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                                                                   EXHIBIT 10(a)

          KMART CORPORATION 2001 BROAD-BASED EMPLOYEE LONG-TERM EQUITY
                               COMPENSATION PLAN

ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION

         1.1. Establishment of the Plan. Kmart Corporation, a Michigan
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Kmart Corporation 2001
Broad-based Employee Long-Term Equity Compensation Plan" (hereinafter referred
to as the "Plan"), as set forth in this document. The Plan permits the grant of
Options, Stock Appreciation Rights, Restricted Stock, Unrestricted Stock,
Performance Shares and Performance Units.

         The Plan shall become effective as of January 16, 2001 (the "Effective
Date") and shall remain in effect as provided in Section 1.3 herein. No award
may be granted under the Plan to officers or directors of the Company.

         1.2. Objectives of the Plan. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.

         The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of Participants who
make significant contributions to the Company's success and to allow
Participants to share in the success of the Company.

         1.3. Duration of the Plan. The Plan shall commence on the Effective
Date set forth in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 herein, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. Awards granted prior
to the date of termination may extend beyond such date and the provisions of the
Plan shall continue to apply thereto.

ARTICLE 2. DEFINITIONS

         Whenever used in the Plan, the following terms shall have the meanings
set forth below, and, when the meaning is intended, the initial letter of the
word shall be capitalized:

         2.1. "Affiliate" has the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.

         2.2. "Award" means, individually or collectively, a grant under the
Plan of Options, Stock Appreciation Rights, Restricted Stock, Unrestricted
Stock, Performance Shares or Performance Units.

         2.3. "Award Agreement" means an agreement evidencing and setting forth
the terms of an Award granted under the Plan, in such form as the Committee may,
from time to time, approve.

         2.4. "Beneficial Owner" or "Beneficial Ownership" has the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.

         2.5. "Board" or "Board of Directors" means the Board of Directors of
the Company.

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         2.6. "Change in Control" of the Company is deemed to have occurred as
of the first day that any one or more of the following conditions shall have
been satisfied:

                  (a) The "Beneficial Ownership" of securities representing more
         than thirty-three percent (33%) of the combined voting power of the
         Company is acquired by any "person" as defined in Sections 13(d) and
         14(d) of the Exchange Act (other than the Company, any trustee or other
         fiduciary holding securities under an employee benefit plan of the
         Company, or any corporation owned, directly or indirectly, by the
         stockholders of the Company in substantially the same proportions as
         their ownership of stock of the Company); or

                  (b) The stockholders of the Company approve a definitive
         agreement to merge or consolidate the Company with or into another
         corporation or to sell or otherwise dispose of all or substantially all
         of its assets, or adopt a plan of liquidation; or

                  (c) During any period of three consecutive years, individuals
         who at the beginning of such period were members of the Board cease for
         any reason to constitute at least a majority thereof (unless the
         election, or the nomination for election by the Company's stockholders,
         of each new director was approved by a vote of at least a majority of
         the directors then still in office who were directors at the beginning
         of such period or whose election or nomination was previously so
         approved).

         2.7. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

         2.8. "Committee" means the Compensation and Incentives Committee of the
Board, unless and until another committee is appointed by the Board in its
discretion to administer Awards to Employees, as described in Article 3 herein.

         2.9. "Employee" means any non-officer employee of the Company or its
Subsidiaries or Affiliates.

         2.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.

         2.11. "Fair Market Value" is deemed to be the mean of the highest price
and lowest price at which the Shares shall have been sold, regular way, on the
date in question or on the next preceding day on which there were such sales of
Shares if no such sales shall have been made on the date in question, as
reported on the Composite Transactions reporting system.

         2.12. "Freestanding SAR" means an SAR that is granted to a Participant
independently of any Option pursuant to Article 7 herein.

         2.13. "Incentive Stock Option" or "ISO" means an option to purchase
Shares granted to a Participant pursuant to Article 6 herein and which is
designated as an Incentive Stock Option and which is intended to meet the
requirements of Code Section 422.

         2.14. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted to a Participant pursuant to Article 6 herein not intended to
meet the requirements of Code Section 422.

         2.15. "Option" means a Stock Option granted to a Participant pursuant
to Article 6 herein. Such Options are intended to constitute Non-Qualified Stock
Options and not Incentive Stock Options (within the meaning of Section 422 of
the Code).

         2.16. "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option.

         2.17. "Participant" means an Employee who has been selected to receive
an Award or one who has an outstanding Award granted under the Plan.

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         2.18. "Performance Share" means an Award granted to a Participant
pursuant to Article 10 herein.

         2.19. "Performance Unit" means an Award granted to a Participant
pursuant to Article 10 herein.

         2.20. "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the occurrence of
other events as determined by the Committee or its delegate, in its discretion),
and the Shares are subject to a substantial risk of forfeiture, as provided in
Article 8 herein.

         2.21. "Restricted Stock" means an Award granted to a Participant
pursuant to Article 8 herein.

         2.22. "Shares" means the shares of common stock of the Company.

         2.23. "Stock Appreciation Right" or "SAR" means an Award, granted to a
Participant alone or in connection with a related Option, designated as an SAR,
pursuant to Article 7 herein.

