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                                                                    EXHIBIT 10.5
June 3, 2003


Mr. Michael T. Macik
5726 Wellwood Drive
Rochester Hills, MI  48305

Dear Mike:

         Reference is made to your Employment Agreement with Kmart Corporation
(the "Company") dated as of April 8, 2002 (the "Agreement"). This letter will
set forth the respective rights and obligations of you and the Company in
connection with the termination of your employment from the Company. Capitalized
terms not defined herein shall have the meaning ascribed to such term in the
Employment Agreement.

1.       Termination. Your employment with the Company was terminated effective
         April 30, 2003 (the "Termination Date").

2.       Certain Acknowledgments. You acknowledge having received an Emergence
         Bonus of $68,000 (less applicable withholding) in full satisfaction of
         your rights under Section 7 of the Agreement. You further acknowledge
         that (1) you have received your full base salary through the
         Termination Date and thus are not entitled to any payments pursuant to
         Section 10(d)(ii)(A) of the Agreement and (2) there are no outstanding
         balances owing to you in respect of any annual or long-term cash
         incentive awards and thus you are not entitled to any amounts pursuant
         to Section 10(d)(ii)(D) of the Agreement.

3.       Compliance with Agreement. You will comply in all respects with your
         obligations under Section 11 of the Agreement.

4.       Return of Company Property. The Company expects that you will
         immediately return to the Company all property of the Company or its
         subsidiary or affiliates which is in your possession, including, but
         not limited to, customers or clients lists, document, contracts,
         agreements, plans, photographs, books, notes, memoranda, manuals,
         records, electronically stored data, proprietary computer software,
         source codes, algorithms and all copies of the foregoing, as well as
         any

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         laptop or other computer hardware, automobile or other materials or
         equipment supplied by the Company to you.

5.       Severance, etc. Provided that (i) you execute the enclosed copy of this
         letter and the enclosed Release and return them to the Company, (ii)
         you do not revoke the Release and (iii) you are in substantial
         compliance with your obligations under this letter, the Company will
         pay to you the following amounts, less applicable withholding, within
         ten days following the date of this letter (but in no event prior to
         expiration of the revocation period applicable to the Release):

                  A.  an amount equal to $1,530,000, pursuant to Section
                      10(d)(ii)(B)(III) of the Agreement; and

                  B.  an amount equal to $70,439, pursuant to Section 8(b) of
                      the Agreement, representing 50% of the present value of
                      the enhanced benefit to which you would have been entitled
                      had you earned the so-called "90 point" pension under the
                      Company's tax-qualified defined benefit pension plan.

6.       Additional Payments/Benefits. In addition, provided you are in
         compliance with clauses (i)-(iii) of paragraph 5 above, you will be
         entitled to the following payments and benefits, less applicable
         withholding;

                  A.  Prorated Annual Bonus. In accordance with Section
                      10(d)(ii)(C) of the Agreement, a prorated annual bonus for
                      fiscal year 2003, based on the actual performance for such
                      year, the amount of which prorated bonus, if any, shall be
                      determined in the same manner as such bonuses are
                      determined for other senior level executives of the
                      Company and shall be paid at the same time that other
                      senior level executives of the Company receive their
                      payment.

                  B.  Miscellaneous Amounts. In accordance with Section
                      10(d)(ii)(E) of the Agreement, any amounts earned, accrued
                      or owing to you but not yet paid under the Agreement.

                  C.  Other Benefits.

                      (1)  Continuing Welfare Benefits. In accordance with
                           Section 10(d)(ii)(F) of the Agreement, continued
                           participation to the extent provided in medical,
                           dental, and hospitalization coverage in which you
                           were participating on the Termination Date, for a
                           period of two years following the Termination Date;
                           provided, that the Company's obligations under this
                           paragraph 6C.(1) shall be reduced to the extent that
                           you receive similar coverage under the plans and
                           programs of a subsequent employer; and provided,
                           further, that (x) if you are precluded from
                           continuing your participation in any such coverage,
                           you


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                           shall be provided with the after-tax economic
                           equivalent of the coverage in which you are unable to
                           participate for the period specified in this
                           paragraph 6C.(1), (y) the economic equivalent of any
                           coverage foregone shall be deemed to be the lowest
                           cost that would be incurred by you in obtaining such
                           coverage yourself on an individual basis, and (z)
                           payment of such after-tax economic equivalent shall
                           be made quarterly in advance.

                      (2)  Non-Continuing Benefits. A lump sum payment of
                           $5,700.00 in exchange for your foregoing your right,
                           provided by Section 10(d)(ii)(F) of the Agreement, to
                           continued participation, for the two-year period
                           following the Termination Date, in the life insurance
                           coverage and in all other employee welfare plans and
                           programs, including long and short term disability,
                           in which you were participating on the Termination
                           Date, and a lump sum payment of $37,600.00 in full
                           satisfaction of your rights to unused vacation time
                           pursuant to the Company's policy for retirement.

                      (3)  Other. In accordance with Section 10(d)(ii)(G) of the
                           Agreement, other or additional benefits in accordance
                           with the applicable plans and programs of the
                           Company.

                  D.  Continuation of Qualified and Unqualified Pension
                      Payments. Pursuant to Section 8(b) of the Agreement, the
                      resumption and continuation of any monthly qualified and
                      unqualified payments previously suspended. The aggregate
                      amount of such monthly payments shall equal $4,957.46,
                      shall continue for your life and shall cease upon your
                      death.

                  E.  For a period of one year following the Termination Date,
                      Executive shall also be entitled to continuing
                      participation in the Financial Planning and Tax
                      Preparation Services previously provided to Executive at
                      the expense of the Company and to continued participation
                      in the annual physical provided to Executive at the
                      Company's expense.

7.       Indemnification. The Company re-affirms its continuing obligation to
         you under Section 12 of the Agreement.

8.       Consulting with Counsel. The Company has advised you to consult with an
         attorney of your choosing prior to signing this letter. You represent
         that you understand and agree that you have the right and have been
         given the opportunity to review this letter, and specifically the
         Release, with an attorney. You further represent that you understand
         and agree that you have executed this letter freely and voluntarily.



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9.       Governing Law. This letter shall be governed by and construed and
         enforced in accordance with the laws of the State of Michigan, applied
         without reference to principles of conflicts of laws. This letter may
         be executed in two or more counterparts, each of which shall be deemed
         an original but all of which together shall constitute one and the same
         instrument.


                                         KMART CORPORATION


                                         By:
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                                               Julian Day
                                               Chief Executive Officer

ACCEPTED AND AGREED TO:


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         Michael T. Macik

Dated:
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