Exhibit 4.2
KMART CORPORATION,
Issuer
and
THE BANK OF NEW YORK,
Trustee
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THIRD SUPPLEMENTAL INDENTURE
Dated as of June 19, 2001
to
INDENTURE
Dated as of December 13, 1999
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9-7/8% Notes Due June 15, 2008
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS
SECTION 1.01 Definitions .......................................................1
SECTION 1.02 Other Definitions .................................................5
ARTICLE 2 TERMS OF NOTES
SECTION 2.01 Designation of Notes; Aggregate Principal Amount ...................
SECTION 2.02 Form of Notes ......................................................
SECTION 2.03 Certain Terms of the Notes ........................................6
SECTION 2.04 Transfer and Exchange .............................................7
SECTION 2.05 Certificated Notes ...............................................10
SECTION 2.06 Defeasance .......................................................10
SECTION 2.07 Covenants ........................................................11
SECTION 2.08 Additional Notes .................................................11
SECTION 2.09 Right of Optional Redemption; Prices..............................11
ARTICLE 3 COVENANTS APPLICABLE TO THE NOTES
SECTION 3.01 Restrictions on Liens ............................................11
SECTION 3.02 Limitations on Sale and Leaseback Transactions ...................13
ARTICLE 4 SUCCESSOR CORPORATION
SECTION 4.01 Consolidation, Merger and Sale of Assets .........................14
ARTICLE 5 DEFEASANCE AND COVENANT DEFEASANCE
SECTION 5.01 Indenture Satisfaction and Discharge Provisions ..................14
SECTION 5.02 Company's Option to Effect Defeasance or Covenant Defeasance .....14
SECTION 5.03 Defeasance and Discharge .........................................14
SECTION 5.04 Covenant Defeasance ..............................................15
SECTION 5.05 Conditions to Defeasance and Discharge or Covenant Defeasance ....15
ARTICLE 6 MISCELLANEOUS
SECTION 6.01 Ratification and Confirmation ....................................16
SECTION 6.02 Recitals, Validity and Sufficiency ...............................16
SECTION 6.03 Counterparts .....................................................16
SECTION 6.04 Governing Law ....................................................16
EXHIBIT 1: Form of Initial Note
EXHIBIT 2: Form of Exchange Note and Private Exchange Note
THIRD SUPPLEMENTAL INDENTURE dated as of June 19, 2001 (the "Third
Supplemental Indenture") between Kmart Corporation, a corporation duly
organized and existing under the laws of the State of Michigan (the
"Company") and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee").
WHEREAS, the Company has executed and delivered to the Trustee an
Indenture dated as of December 13, 1999 (the "Indenture") providing for the
issuance from time to time of one or more series of the Company's debt
securities;
WHEREAS, Section 2.01 of the Indenture provides that the Company
and the Trustee may enter into an indenture supplemental to the Indenture
to establish the form or terms of Securities of any series as permitted by
Section 2.01 and Section 9.01 of the Indenture; and
WHEREAS, the Company is entering into this Third Supplemental
Indenture to establish the form and terms of its 9-7/8% Notes Due June 15,
2008 (the "Initial Notes") and to establish the form and terms of Exchange
Notes (as defined herein) or Private Exchange Notes (as defined herein) for
issue only in a Registered Exchange Offer (as defined herein) or Private
Exchange (as defined herein), respectively, pursuant to a Registration
Rights Agreement (as defined herein) for a like principal amount of Initial
Notes.
NOW THEREFORE, in consideration of the premises and the purchase
of the Initial Notes and Exchange Notes or Private Exchange Notes by the
holders thereof, the Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the holders of Notes as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Indenture has the
meaning assigned to such term in the Indenture. The following terms, as
used herein, have the following meanings:
"Attributable Debt" means, with respect to a Sale and Leaseback
Transaction, at the time of determination, the present value of the
obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended), using a discount rate equal to the average interest
rate per annum used to calculate the present value of operating lease
payments for the most recent year in the Company's most recent Annual
Report to Stockholders. The term "net rental payments" under any lease for
any period shall mean the sum of the rental and other payments required to
be paid in such period by the lessee thereunder, not including, however,
any amounts required to be paid by such lessee (whether or not designated
as rental or additional rental) on account of maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges required to
be paid by such lessee thereunder or any amounts required to be paid by
such lessee thereunder contingent upon the amount of sales, maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) on the third business day preceding such Redemption Date, as set
forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Notes" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
business day, (a) the average of the Reference Treasury Dealer Quotations
for such Redemption Date, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (b) if the Trustee obtains fewer
than four such Reference Treasury Dealer Quotations, the average of all
such Quotations.
"Consolidated Net Tangible Assets" means the total of all the
assets appearing on the consolidated balance sheet of the Company and its
Subsidiaries, less the following:
(1) current liabilities, including liabilities for Debt maturing
more than 12 months from the date of the original creation
thereof but maturing within 12 months from the date of
determination;
(2) reserves for depreciation and other asset valuation
reserves;
(3) intangible assets, including, without limitation, such items
as goodwill, trademarks, tradenames, patents, unamortized
debt discount and expense and other similar intangibles
carried as an asset on said balance sheet; and
(4) appropriate adjustments on account of minority interests of
other Persons holding stock in any Subsidiary of the
Company.
Consolidated Net Tangible Assets shall be determined in accordance
with generally accepted accounting principles and practices applicable to
the type of business in which the Company and its Subsidiaries are engaged
and that are approved by the independent accountants regularly retained by
the Company, and may be determined as of a date not more than 60 days prior
to the happening of the event for which such determination is being made.
"Debt" means, all obligations of a Person for borrowed money,
including obligations secured by Liens on property owned by the Person
whether or not the Person is directly liable for the obligations.
"Exchange Notes" means the 9-7/8% Notes due June 15, 2008 issued
pursuant to the Third Supplemental Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Rights Agreement.
"Funded Debt" means Debt which matures more than one year from the
date of computation, or which is extendable or renewable at the sole option
of the obligor so that it may become payable more than one year from such
date.
"Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Company.
"Initial Notes" means up to $430,000,000 aggregate principal
amount of 9-7/8% Notes due June 15, 2008 issued on the Issue Date.
"Initial Purchasers" means, with respect to the Initial Notes
issued on the Issue Date, the entities identified as Purchasers in the
Purchase Agreement.
"Issue Date" means June 19, 2001.
"Lien" means any mortgage, deed of trust, security interest,
pledge, lien or other encumbrance.
"Notes" means the Initial Notes, the Exchange Notes and the
Private Exchange Notes.
"Opening" means the completion of construction or commencement of
commercial operation of such property, whichever is later.
"Operating Property" means (a) all real property and improvements
thereon owned by the Company or a Subsidiary constituting, without
limitation, any store, warehouse, service center or distribution center
wherever located, provided that such term shall not include any store,
warehouse, service center or distribution center which the Company's Board
of Directors declares by resolution, together with all other stores,
warehouses, service centers or distribution centers similarly not included
in such term, not to be of material importance to the business of the
Company and its Subsidiaries taken as a whole, and (b) all equipment
(including all transportation and warehousing equipment but excluding
office equipment and data processing equipment) owned by the Company or a
Subsidiary.
"Person" means any individual, corporation, limited liability
company, partnership, joint-venture, joint-stock company, unincorporated
organization or government or any agency or political subdivision of the
government.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchaser, in exchange for
the Initial Notes held by the Initial Purchaser as part of its initial
distribution, a like aggregate principal amount of Private Exchange Notes.
"Private Exchange Notes" means the 9-7/8% Notes due June 15, 2008
issued in connection with a Private Exchange pursuant to the Registration
Rights Agreement.
"Purchase Agreement" means, with respect to the Initial Notes
issued on the Issue Date, the Purchase Agreement dated June 14, 2001, among
the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redemption Date", when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to the
Indenture.
"Reference Treasury Dealer" means Credit Suisse First Boston
Corporation and its respective successors and two other nationally
recognized investment banking firms that are Primary Treasury Dealers
specified from time to time by the Company; provided, however, that if any
of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
designate as a substitute another nationally recognized investment banking
firm that is a Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by such Reference Treasury Dealer
as of 3:30 p.m., New York City time, on the third Business Day preceding
such Redemption Date.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to certain holders of
Initial Notes, to issue and deliver to such holders, in exchange for the
Initial Notes, a like aggregate principal amount of Exchange Notes
registered under the Securities Act.
"Registration Rights Agreement" means with respect to the Initial
Notes issued on the Issue Date, the Registration Rights Agreement dated
June 19, 2001, among the Company and the Initial Purchasers.
"Remaining Scheduled Payments" means, with respect to each Note to
be redeemed, the remaining scheduled payments of the principal thereof and
interest thereon that would be due after the related Redemption Date but
for such redemption, except that, if such Redemption Date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon shall be reduced by the
amount of interest accrued thereon to such Redemption Date.
"Sale and Leaseback Transaction" means any arrangement with any
Person providing for the leasing to the Company or any Subsidiary of any
Operating Property, which Operating Property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a
Global Note (as appointed by the Depository), or any successor Person
thereto, and shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
filed by the Company in connection with the offer and sale of Initial Notes
or Private Exchange Notes pursuant to the Registration Rights Agreement.
"Subsidiary" means (1) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company, by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries or (2) any other Person in which the Company, or
one or more Subsidiaries, or the Company and one or more Subsidiaries,
directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs of such Person.
"Transfer Restricted Notes" means Notes that bear or are required
to bear the legend set forth in Section 2.04(b) hereof.
"Treasury Rate" means, with respect to any Redemption Date, the
rate per annum equal to the semiannual equivalent yield to maturity
(computed as of the second business day immediately preceding such
Redemption Date) of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date.
SECTION 1.02 Other Definitions.
Term Defined in Section
"Agent Members"............................................2.02(b)
"Global Note"..............................................2.02(a)
"Regulation S".............................................2.02(a)
"Restricted Global Note"...................................2.02(a)
"Rule 144A"................................................2.02(a)
ARTICLE 2
TERMS OF NOTES
SECTION 2.01 Designation of Notes; Aggregate Principal Amount.
Subject to and in accordance with Section 2.01 of the Indenture, the
Company hereby establishes a series of securities to be issued under the
Indenture with the title"9-7/8% Notes Due June 15, 2008." The aggregate
principal amount of the Initial Notes that may be authenticated and
delivered under the Indenture shall be $430,000,000, and Exchange Notes or
Private Exchange Notes for issue only in a Registered Exchange Offer or
Private Exchange, respectively, pursuant to the Registration Rights
Agreement, for a like principal amount of Initial Notes. In addition, Notes
may be authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes and may be authenticated and
delivered as set forth in Section 2.08 in this Third Supplemental
Indenture.
SECTION 2.02 Form of Notes.
(a) Initial Notes offered and sold to a QIB in reliance on Rule
144A under the Securities Act ("Rule 144A") or in reliance on Regulation S
under the Securities Act ("Regulation S"), in each case as provided in the
Purchase Agreement, and Private Exchange Notes, as provided in the
Registration Rights Agreement, shall be issued initially in the form of one
or more permanent Global Notes in definitive, fully registered form without
interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a "Restricted Global
Note"), which shall be deposited on behalf of the purchasers of the Initial
Notes represented thereby with the Trustee, at its Corporate Trust Office,
as Securities Custodian (or with such other Securities Custodian as the
Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of
the Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided. Exchange Notes shall be issued in global
form (with the global securities legend set forth in Exhibit 1 hereto).
Exchange Notes issued in global form and Restricted Global Notes are
sometimes referred to in this Third Supplemental Indenture as "Global
Notes." The form of Exchange Notes and Private Exchange Notes shall be
substantially in the form as set forth in Exhibit 2 attached hereto. The
Depositary for the Notes shall be The Depository Trust Company, a New York
corporation.