         2.24. "Subsidiary" means any corporation, partnership, joint venture,
or other entity in which the Company directly or indirectly has a majority
interest and/or which the Company consolidates in its financial statements.

         2.25. "Tandem SAR" means an SAR that is granted to a Participant in
connection with a related Option pursuant to Article 7 herein, the exercise of
which shall require forfeiture of the right to purchase a Share under the
related Option (and when a Share is purchased under the Option, the Tandem SAR
shall similarly be canceled).

         2.26 "Unrestricted Stock" means an Award granted to a Participant
pursuant to Article 9 herein.

ARTICLE 3. ADMINISTRATION

         3.1. General. The Plan shall be administered by the Committee, or by
any committee appointed by the Board. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board
of Directors. To the extent that the administration of the Plan remains with the
Board or any other committee designated by the Board, all applicable references
to the Committee in the Plan shall be to the Board or other committee, as
applicable. The Committee shall have the authority to delegate administrative
duties to officers of the Company.

         3.2. Authority of the Committee. Except as limited by law or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee or its delegate shall have full power to select
Employees who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and amend the terms and conditions of any
outstanding Award as provided in the Plan. Further, the Committee shall make all
other determinations which may be necessary or advisable for the administration
of the Plan. As permitted by law (and subject to Section 3.1 herein), the
Committee may delegate its authority as specified herein.

         3.3. Decisions Binding. All determinations and decisions made by the
Committee or its delegate pursuant to the provisions of the Plan and all related
orders and resolutions of the Committee or its delegate shall be final,
conclusive, and binding on all persons, including the Company, its stockholders,
Employees, Participants, and their estates and beneficiaries.

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ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

         4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares which may be issued to
Participants under the Plan shall be eighteen million (18,000,000), of which no
more than three million (3,000,000) may be granted in the form of Restricted
Stock. Shares issued or subject to an Award under the Plan may be either
authorized and unissued Shares or issued Shares which have been reacquired by
the Company. In the event that any Award or portion thereof expires or is
canceled, surrendered, forfeited, or terminated for any reason, such Shares
shall again become available for issue under the Plan.

         4.2. Adjustments in Authorized Shares. In the event of: any change in
corporate capitalization, such as a stock split; a corporate transaction, such
as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company; any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368); or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1 herein, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan as may be determined to be appropriate
and equitable by the Committee, in its discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

         The Committee may, from time to time, grant Awards under the Plan to
Participants. The Committee or its delegate shall determine in its discretion,
in accordance with the provisions of the Plan, to whom an Award is granted and
the terms and conditions of the Award. In making such determinations, the
Committee or its delegate may consider the position and responsibilities of the
Participant, the nature and value to the Company of his or her services and
accomplishments, his or her present and potential contribution to the Company
and such other factors as the Committee or its delegate may deem relevant.

ARTICLE 6. STOCK OPTIONS

         6.1. Grant of Options. Subject to the terms and conditions of the Plan,
the Committee or its delegate, at any time, and from time to time, may grant
Options to Participants in such amounts and upon such terms as the Committee or
its delegate shall determine in its discretion. Options granted under the Plan
shall be subject to and governed by the provisions of the Plan and by such other
terms and conditions, not inconsistent with the Plan, as shall be determined by
the Committee or its delegate.

         6.2. Option Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee or its delegate shall determine.

         6.3. Option Price. The Option Price for each grant of an Option under
the Plan shall be not less than the Fair Market Value of a Share on the date the
Option is granted.

         6.4. Duration of Options. An Option granted under the Plan may not be
exercised after the earlier of (a) the date specified by the Committee or its
delegate, which shall be a maximum of ten years from the date of grant as to an
ISO and a maximum of ten years and two days from the date of grant as to an NQSO
or (b) the applicable time limit specified in the second paragraph of Section
6.5 herein. Any Option not exercised within these time periods shall
automatically terminate at the expiration of such period.

         6.5. Exercise and Payment. Options granted pursuant to this Article 6
shall be exercised by the delivery of a written notice of exercise to the
Company (in the form prescribed by the Company), setting forth the number of
Shares with respect to which the Option is to be exercised and by full payment
for the Shares.

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         The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent (in U.S. dollars), or (b)
by tendering previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the Option Price (provided that the Shares which
are tendered must have been held by the Participant for at least six (6) months
prior to exercise of the Option), or (c) by a combination of cash and Shares
equal to the Option Price. Shares used in payment shall be valued as of the date
notice of exercise is received by the Company. Any Shares delivered in payment
shall be in such form as is acceptable to the Company.

         6.6. Exercisability of Options. Options granted pursuant to this
Article 6 shall be exercisable at such times and be subject to such restrictions
and conditions as the Committee or its delegate shall in each instance approve,
which need not be the same for each grant or for each Participant.

         An Option may be exercised, prior to its expiration, by a Participant
only while such Participant is an Employee or within three months thereafter (or
such longer period thereafter as determined by the Committee in its discretion
or as provided in Section 15.1 herein), and only if the Option is otherwise
exercisable prior to termination of employment, provided, however, if at the
date of termination of employment of the Participant, the Participant has five
or more years of full-time service as an Employee or if such termination results
from death or total and permanent disability, as defined in the Company's
Long-Term Disability Plan, such three-month period shall be extended to five
years or to the expiration of the Option, whichever occurs first. Except as
otherwise provided by the Committee or its delegate, any Option that is not
exercisable at the date of termination shall be forfeited and reacquired by the
Company and all rights of the Participant shall terminate to the extent of the
forfeiture without further obligation on the part of the Company.

