NEW YORK — Bankrupt Kmart Corp. said in a Securities and Exchange Commission filing Wednesday that it will fork over at least $4.6 million to one current and one former employee over the next several months.
The discounter said it will pay $1 million in base pay to newly named chief executive officer Julian Day. In addition, Day gets a $1 million bonus upon the company’s emergence from Chapter 11, which the retailer said will happen by April 30.
James Adamson, former ceo and current non-executive chairman, will receive a total of $3.6 million around the time of Kmart’s emergence from bankruptcy court proceedings. Following the company’s bankruptcy exit, Adamson will vacate his position as chairman. At that time, it is expected that Kmart will have in place a new slate of board members.
Day’s employment agreement, according to the filing, runs through Jan. 31, 2006. He reports directly to the board, while all other executive officers report directly to Day.
One of his perks is use of the company aircraft, and a 10-year option for 1.5 percent of the stock in a reorganized Kmart. The option price for two-thirds of the grant is based on a $1 billion valuation, while the remaining one-third is based on a $2 billion valuation.
Day also gets a bonus of up to four times his base salary if Kmart beats certain performance targets. For 2004, the performance target is set at $400 million in earnings before interest, taxes, depreciation and amortization (EBITDA), the filing specified. Any bonus for the current year will be at the “discretion of [a] postemergence compensation committee.” The ceo is also eligible to participate in any other long-term cash-based incentive programs that may be established by the retailer for its senior executives.
As for Adamson, he receives $3 million in a lump sum cash severance and another lump sum of $600,000, in part as consideration for executing a mutual release of claims agreement with the retailer. Adamson also gets to continue his participation in the firm’s medical and life insurance programs.
As reported, Kmart is expected to file a plan of reorganization with Chicago bankruptcy court by Friday.