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EXHIBIT 1.0
UNDERWRITING AGREEMENT
January 25, 2001
▇▇▇▇▇▇ Brothers Inc.
Chase Securities Inc.
As Representatives of the Underwriters
c/▇ ▇▇▇▇▇▇ Brothers Inc.
Three World Financial Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Ladies and Gentlemen:
Kmart Corporation, a Michigan corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS"), for whom you are acting as representatives, $400,000,000
aggregate principal amount of its 9.375 % Notes Due 2006 (the "SECURITIES") to
be issued pursuant to the provisions of the Indenture dated as of December 13,
1999 (the "INDENTURE") between the Company and The Bank of New York, as Trustee
(the "TRUSTEE"), as supplemented by the Second Supplemental Indenture dated as
of January 30, 2001 (the "SUPPLEMENTAL INDENTURE").
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") two registration statements on Form S-3 (File Nos. 33-64905 and
333-74665), including a prospectus, relating to debt and equity securities (the
"SHELF SECURITIES") to be issued from time to time by the Company and has filed
with, or transmitted for filing to, or shall promptly hereafter file with or
transmit for filing to, the Commission a prospectus supplement (the "PROSPECTUS
SUPPLEMENT") specifically relating to the Securities pursuant to Rule 424 under
the Securities Act of 1933, as amended (the "SECURITIES ACT"). The term
"REGISTRATION STATEMENT" means the registration statements, including the
exhibits thereto, as amended to the date of this Agreement. The term "BASIC
PROSPECTUS" means the prospectus relating to the Registration Statement and the
Shelf Securities in the form first used to confirm sales of the Securities. The
term "PROSPECTUS" means the Basic Prospectus together with the Prospectus
Supplement. The term "PRELIMINARY PROSPECTUS" means a preliminary prospectus
supplement specifically relating to the Securities, together with the Basic
Prospectus. As used herein, the terms "REGISTRATION STATEMENT," "BASIC
PROSPECTUS," "PROSPECTUS" and "PRELIMINARY PROSPECTUS" shall include in each
case the documents, if any, incorporated by reference therein. The terms
"SUPPLEMENT," "AMENDMENT" and "AMEND" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
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If the Company has filed an abbreviated registration statement to register
additional 9.375 % Notes Due 2006 pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
1. Representations and Warranties. The Company represents and warrants to
and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (ii) each part of the Registration Statement,
when such part became effective, did not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(iii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
paragraph do not apply to (A) statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein or (B) that
part of the Registration Statement that constitutes the Statement of
Eligibility (Form T-1) under the Trust Indenture Act of 1939, as
amended (the "TRUST INDENTURE ACT"), of the Trustee.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
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(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been qualified under the Trust Indenture
Act and each of the Indenture and the Supplemental Indenture has been
duly authorized by the Company, and upon execution and delivery
thereof by the Company, and assuming due authorization, execution and
delivery thereof by the Trustee, each of the Indenture and the
Supplemental Indenture will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles
of equity.
(g) The Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
as supplemented by the Supplemental Indenture and delivered to and
paid for by the Underwriters in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture as
supplemented by the Supplemental Indenture and will be valid and
binding obligations of the Company, enforceable in accordance with
their terms, except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
by general principles of equity.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture and the Supplemental Indenture and the issuance and sale
of the Securities will not contravene any provision of applicable law
or the certificate of incorporation or by-laws of the Company or any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, except such contraventions as would not in the aggregate
have a material adverse effect on the Company and its subsidiaries,
taken as a whole, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, the Indenture, the Supplemental Indenture or the issuance
and sale of the Securities, except such as may be required by the
Securities Act, the Exchange Act or the securities or Blue Sky laws of
the various states and the securities laws of jurisdictions outside
the United States in connection with the offer and sale of the
Securities.
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(i) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(k) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(l) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended.