         An Option granted with a maximum exercise period of more than three
years may not be exercised earlier than in three equal annual installments
commencing on the first anniversary of the date of grant (or such other period
as determined by the Committee or its delegate in its discretion); provided,
however, this limitation shall be removed if termination of employment of the
Participant results from death or total and permanent disability, as defined in
the Company's Long Term Disability Plan, or if termination of employment of the
Participant occurs at or after age 55 and the Participant has five or more years
of full-time service as an Employee, or if and to the extent the Committee or
its delegate may so determine in its discretion, or as provided in Section 14.1
herein. An Option granted with a maximum exercise period of three years or less
is not subject to the limitation contained in the preceding sentence.

         6.7. Other Restrictions. The Committee or its delegate may impose such
conditions and/or restrictions on any Shares acquired pursuant to the exercise
of an Option granted pursuant to this Article 6 as it may deem advisable,
including, without limitation, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state securities
laws applicable to such Shares.

         6.8. Nontransferability of Options. Except as otherwise determined by
the Committee or its delegate in its discretion, no Option or any rights with
respect thereto shall be subject to any debts or liabilities of a Participant.
Options may, however, be transferred or assigned to charitable trusts, family
members, or family trusts by the Participant's execution of such form and at
such time as prescribed by the Committee or its delegate. Additionally, any
Shares issued to a Participant hereunder may at the request of the Participant
be issued in the name of the Participant and one other person, as joint tenants
with right of survivorship and not as tenants in common, or in the name of a
trust for the benefit of the Participant or for the benefit of the Participant
and others. An Option may, after the death or total and permanent disability, as
defined in the Company's Long Term Disability Plan, of a Participant also be
exercised pursuant to Section 6.6 herein. In order to continue to meet the
requirements of Code Section 422, however, ISO's may not be assignable or
transferable except by will or the laws of descent and distribution, nor be
exercisable during the Participant's lifetime other than by him or her, nor
shall Shares be issued to or in the name of one other than the Participant.

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ARTICLE 7. STOCK APPRECIATION RIGHTS

         7.1. Grant of SARs. Subject to the terms and conditions of the Plan,
the Committee or its delegate, at any time, and from time to time, may grant
SARs to Participants in such amounts and upon such terms as the Committee shall
determine in its discretion. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SARs. SARs granted under the Plan
shall be subject to and governed by the provisions of the Plan and by such other
terms and conditions, not inconsistent with the Plan, as shall be determined by
the Committee or its delegate.

         The grant price of a Freestanding SAR shall equal the Fair Market Value
of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.

         7.2. SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, the number of
SARs, and such other provisions as the Committee or its delegate shall
determine.

         7.3. Payment of SAR Amount. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined by
multiplying:

                  (a) The difference between the Fair Market Value of a Share on
         the date of exercise over the grant price; by

                  (b) The number of Shares with respect to which the SAR is
         exercised.

         At the discretion of the Committee or its delegate, the payment upon
exercise of an SAR may be in cash, in Shares of equivalent value or in some
combination thereof.

         7.4. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee or its delegate, in its discretion; provided,
however, that such term shall not exceed ten (10) years.

         7.5. Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

         7.6. Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee or its delegate, in its
discretion, imposes upon them.

         7.7. Termination of Employment. Each SAR Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the
SAR following termination of the Participant as an Employee. Such provisions
shall be determined in the discretion of the Committee or its delegate, shall be
included in the Award Agreement entered into with the Participant, need not be
uniform among all SARs issued pursuant to this Article 7, and may reflect
distinctions based on the reasons for termination.

         7.8. Other Restrictions. The Committee or its delegate may impose such
conditions and/or restrictions on any Shares issued pursuant to the exercise of
any SAR granted pursuant to this Article 7 as it may deem advisable, including,
without limitation, restrictions under applicable federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

         7.9. Nontransferability of SARs. Except as otherwise determined by the
Committee or its delegate in its discretion, no SAR or any rights with respect
thereto shall be subject to any debts or liabilities of a Participant, nor be
assignable or transferable except by will or the laws of descent

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and distribution, nor be exercisable during the Participant's lifetime other
than by him or her, nor shall Shares be issued to or in the name of one other
than the Participant; provided, however, that any Shares issued to a Participant
pursuant to an SAR hereunder may at the request of the Participant be issued in
the name of the Participant and one other person as joint tenants with right of
survivorship and not as tenants in common, or in the name of a trust for the
benefit of the Participant or for the benefit of the Participant and others.

ARTICLE 8. RESTRICTED STOCK

         8.1. Grant of Restricted Stock. Subject to the terms and conditions of
the Plan, the Committee or its delegate, at any time, and from time to time, may
grant Restricted Stock to Participants in such amounts and upon such terms as
the Committee or its delegate shall determine in its discretion. Restricted
Stock granted under the Plan shall be subject to and governed by the provisions
of the Plan and by such other terms and conditions, not inconsistent with the
Plan, as shall be determined by the Committee or its delegate.

