Employment Agreement - Kmart Corp. and Michael T. Macik
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of April 8, 2002 (the
"Effective Date"), by and between Kmart Corporation, a Michigan corporation
(together with its successors and assigns permitted under this Agreement, the
"Company"), and Michael T. Macik (the "Executive").
WHEREAS, the Company desires to provide for the re-employment of the
Executive on the terms and conditions set forth herein, in the best interest of
the Company and its constituencies;
WHEREAS, the Executive desires to be re-employed by the Company as
provided herein; and
WHEREAS, the Executive and the Company desire to enter into this
Agreement to set forth the terms and conditions of the Executive's employment
with the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Base Salary" shall mean the salary granted to the
Executive pursuant to Section 4.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Cause" shall mean (i) the Executive is convicted of a
felony involving moral turpitude or any other felony (other than motor
vehicle-related) and, in the case of such other felony, the Executive is unable
to show that he (A) acted in good faith and in a manner he reasonably believed
to be in the best interests of the Company and (B) had no reasonable cause to
believe his conduct was unlawful; or (ii) the Executive engages in conduct that
constitutes willful gross neglect or willful misconduct in carrying out his
duties under this Agreement, resulting, in either case, in material harm to the
Company, unless the Executive believed in good faith that such act or nonact was
in, or was not opposed to, the best interests of the Company.
(d) "Committee" shall mean the Compensation and Incentives
Committee of the Board or any other committee of the Board performing similar
functions.
1
<PAGE>
(e) "Constructive Termination" by the Executive shall mean
termination based on the occurrence without the Executive's express written
consent of any of the following: (i) a material diminution or adverse change in
the Executive's responsibilities, duties, authorities or any reduction in title,
other than for Cause or Disability; (ii) a reduction in the Executive's Base
Salary or Target Bonus (as defined in Section 6) other than for Cause or
Disability and other than as part of an across-the-board salary reduction
generally imposed on executives of the Company; (iii) the relocation of the
Company's principal office to a location more than 35 miles from Troy, Michigan;
or (iv) the failure of the Company to obtain the assumption in writing of its
obligation to perform this Agreement by any successor to all or substantially
all of the assets of the Company on or prior to a merger, consolidation, sale or
similar transaction. The Executive shall further be required to comply with the
provisions of Section 10(d)(i) of this Agreement with respect to a Constructive
Termination.
(f) "Disability" shall mean the Executive's inability to
substantially perform his duties and responsibilities under this Agreement by
reason of any physical or mental incapacity for a period of 180 consecutive
days.
(g) "Emergence" shall occur when a plan of reorganization
that is confirmed by the Bankruptcy Court becomes effective or the Company
otherwise emerges from Chapter 11, as a result of which the business of the
Company is maintained on an ongoing basis, whether maintained by the Company,
the debtor in possession or by an entity that has acquired all or substantially
all of the Company's or debtor in possession's assets.
(h) "KERP" shall mean the Company's Key Employee Retention
Plan, as in effect from time to time, any successor thereto, or such other
emergence bonus program as may be approved by the Bankruptcy Court.
(i) "Restructuring Date" shall mean the date on which any
Emergence occurs.
(j) "Severance Agreement" shall mean that certain Covenant
Not to Sue and Full and Complete Release of Liability, entered into by and
between the Company and the Executive with an effective date of November 3,
2000.
2. Term of Employment. Subject to Section 10, the Company
hereby employs the Executive, and the Executive hereby accepts such employment,
for the period commencing on the Effective Date and ending on April 30, 2004
(the "Term of Employment"); provided, however, that the Term of Employment shall
be automatically extended for an additional year on each anniversary of the
Effective Date thereafter, unless written notice of non-extension is provided by
either Party to the other Party at least 30 days prior to any such anniversary.