(b) Book-Entry Provisions. This Section 2.02(b) shall apply only
to a Global Note deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.02(b), authenticate and deliver initially one or more
Global Notes that (a) shall be registered in the name of the Depository or
the nominee of the Depository and (b) shall be delivered by the Trustee to
the Depository or pursuant to the Depository's instructions or held by the
Trustee as Securities Custodian.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Third Supplemental Indenture with respect
to any Global Note held on their behalf by the Depository or by the Trustee
as the Securities Custodian or under such Global Note, and the Company, the
Trustee and any agent of the Company or the Trustee shall be entitled to
treat the Depository as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company, or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a
beneficial interest in any Global Note.
(c) Certificated Notes. Except as provided in this Section 2.02,
Section 2.04 or Section 2.05, owners of beneficial interests in Restricted
Global Notes shall not be entitled to receive physical delivery of
certificated Notes.
SECTION 2.03 Certain Terms of the Notes. Set forth in the forms of
the Notes attached hereto as Exhibits 1 and 2 are:
(i) the date on which the principal of the Notes is payable;
(ii) the rate at which the Notes shall bear interest;
(iii) the place where payments with respect to the Notes shall be
payable;
(iv) the date from which interest on the Notes will accrue, the
Interest Payment Dates and the record dates for the
determination of holders to whom interest is payable on
Interest Payment Dates; and
(v) the terms upon which the Notes are redeemable.
SECTION 2.04 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
(i) The transfer and exchange of Global Notes or
beneficial interests therein shall be effected through the
Depository, in accordance with this Third Supplemental Indenture
(including applicable restrictions on transfer set forth herein,
if any) and the procedures of the Depository therefor.
(ii) Notwithstanding any other provision of this Third
Supplemental Indenture (other than the provisions set forth in
Section 2.05), a Global Note may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of
the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) In the event that a Restricted Global Note is
exchanged for Notes in certificated registered form pursuant to
Section 2.05 prior to the consummation of a Registered Exchange
Offer or the effectiveness of a Shelf Registration Statement with
respect to such Notes, such Restricted Global Note may be
exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.04
(including the certification requirements set forth on the reverse
of the Initial Notes intended to ensure that such transfers comply
with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing a Transfer
Restricted Note shall bear a legend in substantially the following
form:
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED
THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (III) PURSUANT TO EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted
Note (including any Transfer Restricted Note represented by a
Restricted Global Note) pursuant to Rule 144, the Security
Registrar shall, subject to approval by the Company, permit the
transferee thereof to exchange such Transfer Restricted Note for a
certificated Note that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Note, if the transferor thereof certifies in writing to
the Security Registrar that such sale or transfer was made in
reliance on Rule 144 (such certification to be in the form set
forth on the reverse of the Note).
(iii) After a transfer of any Initial Notes or Private
Exchange Notes pursuant to and during the period of the
effectiveness of a Shelf Registration Statement with respect to
such Initial Notes or Private Exchange Notes, as the case may be,
all requirements pertaining to legends on such Initial Notes or
such Private Exchange Notes with respect to such Notes transferred
will cease to apply and Initial Notes or Private Exchange Notes in
global form, in each case without restrictive transfer legends,
will be available to the transferee of the Holder of such Initial
Notes or Private Exchange Notes upon written directions to
transfer such Holder's interest in the Global Note.
(iv) Upon the consummation of a Registered Exchange Offer
with respect to the Initial Notes, Exchange Notes in global form
will be available to holders that exchange such Initial Notes in
such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with
respect to the Initial Notes, all requirements pertaining to such
Initial Notes that Initial Notes issued to certain holders be
issued in global form will still apply with respect to holders of
such Initial Notes that do not exchange their Initial Notes, and
Private Exchange Notes in global form with the global securities
legend and the Restricted Notes Legend set forth in Exhibit 1
hereto will be available to holders that exchange such Initial
Notes in such Private Exchange.
(c) Cancellation or Adjustment of Global Note. At such time as all
beneficial interests in a Global Note have either been exchanged for
certificated Notes, redeemed, purchased or canceled, such Global Note shall
be canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for certificated Notes,
redeemed, purchased or canceled, the principal amount of Notes represented
by such Global Note shall be reduced and an adjustment shall be made on the
books and records of the Securities Custodian with respect to such Global
Note.
(d) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
certificated Notes and Global Notes at the Security Registrar's
request.
(ii) No service charge shall be made for registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments or similar
governmental charge payable in connection therewith.
(iii) Prior to the due presentation for registration of
transfer of any Note, the Company, the Trustee, the Paying Agent
or the Security Registrar may deem and treat the Person in whose
name a Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on
such Note and for all other purposes whatsoever, whether or not
such Note is overdue, and none of the Company, the Trustee, the
Paying Agent or the Security Registrar shall be affected by notice
to the contrary.
(iv) All Notes issued upon any transfer or exchange
pursuant to the terms of the Indenture shall evidence the same
debt and shall be entitled to the same benefits under the
Indenture as the Notes surrendered upon such transfer or exchange.
(e) No Obligation of Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Note, Agent Member
or other Person with respect to the accuracy of the records of the
Depository or its nominee or of any Agent Member, with respect to
any ownership interest in the Notes or with respect to the
delivery to any Agent Member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to
such Notes. All notices and communications to be given to the
holders and all payments to be made to holders under the Notes
shall be given or made only to or upon the order of the registered
Holders (which shall be the Depository or its nominee in the case
of a Global Note). The rights of beneficial owners in any Global
Note shall be exercised only through the Depository subject to the
applicable rules and procedures of the Depository. The Trustee may
rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Agent Members and
any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Third Supplemental
Indenture or under applicable law with respect to any transfer of
any interest in any Note (including any transfers between or among
Agent Members or beneficial owners in any Global Note) other than
to require delivery of such certificates and other documentation
or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of the Indenture.
SECTION 2.05 Certificated Notes.