         8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock granted, and such other provisions as
the Committee or its delegate shall determine.

         8.3. Termination of Employment. Except as otherwise provided in the
Plan or in the Award Agreement, unless and until the restrictions and other
terms and conditions applicable to a Restricted Stock Award expire or are
terminated or otherwise satisfied, such Award and the Shares and any dividends
or other rights applicable thereto shall be forfeited and reacquired by the
Company if the Participant ceases to be an Employee, and all rights of the
Employee shall terminate to the extent of the forfeiture without further
obligations on the part of the Company.

         8.4. Other Restrictions. The Committee or its delegate may impose such
conditions and/or restrictions on any Shares of Restricted Stock granted
pursuant to this Article 8 as it may deem advisable, including, without
limitation, restrictions requiring the Participant's payment of a stipulated
purchase price for each Share of Restricted Stock, restrictions based upon the
achievement of specific performance goals, time-based restrictions on vesting,
and/or restrictions under federal or state securities laws applicable to such
Shares.

         As soon as practicable following the grant of Shares of Restricted
Stock, either (i) a stock certificate or certificates representing such Shares
shall be registered in the Participant's name and shall bear an appropriate
legend referring to the restrictions applicable thereto, which certificates may
be held in the custody of the Company or its designee for the account of the
Participant; or (ii) the Company's stock transfer agent or its designee shall
credit such Shares to the Participant's Restricted Stock Account, which Shares
shall be subject to the restrictions applicable thereto.

         If and to the extent that the restrictions and other terms and
conditions applicable to a Restricted Stock Award are not satisfied, such Award
and the Shares and any dividends or other rights applicable thereto shall be
forfeited and reacquired by the Company, and all rights of the Participant shall
terminate to the extent of the forfeiture without further obligation on the part
of the Company.

         The Committee or its delegate may in its discretion terminate, shorten,
or accelerate any period of restriction or waive any terms or conditions
applicable to all or any portion of a Restricted Stock Award.

         Upon the expiration or termination of the restrictions and the
satisfaction of any other terms and conditions applicable to a Restricted Stock
Award, a stock certificate or certificates representing Shares free from the
restrictions and any legend, except as may be imposed by law, shall be issued to
the Participant or to the Participant's beneficiary, estate or legal
representative, as the case may be, along with any dividends applicable thereto
which have been withheld by the Company.

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         8.5. Nontransferability of Restricted Stock. Except as otherwise
provided in this Article 8 or determined by the Committee or its delegate in its
discretion, no Shares of Restricted Stock or any rights with respect thereto
shall be subject to any debts or liabilities of a Participant, nor be assignable
or transferable until the expiration or termination of the restrictions and the
satisfaction of any other terms and conditions applicable to the Award, nor
shall any rights with respect to Restricted Stock be available during a
Participant's lifetime other than to him or her.

         8.6. Shareholder Rights. Except as provided in the Plan or in the Award
Agreement, a Participant to whom Restricted Stock is issued, shall generally
have the rights and privileges of a stockholder as to the Restricted Stock,
including the right to vote such Shares.

         At the discretion of the Committee or its delegate, dividends declared
with respect to Shares of Restricted Stock may either be paid to the Participant
or withheld by the Company for the Participant's account, and interest may be
paid on any dividends withheld at a rate determined by the Committee. The
Committee or its delegate may apply any restrictions to the dividends that the
Committee deems appropriate.

ARTICLE 9. UNRESTRICTED STOCK

         9.1. Grant of Unrestricted Stock. Subject to the terms and conditions
of the Plan, the Committee or its delegate, at any time, and from time to time,
may grant Unrestricted Stock to Participants in such amounts and upon such terms
as the Committee or its delegate shall determine in its discretion. Such Stock
granted under the Plan shall be subject to and governed by the provisions of the
Plan and by such other terms and conditions, not inconsistent with the Plan, as
shall be determined by the Committee or its delegate.

         9.2. Unrestricted Stock Agreement. Each Unrestricted Stock grant shall
be evidenced by an Award Agreement that shall specify the number of Shares of
Unrestricted Stock granted, and such other provisions as the Committee or its
delegate shall determine.

         9.3. Other Conditions. The Committee or its delegate may impose such
conditions on any Shares of Unrestricted Stock granted pursuant to this Article
9 as it may deem advisable.

         As soon as practicable following the grant of Shares of Unrestricted
Stock, either (i) a stock certificate or certificates representing such Shares
shall be registered in the Participant's name; or (ii) the Company's stock
transfer agent or its delegate shall credit such Shares to the Participant's
Stock Account.

         The Committee or its delegate may in its discretion waive any terms or
conditions applicable to all or any portion of an Unrestricted Stock Award.

ARTICLE 10. PERFORMANCE UNITS AND PERFORMANCE SHARES

         10.1. Grant of Performance Units/Shares. Subject to the terms and
conditions of the Plan, the Committee or its delegate, at any time, and from
time to time, may grant Performance Units and/or Performance Shares to
Participants in such amounts and upon such terms as the Committee or its
delegate shall determine in its discretion. Performance Units and Performance
Shares granted under the Plan shall be subject to and governed by the provisions
of the Plan and by such other terms and conditions, not inconsistent with the
Plan, as shall be determined by the Committee or its delegate.