3. Position, Duties and Responsibilities.
(a) During the Term of Employment, the Executive shall be
employed and serve as the Executive Vice President, Human Resources of the
Company (or such other position
2
<PAGE>
or positions as may be agreed upon in writing by the Executive and the Company)
and be responsible for the Company's human resources functions, as directed by
the Board and/or the Chief Executive Officer ("CEO") consistent with such
position. The Executive shall report directly to the CEO. The Executive shall
have all authority commensurate with such position. The Executive shall devote
substantially all of his business time, attention and skill to the performance
of such duties and responsibilities, and shall use his best efforts to promote
the interests of the Company. However, the Executive shall be permitted to
complete reasonable transition services for his former employer. The Executive
shall not, without the prior written approval of the Board, engage in any other
business activity which is in violation of policies established from time to
time by the Company.
(b) Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from (i) serving on the boards of directors
of a reasonable number of other corporations or the boards of a reasonable
number of trade associations and/or charitable organizations (subject to the
reasonable approval of the Board), (ii) engaging in charitable activities and
community affairs, and (iii) managing his personal investments and affairs,
provided that such activities do not materially interfere with the proper
performance of his duties and responsibilities as an executive officer of the
Company.
(c) The Executive shall perform his services hereunder
primarily at the Company's headquarters. To that end, the Company shall provide
the Executive with office space and staff at its headquarters in Troy, Michigan
that are commensurate with his duties hereunder.
4. Base Salary. During the Term of Employment, the Executive
shall be paid an annualized Base Salary, payable in accordance with the regular
payroll practices of the Company, in the amount of $425,000. The Base Salary
shall be reviewed no less frequently than annually for increase in the
discretion of the Board and/or the Committee. The Base Salary, including any
increase, shall not be decreased during the Term of Employment.
5. Inducement Payment. The Executive shall receive from the
Company, within seven days following the approval by the Bankruptcy Court
referred to in Section 18 hereof, a lump sum cash payment equal to $425,000 (the
"Inducement Payment").
6. Annual Incentive Awards. During the Term of Employment, the
Executive shall be eligible for an annual target bonus ("Target Bonus") of 60%
of his then-current Base Salary under the annual incentive portion of the KERP
or, following the Restructuring Date, any other annual cash-based incentive
program of the Company, payable in any case if the performance goals thereunder
for the relevant fiscal year of the Company are met. Payment of the annual bonus
shall be made at the same time that other senior-level executives receive their
incentive awards.
7. Emergence Bonus; Other Long-Term Incentive Programs. The
Executive shall be entitled to receive an incentive payment with respect to the
Emergence (such payment, the "Emergence Bonus"). The amount of the Emergence
Bonus and any other terms and
3
<PAGE>
conditions applicable thereto shall be determined in connection with the process
during which the Company's plan of reorganization is developed and finalized.
Payment of the Emergence Bonus shall be made at the same time that other
senior-level executives receive their payment. Following Emergence, the
Executive shall participate in such long-term cash- and/or equity-based
incentive programs as the senior executives of the Company may participate from
time to time.
8. Employee Benefit Programs.
(a) General. During the Term of Employment, the Executive
shall be eligible to participate in all employee pension and welfare benefit
plans and programs made available generally to the Company's senior-level
executives (other than the CEO) or to its employees generally, as such plans or
programs may be in effect from time to time, including, without limitation,
pension, profit sharing, savings and other retirement plans or programs,
medical, dental, hospitalization, short-term and long-term disability and life
insurance plans, accidental death and dismemberment protection, travel accident
insurance, and any other pension or retirement plans or programs and any other
employee welfare benefit plans or programs that may be sponsored by the Company
from time to time, including any plans that supplement the above-listed types of
plans or programs, whether funded or unfunded. Executive shall be enrolled in,
and such benefits shall become effective, immediately upon the Effective Date.