(a) A Global Note deposited with the Depository or with the
Trustee as Securities Custodian pursuant to Section 2.02 shall be
transferred to the beneficial owners thereof in the form of certificated
Notes in an aggregate principal amount equal to the principal amount of
such Global Note, in exchange for such Global Note, only if such transfer
complies with this Section 2.05 and the conditions set forth in Sections
2.05 and 2.11 of the Indenture.
(b) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to
the Trustee at its Corporate Trust Office to be so transferred, in whole or
from time to time in part, without charge, and the Trustee shall
authenticate and deliver, upon such transfer of each portion of such Global
Note, an equal aggregate principal amount of certificated Notes of
authorized denominations. Any portion of a Global Note transferred pursuant
to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 principal amount and any integral multiple thereof
and registered in such names as the Depository shall direct. Any
certificated Initial Note or Private Exchange Note delivered in exchange
for an interest in the Global Note shall, except as otherwise provided by
Section 2.04(b), bear the restricted securities legend set forth in Exhibit
1 hereto.
(c) Subject to the provisions of Section 2.05(b), the registered
holder of a Global Note shall be entitled to grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a holder is
entitled to take under the Indenture or the Notes.
(d) In the event of the occurrence the events specified in Section
2.11 of the Indenture, the Company shall promptly make available to the
Trustee a reasonable supply of certificated Notes in definitive, fully
registered form without interest coupons.
SECTION 2.06 Defeasance. The Notes shall be subject to defeasance
as set forth in Article XI of the Indenture as amended and supplemented by
Article 5 of this Third Supplemental Indenture.
SECTION 2.07 Covenants. Holders of the Notes shall have the
benefit of the additional restrictive covenants set forth in Article 3 and
4 of this Third Supplemental Indenture.
SECTION 2.08 Additional Notes. Notwithstanding Section 2.01 of
this Third Supplemental Indenture, the Company may, without the consent of
the holders of Notes, issue additional notes having the same ranking and
the same interest rate, maturity and other terms as the Notes. Any
additional notes having such similar terms, together with the Notes, will
constitute a single series of Notes under the Indenture, and will be issued
in compliance with Section 2.01 of the Indenture. SECTION 2.09 Right of
Optional Redemption; Prices. The Notes are redeemable in whole or in part,
at the option of the Company at any time and from time to time, on not less
than 30 or more than 90 days' prior notice mailed to the holders of the
Notes, at a redemption price equal to the greater of (i) 100% of the
principal amount of the Notes to be redeemed and (ii) the sum of the
present values of the Remaining Scheduled Payments thereon discounted to
the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 62.5 basis
points, together in either case with accrued interest on the principal
amount being redeemed to the Redemption Date.
ARTICLE 3
COVENANTS APPLICABLE TO THE NOTES
For the sole benefit of the holders of the Notes, the Company
agrees:
SECTION 3.01 Restrictions on Liens. (a) The Company will not, nor
will it permit any Subsidiary to, issue, assume or guarantee any Debt
secured by any Lien upon any Operating Property or upon any shares of stock
or Debt of any Subsidiary (whether such Operating Property, shares of stock
or Debt is now or hereafter acquired) without in any such case effectively
securing, concurrently with the issuance, assumption or guaranty of any
such Debt, the Notes (together with, if the Company shall so determine, any
other Debt of or guaranteed by the Company or such Subsidiary ranking
equally with the Notes and then existing or thereafter created) equally and
ratably with such Debt; provided that the foregoing restrictions shall not
apply to:
(i) Liens on any Operating Property acquired, constructed,
improved or opened by the Company or any Subsidiary after the date
of this Third Supplemental Indenture to secure Debt issued,
assumed or guaranteed within 360 days after such acquisition or
completion of construction or improvement or Opening to provide
for the payment of the purchase price of, or the cost of
constructing or improving or Opening, such Operating Property;
(ii) Liens existing on any Operating Property at the time of
its acquisition by the Company or one of its Subsidiaries, or
Liens on any shares of stock or Debt of any Subsidiary existing at
the time it becomes a Subsidiary;
(iii) Liens existing on any property acquired from a Person
that is merged with or into the Company or a Subsidiary;
(iv) Liens to secure Debt of a Subsidiary to the Company or
to another Subsidiary;
(v) Liens in existence on any Operating Property or any
shares of stock or Debt of any Subsidiary on the date of this
Third Supplemental Indenture;
(vi) Liens in favor of the United States of America or any
state thereof, or any department, agency or instrumentality or
political subdivision of the United States of America or any state
thereof to secure partial progress, advance or other payments
pursuant to any contract or statute or to secure any Debt incurred
for the purpose of financing all or any part of the purchase price
or the cost of constructing or improving the property subject to
such Liens;
(vii) Liens imposed by law, such as carriers',
warehousemen's, mechanics', landlord's, materialmen's, repairmen's
or other like Liens;
(viii) Pledges or deposits in connection with workers'
compensation, unemployment insurance and similar legislation and
deposits securing liability to insurance carriers under insurance
or self-insurance arrangements;
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(x) Liens for taxes, assessments, governmental charges or
levies not yet due or which are being contested in good faith;
(xi) Any Lien incurred or assumed in connection with the
issuance by a state or political subdivision of a state of any
securities the interest on which is exempt from Federal income
taxes by virtue of Section 103 of the Internal Revenue Code of
1986, as amended, or any other laws and regulations in effect at
the time of such issuance; or
(xii) Liens securing Debt incurred to extend, renew or
replace in whole or in part Debt secured by any Lien, provided
that (a) the principal amount of Debt secured thereby shall not
exceed the principal amount of Debt so secured at the time of such
extension, renewal or replacement, and (b) such extension, renewal
or replacement shall be limited to all or a part of the property
that secured the Debt so extended, renewed or replaced plus
improvements on such property.
(b) In addition to the foregoing, the Company and its Subsidiaries
may issue, assume or guarantee Debt secured by a Lien upon any Operating
Property or shares of stock or Debt of any Subsidiary or enter into a Sale
and Leaseback Transaction involving any Operating Property without equally
and ratably securing the Notes if the sum of (1) the amount of the Debt
secured by Liens otherwise prohibited by Section 3.01(a) and (2) the
Attributable Debt of all Sale and Leaseback Transactions otherwise
prohibited by Section 3.02 does not exceed at the time 10% of Consolidated
Net Tangible Assets.
