Document:

EX-4.4:

 

Exhibit 4.4

FORM OF KMART HOLDING CORPORATION

NONQUALIFIED STOCK OPTION AGREEMENT

          NONQUALIFIED STOCK OPTION AGREEMENT, entered into as of October 18, 2004, between Kmart
Holding Corporation, a Delaware corporation (“Holding”), and Aylwin Lewis (the “Executive”), an
employee of Kmart Management Corporation, a Michigan corporation (the “Company”);

          WHEREAS, the Company, Holding, and the Executive have entered into an employment agreement
dated as of the 18th day of October, 2004 (the “Employment Agreement”), pursuant to which, among
other things, the Company and Holding have determined that, as an inducement material to the
Executive’s agreement to enter into employment with the Company, in satisfaction of certain of the
Company’s and Holding’s obligations under Section 6 of the Employment Agreement, the Executive
should be granted a nonqualified option to purchase shares of Holding’s common stock, par value
$.01 (the “Common Stock”);

          WHEREAS, Holding desires to grant such nonqualified option to the Executive;

          NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties hereto do hereby agree as follows:

     1. Capitalized Terms. Capitalized terms not defined herein shall have the definitions
ascribed to such terms in the Employment Agreement.

     2. Grant. Pursuant to Section 6 of the Employment Agreement, the Executive is hereby
granted as of the Effective Date (the “Grant Date”) and subject to the terms and conditions of this
Agreement, a nonqualified stock option to purchase an aggregate of 150,000 shares of Common Stock
(the “Option”). Shares of Common Stock subject to the Option shall be referred to herein as
“Option Shares”.

     3. Shareholder Approval. The Option is subject to its approval by the shareholders of
Holding, in a manner satisfying the requirements of Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as amended. To the extent such approval is not obtained, the Option shall be
forfeited.

     4. Option Term. Subject to earlier termination as provided herein, the Option shall
expire on the tenth anniversary of the Grant Date (the “Expiration Date”).

     5. Purchase Price. The purchase price per share of Common Stock with respect to the
Option shall be $___[the average of the highest and lowest per-share sales prices for a share of
Common Stock on Nasdaq during normal business hours on October 18, 2004].

     6. Vesting/Exercisability. Subject to Section 3 above, the Option shall vest and
become exercisable with respect to four equal installments (each an “Installment”) of Common Stock
on each of the last days of the Company’s 2005, 2006, 2007 and 2008 Fiscal Years,

 

 

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provided that the Executive is employed by the Company or a subsidiary or affiliate
thereof as of the relevant vesting date. The Option may be exercised either for the total number
of shares of Common Stock vested, or for less than the total number in multiples of 100 shares of
Common Stock.

     7. No Rights as a Shareholder. The Executive or other permitted holder of the Option
shall have none of the rights of a shareholder of Common Stock with respect to the shares of Common
Stock covered by the Option until the Option Shares are issued or transferred to such holder upon
exercise of the Option.

     8. Method of Exercise. Upon the exercise of the Option, the purchase price may be
paid (a) in cash or cash equivalents, or (b) by tendering to Holding shares of Common Stock already
owned by the Executive, which, in the case of shares of Common Stock purchased by the Executive
pursuant to the exercise of an option granted by Holding, have been held by the Executive for no
less than six months following the date of such purchase, in any case having a total Fair Market
Value (as defined in the Plan or, if no such Plan has been adopted, based on the average of the
highest and lowest per-share sales prices for a share of Common Stock on Nasdaq during normal
business hours on the date of exercise) equal to the aggregate purchase price, (c) to the extent
permitted by law, by a “cashless exercise” procedure approved by the Compensation Committee of the
Board of Directors of Holding or any other committee of the board of directors of Holding
performing similar functions (the “Committee”), or (d) by a combination of the foregoing methods.
The Option shall be exercised by written notice of election in such form as shall be determined by
the Committee and delivered in person or by regular mail to Holding at its principal executive
office.