         10.2. Value of Performance Units/Shares. Each Performance Unit shall
have an initial value that established by the Committee or its delegate at the
time of grant. Each Performance Share shall have an initial value equal to the
Fair Market Value of a Share on the date of grant. Subject to Article 10 herein,
the Committee or its delegate shall set performance goals in its discretion
which, depending on the extent to which they are met, shall determine the number
and/or value of Performance Units/Shares that shall be paid out to the
Participant. For purposes of this Article 10, the time period during which the
performance goals must be met shall be called a "Performance Period."

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         10.3. Earning of Performance Units/Shares. Subject to the terms of the
Plan and the Award Agreement, after the applicable Performance Period has ended,
the holder of Performance Units/Shares shall be entitled to receive a payout on
the number and value of Performance Units/Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved.

         10.4. Form and Timing of Payment of Performance Units/Shares. Payment
of earned Performance Units/Shares shall be made at the close of the applicable
Performance Period or upon the attainment of the applicable performance goal.
Subject to the terms of the Plan, the Committee, in its discretion, may pay
earned Performance Units/Shares in the form of cash or in Shares (or in a
combination thereof) which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the applicable
Performance Period. Such Shares may be granted subject to any restrictions
deemed appropriate by the Committee.

         At the discretion of the Committee or its delegate, Participants may be
entitled to receive any dividends declared with respect to Shares which have
been earned in connection with grants of Performance Units and/or Performance
Shares, but not yet distributed to Participants (such dividends shall be subject
to the same accrual, forfeiture, and payout restrictions as apply to dividends
earned with respect to Shares of Restricted Stock, as set forth in Section 8.6
herein). In addition, Participants may, in the discretion of the Committee or
its delegate, have the rights and privileges of a stockholder as to the Shares,
including the right to vote such Shares.

         10.5. Termination of Employment. Except as otherwise provided in the
Plan or in the Award Agreement, unless and until the terms and conditions
applicable to an Award of Performance Units/Shares are met, such Award and the
Performance Units/Shares and any dividends or other rights applicable thereto
shall be forfeited to the Company if the Participant ceases to be an Employee,
and all rights of the Employee shall terminate to the extent of the forfeiture
without further obligation on the part of the Company; provided, however, that
the Committee or its delegate may in its discretion waive any terms or
conditions or permit a payout with respect to all or any portion of an Award of
Performance Units/Shares.

         10.6. Other Restrictions. The Committee or its delegate may impose such
conditions and/or restrictions on any Shares issued pursuant to this Article 9
as it may deem advisable, including, without limitation, restrictions under
applicable federal securities laws, under the requirements of any stock exchange
or market upon which such Shares are then listed and/or traded, and under any
blue sky law or state securities laws applicable to such Shares.

         If and to the extent that no payout is earned with respect to an Award
of Performance Units/Shares in accordance with the terms and conditions of the
Award, such Award and the Performance Units/Shares and any dividends or other
rights applicable thereto shall be forfeited to the Company, and all rights of
the Participant shall terminate to the extent of the forfeiture without further
obligation on the part of the Company.

         10.7. Nontransferability of Performance Units/Shares. Except as
otherwise determined by the Committee in its discretion, no Performance
Units/Shares or any rights with respect thereto shall be subject to any debts or
liabilities of a Participant, nor be assignable or transferable except by will
or the laws of descent and distribution, nor be exercisable during the
Participant's lifetime other than by him or her, nor shall Shares be issued to
or in the name of one other than the Participant; provided, however, that any
Shares issued to a Participant hereunder may at the request of the Participant
be issued in the name of the Participant and one other person, as joint tenants
with right of survivorship and not as tenants in common, or in the name of a
trust for the benefit of the Participant or for the benefit of the Participant
and others.

ARTICLE 11. PERFORMANCE MEASURES

         The performance measure(s) to be used for purposes of granting
performance-based Awards shall be as determined by the Committee or its delegate
from time to time.

                                       9

<PAGE>   10

ARTICLE 12. BENEFICIARY DESIGNATION/LEGAL REPRESENTATIVE

         In the event one who holds an outstanding Award dies, either before or
after termination of his or her status as Employee, any Award which is otherwise
exercisable or payable may be exercised by or paid to the person or persons whom
the Participant shall have designated as beneficiary in writing on forms
prescribed by and filed with the Company, or if no designation has been made, by
the person or persons entitled thereto through the Participant's estate. In the
event of the permanent and total disability of a Participant, as defined in the
Company's Long Term Disability Plan, an Award which is otherwise exercisable or
payable may be exercised by or paid to the Participant's legal representative or
guardian. The Company may require an indemnity and/or such evidence or other
assurances as it may deem necessary in connection with an exercise of an Award
by or payment of an Award to a beneficiary, estate, heir, legal representative,
or guardian.

ARTICLE 13. DEFERRALS

         The Committee or its delegate may permit or require a Participant to
defer such Participant's receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant by virtue of the exercise
of an Option or SAR, the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units/Shares. If any such deferral election is required or
permitted, the Committee or its delegate shall, in its discretion, establish
rules and procedures for such payment deferrals.