(m) The Company and its subsidiaries (i) are, to the Company's
best knowledge, in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), (ii) have received, to the Company's best knowledge, all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii)
are in compliance, to the Company's best knowledge, with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(n) Any costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any
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potential liabilities to third parties) would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) No person has the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Securities registered pursuant to the Registration
Statement as a consequence of the filing of the Registration Statement
with the Commission.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective principal amounts of Securities set forth in Schedule I
hereto opposite its name at 99.375% of their principal amount plus accrued
interest, if any, from January 30, 2001 to the date of payment and delivery.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Securities as soon after this Agreement has been entered into as in your
judgment is advisable. The terms of the public offering of the Securities are
set forth in the Prospectus. The Company is further advised by you that the
Securities are to be offered to the public initially at 100% of their principal
amount (the "PUBLIC OFFERING PRICE") plus accrued interest, if any, from January
30, 2001 to the date of payment and delivery and to certain dealers selected by
you at a price that represents a concession not in excess of .375% of the
principal amount, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of .25% of the principal amount, to any
Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Securities shall be made by wire
transfer to the Company in Federal or other funds immediately available in New
York City at 10:00 a.m., New York City time, on January 30, 2001, or at such
other time on the same or such other date, not later than February 6, 2001, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for the Securities shall be made against delivery to you on the
Closing Date for the respective accounts of the several Underwriters of the
Securities registered in such names and in such denominations as you shall
request in writing not less than one full business day prior to the Closing
Date, with any transfer taxes payable in connection with the transfer of the
Securities to the Underwriters duly paid.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Securities to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Securities are subject to the
condition that the Registration Statement shall be effective on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
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(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded the Company
or any of the Company's securities or in the rating outlook for the
Company by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436 (g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in Section 5(a)(i) above and
to the effect that the representations and warranties of the Company
contained in this Agreement are true and correct in all material
respects as of the Closing Date and that the Company has complied in
all material respects with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on
or before the Closing Date.
The officer of the Company signing and delivering such
certificate may rely upon the best of his or her knowledge as to
proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of, Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, special counsel
for the Company, dated the Closing Date, to the effect that:
(i) the Indenture has been qualified under the Trust
Indenture Act and, assuming the due authorization, execution and
delivery of the Indenture and the Supplemental Indenture by the
Company and the Trustee, each of the Indenture and the Supplemental
Indenture will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of
equity;
(ii) assuming the due authorization, execution and delivery
of the Indenture and the Supplemental Indenture by the Company, the
Securities, when executed and authenticated in accordance with the
provisions of the Indenture and the Supplemental Indenture and
delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be entitled to the benefits of the
Indenture and the Supplemental Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their
terms, except as the same may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general
principles of equity;
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(iii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture and the Supplemental Indenture and the issuance and sale
of the Securities will not contravene any provision of Applicable Law
(as defined below), except such contraventions as would not,
individually or in the aggregate, have a material adverse effect on
the condition (financial and other), business, properties, net worth
or results of operations of the Company and its subsidiaries, taken as
a whole, provided that such counsel may state that they express no
opinion under this paragraph with regard to the anti-fraud provisions
of the Securities Act, the Exchange Act or the rules and regulations
thereunder or the information contained in, the accuracy, completeness
or correctness of, or the adequacy of the disclosure contained in, the
Prospectus or the Registration Statement or the responsiveness thereof
to the requirements of the Act and the rules and regulations
thereunder which matters are addressed in paragraph 5(c)(vi) below and
the second paragraph following paragraph 5(c)(vi) below; and no
Governmental Approval is required for the performance by the Company
of its obligations under this Agreement, the Indenture, the
Supplemental Indenture or the Securities, except such as may be
required by the Securities Act, the Exchange Act or the securities or
Blue Sky laws of the various states and the securities laws of
jurisdictions outside the United States in connection with the offer
and sale of the Securities.
(iv) the statements in the Prospectus under the captions
"Description of Debt Securities," "Description of Notes", and
"Underwriters" insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to
therein;
(v) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended; and
(vi) such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) appeared on their
face to be appropriately responsive in all material respects to the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder.
For purposes of the foregoing opinion, such counsel may state
that (a) "Applicable Law" shall mean only the laws of the United
States and the State of New York which, in such counsel's experience,
are normally applicable to
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transactions of the type contemplated by this Agreement (other than
the rules and regulations of the National Association of Securities
Dealers, Inc.), but without such counsel having made any special
investigation as to the applicability of any specific law, rule or
regulation except as specified herein, (b) "Governmental Approval"
shall mean any consent, approval, license, authorization or validation
of, or filing, recording or registration with, any Governmental
Authority pursuant to Applicable Laws, and (c) "Governmental
Authority" means any New York or federal executive, legislative,
judicial, administrative or regulatory body.
In addition, such counsel shall state that it has participated in
conferences with officers and representatives of the Company and
representatives of the independent accountants of the Company at which
the contents of the Registration Statement and the Prospectus, the
documents incorporated by reference therein and related matters were
discussed and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus or the documents incorporated by reference therein and has
made no independent check or verification thereof except for those
made under the captions listed in paragraph 5(c)(iv) above, in each
case insofar as such statements relate to provisions of documents
therein described, on the basis of the foregoing, no facts have come
to such counsel's knowledge that have led such counsel to believe that
the Registration Statement, at the time it became effective or as
supplemented by the Prospectus Supplement at the date of this
Agreement, contained an untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus,
as of the date of this Agreement or the Closing Date, contains an
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
such counsel need not express any belief with respect to the financial
statements, schedules and other financial and statistical data
included or incorporated by reference therein or excluded therefrom or
the exhibits to the Registration Statement, including the Form T-1.