(b) Pension Benefits. The periodic pension benefits that
the Executive has been receiving prior to the Effective Date pursuant to Company
tax-qualified and non-qualified defined benefit pension plans in which Executive
had been participating prior to his previously termination of employment in
November 2000 (collectively, the "Pension Plans") shall cease as of the
Effective Date. Such payments shall resume in accordance with the terms of such
plans (adjusted as may be appropriate to reflect such earlier payments)
following the termination of the Executive's employment hereunder. The benefits
accrued by the Executive under the Pension Plans during his prior employment
with the Company shall not be affected by his re-employment with the Company
hereunder. For purposes of any Pension Plan that is a non-qualified plan, the
Executive's service credits under the Pension Plans shall be determined as if he
had remained continuously in the employ of the Company from his original date of
hire on or about September 1969 through the date of termination of his
employment hereunder. If, at the date of termination of the Executive's
employment hereunder for any reason (including a termination by reason of the
expiration of this Agreement), the Executive had not earned the so-called "90
point" pension under the Company's tax-qualified Pension Plan, the Company shall
pay to the Executive, in a cash lump sum, within ten days following such
termination, an amount equal to fifty percent (50%) of the present value of the
enhanced benefit to which Executive would have been entitled had he earned such
"90 point" pension.
(c) Severance Payments. Severance payments that have been
made to the Executive pursuant to the terms of the Severance Agreement shall
cease as of the Effective Date.
4
<PAGE>
9. Reimbursement of Business and Other Expenses: Perquisites;
Vacations.
(a) The Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement
and the Company shall promptly reimburse him for all reasonable business
expenses incurred in connection with carrying out the business of the Company,
subject to documentation in accordance with the Company's policy.
(b) During the Term of Employment, the Company shall
reimburse the Executive for reasonable personal financial (including tax)
counseling (other than legal fees) by a firm or consultant to be chosen by the
Executive, such reimbursement to be no more than the amount authorized under
Company policy in effect from time to time. The Company shall pay to or
reimburse the Executive up to $10,000 for reasonable legal fees incurred by the
Executive in connection with the negotiation of his re-hire, including the
preparation of this Agreement.
(c) For purposes of the calculation of benefits under the
Company's vacation policy, the Company shall credit the Executive's prior
employment with the Company (from Executive's original date of hire on or about
September 1969 through his prior termination of employment in November 2000) and
the period of his absence from November 2000 through the Effective Date.
10. Termination of Employment.
(a) Termination Due to Death. In the event the Executive's
employment is terminated due to his death, his estate or his beneficiaries as
the case may be, shall be entitled to the following:
(i) Base Salary through the date of death;
(ii) a prorated annual bonus for the year in which
death occurs, based on the actual performance for such year, the amount
of which prorated bonus, if any, shall be determined and paid promptly
following the end of the year to which such bonus relates;
(iii) the balance of any annual or long-term cash
incentive awards (if any) earned (but not yet paid) pursuant to the
terms of the applicable programs;
(iv) any amounts earned, accrued or owing to the
Executive but not yet paid under this Agreement; and
(v) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. In the event the
Executive's employment is terminated due to his Disability, he shall be entitled
in such case to the following:
5
<PAGE>
(i) Base Salary through the date of termination;
(ii) through the Company's long-term disability plans
or otherwise, an amount equal to 60% of the Base Salary for the period
beginning on the date of termination through the Executive's attainment
of age 65;
(iii) a prorated annual bonus for the year in which
termination due to Disability occurs, based on the actual performance
for such year, the amount of which prorated bonus, if any, shall be
determined and paid promptly following the end of the year to which
such bonus relates;
(iv) the balance of any annual or long-term cash
incentive awards (if any) earned (but not yet paid) pursuant to the
terms of the applicable programs;
(v) any amounts earned, accrued or owing to the
Executive but not yet paid under this Agreement; and
(vi) other or additional benefits in accordance with
applicable plans and programs of the Company.
In no event shall a termination of the Executive's employment
for Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 17 below.