     9. Withholding. Holding may require that the Executive pay to Holding at the time of
exercise of any portion of the Option the amount necessary to satisfy the Holding’s liability to
withhold federal, state or local income tax or any other employment taxes incurred by reason of the
exercise of the Option. The Executive may satisfy the foregoing requirement by (a) tendering to
Holding shares of Common Stock already owned by the Executive, which, in the case of shares of
Common Stock purchased by the Executive pursuant to the exercise of an option granted by Holding,
have been held by the Executive for no less than six months following the date of such purchase, or
(b) by electing to have Holding withhold from delivery Option Shares, provided that, in
either case, such shares have a Fair Market Value equal to the minimum amount of tax required to be
withheld. Such shares of Common Stock shall be valued at their Fair Market Value (as defined
above) on the date as of which the amount of tax to be withheld is determined.

     10. Effect of Termination of Employment.

     (a) If the employment of the Executive with the Company and its subsidiaries and affiliates is
terminated by the Company by reason of his death or Disability or without Cause, or by the
Executive by reason of a Constructive Termination, any Installment of the Option that would have
vested and become exercisable on or before the first anniversary of the date of such termination
had the Executive remained employed (but in any event, not less than one additional Installment)
shall become immediately vested and exercisable in full as of the date of such

 

 

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termination of employment. Any portion of the Option that is or becomes vested and exercisable
pursuant to this Section 10(a) as of the date of the Executive’s termination of employment shall be
exercisable by the Executive (or other Option holder, as applicable) for the period ending on the
second anniversary of such termination of employment, but no later than the Expiration Date.

     (b) If the employment of the Executive with the Company and its subsidiaries and affiliates
terminates other than as provided under Section 10(a) above, the Option shall immediately be
forfeited and cancelled in its entirety as of the date of such termination of employment.

     11. Adjustment. In the event of (a) a stock dividend, stock split, reverse stock
split, share combination, or recapitalization or similar event of or by Holding (each, a “Share
Change”), or (b) a merger, consolidation, acquisition of property or shares, separation, spinoff,
reorganization, stock rights offering, liquidation, disaffiliation, or similar event of or by
Holding (each, a “Corporate Transaction”), in each case, affecting the Common Stock, the Committee
or the Board may in its discretion make such substitutions or adjustments as it deems appropriate
and equitable to (i) adjust the number and kind of shares subject to the Stock Option, (ii) adjust
the exercise price per share of the Stock Option. In the case of Corporate Transactions, (x)
unless otherwise determined by the Committee, if the Corporate Transaction results in shareholders
of Common Stock receiving cash, securities, property, or any combination thereof in exchange for
each share of Common Stock, such consideration being exchanged for each share of Common Stock shall
be substituted for each share of Common Stock subject to this Agreement, and (y) the Committee may
in its discretion make such alternative or additional substitutions or adjustments as it deems
appropriate and equitable, including, without limitation, (A) the cancellation of the Stock Option
in exchange for payments of cash, property or a combination thereof having an aggregate value equal
to the value of the Stock Option, as determined by the Committee or the Board in its sole
discretion (it being understood that in the case of a Corporate Transaction with respect to which
shareholders of Common Stock receive consideration other than equity securities of the ultimate
surviving entity, any such determination by the Committee that the value of the Stock Option shall
for this purpose be deemed to equal the excess, if any, of the value of the consideration being
paid for each share of Common Stock pursuant to such Corporate Transaction over the exercise price
per share of the Stock Option shall conclusively be deemed valid) and (B) the substitution of other
property (including, without limitation, cash or other securities of Holding and securities of
entities other than Holding) for the Stock Option. The determination of the Committee regarding
any adjustment will be final and conclusive.

     12. Transferability of Option. The Option shall not be transferable other than (a) by
will or the laws of descent and distribution or (b) to the Participant’s family members, whether
directly or indirectly or by means of a trust or partnership or otherwise or (c) as otherwise
determined by the Committee. For purposes of this Agreement, “family member” shall have the
meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act
of 1933, as amended, and any successor thereto. The Option shall be exercisable during the
Executive’s lifetime only by the Executive or by his guardian or legal representative or the
permitted transferees pursuant to clause (a), (b) and (c) of this Section 12.

 

 

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     13. Laws and Regulations. No shares of Common Stock shall be issued under this Option
unless and until all legal requirements applicable to the issuance of such shares of Common Stock
have been complied with to the satisfaction of the Committee. The Committee shall have the right
to condition any issuance of shares to the Executive hereunder on the Executive’s undertaking in
writing to comply with such restrictions on the subsequent disposition of such shares as the
Committee shall deem necessary or advisable as a result of any applicable law or regulation.