ARTICLE 14. EMPLOYMENT/MISCONDUCT

         14.1. Employment. No provision of the Plan, nor any term or condition
of any Award, nor any action taken by the Committee, the Company, a Subsidiary,
or an Affiliate pursuant to the Plan, shall give or be construed as giving a
Participant any right to be retained in the employ of the Company, a Subsidiary,
or an Affiliate, or affect or limit in any way the right of the Company, a
Subsidiary, or an Affiliate to terminate his or her employment. Employment with
a Subsidiary or an Affiliate shall be deemed terminated on the date such
Subsidiary or Affiliate ceases to be a Subsidiary or an Affiliate of the
Company.

         14.2. Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.

         14.3. Misconduct. Notwithstanding anything contained in the Plan or in
an Award Agreement to the contrary, all rights with respect to all Awards of a
Participant are subject to the conditions that the Participant not engage or
have engaged (i) in fraud, dishonesty, conduct in violation of Company policy,
or any similar act at any time while an Employee; or (ii) in activity directly
or indirectly in competition with any business of the Company, a Subsidiary, or
an Affiliate, or in other conduct inimical to the best interests of the Company,
a Subsidiary, or an Affiliate, during or following the Participant's employment
with the Company, a Subsidiary, or an Affiliate. If it is determined by the
Committee or its delegate, either before or after termination of employment of a
Participant, that there has been a failure of any such condition, all Awards and
all rights with respect to all Awards granted to such Participant shall
immediately terminate and be null and void.

ARTICLE 15. CHANGE IN CONTROL

         15.1. Treatment of Outstanding Awards. Subject to Section 14.3 herein,
upon the occurrence of a Change in Control:

                  (a) Any and all Options and SARs granted hereunder shall
         become immediately exercisable and shall remain exercisable throughout
         their entire term;

                  (b) Any restriction periods and restrictions imposed on
         Restricted Shares which are not performance-based shall lapse;

                                       10

<PAGE>   11

                  (c) The target payout opportunities attainable under all
         outstanding Awards of performance-based Restricted Stock, Performance
         Units, and Performance Shares shall be deemed to have been fully earned
         for the entire Performance Period(s) as of the effective date of the
         Change in Control. The vesting of all Awards denominated in Shares
         shall be accelerated as of the effective date of the Change in Control,
         and there shall be paid out to Participants within thirty (30) days
         following the effective date of the Change in Control a pro rata number
         of Shares (or their cash equivalents) based upon an assumed achievement
         of all relevant targeted performance goals and upon the length of time
         within the Performance Period which has elapsed prior to the Change in
         Control. Awards denominated in cash shall be paid pro rata to
         participants in cash within thirty (30) days following the effective
         date of the Change in Control, with the proration determined as a
         function of the length of time within the Performance Period which has
         elapsed prior to the Change in Control, and based on an assumed
         achievement of all relevant targeted performance goals.

         15.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of the Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of an event which is likely to give
rise to a Change in Control to affect adversely any Award theretofore granted
under the Plan without the prior written consent of the Participant with respect
to said Participant's outstanding Awards.

         15.3. Pooling of Interests Accounting. Notwithstanding anything
contained in the Plan to the contrary, in the event that the consummation of a
Change in Control is contingent on using pooling of interests accounting
methodology, the Board may, in its discretion, take any action necessary to
preserve the use of pooling of interests accounting.

ARTICLE 16. AMENDMENT, MODIFICATION, AND TERMINATION

         16.1. Except as provided in Section 15.2 herein, the Committee may from
time to time alter, amend, suspend, or terminate the Plan in whole or in part.
Any such amendment may be effective in respect of all past and future Awards
granted hereunder in the discretion of the Committee.

ARTICLE 17. WITHHOLDING

         17.1. Tax Withholding. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.

         17.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
the Committee may in its discretion permit a Participant to elect, in such form
and at such time as the Committee may prescribe, to satisfy the withholding
requirement, in whole or in part, by electing to (i) have the Company withhold
whole Shares or (ii) deliver other whole Shares owned by the Participant having
a Fair Market Value equal to the amount to be withheld; provided, however, that
the amount to be withheld shall not exceed the minimum Federal, State and local
tax rates applicable to the transaction.

ARTICLE 18. SUCCESSORS

         All obligations to the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise of all or substantially all of the business
and/or assets of the Company.

                                       11

<PAGE>   12
ARTICLE 19. LEGAL CONSTRUCTION

         19.1. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein shall include the feminine; the plural
shall include the singular; and the singular shall include the plural.

         19.2. Severability. If any provision of the Plan, or any term or
condition of any Award or Award Agreement or form executed or to be executed
thereunder, or any application thereof to any person or circumstance is invalid,
such provision, term, condition or application shall to that extent be void, or,
in the discretion of the Committee or its delegate, such provision, term, or
condition may be amended so as to avoid such invalidity or failure, and shall
not affect other provisions, terms, conditions, or applications thereof, and to
this extent such provision, term, or condition is severable.

         19.3. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

         19.4. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Michigan
without reference to principles of conflict of laws.