(c) Termination by the Company for Cause. In the event the
Company terminates the Executive's employment for Cause, he shall be entitled
to:
(i) Base Salary through the date of the termination
of his employment;
(ii) the balance of any annual or long-term cash
incentive awards (if any) earned (but not yet paid) pursuant to the
terms of the applicable programs;
(iii) any amounts earned, accrued or owing to the
Executive but not yet paid under this Agreement; and
(iv) other or additional benefits in accordance with
applicable plans or programs of the Company;
(v) a termination for Cause shall not take effect
unless the provisions of this paragraph (v) are complied with. The
Executive shall be given written notice by the Board of the intention
to terminate him for Cause, such notice (A) to state in detail the
particular act or acts or failure or failures to act that constitute
the grounds on which the proposed termination for Cause is based
6
<PAGE>
and (B) to be given within six months of the Board learning of such act
or acts or failure or failures to act. The Executive shall have 10 days
after the date that such written notice has been given to the Executive
in which to cure such conduct, to the extent such cure is possible. If
he fails to cure such conduct, the Executive shall then be entitled to
a hearing before the Board. Such hearing shall be held within 15 days
of notice to the Company by the Executive, provided he requests such
hearing within 10 days of the written notice from the Board of the
intention to terminate him for Cause. If, within five days following
such hearing, the Executive is furnished written notice by the Board
confirming that, the Board has determined, by majority vote at a
meeting of the Board duly called and held as to which termination of
the Executive is an agenda item, that grounds for Cause on the basis of
the original notice exist, he shall thereupon be terminated for Cause.
(d) Termination Without Cause; Constructive Termination;
Notice of Non-Extension.
(i) A Constructive Termination shall not take effect
unless the provisions of this paragraph 10(d)(i) are complied with. The
Company shall be given written notice by the Executive of the intention
to terminate his employment on account of a Constructive Termination,
such notice (A) to state in detail the particular act or acts or
failure or failures to act that constitute the grounds on which the
proposed Constructive Termination is based and (B) to be given within
six months of the Executive learning of such act or acts or failure or
failures to act. The Company shall have 30 days after the date that
such written notice has been given to the Company in which to cure such
conduct, to the extent such cure is possible.
(ii) In the event the Executive's employment is
terminated (1) by the Company without Cause (other than due to
Disability or death), (2) by reason of a Constructive Termination or
(3) upon expiration of the Term of Employment following the Company's
having given notice of non-extension of the Term of Employment, the
Executive shall be entitled to:
(A) Base Salary through the date
of termination of the Executive's employment;
(B) Cash severance payments as
set forth below:
(I) if such termination occurs on
or prior to April 30, 2003 and prior to the
Plan Confirmation Date (as defined below),
promptly but in no event later than 10 days
following the effective date of such
termination, a cash lump sum payment equal to
(A) minus (B), where (A) is equal to the sum
of (x) 300% of the Executive's Base
7
<PAGE>
Salary as in effect immediately prior to the
effective date of such termination, plus (y)
the Executive's Target Bonus as in effect
with respect to the year in which such
termination occurs, and where (B) equals
$250,000;
(II) if such termination (other
than a termination under clause (3) above)
occurs following April 30, 2003 but prior to
the date (for purposes of this Section 10(d),
the "Plan Confirmation Date") on which a
confirmed plan of reorganization (other than
a Plan of Liquidation (as defined below)) is
approved by the Bankruptcy Court (as defined
in Section 18), then (1) promptly, but in no
event later than 10 days, following the
effective date of such termination, a cash
lump sum payment equal to the sum of (x) the
Executive's Base Salary as in effect
immediately prior to the effective date of
such termination plus (y) the Executive's
Target Bonus as in effect with respect to the
year in which such termination occurs and (2)
promptly, but in no event later than 10 days,
following the Plan Confirmation Date, an
amount equal to 200% of the Executive's Base
Salary as in effect immediately prior to the
effective date of such termination. For
purposes of this Section 10(d)(ii), a "Plan
of Liquidation" means a chapter 11 plan (A)
under which less than 50% of the Debtors'
operating business continues as a going
concern, and (B) which does not result in a
discharge of the Debtors under 11 U.S.C. ss.