(c) If at any time the Company or any Subsidiary shall issue,
assume or guarantee any Debt secured by any Lien upon any Operating
Property or shares of stock or Debt of any Subsidiary and if Section
3.01(a) requires that the Notes be secured equally and ratably with such
Debt, the Company will promptly execute, at its expense, any instruments
necessary to so equally and ratably secure such Notes and deliver the same
to the Trustee together with:
(i) an Officers' Certificate stating that the covenant of
the Company contained in Section 3.01(a) has been complied with;
and
(ii) an Opinion of Counsel to the effect that such covenant
has been complied with, and that any instruments executed by the
Company in the performance of such covenant comply with the
requirements of such covenant.
(d) If the Company shall hereafter secure the Notes equally and
ratably with any other Debt pursuant to the provisions of this Section
3.01, the Trustee is hereby authorized to enter into an indenture or
supplemental indenture and to take such action, if any, as it may deem
advisable to enable it to enforce effectively the rights of the holders of
the Notes so secured, equally and ratably with such other Debt.
SECTION 3.02 Limitations on Sale and Leaseback Transactions. The
Company will not, nor will it permit any Subsidiary to, enter into any Sale
and Leaseback Transaction involving any Operating Property, unless within
360 days of the effective date of such Sale and Leaseback Transaction, the
Company or such Subsidiary applies or causes to be applied an amount equal
to the greater of (i) the fair market value of the Operating Property so
sold and leased back at the time of entering into such Sale and Leaseback
Transaction (as determined by the Company's Board of Directors) and (ii)
the net proceeds of the sale of the Operating Property sold and leased back
pursuant to such Sale and Leaseback Transaction, to:
(a) the prepayment or retirement (other than mandatory prepayment
or retirement) of Funded Debt of the Company or any Subsidiary, or
(b) the purchase of other property that will constitute Operating
Property.
The foregoing restriction shall not apply to a Sale and Leaseback
Transaction, if:
(i) the Company or such Subsidiary would be entitled to
issue, assume or guarantee Debt in an amount equal to the
Attributable Debt of the Sale and Leaseback Transaction secured by
the Operating Property without being required to equally and
ratably secure the Notes pursuant to Section 3.01(a),
(ii) such Sale and Leaseback transaction involves a store
and occurs within 360 days of the Opening;
(iii) such Sale and Leaseback Transaction is between the
Company and a Subsidiary or between Subsidiaries, or
(iv) such Sale and Leaseback Transaction involves taking
back a lease for a period of three years or less (including
renewals).
ARTICLE 4
SUCCESSOR CORPORATION
SECTION 4.01 Consolidation, Merger and Sale of Assets. The Company
will not consolidate with or merge into any other Person or convey,
transfer or lease all or substantially all of its properties and assets to
any Person, unless:
(i) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer, or which leases all or
substantially all of the properties and assets of the Company
shall be a corporation organized and existing under the laws of
the United States of America, any state or the District of
Columbia and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Notes
and the performance of every covenant of the Indenture as
supplemented by this Third Supplemental Indenture on the part of
the Company to be performed or observed;
(ii) immediately after giving effect to such transaction, no
Event of Default and no Default shall have happened and be
continuing.
The Trustee may require that the Company deliver an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture complies with this Section 4.01 and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
ARTICLE 5
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 5.01 Indenture Satisfaction and Discharge Provisions.
Section 11.02 of the Indenture shall not apply to the Notes. Section 11.03
and 11.04 shall apply to all moneys and Governmental Obligations deposited
with the Trustee or held by any paying agent under this Article 5.
SECTION 5.02 Company's Option to Effect Defeasance or Covenant
Defeasance. In addition to discharge of the Indenture pursuant to Section
11.01 of the Indenture, the Company may at its option elect at any time
either (a) to effect a defeasance and discharge of the Notes under Section
5.03 hereof or (b) to effect a covenant defeasance of the Notes under
Section 5.04 hereof, in each case upon compliance with the applicable
conditions set forth in Section 5.05 hereof.
SECTION 5.03 Defeasance and Discharge. Upon election by Company to
effect a defeasance and discharge of the Notes under this Section 5.03 and
satisfaction of the conditions precedent set forth in Section 5.05, the
Company shall be deemed to have paid and discharged the Notes and the
Company shall be deemed to have satisfied all its other obligations under
the Notes and all its other obligations relating to the Notes under the
Indenture, as supplemented by the Third Supplemental Indenture, except for
Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03, 7.06, 7.10 and 11.05 of the
Indenture that shall survive until the Notes mature and be paid.
Thereafter, Sections 7.06 and 11.05 of the Indenture shall survive.
SECTION 5.04 Covenant Defeasance. Upon election by the Company to
effect a covenant defeasance of the Notes under this Section 5.04, the
Company shall be released from its obligations under Sections 3.01 and 3.02
of this Third Supplemental Indenture on or after the date the conditions
precedent set forth in Section 5.05 are satisfied (hereinafter, "covenant
defeasance"). For this purpose, such covenant defeasance means that the
Issuer may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in Section 3.01 or 3.02 of this
Third Supplemental Indenture.
