation, for the two-year period
following the Termination Date, in the life insurance
coverage and in all other employee welfare plans and
programs, including long and short term disability,
in which you were participating on the Termination
Date, and a lump sum payment of $37,600.00 in full
satisfaction of your rights to unused vacation time
pursuant to the Company's policy for retirement.
(3) Other. In accordance with Section 10(d)(ii)(G) of the
Agreement, other or additional benefits in accordance
with the applicable plans and programs of the
Company.
D. Continuation of Qualified and Unqualified Pension
Payments. Pursuant to Section 8(b) of the Agreement, the
resumption and continuation of any monthly qualified and
unqualified payments previously suspended. The aggregate
amount of such monthly payments shall equal $4,957.46,
shall continue for your life and shall cease upon your
death.
E. For a period of one year following the Termination Date,
Executive shall also be entitled to continuing
participation in the Financial Planning and Tax
Preparation Services previously provided to Executive at
the expense of the Company and to continued participation
in the annual physical provided to Executive at the
Company's expense.
7. Indemnification. The Company re-affirms its continuing obligation to
you under Section 12 of the Agreement.
8. Consulting with Counsel. The Company has advised you to consult with an
attorney of your choosing prior to signing this letter. You represent
that you understand and agree that you have the right and have been
given the opportunity to review this letter, and specifically the
Release, with an attorney. You further represent that you understand
and agree that you have executed this letter freely and voluntarily.
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9. Governing Law. This letter shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan, applied
without reference to principles of conflicts of laws. This letter may
be executed in two or more counterparts, each of which shall be deemed
an original but all of which together shall constitute one and the same
instrument.
KMART CORPORATION
By:
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Julian Day
Chief Executive Officer
ACCEPTED AND AGREED TO:
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Xxxxxxx X. Xxxxx
Dated:
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