1141; provided, that a "Plan of Liquidation"
shall not include any chapter 11 plan that
results in a discharge and more than 50% of
the Debtors' operating business continuing as
a going concern, either through a stand-alone
chapter 11 plan, one or more sales of assets,
an investment from a third party, or any
combination of the foregoing;
(III) notwithstanding clauses
(B)(I) and (B)(II) of this Section 10(d)(ii),
if such termination (other than a termination
under clause (3) above) occurs following the
Plan Confirmation Date (or in contemplation
of the Plan Confirmation Date in order to
reduce the amounts payable hereunder),
promptly but in no event later than 10 days
following the effective date of such
termination, a cash lump sum payment equal to
the sum of (x) 300% of the Executive's Base
Salary as in effect immediately prior to the
effective date of such termination, plus (y)
the
8
<PAGE>
Executive's Target Bonus as in effect with
respect to the year in which such termination
occurs; and
(IV) if the Executive's
employment is terminated under clause (3)
above, promptly but in no event later than 10
days following the effective date of such
termination, a cash lump sum payment equal to
200% of the Executive's Base Salary as in
effect immediately prior to the effective
date of such termination;
(C) a prorated annual bonus for
the year in which such termination occurs, based on
the actual performance for such year, the amount of
which prorated bonus, if any, shall be determined and
paid promptly following the end of the year to which
such bonus relates;
(D) the balance of any annual or
long-term cash incentive awards earned (but not yet
paid) pursuant to the terms of the applicable
programs;
(E) any amounts earned, accrued
or owing to the Executive but not yet paid under this
Agreement;
(F) continued participation to
the extent provided in medical, dental,
hospitalization and life insurance coverage and in
all other employee welfare plans and programs in
which he was participating on the date of termination
for a period of two years following the effective
date of his termination hereunder; provided, that the
Company's obligations under this clause (F) shall be
reduced to the extent that the Executive receives
similar coverage and benefits under the plans and
programs of a subsequent employer: and provided,
further, that (x) if the Executive is precluded from
continuing his participation in any employee benefit
plan or program as provided in this clause, he shall
be provided with the after-tax economic equivalent of
the benefits provided under the plan or program in
which he is unable to participate for the period
specified in this clause (F) of this Section 10(d),
(y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would be
incurred by the Executive in obtaining such benefit
himself on an individual basis, and (z) payment of
such after-tax economic equivalent shall be made
quarterly in advance; and
(G) other or additional benefits
in accordance with applicable plans and programs of
the Company.
9
<PAGE>
(e) Voluntary Termination. In the event of a termination
of employment by the Executive on his own initiative, other than a termination
due to death or Disability or a Constructive Termination, the Executive shall
have the same entitlements as provided in Section 10(c) above for a termination
for Cause. A voluntary termination under this Section 10(e) shall be effective
upon 30 days' prior written notice to the Company and shall not be deemed a
breach of this Agreement.
(f) No Mitigation: No Offset. In the event of any
termination of employment under this Section 10, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain except as
specifically provided in this Section 10.
(g) Nature of Payments. Any amounts due under this Section
10 are in the nature of severance payments considered to be reasonable by the
Company. Failure to qualify for any such payment is not in the nature of a
penalty.
(h) Exclusivity of Severance Payments. Upon termination of
the Executive's employment during the Term of Employment, he shall not be
entitled to any payments or benefits from the Company, other than as provided
herein, or any payments by the Company on account of any claim by him of
wrongful termination, including claims under any federal, state or local human
and civil rights or labor laws, other than the payments and benefits provided
hereunder, except for any benefits which may be due the Executive in normal
course under any employee benefit plan of the Company which provides benefits
after termination of employment.
(i) Non-competition. The Executive agrees that any right
to receive any payments and/or benefits hereunder, other than Base Salary and/or
any pension, and/or any other compensation already earned by the Executive and
required to be paid by state law other than under this Agreement, will cease and
be immediately forfeited if the Executive breaches the provisions of Section 11
below. The Executive agrees that any violation of the provisions of Section 11
below will result in the immediate forfeiture of any rights to exercise or
receive stock options or restricted stock. The foregoing is in addition to the
rights of the Company under Section 11.