SECTION 5.05 Conditions to Defeasance and Discharge or Covenant
Defeasance. The following shall be conditions precedent to the application
of either Section 5.03 or 5.04:
(i) the Company shall have deposited or cause to be
deposited irrevocably with the Trustee, as trust funds in trust
for the purpose of making the following payments, specifically
pledged as security for and dedicated solely to the benefit of the
holders of Notes, of cash in U.S. dollars (or such other money or
currencies as shall then be legal tender in the United States)
and/or Government Obligations, which through the payment of
interest and principal in respect thereof, in accordance with
their terms, will provide (and without reinvestment and assuming
no tax liability will be imposed on the Trustee), not later than
the due date of any payment of money, an amount in cash,
sufficient, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, to discharge
principal (including premium, if any) under the Notes, and each
installment of principal (including premium, if any) and interest
on the Outstanding Notes on the stated maturity of such principal
or installment of principal or interest on the dates on which such
installments of principal and interest are due, in accordance with
the terms of the Indenture, as supplemented by this Third
Supplemental Indenture, and the Notes;
(ii) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that holders of the Notes will
not, or there has been published by the Internal Revenue Service a
ruling to the effect that holders of the Notes will not, recognize
income, gain or loss for Federal income tax purposes as a result
of the Company's exercise of its option under Section 5.03 or
5.04, as the case may be, and will be subject to Federal income
tax on the same amounts and in the same manner and at the same
times, as would have been the case if such defeasance or covenant
defeasance had not occurred;
(iii) no Event of Default or Default shall have occurred and
be continuing on the date of such deposit, and no Event of Default
under Sections 6.01(a)(5) or (6) or event which with the giving of
notice or lapse of time, or both, would become an Event of Default
under Sections 6.01(a)(5) or (6) of the Indenture shall have
occurred and be continuing on the 91st day after such date;
(iv) such deposit will not result in a breach or violation
of, or constitute a default under, the Indenture or this Third
Supplemental Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound;
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the
defeasance and discharge under Section 5.03 or the covenant
defeasance under Section 5.04 (as the case may be) shall have been
complied with;
(vi) such defeasance and discharge or covenant defeasance
will not result in the trust arising from such deposit to
constitute an investment company under the Investment Company Act
of 1940 or such trust shall be qualified under such act or exempt
from regulation thereunder; and
(vii) the Company has paid or caused to be paid all other
sums payable with respect to the Outstanding Notes.
ARTICLE 6
MISCELLANEOUS
SECTION 6.01 Ratification and Confirmation. The Indenture, as
supplemented by this Third Supplemental Indenture, is in all respects
ratified and confirmed. This Third Supplemental Indenture shall be deemed
part of the Indenture in the manner and to the extent herein and therein
provided.
SECTION 6.02 Recitals, Validity and Sufficiency. The recitals
herein contained are made by the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee
makes no representation as to the validity or sufficiency of this Third
Supplemental Indenture.
SECTION 6.03 Counterparts. This Third Supplemental Indenture may
be executed in any number of counterparts each of which shall be an
original; but such counterparts shall together constitute but one and the
same instrument.
SECTION 6.04 Governing Law. This Third Supplemental Indenture and
the Notes shall be governed by, and construed in accordance with, the laws
of the State of New York without regard to conflict of law provisions
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the date first above
written.
KMART CORPORATION
By: /s/ John T. McDonald, Jr.
--------------------------------
Name: John T. McDonald, Jr.
Title: Senior Vice President
and Treasurer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Paul Schmalzel
------------------------------
Name: Paul Schmalzel
Title: Vice President
EXHIBIT 1
to
THIRD SUPPLEMENTAL INDENTURE
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT OR AGENTS FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY GLOBAL NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER
OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) OUTSIDE THE UNITED STATES 1N AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
KMART CORPORATION
9-7/8% Note Due June 15, 2008
No.
$ CUSIP: __________
Kmart Corporation, a corporation duly organized and existing under
the laws of the State of Michigan (the "Issuer"), for value received,
hereby promises to pay to Cede & Co. or registered assigns, the principal
sum of $___________ on June 15, 2008, at the office or agency of the Issuer
in the Borough of Manhattan, The City of New York, in such coin or currency
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay
semi-annually on June 15 and December 15 of each year (each, an "Interest
Payment Date"), commencing December 15, 2001, the amount of interest on
said principal sum at said office or agency, in like coin or currency, at
the rate per annum specified in the title of this Note, from June 19, 2001
or from the most recent Interest Payment Date to which interest has been
paid or duly provided for until said principal sum has been paid or duly
provided for; provided, however, that if a Registration Default (as defined
in the Registration Rights Agreement) occurs, additional interest will
accrue on this Note at a rate of 0.50% per annum (increasing by an
additional 0.50% per annum after the first 90-day period that occurs, after
the date on which such Registration Default occurs up to a maximum
additional interest rate of 1.00% per annum) from and including the date on
which any such Registration Default shall occur to but excluding the date
on which all Registration Defaults have been cured. Interest shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
The interest payable on any Interest Payment Date which is
punctually paid or duly provided for on such Interest Payment Date will be
paid to the Person in whose name this Note is registered at the close of
business on June 1 or December 1 (in each case, whether or not a Business
Day), as the case may be (each , "Regular Record Date"), immediately
preceding such Interest Payment Date. Interest payable on this Note which
is not punctually paid or duly provided for on any Interest Payment Date
therefore shall forthwith cease to be payable to the Person in whose name
this Note is registered at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date, and such interest may
either (i) be paid to the Person in whose name this Note is registered at
the close of business on a special record date to be established for such
payment by the Trustee or (ii) be paid in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, all as more fully provided in the Indenture referred
to on the reverse hereof. At the option of the Issuer, interest on the
Notes may be paid (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of holders of the
Notes or (ii) at the expense of the Issuer, by wire transfer to an account
maintained by the Person entitled thereto as specified in writing to the
Trustee by such Person by the applicable record date of the Notes.
Reference is made to the further provisions of this Note set forth
on the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, KMART CORPORATION has caused this instrument
to be signed by its duly authorized officers and has caused its corporate
seal to be affixed hereunto or imprinted hereon.
Dated:
KMART CORPORATION
By:
------------------------------
Name:
Title
By:
------------------------------
Name:
Title
Attest:
-----------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:
-------------------------------
Authorized Signatory
[FORM OF REVERSE OF INITIAL NOTE]
KMART CORPORATION
9-7/8% Note Due June 15, 2008
1. Indenture. (a) This Note is one of a duly authorized issue of
senior debt securities of the Issuer hereinafter called the "Notes") of a
series designated as the 9-7/8% Notes Due June 15, 2008 of the Issuer,
initially limited in aggregate principal amount to $430,000,000, all issued
or to be issued under and pursuant to the Indenture, dated as of December
13, 1999, as supplemented by the Third Supplemental Indenture, dated as of
June 19, 2001 (as so amended and supplemented, the "Indenture"), between
the Issuer and The Bank of New York, as Trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Issuer, the
Trustee and the holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of
indebtedness (together with the Notes, hereinafter called the "Securities")
may be issued under the Indenture in one or more series, which different
series may vary from the Notes and each other, as in the Indenture
provided.