Adopted January 16, 2001

                                       12FIRST AMENDMENT TO CREDIT AGREEMENT

          FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as
of  February  26,  2001,  among  PEAPOD,   INC.,  a  Delaware  corporation  (the
"Borrower"), and KONINKLIJKE AHOLD NV (the "Lender"). All capitalized terms used
herein and not otherwise defined shall have the respective  meanings assigned to
them in the Credit Agreement referred to below.

                              W I T N E S S E T H:
                              -------------------

          WHEREAS, the Borrower and the Lender are parties to a Credit Agreement
dated as of April 14, 2000 (the "Credit Agreement");

          WHEREAS,  the Borrower  desires to increase the  Commitment  under the
Credit  Agreement  and the Lender is willing to consent to such  increase in the
Commitment; and

          WHEREAS,  the  parties  hereto wish to amend the Credit  Agreement  to
reflect the increased Commitment;

          NOW, THEREFORE, it is agreed that:

         1.    Amendments.  The Credit Agreement is hereby amended as follows:

          (a) The definition of the term "Commitment" in Section 9 of the Credit
Agreement is hereby  amended by deleting the number  "$20,000,000"  set forth in
said definition and replacing it with the number "$50,000,000."

          (b) The term "Security Documents" in Section 9 of the Credit Agreement
is hereby amended to read in its entirety as follows:

         "'Security   Documents'   shall  mean  the  Security   Agreement,   the
         Intellectual Property Assignment and each Mortgage."

          (c) The following new definition is hereby added,  in appropriate  and
alphabetical sequence, in Section 9 of the Credit Agreement:

          "'Mortgage' shall mean each fee and leasehold  mortgage and collateral
assignment of lease executed and delivered by the Borrower to the Lender."

          (d) Section 4B.02 of the Credit Agreement is hereby amended to read in
its entirety as follows:

         "4B.02 Notice of Borrowing;  Board Resolutions.  Prior to the making of
         each Loan, the Lender shall have received a notice of borrowing meeting
         the  requirements  of  Section  1.02,  together  with  a  copy  of  the
         resolutions  of the  Borrower's  Board of  Directors,  certified by its
         Secretary, authorizing Borrower to incur such Loan."

          (e) The Credit  Agreement is hereby amended by (i) deleting  Schedules
I, 5.04 and 5.10(b) to the Credit Agreement in their entirety and (ii) inserting
in lieu thereof Schedules I, 5.04 and 5.10(b) attached hereto as Annex I.

          2. Representations and Warranties.  The Borrower repeats and reaffirms
the  representations  and  warranties  made  by it in  Section  5 of the  Credit
Agreement  with the same effect as though such  representations  and  warranties
were made on and as of the date hereof (and for such purpose all  references  in
said  representations  and  warranties  to "this  Agreement"  shall refer to the
Credit Agreement as amended hereby),  and the Borrower hereby further represents
and warrants to the Lender that (a) the Borrower has full power and authority to
execute,  deliver and perform this  Amendment and each  Mortgage  referred to in
Section  3 below  (collectively,  together  with  the UCC  financing  statements
referred to in Section 3 below, the "Amendment  Documents");  (b) each Amendment
Document has been duly  executed and  delivered by the Borrower and  constitutes
its legal, valid and binding  obligation,  enforceable  against it in accordance
with its terms;  (c) the execution,  delivery and performance by the Borrower of
each  Amendment  do not  violate,  conflict  with or  constitute a breach of the
Borrower's   articles  or  certificate  of  incorporation  or  By-law,  any  law
applicable  to it or any court  order,  contract or agreement by which it or its
properties are bound; (d) no consent,  approval or  authorization  of, or filing
with,  any  governmental  authority,  and no  consent  of any other  Person,  is
required in connection with the Borrower's execution,  delivery, and performance
of any Amendment Document and the transactions  contemplated hereby and thereby,
except for those already duly obtained;  (e) Annex II attached hereto lists each
real property  leasehold  interest of the Borrower (the "Leasehold  Interests"),
and all the  information  set forth in said  Annex II with  respect of each such
Leasehold  Interest  is true and  correct;  (f) Annex III hereto  lists (1) each
location  at which any  inventory  or  equipment  of the  Borrower or any of its
subsidiaries  is held,  (2) each  location  at which the  Borrower or any of its
subsidiaries  maintains an office (specifically  identifying the location of the
Borrower's  and  each of its  subsidiaries'  chief  executive  office),  (3) all
patents, trademarks and copyrights of the Borrower and it subsidiaries which are
registered with the U.S. Patent and Trademark  Office or the Copyright Office or
with  any  similar  public  office  of  any  other  jurisdiction   (specifically
identifying the registered  owner of each such patent,  trademark and copyright,
the office where the same is registered  and the  registration  number,  if any,
thereof), and (4) the names of all subsidiaries of the Borrower. All information
in said Annex III is true and correct; and (g) all information  contained in the
Schedules  attached as Annex I hereto is true and correct and any such Schedules
do not omit any information required to be included therein.