(j) Release of Claims. As a condition of the Executive's
entitlement to the payment and/or delivery of any of the severance rights and
benefits provided in this Section 11 (other than in the event of the Executive's
death), the Executive shall be required to execute and honor a release of claims
in the form reasonably requested by the Company.
(k) Termination at Will. Notwithstanding anything herein
to the contrary, the Executive's employment with the Company is terminable at
will with or without Cause; provided, however, that a termination of the
Executive's employment shall be governed in accordance with the terms hereof.
10
<PAGE>
11. Restrictive Covenants.
(a) Non-Compete. By and in consideration of the
substantial compensation and benefits provided by the Company hereunder, and
further in consideration of the Executive's exposure to the proprietary
information of the Company, the Executive agrees that he shall not, during the
Term of Employment and for a period ending 24 months following termination of
employment for any reason, directly or indirectly own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of or be connected in any manner, including, but not limited to,
holding the positions of officer, director, shareholder, consultant, independent
contractor, employee, partner, or investor, with any Competing Enterprise;
provided, however, that the Executive may invest in stocks, bonds or other
securities of any corporation or other entity (but without participating in the
business thereof) if such stocks, bonds, or other securities are listed for
trading on a national securities exchange or NASDAQ-National Market and the
Executive's investment does not exceed 1% of the issued and outstanding shares
of capital stock, or in the case of bonds or other securities, 1% of the
aggregate principal amount thereof issued and outstanding. For purposes of this
Section 11, "Competing Enterprise" shall mean any and/or all of the following:
(i) Albertson's Inc., American Retail Group, Inc., Carrefour se, Fleming
Companies, Inc., Kohl's Corporation, The May Department Store Company, J.C.
Penny Company, Royal Ahold, Safeway, Inc., Sears, Roebuck and Co., ShopKo
Stores, Inc., Supervalue Inc., Target Corp., The Home Depot, Inc., Toys R Us
Inc., TJX Companies, Inc., and Wal-Mart Stores, Inc., and (ii) an entity or
enterprise whose business is in competition with the business of the Company
which operates retail stores selling general merchandise and/or food if at least
10 of such stores have an area of 50,000 or more square feet and at least 10 of
such stores with 50,000 or more square feet are within 25 miles of any one or
more Kmart stores.
(b) Nonsolicitation. By and in consideration of the
substantial compensation and benefits to be provided by the Company hereunder,
and further in consideration of the Executive's exposure to the proprietary
information of the Company, the Executive agrees that he shall not, during the
Term of Employment and for a period of 24 months following termination of
employment for any reason, without the express prior written approval of the
Company, (i) directly or indirectly, in one or a series of transactions,
recruit, solicit or otherwise induce or influence any proprietor, partner,
stockholder, lender, director, officer, employee, sales agent, joint venturer,
investor, lessor, supplier, agent, representative or any other person which has
a business relationship with the Company, or had a business relationship with
the Company within the 24-month period preceding the date of the incident in
question, to discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (ii) directly or indirectly, employ or seek to
employ (including through any employer of the Executive) or cause any Competing
Enterprise to employ or seek to employ any person or agent who is then (or was
at any time within six months prior to the date the Executive or the Competing
Enterprise employs or seeks to employ such person) employed or retained by the
Company.
(c) Confidential Information. During the Term of
Employment and at all times thereafter, Executive agrees that he will not
divulge to anyone or make use of any
11
<PAGE>
Confidential Information except in the performance of his duties as an executive
of the Company or when legally required to do so (in which case the Executive
shall give prompt written notice to the Company in order to allow the Company
the opportunity to object or otherwise resist such disclosure). "Confidential
Information" shall mean any knowledge or information of any type relating to the
business of the Company or any of its subsidiaries or affiliates, as well as any
information obtained from customers, clients or other third parties, including,
without limitation, all types of trade secrets and confidential commercial
information. The Executive agrees that he will return to the Company immediately
upon termination, any and all documents, records or reports (including
electronic information) that contain any Confidential Information. Confidential
Information shall not include information (i) that is or becomes part of the
public domain, other than through the breach of this Agreement by the Executive
or (ii) regarding the Company's business or industry properly acquired by the
Executive in the course of his career as an executive in the Company's industry
and independent of the Executive's employment by the Company. The Executive
acknowledges that the Company has expended, and will continue to expend,
significant amounts of time, effort and money in the procurement of its
Confidential Information, that the Company has taken all reasonable steps in
protecting the secrecy of the Confidential Information, that said Confidential
Information is of critical importance to the Company.