     14. Registration. As of the date of shareholder approval of this grant, Holding
shall, at its expense, cause issuance of the Option, the exercise of the Option and the resale of
the shares of Common Stock subject to the Option to be registered under the Securities Act of 1933,
as amended, and registered or qualified under applicable state law, to be freely resold. Holding
shall thereafter use its best efforts to maintain the effectiveness of such registration and
qualification for so long as the Executive holds the Option (or any portion thereof) or any of the
Option Shares, or until such earlier date as such Option Shares may otherwise be freely sold under
applicable law.

     15. Notices. Any notices required or permitted hereunder shall be addressed to
Holding at its corporate headquarters, attention: General Counsel, or to the Executive at the
address then on record with Holding, as the case may be, and deposited, postage prepaid, in the
United States mail. Either party may, by notice to the other given in the manner aforesaid, change
his/her or its address for future notices.

     16. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its conflict of laws principles.

     17. Successor. This Agreement shall bind and inure to the benefit of Holding, its
successors and assigns, and the Executive and his or her personal representatives and assigns.

     18. Amendment. This Agreement may be amended or modified at any time by an instrument
in writing signed by the parties hereto.

     19. Miscellaneous.

     (a) This Agreement shall not be construed so as to grant the Executive any right to remain in
the employ of the Company.

     (b) This Agreement may be executed in counterparts, which together shall constitute one and
the same original.

 

 

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     IN WITNESS WHEREOF, Holding has caused this Agreement to be duly executed by its officer
thereunder duly authorized and the Executive has hereunto set his hand, all as of the day and year
first set forth above.

	 	 	 
	

	 	KMART HOLDING CORPORATION
	 
	 	 
	

	 	 
	

	 	Name:
	

	 	Title:

ACCEPTED:

The undersigned hereby acknowledges having read this Nonqualified Stock Option Agreement and hereby
agrees to be bound by all provisions set forth herein.

	 	 	 
	

	 	 
	

	 	ExecutiveEX-4.5:

 

Exhibit 4.5

FORM OF KMART HOLDING CORPORATION

RESTRICTED SHARE AGREEMENT

     RESTRICTED SHARE AGREEMENT, entered into as of [October 18], 2004, between Kmart Holding
Corporation, a Delaware corporation (“Holding”), and Aylwin Lewis (the “Executive”), an employee of
Kmart Management Corporation, a Michigan corporation (the “Company”);

     WHEREAS, the Company, Holding, and the Executive have entered into an employment agreement
dated as of the 18th day of October, 2004 (the “Employment Agreement”), pursuant to which, among
other things, the Company and Holding have determined that, as an inducement material to the
Executive’s agreement to enter into employment with the Company, in satisfaction of certain of the
Company’s and Holding’s obligations under Section 7 of the Employment Agreement, the Executive
should be granted restricted shares of Holding’s common stock, par value $.01 (the “Common Stock”);

     WHEREAS, Holding desires to grant such restricted shares to the Executive;

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties hereto do hereby agree as follows:

     1. Capitalized Terms. Capitalized terms not defined herein shall have the definitions
ascribed to such terms in the Employment Agreement.

     2. Grant. Pursuant to Section 7 of the Employment Agreement, the Executive is hereby
granted, effective as of the Effective Date (the “Grant Date”) and subject to the terms and
conditions of this Agreement,       shares of restricted Common Stock [number of shares having a
Fair Market Value of $4,500,000 on the Effective Date] (the “Restricted Shares”).

     3. Shareholder Approval. This grant of Restricted Shares is subject to the approval
by Holding’s shareholders, in a manner satisfying the requirements of Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended, of the grant and of the performance goals set forth in
Section 5(b) below. To the extent that such approval is not obtained, the Restricted Shares shall
be forfeited by the Executive, and ownership transferred back to Holding.

     4. Issuance of Stock. The Restricted Shares shall be held in the custody of Holding
or its designee for the Executive’s benefit. The Restricted Shares shall be subject to the
restrictions described herein. The Restricted Shares shall bear appropriate legends with respect
to the restrictions described herein.

 

 

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     5. Vesting; Effect of Termination of Employment.

     (a) Subject to Section 3 above, the Restricted Shares shall be eligible to become vested in
four installments (each an “Installment”) of Common Stock, as set forth below, with each of the
first three Installments consisting of       Restricted Shares [number of shares that had a Fair
Market Value on the Effective Date of $1,000,000 (rounded to the nearest whole number of shares)],
and the fourth such Installment representing the remaining balance of the Restricted Shares.