          3. Conditions to Effectiveness and to Additional Borrowings. Section 1
hereof, and the amendments to the Credit Agreement made pursuant thereto,  shall
become  effective  upon the  execution  and  delivery  of  counterparts  of this
Amendment  by the  Borrower and the Lender;  provided,  however,  that until the
delivery to the Lender of all documents and instruments  specified in paragraphs
(a) through (g) below,  in form and substance  satisfactory  to the Lender,  the
Lender  shall not  hereafter  be  obligated  to lend to the  Borrower  more than
$6,000,000  in aggregate  principal  amount or more than  $3,000,000  in any one
month (and the  obligation  to make any such Loans shall in any event be subject
to the  satisfaction of the conditions  precedent set forth in Section 4B of the
Credit  Agreement before giving effect to the amendments to the Credit Agreement
provided for herein):

          (a) Mortgages duly executed and delivered by the Borrower with respect
to real estate leasehold interests of the Borrower specified by the Lender, each
such  Mortgage to be in proper form for filing or recording in each  appropriate
public office;

          (b) UCC-11  search  results for the Borrower and its  subsidiaries  in
each jurisdiction specified by the Lender;

          (c) UCC financing  statements with respect to the Collateral,  listing
the Borrower and/or its subsidiaries,  as specified by the Lender, as debtor and
the Lender as secured  party and in proper form for filing in each  jurisdiction
specified by the Lender;

          (d)  Patent,  trademark  and  copyright  collateral  assignments  with
respect to any registered patents, trademarks and copyrights of the Borrower and
its subsidiaries specified by the Lender;

          (e) Resolutions of the Board of Directors of the Borrower  authorizing
the execution, delivery and performance of each Amendment Document;

          (f) Opinion of Sidley & Austin,  counsel to the Borrower,  in form and
substance  satisfactory  to the  Lender,  as to  the  Amendment  Documents,  the
transaction  contemplated  thereby and as to such other customary matters as the
Lender shall specify; and

          (g)  Such  other   documents  and  instruments  as  the  Lender  shall
reasonably specify.

         4.    Miscellaneous.

          (a)  Expenses.  Without  limiting  the  Borrower's  obligations  under
Section 10.01 of the Credit Agreement,  the Borrower agrees to pay all costs and
expenses incurred by the Lender (including, without limitation,  reasonable fees
and  disbursements  of counsel to the Agent) in connection with the preparation,
filing and recordation of the Amendment Documents.

          (b) WAIVER OF JURY TRIAL. THE BORROWER  WAIVES,  TO THE FULLEST EXTENT
PERMITTED  BY LAW,  ANY  RIGHT  IT MAY  HAVE TO A  TRIAL  BY JURY OF ANY  CLAIM,
COUNTERCLAIM,  ACTION OR OTHER  PROCEEDING  ARISING  UNDER OR  RELATING  TO THIS
AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY.

          (c) Waiver of Certain Claims.  The Borrower hereby  irrevocably waives
and releases any claims for  punitive,  exemplary or  consequential  damages (or
similar  claims)  which it may now or at any time  hereafter  have  against  the
Lender  hereunder,   under  any  Credit  Document  or  in  connection  with  any
transaction contemplated herein or therein.

          (d) Governing Law. This  Amendment  shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflict  of  laws  rules  thereof  which  would  make  the  laws  of any  other
jurisdiction applicable to this Amendment.

          (e) Continuing Effectiveness of Credit Agreement.  Except as expressly
amended hereby, all terms, conditions, covenants, representations and warranties
contained in the Credit Agreement or any other Credit  Document,  and all rights
of the Lender and obligations of the Borrower  thereunder,  shall remain in full
force and effect.  The Borrower confirms that the Credit Agreement and all other
Credit  Documents  are in full  force and effect  and that the  Borrower  has no
defenses, setoffs or counterclaims whatsoever to its obligations thereunder.

          (f) No Third  Party  Beneficiaries.  No Person  other than the parties
hereto shall have any rights hereunder or be entitled to rely on this Amendment,
and all third-party beneficiary rights are hereby expressly disclaimed.

          (g)  Reference  in  Credit  Documents.  From and  after  the date this
Amendment becomes effective,  all references to "Credit Agreement" in any Credit
Document  shall be to the Credit  Agreement  as amended  hereby and as it may be
further amended, modified, supplemented or restated hereafter.

          (h)   Effectiveness.   This  Amendment  shall  become  effective  when
counterparts of this Amendment are signed and delivered  (including  delivery by
facsimile transmission) by each party hereto.

          (i)  Counterparts.  This  Amendment  may be  executed in any number of
separate counterparts, all of which taken together shall be deemed to constitute
one and the same  instrument,  and all  signatures  need not  appear  on any one
counterpart.  Any party  hereto may execute and  deliver a  counterpart  of this
amendment by  delivering  to the other party,  by  facsimile  transmission,  the
signature page of this Amendment  signed by such party.  Any party so delivering
by facsimile  transmission a counterpart  of this  Amendment  signed by it shall
promptly thereafter also deliver a manually signed counterpart of this Amendment
to the other party.

                                    * * * * *

<PAGE>

          IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  their  duly
authorized  officers to execute and deliver this First  Amendment as of the date
first above written.

                                         Borrower

                                         PEAPOD, INC.

                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:
<PAGE>

          IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  their  duly
authorized  officers to execute and deliver this First  Amendment as of the date
first above written.

                                         Lender

                                         KONINKLIJKE AHOLD NV

                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:

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