(c) All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings
assigned to them in the Indenture.
2. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification
of the rights and obligations of the Issuer and the rights of the holders
of the Securities of each series to be affected under the Indenture at any
time by the Issuer and the Trustee with the consent of the holders of a
majority in principal amount of the Securities at the time Outstanding of
each series to be affected. The Indenture also contains provisions
permitting the holders of a majority in principal amount of the Securities
of each series at the time Outstanding, on behalf of the holder of all
Securities of such series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the holder of this
Note shall be conclusive and binding upon such holder and upon all future
holders of this Note and of any issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer or any other
obligor on the Notes, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note in the manner, at
the respective times, at the rate, at the place and in the coin or currency
herein prescribed.
4. Certain Covenants. The Indenture restricts the ability of the
Issuer and its Subsidiaries to incur certain secured indebtedness and enter
into certain sale and leaseback transactions. These covenants are subject
to the covenant defeasance procedures outlined in the Indenture.
5. The Notes are redeemable in whole or in part, at the option of
the Company at any time and from time to time, on not less than 30 or more
than 90 days' prior notice mailed to the holders of the Notes, at a
redemption price equal to the greater of (i) 100% of the principal amount
of the Notes to be redeemed and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 62.5 basis points, together in either
case with accrued interest on the principal amount being redeemed to the
Redemption Date.
Subject to payment by the Company of a sum sufficient to pay the
amount due on redemption, interest on this Note (or portion hereof if this
Note is redeemed in part) shall cease to accrue upon the date duly fixed
for redemption of this Note (or portion hereof if this Note is redeemed in
part).
6. Effect of Event of Default. If an Event of Default shall have
occurred and be continuing under the Indenture, the principal hereof may be
declared, and upon such declaration shall become, due and payable in the
manner, with the effect and subject to the conditions provided in the
Indenture.
7. Defeasance. The Indenture contains provisions for defeasance
and covenant defeasance at any time of the indebtedness on this Note upon
compliance by the Issuer with certain conditions set forth therein.
8. Denominations; Exchanges. (a) The Notes are issuable in
registered form without coupons in denominations of $1,000 and any multiple
of $1,000 at the office or agency of the Issuer in the Borough of
Manhattan, The City of New York, and in the manner and subject to the
limitations provided in the Indenture, Notes may be exchanged for a like
aggregate principal amount of Notes of other authorized denomination.
9. Holder as Owner. The Issuer, the Trustee and any authorized
agent of the Issuer or the Trustee may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof,
interest hereon, and for all other purposes, and none of the issuer or the
Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer in the Indenture or any
indenture supplement thereto or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any past,
present or future incorporator, shareholder, officer or director, as such,
of the Issuer or of any successor corporation of either of them, either
directly or through the Issuer, or any successor corporation, under any
constitution, statute or rule of law or by the enforcement of any
assessment or otherwise, all such liability being expressly waived and
released by the acceptance hereof and as part of the consideration for the
issue hereof.
11. Holders' Compliance with Registration Rights Agreement. Each
holder of a Note, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, including the obligations
of the holders with respect to a registration and the indemnification of
the Company to the extent provided therein.
12. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
conflict of law provisions thereof.
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
____________________________________
Date: ______________ Your Signature:_________________________________________
_______________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
In connection with any transfer of any of the Notes evidenced by
this certificate occurring prior to the expiration of the period referred
to in Rule 144(k) under the Securities Act after the later of the date of
original issuance of such Notes and the last date, if any, on which such
Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Notes are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that purchases
for its own account or for the account of a
qualified institutional buyer to whom notice is
given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to
and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) [ ] outside the United States in an offshore
transaction within the meaning of Regulation S
under the Securities Act of 1933 in compliance
with Rule 904 under the Securities Act of 1933;
or
(5) [ ] pursuant to the exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the
name of any person other than the registered holder thereof;
provided, however, that if box (4) or (5) is checked, the Trustee
shall be entitled to require, prior to registering any such
transfer of the Notes, such legal opinions, certifications and
other information as the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
----------------------------------------
Signature
Signature Guarantee:
----------------------------------- ----------------------------------
Signature must be guaranteed Signature
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Security Registrar, which
requirements include membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Security Registrar in addition to, or
in substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
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NOTICE: To be executed by an executive
officer
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
Signature of
Amount of increase Principal amount of authorized officer
Amount of decrease in principal this Global Note of Trustee or
Date of in principal amount amount of this following such Securities
Exchange of this Global Note Global Note decrease or increase Custodian
-------- -------------------- ------------------ -------------------- -------------------
EXHIBIT 2
to
THIRD SUPPLEMENTAL INDENTURE
[FORM OF FACE OF EXCHANGE NOTE
OR PRIVATE EXCHANGE NOTE]
*/**/
-------------------
*/[If the Note is to be issued in global form, add the Global
Notes Legend from Exhibit 1 to the Third Supplemental Indenture and the
attachment from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL NOTES]
-- SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".]
**/[If the Note is a Private Exchange Note issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Securities Legend from Exhibit 1 to the Third
Supplemental Indenture and replace the Assignment Form included in this
Exhibit A with the Assignment Form included in such Exhibit 1.]
KMART CORPORATION
9-7/8% Note Due June 15, 2008
No.