(d) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President, Secretary and acting General
Counsel for the Company, to the effect that;
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of Michigan,
has the corporate power and authority to own its property and to
conduct its business as presently conducted and as described in the
Registration Statement and Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
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(ii) Kmart Properties, Inc. has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) each of the Indenture and the Supplemental Indenture
has been duly authorized by requisite corporate action on the part of
the Company, and duly executed and delivered by the Company, and is a
valid and binding agreement of the Company enforceable in accordance
with its terms, except as enforcement thereof may be limited by,
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity;
(v) the Securities have been duly authorized by requisite
corporate action on the part of the Company and, when executed and
authenticated in accordance with the provisions of the Indenture and
the Supplemental Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
valid and binding obligations of the Company enforceable in accordance
with their terms, except as the same may be limited by, bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
by general principles of equity;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture, the Supplemental Indenture and the Securities will not
contravene any provision of Applicable Law or the certificate of
incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of which such
counsel is aware, of any Governmental Authority except such
contraventions as would not, individually or in the aggregate, have a
material adverse effect on the condition (financial and other),
business, properties, net worth or results of operations of the
Company and its subsidiaries, taken as a whole, provided that such
counsel may state that they express no opinion under this paragraph
with regard to the anti-fraud provisions of the Securities Act, the
Exchange Act or the rules and regulations thereunder or the
information contained in, the accuracy, completeness or correctness
of, or the adequacy of the disclosure contained in, the
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Prospectus or the Registration Statement which matters are addressed
in the second paragraph following paragraph 5(d)(ix) below; and no
Governmental Approval is required for the performance by the Company
of its obligations under this Agreement, except such as may be
required by the Securities Act, the Exchange Act or the securities or
Blue Sky laws of the various states in connection with the offer and
sale of the Securities;
(vii) to the best knowledge of such counsel based on inquiry
of responsible officers of the Company and review of letters of
counsel to the Company obtained in connection with preparation of
financial statements, there are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described, or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required;
(viii) the statements in the Registration Statement in
Item 15, insofar as said statements constitute summaries of the legal
matters referred to therein, fairly present the information called for
with respect to such legal matters;
(ix) the Company and its subsidiaries (A) are in compliance
with any and all applicable Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are
in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and
(x) such counsel is of the opinion that each document, if
any, filed pursuant to the Exchange Act and incorporated by reference
in the Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such
counsel need not express any opinion) complied when so filed as to
form in all material respects with the Exchange Act and the rules and
regulations of the commission thereunder.
For purposes of the foregoing opinion, such counsel may state
that (a) "Applicable Law" shall mean only the laws of the United
States and the State of Michigan which, in such counsel's experience,
are normally applicable to transactions of the type contemplated by
this Agreement (other than the rules and regulations of the National
Association of Securities Dealers, Inc.), but without such counsel
having made any special investigation as to the applicability of any
specific law, rule or regulation except as specified herein, and (b)
"Governmental Approval" shall mean any consent, approval, license,
authorization or validation of, or filing, recording or registration
with, and Governmental Authority pursuant to Applicable Laws, and (c)
"Governmental Authority" means any Michigan or federal executive,
legislative, judicial, administrative or regulatory body.
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In addition, such counsel shall state that he has participated in
conferences with officers and representatives of the Company and
representatives of the independent accountants of the Company at which
the contents of the Registration Statement and the Prospectus, the
documents incorporated by reference therein and related matters were
discussed and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus or the documents incorporated by reference therein and has
made no independent check or verification thereof, on the basis of the
foregoing, no facts have come to such counsel's knowledge that have
led such counsel to believe that the Registration Statement, at the
time it became effective or as supplemented by the Prospectus
Supplement at the date of this Agreement, contained an untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of the date of this
Agreement or the Closing Date, contains an untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except that such counsel need not
express any belief with respect to the financial statements, schedules
and other financial and statistical data included or incorporated by
reference therein or excluded therefrom or the exhibits to the
Registration Statement, including the Form T-1.
(e) The Underwriters shall have received on the Closing Date an
opinion of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to
in Sections 5(c)(i) an 5(c)(ii) and other related matters as the
Underwriters may reasonably require.
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP may state that their opinion
and belief are based upon their participation in the preparation of
the Prospectus and any amendments or supplements thereto (other than
the documents incorporated by reference) and review and discussion of
the contents thereof (including documents incorporated therein by
reference), but are without independent check or verification except
as specified.