(d) Non-Disparagement. The Parties agree that, during the
term of employment and thereafter (including following the Executive's
termination of employment for any reason), neither Party will not make
statements or representations, or otherwise communicate, directly or indirectly,
in writing, orally, or otherwise, or take any action which may, directly or
indirectly, disparage the Company or any subsidiary or affiliate or their
respective officers, directors, employees, advisors, businesses or reputations.
Notwithstanding the foregoing, nothing in this Agreement shall preclude either
the Executive or the Company from making truthful statements or disclosures that
are required by applicable law, regulation or legal process.
(e) Cooperation. The Executive agrees to cooperate with
the Company, during the term of employment and thereafter (including following
the Executive's termination of employment for any reason), by being reasonably
available to testify on behalf of the Company or any subsidiary or affiliate in
any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, and to assist the Company, or any subsidiary or affiliate, in any
such action, suit or proceeding, by providing information and meeting and
consulting with the Board or its representatives or counsel, or representatives
or counsel to the Company, or any subsidiary or affiliate, as reasonably
requested. The Company agrees to reimburse the Executive for all expenses
actually incurred in connection with his provision of testimony or assistance
(including attorneys' fees incurred in connection therewith) upon submission of
appropriate documentation to the Company.
(f) Remedies. The Executive agrees that any breach of the
terms of this Section 11 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any
reasonable threat of breach, the Company shall be entitled to an
12
<PAGE>
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive. The terms of this
paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including, but not limited
to, remedies available under this Agreement and the recovery of damages. The
Executive and the Company further agree that the provisions of the covenant not
to compete are reasonable. Should a court or arbitrator determine, however, that
any provision of the covenant not to compete is unreasonable, either in period
of time, geographical area, or otherwise, the parties hereto agree that the
covenant shall be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable.
(g) Continuing Operation. The provisions of this Section
11 shall survive any termination of this Agreement and the Term of Employment,
and the existence of any claim or cause of action by the Executive against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants and agreements of
this Section.
(h) Notice to Employer. The Executive agrees that as long
as the provisions of Section 11(a) or 11(b) continue to bind the Executive, he
will provide written notice of the terms and provisions of this Section 11 to
any prospective employer.
12. Indemnification.
(a) The Company agrees that if the Executive is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director or employee of the Company or is
or was serving at the request of the Company as a director, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive's alleged action in an official
capacity while serving as a director, employee or agent, the Executive shall be
indemnified and held harmless by the Company to the fullest extent legally
permitted or authorized by the Company's certificate of incorporation or bylaws
or resolutions of the Company's Board of Directors or, if greater, by the laws
of the State of Michigan against all cost, expense, liability and loss
(including, without limitation, attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by the Executive in connection therewith, and such
indemnification shall continue as to the Executive even if he has ceased to be a
director, employee or agent of the Company or other entity and shall inure to
the benefit of the Executive's heirs, executors and administrators. The Company
shall advance to the Executive all reasonable costs and expenses incurred by him
in connection with a Proceeding within 20 days after receipt by the Company of a
written request for such advance. Such request shall include an undertaking by
the Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.
13
<PAGE>
(b) Neither the failure of the Company (including its
board of directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Executive under Section 12(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
The Company agrees to continue and/or maintain a directors and
officers' liability insurance policy covering the Executive to the same extent
the Company provides such coverage for its other executive officers and
directors and for not less than the amounts in effect for its other executive
officers and directors.
