EXHIBIT 4.5
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 :
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
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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
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
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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 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.
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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 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
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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;
(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
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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 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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).
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
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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 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
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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.
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]
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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: EVP, Chief Restructuring Officer
ESL INVESTMENTS, INC.
By /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Title: ___________________________________
THIRD AVENUE TRUST, on behalf of the Third
Avenue Value Fund Series
By /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Title: ___________________________________
THIRD AVENUE TRUST, on behalf of the Third
Avenue Real Estate Value Fund Series
By /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Title: ___________________________________
THIRD AVENUE TRUST, on behalf of the Third
Avenue Small-Cap Value Fund Series
By /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Title: ___________________________________