$ CUSIP: __________
Kmart Corporation, a corporation duly organized and existing under
the laws of the State of Michigan (the "Issuer"), for value received,
hereby promises to pay to Cede & Co. or registered assigns, the principal
sum of $___________ on June 15, 2008, at the office or agency of the Issuer
in the Borough of Manhattan, The City of New York, in such coin or currency
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay
semi-annually on June 15 and December 15 of each year (each, an "Interest
Payment Date"), commencing December 15, 2001, the amount of interest on
said principal sum at said office or agency, in like coin or currency, at
the rate per annum specified in the title of this Note, from June 19, 2001
or from the most recent Interest Payment Date to which interest has been
paid or duly provided for until said principal sum has been paid or duly
provided for. Interest shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
The interest payable on any Interest Payment Date which is
punctually paid or duly provided for on such Interest Payment Date will be
paid to the Person in whose name this Note is registered at the close of
business on June 1 or December 1 (in each case, whether or not a Business
Day), as the case may be (each, "Regular Record Date"), immediately
preceding such Interest Payment Date. Interest payable on this Note which
is not punctually paid or duly provided for on any Interest Payment Date
therefore shall forthwith cease to be payable to the Person in whose name
this Note is registered at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date, and such interest may
either (i) be paid to the Person in whose name this Note is registered at
the close of business on a special record date to be established for such
payment by the Trustee or (ii) be paid in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, all as more fully provided in the Indenture referred
to on the reverse hereof. At the option of the Issuer, interest on the
Notes may be paid (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of holders of the
Notes or (ii) at the expense of the Issuer, by wire transfer to an account
maintained by the Person entitled thereto as specified in writing to the
Trustee by such Person by the applicable record date of the Notes.
Reference is made to the further provisions of this Note set forth
on the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, KMART CORPORATION has caused this instrument
to be signed by its duly authorized officers and has caused its corporate
seal to be affixed hereunto or imprinted hereon.
Dated:
KMART CORPORATION
By:
-------------------------------
Name:
Title
By:
-------------------------------
Name:
Title
Attest:
-----------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:
-------------------------------
Authorized Signatory
[FORM OF REVERSE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
KMART CORPORATION
9-7/8% Note Due June 15, 2008
1. Indenture. (a) This Note is one of a duly authorized issue of
senior debt securities of the Issuer hereinafter called the "Notes") of a
series designated as the 9-7/8% Notes Due June 15, 2008 of the Issuer,
initially limited in aggregate principal amount to $430,000,000, all issued
or to be issued under and pursuant to the Indenture, dated as of December
13, 1999, as supplemented by the Third Supplemental Indenture, dated as of
June 19, 2001 (as so amended and supplemented, the "Indenture"), between
the Issuer and The Bank of New York, as Trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Issuer, the
Trustee and the holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of
indebtedness (together with the Notes, hereinafter called the "Securities")
may be issued under the Indenture in one or more series, which different
series may vary from the Notes and each other, as in the Indenture
provided.
(c) All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings
assigned to them in the Indenture.
2. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification
of the rights and obligations of the Issuer and the rights of the holders
of the Securities of each series to be affected under the Indenture at any
time by the Issuer and the Trustee with the consent of the holders of a
majority in principal amount of the Securities at the time Outstanding of
each series to be affected. The Indenture also contains provisions
permitting the holders of a majority in principal amount of the Securities
of each series at the time Outstanding, on behalf of the holder of all
Securities of such series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the holder of this
Note shall be conclusive and binding upon such holder and upon all future
holders of this Note and of any issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer or any other
obligor on the Notes, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note in the manner, at
the respective times, at the rate, at the place and in the coin or currency
herein prescribed.
4. Certain Covenants. The Indenture restricts the ability of the
Issuer and its Subsidiaries to incur certain secured indebtedness and enter
into certain sale and leaseback transactions. These covenants are subject
to the covenant defeasance procedures outlined in the Indenture.
5. The Notes are redeemable in whole or in part, at the option of
the Company at any time and from time to time, on not less than 30 or more
than 90 days' prior notice mailed to the holders of the Notes, at a
redemption price equal to the greater of (i) 100% of the principal amount
of the Notes to be redeemed and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 62.5 basis points, together in either
case with accrued interest on the principal amount being redeemed to the
Redemption Date.
Subject to payment by the Company of a sum sufficient to pay the
amount due on redemption, interest on this Note (or portion hereof if this
Note is redeemed in part) shall cease to accrue upon the date duly fixed
for redemption of this Note (or portion hereof if this Note is redeemed in
part).
6. Effect of Event of Default. If an Event of Default shall have
occurred and be continuing under the Indenture, the principal hereof may be
declared, and upon such declaration shall become, due and payable in the
manner, with the effect and subject to the conditions provided in the
Indenture.
7. Defeasance. The Indenture contains provisions for defeasance
and covenant defeasance at any time of the indebtedness on this Note upon
compliance by the Issuer with certain conditions set forth therein.
8. Denominations; Exchanges. (a) The Notes are issuable in
registered form without coupons in denominations of $1,000 and any multiple
of $1,000 at the office or agency of the Issuer in the Borough of
Manhattan, The City of New York, and in the manner and subject to the
limitations provided in the Indenture, Notes may be exchanged for a like
aggregate principal amount of Notes of other authorized denomination.
9. Holder as Owner. The Issuer, the Trustee and any authorized
agent of the Issuer or the Trustee may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof,
interest hereon, and for all other purposes, and none of the issuer or the
Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer in the Indenture or any
indenture supplement thereto or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any past,
present or future incorporator, shareholder, officer or director, as such,
of the Issuer or of any successor corporation of either of them, either
directly or through the Issuer, or any successor corporation, under any
constitution, statute or rule of law or by the enforcement of any
assessment or otherwise, all such liability being expressly waived and
released by the acceptance hereof and as part of the consideration for the
issue hereof.
11. Holders' Compliance with Registration Rights Agreement. Each
holder of a Note, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, including the obligations
of the holders with respect to a registration and the indemnification of
the Company to the extent provided therein.
12. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
conflict of law provisions thereof.
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note
on the books of the Company. The agent may substitute another to act for him.
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Date: ________________ Your Signature:___________________________________
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Sign exactly as your name appears on the other side of this Note.