13. Assignability; Binding Nature. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors, heirs (in the case of the Executive) and assigns. No rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. The Company further agrees that, in the event of a sale or reorganization
transaction as described in the preceding sentence, it shall take whatever
action it legally can in order to cause such assignee or transferee to expressly
assume the liabilities, obligations and duties of the Company hereunder. No
rights or obligations of the Executive under this Agreement may be assigned or
transferred by the Executive other than his rights to compensation and benefits,
which may be transferred only by will or operation of law, except as otherwise
provided herein.
14. Miscellaneous Provisions.
(a) This Agreement contains the final and entire
understanding and agreement between the Parties concerning the subject matter
hereof and supersedes all prior representations, agreements, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto (including but not limited to the Severance Agreement);
provided, however, that this Agreement shall not supersede any separate written
commitments by the Company with respect to indemnification.
(b) No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by the Executive and an
authorized officer of the Company. No waiver by either Party of any breach by
the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent
14
<PAGE>
time. Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
(c) In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
(d) The respective rights and obligations of the Parties
hereunder shall survive any termination of the Executive's employment to the
extent necessary to the intended preservation of such rights and obligations.
(e) The Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
the Executive's death by giving the Company written notice thereof. In the event
of the Executive's death or a judicial determination of his incompetence,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to his beneficiary, estate or other legal representative.
(f) All amounts required to be paid by the Company shall
be subject to reduction in order to comply with applicable Federal, state and
local tax withholding requirements, except as otherwise provided herein.
(g) The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
(h) This Agreement may be executed in two or more
counterparts.
15. Governing Law/Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the laws of
Michigan without reference to principles of conflict of laws. Subject to Section
16, the Company and the Executive hereby consent to the jurisdiction of any or
all of the following courts for purposes of resolving any dispute under this
Agreement: (i) the United States District Court of Detroit, Michigan or (ii) the
State of Michigan Courts of Oakland County, Michigan. The Company and the
Executive further agree that any service of process or notice requirements in
any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Executive hereby
waive, to the fullest extent permitted by applicable law, any objection which it
or the Executive may now or hereafter have to such jurisdiction and any defense
of inconvenient forum.
16. Resolution of Disputes. Any disputes arising under or in
connection with this Agreement shall be resolved by binding arbitration, to be
held in Detroit, Michigan in accordance with the rules and procedures of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction
15
<PAGE>
thereof. All costs and expenses of any arbitration or court proceeding
(including fees and disbursements of counsel) shall be borne by the respective
Party incurring such costs and expenses, but the Company shall reimburse the
Executive for such reasonable costs and expenses in the event he substantially
prevails in such arbitration or court proceeding. Notwithstanding the foregoing,
the Company shall be entitled to seek equitable relief pursuant to Section 11(f)
hereof without otherwise waiving the right to exclusive arbitration of all other
disputes.
17. Notices. Any notice given to a Party shall be in writing
and shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:
If to the Company: Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084-3163
Attention: General Counsel
If to the Executive: Michael T. Macik
Executive Vice President, Human
Resources
c/o Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084-3163
With a copy to: Joseph J. DeVito, Esq.
Butzel Long
100 Bloomfield Hills Parkway,
Second Floor
Bloomfield Hills, MI 48304
18. Approval of Agreement. Notwithstanding anything in this
Agreement to the contrary, the effectiveness of this Agreement is subject to the
approval of the United States Bankruptcy Court for the Northern District of
Illinois (the "Bankruptcy Court"). The Company shall use its reasonable best
efforts to seek Bankruptcy Court approval of this Agreement and to obtain a
Bankruptcy Court order approving this Agreement as soon as practicable following
the execution of this Agreement, such order and the supporting motion or motions
to be in form and substance reasonably satisfactory to the Executive. If this
Agreement is not approved by the Bankruptcy Court, the provisions of this
Agreement shall be null and void.
16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
KMART CORPORATION
By: ____________________________
Title:
________________________________
MICHAEL T. MACIK
17