     (b) Each Installment shall vest as of the later of (i) the last day of the first Fiscal Year,
of Fiscal Years 2005 through 2008, during which the Performance Goal is met and (ii) the last day
of Fiscal Years 2005, 2006, 2007 and 2008, in the case of the first, second, third and fourth
Installments, respectively; provided that the Executive is employed by the Company or a
subsidiary or affiliate thereof as the relevant vesting date. If the Restricted Stock does not
vest on or before the last day of Fiscal Year 2008, it shall thereupon be forfeited. The
“Performance Goal” will be considered to have been met if, for any of Fiscal Years 2005 through
2008, either the Company’s earnings before interest, taxes, depreciation and amortization, as
reported in its audited financial statements for such Fiscal Year, equals or exceeds $100,000,000,
or the Company realizes gross proceeds from sales of real estate equal to or greater than
$50,000,000.

     (c) Notwithstanding the foregoing, in the event the Executive’s employment is terminated
during the Employment Term (i) by the Company without Cause, (ii) as a result of the Executive’s
Disability or death, or (iii) by the Executive by reason of a Constructive Termination, any
Installment of the Restricted Shares that has not yet vested shall become immediately vested and
free of restriction as of the date of such termination of employment.

     6. Restrictions.

     (a) No portion of the Restricted Shares or rights granted hereunder may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of by the Executive until such portion of the
Restricted Shares becomes vested in accordance with Section 5 of this Agreement, and any purported
sale, transfer, assignment, pledge, encumbrance or disposition shall be void and unenforceable
against Holding. The period of time between the Grant Date and the date all Restricted Shares
become vested is referred to herein as the “Restriction Period.”

     (b) If the Executive’s employment with the Company terminates for any reason which does not
result in vesting of the Restricted Shares as provided in Section 3 above, the balance of the
Restricted Shares subject to the provisions of this Agreement which have not vested at the time of
the Executive’s termination of employment shall be forfeited by the Executive, and ownership
transferred back to Holding.

     7. Executive Shareholder Rights. During the Restriction Period, the Executive shall
have all the rights of a shareholder with respect to the Restricted Shares except for the right to
transfer the Restricted Shares, as set forth in Section 6 of this Agreement. Accordingly, the
Executive shall have the right to vote the Restricted Shares and to receive any

 

 

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cash dividends paid to or made with respect to the Restricted Shares, provided,
however, that dividends paid, if any, with respect to those Restricted Shares that have not
vested at the time of the dividend payment shall be held in the custody of Holding and shall be
subject to the same restrictions that apply to the corresponding Restricted Shares;
provided, further, that if such a restriction on dividends would be subject to the
tax imposed under the provisions of Section 409A of the Code, such dividends shall be paid to the
Executive immediately and shall not be subject to the same restrictions that apply to the
corresponding Restricted Shares.

     8. Changes in Stock. In the event of (a) a stock dividend, stock split, reverse stock
split, share combination, or recapitalization or similar event of or by Holding (each, a “Share
Change”), or (b) a merger, consolidation, acquisition of property or shares, separation, spinoff,
reorganization, stock rights offering, liquidation, disaffiliation, or similar event of or by
Holding (each, a “Corporate Transaction”), in each case, affecting the Common Stock, the Committee
or the Board may in its discretion make such substitutions or adjustments as it deems appropriate
and equitable to adjust the number and kind of Restricted Shares. In the case of Corporate
Transactions, (x) unless otherwise determined by the Committee, if the Corporate Transaction
results in shareholders of Common Stock receiving cash, securities, property, or any combination
thereof in exchange for each share of Common Stock, such consideration being exchanged for each
share of Common Stock shall be substituted for each Restricted Share subject to this Agreement, and
(y) the Committee may in its discretion make such alternative or additional substitutions or
adjustments as it deems appropriate and equitable, including, without limitation, (i) the
cancellation of the Restricted Shares in exchange for payments of cash, property or a combination
thereof having an aggregate value equal to the value of the Restricted Shares, as determined by the
Committee or the Board in its sole discretion (it being understood that in the case of a Corporate
Transaction with respect to which shareholders of Common Stock receive consideration other than
equity securities of the ultimate surviving entity, any such determination by the Committee that
the value of the Restricted Shares shall for this purpose be deemed to equal the value of the
consideration being paid for each share of Common Stock pursuant to such Corporate Transaction
shall conclusively be deemed valid); and (ii) the substitution of other property (including,
without limitation, cash or other securities of Holding and securities of entities other than
Holding) for the Restricted Shares. The determination of the Committee regarding any adjustment
shall be final and conclusive.