The opinions of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP and of
▇▇▇▇▇▇ ▇▇▇▇▇▇ described in Sections 5(c) and 5(d) above shall be
rendered to the Underwriters at the request of the Company and shall
so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory
to the Underwriters, from PricewaterhouseCoopers LLP, independent
public accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and
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certain financial information contained in or incorporated by
reference into the Registration Statement and the Prospectus; provided
that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than five business days prior to the Closing Date.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish you, without charge, six signed copies of the
Registration Statement (including exhibits thereto and documents
incorporated therein by reference) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto but including documents incorporated therein by
reference) and to furnish you in New York City, without charge, prior
to 10:00 a.m. New York City time on the business day next succeeding
the date of this Agreement and during the period mentioned in Section
6(c) below, as many copies of the Prospectus, any documents
incorporated therein by reference and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the
Commission within the applicable period specified in Rule 424(b) under
the Securities Act any prospectus required to be filed pursuant to
such Rule.
(c) If, during such period after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the
Company) to which Securities may have been sold by you on behalf of
the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of
the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
13
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement covering the
twelve-month period ending January 25, 2002 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations (including Rule 158) of the Commission thereunder.
(f) During the period beginning on the date hereof and continuing
to and including the Closing Date, not to offer, sell, contract to
sell or otherwise dispose of any debt securities of the Company or
warrants to purchase or otherwise acquire debt securities of the
Company substantially similar to the Securities (other than (i) the
Securities and (ii) commercial paper issued in the ordinary course of
business), without the prior written consent of ▇▇▇▇▇▇ Brothers Inc
and Chase Securities Inc.
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Securities under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the
Underwriters, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Securities under state law and all expenses in connection with the
qualification of the Securities for offer and sale under state law as
provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
or legal investment memorandum, (iv) all filing fees and the
reasonable fees and disbursements of counsel to the Underwriters
incurred in connection with the review and qualification of the
offering of the Securities by the National Association of Securities
Dealers, Inc., (v) any fees charged by the rating agencies for the
rating of the Securities, (vi) the cost of printing certificates
representing the Securities, (vii) the costs and charges of any
trustee, transfer agent, registrar or depositary, (viii) the costs and
expenses of the Company relating to investor presentations on any
"road show" undertaken in connection with the marketing of the
offering of the Securities, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company
and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses
incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section.
14
7. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; provided that the foregoing indemnity agreement with respect to
any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, claims, damages or liabilities
purchased Securities or any person controlling such Underwriter, if a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such losses, claims, damages or liabilities.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Underwriter, but only
with reference to information relating to such Underwriter furnished
to the Company in writing by such Underwriter through you expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 7(a) or 7(b), such
person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named
15
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by ▇▇▇▇▇▇ Brothers
Inc. and Chase Securities Inc., in the case of parties indemnified
pursuant to Section 7(a), and by the Company, in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than
30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement, unless the indemnifying party has contested such
obligation and provides reasonable assurances that such payment can be
made upon resolution of such dispute. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which
any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from
the offering of the Securities or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 7(d)(i) above but also the relative fault of the
Company on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters
16
on the other hand in connection with the offering of the Securities
shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Securities (before deducting
expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Securities. The relative fault
of the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are
several in proportion to the respective principal amounts of
Securities they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 7(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of
the Company contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of
the Securities.
17
8. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Securities on the terms and in the manner contemplated in the
Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Underwriters shall fail or
refuse to purchase Securities that it has or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of the
Securities to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the principal amount of Securities
set forth opposite their respective names in Schedule I bears to the principal
amount of Securities set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date; provided that in no event shall the
principal amount of Securities that any Underwriter has agreed to purchase
pursuant to this Agreement be increased pursuant to this Section 9 by an amount
in excess of one-ninth of such principal amount of Securities without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Securities and the aggregate
principal amount of Securities with respect to which such default occurs is more
than one-tenth of the aggregate principal amount of Securities to be purchased
on such date, and arrangements satisfactory to you and the Company for the
purchase of such Securities are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement (other than on account of an Underwriter's breach of obligations
causing a termination pursuant to the preceding paragraph), the Company will
18
reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
such Underwriters in connection with this Agreement or the offering contemplated
hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
12. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
KMART CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
------------------------------
Name
Title: Vice President and Treasurer
19
Accepted as of the date hereof
▇▇▇▇▇▇ Brothers Inc.
Chase Securities Inc.
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto
By: ▇▇▇▇▇▇ Brothers Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------
Name
Title: Managing Director
20
SCHEDULE I
Principal Amount of
Securities To Be
Underwriter Purchased
-------------------------------------- -------------------
▇▇▇▇▇▇ Brothers Inc. $160,000,000
Chase Securities Inc. 160,000,000
Credit Suisse First Boston Corporation 60,000,000
▇▇▇▇▇▇▇▇ & Partners, Inc. 5,000,000
First Union Securities, Inc. 5,000,000
Fleet Securities, Inc. 5,000,000
The ▇▇▇▇▇▇▇▇ Capital Group, L.P. 5,000,000
------------
Total:............................ $400,000,000
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