     9. Taxes. No later than the date as of which an amount first becomes includible in
the gross income of the Executive for federal income tax purposes with respect to any Restricted
Shares, the Executive shall pay to Holding, or make arrangements satisfactory to Holding regarding
the payment of, all federal, state, local and foreign taxes that are required by applicable laws
and regulations to be withheld with respect to such amount. The Executive may direct Holding, to
the extent permitted by law, to deduct any such taxes from any payment otherwise due to the
Executive, including the delivery of the Restricted Shares that gives rise to the withholding
requirement.

     10. Notices. Any notices required or permitted hereunder shall be addressed to
Holding at its corporate headquarters, attention: General Counsel, or to the Executive at the
address then on record with Holding, as the case may be, and deposited, postage prepaid, in the

 

 

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United States mail. Either party may, by notice to the other given in the manner aforesaid,
change his/her or its address for future notices.

     11. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its conflict of laws principles.

     12. Successor. This Agreement shall bind and inure to the benefit of Holding, its
successors and assigns, and the Executive and his or her personal representatives and assigns.

     13. Amendment. This Agreement may be amended or modified at any time by an instrument
in writing signed by the parties hereto.

     14. Certificates. Certificates representing the Restricted Shares as originally or
from time to time constituted shall bear the following legend:

     The Shares represented by this stock certificate have been granted as restricted stock under a
Restricted Share Agreement between the registered holder of these Shares and Holding. The Shares
represented by this stock certificate may not be sold, exchanged, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of until the restrictions set forth in the
Restricted Stock Agreement between the registered holder of these Shares and Holding shall have
lapsed.

     As soon as administratively practicable after the lapsing of the restrictions with respect to
any Restricted Shares, Holding shall deliver to the Executive or his or her personal
representative, in book-entry or certificate form, the formerly Restricted Shares that do not bear
any restrictive legend making reference to this Agreement. Such Shares shall be free of
restrictions, except for any restrictions required under Federal securities laws.

     15. Laws and Regulations. No shares of Common Stock shall be issued under this
Agreement unless and until all legal requirements applicable to the issuance of such shares have
been complied with to the satisfaction of the Committee. The Committee shall have the right to
condition any issuance of shares of Common Stock to the Executive hereunder on the Executive’s
undertaking in writing to comply with such restrictions on the subsequent disposition of such
shares as the Committee shall deem necessary or advisable as a result of any applicable law or
regulation.

     16. Registration. As of the date of shareholder approval of this grant, Holding
shall, at its expense, cause issuance of the Restricted Shares and the resale thereof to be
registered under the Securities Act of 1933, as amended, and registered or qualified under
applicable state law, to be freely resold. Holding shall thereafter use its best efforts to
maintain the effectiveness of such registration and qualification for so long as the Executive
holds the Restricted Shares (or any portion thereof) or any of the shares of Common Stock that were
previously Restricted Shares, or until such earlier date as such Restricted Shares and shares of
Common Stock, as applicable, may otherwise be freely sold under applicable law.

 

 

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     17. Miscellaneous.

     (a) Holding shall not be required (i) to transfer on its books any Restricted Shares which
shall have been sold or transferred in violation of any of the provisions set forth in this
Agreement, or (ii) to treat as owner of such shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such shares shall have been so transferred.

     (b) This Agreement shall not be construed so as to grant the Executive any right to remain in
the employ of the Company.

     (c) This Agreement may be executed in counterparts, which together shall constitute one and
the same original.

 

 

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     IN WITNESS WHEREOF, Holding has caused this Agreement to be duly executed by its officer
thereunder duly authorized and the Executive has hereunto set his hand, all as of the day and year
first set forth above.

	 	 	 	 	 
	

	 	KMART HOLDING CORPORATION
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 

ACCEPTED:

The undersigned hereby acknowledges having read this Nonqualified Stock Option Agreement and hereby
agrees to be bound by all provisions set forth herein.

	 	 	 	 	 
	 
	 	 	 	 
	

	 	 	 	 
	

	 	Executive

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